PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY
AGREEMENT
MACQUARIE CAPITAL INVESTMENT MANAGEMENT LLC
SUB-ADVISED FUND
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT (the
"Agreement") executed as of 15th Day of December, 2017, by and
between PRINCIPAL GLOBAL INVESTORS, LLC, a Delaware
limited liability company (hereinafter called the "Manager"), and
Macquarie Capital Investment Management LLC, a Delaware limited
liability company (hereinafter called the "Sub-Advisor").
W I T N E S S E T H:
WHEREAS, the Manager is the manager and investment adviser to
each Series of Principal Funds, Inc., (the "Fund"), an open-end
management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager desires to retain the Sub-Advisor to render
discretionary investment advisory services for all or a portion of the
assets of each Series of the Fund identified in Appendix A hereto, as
may be amended from time to time (hereinafter called "Series"),
which the Manager has agreed to provide to the Fund, and the
Sub-Advisor desires to furnish such services; and
WHEREAS, the Manager and the Sub-Advisor agree to amend and
restate the Amended and Restated Sub-Advisory Agreement
between the Manager (having assumed the rights and obligation of
Principal Management Corporation) and the Sub-Advisor dated
March 27, 2015, as further amended and restated on October 1,
2017, with this Agreement; and
WHEREAS, The Manager has furnished the Sub-Advisor with copies
properly certified or authenticated of each of the following and will
promptly provide the Sub-Advisor with copies properly certified or
authenticated of any amendment or supplement thereto:
(a) Management Agreement (the "Management Agreement") with
the Fund;
(b) The Fund's registration statement and financial statements as
filed with the Securities and Exchange Commission (the
"SEC");
(c) The Fund's Articles of Incorporation and By-laws;
(d) Policies, procedures or instructions adopted or approved by the
Board of Directors of the Fund relating to obligations and
services to be provided by the Sub-Advisor.
NOW, THEREFORE, in consideration of the premises and the terms
and conditions hereinafter set forth, the parties agree as follows:
1. Appointment of Sub-Advisor
In accordance with and subject to the Management Agreement,
the Manager hereby appoints the Sub-Advisor to perform the
services described in Section 2 below for investment and
reinvestment of such portion of the assets of each Series as may
be allocated to the Sub-Advisor by the Manager, from time to
time (the "Allocated Assets"), subject to the control and direction
of the Manager and the Fund's Board of Directors, for the period
and on the terms hereinafter set forth. The Sub-Advisor accepts
such appointment and agrees to furnish the services hereinafter
set forth for the compensation herein provided. The Sub-Advisor
shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized,
have no authority to act for or represent the Fund or the Manager
in any way or otherwise be deemed an agent of the Fund or the
Manager.
2. Obligations of and Services to be Provided by the Sub-Advisor
The Sub-Advisor will:
(a) Provide investment advisory services, including but not
limited to research, advice and supervision for the Allocated
Assets of each Series.
(b) Furnish to the Board of Directors of the Fund for approval
(or any appropriate committee of such Board), and revise
from time to time as conditions require, a recommended
investment program for each Series consistent with each
Series' respective investment objective(s) and policies and
any specific criteria applicable to the Allocated Assets.
(c) Implement the approved investment program for the
Allocated Assets by placing orders for the purchase and sale
of securities without prior consultation with the Manager and
without regard to the length of time the securities have been
held, the resulting rate of portfolio turnover or any tax
considerations, subject always to the provisions of the
Fund's registration statement, Articles of Incorporation and
Bylaws and the requirements of the 1940 Act, as each of the
same shall be from time to time in effect.
(d) Advise and assist the officers of the Fund, as requested by
the officers, in taking such steps as are necessary or
appropriate to carry out the decisions of its Board of
Directors, and any appropriate committees of such Board,
regarding the general conduct of the investment business of
each Series.
(e) Maintain, in connection with the Sub-Advisor's investment
advisory services provided to the Allocated Assets, its
compliance with the 1940 Act and the regulations adopted
by the SEC thereunder and the Series' investment strategies
and restrictions as stated in the Fund's prospectus and
statement of additional information and any specific criteria
applicable to the Allocated Assets.
(f) Report to the Board of Directors of the Fund at such times
and in such detail as the Board of Directors may reasonably
deem appropriate in order to enable it to determine that the
investment policies, procedures and approved investment
program of each Series (and any specific criteria applicable
to the Allocated Assets) are being observed.
(g) Upon request, provide assistance and recommendations for
the determination of the fair value of certain securities when
reliable market quotations are not readily available for
purposes of calculating net asset value in accordance with
procedures and methods established by the Fund's Board of
Directors.
(h) Furnish, at its own expense, (i) all necessary investment and
management facilities, including salaries of clerical and
other personnel required for it to execute its duties faithfully,
and (ii) administrative facilities, including bookkeeping,
clerical personnel and equipment necessary for the efficient
conduct of the investment advisory affairs of each Series.
(i) Open accounts with Foreign Account Tax Compliance Act
compliant broker-dealers and futures commission merchants
("broker-dealers"), select broker-dealers to effect all
transactions for each Series, place all necessary orders with
broker-dealers or issuers (including affiliated broker-
dealers), and negotiate commissions, if applicable. To the
extent consistent with applicable law, purchase or sell orders
for each Series may be aggregated with contemporaneous
purchase or sell orders of other clients of the Sub-Advisor. In
such event allocation of securities so sold or purchased, as
well as the expenses incurred in the transaction, will be
made by the Sub-Advisor in the manner the Sub-Advisor
considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to other clients. The
Sub-Advisor will report on such allocations at the request of
the Manager, the Fund or the Fund's Board of Directors
providing such information as the number of aggregated
trades to which each Series was a party, the broker-dealers
to whom such trades were directed and the basis for the
allocation for the aggregated trades. The Sub-Advisor shall
use its best efforts to obtain execution of transactions for
each Series at prices which are advantageous to the Series
and at commission rates that are reasonable in relation to
the benefits received. However, the Sub-Advisor may select
brokers or dealers on the basis that they provide brokerage,
research or other services or products to the Sub-Advisor.
To the extent consistent with applicable law, the Sub-Advisor
may pay a broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of
commission or dealer spread another broker or dealer would
have charged for effecting that transaction if the Sub-
Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the
brokerage and research products and/or services provided
by such broker or dealer. This determination, with respect to
brokerage and research products and/or services, may be
viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Advisor and its
affiliates have with respect to each Series as well as to
accounts over which they exercise investment discretion.
Not all such services or products need be used by the Sub-
Advisor in managing the Allocated Assets. In addition, joint
repurchase or other accounts may not be utilized by the
Series except to the extent permitted under any exemptive
order obtained by the Sub-Advisor provided that all
conditions of such order are complied with.
(j) Section 871(m) Transactions: Sub-Advisor shall not on behalf of
the Fund enter into certain U.S. dividend equivalent payment
transactions described in Section 871(m) of the U.S. Internal
Revenue Code and the regulations thereunder ("871(m)
Transaction") with a foreign counterparty unless: (i), Sub-Advisor
adheres to the ISDA 2015 Section 871(m) Protocol on behalf of
the Fund, and (ii), The foreign counterparty to the 871(m)
Transaction provides Sub-Advisor with a properly completed Form
W-8IMY certifying to its status as a qualified derivatives dealer
("QDD").
(k) Maintain all accounts, books and records with respect to the
Allocated Assets as are required of an investment advisor of
a registered investment company pursuant to the 1940 Act
and Investment Advisers Act of 1940, as amended (the
"Adviser's Act"), and the rules thereunder, and furnish the
Fund and the Manager with such periodic and special
reports as the Fund or the Manager may reasonably
request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Advisor hereby agrees that all
records that it maintains for each Series are the property of
the Fund, agrees to preserve for the periods described by
Rule 31a-2 under the 1940 Act any records that it maintains
for the Series and that are required to be maintained by
Rule 31a-1 under the 1940 Act, and further agrees to
surrender promptly to the Fund any records that it maintains
for the Series upon request by the Fund or the Manager.
The Sub-Advisor has no responsibility for the maintenance
of Fund records except insofar as is directly related to the
services the Sub-Advisor provides to a Series.
(l) Observe and comply with Rule 17j-1 under the 1940 Act and
the Sub-Advisor's Code of Ethics adopted pursuant to that
Rule as the same may be amended from time to time. The
Manager acknowledges receipt of a copy of the Sub-
Advisor's current Code of Ethics. The Sub-Advisor shall
promptly forward to the Manager a copy of any material
amendment to the Sub-Advisor's Code of Ethics along with
certification that the Sub-Advisor has implemented
procedures for administering the Sub-Advisor's Code of
Ethics.
(m) From time to time as the Manager or the Fund may request,
furnish the requesting party reports on portfolio transactions
and reports on investments held by a Series, all in such
detail as the Manager or the Fund may reasonably request.
The Sub-Advisor will make available its officers and
employees to meet with the Fund's Board of Directors at the
Fund's principal place of business on due notice to review
the investments of a Series.
(n) Provide such information as is customarily provided by a
sub-advisor, or as may be required or reasonably requested
by the Manager, for the Fund or the Manager to comply with
their respective obligations under applicable laws, including,
without limitation, the Internal Revenue Code of 1986, as
amended (the "Code"), the 1940 Act, the Advisers Act, the
Securities Act of 1933, as amended (the "Securities Act"),
and any state securities laws, and any rule or regulation
thereunder. Such information includes, but is not limited to:
the Sub-Advisor's compliance manual and policies and
procedures adopted to comply with Rule 206(4)-7 of the
Advisers Act; the Sub-Advisor's most recent annual
compliance report or a detailed summary of such report;
timely and complete responses to all Quarterly Compliance
Questionnaires (including the identification of any material
compliance matters and a copy of any material changes to
the Sub-Advisor's Rule 206(4)-7 compliance policies and
procedures marked to show changes along with a written
summary of the purpose of each such change), Annual
Proxy Voting Questionnaires, Annual Best Execution and
Soft Dollar Questionnaires, and responses to all other
requests from the Manager. The Sub-Advisor agrees to
make available for the Manager's review, all deficiency
letters issued by the SEC together with all responses given
by Sub-Advisor to such letters. The Sub-Advisor will advise
the Manager of any material changes in the Sub-Advisor's
ownership within a reasonable time after any such change.
(o) Vote proxies received on behalf of each Series (with respect
to the portion thereof allocated to the Sub-Advisor) in a
manner consistent with the Sub-Advisor's proxy voting
policies and procedures and provide a record of votes cast
containing all of the voting information required by Form N-
PX in an electronic format to enable the Series to file Form
N-PX as required by SEC rule.
(p) Respond to tender offers, rights offerings and other
voluntary corporate action requests affecting securities held
by each Series (with respect to the portion thereof allocated
to the Sub-Advisor).
(q) Cooperate with the Manager in its performance of quarterly
and annual tax compliance tests to monitor the Series'
compliance with Subchapter M of the Code and Section
817(h) of the Code. If it is determined by the Manager or its
tax advisors that the Series is not in compliance with the
requirements imposed by the Code, the Sub-Advisor, in
consultation with the Manager and its tax advisors, will take
prompt action to bring the Series back into compliance with
the time permitted under the Code.
3. Prohibited Conduct
In providing the services described in this agreement, the Sub-
Advisor will not consult with any other investment advisory firm
that provides investment advisory services to any investment
company sponsored by Principal Life Insurance Company
regarding transactions for the Fund in securities or other assets.
4. Compensation
As full compensation for all services rendered and obligations
assumed by the Sub-Advisor hereunder with respect to the
Allocated Assets, the Manager shall pay the compensation
specified in Appendix A to this Agreement.
5. Liability of Sub-Advisor
Neither the Sub-Advisor nor any of its directors, officers,
employees, agents or affiliates shall be liable to the Manager, the
Fund or its shareholders for any loss suffered by the Manager or
the Fund resulting from any error of judgment made in the good
faith exercise of the Sub-Advisor's investment discretion in
connection with selecting investments for a Series or as a result
of the failure by the Manager or any of its affiliates to comply with
the terms of this Agreement except for losses resulting from
willful misfeasance, bad faith or gross negligence of, or from
reckless disregard of, the duties of the Sub-Advisor or any of its
directors, officers, employees, agents, or affiliates.
6. Trade Errors
The Sub-Advisor will notify the Manager of any Trade Error(s),
regardless of materiality, promptly upon the discovery such Trade
Error(s) by the Sub-Advisor. Notwithstanding Section 5, the Sub-
Advisor shall be liable to the Manager, the Fund or its
shareholders for any loss suffered by the Manager or the Fund
resulting from Trade Errors due to negligence, misfeasance, or
disregard of duties of the Sub-Advisor or any of its directors,
officers, employees, agents (excluding any broker-dealer
selected by the Sub-Advisor), or affiliates. For purposes under
this Section 6, Trade Errors are defined as errors due to (i)
erroneous orders by the Sub-Advisor for the Series that result in
the purchase or sale of securities that were not intended to be
purchased or sold; (ii) erroneous orders by the Sub-Advisor that
result in the purchase or sale of securities for the Series in an
unintended amount or price; or (iii) purchases or sales of
financial instruments which violate the investment limitations or
restrictions disclosed in the Fund's registration statement and/or
imposed by applicable law or regulation (calculated at the Sub-
Advisor's portfolio level), unless otherwise agreed to in writing.
7. Supplemental Arrangements
The Sub-Advisor may enter into arrangements with other
persons affiliated with the Sub-Advisor or with unaffiliated third
parties to better enable the Sub-Advisor to fulfill its obligations
under this Agreement for the provision of certain personnel and
facilities to the Sub- Advisor, subject to written notification to and
approval of the Manager and, where required by applicable law,
the Board of Directors of the Fund; provided, however, that entry
into any such arrangements shall not relieve the Sub-Advisor of
any of its obligations under this Agreement.
8. Regulation
The Sub-Advisor shall submit to all regulatory and administrative
bodies having jurisdiction over the services provided pursuant to
this Agreement any information, reports or other material which
any such body may request or require pursuant to applicable
laws and regulations.
9. Duration and Termination of This Agreement
This Agreement shall become effective with respect to a Series
as of the corresponding date set forth on Appendix B to this
Agreement, as may be amended from time to time, and, unless
otherwise terminated with respect to such Series, shall continue
in effect thereafter for the initial term set forth on Appendix B to
this Agreement, and thereafter from year to year, provided that in
each case the continuance is specifically approved within the
period required by the 1940 Act either by the Board of Directors
of the Fund or by a vote of a majority of the outstanding voting
securities of the Series and in either event by a vote of a majority
of the Board of Directors of the Fund who are not interested
persons of the Manager, Principal Life Insurance Company, the
Sub-Advisor or the Fund cast in person at a meeting called for
the purpose of voting on such approval.
If the shareholders of a Series fail to approve the Agreement or
any continuance of the Agreement in accordance with the
requirements of the 1940 Act, the Sub-Advisor will continue to
act as Sub-Advisor with respect to the Allocated Assets of such
Series pending the required approval of the Agreement or its
continuance or of any contract with the Sub-Advisor or a different
manager or sub-advisor or other definitive action; provided, that
the compensation received by the Sub-Advisor in respect to the
Allocated Assets of such Series during such period is in
compliance with Rule 15a-4 under the 1940 Act.
This Agreement may be terminated with respect to a Series at
any time without the payment of any penalty by the Board of
Directors of the Fund or by the Sub-Advisor, the Manager or by
vote of a majority of the outstanding voting securities of the
Series on sixty days written notice. This Agreement shall
automatically terminate in the event of its assignment. In
interpreting the provisions of this Section 9, the definitions
contained in Section 2(a) of the 1940 Act (particularly the
definitions of "interested person," "assignment," "voting security"
and "majority of the outstanding voting securities") shall be
applied.
10. Amendment of this Agreement
No amendment of this Agreement shall be effective unless in
writing and signed by both parties. No material amendment of
this Agreement shall be effective until approved, if required by
the 1940 Act or the rules, regulations, interpretations or orders
issued thereunder, by vote of the holders of a majority of the
outstanding voting securities of the Series (as defined in the
0000 Xxx) and by vote of a majority of the Board of Directors of
the Fund who are not interested persons (as defined in the 0000
Xxx) of the Manager, the Sub-Advisor, Principal Life Insurance
Company or the Fund cast in person at a meeting called for the
purpose of voting on such approval.
11. Additional Series
In the event the Manager wishes to appoint the Sub-Advisor to
perform the services described in this Agreement with respect to
one or more additional Series of the Fund after the effective date
of this Agreement, such Series will become a Series under this
Agreement upon approval of this Agreement in the manner
required by the 1940 Act and the amendment of Appendices A
and B hereto.
12. General Provisions
(a) Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof. This Agreement shall be construed and
enforced in accordance with and governed by the laws of
the State of Iowa. The captions in this Agreement are
included for convenience only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect.
(b) Any notice under this Agreement shall be (i) in writing,
addressed and delivered or mailed postage pre-paid to the
other party at such address as such other party may
designate for the receipt of such notices; or (ii) by electronic
mail to the address of the party specified below or such
other address as either party may specify in writing. Until
further notice to the other party, it is agreed that the address
of the Manager for this purpose shall be Principal Financial
Group, Xxx Xxxxxx, Xxxx 00000-0000, Email:
xxxxxx.xxxx@xxxxxxxxx.xxx, and the address of the Sub-
Advisor shall be:
Macquarie Capital Investment
Management, LLC
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Email:
xxxxxxxxxxxxx@xxxxxxxxx.xxx
(c) The Sub-Advisor will promptly notify the Manager in writing
of the occurrence of any of the following events:
(1) the Sub-Advisor fails to be registered as an investment
adviser under the Advisers Act or under the laws of any
jurisdiction in which the Sub-Advisor is required to be
registered as an investment advisor in order to perform
its obligations under this Agreement.
(2) the Sub-Advisor is served or otherwise receives notice
of any action, suit, proceeding, inquiry or investigation,
at law or in equity, before or by any court, public board
or body, involving the affairs of a Series.
(3) the Sub-Advisor becomes aware of any pending or
threatened action, suit, proceeding, inquiry or
investigation that is reasonably likely to result in a
conviction, order, judgment or decree issued with
respect to it or any affiliate that could reasonably be
expected to result in the Sub-Advisor becoming
ineligible to serve as an investment adviser of a
registered investment company under the 0000 Xxx.
(4) the Sub-Advisor becomes aware of a transaction or
series of transactions that is reasonably likely to result
in a change in the management or control of the Sub-
Advisor or a controlling person thereof or otherwise in
the assignment (as defined in the 0000 Xxx) of this
Agreement by the Sub-Advisor.
(d) The Manager shall provide (or cause the Series custodian to
provide) timely information to the Sub-Advisor regarding
such matters as the composition of the assets of a Series,
cash requirements and cash available for investment in a
Series, and all other reasonable information as may be
necessary for the Sub-Advisor to perform its duties and
responsibilities hereunder.
(e) The Sub-Advisor acknowledges Manager's representation
that the Diversified Real Asset Fund series does not rely on
the exclusion from the definition of "commodity pool
operator" under Section 4.5 of the General Regulations
under the Commodity Exchange Act (the CEA).
The Sub-Advisor represents that it is a commodity trading
advisor duly registered with the Commodity Futures Trading
Commission and is a member in good standing of the
National Futures Association (the NFA) or is relying on an
exemption from registration as a commodity trading advisor.
As applicable, the Sub-Advisor shall maintain such
registration and membership in good standing or continue to
qualify for an exemption from registration as a commodity
trading advisor during the term of this Agreement. Further,
the Sub-Advisor agrees to notify the Manager within a
commercially reasonable time upon (i) a statutory
disqualification of the Sub-Advisor under Sections 8a(2) or
8a(3) of the CEA, (ii) a suspension, revocation or limitation
of the Sub-Advisor's commodity trading advisor registration
or NFA membership, or (iii) the institution of an action or
proceeding that would reasonably be expected to lead to a
statutory disqualification under the CEA or an investigation
by any governmental agency or self-regulatory organization
relating to Sub-Advisor's registration as a commodity trading
advisor, in each case, subject to applicable law, attorney-
client privilege and confidentiality restrictions.
(f) The Sub-Advisor represents that it will not enter into any
agreement, oral or written, or other understanding under
which the Fund directs or is expected to direct portfolio
securities transactions, or any remuneration, to a broker or
dealer in consideration for the promotion or sale of Fund
shares or shares issued by any other registered investment
company. The Sub-advisor further represents that it is
contrary to the Sub-Advisor's policies to permit those who
select brokers or dealers for execution of Fund portfolio
securities transactions to take into account the broker's or
dealer's promotion or sale of Fund shares or shares issued
by any other registered investment company.
(g) The Sub-Advisor agrees that neither it nor any of its affiliates
will in any way refer to its relationship with the Fund, the
Series, or the Manager or any of their respective affiliates in
offering, marketing or other promotional materials without the
express written consent of the Manager.
(h) This Agreement contains the entire understanding and
agreement of the parties.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the date first above written.
PRINCIPAL GLOBAL INVESTORS, LLC
By
/s/ Xxxxxxx X. Beer
Name:
Xxxxxxx X. Beer
Title:
Executive Director - Principal Funds
By
/s/ Xxxx X. Xxxxxx
Name:
Xxxx X. Xxxxxx
Title:
Counsel
MACQUARIE CAPITAL INVESTMENT MANAGEMENT, LLC
By
/s/ Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, President
By
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx, Head of US And EMEA Fund
Administration
APPENDIX A
[Intentionally Omitted]
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for each Series
Series
Effective Date
Initial Term
Diversified Real Asset Fund
March 27, 2015
2 Years
