PRINCIPAL FUNDS, INC.
AMENDED & RESTATED SUB-ADVISORY AGREEMENT
GUGGENHEIM PARTNERS INVESTMENT MANAGEMENT, LLC SUB-
ADVISED FUNDS
AMENDED AND RESTATED AGREEMENT executed as of January 1,
2015, by and between PRINCIPAL MANAGEMENT CORPORATION, an
Iowa corporation (hereinafter called "the Manager"), and GUGGENHEIM
PARTNERS 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
Fund of the 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 furnish it with
portfolio selection and related research and statistical services in
connection with the investment advisory services for each series identified
in Appendix A ( hereinafter called the "Series"), which the Manager has
agreed to provide to the Fund, and the Sub-Advisor desires to furnish such
services; 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;
(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
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
the securities and other assets of the Series, 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 Series.
(b) Furnish or present to the Board of Directors of the Fund for
approval (or any appropriate committee of such Board), and
revise from time to time as economic conditions require, a
recommended investment program for the Fund consistent
with the Series' investment objective and policies.
(c) In accordance with the approved investment program, identify
securities to purchase, select securities to sell, and execute
documentation for the purchase and sale of securities, and
implement the approved investment program by placing
orders for the purchase and sale of securities without prior
consultation with the Manager and without regard to (i) the
length of time the securities have been held, (ii) the resulting
rate of portfolio turnover or (iii) any tax considerations, subject
always to the provisions of the Fund's Articles of Incorporation
and Bylaws, 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 reasonably 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
the Series.
(e) Maintain, in connection with the Sub-Advisor's investment
advisory services provided to the Series, its compliance with
the 1940 Act and the regulations adopted by the Securities
and Exchange Commission thereunder and the Series'
investment strategies and restrictions as stated in the Fund's
prospectus and statement of additional information, subject to
receipt of such additional information as may be required from
the Manager and provided in accordance with Section 12(d) of
this Agreement. The Sub-Advisor has no responsibility for the
maintenance of Fund records except insofar as is directly
related to the services it provides to the Series.
(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 the Series are being observed.
(g) Upon request, provide assistance in 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 employed by the Sub-Advisor required for it to
execute its duties hereunder, and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment
necessary for the efficient conduct of its duties under this
Agreement.
(i) Open accounts with broker-dealers and futures commission
merchants ("broker-dealers"), select broker-dealers to effect
all transactions for the 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 the
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 accordance with its allocation policies and
consistent with its fiduciary obligations to the Fund and to
other clients. The Manager recognizes that, in some cases,
this procedure may limit the size of the position that may be
acquired or sold for the Series. 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 the 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 the 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 the 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 Series. 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) Maintain all accounts, books and records with respect to the
Series as are required of an investment advisor of a
registered investment company pursuant to the 1940 Act and
Investment Advisor's Act of 1940 (the "Investment Advisor's
Act"), and the rules thereunder, and furnish the Fund and the
Manager with such periodic and special reports as the Fund
or 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 the
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 Fund 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.
(k) 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 Sub-Advisor's
current Code of Ethics. Sub-Advisor shall promptly forward to
the Manager a copy of any material amendment to the Sub-
Advisor's Code of Ethics.
(l) 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 the 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 the Series.
(m) Provide such information as is reasonably requested by the
Fund or Manager and required 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 Investment
Advisers Act, the Securities Act of 1933, as amended (the
"Securities Act"), and any state securities laws, and any rule
or regulation thereunder. Manager acknowledges receipt of
Sub-Advisor's Form ADV more than 48 hours prior to the
execution of this Agreement.
(n) 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 noted above, the Sub-Advisor, in consultation
with the Manager and its tax advisors, will take prompt action
to bring the Series back into compliance (to the extent
possible) within the time permitted under the Code.
(o) Have the responsibility and authority to vote proxies solicited
by, or with respect to, the issuers of securities held in the
Series. The Manager shall cause to be forwarded to Sub-
Advisor all proxy solicitation materials that it receives and
shall assist Sub-Advisor in its efforts to conduct the proxy
voting process.
(p) Have the authority to exercise, on behalf of the Fund and/or
Series, rights and remedies associated with securities held by
the Series, including right to petition to place an obligor or
issuer in bankruptcy proceedings, voting to accelerate the
maturity of an asset, waiving any default or amending any
credit documentation.
(q) Have the authority to execute trade confirmations, trade
tickets, purchase orders, assignment agreements,
engagement letters, amendments, forbearance agreements
and all other documents related to the purchase, sale,
amendment or restructuring of assets of the Series, and shall
have the authority to direct the Custodian (defined below) to
perform any and all actions necessary in order to
consummate or effectuate any such purchase, sale or other
action.
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 Fund,
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 duties under this Agreement 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 (excluding any broker-dealer
selected by the Sub-Advisor), or affiliates.
6. Indemnification
The Manager agrees to indemnify and hold harmless the Sub-
Advisor from and against any and all claims, losses, liabilities or
damages (including reasonable attorneys' fees and other related
expenses), ("Losses") howsoever arising, from or in connection
with this Agreement or the performance by the Sub-Advisor of its
duties hereunder. The Sub-Advisor shall, after receipt of notice of
any claim or commencement of any action, promptly notify the
Manager in writing of the claim or commencement of such action;
provided any failure to so notify the Manager shall not affect the
rights and obligations of the parties hereunder. The Manager shall
not be liable for any settlement of any claim or action effected
without its written consent. Nothing contained herein shall require
the Manager to indemnify the Sub-Advisor for Losses resulting from
the Sub-Advisor's willful misfeasance, bad faith or gross negligence
in the performance of its duties or from its reckless disregard of its
obligations and duties under this Agreement. In addition, while the
Sub-Adviser, in accordance with section 2(h), shall bear its own
expenses incurred in the performance of its duties hereunder, it
shall not be responsible for any costs or expenses of the Manager
or the Fund, including without limitation the fees or expenses of
attorneys or other professionals engaged on behalf of the Manager
or the Fund in connection with the bankruptcy of, or general
negotiations surrounding the restructuring of, Securities or other
assets of the Series, irrespective of whether such engagement was
entered into by the Manager or the Fund, or the Sub-Advisor with
written permission from the Manager, on behalf of the Fund.
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.
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 as of the date of its
execution and, unless otherwise terminated, shall continue in effect
for a period of two years and thereafter from year to year provided
that the continuance is specifically approved at least annually 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 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 Series during such period is in compliance
with Rule 15a-4 under the 1940 Act.
This Agreement may be terminated 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" and "voting
security") shall be applied. Notwithstanding anything herein to the
contrary, the provisions of Sections 5 and 6 shall survive the
termination of this Agreement.
10. Custody
(a) The cash and assets of the Fund shall be held by
Bank of New York Mellon (the "Custodian"), which the
Manager hereby represents has agreed to act as
custodian for the Series. The custodian of the Fund
may change from time to time. The Sub-Advisor shall
at no time have custody or physical control of the
assets in the Fund. In addition, the Sub-Advisor shall
not be liable for any act or omission of the Custodian.
The Sub-Advisor shall give instructions to the
Custodian in writing or orally (at the discretion of the
Custodian) and confirmed in writing as soon as
practicable thereafter. The Manager shall instruct the
Custodian to provide the Sub-Advisor with such
periodic reports concerning the status of the Fund as
the Sub-Advisor and the Manager may agree from
time to time. The Manager shall provide the Sub-
Advisor with a copy of the Fund's agreement with the
Custodian and any modification thereto and will notify
the Sub-Advisor in advance of a change in the
Custodian.
11. Amendment of this Agreement
No material amendment of this Agreement shall be effective until (i)
approved by vote of (a) a majority of the Board of Directors of the
Fund who are not interested persons 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, and (b) 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, and (ii) such amendment is signed by both parties.
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. 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 in writing (i)
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) delivered via
electronic mail. Until further notice to the other party, it is
agreed that the following shall be the correct notice addresses
of the Manager and Sub-Advisor.
To the Manager: Principal Financial Group
Xxx Xxxxxx, Xxxx 00000-
0200
Attention: Xxxxx Xxxxx
E-mail:
Xxxxx.Xxxxx@xxxxxxxxx.xxx
To the Sub-Advisor: Guggenheim Partners
Investment Management, LLC
000 Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx Xxxx, XX 00000
Attention: Operations
Team and Legal Team
E-mail:
XXXXXxxxxXxx@xxxxxxxxxxxxxxxxxx.xxx
XXXxxxx@xxxxxxxxxxxxxxxxxx.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 Investment 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,
with relation to the affairs of the Fund.
(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 the Series, cash
requirements and cash available for investment in the Series,
and all other reasonable information as may be necessary for
the Sub-Advisor to perform its duties and responsibilities
hereunder.
(e) This Agreement contains the entire understanding and
agreement of the parties.
(f) This Agreement shall be governed by the laws of the
State of Iowa, without regard to conflict of law
principles, and each party consents to jurisdiction in
the state and federal courts of Iowa.
(g) The headings and sub-titles herein are for
convenience only and shall not be read to have any
substantive effect on the text of the agreement or
rights and obligations of the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the date first above written.
PRINCIPAL MANAGEMENT
CORPORATION
By /s/ Xxxxxxx X. Beer
Xxxxxxx X. Beer,
Executive Vice President and
Chief Operating Officer
GUGGENHEIM PARTNERS
INVESTMENT MANAGEMENT,
LLC
By /s/ X. X. Xxxxxx
Xxxxxxx Xxxxxx,
Managing Director
APPENDIX A
Guggenheim Partners Investment Management, LLC ("Guggenheim") shall
serve as an investment sub-advisor for the Series identified below. The
Manager will pay Guggenheim, as full compensation for all services
provided under this Agreement, a fee, computed daily and paid monthly in
arrears (upon receipt of an invoice from Guggenheim), at an annual rate as
shown below of each Series' average daily net assets measured on each
day of each month , for which Guggenheim provides investment advisory
services.
"Net assets", for the purpose of calculating the fee to be paid on the
Covered Call Sleeve listed below, shall be defined as the "aggregate fair
market value of the portfolios contained in the Series (as determined by the
Series custodian) that are eligible for the Covered Call overlay program."
Any time between the 15th business day of each month, the Manager shall
identify to Guggenheim which portfolios are eligible for the Covered Call
overlay program.
In calculating the fee for a series included in the table, assets of any
unregistered separate account of Principal Life Insurance Company and
any investment company sponsored by Principal Life Insurance Company
to which Guggenheim provides investment advisory services and which
have the same investment mandate as the series for which the fee is
calculated, will be combined with the assets of the series to arrive at net
assets.
If this Agreement becomes effective or terminates before the end of any
month, the fee (if any) for the period from the effective date to the end of
such month or from the beginning of such month to the date of termination,
as the case may be, shall be prorated according to the proportion which
such period bears to the full month in which such effectiveness or
termination occurs.
Global Diversified Income Fund
High Yield Sleeve
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
All Assets
0.30%
Global Diversified Income Fund
Call Write Overlay
Sub-Advisor's Fee as a Percentage of Net Assets
First $600 million
0.14%
Next $1.4 billion
0.10%
Next $2.0 billion
0.08%
All remaining assets
0.06%
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