PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
SPECTRUM SUB-ADVISED SERIES
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT (the
"Agreement") executed as of the 1st day of January 2018, by and
between PRINCIPAL GLOBAL INVESTORS, LLC (hereinafter called
"the Manager"), and SPECTRUM ASSET MANAGEMENT, INC.
(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 furnish
it with portfolio selection and related research and statistical services
in connection with the investment advisory services for each Series
of the Fund identified in Appendix A hereto (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 14, 2014 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;
(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 the securities and other assets of each 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 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 investment objective and policies.
(c) 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 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 obligations, 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.
(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 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 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 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) 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
each Series as are required of an investment advisor of a
registered investment company pursuant to the 1940 Act
and Investment Advisers Act of 1940 (the "Investment
Advisers 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 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 a 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 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 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 and may be 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.
(o) Vote proxies received on behalf of the Series in a manner
consistent with 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 the Fund and complete and file notices of claims in
connection with class action lawsuits concerning securities
owned by the Fund.
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 each
Series, 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
and/or insurance laws and rules 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. 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.
7. 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.
8. 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 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 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 8, the definitions
contained in Section 2(a) of the 1940 Act (particularly the
definitions of "interested person," "assignment," "voting
security" "majority of the outstanding voting securities") shall be
applied.
9. Amendment of this Agreement
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 and by vote of 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.
10. 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 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. Until further
notice to the other party, it is agreed that the address of
the Manager and the Sub-Advisor for this purpose shall be
Principal Financial Group, Xxx Xxxxxx, Xxxx 00000-0000.
(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, involving the affairs of a
Series.
(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) 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
SPECTRUM ASSET MANAGEMENT, INC.
By
/s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
APPENDIX A
[Intentionally Omitted]
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for each Series
Series
Effective Date
Initial Term
Preferred Securities Fund
December 12, 2008
2 Years
Global Diversified Income Fund
December 12, 2008
2 Years
Capital Securities Fund
March 14, 2014
2 Years
