PRINCIPAL FUNDS, INC.
AMENDED & RESTATED SUB-ADVISORY AGREEMENT
EDGE ASSET MANAGEMENT, INC. SUB-ADVISED SERIES
AGREEMENT executed as of September 28, 2015 by and between
PRINCIPAL MANAGEMENT CORPORATION (hereinafter called "the
Manager"), and EDGE 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 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) 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.
(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 along with
certification that the Sub-Advisor has implemented
procedures for administering 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 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.
(m) 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.
(n) 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.
(o) 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, 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 on the latest of (i) the
date of its execution, (ii) the date of its approval by a majority of
the Board of Directors of the Fund, including approval by the
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 or (iii)
if required by the 1940 Act, the date of its approval by a majority
of the outstanding voting securities of the Series. It shall continue
in effect 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 8,
the definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of "interested person," "assignment"
and "voting security") 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 for this purpose shall be Principal Financial Group,
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The address of the Sub-
Advisor for this purpose shall be ▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
(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 MANAGEMENT CORPORATION
By
/s/ ▇▇▇▇▇▇▇ ▇. Beer
▇▇▇▇▇▇▇ ▇. Beer
President and Chief Executive
Officer
EDGE ASSET MANAGEMENT, INC.
By
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
APPENDIX A
Sub-Advisor shall serve as investment sub-advisor for each Fund
identified below. The Manager will pay Sub-Advisor, as full compensation
for all services provided under this Agreement, a fee, computed and paid
monthly, at an annual rate as shown below of the Fund's net assets as of
the first day of each month allocated to Sub-Advisor's management.
In calculating the fee for a fund included in Table A, assets of all other
funds included in Table A as well as assets of any unregistered separate
account of Principal Life Insurance Company and any investment
company sponsored by Principal Life Insurance Company to which Sub-
Advisor or PGI provides investment advisory services and which invests
primarily in fixed-income securities (except money market separate
accounts or investment companies, and excluding assets of all such
separate accounts or investment companies), will be combined with the
assets of the fund to arrive at net assets.
In calculating the fee for a fund included in Table B, assets of any
unregistered separate account of Principal Life Insurance Company and
any investment company sponsored by Principal Life Insurance
Company to which Sub-Advisor or PGI provides investment advisory
services and which have the same investment mandate (e.g. Equity
Income) as the fund for which the fee is calculated, will be combined with
the assets of the fund 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.
Table A
Net Asset Value of Fund
First Next Next Over
$5 billion $1 billion $4 billion $10 billion
Income Fund,
Government & High Quality Bond Fund, and
Short-Term Income Fund 0.1126% 0.0979% 0.0930% 0.0881%
Table B
Net Asset Value of Fund
First Next Next Next Next Next Over
$50 million $50 million $100 million $200 million
$350 million $750 million $1.5 Billion
Equity Income Fund 0.2643% 0.2448% 0.2154% 0.1762%
0.1273% 0.0881% 0.0587%
Net Asset Value of Fund
First Next Next Next Next Next Over
$25 million $75 million $100 million $300 million
$500 million $500 million $1.5 Billion
Principal Capital
Appreciation Fund 0.3916% 0.3133% 0.2643% 0.2252%
0.1762% 0.1273% 0.0783%
Net Asset Value of Fund
First Next Over
$100 million $150 million $250 million
Small-MidCap Dividend
Income Fund 0.3500% 0.2800% 0.2200%
Table C
Sub-Advisor Percentage Fee
as a Percentage of Net Assets
High Yield Fund 0.2643%
▇▇▇ Balanced Portfolio 0.0416%
▇▇▇ Conservative Balanced Portfolio 0.0416%
▇▇▇ Conservative Growth Portfolio 0.0416%
▇▇▇ Flexible Income Portfolio 0.0416%
▇▇▇ Strategic Growth Portfolio 0.0416%
Table D
Sub-Advisor Percentage Fee
as a Percentage of Net Assets
First Next Over
$100 million $150 million $250 million
EDGE MidCap Fund 0.3500% 0.2800% 0.2200%
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