PRINCIPAL SPECIAL MARKETS FUND, INC.
INVESTMENT SERVICE AGREEMENT
THIS INVESTMENT SERVICE AGREEMENT, executed as of the 22nd day of April,
1993, by and between PRINCIPAL SPECIAL MARKETS FUND, INC. (the "Fund"), an
open-end investment company formed under the laws of Maryland, PRINCOR
MANAGEMENT CORPORATION ("Manager"), an Iowa corporation, AND PRINCIPAL MUTUAL
LIFE INSURANCE COMPANY, a specially chartered Iowa life insurance company.
WITNESSETH:
WHEREAS, Principal Mutual Life Insurance Company has organized the Manager
to serve as an investment adviser and is the owner (through its subsidiaries) of
all of the outstanding stock of the Manager; and
WHEREAS, the Manager and the Fund have entered into a Management Agreement
executed as of April 22, 1993 (the "Management Agreement") whereby the Manager
undertakes to furnish the Fund with investment advisory services and certain
other services relative to certain portfolios of the Fund (the "Portfolios");
and
WHEREAS, the Manager has the right under the Management Agreement to
appoint one or more sub-advisors to furnish such services to the Portfolios (the
"Sub-Advisors"); and
WHEREAS, Principal Mutual Life Insurance Company is willing to make
available to the Manager and the Sub-Advisers on a part-time basis certain
employees and services of Principal Mutual Life Insurance Company for the
purpose of better enabling the Manager or any Sub-Advisor to fulfill its
investment advisory obligations under the Management Agreement or any related
sub-advisory agreement, provided that the Manager bears all costs allocable to
the time spent by such employees on the affairs of the Manager and the
Sub-Advisers, and the Manager and the Fund believe that such an arrangement will
be for their mutual benefit:
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. The Manager shall have the right to use, on a part-time basis, and
Principal Mutual Life Insurance Company shall make available on such basis, such
employees of Principal Mutual Life Insurance Company and for such periods as may
be agreed upon by the Manager and Principal Mutual Life Insurance Company, as
reasonably needed by the Manager and any such Sub-Adviser in the performance of
investment advisory services (but not administrative, transfer and paying
services) under the Management Agreement. It is anticipated that such employees
will be persons assigned to the Investment Department of Principal Mutual Life
Insurance Company. Principal Mutual Life Insurance Company will also make
available to the Manager, any such Sub-Adviser or the Fund such clerical,
stenographic and administrative services as the Manager or any such Sub-Adviser
may reasonably request to facilitate performance of such investment advisory
services.
2. The employees of Principal Mutual Life Insurance Company in performing
services for the Manager or a Sub-Adviser hereunder may, to the full extent that
they deem appropriate, have access to and utilize statistical and economic data,
investment research reports and other material prepared for or contained in the
files of the Investment Department of Principal Mutual Life Insurance Company
that are relevant to making investments for the Fund, and may make such
materials available to the Manager or such Sub-Adviser, provided, that any such
materials prepared or obtained in connection with a private placement or other
non-public transaction need not be made available to the Manager or such
Sub-Adviser if Principal Mutual Life Insurance Company deems such materials
confidential.
3. Employees of Principal Mutual Life Insurance Company performing services
for the Manager or a sub-Adviser pursuant hereto shall report and be responsible
solely to the officers and directors of the Manager or persons designated by
them. Principal Mutual Life Insurance Company shall have no responsibility for
investment recommendations and decisions of the Manager or the Sub-Advisers
based upon information or advice given or obtained by or through such Principal
Mutual Life Insurance Company employees.
4. Principal Mutual Life Insurance Company will, to the extent requested by
the Manager, supply to employees of the Manager and the Sub-Advisers (including
part-time employees of Principal Mutual Life Insurance Company serving the
Manager and the Sub-Advisers) such clerical, stenographic and administrative
services and such office supplies and equipment as may be reasonably required in
order that they may properly perform their respective functions on behalf of the
Manager and the Sub-Advisers in connection with the performance of investment
advisory services under the Management Agreement and related sub-advisory
agreements.
5. The obligation of performance under the Management Agreement is solely
that of the Manager, and Principal Mutual Life Insurance Company undertakes no
obligation in respect thereto or in respect to the obligation of performance by
a Sub-Advisor under any related sub-advisory agreement, except as otherwise
expressly provided.
6. In consideration of the services to be rendered by Principal Mutual Life
Insurance Company employees pursuant to this Investment Service Agreement, the
Manager agrees to reimburse Principal Mutual Life Insurance Company for such
costs, direct and indirect, as may be fairly attributable to the services
performed for the Manager and for the Sub-Advisors. Such costs shall include,
but not be limited to, an appropriate portion of:
(a) salaries;
(b) employee benefits;
(c) general overhead expense;
(d) supplies and equipment; and
(e) a charge in the nature of rent for the cost of space in Principal
Mutual Life Insurance Company offices fairly allocable to activities
of the Manager under the Management Agreement and of any Sub-Advisors
under related sub-advisory agreements.
In the event of disagreement between the Manager and Principal Mutual Life
Insurance Company as to a fair basis for allocating or apportioning costs, such
basis shall be fixed by the public accountants for the Fund.
7. This Agreement shall become effective as to any Portfolio on the latest
of (i) the date of its execution or the execution of an amendment making the
agreement applicable to that Portfolio, (ii) the date of its approval by a
majority of the directors of the Fund, including approval by the vote of a
majority of the directors of the Fund who are not interested persons of the
Manager, Principal Mutual Life Insurance Company or the Fund, cast in person at
a meeting called for the purpose of voting on such approval, and (iii) the date
of its approval by a majority of the outstanding voting securities of the
Portfolio.
This Agreement will continue in effect as to any Portfolio for more than
two years from the date of its execution or the execution of an amendment making
this Agreement applicable to that Portfolio only so long such 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 Fund
and in either event by vote of a majority of the directors of the Fund who are
not interested persons of the Manager, Principal Mutual Life Insurance Company,
or the Fund cast in person at a meeting called for the purpose of voting on such
approval. This Agreement may, on sixty days' written notice, be terminated at
any time without the payment of any penalty, by the Board of Directors of the
Fund, by vote of a majority of the outstanding voting securities of the fund, as
to any Portfolio by the vote of a majority of the outstanding voting securities
of that Portfolio or by the Manager.
This Investment Service Agreement shall automatically terminate in the
event of its assignment. In interpreting the provisions of this Section 7, the
definitions contained in Section 2(a) of the Investment Company Act of 1940 and
the rules thereunder (particularly the definitions of "interested persons",
"assignment" and "voting securities") shall be applied.
The required shareholder approval of this Agreement or of any continuance
of this Agreement shall be effective with respect to any Portfolio if a majority
of the outstanding voting securities of that Portfolio votes to approve the
Agreement or its continuance, notwithstanding that the Agreement or its
continuance may not have been approved by a majority of the outstanding voting
securities of the Fund or of any other Portfolio affected by the matter.
8. No amendment of this Agreement shall be effective until approved by vote
of the holders of a majority of the outstanding voting securities and by vote of
a majority of the directors of the Fund who are not interested persons of the
Manager, Principal Mutual Life Insurance Company or the Fund cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval of any amendment to this Agreement shall be effective with
respect to any Portfolio if a majority of the outstanding voting securities of
that Portfolio votes to approve the amendment, notwithstanding that the
amendment may not have been approved by a majority of the outstanding voting
securities of the Fund or of any other Portfolio affected by the matter.
9. Any notice under this Investment Service Agreement shall be in writing,
addressed and delivered or mailed postage prepaid to the other parties at such
addresses as such other parties may designate for the receipt of such notices.
Until further notice it is agreed that the address of the Fund, that of the
Manager and that of Principal Mutual Life Insurance Company and its subsidiaries
for this purpose shall be The Principal Financial Group, Xxx Xxxxxx, Xxxx
00000-0000.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in three counterparts by their duly authorized officers the day and
year first above written.
PRINCIPAL SPECIAL MARKETS FUND, INC.
/s/ A. S. Filean
By ________________________________
A. S. Filean
PRINCOR MANAGEMENT CORPORATION
/s/ X. X. Xxxxx
By ________________________________
X. X. Xxxxx
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
/s/ X. X. Xxxx
By ________________________________
X. X. Xxxx
FIRST AMENDMENT TO THE
PRINCIPAL SPECIAL MARKETS FUND, INC.
INVESTMENT SERVICE AGREEMENT
The Investment Service Agreement ("Agreement") by and between Principal Special
Markets Fund, Inc., an open-end investment company formed under the laws of
Maryland, Princor Management Corporation, an Iowa corporation, and Principal
Mutual Life Insurance Company, a specially chartered Iowa life insurance
company, was executed on the 22nd day of April, 1993.
WHEREAS, The Agreement contemplates the addition of Portfolios
("Portfolios") to the Fund, and
WHEREAS, The Board of Directors of the Fund has adopted Resolutions to add
Portfolios to the Fund, and
WHEREAS, Principal Special Markets Fund, Inc., Princor Management
Corporation and Principal Mutual Life Insurance Company wish the provisions of
the Agreement to extend to the additional Portfolios:
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. The Agreement shall be effective with respect to the International
Emerging Markets Portfolio as of the _____ day of _________________,
1997.
2. The Agreement shall be effective with respect to the International
SmallCap Portfolio as of the _____ day of _________________, 1997.
Executed this ________ day of ________________, 1997
Principal Special Markets Fund, Inc.
by:_________________________________
Princor Management Corporation
by:_________________________________
Principal Mutual Life Insurance Company
by:_________________________________
