PRINCIPAL INVESTORS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PARTNERS LARGECAP BLEND FUND I AND
PARTNERS MIDCAP VALUE FUND I
AGREEMENT effective as of the 30th day of June, 2004, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the Manager"),
and Xxxxxxx Xxxxx Asset Management, L.P. New York limited partnership organized
under the laws of the State of New York (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 the
Principal Investors Fund, 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 with respect to assets allocated by the Manager for
management by the Sub-Advisor (the "Managed Assets") for a portion of the
portfolio of the Partners LargeCap Blend Fund I of the Fund and for the
portfolio of the Partners MidCap Value Fund I of the Fund (each 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, provided that with respect to procedures governing
transactions involving affiliates (such as those adopted pursuant to
1940 Act Rules 17a-7, 17e-1 and 10f-3), the Manager will identify any
affiliate of the Manager, the Fund and the Series, and provided
further that the Sub-Advisor shall not bear any responsibility and
shall be released from any obligation or cost which results from
entering into a trade with any affiliated entity not specifically
identified to the Sub-Advisor by the Manager, unless the entity is
affiliated with 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
Managed Assets which Sub-Advisor shall manage in its discretion 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 Managed Assets.
(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 economic conditions require, a recommended investment
program for the Fund consistent with the 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 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 obligations provided to the Series, compliance
with the 1940 Act and the regulations adopted by the Securities
and Exchange Commission thereunder and the Series' investment
policies 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 9(d) of this Agreement. The
Sub-Advisor has no responsibility for the maintenance of Fund
records except insofar as is directly related to the Managed
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 the Series are being observed.
(g) Upon request from the Manager, provide consultation 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.
(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 the Series (excluding
brokerage expenses and pricing and bookkeeping services).
(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 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 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 best execution of
transactions for the Series. 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
Managed Assets 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 copies of 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 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. Sub-Advisor will advise Manager of any changes in
Sub-Advisor's general partners within a reasonable time after any
such change. Manager acknowledges receipt of Part II of the
Sub-Advisor's Form ADV more than 48 hours prior to the execution
of this Agreement.
(n) 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. The Manager
understands that the Sub-Advisor establishes from time to time
guidelines for the voting of proxies and may employ the services
of a proxy voting service to exercise proxies in accordance with
the Advisor's guidelines.
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 sub-advisory services to the Fund or an investment company
registered under the 1940 Act that is under common control with the
Fund regarding transactions for the Fund in the securities or other
assets allocated to the Sub-Advisor pursuant to this Agreement.
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.
All rights of compensation under the Agreement for services performed
as of the termination date shall survive the termination of 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 or its
Shareholders resulting from any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission
in carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performances
of its duties, 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 Sub-Advisor also shall have no liability for any act or omission
taken in respect of the non-GSAM portion of the Fund and the Series
and the Manager agree to indemnify and hold harmless the Sub-Advisor
and its officers, directors, agents and employees from any losses,
claims, damages, liabilities or litigation (including reasonable legal
and other expenses) incurred by the Sub-Advisor that (I) were caused
by any action or omission relating to the non-GSAM portion of the
Fund; (ii) may be based upon any willful misfeasance, bad faith or
gross negligence by the Manager (other than Sub-Advisor or its
employees); or (iii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement or prospectus covering shares of the Fund, or any amendment
thereof or any supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, unless such
statement or omission was made in reliance upon written information
furnished to the Fund or the Manager or any affiliated person of the
Manager by the Sub-Advisor which itself is materially misleading.
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 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 the 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 in the
manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
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.
10. Severability.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
11. 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, and 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. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New
York. 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, Xxx Xxxxxx, Xxxx 00000-0000, and the
address of the Sub-Advisor shall be 00 Xxx Xxxx, Xxx Xxxx, XX
00000.
(c) Custody, Delivery and Receipt of Securities. The Manager shall
designate one or more custodians to hold the Managed Assets. The
custodians, as so designated, will be responsible for the
custody, receipt and delivery of securities and other assets of
the Series including the Managed Assets, and the Sub-Advisor
shall have no authority, responsibility or obligation with
respect to the custody, receipt or delivery of securities or
other assets of the Series including the Managed Assets. In the
event that any cash or securities of a Fund are delivered to the
Sub-Advisor, it will promptly deliver the same over to the
custodian for the benefit of and in the name of the Series.
Unless otherwise required by local custom, all securities
transactions for the Managed Assets will be consummated by
payment to or delivery by a Fund of cash or securities due to or
from the Managed Assets.
Repurchase agreements, including tri-party repurchase agreements
and other trading agreements, may be entered into by a Fund
acting through designated officers or agents; custodians under
tri-party repurchase agreements will act as sub-custodians of the
Fund.
(d) 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 the Fund.
(e) 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, any
applicable investment restrictions imposed by state insurance
laws and regulations, reports covering the classification of
securities for purposes of Subchapter M of the Internal Revenue
Code and Treasury Regulations Section 1.817, and all other
reasonable information as may be necessary for the Sub-Advisor to
perform its duties and responsibilities hereunder.
(f) Neither the Manager, Principal Mutual Life Insurance Company, nor
the Fund will publish or distribute any information, including
but not limited to registration statements, advertising or
promotional material, regarding the provision of investment
advisory services by the Sub-Advisor pursuant to this Agreement,
or use in advertising, publicity or otherwise the name of the
Sub-Advisor or any of its affiliates, or any trade name,
trademark, trade device, service xxxx, symbol or any
abbreviation, contraction or simulation thereof of the
Sub-Advisor or its affiliates without the prior written consent
of the Sub-Advisor. This provision includes any written,
electronic or video type of material intended for clients or
brokers. Notwithstanding the foregoing, the Manager may
distribute information regarding the provision of investment
advisory services by the Sub-Advisor to the Fund's board of
Directors ("Board Materials") without the prior written consent
of the Sub-Advisor.
(g) The Manager shall perform quarterly and annual tax compliance
tests to ensure that the Series is in compliance with Subchapter
M of the Internal Revenue Code ("IRC") and Section 817(h) of the
IRC. In connection with such compliance tests, the Manager shall
prepare and provide reports to the Sub-Advisor within 10 business
days of a calendar quarter end relating to the diversification of
the Series under Subchapter M and Section 817(h). The Sub-Advisor
shall review such reports for purposes of determining compliance
with such diversification requirements. If it is determined that
the Series is not in compliance with the requirements noted
above, the Sub-Advisor, in consultation with the Manager, will
take prompt action to bring the Series back into compliance
within the time permitted under the IRC, provided that any such
non-compliance was caused by Sub-Advisor in respect of the
Managed Assets.
(h) This Agreement contains the entire understanding and agreement of
the parties.
13. Other Expenses.
The Manager shall pay all expenses relating to mailing prospectuses,
statements of additional information, proxy solicitation material and
shareholder reports to shareholders.
14. Confidential Information.
Sub-Advisor shall not identify the Manager or the Fund as a client, or
disclose any information about the Manager or the Fund to any third
party except as may be required by law, regulatory proceeding or as
may be expressly permitted by the Manager.
It is understood that the name "Xxxxxxx, Sachs & Co." or "Xxxxxxx
Sachs" or any derivative thereof, any tradename, trademark, trade
device, service xxxx, symbol or logo associated with those names are
the valuable property of the Sub-Advisor and that the Manager has the
right to use such name (or derivative or logo), in offering materials
or promotional or sales-related materials of the Fund, only with the
prior written approval of the Sub-Advisor and for so long as the
Sub-Advisor is Sub-Advisor to the Series and the Fund. Upon
termination of this Agreement between the Fund, the Manager and the
Sub-Advisor, the Fund and the Manager shall forthwith cease to use
such name (or derivative or logo).
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
PRINCIPAL MANAGEMENT CORPORATION
By
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Xxxxxx X. Xxxxxx, Vice President
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By
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Xxxxxx X. Xxxxxxx, Managing Director
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Fund. The
Manager will pay the Sub-Advisor, as full compensation for all services provided
under this Agreement, a fee computed at an annual rate as follows (the
"Sub-Advisor Percentage Fee"):
PARTNERS LARGECAP BLEND FUND I
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
First $500 million.........................0.15%
Next $1 billion............................0.12%
Over $1.5 billion..........................0.10%
In calculating the fee for the Partners LargeCap Blend Fund I of Principal
Investors Fund, Inc. on or after July 1, 2004, assets of any unregistered
separate account of Principal Life Insurance Company and any investment company
sponsored by Principal Life Insurance Company to which the Sub-Advisor provides
investment advisory services and which have the same investment mandate as the
Partners LargeCap Blend Fund I, will be combined (together, the "Aggregated
Assets"). The fee charged for the assets in the Partners LargeCap Blend Fund I
shall be determined by calculating a fee on the value of the Aggregated Assets
and multiplying the aggregate fee by a fraction, the numerator of which is the
amount of assets in the Partners LargeCap Blend Fund I and the denominator of
which is the amount of the Aggregated Assets.
PARTNERS MIDCAP VALUE FUND I
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
First $25 million..........................0.60%*
Next $25 million...........................0.55%*
Next $75 million...........................0.50%
Next $225 million..........................0.45%
Over $350 million..........................0.40%
* If assets exceed $75 million, the fee on the
first $50 million will be 0.50%.
The Sub-Advisor Percentage Fee shall be accrued for each calendar day and
the sum of the daily fee accruals shall be paid monthly to the Sub-Advisor. The
daily fee accruals will be computed by multiplying the fraction of one over the
number of calendar days in the year by the applicable annual rate described
above and multiplying this product by the net assets of the Fund as determined
in accordance with the Fund's prospectus and statement of additional information
as of the close of business on the previous business day on which the Fund was
open for business.
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.
