PRINCIPAL INVESTORS FUND, INC.
SUB-ADVISORY AGREEMENT
XXXXXX BROTHERS SUB-ADVISED FUND
AGREEMENT executed as of July 18, 2007, by and between PRINCIPAL MANAGEMENT
CORPORATION (hereinafter called "the Manager"), and XXXXXX BROTHERS ASSET
MANAGEMENT LLC (hereinafter called "the Sub-Advisor").
W I T N E S S E T H:
WHEREAS, the Manager is the manager and investment advisor to each Series
of 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 furnish it with
investment advisory services with respect to 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 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 act as the Manager's agent and
attorney-in-fact with respect to the investment and reinvestment of
assets in the Series with full power and authority to direct any
custodian of the assets of the Series to purchase, sell or exchange any
stocks, bonds, or other securities or such other assets which are
acceptable to the Sub-Advisor (individually, "security" and
collectively, "securities") and to issue directly to a broker or dealer
such orders for the purchase, sale or exchange of securities or other
property, as the Sub-Advisor may deem appropriate and without prior
consultation with the Manager, 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 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
the 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 the 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 the 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 the Series. Except for
expenses specifically assumed or agreed to be paid by the
Sub-Advisor under this Agreement, the Sub-Advisor shall not be
liable for any expenses of the Manager, the Fund or the Series
including, without limitation, (i) interest and taxes, (ii)
brokerage commissions and other costs in connection with the
purchase or sale of securities or other investment instruments
with respect to the Series, and (iii) custodian fees and
expenses.
(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 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
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 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 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 Advisors
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 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.
Notwithstanding the foregoing, the Sub-Advisor shall not be
obligated to take any action or render advice involving legal
action on the Fund's behalf with respect to assets in the Series
that become subject to any legal notices or proceedings,
including securities class actions and bankruptcies. The Fund
retains the right to proceed directly as a securityholder against
the issuer of any security in the Series.
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 a fund 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, except as provided by Rule 12d-3-1 under the 1940 Act.
4. Compensation
As full compensation for all services rendered and obligations assumed
by the Sub-Advisor hereunder with respect to the 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. The Sub-Advisor shall not
have any responsibilities with respect to any assets of the Fund other
than the Series. The Sub-Advisor shall not be responsible for any loss
incurred by reason of any act or omission of any dealer or broker, or
the Manager, or any custodian, or any other third-party service
provider to the Fund or Series.
The Sub-Advisor shall be responsible only for managing the Series in
good faith and in accordance with the investment objectives,
fundamental policies and restrictions, and shall have no responsibility
whatsoever for, and shall incur no liability on account of (i)
selection or establishment of such investment objectives, fundamental
policies and restrictions (ii) advice on, or management of, any other
assets for Manager or the Fund, (iii) filing of any tax or information
returns or forms, withholding or paying any taxes, or seeking any
exemption or refund for the Manager or the Fund, (iv) registration of
the Fund or Series with any government or agency, or (v) administration
of the plans and trusts investing through the Fund, (vi) overall Fund
compliance with the requirements of the 1940 Act, which requirements
are outside of the Sub-Advisor's control, and any requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended, which
are outside of the Sub-Advisor's control and shall be indemnified and
held harmless by Manager for any loss in carrying out the terms and
provisions of this Agreement, including reasonable attorney's fees,
indemnification to the Fund, or any shareholder thereof and, brokers
and commission merchants, fines, taxes, penalties and interest.
Sub-Advisor, however, shall be liable for any liability, damages, or
expenses of Manager or the Fund arising out of the 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 or
employees.
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. Manager's Representations
The Manager represents and warrants that (i) it is registered as an
investment advisor under the Investment Advisors Act and will continue
to be so registered for so long as this Agreement remains in effect;
(ii) it is not prohibited by the 1940 Act or the Investment Advisors
Act from performing the services contemplated by this Agreement; (iii)
it has met, and will continue to meet for so long as this Agreement
remains in effect, any applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory
agency, necessary to be met in order to perform the services
contemplated by this Agreement; (iv) it has the authority to enter into
and perform the services contemplated by this Agreement, (v) it will
immediately notify the Sub-Advisor of the occurrence of any event that
would disqualify the Manager from serving as an investment advisor of
an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) it has received Sub-Advisor's written disclosure
statement (Form ADV Part II) required by Rule 204-3 under the
Investment Advisers Act at least 48 hours prior to entering into this
Agreement.
The Manager further represents and warrants that on the date of this
Agreement the Series is a "qualified institutional buyer" as that term
is defined in Rule 144A of the Securities Act of 1933, as amended, and
to inform Sub-Adviser promptly if the Series loses its status as a
qualified institutional buyer
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.
10. Indemnification
(a) The Sub-Advisor agrees to indemnify and hold harmless the
Manager, any affiliated person within the meaning of Section
2(a)(3) of the 1940 Act ("affiliated person") of the Manager and
each person, if any who, within the meaning of Section 15 of the
Securities Act controls ("controlling persons") the Manager,
against any and all losses, claims, damages, liabilities or
litigation, including reasonable legal expenses (collectively
"Losses") to which the Manager or such affiliated person or
controlling person of the Manager may become subject under the
Securities Act, the 1940 Act, the Investment Advisors Act, under
any other statute, law, rule or regulation at common law or
otherwise, arising out of the Sub-Advisor's responsibilities
hereunder (1) to the extent of and as a result of the willful
misconduct, bad faith, or gross negligence by the Sub-Advisor,
any of the Sub-Advisor's employees or representatives or any
affiliate of or any person acting on behalf of the Sub-Advisor;
or (2) as a result of any untrue statement of a material fact
contained in the Registration Statement, including any amendment
thereof or any supplement thereto, or the omission to state
therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, if such a
statement or omission was made in reliance upon and in conformity
with written information furnished by the Sub-Advisor to the
Manager specifically for use therein; provided, however, that in
no case is the Sub-Advisor's indemnity in favor of the Manager or
any affiliated person or controlling person of the Manager deemed
to protect such person against any liability to which any such
person would otherwise be subject by reason of willful
misconduct, bad faith or gross negligence in the performance of
its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
(b) The Manager agrees to indemnify and hold harmless the
Sub-Advisor, any affiliated person and any controlling person of
the Sub-Advisor, if any, against any and all Losses to which the
Sub-Advisor or such affiliated person or controlling person of
the Sub-Advisor may become subject under the Securities Act, the
1940 Act, the Investment Advisors Act, under any other statute,
law, rule or regulation, at common law or otherwise, arising out
of the Manager's responsibilities as investment manager of the
Fund (1) to the extent of and as a result of the willful
misconduct, bad faith, or gross negligence by the Manager, any of
the Manager's employees or representatives or any affiliate of or
any person acting on behalf of the Manager, or (2) as a result of
any untrue statement of a material fact contained in the
Registration Statement, including any amendment thereof or any
supplement thereto, or the omission to state therein a material
fact required to be stated therein or necessary to make the
statement therein not misleading; provided, however, that in no
case is the Manager's indemnity in favor of the Sub-Advisor or
any affiliated person or controlling person of the Sub-Advisor
deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful
misconduct, bad faith or gross negligence in the performance of
its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement. It is agreed that
the Manager's indemnification obligations under this Section will
extend to expenses and costs (including reasonable attorneys
fees) incurred by the Sub-Advisor as a result of any litigation
brought by the Manager alleging the Sub-Advisor's failure to
perform its obligations and duties in the manner required under
this Agreement unless judgment is rendered for the Manager.
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.
12. CFTC Disclosure Relief
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION
IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS
AGREEMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE
COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON
THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY
OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE
COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS
TRADING PROGRAM OR THIS AGREEMENT.
13. 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 Maryland.
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 the
Principal Financial Group, Xxx Xxxxxx, Xxxx 00000-0000, and the
address of the Sub-Advisor shall be Xxxxxx Brothers Asset
Management LLC, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000.
(c) The Sub-Advisor will promptly notify the Manager in writing of the
occurrence of any of the following events unless otherwise
prohibited by law or regulation or regulatory request or that the
provision of such notice would be a violation of securities laws
by the Sub-Advisor or its affiliates:
(1) the Sub-Advisor fails to be registered as an investment
advisor under the Investment Advisors 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/ Xxxxxxx X. Beer_________________________________
Xxxxxxx X. Beer, Executive Vice President and
Chief Operating Officer
XXXXXX BROTHERS ASSET MANAGEMENT LLC
By /s/ Xxxx X. Johnson____________________________________
Xxxx X. Xxxxxxx, Managing Director
APPENDIX A
Xxxxxx Brothers Asset Management LLC shall serve as investment sub-advisor for
each Series identified below. The Manager will pay Xxxxxx Brothers Asset
Management LLC, 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 Series' net assets as the first day of each month allocated to Xxxxxx
Brothers Asset Management LLC's management.
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.
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Sub Advisor Fee (as percentage of
Series Daily Net Assets Managed) Annualized
Fee
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All Assets Under Management
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High Yield Fund 0.30%
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