PRINCIPAL INVESTORS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PARTNERS LARGECAP BLEND FUND
AGREEMENT executed as of the 21st day of November, 2003, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the
Manager"), and FEDERATED INVESTMENT MANAGEMENT COMPANY, a Delaware business
trust (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 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
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 "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.
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
(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 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
Certificate 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) 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.
(f) Upon request, provide assistance 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.
(g) 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.
(h) Open accounts with broker-dealers and future 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 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.
(i) 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 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 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 Account 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 each Series
upon request and upon reasonable notice 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 provided
to the Series.
(j) 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.
(k) From time to time as the Manager or the Fund may reasonably request,
furnish the requesting party reports on portfolio transactions and
reports on investments held by each 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 each Series.
(l) 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.
(m) Perform quarterly and annual tax compliance tests to monitor the
Series' compliance with Subchapter M of the Code. It is understood and
agreed the Sub-Advisor will not be held accountable for a failure to
include cash held by the Fund of which the Sub-Advisor is reasonably
unaware when determining compliance with Subchapter M. The Sub-Advisor
shall notify the Manager immediately upon having a reasonable basis
for believing that the Series has ceased to be in compliance or that
it might not be in compliance in the future. 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 (to the extent possible)
within the time permitted under the Code.
(n) 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 strategy and restrictions as stated in the Fund's
prospectus and statement of additional information.
(o) Provide a copy of the Sub-Advisor's Form ADV and any amendments
thereto contemporaneously with filing of such documents with the
Securities and Exchange Commission or other regulator agency.
3. Prohibited Conduct
In providing the services described in this agreement, the Sub-Advisor will
not consult with any other investment advisory firm (other than the
Manager) that provides investment advisory services to any investment
company sponsored by Principal Life Insurance Company regarding
transactions for the Fund or transactions for such other investment company
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 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 any
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 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
each 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.
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 0000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000-0000,
Attention: General Counsel.
(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 the 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 the Series, cash requirements and cash
available for investment in the Series, any applicable investment
restrictions imposed by state insurance laws and regulations, 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/Xxxxxx X. Gillum___________________
Xxxxxx X. Xxxxxx, Vice President
FEDERATED INVESTMENT MANAGEMENT COMPANY
By /s/Xxxxx X. Schappert_________________
Xxxxx X. Xxxxxxxxx, President/CEO
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Partners
LargeCap Blend Fund Series of 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"):
Sub-Advisor Fee as a
Series Percentage of Daily Net Assets
------ ------------------------------
Partners LargeCap Blend Fund First $75,000,000 of assets........0.35%
Next 200,000,000 of assets.........0.25
Next 250,000,000 of assets.........0.20
Assets above $525,000,000..........0.15
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 Series as determined
in accordance with the Series' prospectus and statement of additional
information as of the close of business on the previous business day on which
the Series 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.
