PRINCIPAL INVESTORS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
THE DREYFUS CORPORATION SUB-ADVISED SERIES
AGREEMENT executed as of the 25th day of November, 2003, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the
Manager"), and THE DREYFUS CORPORATION, a New York Corporation (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 Fund 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 furnish it with
portfolio selection and related research and statistical services in connection
with the investment advisory services for the Partners SmallCap Blend Fund and
Partners MidCap Growth Fund I of the Fund (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 the 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 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
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 provided to the Series, its 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
10(d) of this Agreement. The Sub-Advisor has no responsibility for the
maintenance of Fund records except insofar as is directly related to
the services it provides to the Series.
(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 in 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 its duties under
this Agreement.
(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 Manager recognizes that, in some
cases, this procedure may limit the size of the position that may be
acquired or sold for the Series. 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 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 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
Sub-Advisor's Form ADV more than 48 hours prior to the execution of
this Agreement.
(n) Perform quarterly and annual tax compliance tests to monitor the
Series' compliance with Subchapter M of the Code and Section 817(h) of
the Code, subject to receipt of such additional information as may be
required from the Manager and provided in accordance with Section
10(d) of this Agreement. 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.
(o) 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 and shall assist Sub-Advisor
in its efforts to conduct the proxy voting process.
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 the Fund, 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 duties under this Agreement 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 (excluding
any broker-dealer selected by the Sub-Advisor), or affiliates.
6. Indemnification
The Manager agrees to indemnify and hold harmless the Sub-Advisor from and
against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), ("Losses")
howsoever arising, from or in connection with this Agreement or the
performance by the Sub- Advisor of its duties hereunder, so long as the
Sub-Advisor shall, after receipt of notice of any claim or commencement of
any action, promptly notify the Manager in writing of the claim or
commencement of such action. The Manager shall not be liable for any
settlement of any claim or action effected without its written consent.
Nothing contained herein shall require the Manager to indemnify the
Sub-Advisor for Losses resulting from the Sub-Advisor's willful
misfeasance, bad faith or gross negligence in the performance of its duties
or from its reckless disregard of its obligations and duties under this
Agreement.
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; provided, that the compensation
received by the Sub-Advisor in respect to the Fund 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. 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.
11. 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, Xxx Xxxxxx, Xxxx 00000-0000, and the address of the
Sub-Advisor shall be 000 Xxxxx Xxxxxx, Xxxxxx Xxxxx, Xxx Xxxx, XX
00000. Attention: Legal - Mutual Funds.
(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 Fund.
(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, 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. Xxxxxx
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Xxxxxx X. Xxxxxx, Vice President
THE DREYFUS CORPORATION
By /s/Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx, Controller
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 SmallCap Blend Fund
Fee as a Percentage of Average
Average Daily Net Assets Daily Net Assets
First $100 million 0.50%
Next $200 million 0.45%
Over $300 million 0.35%
Partners MidCap Growth Fund I
Fee as a Percentage of Average
Average Daily Net Assets Daily Net Assets
First $50 million 0.40%
Assets over $50 million 0.35%
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.
