PRINCIPAL INVESTORS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PARTNERS LARGECAP GROWTH FUND II
AGREEMENT executed as of the 23rd day of June, 2003, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the
Manager"), and AMERICAN CENTURY INVESTMENT MANAGEMENT, INC., a Delaware
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 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 the Partners LargeCap Growth Fund II
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
(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) a description of its
LargeCap Growth investment strategy, with the understanding that
the strategy is similar or identical to that used for other funds
managed by the Sub-Advisor. The Manager shall ensure that the
strategy is consistent with the Series' investment objective and
policies prior to presenting the recommendation to the Board of
Directors.
(c) Implement the approved investment strategy 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 reasonably
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) 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 and as agreed by the Sub-Advisor in order to enable
the Board to determine that the investment policies, procedures
and approved investment program of the Series are being observed.
It is generally expected that such reports will be made on a
quarterly basis, in a format used with the level of detail agreed
upon by the parties.
(f) 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.
(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 the Series.
(h) Open accounts with broker-dealers and future 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 or, if appropriate, crossed with
contemporaneous purchase or sell orders of other clients of the
Sub-Advisor. If any trades are crossed, Sub-Advisor may charge
the Fund for reasonable expenses incurred in such cross-trade,
excluding brokerage commissions, fees (other than customary
transfer fees) or other remuneration paid in connection with the
transaction. A transaction fee charged by a custodial bank will
be considered a customary transfer fee for purposes of this
agreement. 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 a manner consistent with the
Sub-Advisor's allocation policy and 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.
Notwithstanding the foregoing, nothing in this Agreement shall be
construed to require the Sub-Advisor to use any broker or dealer
that provides brokerage, research or other services, nor to use
any broker or dealer that the Manager may recommend. 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.
(i) 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
Adviser's Act of 1940 (the "Investment Adviser's Act"), and the
rules thereunder, and furnish the Fund and the Manager with such
quarterly 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 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 the 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 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 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 and the Sub-Advisor shall agree. The
Sub-Advisor will make available appropriate representatives 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 once a year.
(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. 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) Notify the Manager of the filing of any amendments to the
Sub-Advisor's Form ADV 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 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 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 the 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, securities or other laws and rules applicable to
the management and marketing of the Fund, 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 Manager agrees that subject to the investment objective, investment
policies and investment restrictions of the Series as set forth in the
Fund's registration statement as in effect from time to time, the
Sub-Advisor's adherence to a LargeCap Growth investment style generally
used by the Sub-Advisor in managing its other LargeCap Growth Funds,
shall not be considered a failure by Sub-Advisor to use its best
judgement, efforts and advice under this Agreement.
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 adviser under the Investment Advisers 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 Advisers
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, and (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.
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 Fund 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 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 or upon
termination of the Management Agreement, provided the Sub-Advisor has
received prior written notice of such termination. 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 Advisers 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 Advisers 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 judgement 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. 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 Xxxx Xxxxxx, Xxxxxx
Xxxx, XX 00000, 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) The Manager will provide Sub-Advisor promptly with any changes to
the Fund's Articles of Incorporation, By-laws, registration
statement, policies, procedures, instructions, and any other
document relevant to the Sub-Advisor's management of the Series.
The parties agree that the Sub-Advisor is not responsible for
compliance with any such changes until notified and provided with
a written copy of such change.
(f) 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
/s/ Xxxxxx X. Xxxxxx
By ____________________________________________
Xxxxxx X. Xxxxxx, Vice President
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
/s/ Xxxxxxx X. Xxxxx
By ____________________________________________
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Partners
LargeCap Growth Fund II 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
Percentage of Daily Net Assets
First $50,000,000....................................0.550%
Next $50,000,000.....................................0.500
Next $150,000,000....................................0.430
Next $250,000,000....................................0.350
Above $500,000,000...................................0.320
The Sub-Advisor Percentage Fee shall be accrued for each calendar day and
the sum of the daily fee accruals shall be wired monthly to the Sub-Advisor, and
shall be accompanied or supplemented by such supportive documentation as the
Sub-Advisor may reasonably request. 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.
