PRINCIPAL PARTNERS LARGECAP VALUE FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
AGREEMENT executed as of the 1st day of July 1, 2004, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the
Manager"), and ALLIANCE CAPITAL MANAGEMENT L.P., a Delaware limited partnership
acting hereunder through its XXXXXXXXX INVESTMENT RESEARCH AND MANAGEMENT UNIT
(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 Principal Partners
LargeCap Value 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 Fund, 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 Fund, 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 Fund.
(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 Fund consistent with the Fund's 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 the Fund.
(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 the Fund are being observed.
(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 Fund.
(h) Open accounts with broker-dealers and future commission merchants
("broker-dealers"), select broker-dealers to effect all
transactions for the Fund, 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
Fund 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 Fund 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 Fund at prices which are advantageous to the Fund 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 Fund 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 Fund. In
addition, joint repurchase or other accounts may not be utilized
by the Fund 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 Fund
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 Fund 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 Fund 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 Fund.
(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 Fund, 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 Fund.
(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. Sub-Advisor will advise Manager of any changes in
Sub-Advisor's general partners within a reasonable time after any
such change.
(m) Perform quarterly and annual tax compliance tests to monitor the
Fund's compliance with Subchapter M of the Code. The Sub-Advisor
shall notify the Manager immediately upon having a reasonable
basis for believing that the Fund has ceased to be in compliance
or that it might not be in compliance in the future. If it is
determined that the Fund is not in compliance with the
requirements noted above, the Sub-Advisor, in consultation with
the Manager, will take prompt action to bring the Fund back into
compliance (to the extent possible) within the time permitted
under the Code.
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.
Brokerage services provided by SCB LLC to the Fund are not within the
scope of the duties of the Sub-Advisor under this Agreement. Subject
to the requirements of applicable law and any procedures adopted by
the Fund's board of directors, SCB LLC may receive brokerage
commissions, fees or other remuneration from the Fund for these
services in addition to the Sub-Advisor's fees for services under the
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 Fund 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 Fund. 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 Fund 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 Fund 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 Fund 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 Fund 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. 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, Xxx Xxxx,
XX 00000, Attention: J. Xxxxxx Xxxxx.
(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 Fund custodian to
provide) timely information to the Sub-Advisor regarding such
matters as the composition of the assets of the Fund, cash
requirements and cash available for investment in the Fund, 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
/s/ Xxxxxx X. Xxxxxx
By________________________________________
Xxxxxx X. Xxxxxx, Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management
Corporation, its General Partner
/s/ Xxxxx X. Xxxxxx
By________________________________________
Xxxxx X. Xxxxxx, Assistant Secretary
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Principal
Partners LargeCap Value Fund, Inc. 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"):
0.600% of the first $10 million of average daily net assets
0.500% of the next $15 million of average daily net assets
0.400% of the next $25 million of average daily net assets
0.300% of the next $50 million of average daily net assets
0.250% of the next $50 million of average daily net assets
0.225% of the next $50 million of average daily net assets
0.200% of average daily net assets thereafter
In calculating the fee for Principal Partners LargeCap Value Fund, Inc. on
or after July 1, 2004, assets of any unregistered separate account of Principal
Life Insurance Company and any investment company sponsored by Principal Life
Insurance Company to which the Sub-Advisor provides investment advisory services
and which have the same investment mandate as the Principal Partners LargeCap
Value Fund, will be combined (together, the "Aggregated Assets"). The Aggregated
Assets will be applied to the above schedule and the resulting fee shall be
prorated back to the Principal Partners LargeCap Value Fund and other affiliated
accounts accordingly.
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.
