PRINCIPAL INVESTORS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
XXXXXXXXX XXXXXX SUB-ADVISED SERIES
AGREEMENT executed as of October 31, 2003, by and between PRINCIPAL MANAGEMENT
CORPORATION (hereinafter called "the Manager"), and XXXXXXXXX XXXXXX MANAGEMENT,
INC. (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 "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 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
The Sub-Advisor will:
(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
each 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 each 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 each 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 each Series.
(i) Open accounts with broker-dealers and futures 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 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 each 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 each 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 each 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 each
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 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 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 Advisers
Act, the Securities Act of 1933, as amended (the "Securities
Act"), and any state securities laws, and any rule or regulation
thereunder.
(n) Perform quarterly and annual tax compliance tests to monitor each
Series' compliance with Subchapter M of the Code. The Sub-Advisor
shall notify the Manager immediately upon having a reasonable
basis for believing that a Series has ceased to be in compliance
or that it might not be in compliance in the future. If it is
determined that a 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) Provide a copy of the Sub-Advisor's Form ADV and any amendments
thereto contemporaneously with the filing of such documents with
the Securities and Exchange Commission or other regulatory
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 each 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.
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
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 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.
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 and the Sub-Advisor for this purpose shall
be Principal Financial Group, Xxx Xxxxxx, Xxxx 00000-0000.
(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 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/Xxxxxx X. Gillum_________________
Xxxxxx X. Xxxxxx, Vice President
XXXXXXXXX XXXXXX MANAGEMENT, INC.
By /s/Xxxxx X. Sundman_________________
Xxxxx X. Xxxxxxx
President
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for each Series of
the Fund identified below. 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 shown below (the "Sub-Advisor Percentage Fee"):
Series Sub-Advisor Percentage Fee
Partners MidCap Value Fund First $100,000,000 of assets..........0.500%
Next $150,000,000 of assets...........0.475
Next $250,000,000 of assets...........0.450
Next $250,000,000 of assets...........0.425
Assets over $750,000,000..............0.400
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.
