PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
AGREEMENT effective as of the 1st day of July, 2004, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the Manager"),
and Xxxxxxx Xxxxx Asset Management, L.P. New York limited partnership organized
under the laws of the State of New York (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 the Principal
Partners Blue Chip 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 render discretionary
investment advisory services with respect to assets allocated by the Manager for
management by the Sub-Advisor (the "Managed Assets") for a portion of the
portfolio of 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, provided that with respect to procedures governing
transactions involving affiliates (such as those adopted pursuant to
1940 Act Rules 17a-7, 17e-1 and 10f-3), the Manager will identify any
affiliate of the Manager and, the Fund, and provided further that the
Sub-Advisor shall not bear any responsibility and shall be released
from any obligation or cost which results from entering into a trade
with any affiliated entity not specifically identified to the
Sub-Advisor by the Manager, unless the entity is affiliated with 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 Managed Assets
which Sub-Advisor shall manage in its discretion 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 Managed Assets.
(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 Fund.
(e) Maintain, in connection with the Sub-Advisor's investment
advisory services obligations provided to the Series, compliance
with the 1940 Act and the regulations adopted by the Securities
and Exchange Commission thereunder and the Fund's investment
strategies 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 12(e) of this Agreement.
The Sub-Advisor has no responsibility for the maintenance of Fund
records except insofar as is directly related to the Managed
Assets.
(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 Fund are being observed.
(g) Upon request from the Manager, provide consultation 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.
(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 the Fund (excluding brokerage
expenses and pricing and bookkeeping services).
(i) Open accounts with broker-dealers and futures 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 best execution of
transactions for the Fund. 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.
(j) Maintain all accounts, books and records with respect to the
Managed Assets 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 copies of 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 Fund 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 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.
(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 Part II of the
Sub-Advisor's Form ADV more than 48 hours prior to the execution
of this Agreement.
(n) Have the responsibility and authority to vote proxies solicited
by, or with respect to, the issuers of securities held in the
Fund. The Manager shall cause to be forwarded to Sub-Advisor all
proxy solicitation materials that it receives. The Manager
understands that the Sub-Advisor establishes from time to time
guidelines for the voting of proxies and may employ the services
of a proxy voting service to exercise proxies in accordance with
the Advisor's guidelines.
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.
All rights of compensation under the Agreement for services performed
as of the termination date shall survive the termination of 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 or its
Shareholders resulting from any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission
in carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performances
of its duties, 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 Sub-Advisor also shall have no liability for any act or omission
taken in respect of the non-GSAM portion of the Fund and the Manager
agrees to indemnify and hold harmless the Sub-Advisor and its officers,
directors, agents and employees from any losses, claims, damages,
liabilities or litigation (including reasonable legal and other
expenses) incurred by the Sub-Advisor that (I) were caused by any
action or omission relating to the non-GSAM portion of the Fund; (ii)
may be based upon any willful misfeasance, bad faith or gross
negligence by the Manager (other than Sub-Advisor or its employees); or
(iii) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or
prospectus covering shares of the Fund, or any amendment thereof or any
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement therein not misleading, unless such statement or
omission was made in reliance upon written information furnished to the
Fund or the Manager or any affiliated person of the Manager by the
Sub-Advisor which itself is materially misleading.
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
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 in the manner and to
the extent permitted by the 1940 Act and the rules and regulations
thereunder.
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. Severability
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
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 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, and such amendment is signed by
both parties.
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. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
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 Xxx Xxx Xxxx Xxxxx, 00xx
Xxxxx, Xxx Xxxx, XX 00000.
(c) Custody, Delivery and Receipt of Securities. The Manager shall
designate one or more custodians to hold the Managed Assets. The
custodians, as so designated, will be responsible for the custody,
receipt and delivery of securities and other assets of the Fund
including the Managed Assets, and the Sub-Advisor shall have no
authority, responsibility or obligation with respect to the
custody, receipt or delivery of securities or other assets of the
Fund including the Managed Assets. In the event that any cash or
securities of a Fund are delivered to the Sub-Advisor, it will
promptly deliver the same over to the custodian for the benefit of
and in the name of the Fund.
Unless otherwise required by local custom, all securities
transactions for the Managed Assets will be consummated by payment
to or delivery by a Fund of cash or securities due to or from the
Managed Assets.
Repurchase agreements, including tri-party repurchase agreements
and other trading agreements, may be entered into by a Fund acting
through designated officers or agents; custodians under tri-party
repurchase agreements will act as sub-custodians of the Fund.
(d) 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.
(e) 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, reports covering the classification of securities for
purposes of Subchapter M of the Internal Revenue Code and Treasury
Regulations Section 1.817, and all other reasonable information as
may be necessary for the Sub-Advisor to perform its duties and
responsibilities hereunder.
(f) Neither the Manager, Principal Mutual Life Insurance Company, nor
the Fund will publish or distribute any information, including but
not limited to registration statements, advertising or promotional
material, regarding the provision of investment advisory services
by the Sub-Advisor pursuant to this Agreement, or use in
advertising, publicity or otherwise the name of the Sub-Advisor or
any of its affiliates, or any trade name, trademark, trade device,
service xxxx, symbol or any abbreviation, contraction or
simulation thereof of the Sub-Advisor or its affiliates without
the prior written consent of the Sub-Advisor. This provision
includes any written, electronic or video type of material
intended for clients or brokers. Notwithstanding the foregoing,
the Manager may distribute information regarding the provision of
investment advisory services by the Sub-Advisor to the Fund's
board of Directors ("Board Materials") without the prior written
consent of the Sub-Advisor.
(g) The Manager shall perform quarterly and annual tax compliance
tests to ensure that the Fund is in compliance with Subchapter M
of the Internal Revenue Code ("IRC") and Section 817(h) of the
IRC. In connection with such compliance tests, the Manager shall
prepare and provide reports to the Sub-Advisor within 10 business
days of a calendar quarter end relating to the diversification of
the Fund under Subchapter M and Section 817(h). The Sub-Advisor
shall review such reports for purposes of determining compliance
with such diversification requirements. 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 within the
time permitted under the IRC, provided that any such
non-compliance was caused by Sub-Advisor in respect of the Managed
Assets.
(h) This Agreement contains the entire understanding and agreement of
the parties.
13. Other Expenses
The Manager shall pay all expenses relating to mailing prospectuses,
statements of additional information, proxy solicitation material and
shareholder reports to shareholders.
14. Confidential Information
Sub-Advisor shall not identify the Manager or the Fund as a client, or
disclose any information about the Manager or the Fund to any third party
except as may be required by law, regulatory proceeding or as may be
expressly permitted by the Manager.
It is understood that the name "Xxxxxxx, Sachs & Co." or "Xxxxxxx Xxxxx" or
any derivative thereof, any tradename, trademark, trade device, service
xxxx, symbol or logo associated with those names are the valuable property
of the Sub-Advisor and that the Manager has the right to use such name (or
derivative or logo), in offering materials or promotional or sales-related
materials of the Fund, only with the prior written approval of the
Sub-Advisor and for so long as the Sub-Advisor is Sub-Advisor to the Series
and the Fund. Upon termination of this Agreement between the Fund, the
Manager and the Sub-Advisor, the Fund and the Manager shall forthwith cease
to use such name (or derivative or logo).
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
PRINCIPAL MANAGEMENT CORPORATION
By /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Xxxxxx X. Xxxxxx, Vice President
XXXXXXX XXXXX ASSET MANAGEMENT, L.P. NEW YORK
By /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxx, Managing Director
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"):
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
First $500 million.........................0.15%
Next $1 billion............................0.12%
Over $1.5 billion..........................0.10%
In calculating the fee for the Principal Partners Blue Chip 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 Blue Chip
Fund, Inc., will be combined (together, the "Aggregated Assets"). The fee
charged for the assets in the Principal Partners Blue Chip Fund shall be
determined by calculating a fee on the value of the Aggregated Assets and
multiplying the aggregate fee by a fraction, the numerator of which is the
amount of assets in the Principal Partners Blue Chip Fund and the denominator of
which is the amount of the Aggregated Assets.
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.
