BT- PB-8
PRINCIPAL PACIFIC BASIN FUND, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT executed as of the 1st day of April, 2000, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the Manager"),
and BT FUNDS MANAGEMENT (INTERNATIONAL) LIMITED, a New South Wales, Australia
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 Principal Pacific
Basin 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
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The Sub-Advisor is hereby expressly authorized to:
(a) Provide investment advisory services, including but not limited
to research, advice and portfolio management 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 economic 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,
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) 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 Fund's 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 the Fund 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 the Fund.
(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; provided however, the
Sub-Advisor is under no obligation to do so. 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.
(j) 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.
(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 reasonably requested by 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 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.
(o) Enter into derivatives transactions for and on behalf of the Fund
using an account for the Fund in the name of BT Custodial
Services Limited (ACN 000 871 661) as nominee.
3. Custodian
The Fund shall appoint a Custodian to act as custodian of the Fund's
assets. The Manager shall ensure that the Custodian (a) complies with
the instructions of the Sub-Advisor; (b) advises the Sub-Advisor
immediately of cash movements to the account and (c) provides the
Sub-Advisor promptly with records of investments as and when required
by the Sub Adviser. Subject to paragraph 2 (o) of this Agreement, all
settlements of transactions must take place through the Custodian. The
Sub-Advisor shall not be liable for any acts or omissions of the
Custodian nor any loss or liability caused to the Fund or the Manager
for any failure by the Custodian to act in accordance with the
instructions of the Sub-Advisor. The Manager shall ensure that all
operational arrangements with the Custodian are satisfactory to the
Sub-Advisor.
4. Compensation
As full compensation for all services rendered and obligations assumed
by the Sub-Advisor hereunder with respect to the Fund, the Manager
shall pay the compensation specified in Appendix A to this Agreement.
5. Sub-Advisor's Representations And Warranties.
---------------------------------------------
Sub-Advisor hereby represents and warrants to the Manager as follows:
(a) It is duly organized, validly existing and in good standing.
(b) It has the power and authority to enter into this Agreement and to carry
out its obligations hereunder. The execution of this Agreement and the
performance of the Sub-Advisor's obligations hereunder have been duly
authorized and no other proceedings are necessary to authorize this
Agreement.
(c) Neither the execution of this Agreement nor the acts contemplated hereby
nor compliance by the Sub-Advisor with any provisions hereof will violate
(a) any provisions of the Sub-Advisor's organizational documents, (b) any
statute, law, judgement, decree, order, regulation or rule of any court or
governmental authority applicable to the Sub-Advisor or, (c) be in conflict
with, or constitute a default under or permit the termination of, or
require the consent of any person under any agreement to which the
Sub-Advisor may be bound.
6. Manager's Representations And Warranties.
-----------------------------------------
(a) Manager represents that it is duly organized, validly existing and in good
standing.
(b) Manager represents that it has the power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution of this
Agreement and the performance of the Manager's obligations hereunder have
been duly authorized by the Manager and no other proceedings on the part of
the Manager are necessary to authorize this Agreement.
(c) Manager represents that neither the execution of this Agreement nor the
acts contemplated hereby nor compliance by the Manager with any provisions
hereof will (a) violate any provision of the Manager's organizational
documents, (b) violate any statute, law, judgement, decree, order,
regulation or rule of any court or governmental authority applicable to the
Manager, or (c) be in conflict with, or constitute a default under, or
permit the termination of, or require the consent of any person under, any
agreement to which the Manager may be bound which violation, conflict,
default, termination or absence, in the aggregate, would have a material
adverse effect on the financial condition of the Manager.
(d) Manager has requested and received all information from the Sub-Advisor
that the Manager deems relevant to the engagement of the Sub-Advisor as
contemplated by this Agreement. The Manager acknowledges receipt of a copy
of the Sub-Advisor's Form ADV as such form exists on the date of this
Agreement.
(e) The Employee Retirement Income Security Act of 1974 is not applicable to
any asset in the Fund. To the extent any law of any political jurisdiction
is applicable to the Fund or any of its assets, the Manager shall be
responsible for assuring that any instructions given by the Manager to the
Sub-Advisor are consistent with any such law, and the Sub-Advisor shall
have no responsibility for such compliance. To the extent any federal
securities law of the United States of America is applicable at any time,
the Fund constitutes a "qualified institutional buyer", an "accredited
investor", and a "qualified purchaser" as those concepts are defined in the
federal securities laws of the United States of America.
7. Liability of Sub-Advisor
(a) 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.
(b) Without limiting the generality of sub-paragraph (a), the Sub-Advisor shall
not be responsible or liable for the acts or omissions of any agents, other
than Supervised Agents or its own acts or omissions premised on
misinformation provided by the Custodian or any agents, other than
Supervised Agents. The Sub-Advisor shall not be responsible or liable for
the acts or omissions of the Custodian.
(c) "Supervised Agent" means an agent of the Sub-Advisor which in fact acts
under the control and supervision of the Sub-Advisor, but does not include
an agent of the Sub-Advisor which:
(1) is a broker or Clearing House or who otherwise acts in a Clearing House
or broking capacity; or
(2) is an agent, or one of a class of agents, nominated in writing by the
Sub-Advisor for this purpose and which is not objected to by the
Manager within 14 days of the date the Manager receives the nomination;
or
(3) is an agent whose conduct or actions is not capable of supervision by
the Sub-Advisor, in respect of the particular matter to which reference
is made; or
(4) acts in accordance with the direction of the Manager in respect of the
particular matter to which reference is made.
(d) "Clearing House" means a person who provides facilities for the transfer of
securities or settlement in the ordinary course of trading in securities.
8. 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.
9. 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.
10. Retain Counsel
The Sub-Advisor may retain counsel on behalf of the Manager or the Fund
in the event of actual or threatened litigation or other proceedings
potentially affecting any investment. Such retention of counsel shall
be subject to the prior consent of the Manager, which consent shall not
be unreasonably withheld. In the event that the Sub-Advisor believes
that an attorney must be retained immediately or the interests of the
Manager or the Fund will be compromised, the Sub-Advisor may retain any
such attorney immediately and promptly thereafter seek approvals from
the Manager.
11. 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 7, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions
of "interested person," "assignment" and "voting security") shall be
applied.
12. 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.
13. 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) All notices given pursuant or in connection with this Agreement
shall be in writing and shall be deemed given if delivered
personally or telecopied by telefacsimile transmission subject to
confirmation by telephone by an authorized representative of the
recipient, or sent by nationally recognized courier service or
mailed by registered, certified or express mail, postage prepaid,
and shall be deemed given when so delivered personally, or
transmitted by telefacsimile or, if mailed, five (5) days after
the date of mailing to the following addresses, or to such other
address as the parties shall designate in writing from time to
time:
Sub-Advisor: BT Funds Management Limited
Attn: Business Manager-Equities
Xxxxx 00
Xxxxxxx Xxxxx
0 Xxxxxxx Xxxxxx
Xxxxxx XXX 0000
Facsimile: 000-0000-0000
Telephone: 000-0000-0000
Manager/Fund: Principal Financial Group
Xxx Xxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxx
Facsimile: 000-000-0000
Telephone: 000-000-0000
(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 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, 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/A. S. Filean____________________________
A.S. Filean, Senior Vice President
BT FUNDS MANAGEMENT (INTERNATIONAL) LIMITED
By _/s/Grant Forster___________________________
BT- PB-9
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"):
First $250,000,000 of assets.......................................0.600%
Next 250,000,000 of assets.........................................0.575
Next 250,000,000 of assets.........................................0.550
Next 250,000,000 of assets.........................................0.525
Assets above $1,000,000,000........................................0.500
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.
