PRINCIPAL INVESTORS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PARTNERS LARGECAP BLEND FUND I AND
PARTNERS MIDCAP VALUE FUND I
AGREEMENT effective as of the 20th day of November, 2003, 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 each Series of the
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 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 Partners LargeCap Blend Fund I of the Fund and for the
portfolio of the Partners MidCap Value Fund I of the Fund (each hereinafter
called the "Series"), which the Manager has agreed to provide to the Fund, and
the Sub-Advisor desires to furnish such services; and
WHEREAS, The Manager has furnished the Sub-Advisor with copies properly
certified or authenticated of each of the following and will promptly provide
the Sub-Advisor with copies properly certified or authenticated of any amendment
or supplement thereto:
(a) Management Agreement (the "Management Agreement") with the Fund;
(b) The Fund's registration statement and financial statements as filed
with the Securities and Exchange Commission;
(c) The Fund's Articles of Incorporation and By-laws;
(d) Policies, procedures or instructions adopted or approved by the Board
of Directors of the Fund relating to obligations and services provided
by the Sub-Advisor, 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, the Fund and the Series, 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 Series.
(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 Series' investment policies 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 9(d) 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 Series 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 Series (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 Series, place all necessary orders with broker-dealers or
issuers (including affiliated broker-dealers), and negotiate
commissions, if applicable. To the extent consistent with applicable
law, purchase or sell orders for the Series may be aggregated 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 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 best execution of transactions for the Series. The Sub-Advisor
may select brokers or dealers on the basis that they provide
brokerage, research or other services or products to the Sub-Advisor.
To the extent consistent with applicable law, the Sub-Advisor may pay
a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer spread
another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research products and/or services provided by such
broker or dealer. This determination, with respect to brokerage and
research products and/or services, may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Sub-Advisor and its affiliates have with respect to the Series as well
as to accounts over which they exercise investment discretion. Not all
such services or products need be used by the Sub-Advisor in managing
the Series. 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 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
Series 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
Series 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 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 the 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. 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 Series. 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 sub-advisory services to the Fund or an investment company
registered under the 1940 Act that is under common control with the Fund
regarding transactions for the Fund in the securities or other assets
allocated to the Sub-Advisor pursuant to this Agreement.
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 Series and the
Manager agree 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 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 the Series fail to approve the Agreement or any
continuance of the Agreement in accordance with the requirements of the
1940 Act, the Sub-Advisor will continue to act as Sub-Advisor with respect
to the Series pending the required approval of the Agreement or its
continuance or of any contract with the Sub-Advisor or a different manager
or sub-advisor or other definitive action 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 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,
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 00 Xxx Xxxx, 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 Series
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 Series
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 Series. 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 Series custodian to provide)
timely information to the Sub-Advisor regarding such matters as the
composition of the assets of the Series, cash requirements and cash
available for investment in the Series, any applicable investment
restrictions imposed by state insurance laws and regulations, 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 Series 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 Series
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 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 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. Gillum________________
Xxxxxx X. Xxxxxx, Vice President
XXXXXXX XXXXX ASSET MANAGEMENT, L.P.
By_/s/Xxxxx McNamara__________________
Xxxxx XxXxxxxx, 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"):
PARTNERS LARGECAP BLEND FUND I
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%
PARTNERS MIDCAP VALUE FUND I
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
First $25 million..........................0.60%*
Next $25 million...........................0.55%*
Next $75 million...........................0.50%
Next $225 million..........................0.45%
Over $350 million..........................0.40%
* If assets exceed $75 million, the fee on the first $50 million will be 0.50%.
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.
