U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. _______________)
Filed by Registrant____X______ Filed by a party other than the
Registrant_________
Check the appropriate box:
____ Preliminary Proxy Statement
____ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
_X__ Definitive Proxy Statement
_X__ Definitive Additional Materials
____ Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Exact Name of Registrant as Specified in Charter:
Principal Partners Blue Chip Fund, Inc.
(Formerly known as Principal Blue Chip Fund, Inc.)
Name of Person(s) Filing Proxy Statement, if other than the Registrant
N/A
Payment of Filing Fee (Check the appropriate box):
_X__ No fee required
____ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
____ Fee paid previously with preliminary materials.
Principal
Mutual
Fund
October 1, 2002
Dear Shareholder:
The Board of Directors of Principal Partners Blue Chip Fund, Inc. ("Blue Chip
Fund"), formerly known as Principal Blue Chip Fund, Inc., have recently
determined it was in the best interest of the Fund and the Fund's shareholders
to change the structure of the management of the Fund's portfolio in an effort
to improve the Fund's investment performance. As a result, the Board has decided
to terminate the sub-advisory agreement with Invista Capital Management
effective December 15, 2002 and has approved sub-advisory agreements to be
entered into between Principal Management Corporation, the Fund's investment
adviser, and two sub-advisers, Goldman Sachs Asset Management and Wellington
Management Company. The Board has called a special meeting of shareholders for
November 20, 2002 to request shareholder approval of the two new sub-advisory
agreements. The Board of the Blue Chip Fund believes that the proposed
agreements are in the best interest of the Fund and its shareholders.
The Board is also requesting shareholder approval of a proposal to permit
Principal Management Corporation, with Board approval, to appoint and replace
sub-advisers and to enter into and amend sub-advisory agreements on behalf of
the Blue Chip Fund without further shareholder approval. Approval of this
proposal would permit the Fund to implement changes the Board and the Fund's
manager believe to be in the Fund's interest, on an expedited basis without the
Fund incurring expenses related to shareholder meetings.
No matter how many shares you own, it is important that you take time to read
the proxy statement and vote as soon as possible. If you have more than one
account in Blue Chip Fund, you have received a consolidated proxy ballot which
allows you to vote all of your accounts at once--by mail, by phone or via the
Internet. Please return ALL of the proxy ballots.
We appreciate your taking the time to respond on this important matter. If you
have questions regarding the proxy or the voting process, please call our proxy
solicitor, D.F. King & Co., Inc. at 1-800-659-6590. If you have questions
concerning your account, please call our shareholder services department
toll-free at 1-800-247-4123.
Sincerely,
LOGO
LOGO
/s/Ralph C. Eucher
Ralph C. Eucher
President
Principal Partners Blue Chip Fund, Inc.
IMPORTANT INFORMATION TO HELP YOU VOTE ON THE PROPOSAL
HOW MANY VOTES AM I ENTITLED TO CAST?
You are entitled to one vote for each share of the Principal Partners
Blue Chip Fund owned on the record date, September 16, 2002.
HOW DO I VOTE MY SHARES?
Voting is easy. You may vote your shares by completing and signing the
enclosed proxy ballot and mailing it in the enclosed postage paid
envelope or, if it is more convenient, you may vote by touch-tone
telephone or via the Internet. Refer to your proxy ballot for the
toll-free telephone number or Internet address. If you need any
assistance or have any questions concerning the Plan or how to vote
your shares, please call 1-800-659-6590.
HOW DO I SIGN THE PROXY BALLOT?
Individual Accounts: Shareholders should sign exactly as their names
appear in the account registration shown on the
proxy ballot.
Joint Accounts: Either owner may sign, but the name of the person
signing should conform exactly to a name that
appears in the account registration shown on the
proxy ballot.
All Other Accounts: The person signing must indicate his or her
capacity. For example, a trustee for a trust or
other entity should sign, "John A. Doe, Trustee."
PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
(FORMERLY KNOWN AS PRINCIPAL BLUE CHIP FUND, INC.)
DES MOINES, IOWA 50392-0200
____________
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 20, 2002
___________
To the Shareholders:
Notice hereby is given that a special meeting of the shareholders of Principal
Partners Blue Chip Fund, Inc. (Blue Chip Fund) will be held at 2:00 p.m. C.S.T.,
on November 20, 2002, at the offices of Principal Management Corporation, 680
8th Street, Des Moines, Iowa 50392-0200. The meeting is being held to consider
and vote on the following matters as well as any other business that may
properly come before the meeting or any adjournment thereof:
1. Approval of sub-advisory agreements between Principal Management
Corporation, the Blue Chip Fund's investment adviser, and two
sub-advisory firms, Goldman Sachs Asset Management a unit of the
Investment Management Division of Goldman, Sachs & Co., and
Wellington Management Company, LLP.
2. Approval of a proposal to permit Principal Management
Corporation, with the approval of the Blue Chip Fund's Board of
Directors, to appoint and replace sub-advisers, and to enter into
and amend sub-advisory agreements on behalf of the Blue Chip Fund
without further shareholder approval.
You are entitled to notice of and to vote at the meeting, and any adjournment,
if you owned shares of the Blue Chip Fund at the close of business on September
16, 2002, the record date for the meeting.
Your vote is important. No matter how many shares you own, please read the
attached proxy statement, and vote today.
LOGO
/s/A. S. Filean
For the Board of Directors
Arthur S. Filean
Senior Vice President and Secretary
October 1, 2002
PROXY STATEMENT
INTRODUCTION AND VOTING INFORMATION
SPECIAL MEETING; VOTING OF PROXIES; ADJOURNMENT
- -----------------------------------------------
We are furnishing this proxy statement to you as shareholders of the Principal
Partners Blue Chip Fund, Inc. (the "Fund"), formerly known as Principal Blue
Chip Fund, Inc., in connection with the solicitation by the Board of Directors
of the Fund of proxies to be used at a special meeting of the shareholders to be
held on November 20, 2002 and at any adjournment thereof. The purpose of the
meeting is to vote on two issues described below. This proxy statement is first
being furnished to shareholders on or about October 1, 2002.
Shareholders of record of the Fund at the close of business on September 16,
2002, the record date, are entitled to vote at the meeting. As of the record
date, the Fund had 7,838,074.50 Class A shares and 2,129,351.55 Class B shares
outstanding and entitled to be voted. Shareholders are entitled to one vote for
each share of each Class held. A quorum must be present at the meeting for the
transaction of business. The holders of record of one-third of the shares
outstanding at the close of business on the record date present in person or
represented by proxy will constitute a quorum for the meeting. The approval of
each issue requires the affirmative vote of a majority of all the votes entitled
to be cast by shareholders of the Fund. Abstentions and broker non-votes
(proxies from brokers or nominees indicating that they have not received
instructions from the beneficial owners on an item for which the broker or
nominee does not have discretionary power) are counted toward a quorum but do
not represent votes cast for any issue. If the shareholders of the Fund do not
approve the sub-advisory agreements described below, the Fund will consider
possible alternative arrangements, and Principal Management Corporation will
continue to manage the Fund.
The proxies will vote in accordance with your direction, as indicated on your
proxy ballot, if the proxy ballot is received and is properly executed. If you
properly execute your proxy ballot and give no voting instructions with respect
to an issue, the proxies will vote your shares in favor of the issues. The
proxies, in their discretion, may vote upon such other matters as may properly
come before the meeting. We are not aware of any other matters expected to come
before the meeting.
If either (i) a quorum is not present at the meeting or (ii) a quorum is present
but sufficient votes in favor of approving the issues are not received by 12:00
Noon C.S.T., November 20, 2002, then the persons named as proxies in the
enclosed form of proxy may propose one or more adjournments of the meeting to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of at least a majority of the Fund shares represented, in
person or by proxy, at the session of the meeting to be adjourned. The proxies
will vote those proxies that they are required to vote FOR the issues in favor
of such an adjournment and will vote those proxies required to be voted AGAINST
the issues against such an adjournment.
PROXY SOLICITATION
- ------------------
We will solicit proxies primarily by mail. Additional solicitations may be made
by internet, telephone, facsimile or personal contact by officers or employees
of the Fund or Principal Management Corporation who will not be specially
compensated for these services. In addition, the Fund has retained D.F. King &
Co., Inc. to solicit proxies for estimated fees and expenses of $148,000 for the
services it provides to the Fund. The Fund will bear the costs of the meeting,
including costs of preparing and mailing the notice, the proxy statement, and
the proxy ballot and of soliciting proxies. Banks, brokers, and other persons
holding Fund shares as nominees will be reimbursed for their reasonable expenses
incurred in sending proxy materials to and obtaining voting information from the
beneficial owners of those shares.
REVOCATION OF PROXIES
- ---------------------
You may revoke your proxy: (i) at any time prior to the proxy's exercise by
sending written notice to the Secretary of the Principal Partners Blue Chip
Fund, at 680 8th Street, Des Moines, Iowa, 50392-0200 prior to the meeting; (ii)
by the subsequent execution and return of another proxy prior to the meeting; or
(iii) by being present and voting in person at the meeting after giving oral
notice of revocation to the Chairman of the meeting.
ADDITIONAL INFORMATION
- ----------------------
On September 16, 2002, the directors and officers of the Fund together owned
less than 1% of its outstanding shares. The Fund does not know of any person who
owned at the record date, of record or beneficially, 5% or more of the
outstanding shares of the Fund.
PROPOSAL 1
APPROVAL OF SUB-ADVISORY AGREEMENTS BETWEEN THE MANAGER AND SUB-ADVISERS
The Fund's Board of Directors recently approved a proposal by the Manager to
restructure the manner in which the Fund's portfolio assets are managed by
having two sub-advisers directly manage a portion of the Fund's assets, subject
to oversight by the Manager and the Board. The proposal to restructure is an
effort by the Manager to improve the investment performance of the Fund. On
September 9, 2002, the Funds' Board of Directors, including a majority of the
Board members who are not "interested persons" as that term is defined in
Section 2(a) (19) of the Investment Company Act of 1940 (Independent Board
Members), voted to approve the proposal and to terminate the previous
sub-advisory agreement (Former Agreement) between the Manager and Invista
Capital Management, LLC, effective December 15, 2002, and to approve
sub-advisory agreements ("Sub-Advisory Agreements") between the Manager and
Goldman Sachs Asset Management (a unit of the Investment Management Division of
Goldman, Sachs & Co.) and Wellington Management Company, LLP. The Board believes
that the Fund will be able to achieve better performance consistent with the
investment objectives and strategies of the Fund by employing the proposed
sub-advisers to manage the Fund's assets (as allocated from time to time by the
Manager).
Under the Sub-Advisory Agreements, each sub-adviser will invest the Fund's
assets for which the Manager and not the Fund, will pay the sub-adviser an
annual fee. The Board is asking shareholders to approve new Sub-Advisory
Agreements between the Manager and the applicable sub-advisers.
Under each Sub-Advisory Agreement, each sub-adviser will manage the day-to-day
investment of all or a portion of the Fund's assets (as allocated from time to
time by the Manager), consistent with the Fund's investment objectives,
policies, and restrictions. Each sub-adviser will be responsible for, among
other things, placing all orders for the purchase and sale of portfolio
securities for which it is responsible, subject to the supervision and
monitoring of the Manager and the over-sight of the Fund's Board. The Manager,
and not the Fund, will be responsible for paying all fees charged by the
applicable Sub-Adviser for these Sub-Advisory services. Any description of the
Sub-Advisory Agreements set forth herein is qualified in its entirety by the
actual Sub-Advisory Agreements, forms of which are attached as Exhibits A and B.
The obligations of each sub-adviser under the Sub-Advisory Agreements as
described above, are the same in all material respects as the obligations of
Invista under the Former Agreement.
If approved by the shareholders, each Sub-Advisory Agreement will remain in
effect for an initial one-year period. Thereafter, each Sub-Advisory Agreement
would continue automatically for successive years, provided that it is
specifically approved at least annually by the Board of Directors of the Fund or
by a vote of a majority of the outstanding voting securities of the Fund, but in
either event by a vote of a majority of the Independent Board Members.The
Sub-Advisory Agreement maybe terminated at any time, without penalty, by the
Board of Directors of the Fund or by the Manager, sub-adviser or by vote of a
majority of the outstanding shares of the Fund on 60 days' written notice. Each
Sub-Advisory Agreement will automatically terminate without penalty in the event
of its assignment.
If the proposal is not approved by the shareholders of the Fund, the Board and
the Manager will consider appropriate alternative actions.
The Sub-Advisory agreements will not impact the Fund's total expense ratios. The
Manager (not the Fund) pays a fee to the sub-advisers for services under the
Sub-Advisory Agreements.
At a meeting on September 9, 2002, the Board determined that it would be in the
best interests of the Fund and its shareholders to approve the Sub-Advisory
Agreements. In making this decision, the Board considered the expertise of each
proposed sub-adviser, the financial strength and quality of services offered by
each proposed sub-adviser, the fees charged for the services and the rigorous
due diligence process employed by the Manager with respect to each proposed
sub-adviser.
The Manager's due diligence process was completed by a Search Committee
consisting of members of senior management of the Manager. The Search Committee
conducted an initial screening of potential investment advisory candidates based
upon characteristics including: 1. At least a 3-year history of providing
investment advisory services using an investment strategy appropriate for the
fund; 2. Strong long-term investment performance; 3. Modest portfolio risk
profile; 4. Institutional or retail name recognition; and 5. Existing investment
advisory relationships, including an investment advisory relationship with
Principal Life. The Manager narrowed the field of appropriate investment
advisory firms and solicited a detailed questionnaire (request for proposal) to
selected candidates to elicit indications of interest and information about the
firm, its invest process, personnel and fees.
The Search Committee evaluated the responses of each candidate to the request
for proposal and selected final candidates which were then interviewed. The
Search Committee then evaluated the finalists based upon a variety of factors
including:
. General reputation of the firm
. Market focus of the firm and the awareness of the firm within the industry
and markets
. Length of time in the investment advisory business
. Tenure of the firm and its investment professionals
. Investment style, process and strategy
. Investment performance track record
. Ability to link electronically with Principal Management Corporation and
custodial bank
. Level and grading of fees
. Securities trading relationships
. Marketing support and distribution potential
. Code of ethics and insider trading policies
. Familiarity with and understanding of the 1940 Act
. Regulatory experience
. Compliance monitoring procedures
. Proxy voting procedures
. Soft dollar policies
All of the above factors were important considerations, although primary
consideration was generally given to the investment process, personnel, fees,
ability to link electronically, and investment performance track record.
On the basis of the entire search process, the Search Committee reached its
conclusion and recommended hiring a particular firm.
The Board concluded that each proposed sub-adviser is capable of providing
high-quality service as reflected by (i) the qualifications and experience of
its advisory personnel, (ii) its available organizational resources, and (iii)
its investment performance track record when managing accounts that are
comparable to the Fund.
GENERAL INFORMATION ABOUT WELLINGTON MANAGEMENT COMPANY, LLP
Wellington Management Company, LLP ("Wellington Management") is a Massachusetts
limited liability partnership with principal offices at 75 State Street, Boston,
Massachusetts 02109. Wellington Management is a professional investment
counseling firm that provides investment services to investment companies,
employee benefit plan, endowments, foundations, and other institutions.
Wellington Management and its predecessor organizations have provided investment
advisory services for over 70 years. As of June 30, 2002, Wellington Management
had approximately $312 billion in assets under management.
Wellington Management is managed by its 74 partners, all of whom are full-time
professional members of the firm. The managing partners of Wellington Management
are Laurie A. Gabriel, Duncan M. McFarland, and John R. Ryan. It should be noted
that the managing partners are not necessarily those with the largest economic
interests in the firm. Matthew E. Megargel, Senior Vice President and Partner,
has significant portfolio management responsibility for the Fund.
Wellington Management, nor any of its affiliates, provide any additional
services to the Fund. The Manager will pay Wellington Management a fee in the
annual amount of 0.25% of the Fund's first $500 million of average net assets
that Wellington Management manages and 0.20% on assets exceeding $500 million.
In calculating the fee, other asset pools Wellington Management manages for
Principal Financial Group that have the same investment objective as the portion
of the assets of the Blue Chip Fund managed by Wellington Management, will be
aggregated to determine the average net asset amount to which the fee applies.
Wellington Management also provides investment advisory services to other mutual
funds with similar investment objectives as the portions of the Fund's portfolio
that Wellington Management manages. The table below identifies the funds, the
size of each fund as of its last fiscal year end, and the rate of compensation
for advisory services (as a % of average net assets).
NET ASSETS
FUND SCHEDULE OF FEES (IN THOUSANDS)
---- ---------------- --------------
First $50 million 0.325% $ 2,189,571
Next $100 million 0.250%
Hartford MF Advisers Fund Next $350 million 0.200%
Next $500 million 0.150%
Over $1 billion 0.125%
First $50 million 0.325% $11,836,564
Next $100 million 0.250%
Hartford VA Advisers Fund Next $350 million 0.200%
Over $500 million 0.150%
First $50 million 0.325% $ 1,931,822
Next $100 million 0.250%
Hartford MF Stock Fund Next $350 million 0.200%
Next $500 million 0.150%
Over $1 billion 0.125%
First $50 million 0.325% $ 7,834,643
Next $100 million 0.250%
Hartford VA Stock Fund Next $350 million 0.200%
Over $500 million 0.150%
First $100 million 0.325% $ 144,642
New England Zenith Balanced Next $100 million 0.275%
Series Over $200 million 0.250%
First $50 million 0.325% $ 913,980
Next $450 million 0.250%
VALIC Core Equity Fund Next $1 billion 0.200%
Over $1.5 billion 0.180%
GENERAL INFORMATION ABOUT GOLDMAN SACHS ASSET MANAGEMENT
Goldman Sachs Assets Management (GSAM), a business unit of the Investment
Management Division ("IMD") of Goldman, Sachs & Co. is located at 32 Old Slip,
New York, NY 10005. GSAM provides a wide range of discretionary investment
advisory services, quantitatively driven and actively managed to U.S. and
international equity portfolios, U.S. and global fixed-income portfolios,
commodity and currency products and money market accounts. As of June 30, 2002,
GSAM, along with other units of IMD, had assets under management of $297.7
billion.
Goldman, Sachs & Co. is a partnership consisting of two general partners, The
Goldman, Sachs & Co. LLC and the Goldman, Sachs Group Inc. The address of both
general partners is 85 Broad Street, new York, New York, 10004.
GSAM, nor any of its affiliates, provide additional services to the Fund. The
Manager will pay GSAM a fee in the annual amount of 0.15% of the Fund's first
$500 million of average net assets, that GSAM manages, 0.12% of the next $1
billion in such assets and 0.10% on assets over $1.5 billion. In calculating the
fee, other asset pools GSAM manages for Principal Financial Group that have the
same investment objective as the portion of the assets of the Blue Chip Fund
managed by GSAM, will be aggregated to determine the average net asset amount to
which the fee applies.
GSAM also provides investment advisory services to another mutual fund with a
similar investment objective as the portions of the Fund's portfolio that GSAM
manages, Goldman Sachs CORE U.S. Equity Fund ("CORE Equity Fund"). The CORE
Equity Fund had total assets of approximately $674,323,000 as of August 31,
2002. GSAM received a fee for advisory services from the CORE Equity Fund of
0.75% as a percentage of the funds average net assets, 0.70% after waiver.
The Blue Chip Fund paid brokerage commissions in an amount of $14,982 to Goldman
Sachs & Company during the year ended October 31, 2001, which was 4.33% of the
fund's aggregate brokerage commissions.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF PROPOSAL 1.
Approval of this proposal requires a "FOR" vote by a "majority of the
outstanding voting securities" of the Fund, as provided in the 1940 Act. For
this purpose, this means a "FOR" vote by the lesser of (i) more than 50% of the
outstanding shares of the Fund, or (ii) 67% or more of the shares present at the
meeting, if more than 50% of the outstanding shares are present at the meeting
in person or by proxy. Because abstentions and broker non-votes are treated as
shares present but not voting, any abstentions and broker non-votes will have
the effect of votes "AGAINST" this proposal.
PROPOSAL 2
APPROVAL OF A PROPOSAL TO PERMIT THE MANAGER AND THE BOARD
TO APPOINT AND REPLACE SUB-ADVISERS, ENTER INTO SUB-ADVISORY
AGREEMENTS AND APPROVE AMENDMENTS TO SUB-ADVISORY
AGREEMENTS WITHOUT FURTHER SHAREHOLDER APPROVAL
In conformity with Section 15 of the 1940 Act, each Fund currently must obtain
shareholder approval of a sub-advisory agreement in order to employ new
sub-advisers, replace existing sub-advisers, change the terms of a sub-advisory
agreement, or continue the employment of an existing sub-adviser when that
sub-adviser's contract terminates because of an assignment. The Board has
determined that it would be in the best interests of shareholders for the
Manager to have the ability to appoint and replace sub-advisers for the Blue
Chip Fund and to enter into, and approve amendment of, sub-advisory agreements,
in the future without first obtaining shareholder approval. Thus, at its meeting
on September 9, 2002, the Board approved, and recommended that the Fund's
shareholders also be asked to approve, a policy to permit the Manager, subject
to prior Board approval, to appoint and replace sub-advisers, to enter into
sub-advisory agreements, and to amend sub-advisory agreements on behalf of the
Fund without further shareholder approval.
On January 19, 1999, the SEC granted an order ("Order") permitting the Manager
to change sub-advisers for the Fund without first calling a special shareholder
meeting and obtaining shareholder approval. One of the conditions for approval
by the SEC is that the shareholders approve this "manager-of-managers"
arrangement. By approving this proposal, you will be authorizing the Manager to
change, with prior Board approval, sub-advisers in the future without first
obtaining shareholder approval.
If the proposal is approved, the Manager and the Fund would be permitted to
enter into new or amended sub-advisory agreements without obtaining shareholder
approval. In all cases, however, approval by the Board, including the
Independent Board Members, will continue to be required for any new or amended
sub-advisory agreement.
If the proposal is not approved by shareholders of the Fund, then the Manager
and the Fund would only enter into new or amended sub-advisory agreements with
shareholder approval, adding additional time and expense to making a change
deemed beneficial by the Fund's Board. Sub-Advisory agreements with affiliated
sub-advisers would remain subject to the shareholder approval requirement even
if the proposal is approved.
If the proposal is approved, and a new sub-adviser is subsequently appointed
without shareholder approval, the Fund will send an information statement
containing all of the relevant information that otherwise would be in proxy
materials to shareholders within 90 days following the hiring of any new
sub-adviser. The information statement will include, for example, disclosure as
to the level of fees to be paid by the Manager to the sub-adviser.
If this proposal is approved, amendments to the Management Agreement between the
Manager and the Fund will remain subject, where applicable, to the shareholder
and Board approval requirements of Section 15 of the 1940 Act and approval of
the proposal generally will permit the Board and the Manager to change the fees
payable to a sub-adviser without shareholder approval, which in turn may result
in a different net fee retained by the Manager. Such changes will not permit the
Board and the Manager to increase the rate of the fees payable by the Fund to
the Manager under the agreement without first obtaining shareholder approval.
The Board believes that it is in the best interests of the Fund's shareholders
to allow the Manager the maximum flexibility to select, supervise, and evaluate
sub-advisers without incurring the expense and potential delay of seeking
specific shareholder approval.
Generally, a change in investment management arrangements involving one or more
sub-advisers requires that a Fund must call and hold a meeting of the Fund's
shareholders, create and distribute proxy materials, and arrange for the
solicitation of voting instructions from shareholders. This process results in
unnecessary administrative expenses to a Fund and may cause harmful delays in
executing changes that the Board and the Manager have determined are necessary
or desirable. These costs are generally borne entirely by the Fund. If the
Manager and the Board can rely on the proposed policy, the Board would be able
to act more quickly and with less expense to the Fund to appoint an unaffiliated
sub-adviser when the Board and the Manager believe that the appointment would
benefit the Fund and its shareholders. If the Fund's shareholders are not
satisfied with the sub-advisory arrangements that the Manager and the Board
implement, they would, of course, be able to exchange or sell their shares.
Also, the Board will oversee the sub-adviser selection process to ensure that
shareholders' interests are protected whenever the Manager selects a sub-adviser
or modifies a sub-advisory agreement. The Board, including a majority of the
Independent Board Members, will continue to evaluate and approve all new
sub-advisory agreements as well as any modification to existing sub-advisory
agreements. In each review, the Board will analyze all factors that it considers
to be relevant to the determination, including the nature, quality, and scope of
services provided by the sub-advisers. The Board will compare the investment
performance of the assets managed by the sub-adviser with other accounts with
similar investment objectives managed by other advisers and will review the
sub-adviser's compliance with federal securities laws and regulations. The Board
believes that its review will ensure that the Manager continues to act in the
best interests of the Fund and its shareholders.
The Order grants the Fund relief from Section 15(a) of the 1940 Act and certain
rules thereunder in order for the Fund to operate in the manner described in
this proposal, subject to certain conditions, including approval of this
proposal by the Fund's shareholders. The fund will not rely on the Order unless
all such conditions have been met. The conditions for the relief set forth in
the Order are as follows:
. Before the fund may rely on the Order, the proposed "manager of managers"
structure of the Fund will be approved by a majority of the Fund's
outstanding voting securities, as defined in the 1940 Act.
. The Fund will disclose in its prospectus the existence, substance, and
effect of the Order. In addition, the Fund will hold itself out to the
public as employing a "Manager of Managers" strategy. The prospectus
relating to the Fund will prominently disclose that the Manager has ultimate
responsibility to oversee the subadviser and recommend its hiring,
termination, and replacement.
. The Manager will provide management and administrative services to the Fund,
including overall supervisory responsibility for the general management and
investment of the Fund, and, subject to review and approval by the Board,
will (i) set the Fund's overall investment strategies; (ii) evaluate,
select, and recommend subadvisers to manage all or part of the Fund's
assets; (iii) when appropriate, allocate and reallocate the Fund's assets
among multiple subadvisers; (iv) monitor and evaluate the investment
performance of subadvisers; and (v) implement procedures reasonably designed
to ensure that the subadvisers comply with the fund's investment objectives,
policies, and restrictions.
. At all times, a majority of the Fund's Board will be Independent Board
Members, and the nomination of new or additional Independent Board Members
will be placed within the discretion of the then existing Independent Board
Members.
. The Manager will not enter into a subadvisory agreement with any sub-adviser
that is an affiliated person of the Fund or the Manager, as defined in
Section 2(a) (3) of the 1940 Act, without such agreement, including the
compensation to be paid thereunder, being approved by the shareholders of
the Fund.
. When a sub-adviser change is proposed for the Fund with an affiliated
sub-adviser, the Board, including a majority of the Independent Board
Members, will make a separate finding, reflected in the Board's minutes,
that such change is in the best interests of the Fund and its shareholders
and does not involve a conflict of interest from which the Manager or the
affiliated subadviser derives an inappropriate advantage.
. No director or officer of the Fund or director or officer of the Manager
will own directly or indirectly (other than through a pooled investment
vehicle that is not controlled by any such director or officer) any interest
in any sub-adviser for the Fund except for (i) ownership of interests in the
Manager or any entity that controls, is controlled by, or is under common
control with the Manager or (ii) ownership of less than 1% of the
outstanding securities of any class of equity or debt of a publicly traded
company that is either a sub-adviser or any entity that controls, is
controlled by, or is under common control with a sub-adviser for the Fund.
. Within 90 days of the hiring of any new subadviser, the Manager will furnish
shareholders of the Fund all the information that would have been included
in a proxy statement.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF PROPOSAL 2.
Approval of Proposal 2 will require a "FOR" vote by a "majority of the
outstanding voting securities" of a Fund, as provided in the 1940 Act. For this
purpose, this means a "FOR" vote by the lesser of (i) more than 50% of the
outstanding shares of the Fund, or (ii) 67% or more of the shares present at the
meeting in person or by proxy. Because abstentions and broker non-votes are
treated as shares present but not voting, any abstentions and broker non-votes
will have the effect of votes "AGAINST" this proposal.
EXHIBIT A
PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT effective as of the _ day of December, 2002, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the Manager"),
and Goldman Sachs Asset Management, a unit of the Investment Management Division
of Goldman, Sachs & Co., 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 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 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. 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.
4. 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.
5. 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.
6 Supplemental Arrangements
The Sub-Advisor may enter into arrangements with other persons
affiliated with the Sub-Advisor or with unaffiliated third parties to
better enable the Sub-Advisor to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Sub? Advisor, subject to written notification to and approval of the
Manager and, where required by applicable law, the Board of Directors
of the Fund.
7. Regulation
The Sub-Advisor shall submit to all regulatory and administrative
bodies having jurisdiction over the services provided pursuant to this
Agreement any information, reports or other material which any such
body may request or require pursuant to applicable laws and
regulations.
8. Duration and Termination of This Agreement
This Agreement shall become effective on the latest of (i) the date of
its execution, (ii) the date of its approval by a majority of the
Board of Directors of the Fund, including approval by the vote of a
majority of the Board of Directors of the Fund who are not interested
persons of the Manager, the Sub-Advisor, Principal Life Insurance
Company or the Fund cast in person at a meeting called for the purpose
of voting on such approval or (iii) if required by the 1940 Act, the
date of its approval by a majority of the outstanding voting
securities of the Fund. It shall continue in effect, thereafter from
year to year provided that the continuance is specifically approved at
least annually either by the Board of Directors of the Fund or by a
vote of a majority of the outstanding voting securities of the Fund
and in either event by a vote of a majority of the Board of Directors
of the Fund who are not interested persons of the Manager, Principal
Life Insurance Company, the Sub-Advisor or the Fund cast in person at
a meeting called for the purpose of voting on such approval.
If the shareholders of the Fund fail to approve the Agreement or any
continuance of the Agreement in accordance with the requirements of
the 1940 Act, the Sub-Advisor will continue to act as Sub-Advisor with
respect to the Fund pending the required approval of the Agreement or
its continuance or of any contract with the Sub-Advisor or a different
manager or sub-advisor or other definitive action 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 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.
9. 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.
10. 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.
11. General Provisions
(a) Each party agrees to perform such further acts and
execute such further documents as are necessary to
effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed
by the laws of the State of Iowa. The captions in this
Agreement are included for convenience only and in no
way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(b) Any notice under this Agreement shall be in writing,
addressed and delivered or mailed postage pre-paid to
the other party at such address as such other party may
designate for the receipt of such notices. Until
further notice to the other party, it is agreed that
the address of the Manager for this purpose shall be
Principal Financial Group, Des Moines, Iowa 50392-0200,
and the address of the Sub-Advisor shall be One New
York Plaza, 41st Floor, New York, NY 10004.
(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 mark, 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.
12. Other Expenses.
The Manager shall pay all expenses relating to mailing prospectuses,
statements of additional information, proxy solicitation material and
shareholder reports to shareholders.
13. 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 "Goldman, Sachs & Co." or "Goldman
Sachs" or any derivative thereof, any tradename, trademark, trade
device, service mark, 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 _______________________________________________________
Ernest H. Gillum, Vice President
GOLDMAN SACHS ASSET MANAGEMENT, A SEPARATE OPERATING
DIVISION OF GOLDMAN SACHS CO., NEW YORK
By _________________________________________________________
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%
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.
EXHIBIT B
PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT effective as of the __ day of December, 2002, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the Manager"),
and Wellington Asset Management, LLP (hereinafter called "the Sub-Advisor").
W I T N E S S E T H:
WHEREAS, the Manager is the manager and investment adviser to Principal Partners
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 furnish it with
portfolio selection and related research and statistical services in connection
with the investment advisory services 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 (the
"Registration Statement");
(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
The Sub-Advisor will:
(a) Provide investment advisory services, including but not
limited to research, advice and supervision for the
Fund; or such portions of the Fund's assets as the
Manager shall specify from time to time.
(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 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
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 Fund, 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(d) of this Agreement. 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.
(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 (excluding custodial services, brokerage
expenses and pricing and bookkeeping services).
(i) Open accounts with broker-dealers and futures
commission merchants ("broker-dealers"), select
broker-dealers to effect transactions for the Fund,
place all necessary orders with broker-dealers or
issuers (including affiliated broker-dealers), and
negotiate commissions, if applicable. To the extent
consistent with applicable law, purchase or sell orders
for the Fund may be aggregated with contemporaneous
purchase or sell orders of other clients of the
Sub-Advisor. In such event allocation of securities so
sold or purchased, as well as the expenses incurred in
the transaction, will be made by the Sub-Advisor in the
manner the Sub-Advisor considers to be the most
equitable and consistent with its fiduciary obligations
to the Fund and to other clients. The Sub-Advisor will
report on such allocations at the request of the
Manager, the Fund or the Fund's Board of Directors
providing such information as the number of aggregated
trades to which the Fund was a party, the
broker-dealers to whom such trades were directed and
the basis for the allocation for the aggregated trades.
The Sub-Advisor shall use its best efforts to obtain
execution of transactions for the Fund at prices which
are advantageous to the Fund and at commission rates
that are reasonable in relation to the benefits
received. However, the Sub-Advisor may select brokers
or dealers on the basis that they provide brokerage,
research or other services or products to the
Sub-Advisor. To the extent consistent with applicable
law, the Sub-Advisor may pay a broker or dealer an
amount of commission for effecting a securities
transaction in excess of the amount of commission or
dealer spread another broker or dealer would have
charged for effecting that transaction if the
Sub-Advisor determines in good faith that such amount
of commission is reasonable in relation to the value of
the brokerage and research products and/or services
provided by such broker or dealer. This determination,
with respect to brokerage and research products and/or
services, may be viewed in terms of either that
particular transaction or the overall responsibilities
which the Sub-Advisor and its affiliates have with
respect to the Fund as well as to accounts over which
they exercise investment discretion. Not all such
services or products need be used by the Sub-Advisor in
managing the Fund. In addition, joint repurchase or
other accounts may not be utilized by the Fund except
to the extent permitted under any exemptive order
obtained by the Sub-Advisor provided that all
conditions of such order are complied with.
(j) Maintain all accounts, books and records with respect
to the Sub-Adviser's management of this Fund 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 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 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. Manager acknowledges receipt of
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 and shall assist Sub-Advisor
in its efforts to conduct the proxy voting process.
3. 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.
4. Liability
(a) Except as may otherwise be provided by the 1940 Act or
any other federal securities law, neither the
Sub-Advisor nor any of its partners, officers,
employees, consultants, or agents thereof (its
"Affiliates") shall be liable for any loses, claims,
damages, liabilities or litigation (including legal and
other expenses) incurred or suffered by the Manager or
the Fund as a result of any error of judgment or
mistake of law by the Sub-Advisor or its Affiliates
with respect to the Fund, except that nothing in this
Agreement shall operate or purport to operate in any
way to exculpate, waive or limit the liability of the
Sub-Advisor or its Affiliates for, and the Sub-Advisor
shall indemnify and hold harmless the Fund, the
Manager, all affiliated persons thereof (within the
meaning of Section 2(a)(3) of the 1940 Act) and all
controlling persons (as described in Section 15 of the
Securities Act of 1933, as amended (the "1933 Act"))
(collectively, "Manager Indemnities") against any and
all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) to
which any of the Manager Indemnities may become subject
under the 1933 Act, the 1940 Act, the Investment
Advisers Act or under any other statue, at common law
or otherwise arising out of or based on (i) any willful
misconduct, bad faith, reckless disregard or gross
negligence of the Sub-Advisor in the performance of any
of its duties or obligations hereunder or (ii) any
untrue statement of a material fact contained in the
Registration Statement, proxy materials, reports,
advertisements, sales literature, or other materials
pertaining to the Series or the omission to state
therein a material fact known to the Sub-Advisor which
was required to be stated therein or necessary to make
the statements therein not misleading, if such
statement or omission was made in reliance upon
information furnished to the Manager or the Fund by the
Sub-Advisor Indemnities (as defined below) for use
therein.
(b) Except as may otherwise be provided by the 1940 Act or
any other federal securities law, the Manager and the
Fund shall not be liable for any loses, claims,
damages, liabilities or litigation (including legal and
other expenses) incurred or suffered by the Sub-Advisor
as a result of any error of judgment or mistake of law
by the Manager with respect to the Series, except that
nothing in this Agreement shall operate or purport to
operate in any way to exculpate, waive or limit the
liability of the Manager for, and the Manager shall
indemnify and hold harmless the Sub-Advisor, all
affiliated persons thereof (within the meaning of
Section 2(a)(3) of the 1940 Act) and all controlling
persons (as described in Section 15 of the 1933 Act)
(collectively, "Sub-Advisor Indemnities") against any
and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other
expenses) to which any of the Sub-Advisor Indemnities
may become subject under the 1933 Act, the 1940 Act,
the Investment Advisers Act or under any other statue,
at common law or otherwise arising out of or based on
(i) any willful misconduct, bad faith, reckless
disregard or gross negligence of the Manager in the
performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material
fact contained in the Registration Statement, proxy
materials, reports, advertisements, sales literature,
or other materials pertaining to the Fund or the
omission to state therein a material fact known to the
Manager which was required to be stated therein or
necessary to make the statements therein not
misleading, unless such statement or omission concerned
the Sub-Advisor and was made in reliance upon written
information furnished to the Manager or the Fund by the
Sub-Advisor Indemnities (as defined below) for use
therein.
5. 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.
6. 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.
7. Representations of the Manager
The Manager represents and warrants as follows:
(a) The Manager (i) is registered as an investment advisor
under the Investment Advisers Act and will continue to
be so registered for as long as this Agreement remains
in effect; (ii) is not prohibited by the 1940 Act or
the Investment Advisers Act from performing the
services contemplated by this Agreement, (iii) has met,
and will seek to continue to meet for so long as this
Agreement remains in effect, any other applicable
federal or state requirements, or the applicable
requirements of any regulatory or industry
self-regulatory agency necessary to be met in order to
perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the
services contemplated by this Agreement; and (v) will
promptly notify the Sub-Advisor of the occurrence of
any event that would disqualify the Manager from
serving as an investment advisor of an investment
company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) That (i) this Agreement has been approved 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 and (ii)
either (a) this Agreement has been approved by a
majority of the outstanding voting securities of the
Series or (b) the Fund has obtained exemptive relief
from the Securities and Exchange Commission to the
effect that no such approval is necessary.
(c) The Manager agrees that neither it nor any of its
affiliates will in any way refer directly or indirectly
to its relationship with the Sub-Advisor, or any of its
affiliates, in offering, marketing, or other
promotional materials without the prior written consent
of the Sub-Advisor.
8. References to the Sub-Advisor
During the term of this Agreement, the Manager agrees to furnish to
the Sub-Advisor at its principal office all prospectuses, proxy
statements, reports to shareholders, sales literature, or other
material prepared for distribution to sales personnel, shareholders of
the Fund or the public, which refer to the Sub-Advisor or its clients
in any way, prior to use thereof and not to use such material if the
Sub-Advisor reasonably objects in writing five business days (or such
time as may be mutually agreed upon) after receipt thereof. Sales
literature may be furnished to the Sub-Advisor hereunder by
first-class or overnight mail, electronic or facsimile transmission,
or had delivery.
9. The Sub-Advisor's Services Are Not Exclusive
Nothing in this Agreement shall limit or restrict the right of any of
the Sub-Advisor's partners, officers, or employees to engage in any
other business or to devote his or her time and attention in part to
the management or other aspects of any business, whether of a similar
or a dissimilar nature, or limit or restrict the Sub-Advisor's right
to engage in any other business or to render services or any kind to
any other corporation, form, individual, or association.
10. 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.
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 Iowa. The captions in this
Agreement are included for convenience only and in no
way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(b) Any notice under this Agreement shall be in writing,
addressed and delivered or mailed postage pre-paid to
the other party at such address as such other party may
designate for the receipt of such notices. Until
further notice to the other party, it is agreed that
the address of the Manager for this purpose shall be
Principal Financial Group, Des Moines, Iowa 50392-0200,
Attention: Ernest H. Gillum, Vice President, and the
address of the Sub-Advisor shall be Wellington
Management Company, LLP, 75 State Street, Boston, MA
02109, Attention: John E. Bruno, Regulatory Affairs.
(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.
(f) It is understood and agreed that no (i) failure or
delay to exercise, nor (ii) single or partial exercise
of any right, power, or privilege given or arising
under this Agreement shall operate as a waiver or
future to exercise any such right, power or privilege.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date
first above written.
PRINCIPAL MANAGEMENT CORPORATION
By ________________________________________
Ernest H. Gillum, Vice President
WELLINGTON MANAGEMENT COMPANY, LLP
By ________________________________________
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 0.25%
Over $500 million 0.20%
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.
King Mutual Fund Services
Telephone Script
PRINCIPAL PARTNERS BLUE CHIP FUND
Introduction
Hello, Mr./Mrs. (Shareholder). I am calling with regard to your investment in
the Principal Partners Blue Chip Fund. My name is ________________ and I'm a
proxy representative with D.F. King & Co. calling at the request of Principal
Funds. We're currently contacting shareholders of the Funds to assist in getting
the necessary proxy votes for the shareholder meetings scheduled for November
20, 2002. Did you receive the materials from the fund?
If not, then help the shareholder obtain the material he requires. If a
NOBO, give them the 800# and have them call back when they receive. If
registered, we will send the materials directly. In either case, make
sure the address is correct, make any necessary corrections, and code
the disposition as "14" or "15".
Are you familiar with the proposal? Do you have any questions?
Take time to answer all questions carefully. Do not give advice. Remind
the shareholder that his/her Board Members have recommended that he/she
vote in favor of the proposal. Most questions can be addressed by
referring to the proxy statement and reading the appropriate sections.
At your earliest convenience, please vote by signing and dating the proxy card
you received, and returning it in the envelope provided. If you like, I can
record your vote over the telephone right now. Okay?
Allow the person to give you a response. If the person says he/she has
already sent in the proxy, do not ask how he/she voted.
Here is how we will proceed. I will record this phone call. I will ask you for
your name, your address and the last 4 digits of your social security number (or
Tax Identification Number if shares are registered to an entity). Finally, I
will confirm that you have received the proxy materials. Then I will take your
votes. Within 72 hours, you will be mailed a letter confirming your votes, which
will tell you how to make any changes you wish. Are you ready?
Begin the Vote
At this time, I'll begin recording the call. First, I'll reintroduce myself. My
name is __________, calling from D.F. King & Co., Inc. on behalf of the
Principal Partners Blue Chip Fund. Today's date is __________ and the time is
__________.
May I please have your full name? If shareholder is an entity, may I please have
your title? Can you confirm that you are authorized to direct the voting of
these Principal Partners Blue Chip Fund's shares?
May I please have your address?
May I have the last 4 digits of your social security number? (If shareholder is
an entity, ask for Tax Identification Number)
Input the last 4 digits of the SSN. You may not proceed without this
information. If the shareholder refuses to give this information, explain that
it is for security purposes only, to assure that only the proper person can vote
his shares. However, if the shareholder continues to resist, you have no choice
but to politely end the call.
Have you received the proxy materials?
Actual Voting
Your Board Members are asking you to consider a proposal which they have studied
carefully. They recommend that you vote in favor of the proposal. Would you like
to vote in favor of the proposal as recommended by your Board?
If you are required to read the proposal individually, end each
proposal by saying, "Your Board recommends that you vote in favor. How
would you like to vote?" For most proposals, the valid responses are
F = For proposal.
A = Against proposal.
B = Abstain.
For Director voting, the only valid responses are:
F = For at least one or more of the
nominees. W = Withhold authority for all
nominees.
Closing
I have recorded your votes. You have voted __________. Is that correct? As your
voting agent I will execute a written proxy in accordance with your instructions
and forward it onto the fund. In the next 72 hours, we will mail you a letter by
first class mail confirming your vote. If you wish to change your vote for any
reason, please call us at the phone number listed in the letter. Thank you for
your time.
PRINCIPAL PARTNERS BLUE CHIP FUND
- --------------------------------------------------------------------------------
Answering Machine Message
- --------------------------------------------------------------------------------
Hello, this is _______ calling on behalf of the Principal Funds. You should have
received material in the mail concerning the Special Shareholders Meeting to be
held on November 20, 2002.
At your earliest convenience, please sign, date, and return the proxy card in
the envelope provided. If you have any questions, need proxy material or would
like to vote by telephone, please call 1-800-659-6590.
Thank you for your consideration.