PRINCIPAL VARIABLE CONTRACTS FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
SMALLCAP VALUE ACCOUNT I
AGREEMENT executed as of the 1st day of January, 2010, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa Corporation (hereinafter called
"the Manager") and X.X. XXXXXX INVESTMENT MANAGEMENT INC., a Delaware
Corporation (hereinafter called "the Sub-Advisor").
W I T N E S S E T H:
WHEREAS, the Manager is the manager and investment adviser to each Series
of Principal Variable Contracts Funds, 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 which the Manager has
agreed to provide to the Fund, and the Sub-Advisor desires to furnish such
services; and
WHEREAS, The Manager has furnished the Sub-Advisor with copies properly
certified or authenticated of each of the following and will promptly
provide the Sub-Advisor with copies properly certified or authenticated of
any amendment or supplement thereto:
(a) Management Agreement (the "Management Agreement") with the
Fund;
(b) The Fund's registration statement and financial statements as
filed with the Securities and Exchange Commission;
(c) The Fund's Articles of Incorporation and By-laws;
(d) Policies, procedures or instructions adopted or approved by the
Board of Directors of the Fund relating to obligations and
services provided by the Sub-Advisor.
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, the parties agree as follows:
1. Appointment of Sub-Advisor
In accordance with and subject to the Management Agreement, the
Manager hereby appoints the Sub-Advisor to perform the services
described in Section 2 below for investment and reinvestment of the
securities and other assets of the SmallCap Value Account I Series
of the Fund (hereinafter called "the Series"), subject to the
control and direction of 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
(a) Provide investment advisory services, including but not
limited to research, advice and supervision of the investments
of the Series.
(b) Furnish to the Board of Directors of the Fund for approval (or
any appropriate committee of such Board), and revise from time to
time as economic conditions require, a recommended investment
program that describes the broad strategy for the Series
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 Certificate 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 in taking such
steps as are necessary or appropriate to carry out the decisions
of its Board of Directors, and any appropriate committees of such
Board, regarding the general conduct of the investment business
of the Series.
(e) 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.
(f) Provide assistance in 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.
(g) 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
its duties under this Agreement.
(h) Select brokers and dealers to effect all transactions for the
Series, place all necessary orders with brokers, dealers, or
issuers, and negotiate brokerage 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. The
Manager recognizes that, in some cases, this procedure may limit
the size of the position that may be acquired or sold for the
Series. The Sub-Advisor shall use its best efforts to obtain
execution of transactions for the Series at prices which are
advantageous to the Series and at commission rates that are
reasonable in relation to the benefits received. However, the
Sub-Advisor may select brokers or dealers on the basis that they
provide brokerage, research or other services or products to the
Series and/or other accounts serviced by 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 services or products, 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 or 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.
(i) Maintain all accounts, books and records with respect to the
Series as are required of an investment advisor of a registered
investment company pursuant to the 1940 Act and Investment
Advisers Act of 1940 (the "Investment Advisors Act") and the
rules thereunder.
3. Prohibited Conduct
In providing the services described in this agreement, the Sub-
Advisor will not consult with any other investment advisory firm
that provides investment advisory services to any investment
company sponsored by Principal Life Insurance Company regarding
transactions for the Fund in securities or other assets.
4. Compensation
As full compensation for all services rendered and obligations
assumed by the Sub-Advisor hereunder with respect to the Series, the
Manager shall pay the compensation specified in Appendix A to this
Agreement.
5. Liability of Sub-Advisor
Neither the Sub-Advisor nor any of its directors, officers or
employees shall be liable to the Manager, the Fund or its
shareholders for any loss suffered by the Manager or the Fund
resulting from any error of judgment made in the good faith exercise
of the Sub-Advisor's duties under this Agreement except for losses
resulting from willful misfeasance, bad faith or gross negligence
of, or from reckless disregard of, the duties of the Sub-Advisor or
any of its directors, officers or employees under this Agreement.
6. Indemnification
The Manager agrees to indemnify and hold harmless the Sub-Adviser
from and against any and all claims, losses, liabilities or damages
(including reasonable attorneys' fees and other related expenses),
("Losses") howsoever arising, from or in connection with this
Agreement or the performance by the Sub-Adviser of its duties
hereunder, so long as the Sub-Advisor shall, after receipt of notice
of any claim or commencement of any action, promptly notify the
Manager in writing of the claim or commencement of such action. The
Manager shall not be liable for any settlement of any claim or
action effected without its written consent. Nothing contained
herein shall require the Manager to indemnify the Sub-Advisor for
Losses resulting from the Sub-Advisor's willful misfeasance, bad
faith or gross negligence in the performance of its duties or from
its reckless disregard of its obligations and duties under this
Agreement.
7. Disclosure
Neither the Fund nor the Manager shall, without the prior written
consent of the Sub-Adviser, make representations regarding or
reference to the Sub-Adviser or any affiliates in any disclosure
document, advertisement, sales literature or other promotional
materials.
8. Supplemental Arrangements
The Sub-Advisor may enter into arrangements with other persons
affiliated with the Sub-Advisor or with unaffiliated third parties
to better enable the Sub-Advisor to fulfill its obligations under
this Agreement for the provision of certain personnel and facilities
to the Sub- Advisor, subject to written notification to and approval
of the Manager and the Board of Directors of the Fund.
9. Regulation
The Sub-Advisor shall submit to all regulatory and administrative
bodies having jurisdiction over the services provided pursuant to
this Agreement any information, reports or other material which any
such body may request or require pursuant to applicable laws and
regulations.
10. 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, Principal Mutual 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 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 Mutual 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 requirements of
the 1940 Act, the Sub-Advisor will continue to act as Sub-Advisor
with respect to the Series pending the required approval of the
Agreement or its continuance or of any contract with the Sub-Advisor
or a different manager or sub-advisor or other definitive action;
provided, that the compensation received by the Sub-Advisor in
respect to the Series during such period is in compliance with Rule
15a-4 under the 1940 Act.
This Agreement may, on sixty days written notice, be terminated at
any time without the payment of any penalty, by the Board of
Directors of the Fund, the Sub-Advisor or the Manager or by vote of
a majority of the outstanding voting securities of the Series. This
Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 10, 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 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
Mutual Life Insurance Company or the Fund cast in person at a
meeting called for the purpose of voting on such approval.
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
The Principal Financial Group, Xxx Xxxxxx, Xxxx 00000-0000, and
the address of the Sub-Advisor shall be 000 Xxxxx Xxxxxx, Xxxxxx
Xxxxx, Xxx Xxxx, XX 00000. Attention: Legal - Mutual Funds.
(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 Series.
(d) The Manager shall provide (or cause the Series custodian to
provide) timely information to the Sub-Advisor regarding such
matters as the composition of the assets of the Series, cash
requirements and cash available for investment in the Series, and
all other reasonable information as may be necessary for the Sub-
Advisor to perform its duties and responsibilities hereunder.
(e) The Sub-Advisor represents that it will not enter into any
agreement, oral or written, or other understanding under which
the Fund directs or is expected to direct portfolio securities
transactions, or any remuneration, to a broker or dealer in
consideration for the promotion or sale of Fund shares or
shares issued by any other registered investment company. Sub-
advisor further represents that it is contrary to the Sub-
advisor's policies to permit those who select brokers or
dealers for execution of fund portfolio securities transactions
to take into account the broker or dealer's promotion or sale
of Fund shares or shares issued by any other registered
investment company.
(f) The Sub-Advisor agrees that neither it nor any of its
affiliates will in any way refer directly or indirectly to its
relationship with the Fund, the Series, or the Manager or any
of their respective affiliates in offering, marketing or other
promotional materials without the express written consent of
the Manager.
(g) This Agreement contains the entire understanding and
agreement of the parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
PRINCIPAL MANAGEMENT CORPORATION
By /s/ Xxxxxxx X. Beer
Xxxxxxx X. Beer, Executive
Vice President
X.X. XXXXXX INVESTMENT MANAGEMENT
INC.
By /s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx, Vice President
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the SmallCap Value
Account I Series of the Fund. The Manager will pay the Sub-Advisor, as full
compensation for all services provided under this Agreement, a fee computed at an
annual rate as follows (the "Sub-Advisor Percentage Fee"):
First $300,000,000 of Assets 0.45%
Assets above $300,000,000 0.35%
The Sub-Advisor Percentage Fee shall be accrued for each calendar day and the
sum of the daily fee accruals shall be paid monthly to the Sub-Advisor. The daily
fee accruals will be computed by multiplying the fraction of one over the number
of calendar days in the year by the applicable annual rate described above and
multiplying this product by the net assets of the Series as determined in
accordance with the Series' prospectus and statement of additional information as
of the close of business on the previous business day on which the Series was
open for business. Cash and cash equivalents shall be included in the Series net
assets calculation up to a maximum of 1.00% of the Series net assets. If the
Manager requests the Sub-Advisor to raise cash in the Series portfolio in excess
of 1.00% of the Series net assets for the purpose of funding redemptions from the
Series, such amount requested shall be included in the Series net assets
calculation.
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.
JPM-7
