PRINCIPAL VARIABLE CONTRACTS FUND, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT executed as of the 1st day of September, 1997, by and between PRINCOR
MANAGEMENT CORPORATION, an Iowa Corporation (hereinafter called "the Manager")
and XXXXXX XXXXXXX ASSET MANAGEMENT INC. (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 Variable
Contracts 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 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 as filed with the Securities
and Exchange Commission;
(c) The Fund's Articles of Incorporation and By-laws;
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 certain series of the Fund (Appendix A), 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 for the Accounts
identified in Appendix A hereto (the "Accounts").
(b) Furnish to the Board of Directors of the Fund (or any
appropriate committee of such Board), and revise from time to
time as economic conditions require, a recommended investment
program for the portfolio of each Account consistent with the
Account's investment objective and policies.
(c) Implement such of its recommended investment program as the
Board of Directors (or any appropriate committee of the Board)
shall approve, by placing orders for the purchase and sale of
securities, 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 Fund.
(e) Report to the Board of Directors of the Fund at such times and
in such detail as the Board may deem appropriate in order to
enable it to determine that the investment policies of the
Accounts are being observed.
(f) Provide determinations of the fair value of certain securities
when 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 the investment advisory affairs of
the Accounts.
(h) Select brokers and dealers to effect all transactions for the
Accounts, place all necessary orders with brokers, dealers, or
issuers, and negotiate brokerage commissions if applicable.
(i) Maintain all accounts, books and records with respect to the
Accounts 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.
3. Compensation
As full compensation for all services rendered and obligations assumed
by the Sub-Advisor hereunder with respect to the Accounts, the Manager
shall pay the compensation specified in Appendix A to this Agreement.
4. Liability of Sub-Advisor
Neither the Sub-Advisor nor any of its directors, officers or employees
shall be liable to the Manager or the Fund for any loss suffered by the
Manager or the Fund resulting from any error of judgment made in the
good faith exercise of the Sub-Advisor's investment discretion in
connection with selecting Fund investments 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.
5. Supplemental Arrangements
The Sub-Advisor may enter into arrangements with other persons
affiliated with the Sub-Advisor to better enable it to fulfill its
obligations under this Agreement for the provision of certain personnel
and facilities to the Sub- Advisor.
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. Duration and Termination of This Agreement
This Agreement shall remain in force until the conclusion of the first
meeting of the shareholders of the Fund and if it is approved by a vote
of 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 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 Fund fail to approve the Agreement or any
continuance of the Agreement, the Sub-Advisor will continue to act as
Sub-Advisor with respect to the Accounts 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 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 Fund. 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 Act (particularly the definitions of "interested person,"
"assignment" and "voting security") shall be applied.
8. Amendment of this Agreement
No amendment of this Agreement shall be effective until approved by
vote of the holders of a majority of the outstanding voting securities
of the Account and by vote of a majority of the 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.
9. 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 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000.
(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) 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.
PRINCOR MANAGEMENT CORPORATION
/s/ A. S. Filean
By ____________________________________________
A. S. Filean, Vice President
XXXXXX XXXXXXX ASSET MANAGEMENT INC.
/s/ Xxxxxx Xxxxxxx, Principal
By ____________________________________________
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Aggressive
Growth and Asset Allocation Accounts of the Fund. With respect to such Accounts,
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 $ 40,000,000 of Assets........................... 0.45%
Next $160,000,000 of Assets............................ 0.30%
Next $100,000,000 of Assets............................ 0.25%
Assets above $300,000,000.............................. 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.
