PRINCIPAL VARIABLE CONTRACTS FUND, INC.
SUB-ADVISORY AGREEMENT
AGREEMENT executed as of the _____ day of _____________, 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
certain 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 of the Fund
identified on 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 Investment Company 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 Investment Company Act of 1940 (the "Investment
Company Act") and Investment Advisers Act of 1940 (the "Investment
Advisors 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 B 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 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 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 Investment Company 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 Investment Company Act of 1940
(particularly the definitions of "interested person," "assignment" and "voting
security") shall be applied.
8. Amendment of this Agreement
No amendment of this Agreement as to an Account 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, Xxx Xxxx 00000.
(c) The Sub-Advisor will promptly notify the Advisor 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
By ____________________________________________
Xxxxxxx X. Xxxxx, President
XXXXXX XXXXXXX ASSET MANAGEMENT INC.
By ____________________________________________
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for Aggressive Growth
and Asset Allocation Accounts of the Fund. With respect to such Account, 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.
