PRINCIPAL VARIABLE CONTRACTS FUND, INC.
AMENDED AND RESTATED
INVESTMENT SERVICE AGREEMENT
THIS INVESTMENT SERVICE AGREEMENT, to be effective the 1st day of April
2004, by and between PRINCIPAL VARIABLE CONTRACTS FUND, INC. (the "Fund"), an
open-end investment company formed under the laws of Maryland, PRINCIPAL
MANAGEMENT CORPORATION ("Manager"), an Iowa corporation, and PRINCIPAL LIFE
INSURANCE COMPANY, a specially chartered Iowa life insurance company;
WITNESSETH:
WHEREAS, Principal Life Insurance Company has organized the Manager to
serve as investment adviser and is the owner (through its subsidiaries) of all
of the outstanding stock of the Manager; and
WHEREAS, the Manager and the Fund have entered into a Management
Agreement effective as of September 1, 1997 whereby the Manager undertakes to
furnish the Fund with investment advisory services and certain other services;
and
WHEREAS, Principal Life Insurance Company is willing to make available
to the Manager on a part-time basis certain employees and services of Principal
Life Insurance Company and its subsidiaries for the purpose of better enabling
the Manager to fulfill its investment advisory obligations under the Management
Agreement, provided that the Manager bears all costs allocable to the time spent
by them on the affairs of the Manager, and the Manager and the Fund believe that
such an arrangement will be for their mutual benefit:
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. The Manager shall have the right to use, on a part-time basis, and
Principal Life Insurance Company shall make available on such basis, such
employees of Principal Life Insurance Company and its subsidiaries and for such
periods as may be agreed upon by the Manager and Principal Life Insurance
Company and its subsidiaries, as reasonably needed by the Manager in the
performance of its investment advisory services (but not its administrative,
transfer and paying services) under the Management Agreement. It is anticipated
that such employees will be persons employed in the Investment Department of
Principal Life Insurance Company or its subsidiaries. Principal Life Insurance
Company will also make available to the Manager or the Fund such clerical,
stenographic and administrative services as the Manager may reasonably request
to facilitate its performance of such investment advisory services.
2. The employees of Principal Life Insurance Company and its
subsidiaries in performing services for the Manager hereunder may, to the full
extent that they deem appropriate, have access to and utilize statistical and
economic data, investment research reports and other material prepared for or
contained in the files of the Investment Department of Principal Life Insurance
Company or its subsidiaries which is relevant to making investments for the
Fund, and may make such materials available to the Manager, provided, that any
such materials prepared or obtained in connection with a private placement or
other non-public transaction need not be made available to the Manager if
Principal Life Insurance Company or its subsidiaries deem such materials
confidential.
3. Employees of Principal Life Insurance Company or its subsidiaries
performing services for the Manager pursuant hereto shall report and be
responsible solely to the officers and directors of the Manager or persons
designated by them. Principal Life Insurance Company or its subsidiaries shall
have no responsibility for investment recommendations and decisions of the
Manager based upon information or advice given or obtained by or through such
Principal Life Insurance Company employees or employees of Principal Life
Insurance Company subsidiaries.
4. Principal Life Insurance Company will, to the extent requested by
the Manager, supply to employees of the Manager (including part-time employees
of Principal Life Insurance Company or its subsidiaries serving the Manager)
such clerical, stenographic and administrative services and such office supplies
and equipment as may be reasonably required in order that they may properly
perform their respective functions on behalf of the Manager in connection with
its performance of its investment advisory services under the Management
Agreement.
5. The obligation of performance under the Management Agreement is
solely that of the Manager, and Principal Life Insurance Company and its
subsidiaries undertake no obligation in respect thereto, except as otherwise
expressly provided herein.
6. In consideration of the services to be rendered by Principal Life
Insurance Company or its subsidiaries and their employees pursuant to this
Investment Service Agreement, the Manager agrees to pay Principal Life or its
subsidiaries within 10 days after the end of each calendar month, or as
otherwise agreed, an amount calculated in accordance with Schedule A, attached
hereto.
7. This Investment Service 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 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 vote of a majority of the outstanding voting securities of the Fund
and in either event such continuance shall be approved by the vote of a majority
of the directors who are not interested persons of the Manager, Principal Life
Insurance Company or its subsidiaries or the Fund cast in person at a meeting
called for the purpose of voting on such approval. This Investment Service
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, by vote of a
majority of the outstanding voting securities of the Fund, by the Manager or
Principal Life Insurance Company. This Investment Service 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
persons", "assignment" and "voting securities") shall be applied.
8. Any notice under this Investment Service Agreement shall be in
writing, addressed and delivered or mailed postage prepaid to the other parties
at such addresses as such other parties may designate for the receipt of such
notices. Until further notice it is agreed that the address of the fund, that of
the Manager and that of Principal Life Insurance Company and its subsidiaries
for this purpose shall be The Principal Financial Group, Xxx Xxxxxx, Xxxx 00000.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in three counterparts by their duly authorized officers the day and
year first above written.
PRINCIPAL VARIABLE CONTRACTS FUND, INC.
/s/X. X. Xxxxxx
By_________________________________________________
X. X. Xxxxxx, President and Chief Executive Officer
PRINCIPAL MANAGEMENT CORPORATION
/s/A. S. Filean
By________________________________________________
A. S. Filean, Senior Vice President
PRINCIPAL LIFE INSURANCE COMPANY
/s/X. X. Xxxxxx
By________________________________________________
X. X. Xxxxxx, Senior Vice President
SCHEDULE A
For the services provided and the expenses incurred by Principal Life or its
subsidiaries pursuant to the Investment Service Agreement, the Manager, not the
Fund, shall pay Principal Life or its subsidiaries a fee, computed and paid
monthly, at the annual rates shown below applied to the net assets of each of
the Funds' accounts as of the first day of each month as follows:
Account Fee
Bond*
First $5 billion 0.1150%
Next $1 billion 0.1000%
Next $4 billion 0.0950%
Over $10 billion 0.0900%
Money Market 0.0750%
Real Estate Securities 0.50%
All Other Accounts At Cost**
*In calculating the fee for the Bond Account, assets of any unregistered
separate account of Principal Life Insurance Company and any investment company
sponsored by Principal Life Insurance Company to which PGI provides investment
advisory services and which invests primarily in fixed-income securities (except
money market separate accounts or investment companies, and excluding assets of
all such separate accounts or investment companies for which advisory services
are provided directly or indirectly by employees of Post Advisory Group, LLC) as
well as the assets of the Balanced Account of Principal Variable Contracts Fund
and Principal Balanced Fund, Inc., will be combined with the assets of the Bond
Account to arrive at net assets.
The fee for assets of the Bond Account for which advisory services are provided
directly or indirectly by employees of Post Advisory Group, LLC is equal to an
annual rate of 0.3000%.
**As used in this Investment Service Agreement, "at cost" shall mean that, in
consideration of the services to be rendered by Principal Life Insurance Company
or its subsidiaries and their employees pursuant to this Investment Service
Agreement, the Manager agrees to reimburse Principal Life Insurance Company or
its subsidiaries for such costs, direct and indirect, as may be fairly
attributable to the services performed for the Manager. Such costs shall
include, but not be limited to, an appropriate portion of:
(a) salaries;
(b) employee benefits;
(c) general overhead expense;
(d) supplies and equipment; and
(e) a charge in the nature of rent for the cost of space in Principal
Life Insurance Company offices fairly allocable to activities of
the Manager under the Management Agreement.
In the event of disagreement between the Manager and Principal Life Insurance
Company and its subsidiaries as to a fair basis for allocating or apportioning
costs, such basis shall be fixed by the public accountants for the Fund.
