PRINCIPAL VARIABLE CONTRACTS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
MELLON CAPITAL MANAGEMENT CORPORATION SUB-ADVISED SERIES
AGREEMENT executed as of the 1st day of January, 2008, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa Corporation (hereinafter called "the Manager")
and MELLON CAPITAL MANAGEMENT CORPORATION, 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 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 for a portion of the portfolio for the Fund's
SmallCap Value Account I Series and for the Fund's MidCap Growth Account I Series
(hereinafter called the "Series"), 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 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 for 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 for the
Series consistent with the Series' investment objective and policies.
(c) Implement the approved investment program by opening accounts and
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 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.
(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 Series.
(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 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, employees or
affiliates shall be liable to the Manager, the Fund or its shareholders for
any loss suffered by the Manager or the Fund resulting from the
Sub-Advisor's provision of services 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, employees or affiliates.
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 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
reasonably 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, 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 the 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 8, 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. 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.
10. 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, Xxxxx 0000, Xxxxxxxxxx, XX 00000-0000.
(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) 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 and
Chief Operating Officer
MELLON CAPITAL MANAGEMENT
CORPORATION
By /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
EVP & Chief
Administrative Officer
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"):
MidCap Growth Account I
Average Daily Net Assets Fee as a Percentage of Average
Daily Net Assets
First $50 million 0.40%
Assets over $50 million 0.35%
In calculating the fee for the MidCap Growth Series of the Fund on or after
July 1, 2004, assets
of any unregistered separate account of Principal Life Insurance Company and any
investment company sponsored by Principal Life Insurance Company to which the
Sub-Advisor provides investment advisory services and which have the same
investment mandate as the MidCap Growth Account I Series, will be
combined (together, the "Aggregated Assets"). The fee charged for the assets in
the MidCap Growth Account I Series shall be determined by calculating a fee on
the value of the Aggregated Assets and multiplying the aggregate fee by a
fraction, the numerator of which is the amount of assets in the MidCap Growth
Series and the denominator of which is the amount of the Aggregated Assets.
SmallCap Value Account I Series
Average Daily Net Assets Fee as a Percentage of Average
Daily Net Assets
First $100 million 0.50%
Next $200 million 0.45%
Over $300 million 0.35%
In calculating the fee for the SmallCap Value Account I Series on or after July
1, 2005, assets of any unregistered separate account of Principal Life Insurance
Company and any investment company sponsored by Principal Life Insurance Company to
which the Sub-Advisor provides investment advisory services and which have the same
investment mandate as the SmallCap Value Account I Series, will be combined
(together, the "Aggregated Assets"). The fee charged for the assets in the SmallCap
Value Account I Series shall be determined by calculating a fee on the value of the
Aggregated Assets and multiplying the aggregate fee by a fraction, the numerator of
which is the amount of assets in the SmallCap Value Account I Series and the
denominator of which is the amount of the Aggregated Assets.
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.
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.
1
DC-5
