PRINCIPAL VARIABLE CONTRACTS FUND, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
AGREEMENT executed as of the 30th day of June, 2004, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa Corporation (hereinafter called "the Manager")
and XXXXXX XXXXXXX INVESTMENT MANAGEMENT INC. (formerly known as 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. 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 sub-advisory services to the Fund or a fund that is under
common control with the Fund regarding transactions for the Fund in the
securities or other assets allocated to the Sub-Advisor pursuant to
this Agreement, except as provided by Rule 12d-3-1 under the 1940 Act.
4. 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.
5. 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.
6. 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.
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 request or require pursuant to applicable laws and
regulations.
8. 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 8, the definitions contained in Section
2(a) of the Act (particularly the definitions of "interested person,"
"assignment" and "voting security") shall be applied.
9. 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.
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 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.
PRINCIPAL MANAGEMENT CORPORATION
/s/Xxxxxx X. Xxxxxx
By _________________________________________
Xxxxxx X. Xxxxxx, Vice President
XXXXXX XXXXXXX INVESTMENT MANAGEMENT INC.
/s/ Xxxx Xxx Xxxxxxxxx
By_________________________________________
Xxxx Xxx Xxxxxxxxx, Exec. Director
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Equity Growth
and Asset Allocation Accounts 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"):
Asset Allocation Account
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
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%
Equity Growth Account
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
$0 -- $200 million................................................. 0.30%
$200 million -- $300 million....................................... 0.25%
$300 million -- $1 billion......................................... 0.20%
$1 billion -- $2 billion........................................... 0.195%
Over $2 billion.................................................... 0.19%
In calculating the fee for the Equity Growth Account 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 Equity Growth Account, will be combined
(together, the "Aggregated Assets"). The fee charged for the assets in the
Equity Growth Account shall be determined by calculating a fee on the value of
the Aggregated Assets using the above fee schedule and multiplying the aggregate
fee by a fraction, the numerator of which is the amount of assets in the Equity
Growth Account 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 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.
