PRINCIPAL VARIABLE CONTRACTS FUNDS INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PRINCIPAL GLOBAL INVESTORS SUB-ADVISED ACCOUNTS
AGREEMENT executed as of May 1, 2013, by and between PRINCIPAL
MANAGEMENT CORPORATION (hereinafter called "the Manager"), and
PRINCIPAL GLOBAL INVESTORS, LLC (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
Account of Principal Variable Contracts Funds, 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 for each Account of the
Fund identified in Appendix A hereto (hereinafter called "Account"), 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 and financial statements as filed
with the Securities and Exchange Commission; and
(c) Policies, procedures or instructions adopted or approved by the
Board of Directors of the Fund relating to obligations and services
to be 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 each Account, subject to the
control and direction of the Manager and 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
The Sub-Advisor will:
(a) Provide investment advisory services, including but not limited
to research, advice and supervision for each Account.
(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 conditions require, a recommended investment
program for each Account consistent with each Account's
investment objective and policies.
(c) Implement the approved investment program by 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 registration statement, Articles
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, as requested by
the officers, 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 each Account.
(e) Maintain, in connection with the Sub-Advisor's investment
advisory services obligations, compliance with the 1940 Act
and the regulations adopted by the Securities and Exchange
Commission thereunder and the Account's investment
strategies and restrictions as stated in the Fund's prospectus
and statement of additional information.
(f) 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 each Account are being observed.
(g) Upon request, 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.
(h) 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 each Account.
(i) Open accounts with broker-dealers and futures commission
merchants ("broker-dealers"), select broker-dealers to effect
all transactions for each Account, place all necessary orders
with broker-dealers or issuers (including affiliated broker-
dealers), and negotiate commissions, if applicable. To the
extent consistent with applicable law, purchase or sell orders
for each Account may be aggregated with contemporaneous
purchase or sell orders of other clients of the Sub-Advisor. In
such event allocation of securities so sold or purchased, as
well as the expenses incurred in the transaction, will be made
by the Sub-Advisor in the manner the Sub-Advisor considers
to be the most equitable and consistent with its fiduciary
obligations to the Fund and to other clients. The Sub-Advisor
will report on such allocations at the request of the Manager,
the Fund or the Fund's Board of Directors providing such
information as the number of aggregated trades to which each
Account was a party, the broker-dealers to whom such trades
were directed and the basis for the allocation for the
aggregated trades. The Sub-Advisor shall use its best efforts
to obtain execution of transactions for each Account at prices
which are advantageous to the Account 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 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
products and/or services, 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 each
Account as well as to accounts over which they exercise
investment discretion. Not all such services or products need
be used by the Sub-Advisor in managing the Account. In
addition, joint repurchase or other accounts may not be
utilized by the Account except to the extent permitted under
any exemptive order obtained by the Sub-Advisor provided
that all conditions of such order are complied with.
(j) Maintain all accounts, books and records with respect to each
Account 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, and furnish the Fund and the
Manager with such periodic and special reports as the Fund
or Manager may reasonably request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-
Advisor hereby agrees that all records that it maintains for
each Account are the property of the Fund, agrees to
preserve for the periods described by Rule 31a-2 under the
1940 Act any records that it maintains for the Account and
that are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the
Fund any records that it maintains for an Account upon
request by the Fund or the Manager. The Sub-Advisor has no
responsibility for the maintenance of Fund records except
insofar as is directly related to the services the Sub-Advisor
provides to an Account.
(k) Observe and comply with Rule 17j-1 under the 1940 Act and
the Sub-Advisor's Code of Ethics adopted pursuant to that
Rule as the same may be amended from time to time. The
Manager acknowledges receipt of a copy of Sub-Advisor's
current Code of Ethics. Sub-Advisor shall promptly forward to
the Manager a copy of any material amendment to the Sub-
Advisor's Code of Ethics along with certification that the Sub-
Advisor has implemented procedures for administering the
Sub-Advisor's Code of Ethics.
(l) From time to time as the Manager or the Fund may request,
furnish the requesting party reports on portfolio transactions
and reports on investments held by an Account, all in such
detail as the Manager or the Fund may reasonably request.
The Sub-Advisor will make available its officers and
employees to meet with the Fund's Board of Directors at the
Fund's principal place of business on due notice to review the
investments of an Account.
(m) Provide such information as is customarily provided by a sub-
advisor and may be required for the Fund or the Manager to
comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of
1986, as amended (the "Code"), the 1940 Act, the Investment
Advisers Act, the Securities Act of 1933, as amended (the
"Securities Act"), and any state securities laws, and any rule
or regulation thereunder.
(n) Vote proxies received on behalf of the Account in a manner
consistent with Sub-Advisor's proxy voting policies and
procedures and provide a record of votes cast containing all of
the voting information required by Form N-PX in an electronic
format to enable the Account to file Form N-PX as required by
SEC rule.
(o) Respond to tender offers, rights offerings and other voluntary
corporate action requests affecting securities held by the Fund
and complete and file notices of claims in connection with
class action lawsuits concerning securities owned by the
Fund.
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 each
Account, 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, agents 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 any error of judgment made in the good
faith exercise of the Sub-Advisor's investment discretion in
connection with selecting investments for an Account or as a result
of the failure by the Manager or any of its affiliates to comply with
the terms of 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, agents, 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, where required by applicable law, 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 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, the Sub-Advisor, Principal 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 Account. 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 Account 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 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 an Account 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 Account 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 Account during such period is in
compliance with Rule 15a-4 under the 1940 Act.
This Agreement may be terminated at any time without the
payment of any penalty by the Board of Directors of the Fund or by
the Sub-Advisor, the Manager or by vote of a majority of the
outstanding voting securities of the Account on sixty days written
notice. 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 Account 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
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 and the Sub-Advisor for this purpose shall be
Principal Financial Group, Xxx Xxxxxx, Xxxx 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 an Account.
(d) The Manager shall provide (or cause the Account custodian to
provide) timely information to the Sub-Advisor regarding such
matters as the composition of the assets of an Account, cash
requirements and cash available for investment in an Account,
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
PRINCIPAL GLOBAL INVESTORS, LLC
By ___________________________________________
By
Xxxxx X. Xxxxxxx, Assistant General Counsel
APPENDIX A
PGI shall serve as investment sub-advisor for each Account
identified below. The Manager will pay PGI, as full compensation for
all services provided under this Agreement, a fee, computed and
paid monthly, at an annual rate determined as described below of
the Account's net assets as of the first day of each month allocated
to PGI's management.
In calculating the fee for an Account included in Table A, assets of all
other Accounts included in Table A, assets of any unregistered
separate account of Principal Life Insurance Company or other non-
Account pooled investment vehicles (identified below as "Other
Aggregated Fixed Income Pools"), as well as any other future fixed
income investment pools which may be added, as agreed, from time
to time, will be combined with the assets of the relevant Account to
arrive at net assets for fee breakpoint purposes.
In calculating the fee for an Account included in Table B, assets of
any unregistered separate account of Principal Life Insurance
Company or any investment company sponsored by Principal Life
Insurance Company to which PGI provides investment advisory
services and which have the same investment mandate (e.g. MidCap
Value) as the Account for which the fee is calculated (identified
below as "Other Aggregated Pools in Style"), as well as any other
future investment pools in the same style which may be added, as
agreed, from time to time, will be combined with the assets of the
relevant Account to arrive at net assets for fee breakpoint purposes.
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.
Table A
Net Asset Value of Account and Sub-Advisor Percentage
Fee as a Percentage of Net Assets
First
Next
Next
Over
Account
$5 billion
$1 billion
$4 billion
$10 billion
Balanced Account, and Bond & Mortgage Securities
Account,
0.1126%
0.0979%
0.0930%
0.0881%
Other Aggregated Fixed Income Pools:
The following other accounts of the Fund: Government &
High Quality Bond Account, Income Account and Short-
Term Income Account
The following Principal Funds, Inc. funds: Bond & Mortgage
Securities Fund, Government and High Quality Bond Fund,
Income Fund, and Short-Term Income Fund
The following Principal Life Insurance Company separate
accounts: Bond & Mortgage, LDI Long Duration, and
Government & High Quality.
Table B
Net Asset Value of Account and Sub-Advisor
Percentage Fee as a Percentage of Net Assets
First
Next
Next
Next
Next
Next
Over
Account
$50
million
$50
million
$100
million
$200
million
$350
million
$750
million
$1.5
billion
LargeCap Value Account
0.2643%
0.2448%
0.2154%
0.1762%
0.1273%
0.0881%
0.0587%
Other Aggregated Pools in Style:
The following other accounts of the Fund:
Equity Income Account
The following Principal Funds, Inc. funds:
LargeCap Value Fund and Equity Income
Fund
The following Principal Life Insurance
Company separate accounts: LargeCap Value
Separate Account
Diversified International Account
0.3427%
0.2741%
0.1958%
0.1566%
0.1175%
0.0979%
0.0783%
Other Aggregated Pools in Style:
The following Principal Funds, Inc. funds:
Diversified International Fund
The following Principal Life Insurance
Company separate accounts: Diversified
International Separate Account
Net Asset Value of Account and Sub-Advisor
Percentage Fee as a Percentage of Net Assets
First
Next
Next
Next
Next
Next
Over
Account
$25
million
$75
million
$100
million
$300
million
$500
million
$500
million
$1.5
billion
MidCap Account
Other Aggregated Pools in Style:
The following Principal Funds, Inc. Funds:
MidCap Fund
The following Principal Life Insurance
Company separate accounts: MidCap
Separate Account
0.3916%
0.3133%
0.2643%
0.2252%
0.1762%
0.1273%
0.0783%
SmallCap Blend Account
Other Aggregated Pools in Style:
The following Principal Funds, Inc. Funds:
SmallCap Blend Fund
The following Principal Life Insurance
Company separate accounts: SmallCap Blend
Separate Account
0.4699%
0.3524%
0.2643%
0.2448%
0.2154%
0.1762%
0.1175%
Table C
Sub-Advisor
Percentage Fee as a
Account
Percentage of Net
Assets
International Emerging Markets Account
0.4895%
LargeCap S&P 500 Index Account
0.0147%
Money Market Account
0.0734%
Principal LifeTime 2010 Account
0.03%
Principal LifeTime 2020 Account
0.03%
Principal LifeTime 2030 Account
0.03%
Principal LifeTime 2040 Account
0.03%
Principal LifeTime 2050 Account
0.03%
Principal LifeTime 2060 Account
Principal LifeTime Strategic Income Account
0.03%
0.03%
2
