PRINCIPAL VARIABLE CONTRACTS FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
LARGECAP VALUE ACCOUNT III
AGREEMENT executed as of the 1st day of January, 2010, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter
called "the Manager"), and ALLIANCEBERSTEIN L.P. (formerly known as
ALLIANCE CAPITAL MANAGEMENT, L.P.), a Delaware limited partnership
(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 the 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 the LargeCap Value
Account of the Fund (hereinafter called the "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;
(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 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 the 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
economic conditions require,
a recommended investment program for the Account consistent with
the 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 Articles of Incorporation and By-laws, 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 the 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 the
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 the Account.
(i) Open accounts with broker-dealers and futures commission
merchants ("broker-
dealers"), select broker-dealers to effect all transactions for
the 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 the
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 the 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 the 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 the 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 the
Account as are required of
an investment advisor of a registered investment company
pursuant to the 1940 Act
and Investment Advisor's Act of 1940 (the "Investment Advisor's
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 the 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 the 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 provided to the
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.
(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 the 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 the
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. Sub-Advisor will advise Manager of any changes in
Sub-
Advisor's general partners within a reasonable time after any
such change.
(n) Perform quarterly and annual tax compliance tests to monitor the
Account 's compliance with Subchapter M of the Code and Section
817(h) of the Code, subject to receipt of
such additional information as may be required from the Manager
and provided in accordance with Section 10(d) of this Agreement.
The Sub-Advisor shall notify the Manager immediately upon
having a reasonable basis for believing that the Account
has ceased to be in compliance or that it might not be in
compliance in the future. If it is determined that the Account
is not in compliance with the requirements noted above,
the Sub-Advisor, in consultation with the Manager, will take
prompt action to bring the Account back into compliance (to the
extent possible) within the time permitted under
the Code.
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 Account,
the Manager shall pay the compensation specified in Appendix A to
this Agreement. Brokerage services provided to the Account by the
Sub-Advisor's affiliate, Xxxxxxx X. Xxxxxxxxx & Co., LLC ("SCB
LLC"), are not within the scope of
the duties of the Sub-Advisor under this Agreement. Subject to the
requirements of
applicable law and any procedures adopted by the Fund's board of
directors, SCB LLC may receive brokerage commissions, fees or other
remuneration from the Account for these services in addition to the
sub-advisory fees, for services under 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 the Account or
as a result of the failure by the Manager or any of its affiliates
to comply with the terms of this Agreement and/or any insurance laws
and rules, 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 the 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 Fund 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
(b) 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
(c) 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
Principal Financial Group, Xxx Xxxxxx, Xxxx 00000-0000, and the
address of the Sub-Advisor shall be 0000 Xxxxxx xx xx Xxxxxxxx,
Xxx Xxxx, XX 00000. ATTN: Xxxxxxx Xxxx.
(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 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 the Account, cash requirements and cash available for
investment in the Account, and
all other reasonable information as may be necessary for the Sub-
Advisor to perform its duties and responsibilities hereunder.
(e) The Sub-Advisor agrees that neither it nor any of its
affiliates will in any way refer directly or indirectly to its
relationship with the Fund, the Series, or the Manager or any
of their respective affiliates in offering, marketing or other
promotional materials without the express written consent of
the Manager.
(f) The Sub-Advisor represents that it will not enter into any
agreement, oral or written, or other understanding under which the
Fund directs or is expected to direct portfolio securities
transactions, or any remuneration, to a broker or dealer in
consideration for the promotion or sale of Fund shares or shares
issued by any other registered investment company. Sub-advisor
further represents that it is contrary to the Sub-advisor's
policies to permit those who select brokers or dealers for
execution of fund portfolio securities transactions to take into
account the broker or dealer's promotion or sale of Fund shares or
shares issued by any other registered investment company.
(g) 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
ALLIANCEBERNSTEIN L.P.
By /s/ Xxxxx X Xxxxxx
Xxxxx X. Xxxxxx, Assistant
Secretary
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the 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"):
Sub-Advisor's Fee As A Percentage of Average Daily Net Assets
0.23% for the first $300
million of average daily net assets
0.20% of the average
daily net assets thereafter
In calculating the fee for the 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
Account, will be combined (together, the "Aggregated Assets"). The fee
charged for the assets in the Account 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 Account
and the denominator of which is the amount of the Aggregated Assets. Cash
and cash equivalents shall be included in the Series net assets
calculation up to a maximum of 1.00% of the Series net assets. If the
Manager requests the Sub-Advisor to raise cash in the Series portfolio in
excess of 1.00% of the Series net assets for the purpose of funding
redemptions from the Series, such amount requested shall be included in
the Series net assets calculation.
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
Account as determined in accordance with the Account's prospectus and
statement of additional information as of the close of business on the
previous business day on which the Account 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.
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