PRINCIPAL VARIABLE CONTRACTS FUNDS INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PRINCIPAL GLOBAL INVESTORS SUB-ADVISED ACCOUNTS
AGREEMENT executed as of March 31, 2017, 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;
(c) The Fund's Articles of Incorporation and By-laws; and
(d) 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, swap dealers,
clearinghouses 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
or swaps 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 or derivatives
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 1940
Act, the Investment Advisers Act, the Securities Act of
1933, as amended, the Commodity Exchange Act, as
amended, 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.
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
No amendment of this Agreement shall be effective unless in writing
and signed by both parties.
This Agreement shall become effective with respect to an Account as
of the corresponding date set
forth on Appendix B to this Agreement, as may be amended from time
to time, and, unless otherwise
terminated with respect to such Account, shall continue in effect
thereafter for the initial term set forth
on Appendix B to this Agreement, and thereafter from year to year,
provided that in each case the
continuance is specifically approved within the period required by
the 1940 Act 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 such 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 such
Account during such period is in compliance with Rule 15a-4 under
the 1940 Act.
This Agreement may be terminated with respect to a Account 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," "voting security" and "majority of
the outstanding voting
securities") 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. Additional Series
In the event the Manager wishes to appoint the Sub-Advisor to perform the
services described in this
Agreement with respect to one or more additional Series of the Fund after
the effective date of this
Agreement, such Series will become a Series under this Agreement upon
approval of this Agreement
in the manner required by the 1940 Act and the amendment of Appendices
A and B hereto.
11. 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, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
(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
/s/ ▇▇▇▇▇▇▇▇ ▇. Block
By
_____________________________________
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By
_____________________________________
PRINCIPAL GLOBAL INVESTORS, LLC
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By
_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Counsel
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
By
_____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Counsel
APPENDIX A
This Appendix intentionally left blank.
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for each
Series
Series
Effective Date
Initial Term
Balanced Account
02/27/1998
One Year
Core Plus Bond Account
07/01/2005
One Year
Diversified Balanced Volatility
Control Account
03/31/2017
Two Years
Diversified Growth Volatility Control
Account
03/31/2017
Two Years
Diversified International Account
02/27/1998
One Year
International Emerging Markets
Account
08/09/2000
One Year
LargeCap S&P 500 Index Account
01/01/1999
One Year
LargeCap S&P 500 Managed
Volatility Index Account
10/31/2013
One Year
LargeCap Value Account
02/27/1998
One Year
MidCap Account
02/27/1998
One Year
Multi-Asset Income Account
07/28/2015
One Year
Principal LifeTime Strategic Income
Account
06/30/2004
One Year
Principal LifeTime 2010 Account
06/30/2004
One Year
Principal LifeTime 2020 Account
06/30/2004
One Year
Principal LifeTime 2030 Account
06/30/2004
One Year
Principal LifeTime 2040 Account
06/30/2004
One Year
Principal LifeTime 2050 Account
06/30/2004
One Year
Principal LifeTime 2060 Account
05/01/2013
One Year
SmallCap Account
02/27/1998
One Year