SUB-SUB-ADVISORY AGREEMENT
AGREEMENT made effective as of the 1st day of July, 2005, by and
between Spectrum Asset Management, Inc. (hereinafter called the "Sub-Adviser")
and Principal Global Investors, LLC (hereinafter called the "Adviser").
WHEREAS, the Adviser has entered into a Sub-Advisory Agreement
("Sub-Advisory Agreement") with Principal Management Corporation, ("Client")
relating to Principal Variable Contracts Fund, Inc. (the "Account"), pursuant to
which the Adviser acts as investment adviser to the Bond Account and the Equity
Income Account (individually a "Portfolio" and collectively the "Portfolios").
NOW, THEREFORE, in consideration of the premises and the mutual
promises set forth, the Adviser and the Sub-Adviser agree as follows with
respect to each of the Portfolios:
1. (a) The Sub-Adviser shall, subject to the supervision of the
Adviser, direct the investments of all or such portion of the Portfolio's assets
as the Adviser shall designate in accordance with the investment objectives,
policies and limitations as provided in the Portfolio's prospectus or other
governing instruments, as amended from time to time, the Investment Company Act
of 1940 and rules thereunder, as amended from time to time (the "1940 Act"), and
such other limitations as the Portfolio may impose by notice in writing to the
Adviser or Sub-Adviser. The Sub-Adviser shall also furnish for the use of the
Portfolios office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio; and shall pay the
salaries and fees of all personnel of the Sub-Adviser performing services for
the Portfolio relating to research, statistical and investment activities. The
Sub-Adviser is authorized, in its discretion and without prior consultation with
the Portfolio or the Adviser, to buy, sell, lend and otherwise trade in any
stocks, bonds and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the Portfolio are
and shall at all times be subject to the control and direction of the Account's
Board of Directors.
(b) The Sub-Adviser shall also furnish such reports,
evaluations, information or analyses to the Account and the Adviser as the
Account's Board of Directors or the Adviser may request from time to time or as
the Sub-Adviser may deem to be desirable. The Sub-Adviser shall make
recommendations to the Account's Board of Directors with respect to Portfolio
policies, and shall carry out such policies as are adopted by the Directors. The
Sub-Adviser shall, subject to review by the Board of Directors, furnish such
other services as the Sub-Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement and which
are not otherwise furnished by the Adviser.
(c) The Sub-Adviser shall place all orders for the purchase
and sale of portfolio securities for the Portfolio's accounts with brokers or
dealers selected by the Sub-Adviser, which may include brokers or dealers
affiliated with the Adviser or Sub-Adviser. The Sub-Adviser shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are reasonable in
relation to the benefits received. In selecting brokers or dealers qualified to
execute a particular transaction, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Sub-Adviser, Adviser or their affiliates exercise
investment discretion. The Sub-Adviser is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
which the Sub-Adviser and its affiliates have with respect to accounts over
which they exercise investment discretion.
2. The Adviser will pay the Sub-Adviser, as full compensation for all services
provided to the Bond Account under this Agreement, a fee, computed and paid
monthly, at an annual rate of 0.20% of the net assets of the Bond Account
allocated to the Sub-Adviser for management as of the first day of each month.
The Adviser will pay the Sub-Adviser, as full compensation for all services
provided to the Equity Income Account under this Agreement, a fee equal to
$1,750 per annum. Such fees shall not be reduced to reflect expense
reimbursements or fee waivers by the Adviser, if any, in effect from time to
time.
3. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Sub-Adviser hereunder or by the
Adviser under the Sub-Advisory Agreement.
4. The Services of the Sub-Adviser to the Adviser are not to be deemed
to be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a material
manner, with the Sub-Adviser's ability to meet all of its obligations with
respect to rendering investment advice hereunder. The Sub-Adviser shall for all
purposes be an independent contractor and not an agent or employee of the
Adviser or the Account.
5. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Sub-Adviser, the Sub-Adviser shall not be subject to liability to the Adviser,
the Client, the Account or to any shareholder of the Portfolio for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6 for Portfolio, this Agreement shall continue in force for
one year, and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Account's Board of Directors or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent subject
to the provisions of Section 15 of the 1940 Act, as modified by or interpreted
by any applicable order or orders of the Securities and Exchange Commission (the
"Commission") or any rules or regulations adopted by, or interpretive release
of, the Commission.
(c) In addition to the requirements of sub-paragraphs (a) and
(b) of this paragraph 6, the terms of any continuance or modification of the
Agreement must have been approved by the vote of a majority of those Directors
of the Account who are not parties to such Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may,
at any time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of its Board
of Directors, or by vote of a majority of its outstanding voting securities.
This Agreement shall terminate automatically upon the termination of the
Sub-Advisory Agreement. This Agreement shall terminate automatically in the
event of its assignment.
7. The Sub-Adviser agrees that any obligations of the Account or the
Portfolio arising in connection with this Agreement shall be limited in all
cases to the Portfolio and its assets, and the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Portfolio. Nor shall the Sub-Adviser seek satisfaction of any such
obligation from the Directors or any individual Director.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons," when
used herein, shall have the respective meanings specified in the 1940 Act as now
in effect or as hereafter amended.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be signed in their behalf by their respective officers, duly authorized, all as
of the date written above.
PRINCIPAL GLOBAL INVESTORS, LLC
By:
/s/Xxxxx Xxxxxx /s/Xxxxxxx X. XxXxxxxx
-----------------------------------------
Xxxxx Xxxxxx Xxxxxxx X. XxXxxxxx
Name Printed
CFO COO
Title
SPECTRUM ASSET MANAGEMENT, INC.
By:
/s/Xxxx Xxxx
---------------------------
Xxxx Xxxx
Name Printed
Executive Director
Title
