PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
AGREEMENT to be effective September 9, 2008 by and between PRINCIPAL
FUNDS, INC., a Maryland corporation (hereinafter called the "Fund") and
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called the
"Manager").
W I T N E S S E T H:
WHEREAS, The Fund has furnished the Manager with copies properly certified
or authenticated of each of the following:
(a) Articles of Incorporation of the Fund;
(b) Bylaws of the Fund as adopted by the Board of Directors; and
(c) Resolutions of the Board of Directors of the Fund selecting the Manager as
investment adviser and approving the form of this Agreement.
NOW THEREFORE, in consideration of the premises and mutual agreements
herein contained, the Fund hereby appoints the Manager to act as investment
adviser and manager of the Fund, and the Manager agrees to act, perform or
assume the responsibility therefore in the manner and subject to the conditions
hereinafter set forth. The Fund will furnish the Manager from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to the foregoing, if any.
1. INVESTMENT ADVISORY SERVICES
The Manager will regularly perform the following services for the Fund:
(a) Provide investment research, advice and supervision;
(b) Provide investment advisory, research and statistical facilities and all
clerical services relating to research, statistical and investment work;
(c) Furnish to the Board of Directors of the Fund (or any appropriate committee
of such Board), and revise from time to time as conditions require, a
recommended investment program for the portfolio of each Series of the Fund
consistent with each Series' investment objective and policies;
(d) Implement such of its recommended investment program as the Fund shall
approve, by placing orders for the purchase and sale of securities, subject
always to the provisions of the Fund's Articles of Incorporation and Bylaws and
the requirements of the Investment Company Act of 1940 (the "1940 Act"), and the
Fund's Registration Statement, current Prospectus and Statement of Additional
Information, as each of the same shall be from time to time in effect;
(e) 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; and
(f) 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 Fund are being observed.
2. ACCOUNTING SERVICES
The Manager will provide all accounting services customarily
required by investment companies, in accordance with the requirements of
applicable laws, rules and regulations and with the policies and practices of
the Fund as communicated to the Manager from time to time, including, but not
limited to, the following:
(a) Maintain fund general ledger and journal;
(b) Prepare and record disbursements for direct Fund expenses;
(c) Prepare daily money transfer;
(d) Reconcile all Fund bank and custodian accounts;
(e) Assist Fund independent auditors as appropriate;
(f) Prepare daily projection of available cash balances;
(g) Record trading activity for purposes of determining net asset values and
daily dividend;
(h) Prepare daily portfolio valuation report to value portfolio securities and
determine daily accrued income;
(i) Determine the net asset value per share daily or at such other intervals
as the Fund may reasonably request or as may be required by law;
(j) Prepare monthly, quarterly, semi-annual and annual financial statements;
(k) Provide financial information for reports to the Securities and Exchange
Commission in compliance with the provisions of the Investment Company Act of
1940 and the Securities Act of 1933, the Internal Revenue Service and any other
regulatory or governmental agencies as required;
(l) Provide financial, yield, net asset value, and similar information to
National Association of Securities Dealers, Inc., and other survey and
statistical agencies as instructed from time to time by the Fund;
(m) Investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, insurers, banks and
persons in any other capacity deemed to be necessary or desirable for the Fund's
operations; and
(n) Obtain and keep in effect fidelity bonds and directors and officers/errors
and omissions insurance policies for the Fund in accordance with the
requirements of the Investment Company Act of 1940 and the rules thereunder, as
such bonds and policies are approved by the Fund's Board of Directors.
3. CORPORATE ADMINISTRATIVE SERVICES
The Manager will provide the following corporate administrative services
for the Fund:
(a) furnish the services of such of the Manager's officers and employees as may
be elected officers or directors of the Fund, subject to their individual
consent to serve and to any limitations imposed by law;
(b) furnish office space, and all necessary office facilities and equipment, for
the general corporate functions of the Fund (i.e., functions other than (i)
underwriting and distribution of Fund shares; (ii) custody of Fund assets, (iii)
transfer and paying agency services; and (iv) corporate and portfolio accounting
services); and
(c) furnish the services of executive and clerical personnel necessary to
perform the general corporate functions of the Fund.
4. RESERVED RIGHT TO DELEGATE DUTIES AND SERVICES TO OTHERS
The Manager in assuming responsibility for the various services as set
forth in this Agreement reserves the right to enter into agreements with others
for the performance of certain duties and services or to delegate the
performance of some or all of such duties and services to Principal Life
Insurance Company, or one or more affiliates thereof; provided, however, that
entry into any such agreements shall not relieve the Manager of its duty to
review and monitor the performance of such persons to the extent provided in the
agreements with such persons or as determined from time to time by the Board of
Directors.
5. EXPENSES BORNE BY THE MANAGER
The Manager will pay:
(a) the organizational expenses of the Fund and its portfolios and share
classes, including the Fund's registration under the Investment Company Act of
1940, and the initial registration of its Capital Stock for sale under the
Securities Act of 1933 with the Securities and Exchange Commission;
(b) Compensation of personnel, officers and directors who are also affiliated
with the Manager; and
(c) Expenses and compensation associated with furnishing office space, and all
necessary office facilities and equipment, and personnel necessary to perform
the general corporate functions of the Fund.
6. COMPENSATION OF THE MANAGER BY FUND
For all services to be rendered and payments made as provided in Sections
1, 2 and 4 hereof, the Fund will accrue daily and pay the Manager monthly, or at
such other intervals as the Fund and Manager may agree, a fee based on the
average of the values placed on the net assets of each Series of the Fund as of
the time of determination of the net asset value on each trading day throughout
the month in accordance with Schedule 1 attached hereto.
Net asset value shall be determined pursuant to applicable provisions of
the Articles of Incorporation of the Fund. If pursuant to such provisions the
determination of net asset value is suspended, then for the purposes of this
Section 5 the value of the net assets of the Fund as last determined shall be
deemed to be the value of the net assets for each day the suspension continues.
The Manager may, at its option, waive all or part of its compensation for
such period of time as it deems necessary or appropriate.
7. EXPENSES BORNE BY FUND
The Fund will pay, without reimbursement by the Manager, all expenses
attributable to the operation of the Fund or the services described in this
Agreement and not specifically identified in this Agreement as being paid by the
Manager.
8. AVOIDANCE OF INCONSISTENT POSITION
In connection with purchases or sales of portfolio securities for the
account of the Fund, neither the Manager nor any of the Manager's directors,
officers or employees will act as a principal or agent or receive any
commission.
9. LIMITATION OF LIABILITY OF THE MANAGER
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the Manager's part in the performance of its duties
or from reckless disregard by it of its obligations and duties under this
Agreement.
10. COPIES OF CORPORATE DOCUMENTS
The Fund will furnish the Manager promptly with properly certified or
authenticated copies of amendments or supplements to its Articles of
Incorporation or Bylaws. Also, the Fund will furnish the Manager financial and
other corporate information as needed, and otherwise cooperate fully with the
Manager in its efforts to carry out its duties and responsibilities under this
Agreement.
11. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall remain in force and in effect from year to year
following its execution 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 Series and in either event
by vote of a majority of the directors of the Fund who are not interested
persons of the Manager, Principal Life Insurance Company, or the Fund cast in
person at a meeting called for the purpose of voting on such approval. 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, by vote of a
majority of the outstanding voting securities of the Series, or by the Manager.
This Agreement shall automatically terminate in the event of its assignment. In
interpreting the provisions of this Section 10, the definitions contained in
Section 2(a) of the Investment Company Act of 1940 (particularly the definitions
of "interested person," "assignment" and "voting security") shall be applied.
12. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and 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
Series to which such amendment relates and by vote of a majority of the
directors who are not interested persons of the Manager, Principal Life
Insurance Company or the Fund cast in person at a meeting called for the purpose
of voting on such approval.
13. ADDRESS FOR PURPOSE OF NOTICE
Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, 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 Fund and that of the
Manager for this purpose shall be the Principal Financial Group, Xxx Xxxxxx,
Xxxx 00000-0000.
14. MISCELLANEOUS
The captions in this Agreement are included for convenience of reference
only, and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized.
PRINCIPAL FUNDS, INC.
By /s/Xxxx Xxxxxxx
Xxxx Xxxxxxx, President
PRINCIPAL MANAGEMENT CORPORATION
By /s/Xxxxxxx X. Beer
Xxxxxxx X. Beer, Executive Vice President and Chief Operating Officer
SCHEDULE 1
Series Management Fee as a Percentage of Average Daily Net Assets
LargeCap S&P 500 Index Fund 0.15%
MidCap S&P 400 Index Fund 0.15%
SmallCap S&P 600 Index Fund 0.15%
Series Management Fee as a Percentage
of Average Daily Net Assets
First Over
$3 billion $3 billion
Principal LifeTime 2010 Fund 0.1225% 0.1125%
Principal LifeTime 2015 Fund 0.1225% 0.1125%
Principal LifeTime 2020 Fund 0.1225% 0.1125%
Principal LifeTime 2025 Fund 0.1225% 0.1125%
Principal LifeTime 2030 Fund 0.1225% 0.1125%
Principal LifeTime 2035 Fund 0.1225% 0.1125%
Principal LifeTime 2040 Fund 0.1225% 0.1125%
Principal LifeTime 2045 Fund 0.1225% 0.1125%
Principal LifeTime 2050 Fund 0.1225% 0.1125%
Principal LifeTime 2055 Fund 0.1225% 0.1125%
Principal LifeTime Strategic Income Fund 0.1225% 0.1125%
Series Management Fee as a Percentage
of Average Daily Net Assets
First Next Next Over Next Over
$500 $500 $500 $1.5 $1 $3
million million million billion billion billion
Bond & Mortgage Securities Fund 0.55% 0.53% 0.51% 0.50% 0.48% 0.45%
Diversified International Fund 0.90% 0.88% 0.86% 0.85% 0.83% 0.80%
Global Diversified Income Fund 0.80% 0.78% 0.76% 0.75% 0.73% 0.70%
Global Real Estate Securities Fund 0.90% 0.88% 0.86% 0.85%
Government & High Quality Bond Fund 0.40% 0.38% 0.36% 0.35%
High Quality Intermediate-Term Bond Fund 0.40% 0.38% 0.36% 0.35%
High Yield Fund I 0.65% 0.63% 0.61% 0.60%
Inflation Protection Fund 0.40% 0.38% 0.36% 0.35%
International Emerging Markets Fund 1.20% 1.18% 1.16% 1.15%
International Growth Fund 1.00% 0.98% 0.96% 0.95%
Disciplined LargeCap Blend Fund 0.60% 0.58% 0.56% 0.55%
LargeCap Value Fund 0.45% 0.43% 0.41% 0.40%
MidCap Blend Fund 0.65% 0.63% 0.61% 0.60%
MidCap Growth Fund 0.65% 0.63% 0.61% 0.60%
MidCap Value Fund III 0.65% 0.63% 0.61% 0.60%
Money Market Fund 0.40% 0.39% 0.38% 0.37% 0.36% 0.35%
Global Equity Fund I 0.95% 0.93% 0.91% 0.90%
International Fund I 1.10% 1.08% 1.06% 1.05%
International Value Fund I 1.10% 1.08% 1.06% 1.05%
LargeCap Blend Fund II 0.75% 0.73% 0.71% 0.70%
LargeCap Blend Fund I 0.45% 0.43% 0.41% 0.40%
LargeCap Growth Fund I 0.75% 0.73% 0.71% 0.70%
LargeCap Growth Fund II 0.95% 0.93% 0.91% 0.90%
LargeCap Value Fund III 0.80% 0.78% 0.76% 0.75% 0.73% 0.70%
LargeCap Value Fund I 0.80% 0.78% 0.76% 0.75%
LargeCap Value Fund II 0.85% 0.83% 0.81% 0.80%
MidCap Growth Fund III 1.00% 0.96% 0.94% 0.92%
MidCap Growth Fund I 1.00% 0.98% 0.96% 0.95%
MidCap Growth Fund II 1.00% 0.98% 0.96% 0.95%
MidCap Value Fund II 1.00% 0.98% 0.96% 0.95%
MidCap Value Fund I 1.00% 0.98% 0.96% 0.95%
SmallCap Blend Fund I 1.00% 0.98% 0.96% 0.95%
SmallCap Growth Fund I 1.10% 1.08% 1.06% 1.05%
SmallCap Growth Fund II 1.00% 0.98% 0.96% 0.95%
SmallCap Growth Fund III 1.10% 1.08% 1.06% 1.05%
SmallCap Value Fund III 1.00% 0.98% 0.96% 0.95%
SmallCap Value Fund I 1.00% 0.98% 0.96% 0.95%
SmallCap Value Fund II 1.00% 0.98% 0.96% 0.95%
Preferred Securities Fund 0.75% 0.73% 0.71% 0.70%
Real Estate Securities Fund 0.85% 0.83% 0.81% 0.80%
Short-Term Bond Fund 0.40% 0.38% 0.36% 0.35%
SmallCap Blend Fund 0.75% 0.73% 0.71% 0.70%
SmallCap Growth Fund 0.75% 0.73% 0.71% 0.70%
SmallCap Value Fund 0.75% 0.73% 0.71% 0.70%
Ultra Short Term Fund 0.40% 0.39% 0.38% 0.37%
Series Management Fee as a Percentage
of Average Daily Net Assets
First Next Next Next Over
$500 $500 $1 $1 $3
million million billion billion billion
LargeCap Growth Fund 0.68% 0.65% 0.62% 0.58% 0.55%
Series Management Fee as a Percentage
of Average Daily Net Assets
First Next Over
$250 million $250 million $500 million
Equity Income Fund 0.60% 0.55% 0.50%
Series Management Fee as a Percentage
of Average Daily Net Assets
First $500 million Next $500 million Over $1 billion
West Coast Equity Fund 0.625% 0.50% 0.375%
Series Management Fee as a Percentage
of Average Daily Net Assets
First $1 billion Next $1 billion Next $1 billion Over $3 billion
MidCap Stock Fund 0.75% 0.70% 0.65% 0.60%
Series Management Fee as a Percentage
of Average Daily Net Assets
First $2 billion Over $2 billion
Mortgage Securities Fund 0.50% 0.45%
Income Fund 0.50% 0.45%
Series Management Fee as a Percentage
of Average Daily Net Assets
First $250 million Over $250 million
High Yield Fund 0.625% 0.50%
Series Management Fee as a Percentage
of Average Daily Net Assets
First $1 billion Over $1 billion
California Municipal Fund 0.50% 0.45%
Series Management Fee as a Percentage
of Average Daily Net Assets
First $500 million Next $500 million Next $500 million Over $1.5
billion
Tax-Exempt Bond Fund 0.50% 0.48% 0.46% 0.45%
Series Management Fee as a Percentage
of Average Daily Net Assets
First $200 million Next $300 million Over $500 million
Short-Term Income 0.50% 0.45% 0.40%
Series Management Fee as a Percentage
of Average Daily Net Assets
First Next Next Next Next Over
$500 $500 $500 $500 $500 $2.5
million million million million million billion
Core Plus Bond Fund I 0.60% 0.58% 0.56% 0.55% 0.53% 0.50%
Series Management Fee as a Percentage
of Average Daily Net Assets
First Next Next Next Next Next Over
$500 $500 $1 $1 $1 $1 $5
million million billion billion billion billion
billion
XXX Balanced Portfolio* 0.55% 0.50% 0.45% 0.40% 0.35% 0.30% 0.25%
XXX Conservative Balanced Portfolio* 0.55% 0.50% 0.45% 0.40% 0.35% 0.30%
0.25%
XXX Conservative Growth Portfolio* 0.55% 0.50% 0.45% 0.40% 0.35% 0.30% 0.25%
XXX Flexible Income Portfolio* 0.55% 0.50% 0.45% 0.40% 0.35% 0.30% 0.25%
XXX Strategic Growth Portfolio* 0.55% 0.50% 0.45% 0.40% 0.35% 0.30% 0.25%
*Breakpoints based on aggregate XXX Portfolio net assets
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