5
MANAGEMENT AGREEMENT
AMENDMENT AND RESTATEMENT
AGREEMENT to be effective January 1, 2000, by and between PRINCIPAL
SMALLCAP FUND, 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) Certificate 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 therefor 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 economic
conditions require, a recommended investment program for the Fund's
portfolio consistent with the Fund's 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 Certificate of
Incorporation and Bylaws and the requirements of the Investment Company
Act of 1940, 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. CORPORATE ADMINISTRATIVE SERVICES
In addition to the investment advisory services set forth in Section 1, the
Manager will perform the following corporate administrative services:
(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, and (iii) transfer and paying agency
services);
(c) Furnish the services of the supervisory and clerical personnel
necessary to perform the general corporate functions of the Fund; and
(d) Determine the net asset value of the shares of the Fund's Capital Stock
as frequently as the Fund shall request, or as shall be required by
applicable law or regulations.
3. 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 an affiliate 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.
4. EXPENSES BORNE BY THE MANAGER
The Manager will pay:
(a) The compensation and expenses of all officers and executive employees
of the Fund;
(b) The compensation and expenses of all directors of the Fund who are
persons affiliated with the Manager; and
(c) The expenses of the organization of the Fund, including its
registration under the Investment Company Act of 1940, and the initial
registration and qualification of its Capital Stock for sale under the
Securities Act of 1933 and the Blue Sky laws of the states in which it
initially qualifies.
5. 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 within five
days after the end of each calendar month a fee based on the average of the
values placed on the net assets of the Fund as of the time of determination of
the net asset value on each trading day throughout the month in accordance with
the following schedule.
Average Daily Net Fee as a Percentage of
Assets of the Fund Average Daily Net Assets
First $100,000,000 0.85%
Next $100,000,000 0.80%
Next $100,000,000 0.75%
Next $100,000,000 0.70%
Amount Over $400,000,000 0.65%
Net asset value shall be determined pursuant to applicable provisions of
the Certificate 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.
6. SERVICES FURNISHED BY THE MANAGER
The Manager (in addition to the services to be performed by it pursuant to
Sections 1 and 2 hereof) will use its best efforts to qualify the Capital Stock
of the Fund for sale in states and jurisdictions other than those in which
initially qualified, as directed by the Fund.
The Manager will maintain records in reasonable detail that will support
the amount it charges the Fund for performance of the services set forth in this
Section 6. At the end of each calendar month the Fund will pay the Manager for
its performance of these services.
7. EXPENSES BORNE BY FUND
The Fund will pay:
(a)Taxes, including in case of redeemed shares any initial transfer taxes,
and governmental fees (except with respect to the Fund's organization
and the initial qualification and registration of its Capital Stock);
(b) Portfolio brokerage fees and incidental brokerage expenses;
(c) Interest;
(d) The fees of its independent auditor and its legal counsel, incurred
subsequent to the Fund's organization and the initial qualification and
registration of its Capital Stock;
(e) The fees and expenses of the Custodian of its assets;
(f) The fees and expenses of all directors of the Fund who are not persons
affiliated with the Manager;
(g) The cost of meetings of shareholders; and
(h) The fees and expenses of transfer and paying agent and registrar
services.
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. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall remain in force until the first meeting of the
shareholders of the Fund and if it is approved by a vote of a majority of the
outstanding voting securities of the Fund 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 Fund 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 Fund, 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.
11. 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 Fund's outstanding voting securities
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.
12. 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.
13. 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 SMALLCAP FUND, INC.
/s/A. S. Filean
By _________________________________________
Xxxxxx X. Xxxxxx, Vice President
PRINCIPAL MANAGEMENT CORPORATION
/s/Xxxxx X. Xxxxxx
By _________________________________________
Xxxxx X. Xxxxxx, President
