CUSTODY AGREEMENT
AGREEMENT, dated as of October 27, 2000 between Principal Investors
Fund, Inc., a corporation organized and existing under the laws of the State of
Maryland having its principal office and place of business at 711 High Street,
Des Moines, Iowa 50392-0870 (the "Fund") and The Bank of New York, a New York
corporation authorized to do a banking business having its principal office and
place of business at One Wall Street, New York, New York 10286 ("Custodian").
W I T N E S S E T H:
that for and in consideration of the mutual promises hereinafter set forth the
Fund and Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words shall have the
meanings set forth below:
1. "Authorized Person" shall be any person, whether or not an
officer or employee of the Fund, duly authorized by the Fund's
board to execute any Certificate or to give any Oral Instruction
with respect to one or more Accounts, such persons to be
designated in a Certificate annexed hereto as Schedule I hereto
or such other Certificate as may be received by Custodian from
time to time.
2. "BNY Affiliate" shall mean any office, branch or subsidiary of
The Bank of New York Company, Inc.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for receiving and delivering securities, its
successors and nominees.
4. "Business Day" shall mean any day on which Custodian and relevant
Depositories are open for business.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement
to be given to Custodian, which is actually received by Custodian
by letter or facsimile transmission and signed on behalf of the
Fund by an Authorized Person or a person reasonably believed by
Custodian to be an Authorized Person.
6. "Composite Currency Unit" shall mean the Euro or any other
composite currency unit consisting of the aggregate of specified
amounts of specified currencies, as such unit may be constituted
from time to time.
7. "Depository" shall include (a) the Book-Entry System, (b) the
Depository Trust Company, (c) any other clearing agency or
securities depository registered with the Securities and Exchange
Commission identified to the Fund from time to time, and (d) the
respective successors and nominees of the foregoing.
8. "Foreign Depository" shall mean (a) Euroclear, (b) Clearstrearn
Banking, societe anonyme, (c) each Eligible Securities Depository
as defined in Rule 17f-7 under the Investment Company Act of
1940, as amended, identified to the Fund from time to time, and
(d) the respective successors and nominees of the foregoing.
9. "Instructions" shall mean communications transmitted by
electronic or telecommunications media, including S.W.I.F.T.,
computer-to-computer interface, or dedicated transmission lines.
10. "Oral Instructions" shall mean verbal instructions received by
Custodian from an Authorized Person or from a person reasonably
believed by Custodian to be an Authorized Person.
1l. "Series" shall mean the various portfolios, if any, of the Fund
listed on Schedule II hereto, and if none are listed references
to Series shall be references to the Fund.
12. "Securities" shall include, without limitation, any common stock
and other equity securities, bonds, debentures and other debt
securities, notes, mortgages or other obligations, and any
instruments representing rights to receive, purchase, or
subscribe for the same, or representing any other rights or
interests therein (whether represented by a certificate or held
in a Depository or by a Subcustodian).
13. "Subcustodian" shall mean a bank (including any branch thereof)
or other financial institution (other than a Foreign Depository)
located outside the U.S. which is utilized by Custodian in
connection with the purchase, sale or custody of Securities
hereunder and identified to the Fund from time to time, and their
respective successors and nominees.
ARTICLE II
APPOINTMENT OF CUSTODIAN; ACCOUNTS;
REPRESENTATIONS, WARRANTIES, AND COVENANTS
1. (a) The Fund hereby appoints Custodian as custodian of all
Securities and cash at any time delivered to Custodian during the term of this
Agreement, and authorizes Custodian to hold Securities in registered form in its
name or the name of its nominees. Custodian hereby accepts such appointment and
agrees to establish and maintain one or more securities accounts and cash
accounts for each Series in which Custodian will hold Securities and cash as
provided herein. Custodian shall maintain books and records segregating the
assets of each Series from the assets of any other Series. Such accounts (each,
an "Account"; collectively, the "Accounts") shall be in the name of the Fund.
(b) Custodian may from time to time establish on its books and
records such sub-accounts within each Account as the Fund and Custodian may
agree upon (each a "Special Account"), and Custodian shall reflect therein such
assets as the Fund may specify in a Certificate or Instructions.
(c) Custodian may from time to time establish pursuant to a
written agreement with and for the benefit of a broker, dealer, future
commission merchant or other third party identified in a Certificate or
Instructions such accounts on such terms and conditions as the Fund and
Custodian shall agree, and Custodian shall transfer to such account such
Securities and money as the Fund may specify in a Certificate or Instructions.
2. The Fund hereby represents and warrants, which representations and
warranties shall be continuing and shall be deemed to be reaffirmed upon each
delivery of a Certificate or each giving of Oral Instructions or Instructions by
the Fund, that:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power to carry on its business as
now conducted, to enter into this Agreement, and to perform its obligations
hereunder;
(b) This Agreement has been duly authorized, executed and
delivered by the Fund, approved by a resolution of its board, constitutes a
valid and legally binding obligation of the Fund, enforceable in accordance with
its terms, and there is no statute, regulation, rule, order or judgment binding
on it, and no provision of its charter or by-laws, nor of any mortgage,
indenture, credit agreement or other contract binding on it or affecting its
property, which would prohibit its execution or performance of this Agreement;
(c) It is conducting its business in substantial compliance
with all applicable laws and requirements, both state and federal, and has
obtained all regulatory licenses, approvals and consents necessary to carry on
its business as now conducted;
(d) It will not use the services provided by Custodian
hereunder in any manner that is, or will result in, a violation of any law, rule
or regulation applicable to the Fund;
(e) Its board or its foreign custody manager, as defined in
Rule 17f-5 under the Investment Company Act of 1940, as amended (the `"40 Act"),
has determined that use of each Subcustodian (including any Replacement
Custodian) and each Depository which Custodian or any Subcustodian is authorized
to utilize in accordance with Section l(a) of Article III hereof, satisfies the
applicable requirements of the `40 Act and Rules 17f-4 or 17f-5 thereunder, as
the case may be;
(f) The Fund or its investment adviser has determined that the
custody arrangements of each Foreign Depository provide reasonable safeguards
against the custody risks associated with maintaining assets with such Foreign
Depository within the meaning of Rule 17f-7 under the `40 Act.;
(g) It is fully informed of the protections and risks
associated with various methods of transmitting Instructions and Oral
Instructions and delivering Certificates to Custodian, understands that there
may be more secure methods of transmitting or delivering the same than the
methods selected by the Fund, agrees that the security procedures (if any) to be
utilized provide a commercially reasonable degree of protection in light of its
particular needs and circumstances, and acknowledges and agrees that
Instructions need not be reviewed by Custodian, may conclusively be presumed by
Custodian to have been given by person(s) duly authorized, and may be acted upon
as given;
(h) It shall manage its borrowings, including, without
limitation, any advance or overdraft (including any day-light overdraft) in the
Accounts, so that the aggregate of its total borrowings for each Series does not
exceed the amount such Series is permitted to borrow under the `40 Act;
(i) Its transmission or giving of, and Custodian acting upon
and in reliance on, Certificates, Instructions, or Oral Instructions pursuant to
this Agreement shall at all times comply with the `40 Act;
(j) It shall impose and maintain restrictions on the
destinations to which cash may be disbursed by Instructions to ensure that each
disbursement is for a proper purpose; and
(k) It has the right to make the pledge and grant the security
interest and security entitlement to Custodian contained in Section I of Article
V hereof, free of any right of redemption or prior claim of any other person or
entity, such pledge and such grants shall have a first priority subject to no
setoffs, counterclaims, or other liens or grants prior to or on a parity
therewith, and it shall take such additional steps as Custodian may require to
assure such priority.
3. The Fund hereby covenants that it shall from time to time complete
and execute and deliver to Custodian upon Custodian's request a Form FR U-I (or
successor form) whenever the Fund borrows from Custodian any money to be used
for the purchase or carrying of margin stock as defined in Federal Reserve
Regulation U.
ARTICLE III
CUSTODY AND RELATED SERVICES
1. (a) Subject to the terms hereof, the Fund hereby authorizes
Custodian to hold any Securities received by it from time to time for the Fund's
account. Custodian shall be entitled to utilize Depositories, Subcustodians,
and, subject to subsection(c) of this Section 1, Foreign Depositories, to the
extent possible in connection with its performance hereunder. Securities and
cash held in a Depository or Foreign Depository will be held subject to the
rules, terms and conditions of such entity. Securities and cash held through
Subcustodians shall be held subject to the terms and conditions of Custodian's
agreements with such Subcustodians. Subcustodians may be authorized to hold
Securities in Foreign Depositories in which such Subcustodians participate.
Unless otherwise required by local law or practice or a particular subcustodian
agreement, Securities deposited with a Subcustodian, a Depositary or a Foreign
Depository will be held in a commingled account, in the name of Custodian,
holding only Securities held by Custodian as custodian for its customers.
Custodian shall identify on its books and records the Securities and cash
belonging to the Fund, whether held directly or indirectly through Depositories,
Foreign Depositories, or Subcustodians. Custodian shall, directly or indirectly
through Subcustodians, Depositories, or Foreign Depositories, endeavor, to the
extent feasible, to hold Securities in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for cancellation and/or payment and/or
registration, or where such Securities are acquired. Custodian at any time may
cease utilizing any Subcustodian and/or may replace a Subcustodian with a
different Subcustodian (the "Replacement Subcustodian"). In the event Custodian
selects a Replacement Subcustodian, Custodian shall not utilize such Replacement
Subcustodian until after the Fund's board or foreign custody manager has
determined that utilization of such Replacement Subcustodian satisfies the
requirements of the `40 Act and Rule 17f-5 thereunder.
(b) Unless Custodian has received a Certificate or
Instructions to the contrary, Custodian shall hold Securities indirectly through
a Subcustodian only if (i) the Securities are not subject to any right, charge,
security interest, lien or claim of any kind in favor of such Subcustodian or
its creditors or operators, including a receiver or trustee in bankruptcy or
similar authority, except for a claim of payment for the safe custody or
administration of Securities on behalf of the Fund by such Subcustodian, and
(ii) beneficial ownership of the Securities is freely transferable without the
payment of money or value other than for safe custody or administration.
(c) With respect to each Foreign Depository, Custodian shall
exercise reasonable care, prudence, and diligence (i) to provide the Fund with
an analysis of the custody risks associated with maintaining assets with the
Foreign Depository, and (ii) to monitor such custody risks on a continuing basis
and promptly notify the Fund of any material change in such risks. The Fund
acknowledges and agrees that such analysis and monitoring shall be made on the
basis of, and limited by, information gathered from Subcustodians or through
publicly available information otherwise obtained by Custodian, and shall not
include any evaluation of Country Risks. As used herein the term "Country Risks"
shall mean with respect to any Foreign Depository: (a) the financial
infrastructure of the country in which it is organized, (b) such country's
prevailing settlement practices, (c) nationalization, expropriation or other
governmental actions, (d) such country's regulation of the banking or securities
industry, (e) currency controls, restrictions, devaluations or fluctuations, and
(f) market conditions which affect the order execution of securities
transactions or affect the value of securities.
2. Custodian shall furnish the Fund with an advice of daily
transactions (including a confirmation of each transfer of Securities) and a
monthly summary of all transfers to or from the Accounts.
3. With respect to all Securities held hereunder, Custodian shall,
unless otherwise instructed to the contrary:
(a) Receive all income and other payments and advise the
Fund as promptly as practicable of any such amounts due but not paid;
(b) Present for payment and receive the amount paid upon
all Securities which may mature and advise the Fund as promptly as practicable
of any such amounts due but not paid;
(c) Forward to the Fund copies of all information or documents
that it may actually receive from an issuer of Securities which, in the opinion
of Custodian, are intended for the beneficial owner of Securities;
(d) Execute, as custodian, any certificates of ownership,
affidavits, declarations or other certificates under any tax laws now or
hereafter in effect in connection with the collection of bond and note coupons;
(e) Hold directly or through a Depository, a Foreign
Depository, or a Subcustodian all rights and similar Securities issued with
respect to any Securities credited to an Account hereunder; and
(f) Endorse for collection checks, drafts or other negotiable
instruments.
4. (a) Custodian shall notify the Fund of rights or discretionary
actions with respect to Securities held hereunder, and of the date or dates by
when such rights must be exercised or such action must be taken, provided that
Custodian has actually received, from the issuer or the relevant Depository
(with respect to Securities issued in the United States) or from the relevant
Subcustodian, Foreign Depository, or a nationally or internationally recognized
bond or corporate action service to which Custodian subscribes, timely notice of
such rights or discretionary corporate action or of the date or dates such
rights must be exercised or such action must be taken. Absent actual receipt of
such notice, Custodian shall have no liability for failing to so notify the
Fund.
(b) Whenever Securities (including, but not limited to,
warrants, options, tenders, options to tender or non-mandatory puts or calls)
confer discretionary rights on the Fund or provide for discretionary action or
alternative courses of action by the Fund, the Fund shall be responsible for
making any decisions relating thereto and for directing Custodian to act. In
order for Custodian to act, it must receive the Fund's Certificate or
Instructions at Custodian's offices, addressed as Custodian may from time to
time request, not later than noon (New York time) at least two (2) Business Days
prior to the last scheduled date to act with respect to such Securities (or such
earlier date or time as Custodian may specify to the Fund). Absent Custodian's
timely receipt of such Certificate or Instructions, Custodian shall not be
liable for failure to take any action relating to or to exercise any rights
conferred by such Securities.
5. All voting rights with respect to Securities, however registered,
shall be exercised by the Fund or its designee. For Securities issued in the
United States, Custodian's only duty shall be to mail to the Fund any documents
(including proxy statements, annual reports and signed proxies) actually
received by Custodian relating to the exercise of such voting rights. With
respect to Securities issued outside of the United States, Custodian's only duty
shall be to provide the Fund with access to a provider of global proxy services
at the Fund's request. The Fund shall be responsible for all costs associated
with its use of such services.
6. Custodian shall promptly advise the Fund upon Custodian's actual
receipt of notification of the partial redemption, partial payment or other
action affecting less than all Securities of the relevant class. If Custodian,
any Subcustodian, any Depository, or any Foreign Depository holds any Securities
in which the Fund has an interest as part of a fungible mass, Custodian, such
Subcustodian, Depository, or Foreign Depository may select the Securities to
participate in such partial redemption, partial payment or other action in any
non-discriminatory manner that it customarily uses to make such selection.
7. Custodian shall not under any circumstances accept bearer interest
coupons which have been stripped from United States federal, state or local
government or agency securities unless explicitly agreed to by Custodian in
writing.
8. The Fund shall be liable for all taxes, assessments, duties and
other governmental charges, including any interest or penalty with respect
thereto ("Taxes"), with respect to any cash or Securities held on behalf of the
Fund or any transaction related thereto. The Fund shall indemnify Custodian and
each Subcustodian for the amount of any Tax that Custodian, any such
Subcustodian or any other withholding agent is required under applicable laws
(whether by assessment or otherwise) to pay on behalf of, or in respect of
income earned by or, payments or distributions made to or for the account of the
Fund (including any payment of Tax required by reason of an earlier failure to
withhold). Custodian shall, or shall instruct the applicable Subcustodian or
other withholding agent to, withhold the amount of any Tax which is required to
be withheld under applicable law upon collection of any dividend, interest or
other distribution made with respect to any Security and any proceeds or income
from the sale, loan or other transfer of any Security. In the event that
Custodian or any Subcustodian is required under applicable law to pay any Tax on
behalf of the Fund, Custodian is hereby authorized to withdraw cash from any
cash account in the amount required to pay such Tax and to use such cash, or to
remit such cash to the appropriate Subcustodian or other withholding agent, for
the timely payment of such Tax in the manner required by applicable law. If the
aggregate amount of cash in all cash accounts is not sufficient to pay such Tax,
Custodian shall promptly notify the Fund of the additional amount of cash (in
the appropriate currency) required, and the Fund shall directly deposit such
additional amount in the appropriate cash account promptly after receipt of such
notice, for use by Custodian as specified herein. In the event that Custodian
reasonably believes that Fund is eligible, pursuant to applicable law or to the
provisions of any tax treaty, for a reduced rate of, or exemption from, any Tax
which is otherwise required to be withheld or paid on behalf of the Fund under
any applicable law, Custodian shall, or shall instruct the applicable
Subcustodian or withholding agent to, either withhold or pay such Tax at such
reduced rate or refrain from withholding or paying such Tax, as appropriate;
provided that Custodian shall have received from the Fund all documentary
evidence of residence or other qualification for such reduced rate or exemption
required to be received under such applicable law or treaty. In the event that
Custodian reasonably believes that a reduced rate of, or exemption from, any Tax
is obtainable only by means of an application for refund, Custodian and the
applicable Subcustodian shall have no responsibility for the accuracy or
validity of any forms or documentation provided by the Fund to Custodian
hereunder. The Fund hereby agrees to indemnify and hold harmless Custodian and
each Subcustodian in respect of any liability arising from any underwithholding
or underpayment of any Tax which results from the inaccuracy or invalidity of
any such forms or other documentation, and such obligation to indemnify shall be
a continuing obligation of the Fund, its successors and assigns notwithstanding
the termination of this Agreement.
9. (a) For the purpose of settling Securities and foreign exchange
transactions, the Fund shall provide Custodian with sufficient immediately
available funds for all transactions by such time and date as conditions in the
relevant market dictate. As used herein, "sufficient immediately available
funds" shall mean either (i) sufficient cash denominated in U.S. dollars to
purchase the necessary foreign currency, or (ii) sufficient applicable foreign
currency, to settle the transaction. Custodian shall provide the Fund with
immediately available funds each day which result from the actual settlement of
all sale transactions, based upon advices received by Custodian from
Subcustodians, Depositories, and Foreign Depositories. Such funds shall be in
U.S. dollars or such other currency as the Fund may specify to Custodian.
(b) Any foreign exchange transaction effected by Custodian in
connection with this Agreement may be entered with Custodian or a BNY Affiliate
acting as principal or otherwise through customary banking channels. The Fund
may issue a standing Certificate or Instructions with respect to foreign
exchange transactions, but Custodian may establish rules or limitations
concerning any foreign exchange facility made available to the Fund. The Fund
shall bear all risks of investing in Securities or holding cash denominated in a
foreign currency.
(c) To the extent that Custodian has agreed to provide pricing
or other information services in connection with this Agreement, Custodian is
authorized to utilize any vendor (including brokers and dealers of Securities)
reasonably believed by Custodian to be reliable to provide such information. The
Fund understands that certain pricing information with respect to complex
financial instruments (e.g., derivatives) may be based on calculated amounts
rather than actual market transactions and may not reflect actual market values,
and that the variance between such calculated amounts and actual market values
may or may not be material. Where vendors do not provide information for
particular Securities or other property, an Authorized Person may advise
Custodian in a Certificate regarding the fair market value of, or provide other
information with respect to, such Securities or property as determined by it in
good faith. Custodian shall not be liable for any loss, damage or expense
incurred as a result of errors or omissions with respect to any pricing or other
information utilized by Custodian hereunder.
10. Custodian shall promptly send to the Fund (a) any reports it
receives from a Depository on such Depository's system of internal accounting
control, and (b) such reports on its own system of internal accounting control
as the Fund may reasonably request from time to time.
ARTICLE IV
PURCHASE AND SALE OF SECURITIES;
CREDITS TO ACCOUNT
1. Promptly after each purchase or sale of Securities by the Fund, the
Fund shall deliver to Custodian a Certificate or Instructions, or with respect
to a purchase or sale of a Security generally required to be settled on the same
day the purchase or sale is made, Oral Instructions specifying all information
Custodian may reasonably request to settle such purchase or sale. Custodian
shall account for all purchases and sales of Securities on the actual settlement
date unless otherwise agreed by Custodian.
2. The Fund understands that when Custodian is instructed to deliver
Securities against payment, delivery of such Securities and receipt of payment
therefor may not be completed simultaneously. Notwithstanding any provision in
this Agreement to the contrary, settlements, payments and deliveries of
Securities may be effected by Custodian or any Subcustodian in accordance with
the customary or established securities trading or securities processing
practices and procedures in the jurisdiction in which the transaction occurs,
including, without limitation, delivery to a purchaser or dealer therefor (or
agent) against receipt with the expectation of receiving later payment for such
Securities. The Fund assumes full responsibility for all risks, including,
without limitation, credit risks, involved in connection with such deliveries of
Securities.
3. Custodian may, as a matter of bookkeeping convenience or by separate
agreement with the Fund, credit the Account with the proceeds from the sale,
redemption or other disposition of Securities or interest, dividends or other
distributions payable on Securities prior to its actual receipt of final payment
therefor. All such credits shall be conditional until Custodian's actual receipt
of final payment and may be reversed by Custodian to the extent that final
payment is not received. Payment with respect to a transaction will not be
"final" until Custodian shall have received immediately available funds which
under applicable local law, rule and/or practice are irreversible and not
subject to any security interest, levy or other encumbrance, and which are
specifically applicable to such transaction.
ARTICLE V
OVERDRAFTS OR INDEBTEDNESS
1. If Custodian should in its sole discretion advance funds on behalf
of any Series which results in an overdraft (including, without limitation, any
day-light overdraft) because the money held by Custodian in an Account for such
Series shall be insufficient to pay the total amount payable upon a purchase of
Securities specifically allocated to such Series, as set forth in a Certificate,
Instructions or Oral Instructions, or if an overdraft arises in the separate
account of a Series for some other reason, including, without limitation,
because of a reversal of a conditional credit or the purchase of any currency,
or if the Fund is for any other reason indebted to Custodian with respect to a
Series, including any indebtedness to The Bank of New York under the Fund's Cash
Management and Related Services Agreement (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pursuant to a
separate agreement and subject to the provisions of Section 2 of this Article),
such overdraft or indebtedness shall be deemed to be a loan made by Custodian to
the Fund for such Series payable on demand and shall bear interest from the date
incurred at a rate per annum ordinarily charged by Custodian to its
institutional customers, as such rate may be adjusted from time to time. In
addition, the Fund hereby agrees that Custodian shall to the maximum extent
permitted by law have a continuing lien, security interest, and security
entitlement in and to any property, including, without limitation, any
investment property or any financial asset, of such Series at any time held by
Custodian for the benefit of such Series or in which such Series may have an
interest which is then in Custodian's possession or control or in possession or
control of any third party acting in Custodian's behalf. The Fund authorizes
Custodian, in its sole discretion, at any time to charge any such overdraft or
indebtedness together with interest due thereon against any balance of account
standing to such Series' credit on Custodian's books.
2. If the Fund borrows money from any bank (including Custodian if the
borrowing is pursuant to a separate agreement) for investment or for temporary
or emergency purposes using Securities held by Custodian hereunder as collateral
for such borrowings, the Fund shall deliver to Custodian a Certificate
specifying with respect to each such borrowing: (a) the Series to which such
borrowing relates; (b) the name of the bank, (c) the amount of the borrowing,
(d) the time and date, if known, on which the loan is to be entered into, (e)
the total amount payable to the Fund on the borrowing date, (f) the Securities
to be delivered as collateral for such loan, including the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities, and (g) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the `40 Act and the Fund's prospectus. Custodian shall deliver
on the borrowing date specified in a Certificate the specified collateral
against payment by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. Custodian shall deliver such Securities as additional collateral as
may be specified in a Certificate to collateralize further any transaction
described in this Section. The Fund shall cause all Securities released from
collateral status to be returned directly to Custodian, and Custodian shall
receive from time to time such return of collateral as may be tendered to it. In
the event that the Fund fails to specify in a Certificate the Series, the name
of the issuer, the title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by Custodian, Custodian
shall not be under any obligation to deliver any Securities.
ARTICLE VI
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any shares issued by the Fund
("Shares") it shall deliver to Custodian a Certificate or Instructions
specifying the amount of money and/or Securities to be received by Custodian for
the sale of such Shares and specifically allocated to an Account for such
Series.
2. Upon receipt of such money, Custodian shall credit such money to an
Account in the name of the Series for which such money was received.
3. Except as provided hereinafter, whenever the Fund desires Custodian
to make payment out of the money held by Custodian hereunder in connection with
a redemption of any Shares, it shall furnish to Custodian a Certificate or
Instructions specifying the total amount to be paid for such Shares. Custodian
shall make payment of such total amount to the transfer agent specified in such
Certificate or Instructions out of the money held in an Account of the
appropriate Series.
4. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, Custodian, unless
otherwise instructed by a Certificate or Instructions, shall, upon presentment
of such check, charge the amount thereof against the money held in the Account
of the Series of the Shares being redeemed, provided, that if the Fund or its
agent timely advises Custodian that such check is not to be honored, Custodian
shall return such check unpaid.
ARTICLE VII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. Whenever the Fund shall determine to pay a dividend or distribution
on Shares it shall furnish to Custodian Instructions or a Certificate setting
forth with respect to the Series specified therein the date of the declaration
of such dividend or distribution, the total amount payable, and the payment
date.
2. Upon the payment date specified in such Instructions or Certificate,
Custodian shall pay out of the money held for the account of such Series the
total amount payable to the dividend agent of the Fund specified therein.
ARTICLE VIII
CONCERNING CUSTODIAN
1. (a) Except as otherwise expressly provided herein, Custodian shall
not be liable for any costs, expenses, damages, liabilities or claims, including
attorneys' and accountants' fees (collectively, "Losses"), incurred by or
asserted against the Fund, except those Losses arising out of Custodian's own
negligence or willful misconduct. Custodian shall have no liability whatsoever
for the action or inaction of any Depositories, or, except to the extent such
action or inaction is a direct result of the Custodian's failure to fulfill its
duties hereunder, of any Foreign Depositories. With respect to any Losses
incurred by the Fund as a result of the acts or any failures to act by any
Subcustodian (other than a BNY Affiliate), Custodian shall take appropriate
action to recover such Losses from such Subcustodian; and Custodian's sole
responsibility and liability to the Fund shall be limited to amounts so received
from such Subcustodian (exclusive of costs and expenses incurred by Custodian).
In no event shall Custodian be liable to the Fund or any third party for
special, indirect or consequential damages, or lost profits or loss of business,
arising in connection with this Agreement, nor shall BNY or any Subcustodian be
liable: (i) for acting in accordance with any Certificate or Oral Instructions
actually received by Custodian and reasonably believed by Custodian to be given
by an Authorized Person; (ii) for acting in accordance with Instructions without
reviewing the same; (iii) for conclusively presuming that all Instructions are
given only by person(s) duly authorized; (iv) for conclusively presuming that
all disbursements of cash directed by the Fund, whether by a Certificate, an
Oral Instruction, or an Instruction, are in accordance with Section 2(i) of
Article II hereof, (v) for holding property in any particular country,
including, but not limited to, Losses resulting from nationalization,
expropriation or other governmental actions; regulation of the banking or
securities industry; exchange or currency controls or restrictions, devaluations
or fluctuations; availability of cash or Securities or market conditions which
prevent the transfer of property or execution of Securities transactions or
affect the value of property; (vi) for any Losses due to forces beyond the
control of Custodian, including without limitation strikes, work stoppages, acts
of war or terrorism, insurrection, revolution, nuclear or natural catastrophes
or acts of God, or interruptions, loss or malfunctions of utilities,
communications or computer (software and hardware) services; (vii) for the
insolvency of any Subcustodian (other than a BNY Affiliate), any Depository, or,
except to the extent such action or inaction is a direct result of the
Custodian's failure to fulfill its duties hereunder, any Foreign Depository; or
(viii) for any Losses arising from the applicability of any law or regulation
now or hereafter in effect, or from the occurrence of any event, including,
without limitation, implementation or adoption of any rules or procedures of a
Foreign Depository, which may affect, limit, prevent or impose costs or burdens
on, the transferability, convertibility, or availability of any currency or
Composite Currency Unit in any country or on the transfer of any Securities, and
in no event shall Custodian be obligated to substitute another currency for a
currency (including a currency that is a component of a Composite Currency Unit)
whose transferability, convertibility or availability has been affected,
limited, or prevented by such law, regulation or event, and to the extent that
any such law, regulation or event imposes a cost or charge upon Custodian in
relation to the transferability, convertibility, or availability of any cash
currency or Composite Currency Unit, such cost or charge shall be for the
account of the Fund, and Custodian may treat any account denominated in an
affected currency as a group of separate accounts denominated in the relevant
component currencies.
(b) Custodian may enter into subcontracts, agreements and
understandings with any BNY Affiliate, whenever and on such terms and conditions
as it deems necessary or appropriate to perform its services hereunder. No such
subcontract, agreement or understanding shall discharge Custodian from its
obligations hereunder.
(c) The Fund agrees to indemnify Custodian and hold Custodian
harmless from and against any and all Losses sustained or incurred by or
asserted against Custodian by reason of or as a result of any action or
inaction, or arising out of Custodian's performance hereunder, including
reasonable fees and expenses of counsel incurred by Custodian in a successful
defense of claims by the Fund; provided however, that the Fund shall not
indemnify Custodian for those Losses arising out of Custodian's own negligence
or willful misconduct. This indemnity shall be a continuing obligation of the
Fund, its successors and assigns, notwithstanding the termination of this
Agreement.
2. Without limiting the generality of the foregoing, Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(a) Any Losses incurred by the Fund or any other person as a
result of the receipt or acceptance of fraudulent, forged or invalid Securities,
or Securities which are otherwise not freely transferable or deliverable without
encumbrance in any relevant market;
(b) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received therefor;
(c) The legality of the sale or redemption of any Shares,
or the propriety of the amount to be received or paid therefor;
(d) The legality of the declaration or payment of any dividend
or distribution by the Fund;
(e) The legality of any borrowing by the Fund;
(f) The legality of any loan of portfolio Securities, nor
shall Custodian be under any duty or obligation to see to it that any cash or
collateral delivered to it by a broker, dealer or financial institution or held
by it at any time as a result of such loan of portfolio Securities is adequate
security for the Fund against any loss it might sustain as a result of such
loan, which duty or obligation shall be the sole responsibility of the Fund. In
addition, Custodian shall be under no duty or obligation to see that any broker,
dealer or financial institution to which portfolio Securities of the Fund are
lent makes payment to it of any dividends or interest which are payable to or
for the account of the Fund during the period of such loan or at the termination
of such loan, provided, however that Custodian shall promptly notify the Fund in
the event that such dividends or interest are not paid and received when due;
(g) The sufficiency or value of any amounts of money and/or
Securities held in any Special Account in connection with transactions by the
Fund; whether any broker, dealer, futures commission merchant or clearing member
makes payment to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker, dealer, futures
commission merchant or clearing member, or whether any payment received by
Custodian from any broker, dealer, futures commission merchant or clearing
member is the amount the Fund is entitled to receive, or to notify the Fund of
Custodian's receipt or non-receipt of any such payment; or
(h) Whether any Securities at any time delivered to, or held
by it or by any Subcustodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus and statement of
additional information, or to ascertain whether any transactions by the Fund,
whether or not involving Custodian, are such transactions as may properly be
engaged in by the Fund.
3. Custodian may, with respect to questions of law specifically
regarding an Account, obtain the advice of counsel and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice.
4. Custodian shall be under no obligation to take action to collect any
amount payable on Securities in default, or if payment is refused after due
demand and presentment.
5. Custodian shall have no duty or responsibility to inquire into,
make recommendations, supervise, or determine the suitability of any
transactions affecting any Account.
6. The Fund shall pay to Custodian the fees and charges as may be
specifically agreed upon from time to time and such other fees and charges at
Custodian's standard rates for such services as may be applicable. The Fund
shall reimburse Custodian for all costs associated with the conversion of the
Fund's Securities hereunder and the transfer of Securities and records kept in
connection with this Agreement. The Fund shall also reimburse Custodian for
out-of-pocket expenses which are a normal incident of the services provided
hereunder.
7. Custodian has the right to debit any cash account for any amount
payable by the Fund in connection with any and all obligations of the Fund to
Custodian. In addition to the rights of Custodian under applicable law and other
agreements, at any time when the Fund shall not have honored any of its
obligations to Custodian, Custodian shall have the right without notice to the
Fund to retain or set-off, against such obligations of the Fund, any Securities
or cash Custodian or a BNY Affiliate may directly or indirectly hold for the
account of the Fund, and any obligations (whether matured or unmatured) that
Custodian or a BNY Affiliate may have to the Fund in any currency or Composite
Currency Unit. Any such asset of, or obligation to, the Fund may be transferred
to Custodian and any BNY Affiliate in order to effect the above rights.
8. The Fund agrees to forward to Custodian a Certificate or
Instructions confirming Oral Instructions by the close of business of the same
day that such Oral Instructions are given to Custodian. The Fund agrees that the
fact that such confirming Certificate or Instructions are not received or that a
contrary Certificate or contrary Instructions are received by Custodian shall in
no way affect the validity or enforceability of transactions authorized by such
Oral Instructions and effected by Custodian. If the Fund elects to transmit
Instructions through an on-line communications system offered by Custodian, the
Fund's use thereof shall be subject to the Terms and Conditions attached as
Appendix I hereto, and Custodian shall provide user and authorization codes,
passwords and authentication keys only to an Authorized Person or a person
reasonably believed by Custodian to be an Authorized Person.
9. The books and records pertaining to the Fund which are in possession
of Custodian shall be the property of the Fund. Such books and records shall be
prepared and maintained as required by the `40 Act and the rules thereunder. The
Fund, or its authorized representatives, shall have access to such books and
records during Custodian's normal business hours. Upon the reasonable request of
the Fund, copies of any such books and records shall be provided by Custodian to
the Fund or its authorized representative. Upon the reasonable request of the
Fund, Custodian shall provide in hard copy or on computer disc any records
included in any such delivery which are maintained by Custodian on a computer
disc, or are similarly maintained.
10. It is understood that Custodian is authorized to supply any
information regarding the Accounts which is required by any law, regulation or
rule now or hereafter in effect. The Custodian shall provide the Fund with any
report obtained by the Custodian on the system of internal accounting control of
a Depository, and with such reports on its own system of internal accounting
control as the Fund may reasonably request from time to time.
11. Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied against Custodian in
connection with this Agreement.
ARTICLE IX
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the board of the Fund, certified by the Secretary
or any Assistant Secretary, electing to terminate this Agreement and designating
a successor custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus and undivided
profits. In the event such notice is given by Custodian, the Fund shall, on or
before the termination date, deliver to Custodian a copy of a resolution of the
board of the Fund, certified by the Secretary or any Assistant Secretary,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, Custodian may designate a successor custodian which
shall be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and money then owned by the Fund and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or Custodian
in accordance with the preceding Section, the Fund shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by
Custodian of all Securities (other than Securities which cannot be delivered to
the Fund) and money then owned by the Fund be deemed to be its own custodian and
Custodian shall thereby be relieved of all duties and responsibilities pursuant
to this Agreement, other than the duty with respect to Securities which cannot
be delivered to the Fund to hold such Securities hereunder in accordance with
this Agreement.
ARTICLE X
MISCELLANEOUS
1. The Fund agrees to furnish to Custodian a new Certificate of
Authorized Persons in the event of any change in the then present Authorized
Persons. Until such new Certificate is received, Custodian shall be fully
protected in acting upon Certificates or Oral Instructions of such present
Authorized Persons.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to Custodian, shall be sufficiently given if
addressed to Custodian and received by it at its offices at 100 Church Street,
New York, New York 10286, or at such other place as Custodian may from time to
time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and received by it at its offices at 711 High Street, Des Moines,
Iowa 50392-0870,or at such other place as the Fund may from time to time
designate in writing.
4. Each and every right granted to either party hereunder or under any
other document delivered hereunder or in connection herewith, or allowed it by
law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of either party to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial exercise
by either party of any right preclude any other or future exercise thereof or
the exercise of any other right.
5. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any exclusive jurisdiction, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected thereby. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties, except that any
amendment to the Schedule I hereto need be signed only by the Fund and any
amendment to Appendix I hereto need be signed only by Custodian. This Agreement
shall extend to and shall be binding upon the parties hereto, and their
respective successors and assigns; provided, however, that this Agreement shall
not be assignable by either party without the written consent of the other.
6. This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The Fund and Custodian hereby consent to the jurisdiction of a state or
federal court situated in New York City, New York in connection with any dispute
arising hereunder. The Fund hereby irrevocably waives, to the fullest extent
permitted by applicable law, any objection which it may now or hereafter have to
the laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum. The Fund and Custodian each hereby irrevocably waives any and all rights
to trial by jury in any legal proceeding arising out of or relating to this
Agreement.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the Fund and Custodian have caused this Agreement
to be executed by their respective officers, thereunto duly authorized, as of
the day and year first above written.
PRINCIPAL INVESTORS FUND, INC.
/s/A. S. Filean
By: ________________________________________
Title: Senior Vice President & Secretary
Tax Identification No:
THE BANK OF NEW YORK
/s/Edward G. McGann
By: ________________________________________
Title: EDWARD G. MCGANN
VICE PRESIDENT
Principal
Financial
Group
SIGNATURE LIST
The undersigned, Arthur S. Filean, Senior Vice President and Secretary, hereby
certifies that each of the persons named below has been duly elected and
qualified, and as of the date hereof, is an officer of the Corporation, holding
the office set forth opposite his or her name, and signature set forth opposite
his or her name is his or her genuine signature.
<TABLE>
<CAPTION>
Name Office Signature
<S> <C> <C>
/s/J. Barry Griswell
J. Barry Griswell Chairman of the Board and ______________________
Director
/s/Ralph C. Eucher
Ralph C. Eucher President and Director ______________________
/s/Ronald L. Danilson
Ronald L. Danilson Executive Vice President ______________________
/s/Kirk L. Tibbetts
Kirk L. Tibbetts Senior Vice President and CFO ______________________
/s/Arthur S. Filean
Arthur S. Filean Senior Vice President and Secretary ______________________
/s/Craig L. Bassett
Craig L. Bassett Treasurer ______________________
/s/Michael D. Roughton
Michael D. Roughton Counsel ______________________
/s/Ernest H. Gillum
Ernest H. Gillum Vice President and Assistant Secretary ______________________
/s/Jane E. Karli
Jane E. Karli Assistant Treasurer ______________________
/s/Layne A. Rasmussen
Layne A. Rasmussen Controller ______________________
/s/Jean B. Schustek
Jean B. Schustek Assistant Vice President and ______________________
Assistant Secretary
/s/Traci L. Weldon
Traci L. Weldon Assistant Counsel ______________________
/s/A. S. Filean
---------------------------------------
A.S. Filean: Senior Vice President and Secretary
Barbara R. Duncan
--------------------------
Notary
Iowa Seal Barbara R. Duncan
My Commission Expires
April 7,2002
</TABLE>
Securities offered through Princor Financial Services Corporation, a member of
the Principal Financial Group, Des Moines, Iowa 50392-0200 (800) 247-4123 / FAX
(515) 248-4745
Schedule II
Series
Principal Investors Fund, Inc.
High Quality Short-Term Bond Fund
High Quality Intermediate-Term Bond Fund
High Quality Long-Term Bond Fund
Government Securities Fund
Bond and Mortgage Securities Fund
LargeCap Growth Fund
Partners LargeCap Growth Fund I
MidCap Growth Fund
Partners MidCap Growth Fund
SmallCap Growth Fund
SmallCap Blend Fund
LargeCap Blend Fund
LargeCap Value Fund
SmallCap Value Fund
MidCap Value Fund
MidCap Blend Fund
International Fund I
International SmallCap Fund
International Emerging Markets Fund
LargeCap S&P 500 Index Fund
Partners LargeCap Value Fund
Partners SmallCap Growth Fund I
Partners LargeCap Blend Fund
Partners MidCap Value Fund
MidCap S&P 400 Index Fund
SmallCap S&P 600 Index Fund
Real Estate Fund
Partners SmallCap Growth Fund II
Partners LargeCap Growth Fund II
Money Market Fund
Balanced Fund
APPENDIX I
THE BANK OF NEW YORK
ON-LINE COMMUNICATIONS SYSTEM (THE "SYSTEM")
TERMS AND CONDITIONS
1. License; Use. Upon delivery to an Authorized Person or a person
reasonably believed by Custodian to be an Authorized Person the Fund of software
enabling the Fund to obtain access to the System (the "Software"), Custodian
grants to the Fund a personal, nontransferable and nonexclusive license to use
the Software solely for the purpose of transmitting Written Instructions,
receiving reports, making inquiries or otherwise communicating with Custodian in
connection with the Account(s). The Fund shall use the Software solely for its
own internal and proper business purposes and not in the operation of a service
bureau. Except as set forth herein, no license or right of any kind is granted
to the Fund with respect to the Software. The Fund acknowledges that Custodian
and its suppliers retain and have title and exclusive proprietary rights to the
Software, including any trade secrets or other ideas, concepts, know-how,
methodologies, or information incorporated therein and the exclusive rights to
any copyrights, trademarks and patents (including registrations and applications
for registration of either), or other statutory or legal protections available
in respect thereof. The Fund further acknowledges that all or a part of the
Software may be copyrighted or trademarked (or a registration or claim made
therefor) by Custodian or its suppliers. The Fund shall not take any action with
respect to the Software inconsistent with the foregoing acknowledgments, nor
shall you attempt to decompile, reverse engineer or modify the Software. The
Fund may not copy, sell, lease or provide, directly or indirectly, any of the
Software or any portion thereof to any other person or entity without
Custodian's prior written consent. The Fund may not remove any statutory
copyright notice or other notice included in the Software or on any media
containing the Software. The Fund shall reproduce any such notice on any
reproduction of the Software and shall add any statutory copyright notice or
other notice to the Software or media upon Custodian's request.
2. Equipment. The Fund shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to communications
services, necessary for it to utilize the Software and obtain access to the
System, and Custodian shall not be responsible for the reliability or
availability of any such equipment or services.
3. Proprietary Information. The Software, any data base and any
proprietary data, processes, information and documentation made available to the
Fund (other than which are or become part of the public domain or are legally
required to be made available to the public) (collectively, the "Information"),
are the exclusive and confidential property of Custodian or its suppliers. The
Fund shall keep the Information confidential by using the same care and
discretion that the Fund uses with respect to its own confidential property and
trade secrets, but not less than reasonable care. Upon termination of the
Agreement or the Software license granted herein for any reason, the Fund shall
return to Custodian any and all copies of the Information which are in its
possession or under its control.
4. Modifications. Custodian reserves the right to modify the Software
from time to time and the Fund shall install new releases of the Software as
Custodian may direct. The Fund agrees not to modify or attempt to modify the
Software without Custodian's prior written consent. The Fund acknowledges that
any modifications to the Software, whether by the Fund or Custodian and whether
with or without Custodian's consent, shall become the property of Custodian.
5. NO REPRESENTATIONS OR WARRANTIES. CUSTODIAN AND ITS MANUFACTURERS
AND SUPPLIERS MAKE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE
SOFTWARE, SERVICES OR ANY DATABASE, EXPRESS OR IMPLIED, IN FACT OR IN LAW,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. THE FUND ACKNOWLEDGES THAT THE SOFTWARE, SERVICES AND ANY
DATABASE ARE PROVIDED "AS IS." IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE
LIABLE FOR ANY DAMAGES, WHETHER DIRECT, INDIRECT SPECIAL, OR CONSEQUENTIAL,
WHICH THE FUND MAY INCUR IN CONNECTION WITH THE SOFTWARE, SERVICES OR ANY
DATABASE, EVEN IF CUSTODIAN OR SUCH SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ACTS
OF GOD, MACHINE OR COMPUTER BREAKDOWN OR MALFUNCTION, INTERRUPTION OR
MALFUNCTION OF COMMUNICATION FACILITIES, LABOR DIFFICULTIES OR ANY OTHER SIMILAR
OR DISSIMILAR CAUSE BEYOND THEIR REASONABLE CONTROL.
6. Security: Reliance; Unauthorized Use. The Fund will cause all
persons utilizing the Software and System to treat all applicable user and
authorization codes, passwords and authentication keys with extreme care, and it
will establish internal control and safekeeping procedures to restrict the
availability of the same to persons duly authorized to give Instructions.
Custodian is hereby irrevocably authorized to act in accordance with and rely on
Instructions received by it through the System. The Fund acknowledges that it is
its sole responsibility to assure that only persons duly authorized use the
System and that Custodian shall not be responsible nor liable for any
unauthorized use thereof.
7. System Acknowledgments. Custodian shall acknowledge through the
System its receipt of each transmission communicated through the System, and in
the absence of such acknowledgment Custodian shall not be liable for any failure
to act in accordance with such transmission and the Fund may not claim that such
transmission was received by Custodian.
8. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY
UNITED STATES LAW. THE FUND MAY NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT,
TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO
ANY OTHER COUNTRY. IF CUSTODIAN DELIVERED THE SOFTWARE TO THE FUND OUTSIDE OF
THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH THE EXPORTER ADMINISTRATION REGULATIONS. DIVERSION CONTRARY TO
U.S. LAW IS PROHIBITED. The Fund hereby authorizes Custodian to report its name
and address to government agencies to which Custodian is required to provide
such information by law.
9. ENCRYPTION. The Fund acknowledges and agrees that encryption may
not be available for every communication through the System, or for all data.
The Fund agrees that Custodian may deactivate any encryption features at any
time, without notice or liability to the Fund, for the purpose of maintaining,
repairing or troubleshooting the System or the Software.
<PAGE>
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of October 27, 2000, between Principal Investors Fund,
Inc. (the "Fund") and The Bank of New York ("BNY").
W I T N E S S E T H:
WHEREAS, the Fund desires to appoint BNY as a Foreign Custody Manager
on the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform
the duties set forth herein on the terms and condition contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, the Fund and BNY hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Board" shall mean the board of directors or board of trustees,
as the case may be, of the Fund.
2. "Eligible Foreign Custodian" shall have the meaning provided in
the Rule.
3. "Monitoring System" shall mean a system established by BNY to
fulfill the Responsibilities specified in clauses 1(d) and 1(e)
of Article III of this Agreement.
4. "Responsibilities" shall mean the responsibilities delegated to
BNY under the Rule as a Foreign Custody Manager with respect to
each Specified Country and each Eligible Foreign Custodian
selected by BNY, as such responsibilities are more fully
described in Article III of this Agreement.
5. "Rule" shall mean Rule 17f-5 under the Investment Company Act of
1940, as amended on June 12, 2000.
6. "Specified Country" shall mean each country listed on Schedule I
attached hereto and each country, other than the United States,
constituting the primary market for a security with respect to
which the Fund has given settlement instructions to The Bank of
New York as custodian (the "Custodian") under its Custody
Agreement with the Fund.
ARTICLE II.
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with respect to each
Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with respect
to each Specified Country and agrees in performing the Responsibilities as a
Foreign Custody Manager to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of the Fund's assets would
exercise.
3. BNY shall provide to the Board at such times as the Board deems
reasonable and appropriate based on the circumstances of the Fund's foreign
custody arrangements written reports notifying the Board of the placement of
assets of the Fund with a particular Eligible Foreign Custodian within a
Specified Country and of any material change in the arrangements (including the
contract governing such arrangements) with respect to assets of the Fund with
any such Eligible Foreign Custodian.
ARTICLE III.
RESPONSIBILITIES
1. Subject to the provisions of this Agreement, BNY shall with respect
to each Specified Country select an Eligible Foreign Custodian. In connection
therewith, BNY shall: (a) determine that assets of the Fund held by such
Eligible Foreign Custodian will be subject to reasonable care, based on the
standards applicable to custodians in the relevant market in which such Eligible
Foreign Custodian operates, after considering all factors relevant to the
safekeeping of such assets, including, without limitation, those contained in
paragraph (c)(1) of the Rule; (b) determine that the Fund's foreign custody
arrangements with each Eligible Foreign Custodian are governed by a written
contract with the Custodian which will provide reasonable care for the Fund's
assets based on the standards specified in paragraph (c)(1) of the Rule; (c)
determine that each contract with an Eligible Foreign Custodian shall include
the provisions specified in paragraph (c)(2)(i)(A) through (F) of the Rule or,
alternatively, in lieu of any or all of such (c)(2)(i)(A) through (F)
provisions, such other provisions as BNY determines will provide, in their
entirety, the same or a greater level of care and protection for the assets of
the Fund as such specified provisions; (d) monitor pursuant to the Monitoring
System the appropriateness of maintaining the assets of the Fund with a
particular Eligible Foreign Custodian pursuant to paragraph (c)(1) of the Rule
and the performance of the contract governing such arrangement; and (e) advise
the Fund whenever BNY determines under the Monitoring System that an arrangement
(including, any material change in the contract governing such arrangement)
described in preceding clause (d) no longer meets the requirements of the Rule.
2. For purposes of clause (d) of preceding Section 1 of this Article,
BNY's determination of appropriateness shall not include, nor be deemed to
include, any evaluation of Country Risks associated with investment in a
particular country. For purposes hereof, "Country Risks" shall mean systemic
risks of holding assets in a particular country including but not limited to (a)
an Eligible Foreign Custodian"s use of any depositories that act as or operate a
system or a transnational system for the central handling of securities or any
equivalent book-entries; (b) such country's financial infrastructure; (c) such
country's prevailing custody and settlement practices; (d) nationalization,
expropriation or other governmental actions; (e) regulation of the banking or
securities industry; (f) currency controls, restrictions, devaluations or
fluctuations; and (g) market conditions which affect the orderly execution of
securities transactions or affect the value of securities.
ARTICLE IV.
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by the Fund, constitutes a valid and legally
binding obligation of the Fund enforceable in accordance with its terms, and no
statute, regulation, rule, order, judgment or contract binding on the Fund
prohibits the Fund's execution or performance of this Agreement; (b) this
Agreement has been approved and ratified by the Board at a meeting duly called
and at which a quorum was at all times present; and (c) the Board or its
investment advisor has considered the Country Risks associated with investment
in each Specified Country and will have considered such risks prior to any
settlement instructions being given to the Custodian with respect to any other
Specified Country.
2. BNY hereby represents that: (a) BNY is duly organized and existing
under the laws of the State of New York, with full power to carry on its
businesses as now conducted, and to enter into this Agreement and to perform its
obligations hereunder; (b) this Agreement has been duly authorized, executed and
delivered by BNY, constitutes a valid and legally binding obligation of BNY
enforceable in accordance with its terms, and no statute, regulation, rule,
order, judgment or contract binding on BNY prohibits BNY's execution or
performance of this Agreement; and (c) BNY has established the Monitoring
System.
ARTICLE V.
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages,
liabilities or claims, including attorneys' and accountants' fees, sustained or
incurred by, or asserted against, the Fund except to the extent the same arises
out of the failure of BNY to exercise the care, prudence and diligence required
by Section 2 of Article II hereof. In no event shall BNY be liable to the Fund,
the Board, or any third party for special, indirect or consequential damages, or
for lost profits or loss of business, arising in connection with this Agreement.
2. The Fund shall indemnify BNY and hold it harmless from and against
any and all costs, expenses, damages, liabilities or claims, including
attorneys' and accountants' fees, sustained or incurred by, or asserted against,
BNY by reason or as a result of any action or inaction, or arising out of BNY's
performance hereunder, provided that the Fund shall not indemnify BNY to the
extent any such costs, expenses, damages, liabilities or claims arises out of
BNY's failure to exercise the reasonable care, prudence and diligence required
by Section 2 of Article II hereof.
3. For its services hereunder, the Fund agrees to pay to BNY such
compensation and out-of-pocket expenses as shall be mutually agreed.
4. BNY shall have only such duties as are expressly set forth herein.
In no event shall BNY be liable for any Country Risks associated with
investments in a particular country.
ARTICLE VI.
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between the Fund and
BNY, and no provision in the Custody Agreement between the Fund and the
Custodian shall affect the duties and obligations of BNY hereunder, nor shall
any provision in this Agreement affect the duties or obligations of the
Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to BNY, shall be sufficiently given if received by it
at its offices at 100 Church Street, 10th Floor, New York, New York 10286, or at
such other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if received
by it at its offices at 711 High Street, Des Moines, Iowa 50392-0870 or at such
other place as the Fund may from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective successors and
assigns; provided however, that this Agreement shall not be assignable by either
party without the written consent of the other.
5. This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The Fund and BNY hereby consent to the jurisdiction of a state or
federal court situated in New York City, New York in connection with any dispute
arising hereunder. The Fund hereby irrevocably waives, to the fullest extent
permitted by applicable law, any objection which it may now or hereafter have to
the laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum. The Fund and BNY each hereby irrevocably waives any and all rights to
trial by jury in any legal proceeding arising out of or relating to this
Agreement.
6. The parties hereto agree that in performing hereunder, BNY is acting
solely on behalf of the Fund and no contractual or service relationship shall be
deemed to be established hereby between BNY and any other person.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
8. This Agreement shall terminate simultaneously with the termination
of the Custody Agreement between the Fund and the Custodian, and may otherwise
be terminated by either party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than thirty
(30) days after the date of such notice.
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be executed
by their respective officers, thereunto duly authorized, as of the date first
above written.
PRINCIPAL INVESTORS FUND, INC.
/s/ A. S. Filean
By: _______________________________________
Title: Senior Vice President and Secretary
Tax Identification No.:
THE BANK OF NEW YORK
/s/ Edward G. McGann
By: _______________________________________
Title: EDWARD G. McGANN
VICE PRESIDENT
SCHEDULE 1
Specified Countries
