Exhibit (g.3)
DELEGATION AGREEMENT
AGREEMENT, dated as of April 25, 2000 by and between INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company (the "Delegate"), and iShares TRUST, a
business trust established under the laws of the State of Delaware (the "Fund").
WHEREAS, pursuant to the provisions of Rule 17f-5(b) under the Investment
Company Act of 1940, and subject to the terms and conditions set forth herein,
the Board of Trustees of the Fund desires to delegate to the Delegate, and the
Delegate hereby agrees to accept and assume, certain responsibilities described
herein concerning Assets held outside of the United States, including those
assigned to the Foreign Custody Manager as set forth in paragraphs (c)(1),
(c)(2) and (c)(3) of Rule 17f-5.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Definitions
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Capitalized terms in this Agreement have the following meanings:
a. Assets
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Assets means any of Fund's investments (including foreign currencies)
for which the primary market is outside the United States, and such cash and
cash equivalents as are reasonably necessary to effect Fund's transactions in
such investments.
b. Authorized Representative
-------------------------
Authorized Representative means any one of the persons who are
empowered, on behalf of the parties to this Agreement, to receive notices from
the other party and to send notices to the other party.
c. Board
-----
Board means the Board of Trustees (or the body authorized to exercise
authority similar to that of the board of directors of a corporation) of Fund.
d. Country Risk
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Country Risk means all factors reasonably related to the systemic risk
of holding assets in a particular country including, but not limited to, such
country's financial infrastructure (including any Securities Depositories
operating in such country);
prevailing custody and settlement practices; and laws applicable to the
safekeeping and recovery of Assets held in custody.
e. Eligible Foreign Custodian
--------------------------
Eligible Foreign Custodian has the meaning set forth in Rule 17f-
5(a)(1) and shall also include foreign branches of U.S. Banks (as the term "U.S.
Bank" is defined in Rule 17f-5).
f. Foreign Custody Manager
-----------------------
Foreign Custody Manager has the meaning set forth in Rule 17f-5(a)(2).
g. Monitor
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Monitor means to re-assess or re-evaluate, at reasonable intervals, a
decision or determination previously made.
h. Securities Depository
---------------------
Securities Depository has the meaning set forth in Rule 17f-5(a)(6).
2. Representations
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a. Delegate's Representations
--------------------------
Delegate represents that it is a trust company chartered under the
laws of the Commonwealth of Massachusetts and a U.S. Bank (as such term is
defined in Rule 17f-5). Delegate further represents that the persons executing
this Agreement and any amendment or appendix hereto on its behalf are duly
authorized to so bind the Delegate with respect to the subject matter of this
Agreement.
b. Fund's Representations
----------------------
Fund represents that the Board has determined that it is reasonable to
rely on Delegate to perform the responsibilities delegated by this Agreement.
Fund further represents that the persons executing this Agreement and any
amendment or appendix hereto on its behalf are duly authorized to so bind the
Fund with respect to the subject matter of this Agreement.
3. Jurisdictions Covered
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a. Initial Jurisdictions
---------------------
The authority delegated by this Agreement applies only with respect to
Assets held in the jurisdictions listed in Appendix A.
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b. Added Jurisdictions
-------------------
Jurisdictions may be added to Appendix A by written agreement in the
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form of Appendix B. Delegate's responsibility and authority with respect to any
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jurisdiction so added will commence at the later of (i) the time that Delegate's
Authorized Representative and the Fund's Authorized Representative have both
executed a copy of Appendix B listing such jurisdiction, or (ii) the time that
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Delegate's Authorized Representative receives a copy of such fully executed
Appendix B.
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c. Withdrawn Jurisdictions
-----------------------
Board may withdraw its delegation with respect to any jurisdiction
upon written notice to Delegate. Delegate may withdraw its acceptance of
delegated authority with respect to any jurisdiction upon written notice to
Board. Ten days (or such longer period as to which the parties agree) after
receipt of any such notice by the Authorized Representative of the party other
than the party giving notice, Delegate shall have no further responsibility or
authority under this Agreement with respect to the jurisdiction or jurisdictions
is to which authority is withdrawn.
4. Delegation of Authority to Act as Foreign Custody Manager
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a. Selection of Eligible Foreign Custodians
----------------------------------------
Subject to the provisions of this Agreement and the requirements of
Rule 17f-5 (and any other applicable law), Delegate is authorized and directed
to place and maintain Assets in the care of any Eligible Foreign Custodian or
Custodians selected by Delegate in each jurisdiction to which this Agreement
applies, except that Delegate does not accept such authorization and direction
with regard to Securities Depositories.
b. Contracts With Eligible Foreign Custodians
------------------------------------------
Subject to the provisions of this Agreement and the requirements of
Rule 17f-5 (and any other applicable law), Delegate is authorized and directed
to enter into, on behalf of Fund, such written contracts governing Fund's
foreign custody arrangements with such Eligible Foreign Custodians as Delegate
deems appropriate.
5. Monitoring of Eligible Foreign Custodians and Contracts
-------------------------------------------------------
In each case in which Delegate has exercised the authority delegated under
this Agreement to place Assets with an Eligible Foreign Custodian, Delegate is
authorized to, and shall, on behalf of Fund, establish and maintain a system to
Monitor the appropriateness of maintaining Assets with such Eligible Foreign
Custodian. In each case in which Delegate has exercised the authority delegated
under this Agreement to enter into a written contract governing Fund's foreign
custody arrangements, Delegate is
authorized to, and shall, on behalf of Fund, establish a system to Monitor the
appropriateness of such contract.
6. Guidelines and Procedures for the Exercise of Delegated Authority
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a. Board's Conclusive Determination Regarding Country Risk
-------------------------------------------------------
In exercising its delegated authority under this Agreement, Delegate
may assume, for all purposes, that the Board (or Fund's investment advisor,
pursuant to authority delegated by the Board) has considered, and pursuant to
its fiduciary duties to Fund and Fund's shareholders, determined to accept, such
Country Risk as is incurred by placing and maintaining Assets in the
jurisdictions to which this Agreement applies. In exercising its delegated
authority under this Agreement, Delegate may also assume that Board (or Fund's
investment advisor, pursuant to authority delegated by Board) has, and will
continue to, Monitor such Country Risk to the extent Board deems necessary or
appropriate.
Nothing in this Agreement shall require Delegate to make any selection
or to engage in any Monitoring on behalf of Fund that would entail consideration
of Country Risk.
b. Selection of Eligible Foreign Custodians
----------------------------------------
In exercising the authority delegated under this Agreement to place
Assets with an Eligible Foreign Custodian, Delegate shall determine that Assets
will be subject to reasonable care, based on the standards applicable to
custodians in the market in which the Assets will be held, after considering all
factors relevant to the safekeeping of such assets, including, without
limitation;
i. The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if
applicable), the method of keeping custodial records, and the
security and data protection practices;
ii. Whether the Eligible Foreign Custodian has the financial strength
to provide reasonable care for Assets;
iii. The Eligible Foreign Custodian's general reputation and
standing;
iv. Whether Fund will have jurisdiction over and be able to enforce
judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of the Eligible Foreign
Custodian in the United States or the Eligible Foreign
Custodian's consent to service of process in the United States;
v. In the case of an Eligible Foreign Custodian that is a banking
institution or trust company, any additional factors and criteria
set forth in Appendix C to this Agreement; and
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c. Evaluation of Written Contracts
-------------------------------
In exercising the authority delegated under this Agreement to enter
into written contracts governing Fund's foreign custody arrangements with an
Eligible Foreign Custodian, Delegate shall determine that such contracts provide
reasonable care for Assets based on the standards applicable to Eligible Foreign
Custodians in the relevant market. In making this determination, Delegate shall
ensure that the terms of such contracts comply with the provisions of Rule 17f-
5(c)(2).
d. Monitoring
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In exercising the authority delegated under this Agreement to
establish a system to Monitor the appropriateness of maintaining Assets with an
Eligible Foreign Custodian and the appropriateness of a written contract
governing the Fund's foreign custody arrangements, Delegate shall consider any
factors and criteria set forth in Appendix D to this Agreement. If, as a result
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of its Monitoring of Eligible Foreign Custodian relationships hereunder or
otherwise, the Delegate determines in its sole discretion that it is in the best
interest of the safekeeping of the Assets to move such Assets to a different
Eligible Foreign Custodian, the Fund shall bear any expense related to such
relocation of Assets, except to the extent such expense results from the
negligence, willful misconduct, bad faith or material breach of this Agreement
by the Bank.
7. Standard of Care
----------------
In exercising the authority delegated under this Agreement, Delegate agrees
to exercise reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of an investment company registered
under the Investment Company Act of 1940 would exercise.
8. Reporting Requirements
----------------------
Delegate agrees to provide written reports notifying Board of the placement
of Assets with a particular Eligible Foreign Custodian and of any material
change in Fund's foreign custody arrangements. Such reports shall be provided to
Board quarterly for consideration at the next regularly scheduled meeting of the
Board or earlier if deemed necessary or advisable by the Delegate in its sole
discretion.
9. Provision of Information Regarding Country Risk
-----------------------------------------------
With respect to the jurisdictions listed in Appendix A, or added thereto
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pursuant to Article 3, Delegate agrees to provide annually to Board, such
information relating to
Country Risk, and information regarding Securities Depositories, if available,
as is specified in Appendix E to this Agreement. Such information relating to
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Country Risk shall be updated from time to time as the Delegate deems necessary.
10. Limitation of Liability.
-----------------------
10.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including reasonable legal fees, (a "Claim")
arising as a result of any act or omission of the Bank or any Indemnified Party
under this Agreement, except for any Claim to the extent such Claim results from
the material breach of this Agreement by or negligence, willful misfeasance or
bad faith of the Bank or any Indemnified Party.
10.2 The Bank shall indemnify and hold the Fund, its Board of Trustees,
officers and employees and its agents harmless from and against any and all
Claims to the extent any such Claim arises out of the negligent acts or
omissions, bad faith, willful misconduct or material breach of this Agreement by
the Bank, its officers, directors or employees or any of its agents or
subcustodians in connection with the activities undertaken pursuant to this
Agreement, provided that the Bank's indemnification obligation with respect to
the acts or omissions of its subcustodians shall not exceed the indemnification
provided by the applicable subcustodian to the Bank.
10.3 Notwithstanding anything to the contrary in this Agreement, in no
event shall a party to this Agreement be liable to the other party or any third
party for lost profits or lost revenues or any special, consequential, punitive
or incidental damages of any kind whatsoever in connection with this Agreement
or any activities hereunder.
10.4 Notwithstanding anything to the contrary in this Agreement, in no
event shall a party to this Agreement be liable to the other party or any third
party for losses resulting from (i) any acts of God, fires, floods, or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, or insurrection, and (ii) other happenings
or events beyond the reasonable control or anticipation of the party effected,
provided that (A) the effected party has in place appropriate business
resumption procedures, systems and facilities and (B) the effected party uses
its best efforts to avoid or remove the cause of such losses.
10.5 In performing its duties hereunder, the Bank will be entitled to
receive and act upon the advice of independent counsel of its own selection,
which may be counsel for the Fund.
10.6 The Bank may rely upon any Proper Instruction which it reasonably
believes to be genuine and to be signed or presented by any Authorized Person.
The Bank shall not be held to have notice of any change of authority of any
Authorized
Person until receipt of appropriate written notice thereof has been received by
the Bank from the Fund.
10.7 In order that the indemnification provisions contained in this
Article 14 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking the indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
seeking indemnification shall give the indemnifying party full and complete
authority, information and assistance to defend such claim or proceeding, and
the indemnifying party shall have, at its option, sole control of the defense of
such claim or proceeding and all negotiations for its compromise or settlement.
The party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent, which consent shall not be
unreasonably withheld.
11. Effectiveness and Termination of Agreement
------------------------------------------
This Agreement shall be effective as of the later of the date of execution
on behalf of Board or Delegate and shall remain in effect until terminated as
provided herein. This Agreement may be terminated at any time, without penalty,
by written notice from the terminating party to the non-terminating party.
Termination will become effective 90 days after receipt by the non-terminating
party of such notice.
12. Authorized Representatives and Notices
--------------------------------------
The respective Authorized Representatives of Fund and Board, and the
addresses to which notices and other documents under this Agreement are to be
sent to each, are as set forth in Appendix F. Any Authorized Representative of a
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party may add or delete persons from that party's list of Authorized
Representatives by written notice to an Authorized Representative of the other
party.
13. Governing Law
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This Agreement shall be constructed in accordance with the laws of the
State of New York without regard to principles of choice of law.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxx Xxxxxxx
___________________________________
Name: Xxxxx Xxxxxxx
Title: President
iShares TRUST
By: /s/ Xxxxxx Most
____________________________________
Name: Xxxxxx Most
Title: President
List of Appendices
------------------
A -- Jurisdictions Covered
B -- Additional Jurisdictions Covered
C -- Additional Factors and Criteria To Be Applied in the Selection of
Eligible Foreign Custodians That Are Banking Institutions or Trust
Companies
D -- Factors and Criteria To Be Applied in Establishing Systems For the
Monitoring of Foreign Custody Arrangements and Contracts
E -- Information Regarding Country Risk
F -- Authorized Representatives
APPENDIX A
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Jurisdictions Covered
---------------------
[delete those countries which are not delegated]
Argentina Kenya
Austria Korea
Australia Latvia
Bahrain Lebanon
Bangladesh Lithuania
Belgium Luxembourg
Bermuda Malaysia
Bolivia Mauritius
Botswana Mexico
Brazil Morocco
Bulgaria Namibia
Canada Netherlands
Chile New Zealand
China Norway
Clearstream (Cedel) Oman
Colombia Pakistan
Costa Rica Panama
Croatia Papua New Guinea
Cyprus Peru
Czech Republic Philippines
Denmark Poland
Ecuador Portugal
Egypt Romania
Estonia Russia
Euroclear Singapore
Finland Slovak Republic
France Slovenia
Germany South Africa
Ghana Spain
Greece Sri Lanka
Hong Kong Swaziland
Hungary Sweden
Iceland Switzerland
India Taiwan
Indonesia Thailand
Ireland Turkey
Israel Ukraine
Italy United Kingdom
Ivory Coast Uruguay
Japan Venezuela
Jordan Zambia
Kazakhstan Zimbabwe
APPENDIX B
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Additional Jurisdictions Covered
--------------------------------
Pursuant to Article 3 of this Agreement, Delegate and Board agree that
the following jurisdictions shall be added to Appendix A:
[insert additional countries]
INVESTORS BANK & TRUST COMPANY
By: ___________________________________
Name:
Title:
[FUND]
By:____________________________________
Name:
Title:
DATE: ______________________________
APPENDIX C
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Additional Factors and Criteria To Be Applied
in the Selection of Eligible Foreign Custodians
That Are Banking Institutions or Trust Companies
------------------------------------------------
In addition to the factors set forth in Rule 17f-5(c)(1), in selecting
Eligible Foreign Custodians that are banking institutions or trust companies,
Delegate shall consider the following factors, if such information is available
(check all that apply):
_________ None
_________ Other (list below):
APPENDIX D
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Factors and Criteria To Be Applied
in the Establishing Systems For the Monitoring of
Foreign Custody Arrangements and Contracts
-------------------------------------------
In establishing systems for the Monitoring of foreign custody arrangements
and contracts with Eligible Foreign Custodians, Delegate shall consider the
following factors, if such information is available:
1. Operating performance
2. Established practices and procedures
3. Relationship with market regulators
4. Contingency planning
APPENDIX E
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Information Regarding Country Risk
----------------------------------
To aid the Board in its determinations regarding Country Risk, Delegate
will furnish Board annually with respect to the jurisdictions specified in
Article 3, the following information:
1. Copy of Addenda or Side Letters to Subcustodian Agreements
2. Legal Opinion, if available, with regard to:
a) Access to books and records by the Fund's accountants
b) Ability to recover assets in the event of bankruptcy of a custodian
c) Ability to recover assets in the event of a loss
d) Likelihood of expropriation or nationalization, if available
e) Ability to repatriate or convert cash or cash equivalents
3. Audit Report
4. Copy of Balance Sheet from Annual Report
5. Summary of Central Depository Information
6. Country Profile Matrix containing market practice for:
a) Delivery versus payment
b) Settlement method
c) Currency restrictions
d) Buy-in practice
e) Foreign ownership limits
f) Unique market arrangements
7. Information Regarding Securities Depositories
a) Whether use is voluntary or compulsory
b) Ownership
c) Operating History
d) Established rules, practices and procedures
e) Membership
f) Financial strength
g) Governing regulatory body
APPENDIX F
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Authorized Representatives
--------------------------
The names and addresses of each party's authorized representatives are set forth
below:
A. Board
With a copy to:
B. Delegate
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, XX 00000-0000
Attention: _______________, Director, Client Management
Fax: (000) 000-0000
With a copy to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx, General Counsel
Fax: (000) 000-0000
