FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
AGREEMENT made as of the 15' day of June 1998 between Bailard, Xxxxx &
Xxxxxx Fund Group (the "Company"), on behalf of the Bailard, Xxxxx & Xxxxxx
Diversa Fund (the "Fund"), a management investment company registered with the
Securities and Exchange Commission (the "Commission") under the Investment
Company Act of 1940, as amended (the "Act"), acting through its Board of
Trustees (the "Board") or its duly appointed representative, and XXXXX BROTHERS
XXXXXXXX & CO., a New York limited partnership with an office in Boston,
Massachusetts (the "Delegate").
WITNESSETH
WHEREAS the Company has appointed the Delegate as custodian (the "Cust
of the Fund's Assets pursuant to a Custodian Agreement dated September 24, 1990
(the "Custodian Agreement");
WHEREAS the Company may, from time to time, deter-mine to invest and
some or all of the Fund's Assets outside the United States;
WHEREAS,
in accordance with Rule l7f-5 under the Act, as amended ("Rule
17f5"), the Board wishes to delegate to the Delegate certain functions with
respect to the custody of the Fund's Assets outside the United States;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Company and the Delegate agree as follows. Capitalized
TERMS SHALL HAVE THE meaning indicated in Section 14 unless otherwise indicated.
1. MAINTENANCE OF FUND'S ASSETS ABROAD. The Company, acting through its
Boar or its duly authorized representative, hereby authorizes Delegate pursuant
to the terms of the Custodian Agreement to place and maintain the Fund's Assets
within the countries listed in Schedule I attached to the Custodian Agreement
("Schedule 1") (as such Schedule may be amended from time to time in accordance
herewith). Such authorization shall be deemed to include an instruction to use
any Compulsory Securities Depository approved by the Board in any such country.
Countries may be added to and deleted from Schedule 1 by written
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INSTRUCTION OF THE COMPANY THAT IS ACCEPTED in writing by the Delegate as an
amendment to Schedule 1. With respect to amendments adding countries to Schedule
1, the Company acknowledges that - (a) the Delegate shall perform services
hereunder only with respect to the countries where it provides custodial
services to the Company under the Custodian Agreement; (b) depending on
conditions in the particular country, advance notice may be required before the
Delegate shall be able to perform its duties hereunder in or with respect to
such country (such advance notice to be reasonable in light of the specific
facts and circumstances attendant to performance of duties in such country); and
(c) nothing in this Agreement shall require the Delegate to provide delegated or
custodial services in any country not listed in Schedule 1 until such amended
Schedule I has been accepted by the Delegate in accordance herewith.
2. DELEGATION. Pursuant to the provisions of Rule 17f-5, the Board
hereby delegates to the Delegate, and the Delegate hereby accepts such
delegation and agrees to PERFORM, ONLY THOSE DUTIES set forth in this Agreement
concerning the safekeeping of the Fund's Assets in each of the countries set
forth in Schedule 1. The Delegate is hereby authorized to take such actions on
behalf of or in the name of the Company as are reasonably required to discharge
its duties under this Agreement, including, without limitation, to cause the
Fund's Assets to be placed with a particular Eligible Foreign Custodian in
accordance herewith. The Company confirms to the Delegate that the Company or
its investment adviser has considered the Sovereign Risk and prevailing country
risk as part of its continuing investment decision process, including such
factors as may be reasonably related to the systemic risk of maintaining the
Fund's Assets in a particular country, including, but not limited to, financial
infrastructure, prevailing custody and settlement systems and practices, and the
laws relating to the safekeeping and recovery of the Fund's Assets held in
custody pursuant to the terms of the Custodian Agreement.
3. SELECTION OF ELIGIBLE FOREIGN CUSTODIAN AND CONTRACT ADMINISTRATION.
T Delegate shall perform the following duties with respect to the selection of
Eligible Foreign Custodians and administration of the contracts governing the
Fund's foreign custodial arrangements:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIAN. The Delegate shall place
and maintain the Fund's Assets only with Eligible Foreign Custodians. With
respect to each such
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Eligible Foreign Custodian, the Delegate shall have determined that the Fund's
Assets will be subject to reasonable care based on the standards applicable to
custodians in the relevant market 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 controls and
procedures for dealing with any Securities Depository, the method of keeping
custodial records, and the security and data protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing and, in the case of a Securities Depository, the depository's operating
history and number of participants; and
(iv) Whether the Company 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 such Eligible Foreign Custodian in the
United States or such Eligible Foreign Custodian's appointment of an agent for
service of process in the United States or consent to jurisdiction in the United
States.
(b) CONTRACT ADMINISTRATION. The Delegate shall cause the Fund's
foreign custody arrangements to be governed by a written contract (or, in the
case of a Securities Depository, by such contract, by the rules or established
practices or procedures of the depository, or by any combination of the
foregoing) that the Delegate has determined will provide reasonable care for the
Fund's Assets based on the standards applicable to custodians in the relevant
market. Each such contract shall, except as set forth in the last paragraph of
this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) such that the Fund will be adequately protected
against the risk of loss of assets held in accordance with such contract;
(ii) That the Fund's Assets will not be subject to any right,
charge, security
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interest, lien or claim of any kind in favor of the Eligible Foreign Custodian
or its creditors except a claim of payment for their safe custody or
administration or, in the case of cash deposits, liens or rights in favor of
creditors of the Eligible Foreign Custodian arising under bankruptcy, insolvency
or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be
freely transferable without the payment of money or value other than for safe
custody or administration;
(iv) That adequate records will be maintained identifying the
Fund's Assets as belonging to the Fund or as being held by a third party for the
benefit of the Fund;
(v) That the Company's independent public accountants will be
given access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Company (which may receive such information
through the Delegate) will receive sufficient and timely periodic reports with
respect to the safekeeping of the Fund's Assets, INCLUDING, BUT NOT LIMITED TO,
NOTIFICATION OF ANY TRANSFER to or from the Fund's account or a third party
account containing the Fund's Assets.
Such contract may contain, in lieu of any or all of the provisions specified in
this subsection 3(b), such other provisions that the Delegate determines will
provide, in their entirety, the same or a greater level of care and protection
for the Fund's Assets as the specified provisions, in their entirety,
(c) LIMITATION TO DELEGATED SELECTION. Notwithstanding anything in this
Agreement to the contrary, the duties under this Section 3 shall apply only to
Eligible Foreign Custodians selected by the Delegate and shall not apply to
Compulsory Securities Depositories or to any Eligible Foreign Custodian that the
Delegate is directed to use pursuant to Section 7.
4. MONITORING. The Delegate shall establish a system to monitor at
reasonable intervals (and at least annually) the appropriateness of maintaining
the Fund's Assets with each Eligible Foreign Custodian that has been selected by
the Delegate pursuant to Section 3 of this Agreement. The Delegate shall monitor
the continuing appropriateness of placement of the Fund's Assets with each
particular Eligible Foreign Custodian in accordance with the criteria
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established under Section 3(a) of this Agreement. The Delegate shall monitor the
continuing appropriateness of the contract governing the Fund's arrangements in
accordance with the criteria established under Section 3(b) of this Agreement.
5. REPORTING. At least annually and more frequently as mutually agreed
between the parties, the Delegate shall provide to the Board written reports
specifying placement of the Fund's Assets with each Eligible Foreign Custodian
selected by the Delegate pursuant to Section 3 of this Agreement and shall
promptly report any material changes to the Fund's foreign custody arrangements.
Delegate will PREPARE SUCH A REPORT WITH RESPECT TO ANY Eligible Foreign
Custodian that the Delegate has been instructed to use pursuant to Section 7
only to the extent specifically agreed with respect to the particular situation.
6. WITHDRAWAL OF FUND'S ASSETS. If the Delegate determines that an
arrangement with a specific Eligible Foreign Custodian selected by the Delegate
under Section 3 of this Agreement no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from such Eligible Foreign
Custodian as soon as reasonably practicable; PROVIDED, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate to provide information regarding the particular circumstances and
to act only in accordance with PROPER Instructions of the Company or its
investment advisor with respect to such liquidation or other withdrawal.
7. DIRECTION AS TO ELIGIBLE FOREIGN CUSTODIAN. Notwithstanding this
Delegation Agreement, the Company, acting through its Board, its investment
adviser or its other authorized representative, may direct the Delegate to place
and maintain the Fund's Assets with a particular Eligible Foreign Custodian. In
such event, the Delegate shall be entitled to rely on any such instruction and
shall have no duties under this Delegation Agreement with respect to such
arrangement save those in Section 9 and that it may undertake specifically in
writing with respect to each particular instance.
8. STANDARD OF CARE. In carrying out its duties under this Agreement,
the Delegate agrees to exercise reasonable care, prudence and diligence such as
a person having
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responsibility for safekeeping the Fund's Assets would exercise.
9. INFORMATION Services. In addition to the delegated duties set forth
herein, and with respect to the jurisdictions listed in Schedule 1, or added
thereto pursuant to Section 1, the Delegate agrees to provide to the Board
and/or the Company's investment adviser, such information as may be reasonably
available to the Custodian relating to:
(a) Information relevant to the compulsory nature of any Compulsory
Secu Depository;
(b) Information as to the existence and merits of an alternative to the
Compulsory SECURITIES DEPOSITORY, INCLUDING matters relevant to practices with
regard to safekeeping, administration and settlement of assets; and,
(c) Information relevant to the criteria with respect to Compulsory
Securities Depositories established by Rule l7f-5 as it existed prior to the
1997 amendments.
The Custodian may provide information under this Section by means of its
regularly established mechanisms for the communication of client market
information. In the provision of information under this Section, the Delegate
shall be responsible to use reasonable care in the gathering of such information
and may rely without limitation on reports and information distributed by the
Compulsory Securities Depository, governmental or regulatory reports, reports of
any auditor of a Compulsory Securities Depository, reports and analysis of
industry groups or similar sources and commercial information services.
Provision of information in accordance with this Section is not offered as
financial, investment or other professional advice. The Custodian makes no
warranty as to the accuracy or completeness of the information provided.
With respect to the jurisdictions listed in Schedule 1, or added thereto
pursuant to Section 1, the
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Delegate agrees to provide at least annually to the Board and/or the Company's
investment adviser, SUCH INFORMATION AS MAY BE AVAILABLE RELATING to: (a) the
systemic risks of maintaining the Fund's Assets in such countries, including but
not limited to Sovereign Risk, financial infrastructure, prevailing custody and
settlement systems and practices (including the practices of any Compulsory
Securities Depository), and (b) the laws relating to the safekeeping and
recovery of the Fund's Assets held in such countries; provided that the Delegate
shall only be responsible to use reasonable care in the gathering of such
information and shall not be deemed to warranty the completeness or specific
accuracy of such information. The Delegate agrees to promptly notify the Board
or the Company's investment adviser at any time that the Delegate becomes aware
of a material change in such information.
The Delegate also agrees to provide such information as may be reasonably
necessary for the Board to determine that it is reasonable to rely on the
Delegate to perform the delegated responsibilities provided for herein.
10. FAVORED CLIENT. In the event that Delegate in the future shall
generally as a matter of its conduct of business offer additional or different
services with respect to performing delegated duties under Rule l7f-5 with
respect to Compulsory Securities Depositories or OTHERWISE, IT SHALL PROMPTLY
OFFER SUCH SERVICES TO THE Company on its usual business terms.
11. REPRESENTATIONS AND WARRANTIES. The Delegate hereby represents and
warrants that it is a U.S. Bank and that this Agreement has been duly
authorized, executed and delivered by the Delegate and is a legal, valid and
binding agreement of the Delegate.
The Company hereby represents and warrants that, based on information
provided by the Delegate and the Company's investment advisor, the Board has
determined that it is reasonable to rely on the Delegate to perform the
delegated responsibilities provided for herein and that this Agreement has been
duly authorized, executed and delivered by the Company and is a legal, valid and
binding agreement of the Company.
12. EFFECTIVENESS, TERMINATION. This Agreement shall be effective as of
the date first above written. This Agreement may be terminated at any time,
without penalty, by written notice from the terminating party to the
non-terminating party. Such termination shall be
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effective on the 75th day following the date on which the non-terminating party
shall receive the foregoing notice. The foregoing to the contrary
notwithstanding, this Agreement shall be deemed to have been terminated
concurrently with the termination of the Custodian Agreement.
13. NOTICES. Notices and other communications under this Agreement are
TO BE MADE IN ACCORDANCE WITH THE arrangements designated for such purpose under
the Custodian Agreement unless otherwise indicated in a writing referencing this
Agreement and executed by both parties.
14. Definitions. Capitalized terms in this Agreement have the following
meanings:
a. COMPULSORY SECURITIES DEPOSITO - shall mean a Securities Depository
the use of which is mandatory (i) under applicable law or regulation; (ii)
because securities cannot be withdrawn from the depository; or (iii) because
maintaining securities outside the Securities Depository is not consistent with
prevailing custodial practices.
b. ELIGIBLE FOREIGN CUSTODIAN - shall have the meaning set forth in
Rule 17f 5(a)(1) and shall also include a U.S. Bank.
c. FUND'S ASSETS - shall mean any of the Fund's investments (including
foreign currencies) held outside the United States pursuant to Rule 17f-5 under
the Act, as well as such cash and cash equivalents as are reasonably necessary
to effect the Fund's transactions in such investments.
d. PROPER INSTRUCTIONS - shall have the meaning set forth in the
Custodian Agreement.
e. SECURITIES DEPOSITORY - shall have the meaning set forth in Rule
l7f-5(a)(6).
f. SOVEREIGN RISK - shall have the meaning set forth in Section 6.C of
the Custodian Agreement.
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g. U.S. BANK - shall mean a bank that qualifies to serve as a custodian
of assets of investment companies under Section 17(F) OF THE ACT.
16. GOVERNING LAW AND JURISDICTION. This Agreement shall be construed
in accordance with the laws of the Commonwealth of Massachusetts. The parties
hereby submit to the exclusive jurisdiction of the Federal courts sitting in the
Commonwealth of Massachusetts or of the state courts of such Commonwealth.
17. Fees. Delegate shall perform its functions under this AGREEMENT FOR
THE compensation determined under the Custodian Agreement.
18. INTEGRATION. This Agreement sets forth all of the Delegate's duties
with respect the selection and monitoring of Eligible Foreign Custodians, the
administration of contracts with Eligible Foreign Custodians, the withdrawal of
assets from Eligible Foreign Custodians and the issuance of reports in
connection with such duties. The terms of the Custodian Agreement shall apply
generally as to matters not expressly covered in this Agreement, including
dealings with the Eligible Foreign Custodians in the course of discharge of the
Delegate's obligations under the Custodian Agreement.
19. LIMITATION OF LIABILITY. Notice is hereby given of the limitations
of the liability of the Company's shareholders and Trustees as set forth in the
Company's Declaration of Trust, as AMENDED, ON FILE WITH the Commonwealth of
Massachusetts. The obligations assumed by a Fund or the Company pursuant to this
Agreement shall be limited in all cases to such Fund and its assets. No party
named herein shall seek satisfaction of any such obligation from the
shareholders or any shareholder of the Company; nor shall any party named herein
seek satisfaction of any such obligation from the Board of Trustees or any
individual Trustee of the Company.
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NOW THEREFORE, the parties have caused this Agreement to be executed by its duly
authorized representatives, effective as of the date first above written.
XXXXX BROTHERS XXXXXXXX & CO.
By:
NAME: Xxxxxxx Xxxxxxxxxxx Xxxxxxxxx
-----------------------------------
Title: PARTNER
--------------
Date: JUNE 30, 1998
------------------
BAILARD, XXXXX & XXXXXX FUND GROUP,
on behalf of the BAILARD, XXXXX & XXXXXX DIVERSA FUND
Name: NIC
Title:
Date: 6/26
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