EXHIBIT (2)(j)(2)
DELEGATION AGREEMENT
AGREEMENT, dated as of July 21, 1997 by and between Investors Bank &
Trust Company, a Massachusetts trust company (the "Delegate"), and The Central
European Equity Fund, Inc., organized under the laws of Maryland (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 Directors 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.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Definitions
Capitalized terms in this Agreement have the following meanings--
a. Assets
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, to send notices to the other party, to add or delete
jurisdictions pursuant to Article 4, and to otherwise bind the respective
parties with respect to the subject matter of this Agreement.
c. Board
Board means the Board of Directors (or the body authorized to
exercise authority similar to that of the board of directors of a corporation)
of Fund.
d. Compulsory Securities Depository
Compulsory Securities Depository means a Securities Depository
the use of which is mandatory (i) by 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cannot be withdrawn from the depository; or (iii) because maintaining securities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.
e. Eligible Foreign Custodian
Eligible Foreign Custodian has the meaning set forth in Rule
17f-5(a)(1).
f. Foreign Custody Manager
Foreign Custody Manager has the meaning set forth in Rule
17f-5(a)(2).
g. Monitor
Monitor has the meaning used in Rule 17f-5(c)(3).
h. Permissible Foreign Custodian
Permissible Foreign Custodian means any person with whom
Assets may be placed and maintained outside the United States under (i) the
Investment Company Act of 1940 or (ii) an order of the U.S. Securities and
Exchange Commission, without regard to Rule 17f-5.
i. Securities Depository
Securities Depository has the meaning set forth in Rule
17f-5(a)(6).
2. Representations
a. Delegate's Representations
Delegate represents that it is a trust company chartered under
the laws of the Commonwealth of Massachusetts. Delegate confirms that Fund's
existing foreign subcustody arrangements are in conformity with Article 7.
b. Fund's Representations
Fund represents that the Board has adopted the resolution
attached as Appendix G.
3. Jurisdictions Covered
a. Initial Jurisdictions
The authority delegated by this Agreement applies only with
respect to Assets held in the jurisdictions listed in Appendix A. Delegate shall
have no responsibility for the selection, evaluation or Monitoring of any
jurisdiction in which the Fund invests or holds Assets.
b. Added Jurisdictions
Jurisdictions may be added to Appendix A by written agreement
in the form of Appendix B. Delegate's responsibility and authority with respect
to any jurisdiction so added will commence at the later of (i) the time that
Delegate's Authorized Representative and Board's Authorized Representative have
both executed a copy of Appendix B listing such jurisdiction, or (ii) the time
that Delegate's Authorized Representative receives a copy of such fully executed
Appendix B.
2
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. Thirty 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 as to which authority is withdrawn, except that
the Fund may withdraw authority at any time as to any jurisdiction and Delegate
may withdraw its acceptance of delegated authority as to any jurisdiction upon
less than thirty days' notice if Delegate states in its notice that it believes
it cannot perform its responsibilities as to the jurisdiction for which it is
withdrawing.
4. Delegation of Authority to Act as Foreign Custody Manager
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 it in each jurisdiction to which
this Agreement applies.
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 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. Delegation of Authority to Place Assets With Permissible Foreign
Custodians
Subject to the requirements of the Investment Company Act of
1940 (and any other applicable law or order), Delegate is authorized to place
and maintain Assets in the care of any permissible Foreign Custodian or
Custodians in each jurisdiction to which this Agreement applies and to enter
into, on behalf of Fund, such written contracts governing Fund's foreign custody
arrangements with such Permissible Foreign Custodians as Delegate deems
appropriate. Articles 6, 7b, 7c, 7d, and 8 of this Agreement shall not apply to
Delegate's exercise of authority under this Article 5.
6. 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 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.
3
7. Guidelines and Procedures for the Exercise of Delegated Authority
a. 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 and, in the case of a Securities
Depository, the Securities Depository's operating
history and number of participants;
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;
and
v. In the case of an Eligible Foreign Custodian that is
a Securities Depository, any additional factors and
criteria set forth in Appendix C to this Agreement.
b. 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 (or,
in the case of a Securities Depository, such contract, the rules or established
practices or procedures of the depository, or any combination of the foregoing)
provide reasonable care for Assets based on the standards applicable to Eligible
Foreign Custodians in the relevant market after considering all relevant
factors, including those set forth in a. above. In making this determination,
Delegate shall ensure that the terms of such contracts comply with the
requirements of Rule 17f-5(c)(2).
c. Monitoring
In exercising the authority delegated under this Agreement to
establish a system to Monitor the appropriateness of maintaining Assets with an
Eligible Foreign Custodian or the appropriateness of a written contract
governing Fund's foreign custody
4
arrangements, Delegate shall consider the factors noted in a. and b. above and
any factors and criteria set forth in Appendix D to this Agreement.
8. 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.
9. Reporting Requirements
Delegate agrees to provide written reports notifying Board of the
placement of Assets with a particular Eligible Foreign Custodian or Permissible
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. Such
report shall, among other things, confirm jurisdictions in which there have been
no material changes in foreign custody arrangements. The Delegate shall give
reasonably prompt notice to the Board of any jurisdictions in which the Delegate
believes it can no longer perform the services required by this Agreement.
10. Provision of Information Regarding Jurisdictions
With respect to the jurisdictions listed in Appendix A, or added
thereto pursuant to Article 4, Delegate agrees to provide annually to Board,
such information relating to Country Risk, if available, as is specified in
Appendix E to this Agreement.
11. Limitation of Liability
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Delegate 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 Delegate and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Delegate or any Indemnified Party under
this Agreement, except for any Claim resulting solely from a breach of the
standard of care set forth in Article 8 or the negligence, willful misfeasance
or bad faith of the Delegate or any Indemnified Party. Neither the Delegate nor
the Indemnified Parties shall be liable for, and the Delegate and the
Indemnified Parties shall be indemnified against, any Claim arising as a result
of:
i. Any act or omission by the Delegate or any Indemnified Party
in reasonable good faith reliance upon the terms of this
Agreement, any resolution of the Board, telegram, telecopy,
notice, request, certificate or other instrument reasonably
believed by the Delegate to genuine;
5
ii. Any information which the Delegate provides or does not to
provide under Section 11 hereof, or
iii. Any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots,
nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion,
fission or radiation, the interruption, loss or malfunction of
utilities, transportation or computers (hardware or software)
and computer facilities, the unavailability of energy sources
and other similar happenings or events;
provided that such claim does not arise from a breach of the standard of care
set forth in Article 8 hereof or the negligence, willful misfeasance or bad
faith of the Delegate or the Indemnified Party.
12. No Additional Compensation
Delegate agrees to perform its responsibilities hereunder without any
additional compensation from Fund beyond Delegate's compensation as set forth in
the Custodian Agreement between the Fund and the Delegate. The Fund shall bear
all expenses related to the custody of Assets, including expenses related to the
relocation of Assets, as set forth in such Custodian Agreement.
13. 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 30 days after receipt
by the non-terminating party of such notice.
14. 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
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.
15. Governing Law
Fund and Delegate intend that the delegation contemplated hereby shall
be made in accordance with Rule 17f-5 and that the provisions hereof shall be
interpreted accordingly. This Agreement shall otherwise be construed in
accordance with the laws of the Commonwealth of Massachusetts without regard to
principals of choice of law.
6
[Remainder of Page Intentionally Left Blank]
7
IN WITNESS WHEREOF, Authorized Representatives of Board and of Delegate
have affixed their signatures as of the date first written above.
INVESTORS BANK & TRUST COMPANY
By: _____________________________________
Name:
Title:
THE CENTRAL EUROPEAN EQUITY FUND, INC.
By: _____________________________________
Name:
Title:
8
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 Securities Depositories
D -- Additional Factors and Criteria To Be Applied in Entering Into Written
Contracts Governing Foreign Custody Arrangements
E -- Information Regarding Country Risk
F -- Authorized Representatives
G -- Resolution of the Board
9
APPENDIX A
JURISDICTIONS COVERED
THE CENTRAL EUROPEAN EQUITY FUND, INC.
Austria
Belgium
Croatia
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Luxembourg
Netherlands
Norway
Poland
Portugal
Romania
Russia
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
Ukraine
United Kingdom
A-1
APPENDIX B
ADDITIONAL JURISDICTIONS COVERED
Pursuant to Article 4 of this Agreement, Delegate and Board agree that
the following jurisdictions shall be added to Appendix A:
[INSERT LIST]
INVESTORS BANK & TRUST COMPANY
By: ____________________________________
Name:
Title:
THE NEW GERMANY FUND, INC.
By: ____________________________________
Name:
Title:
DATE: _________________________________
A-2
APPENDIX C
ADDITIONAL FACTORS AND CRITERIA TO BE
APPLIED IN THE SELECTION OF ELIGIBLE FOREIGN
CUSTODIANS THAT ARE SECURITIES DEPOSITORIES
In addition to the factors set forth in Rule 17f-5(c)(1), in selecting
Eligible Foreign Custodians that are Securities Depositories, Delegate shall
consider the following factors, if such information is available (check all that
apply):
None
------------------
X Whether use is voluntary or compulsory
------------------
X Ownership
------------------
X Operating History
------------------
Established rules, practices and procedures
------------------
X Membership
------------------
X Financial strength
------------------
X Governing regulatory body
------------------
Other (list below):
------------------
A-3
APPENDIX D
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 (check all that
apply):
None
------------------
X Operating performance
------------------
X Established practices and procedures
------------------
X Relationship with market regulators
------------------
X Contingency planning Other (list below):
------------------
A-4
APPENDIX E
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 Subcustodian Agreement
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
A-5
APPENDIX F
AUTHORIZED REPRESENTATIVES
Notices under this Agreement shall be sent to, and shall be executed on
behalf of the respective parties by, any one of the following --
1. Board
a. __________________________(name)
__________________________(title)
__________________________(address)
b. __________________________(name)
__________________________(title)
__________________________(address)
c. __________________________(name)
__________________________(title)
__________________________(address)
2. Delegate
a. __________________________(name)
__________________________(title)
__________________________(address)
b. __________________________(name)
__________________________(title)
__________________________(address)
c. __________________________(name)
__________________________(title)
__________________________(address)
A-6
