FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
AGREEMENT made as of this 19th day of September 1998 between IVY
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 Directors/Trustees or its
duly appointed representative (the "Fund"), and XXXXX BROTHERS XXXXXXXX & CO., a
New York limited partnership with an office in Boston, Massachusetts (the
"Delegate").
WITNESSETH
WHEREAS the Fund has appointed the Delegate as custodian (the
"Custodian") of the Fund's Assets pursuant to a Custodian Agreement dated June
1, 1993 (the "Custodian Agreement");
WHEREAS the Fund may, from time to time, determine to invest and
maintain some or all of the Fund's Assets outside the United States;
WHEREAS the Board of Directors/Trustees of the Fund (the "Board")
wishes to delegate to the Delegate certain functions with respect to the custody
of Fund's Assets outside the United States;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Fund and the Delegate agree as follows.
Capitalized terms shall have the meaning indicated in Section 12 unless
otherwise indicated.
1. Maintenance of Fund's Assets Abroad. The Fund, acting through
its Board or its duly authorized representative, hereby instructs Delegate
pursuant to the terms of the Custodian Agreement to place and maintain the
Fund's Assets within the countries listed in Schedule 1 attached hereto (as such
Schedule may be amended from time to time in accordance herewith). Such
instruction shall be deemed to include an instruction to use any Compulsory
Securities Depository in any such country and shall represent a Proper
Instruction under the terms of the Custodian Agreement. Countries may be added
to Schedule 1 by written instruction of the Fund that is accepted in writing by
the Delegate as an amendment to Schedule 1. With respect to amendments adding
countries to Schedule 1, the Fund acknowledges that - (a) the Delegate shall
perform services hereunder only with respect to the countries where it provides
custodial services to the Fund 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 1 has been accepted by the Delegate in accordance herewith.
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the
Act as amended, 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 hereto, as amended from time to time.
The Delegate is hereby authorized to take such actions on behalf of or in the
name of the Fund 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
Fund confirms to the Delegate that the Fund 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 (including the use of
any Compulsory Securities Depository), 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. The Delegate shall perform the following duties with respect to
the selection of Eligible Foreign Custodians and administration of certain
contracts governing the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall
place and maintain the Fund's Assets with an Eligible Foreign Custodian;
provided that 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,
including but not limited to the adequacy of the Eligible Foreign
Custodian's capital with regard to protecting the Fund's assets against
the risk of loss due to such Custodian's insolvency;
(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 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 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.
The Delegate shall be required to make the foregoing determination to the best
of its knowledge and belief based only on information reasonably available to
it.
(b) Contract Administration. In the case of an Eligible Foreign
Custodian that is not a Securities Depository or a U.S. Bank, the Delegate shall
cause that the foreign custody arrangements shall be governed by a written
contract that the Delegate has determined will provide reasonable care for Fund
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 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 such 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 Fund'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 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 Section 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. The parties agree to amend or
supplement this Agreement due to subsequent amendments to or clarifications by
the Securities and Exchange Commission of Rule 17f-5 under the Act as it relates
to Compulsory Securities Depositories or the duties of a delegate under such
Rule. The parties further agree that the Delegate shall provide the Fund with
the opportunity to amend or supplement this Agreement in the same manner as and
promptly after any other registered investment company or series thereof for
which the Delegate serves as a delegate under Rule 17f-5 has agreed with the
Delegate to amend the terms of or supplement its delegation agreement under Rule
17f-5 as it relates to Compulsory Securities Depositories or the duties of the
Delegate under such agreement.
4. Monitoring. The Delegate shall establish a system to monitor at
reasonable intervals (but 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 in accordance
with the criteria 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 by 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 as to any material changes to such 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 promptly notify the Fund of such fact and shall withdraw
the Fund's Assets from the non-complying arrangement 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 Fund or its Investment Adviser with
respect to such liquidation or other withdrawal.
7. Direction as to Eligible Foreign Custodian. Notwithstanding
this Delegation Agreement, the Fund, 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 as a
Proper Instruction under the terms of the Custodian Agreement and shall have no
duties under this Delegation Agreement with respect to such arrangement save
those that it may undertake as mutually agreed upon by the Fund and the
Delegate. Such additional duties shall be memorialized in writing with respect
to each particular instance, and may include monitoring and reports with respect
to these Custodians.
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 responsibility for safekeeping the Fund's
Assets would exercise.
9. Representations. 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 Fund hereby represents and warrants that its Board of
Directors 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 Fund and is a
legal, valid and binding agreement of the Fund.
10. Effectiveness; termination. This Agreement shall be effective
as of the date on which this Agreement shall have been accepted by the Delegate,
as indicated by the date set forth below the Delegate's signature. 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
effective on the 30th 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.
11. 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.
12. Definitions. Capitalized terms in this agreement have the
following meanings:
a. Compulsory Securities Depository - 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) for which the primary market is
outside the United States, and 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 17f-5(a)(6).
f. Sovereign Risk - shall have the meaning set forth in Section
[6.3] of the Custodian Agreement.
g. U.S. Bank - shall mean a bank which qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of
the Act.
13. Governing Law and Jurisdiction. This Agreement shall be
construed in accordance with the laws of the State of New York. The parties
hereby submit to the exclusive jurisdiction of the Federal courts sitting in the
State of New York or the Commonwealth of Massachusetts or of the state courts of
either such State or such Commonwealth.
It is understood and expressly stipulated that none of the trustees, officers,
agents or shareholders of the Fund shall be personally liable hereunder. It is
understood and acknowledged that all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund, as neither the trustees, officers, agents nor shareholders assume any
personal liability for obligations entered into on behalf of the Fund.
14. Fees. Delegate shall perform its functions under this
agreement for the compensation determined under the Custodian Agreement.
15. Integration. This Agreement sets forth all of the Delegate's
duties with respect to 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.
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. IVY FUND
By: XXXXXXX X. XXXXXXX, XX. By: C. XXXXXXX XXXXXX
Name: Xxxxxxx X. Xxxxxxx, Xx. Name: C. Xxxxxxx Xxxxxx
Title: Partner__________________ Title: Secretary/Treasurer
Date: 9/16/98____________________ Date: 9/14/98
