EXHIBIT (G)(3)
FORM OF
DELEGATION AGREEMENT
BETWEEN
TCW GALILEO FUNDS, INC.
AND
INVESTORS BANK & TRUST COMPANY
FORM OF
DELEGATION AGREEMENT
--------------------
AGREEMENT, dated as of __________________, 1998 by and between INVESTORS
BANK & TRUST COMPANY, a Massachusetts trust Company (the "Delegate"), and TWC
GALILEO FUNDS, INC., a _________________________ (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 and to send notices to the other party.
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be withdrawn from the depository; or (iii) because maintaining securities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. Country Risk
------------
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.
f. 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).
g. Foreign Custody Manager
-----------------------
Foreign Custody Manager has the meaning set forth in Rule 17f-5(a)(2).
h. Monitor
-------
Monitor means to re-assess or re-evaluate, at reasonable intervals, a
decision or determination previously made.
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 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
---------------------
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
form of Appendix B. Delegate's responsibility and authority with respect to any
jurisdiction so added
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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
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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
---------------------------------------------------------
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 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 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 Board (or Fund's investment advisor, pursuant
to authority delegated by 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
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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
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;
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).
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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 or the appropriateness of a written contract
governing 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.
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, if available, as is specified in Appendix
--------
E to this Agreement. Such information relating to Country Risk shall be updated
-
from time to time as the Delegate deems necessary.
10. LIMITATION OF LIABILITY.
-----------------------
a. 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 the negligence,
willful misfeasance or bad faith of the Delegate or any Indemnified Party.
Without limiting the foregoing, 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
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resolution of the Board, telegram, telecopy, notice, request,
certificate or other instrument reasonably believed by the
Delegate to be genuine;
ii. Any information which the Delegate provides or does not provide
under Section 9 hereof;
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.
b. Notwithstanding anything to the contrary in this Agreement, in no event
shall the Delegate or the Indemnified Parties be liable to the Fund 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.
11. ARBITRATION OF DISPUTES
-----------------------
To the extent permitted by law, all disputes or claims arising under this
Agreement shall be resolved through arbitration. Arbitration under this Article
shall be conducted according to the Commercial Arbitration Rules of the American
Arbitration Association and shall take place in the City of Boston,
Massachusetts. This Article shall be enforced and interpreted exclusively in
accordance with applicable federal law, including the Federal Arbitration Act.
12. 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.
13. 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
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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.
14. GOVERNING LAW
-------------
This Agreement shall be constructed in accordance with the laws of the
Commonwealth of Massachusetts without regard to principles of choice of law.
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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: ___________________________________
NAME:
TITLE:
TCW GALILEO FUNDS, INC.
BY:____________________________________
NAME:
TITLE:
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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
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APPENDIX A
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JURISDICTIONS COVERED
---------------------
[delete those countries which are not delegated]
Argentina Latvia
Austria Lebanon
Australia Lithuania
Bahrain Luxembourg
Bangladesh Malaysia
Belgium Mauritius
Bermuda Mexico
Botswana Morocco
Brazil Namibia
Bulgaria Netherlands
Canada New Zealand
Chile Norway
China Oman
Colombia Pakistan
Croatia Papau 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
Japan Uruguay
Jordan Venezuela
Kazakhstan Zambia
Kenya Zimbabwe
Korea
A-1
APPENDIX B
----------
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:
TCW GALILEO FUNDS, INC.
BY:____________________________________
NAME:
TITLE:
DATE: ______________________________
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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):
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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
A-4
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
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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: Xxxxxxxx X'Xxxxxxx, 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
A-6
