DELEGATION AGREEMENT
AGREEMENT, dated as of October 1, 1999 by and between INVESTORS BANK &
TRUST COMPANY, a Massachusetts trust Company (the "Delegate"), and LSA VARIABLE
SERIES TRUST, a business trust organized under the laws of the state of Delaware
(the "Trust").
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 Trust 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 Trust'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 Trust'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 Trust.
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be withdrawn from the depository; or (iii) because maintaining securities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.
1
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. TRUST'S REPRESENTATIONS
Trust represents that the Board has determined that it is reasonable to
rely on Delegate to perform the responsibilities delegated by this Agreement.
Trust further represents that the persons executing this Agreement and any
amendment or appendix hereto on its behalf are duly authorized to so bind the
Trust 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.
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. 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 Trust, such written contracts governing Trust'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 Trust, 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 Trust's foreign
custody arrangements, Delegate is authorized to, and shall, on behalf of Trust,
establish a system to Monitor the appropriateness of such contract.
6. GUIDELINES AND PROCEDURES FOR THE EXERCISE OF DELEGATED AUTHORITY
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 Trust's investment advisor, pursuant to
authority delegated by Board) has considered, and pursuant to its fiduciary
duties to Trust and Trust'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 Trust'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. It is
understood that, notwithstanding the Board's (or Trust's investment advisor's)
determination to accept such Country Risk as is incurred by placing and
maintaining Assets in the jurisdictions to which this Agreement applies, the
Delegate will select Eligible Foreign Custodians in each such jurisdiction, exce
that Delegate does not accept any authorization or direction with regard to
Securities Depositories.
3
Nothing in this Agreement shall require Delegate to make any selection
or to engage in any Monitoring on behalf of Trust 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 Trust 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
c. EVALUATION OF WRITTEN CONTRACTS
In exercising the authority delegated under this Agreement to enter into
written contracts governing Trust'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).
4
d. 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 Trust's
foreign custody arrangements, Delegate shall consider any factors and criteria
set forth in APPENDIX D to this Agreement. If, as a result 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 Trust 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 Trust'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
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 Trust or any third
party, and the Trust 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:
5
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 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 Trust 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 Trust 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.
6
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.
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/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
LSA VARIABLE SERIES TRUST
By: /s/ Xxxx X. Xxxxxx
------------------
Name: Xxxx X. Xxxxxx
Title: President
7
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
8
APPENDIX A
JURISDICTIONS COVERED
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:
none
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
LSA VARIABLE SERIES TRUST
By: /s/ Xxxx X. Xxxxxx
------------------
Name: Xxxx X. Xxxxxx
Title: President
DATE: September 27, 0000
X-0
XXXXXXXX C
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):
____X_____ None
_________ 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:
1. Operating performance
2. Established practices and procedures
3. Relationship with market regulators
4. Contingency planning
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 Addenda or Side Letters to Subcustodian Agreements
2. Legal Opinion, if available, with regard to:
a) Access to books and records by the Trust'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
A-5
APPENDIX F
AUTHORIZED REPRESENTATIVES
The names and addresses of each party's authorized representatives are set
forth below:
A. BOARD
With a copy to: Xxxxxxxx X. Xxxxxxx
Vice President, Chief Operations Officer
Phone: (000) 000-0000
Fax: (000) 000-0000
B. DELEGATE
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx, 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
