S.L. 370.32 Art. 56Delegation of function by the depositary to a sub- depositary. Cap. 386.

(1) The depositary may, with the consent of the scheme or the fund manager acting on behalf of the scheme, delegate all or part of the functions and duties referred to in regulation 51 to a sub-

depositary, and may also entrust or deposit all or part of the assets of the scheme held in custody with such sub-depositary.

(2) The liability of the depositary for its own acts or omissions pursuant to regulation 55 shall not be affected or reduced as a result of the depositary delegating functions and duties or entrusting all or part of the assets of the scheme to a sub-depositary.

(3) Where the depositary delegates or entrusts functions, duties or assets in terms of sub-regulation (1) to a person who is either a group company or is the fund manager or associate of the fund manager, without prejudice to the liability of such person, the depositary shall be liable for any loss or prejudice suffered by the scheme or the unit-holders as a result of the acts, omissions or insolvency of such person: Provided that the depositary may not delegate to the fund manager acting on behalf of the scheme any function of oversight in respect of the fund manager or any function of custody of the assets, nor may the depositary delegate to an associate of the fund manager any function of oversight in respect of such entity.

(4) Where the depositary delegates or entrusts functions, duties or assets in terms of sub-regulation (1) to a person which is not a group company nor the fund manager acting on behalf of the scheme nor associate of the fund manager, without prejudice to the liability of such person, the depositary shall be liable for any loss or prejudice suffered by the fund manager, the scheme or the unit-holders as a result of the acts or omissions of such person unless the depositary can prove that such person was and remains qualified and competent to carry out the functions and duties delegated to it and that the depositary exercised reasonable care to oversee that the functions and duties delegated were undertaken by such person competently.

(5) The liability of the depositary pursuant to sub-regulations

(3) and (4) may be varied or reduced with the written consent of the scheme or the fund manager acting on behalf of the scheme, and in accordance with the terms and conditions of the written depositary agreement appointing the depositary, the deed or other instrument establishing and regulating the scheme, the conditions of the collective investment scheme licence which may be held by the scheme, the conditions of any investment services licence and such other requirements as may be prescribed by the competent authority: Provided that the depositary discloses fully to the scheme or the fund manager acting on behalf of the scheme, any risks that may be associated with the nature of the custody arrangements, and that the agreement appointing the depositary shall clearly define the extent of liability of the depositary. Any such risks shall also be fully disclosed to the unit-holders in the scheme.

(6) For the purposes of this regulation, "associate" in relation to the fund manager means a body corporate which forms part of the same group of companies as the fund manager acting on behalf of the scheme.

(7) For the purposes of this regulation, "group company" in relation to the depositary, means any body corporate which is the depositary’s subsidiary or parent company, or a subsidiary of the depositary’s parent company; and the terms "parent" and "subsidiary" shall be construed in accordance with article 2(2) of the Companies Act.