EXHIBIT 99(g)(2)
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT dated as of February 27, 2002, between THIRD AVENUE VARIABLE
SERIES TRUST (the "Trust"), a business trust formed and existing under the laws
of the State of Delaware, acting on behalf of each of the series of the Trust
identified on Exhibit A hereto (each, a "Fund") and CUSTODIAL TRUST COMPANY
("CTC"), a bank organized and existing under the laws of the State of New
Jersey.
WHEREAS, CTC serves as custodian for the assets of each Fund pursuant
to a Custody Agreement with the Trust dated as of August 30, 1999;
WHEREAS, the Trust desires that the Funds maintain their Foreign Assets
(as hereinafter defined) in one or more foreign countries;
WHEREAS, the Trust wishes to appoint CTC as a Foreign Custody Manager
on the terms and conditions contained herein;
WHEREAS, CTC wishes to serve as a Foreign Custody Manager and perform
the duties set forth herein on the term and conditions contained herein;
NOW THEREFORE, in consideration of the agreements made herein, the
Trust and CTC hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. Whenever used in this Agreement, the
following terms, unless the context otherwise requires, shall mean:
(a) "ACT" means the Investment Company Act of 1940.
(b) "BOARD" means the Board of Trustees of the Trust.
(c) "ELIGIBLE CUSTODIAN" means a bank having the qualifications
prescribed in Section 26(a)(1) of the Act, or an Eligible Foreign Custodian.
(d) "ELIGIBLE FOREIGN CUSTODIAN" has the same meaning as in Rule 17f-5
under the Act.
(e) "ELIGIBLE SECURITIES DEPOSITORY" means any system for the central
handling of securities within the meaning set forth in Rule 17f-7 under the Act.
(f) "FOREIGN ASSETS" of any Fund has the same meaning as in Rule 17f-5
under the Act..
(g) "QUALIFIED FOREIGN BANK" has the same meaning as in Rule 17f-5
under the Act.
(h) "SPECIFIED COUNTRY" means any country listed on Exhibit B hereto
(as amended from time to time) in which Foreign Assets of any Fund are or are to
be held in custody.
1.2 OTHER DEFINITIONS. Capitalized terms used in this Agreement and not
otherwise defined in this Agreement shall have the meanings given such terms in
Rule 17f-5 under the Act.
ARTICLE II
CTC AS A FOREIGN CUSTODY MANAGER
2.1 DELEGATION AND ACCEPTANCE. The Trust hereby delegates to CTC, and
CTC hereby accepts such delegation and agrees to perform, with respect to each
Specified Country, the duties of Foreign Custody Manager set forth in this
Agreement.
2.2 STANDARD OF CARE. In performing the duties of Foreign Custody
Manager set forth in this Agreement, CTC shall exercise reasonable care,
prudence and diligence such as a bailee for hire having responsibility for the
safekeeping of the assets of the Funds would exercise.
ARTICLE III
DUTIES OF FOREIGN CUSTODY MANAGER
3.1 SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. (a) For each Specified
Country in which Foreign Assets of the Funds are not held (or are not to be
held) in custody solely by an overseas branch of a U.S. Bank, CTC shall select
from among the Eligible Foreign Custodians in such Specified Country (if there
are any) one or more Eligible Foreign Custodians in whose care Foreign Assets
held or to be held in custody in such Specified Country may be placed and
maintained, provided that CTC has determined with respect to each such selected
Eligible Foreign Custodian (i) that Foreign Assets placed and maintained with it
will be subject to reasonable care based on the standards applicable to
custodians in the relevant market, and (ii) that any custody arrangement with
such Eligible Foreign Custodian will be governed by a written contract
containing the provisions specified in Section 3.1(c) below which will provide
reasonable care for such Foreign Assets based on the standards applicable to
custodians in the relevant market.
(b) In making with respect to any Eligible Foreign Custodian the
determination required by Section 3.1(a)(i) above, CTC shall consider all
factors that it deems relevant to the safekeeping of Foreign Assets by such
Eligible Foreign Custodian including, without limitation:
(i) such Eligible Foreign Custodian's practices, procedures and
internal controls, including, but not limited to, the physical protection
available for certificated securities, the method of keeping custodial records,
and security and data protection practices;
(ii) whether such Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Foreign Assets of the
Funds placed in its care;
(iii) the general standing and reputation of such Eligible Foreign
Custodian; and
-3-
(iv) whether each Fund whose Foreign Assets are placed in the care of
such Eligible Foreign Custodian will have jurisdiction over and be able to
enforce judgments against it, due to, for example, such Eligible Foreign
Custodian having an office in the United States, or having otherwise submitted
to jurisdiction in the United States, or having appointed an agent for the
service of process in the United States.
(c) CTC shall not with respect to any written contract with any
Eligible Foreign Custodian make the determination required by Section 3.1(a)(ii)
above unless such contract contains at least (i) provisions that provide:
(A) for indemnification or insurance (or any combination of the
foregoing) such that the Funds will be adequately protected against the risk of
loss of Foreign Assets held in accordance with such contract;
(B) that Foreign Assets in the care of such Eligible Foreign Custodian
will not be subject to any right, charge, security interest, lien or claim of
any kind in favor of such Eligible Foreign Custodian 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 Eligible Foreign Custodian arising under
bankruptcy, insolvency or similar laws;
(C) that beneficial ownership of Foreign Assets in the care of such
Eligible Foreign Custodian will be freely transferable without the payment of
money or value to such Eligible Foreign Custodian other than for safe custody or
administration;
(D) that adequate records will be maintained identifying the Foreign
Assets of the Funds in the care of such Eligible Foreign Custodian either as
belonging to the Funds or as being held by a third party for their benefit;
(E) that the independent public accountants of any Fund whose Foreign
Assets are in the care of such Eligible Foreign Custodian will be given access
to such records (concerning such Foreign Assets) or confirmation of the contents
of such records; and
(F) that such Eligible Foreign Custodian will provide, for delivery to
any Fund whose Foreign Assets are in its care, periodic reports with respect to
the safekeeping of such Foreign Assets, including, but not limited to,
notification of any transfer to or from such Fund's account or a third party
account containing such Foreign Assets;
or (ii) in lieu of any or all of the foregoing provisions (the "Omitted
Provisions"), such other provisions as CTC may determine will provide, in their
entirety, the same or greater level of care for
-4-
the Foreign Assets in the care of such Eligible Foreign Custodian as the Omitted
Provisions in their entirety.
3.2 CONDITIONS OF SELECTION PROCESS. (a) In selecting an Eligible
Foreign Custodian in any Specified Country in the manner provided for in Section
3.1 above, CTC need not examine all Eligible Foreign Custodians in such
Specified Country, but may select any Eligible Foreign Custodian with respect to
which it makes the determinations required by Section 3.1(a) above.
(b) The Trust understands that in making any selection of an Eligible
Foreign Custodian pursuant to Section 3.1 above, CTC may, without independent
examination on its part but subject to the standard of care to which it is held
in Section 2.2 above, rely upon examinations performed and determinations made
by Citibank, N.A. or such other operator of a global custody system as the Trust
may from time to time approve.
3.3 MONITORING. By means of a system established either by CTC or by
Citibank, N.A. (or such other operator of a global custody system as the Trust
may from time to time approve), and subject to Section 3.4 below, CTC shall
monitor at reasonable intervals (but at least annually) (a) based on factors
that include those specified in Section 3.1 (b) above, the continuing
appropriateness of maintaining the Foreign Assets of each Fund with each
Eligible Foreign Custodian in whose care the Foreign Assets of such Fund have
been placed pursuant to Section 3.1 above and (b) based on the factors specified
in Section 3.1(c) above, the continuing appropriateness of the written contract
that governs each Fund's custody arrangement with each such Eligible Foreign
Custodian.
3.4 APPROPRIATENESS. In making any determination of appropriateness
pursuant to Section 3.3 above, CTC shall not be required to consider or evaluate
any prevailing country risk associated with investment in a particular country.
Country risk includes, but is not limited to (a) nationalization, expropriation
or other governmental actions, (b) market conditions which affect the orderly
execution of securities transactions or affect the value of securities, (c)
currency devaluations and other currency fluctuations, and (d) systemic risks of
holding assets in a particular country such as (i) financial infrastructure,
(ii) prevailing custody and settlement practices (including the use of
-5-
Eligible Securities Depositories), (iii) regulation of the banking and
securities industries (including laws and regulations relating to the
safekeeping and recovery of assets held pursuant to custody agreements), and
(iv) currency controls and restrictions.
3.5 REPORTING. (a) At such times as the Board and CTC may agree, but no
less often than annually, CTC shall provide the Board with written reports of
(i) the placement of any Foreign Assets of any Fund with a particular Eligible
Custodian, and (ii) any material change in the custody arrangements of any Fund
with any Eligible Foreign Custodian.
(b) CTC shall promptly advise the Trust whenever a custody arrangement
of any Fund with any Eligible Foreign Custodian selected by CTC pursuant to
Section 3.1 above no longer meets the requirements of the Rule.
3.6 LIMITATION REGARDING FOREIGN SECURITIES DEPOSITORIES.
Notwithstanding anything in this Agreement to the contrary, CTC's duties as
Foreign Custody Manager under this Agreement shall not apply to Eligible
Securities Depositories or to any custody arrangement with any of them.
3.7. PRIOR NOTICE. The Trust understands that CTC in order to perform
its duties with respect to custody arrangements in a particular Specified
Country may require reasonable advance notice of a Fund's intention to invest in
such Specified Country.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE TRUST. The Trust represents and warrants (a)
that this Agreement has been duly authorized, executed and delivered by the
Trust, and constitutes a valid and legally binding obligation of the Trust
enforceable in accordance with its terms, (b) that no statute, regulation, rule,
order, judgement or contract binding on the Trust prohibits the Trust's
execution or performance of this Agreement, and (c) that the Board and/or the
investment adviser of each Fund
-6-
has or will have considered the country risks (as described in part in Section
3.4 above) associated with investment in each Specified Country in which such
Fund has or will have invested.
4.2 REPRESENTATIONS OF CTC. CTC represents and warrants (a) that it is
duly organized and existing under the laws of the State of New Jersey, with full
corporate power to carry on its businesses as now conducted, to enter into this
Agreement and to perform its obligations hereunder, (b) that this Agreement has
been duly authorized, executed and delivered by CTC, and constitutes a valid and
legally binding obligation of CTC enforceable in accordance with its terms, and
(c) that no statute, regulation, rule, order, judgement or contract binding on
CTC prohibits its execution or performance of this Agreement.
ARTICLE V
LIABILITIES AND INDEMNIFICATION
5.1 CTC LIABILITY. CTC shall be without liability to any Fund or the
Trust for any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim which does not arise from CTC's failure by
reason of willful misfeasance, bad faith or negligence on its part to adhere to
the standard of care imposed in Section 2.2 above. In no event shall CTC be
liable for special, incidental or consequential damages, even if CTC has been
advised of the possibility of such damages.
5.2 INDEMNIFICATION BY CTC. CTC shall indemnify and hold harmless the
Trust and each Fund from and against any and all costs, expenses, damages,
liabilities or claims (including reasonable attorney's and accountants' fees)
arising from any failure by CTC to perform its obligations under this Agreement
at the standard of care to which it is held in Section 2.2 above if such failure
arises from bad faith, willful misconduct or negligence on the part of CTC,
provided that neither the Trust nor any Fund shall be indemnified and held
harmless from and against (a) any such costs, expenses, damages, liabilities or
claims arising from bad faith, willful misconduct or negligence on the part of
the Trust or such Fund, or (b) special, incidental or consequential damages,
even if CTC has been advised of the possibility of such damages.
-7-
5.3 INDEMNIFICATION BY FUNDS. Each Fund, severally and not jointly,
shall indemnify and hold harmless CTC from and against any and all costs,
expenses, damages, liabilities or claims (including reasonable attorneys' and
accountants' fees) arising from CTC's performance of its obligations under this
Agreement with respect to such Fund, provided that CTC shall not be indemnified
and held harmless from and against (a) any such costs, expenses, damages,
liabilities or claims arising from bad faith, willful misconduct or negligence
on the part of CTC, or (b) special, incidental or consequential damages, even if
the Trust or any Fund has been advised of the possibility of such damages.
5.4 EXPRESS DUTIES ONLY. CTC shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against CTC. CTC shall have no discretion whatsoever with respect to the
management, disposition or investment of the assets of any Fund and is not a
fiduciary to the Trust or any Fund. In no event shall CTC be liable for any
country risks (as described in part in Section 3.4 above) associated with
investments in a particular country.
ARTICLE VI
MISCELLANEOUS
6.1 ADDRESS FOR NOTICES. Unless otherwise specified herein, all
demands, notices, instructions, and other communications to be given hereunder
shall be sent, delivered or given to the recipient at the address, or the
relevant telephone number, set forth after its name hereinbelow:
If to the Trust:
THIRD AVENUE VARIABLE SERIES TRUST
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: GENERAL COUNSEL
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-8-
If to CTC:
CUSTODIAL TRUST COMPANY
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: SENIOR VICE PRESIDENT - TRUST AND SECURITIES CLEARANCE
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as either party hereto shall have provided to the other
by notice given in accordance with this Section 6.1.
6.2 NO WAIVER. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
6.3 AMENDMENTS. This Agreement and the Exhibits hereto cannot be
changed orally and no amendment to this Agreement or any of such Exhibits shall
be effective unless evidenced by an instrument in writing executed by the
parties hereto.
6.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
6.5 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; PROVIDED, HOWEVER, that this
-9-
Agreement shall not be assignable by either party hereto without the written
consent of the other party. Any purported assignment in violation of this
Section 6.6 shall be void.
6.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of law principles thereof.
6.8 JURISDICTION. Any suit, action or proceeding with respect to this
Agreement may be brought in the Supreme Court of the State of New York, County
of New York, or in the United States District Court for the Southern District of
New York, and the parties hereto hereby submit to the non-exclusive jurisdiction
of such courts for the purpose of any such suit, action or proceeding, and
hereby waive for such purpose any other preferential jurisdiction by reason of
their present or future domicile or otherwise. Each party hereto hereby
irrevocably waives its right to trial by jury in any suit, action or proceeding
with respect to this Agreement.
6.9 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
6.10 TERMINATION. This Agreement shall automatically terminate as soon
as the Custody Agreement dated as of March 27, 1997, between the Trust and CTC
ceases to be in effect, and may otherwise be terminated by either party giving
to the other party a notice in writing specifying the date of such termination,
which shall not be less than thirty (30) days after the date of the giving of
such notice.
6.11 FEES. In consideration of the services provided by CTC hereunder,
each Fund shall pay to CTC such compensation and out-of-pocket expenses as may
be agreed upon from time to time.
6.12 CONFLICTS WITH CUSTODY AGREEMENT. In the event of any conflict
between this Agreement and the Custody Agreement dated as of August 30, 1999,
between the Trust and CTC, the terms of this Agreement shall prevail.
-10-
6.13 SEPARATE FUNDS. Every reference in this Agreement to a Fund shall
be deemed a reference solely to the particular Fund referred to. Under no
circumstances shall the rights, obligations or remedies with respect to a
particular Fund constitute a right, obligation or remedy applicable to any other
Fund. In particular, and without otherwise limiting the scope of this Section
6.13, CTC shall have no right to set off claims against one Fund by applying
thereto the property of any other Fund.
IN WITNESS WHEREOF, the Trust, on behalf of each Fund individually and
not jointly, and CTC have caused this Agreement to be executed by their
respective officers thereunto duly authorized, all as of the date first above
written.
THIRD AVENUE VARIABLE SERIES
TRUST on behalf of each Fund identified
on Exhibit A attached hereto, individually
and not jointly
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
CUSTODIAL TRUST COMPANY
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-11-
EXHIBIT A
NAME OF FUND
Third Avenue Value Portfolio
-▇▇-
▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇
Sweden
-13-
-14-