EXHIBIT 99(d)(1)
THIRD AVENUE VARIABLE SERIES TRUST INVESTMENT
ADVISORY AGREEMENT
Investment Advisory Agreement dated as of August 8, 2002,
between Third Avenue Variable Series Trust (the "Trust"), a Delaware
business trust, on behalf of its series, Third Avenue Value Portfolio
(the "Fund"), and Third Avenue Management LLC (the "Adviser"), a
Delaware limited liability company.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:
1. IN GENERAL
The Adviser agrees, all as more fully set forth herein, to
act as investment adviser to the Fund with respect to the investment of
the assets of the Fund and to supervise and arrange the purchase and
sale of assets held in the investment portfolio of the Trust. The
Adviser may delegate any or all of its responsibilities to one or more
sub-advisers or administrators, subject to the approval of the Board of
Trustees of the Trust. Such delegation shall not relieve the Adviser of
its duties and responsibilities hereunder.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO
INVESTMENTS OF ASSETS OF THE FUND
(a) Subject to the succeeding provisions of this paragraph
and subject to the direction and control of the Trust's Board of
Trustees, the Adviser shall (i) act as investment adviser for and
supervise and manage the investment and reinvestment of the Fund's
assets and in connection therewith have complete discretion in
purchasing and selling securities and other assets for the Fund and in
voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Fund;
and (ii) arrange for the purchase and sale of securities and other
assets held in the investment portfolio of the Fund. Nothing contained
herein shall be construed to restrict the Fund's right to hire its own
employees or to contract separately with the Adviser or others to
provide administrative services to the Fund, including but not limited
to, the calculation of net asset value of the Fund's shares.
(b) In the performance of its duties under this Agreement,
the Adviser shall at all times use all reasonable efforts to conform
to, and act in accordance with, any requirements imposed by (i) the
provisions of the Investment Company Act of 1940, as amended (the
"Act"), and of any rules or regulations in force thereunder; (ii) any
other applicable provisions of law; (iii) the provisions of the Trust
Instrument and By-Laws of the Trust, as such documents are amended from
time to time; (iv) the investment objective, policies and restrictions
applicable to the Fund as set forth in the Fund's Prospectus (including
its Statement of Additional Information) and (v) any policies and
determinations of the Board of Trustees of the Trust.
(c) The Adviser will seek to provide qualified personnel
to fulfill its duties hereunder and will bear all costs and expenses
(including any overhead and personnel costs) incurred in connection
with its duties hereunder and shall bear the costs of any salaries or
trustees fees of any officers or trustees of the Trust who are
affiliated persons (as defined in the Act) of the Adviser. Subject to
the foregoing, the Fund shall be
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responsible for the payment of all the Fund's other expenses, including
(i) payment of the fees payable to the Adviser under paragraph 4
hereof; (ii) organizational expenses; (iii) brokerage fees and
commissions; (iv) taxes; (v) interest charges on borrowing; (vi) the
cost of liability insurance or fidelity bond coverage for the Fund's
officers and employees, and trustees' and officers' errors and
omissions insurance coverage; (vii) legal, auditing, and accounting
fees and expenses; (viii) charges of the Fund's administrator,
custodian, transfer agent and other service providers; (ix) the Fund's
pro rata portion of dues, fees and charges of any trade association of
which the Fund is a member; (x) the expenses of printing, preparing and
mailing proxies, stock certificates and reports, including the Fund's
prospectus and statements of additional information, and notices to
shareholders; (xi) filing fees for the registration or qualification of
the Fund and its shares under federal or state securities laws; (xii)
the fees and expenses involved in registering and maintaining
registration of the Fund's shares with the Securities and Exchange
Commission; (xiii) the expenses of holding shareholder meetings; (xiv)
the compensation, including fees, of any of the Trust's trustees,
officers or employees who are not affiliated persons of the Adviser;
(xv) all expenses of computing the Fund's net asset value per share,
including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Fund's investment portfolio; (xvi)
expenses of personnel performing shareholder servicing functions and
all other distribution expenses payable by the Fund; (xvii) expenses of
redemption of shares and (xviii) litigation and other extraordinary or
non-recurring expenses and other expenses properly payable by the Fund.
(d) The Adviser shall give the Fund the benefit of its
best judgment and effort in rendering services hereunder, but neither
the Adviser nor any of its officers, directors, employees, agents or
controlling persons shall be liable for any act or omission or for any
loss sustained by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by
reason of its reckless disregard of its obligations and duties under
this agreement, provided, however, that the foregoing shall not
constitute a waiver of any rights which the Fund may have which may not
be waived under applicable law.
(e) Nothing in this Agreement shall prevent the Adviser or
any director, officer, employee or other affiliate thereof from acting
as investment adviser for any other person, firm or corporation, or
from engaging in any other lawful activity, and shall not in any way
limit or restrict the Adviser or any of its directors, employees or
agents from buying, selling or trading any securities for its or their
own accounts or for the accounts of others for whom it or they may be
acting.
3. PORTFOLIO TRANSACTIONS
In the course of the Adviser's execution of portfolio
transactions for the Fund, it is agreed that the Adviser shall employ
securities brokers and dealers which, in its judgment, will be able to
satisfy the policy of the Fund to seek the best execution of its
portfolio transactions at reasonable expenses. For purposes of this
Agreement, "best execution" shall mean prompt, efficient and reliable
execution at the most favorable price obtainable. Under such conditions
as may be specified by the Trust's Board of Trustees in the interest of
its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale
of the Fund's portfolio securities with its affiliates, X.X. Xxxxxxx
LLC and Private Debt LLC; (b) pay commissions to brokers other than its
affiliates which are higher than might be charged by another qualified
broker or obtain brokerage and/or research services considered by the
Adviser to be useful or desirable in the performance of its duties
hereunder and for the investment management of other advisory accounts
over which it or its affiliates exercise investment discretion; and (c)
consider sales by brokers (other than its affiliated
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distributor) of shares of the Fund and any other mutual fund for which
it or its affiliates act as investment adviser, as a factor in its
selection of brokers and dealers for the Fund's portfolio transactions.
4. COMPENSATION OF THE ADVISER
(a) The Fund agrees to pay to the Adviser out of the
Fund's assets and the Adviser agrees to accept as full compensation for
all services rendered by or through the Adviser a fee computed daily
and payable monthly in arrears an amount equal to 1/12 of 0.90% of the
Fund's daily average net assets for such month. For any period less
than a month during which this Agreement is in effect, the fee shall be
prorated according to the proportion which such period bears to a full
month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the
Fund shall be calculated pursuant to the procedures adopted by
resolutions of the Trustees of the Trust for calculating the net asset
value of the Fund's shares.
5. INDEMNITY
(a) The Fund hereby agrees to indemnify the Adviser and
each of the Adviser's directors, officers, employees, and agents
(including any individual who serves at the Adviser's request as
director, officer, partner, trustee or the like of another corporation)
and controlling persons (each such person being an "indemnitee")
against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees (all as provided in accordance with applicable corporate
law) reasonably incurred by such indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or investigative
body which he may be or may have been involved as a party or otherwise
or with which he may have been threatened, while acting in any capacity
set forth above in this paragraph or thereafter by reason of his having
acted in any such capacity, except with respect to any matter as to
which he shall have been adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interest of the
Fund and furthermore, in the case of any criminal proceeding, so long
as he had no reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Fund or its shareholders or any
expense of such indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence (iv) reckless
disregard of the duties involved in the conduct of his position (the
conduct referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee,
pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless
there has been a determination that such settlement or compromise is in
the best interests of the Fund and that such indemnitee appears to have
acted in good faith in the reasonable belief that his action was in the
best interest of the Fund and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff, indemnification
shall be mandatory only if the prosecution of such action, suit or
other proceeding by such indemnitee was authorized by a majority of the
full Board of the Trust. Notwithstanding the foregoing, the Fund shall
not be obligated to provide such indemnification (i) to the extent such
provision would waive any right which the Fund cannot lawfully waive or
(ii) with respect to any obligation, liability or expense of any other
series of shares of the Trust.
(b) The Fund shall make advance payments in connection
with the expenses of defending any action with respect to which
indemnification might be sought hereunder
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if the Fund receives a written affirmation of the indemnitee's good
faith belief that the standard of conduct necessary for indemnification
has been met and a written undertaking to reimburse the Fund unless it
is subsequently determined that he is entitled to such indemnification
and if the Trustees of the Trust determine that the facts then known to
them would not preclude indemnification. In addition, at least one of
the following conditions must be met: (A) the indemnitee shall provide
a security for his undertaking, (B) the Fund shall be insured against
losses arising by reason of any lawful advances, or (C) a majority of a
quorum of trustees of the Trust who are neither "interested persons" of
the Trust (as defined in Section 2(a)(19) of the Act) nor parties to
the proceeding ("Disinterested Non-Party Trustees") or an independent
legal counsel in a written opinion, shall determine based on a review
of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be
found entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a
court or other body before whom the proceeding was brought that such
indemnitee is not liable by reason of disabling conduct or, (2) in the
absence of such a decision, by (i) a majority vote of a quorum of the
Disinterested Non-Party Trustees of the Trust, or (ii) if such a quorum
is not obtainable or even, if obtainable, if a majority vote of such
quorum so directs, independent legal counsel in a written opinion.
The rights accruing to any indemnitee under these
provisions shall not exclude any other right to which he may be
lawfully entitled.
6. DURATION AND TERMINATION
This Agreement shall become effective upon the date hereof
and shall continue in effect for a period of two years and thereafter
from year to year, but only so long as such continuation is
specifically approved at least annually in accordance with the
requirements of the Act.
This Agreement may be terminated by the Adviser at any
time without penalty upon giving the Fund sixty days written notice
(which may be waived by the Fund) and may be terminated by the Fund at
any time without penalty upon giving the Adviser sixty days notice
(which notice may be waived by the Adviser), provided that such
termination by the Fund shall be directed or approved by the vote of a
majority of the Trustees of the Trust in office at the time or by the
vote of the holders of a "majority of the voting securities" (as
defined in the Act) of the Fund at the time outstanding and entitled to
vote. This Agreement shall terminate automatically in the event of its
assignment (as "assignment" is defined in the Act and the rules
thereunder).
It is understood and hereby agreed that the name "Third
Avenue" and any associated logo and mask are the property of the
Adviser for copyright and other purposes. The Fund further agrees that
the words "Third Avenue" may freely be used by the Adviser for other
investment companies, entities or products. The Fund further agrees
that, in the event that the Adviser shall cease to act as investment
adviser to the Fund, the Fund shall promptly take all necessary and
appropriate action to change its name to names which do not include the
words "Third Avenue"; provided, however, that the Fund may continue to
use the words "Third Avenue" if the Adviser consents in writing to such
use.
7. NOTICES
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time
to time for the receipt of such notice and shall be deemed to be
received on the earlier of the date actually received or on the fourth
day after the postmark if such notice is mailed first class postage
prepaid.
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8. GOVERNING LAW
This Agreement shall be construed in accordance with the
laws of the State of New York for contracts to be performed entirely
therein and in accordance with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized officers,
all as of the day and the year first above written.
THIRD AVENUE VARIABLE SERIES TRUST,
FOR THE THIRD AVENUE VALUE
PORTFOLIO SERIES
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President
THIRD AVENUE MANAGEMENT LLC
By: /s/ Xxxxxxx X. Xxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
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