April 14, 1997
THIRD AVENUE SMALL-CAP VALUE FUND
THIRD AVENUE VALUE FUND
The following information supplements the information
contained in the section entitled "Investment Philosophy
and Approach" of the Funds' Prospectus dated April 1,
1997.
FOREIGN CURRENCY TRANSACTIONS
BOTH THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP
VALUE FUND may, from time to time, engage in foreign
currency transactions in order to hedge the value of
their respective portfolio holdings denominated in
foreign currencies against fluctuations in foreign
currency prices versus the U.S. dollar. These transac-
tions include forward currency contracts, exchange
listed and OTC options on currencies, currency swaps and
other swaps incorporating currency hedges.
The notional amount of a currency hedged by a Fund will
be closely related to the aggregate market value (at the
time of making such sale) of the securities held and
reasonably expected to be held in its portfolio
denominated or quoted in or currently convertible into
that particular currency or a closely related currency.
If a Fund enters into a hedging transaction in which such
Fund is obligated to make further payments, its custodian
will segregate cash or readily marketable securities
having a value at all times at least equal to such Fund's
total commitments.
The cost to a Fund of engaging in currency hedging
transactions varies with factors such as (depending upon
the nature of the hedging transaction) the currency
involved, the length of the contract period, interest
rates in foreign countries for prime credits relative to
U.S. interest rates for U.S. Treasury obligations, the
market conditions then prevailing and fluctuations in the
value of such currency in relation to the U.S. dollar.
Transactions in currency hedging contracts usually are
conducted on a principal basis, in which case no fees or
commissions are involved. The use of currency hedging
contracts does not eliminate fluctuations in the prices
in local currency of the securities being hedged. The
ability of a Fund to realize its objective in entering
into currency hedging transactions is dependent on the
performance of its counterparties on such contracts,
which may in turn depend on the absence of currency
exchange interruptions or blockage by the governments
involved, and any failure on their part could result in
losses to a Fund. The requirements for qualification as
a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"), may cause a Fund
to restrict the degree to which it engages in currency
hedging transactions.
