AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON DECEMBER 19, 1997 REGISTRATION NOS.: 333-20891
811-8039
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ 2 ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. [ 3 ]
THIRD AVENUE TRUST
(Exact name of Registrant as Specified in Charter)
767 Third Avenue, New York, New York 10017-2023
(Address of Principal Executive Offices including Zip Code)
(toll-free) (800)443-1021, (212)888-6685
(Registrant's Telephone Number, including Area Code)
Please send copies of communications to:
David M. Barse Richard T. Prins, Esq.
767 Third Avenue Skadden, Arps, Slate, Meagher & Flom LLP
New York, New York 10017-2023 919 Third Avenue, New York, NY 10022
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ X ] 75 days after filing, pursuant to paragraph (a)(2) of Rule 485.
- --------------------------------------------------------------------------------
Third Avenue Trust - Post-Effective Amendment No. 2
<PAGE>
THIRD AVENUE TRUST
CROSS-REFERENCE SHEET
[AS REQUIRED BY RULE 481A]
<TABLE>
<CAPTION>
<S> <C>
PART A.
ITEM NO. PROSPECTUS CAPTION
Item 1. Cover Page Cover Page
Item 2. Synopsis Cover Page; Fund
Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant About The Funds
Item 5. Management of the Fund Management of the Funds;
Performance Information
Item 5a. Management's Discussion of Fund Performance Inapplicable
Item 6. Capital Stock and Other Securities About the Funds; Shareholder
Services; Dividends, Capital
Gain Distributions and Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Shares, How
to Exchange Shares
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Legal Proceedings Inapplicable
</TABLE>
- --------------------------------------------------------------------------------
Third Avenue Trust - Post-Effective Amendment No. 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PART B. STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
Item 13. Investment Objectives and Policies Investment Policies;
Investment Restrictions
Item 14. Management of the Registrant Management of the Trust;
Compensation Table
Item 15. Control Persons and Principal Principal Shareholders
Item 16. Investment Advisory and Other Investment Adviser;
Services Investment Advisory Agreement;
Administrator; Custodian
Item 17. Brokerage Allocation Portfolio Trading Practices
Item 18. Capital Stock and Other Securities Inapplicable
Item 19. Purchase, Redemption and Pricing Redemption of Shares; (See
of Securities Being Offered Prospectus)
Item 20. Tax Status Dividends, Capital Gain
Distributions and Taxes
Item 21. Underwriters Distributor
Item 22. Calculations of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
PART C. OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Post-Effective Amendment No. 2 to the
Registration Statement.
</TABLE>
- --------------------------------------------------------------------------------
Third Avenue Trust - Post-Effective Amendment No. 2
<PAGE>
PROSPECTUS
February 15, 1998
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 1
<PAGE>
Contents
FUND EXPENSES
FINANCIAL HIGHLIGHTS
ABOUT THE FUNDS
Investment Objectives
INVESTMENT PHILOSOPHY AND APPROACH
Value Discipline
Intensive Research
Diversification
Buy and Hold
Investment in Equity Securities
Investment in Debt Securities
Convertible Securities
Mortgage-Backed Securities
Asset-Backed Securities
Floating Rate, Inverse Floating Rate and Index Obligations
Investment in High Yield Debt Securities
Zero-Coupon and Pay-in-Kind Securities
Loans and Other Direct Debt Instruments
Trade Claims
Portfolio Practices
Foreign Securities
Foreign Currency Transactions
Restricted and Illiquid Securities
Investment in Relatively New Issues
Temporary Defensive Investments
Borrowing
Investment in Other Investment Companies
Simultaneous Investments
Restrictions on Investments
Securities Lending
Portfolio Turnover
MANAGEMENT OF THE FUNDS
The Investment Adviser
Advisory Fees
Administrator
Distributor
Custodian and Transfer Agent
Portfolio Trading Practices
PERFORMANCE INFORMATION
Performance Illustration
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Distribution Options
Withholding
HOW TO PURCHASE SHARES
Business Hours
Determining Net Asset Value
Share Certificates
Through an Authorized Broker-Dealer or Investment Adviser
New Accounts
Initial Investment
By Mail
By Wire
Additional Investments By Mail
Additional Investments Through the Automatic Investment Plan
Individual Retirement Accounts
Other Retirement Plans
HOW TO REDEEM SHARES
By Mail
Telephone Redemption Service
Fees
Redemption Without Notice
Account Minimum
Payment of Redemption Proceeds
Wired Proceeds
Signature Guarantees/Other Documents
Systematic Withdrawal Plan
Early Redemption Fee
HOW TO EXCHANGE SHARES
Inter-Fund Exchange Privilege
Money Market Exchange Privilege
Early Redemption Fee
SHAREHOLDER SERVICES
Telephone Information
TRANSFER OF OWNERSHIP
DESCRIPTION OF CORPORATE BOND RATINGS
Standard & Poor's Ratings Group
Moody's Investor's Service, Inc.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 2
<PAGE>
Third Avenue Trust (the "Trust") is an open-end, non-diversified, management
investment company organized as a Delaware business trust. The Trust currently
consists of three separate investment series; THIRD AVENUE VALUE FUND, THIRD
AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND (each a "Fund" and,
collectively, the "Funds").
Each of THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND seeks to
achieve its investment objective of long-term capital appreciation by adhering
to a strict value discipline when selecting securities. While both such Funds
pursue a capital appreciation objective, each Fund has a distinct investment
approach. THIRD AVENUE HIGH YIELD FUND seeks to achieve its objective of
providing high current income and, secondarily, capital appreciation by adhering
to a similar value discipline in selecting securities.
THIRD AVENUE VALUE FUND seeks to achieve its objective by investing in a
portfolio of equity securities of well-financed companies believed to be priced
below their private market values and debt securities providing strong,
protective covenants and high effective yields.
THIRD AVENUE SMALL-CAP VALUE FUND seeks to achieve its objective by investing at
least 65% of its assets in a portfolio of equity securities of well-financed
companies having market capitalizations of below $1 billion at the time of
investment and believed to be priced below their private market values.
THIRD AVENUE HIGH YIELD FUND seeks to achieve its objective by investing at
least 65% of its assets in a portfolio of fixed income or other debt securities,
rated below investment grade, of companies whose capital structures have a
market value priced below their private market values.
Some of the securities in which the Funds may invest are regarded as
speculative. As with all mutual funds, there is no assurance the Funds will
achieve their objectives. The Funds are not intended to be a complete investment
program.
Each Fund's objective is suitable for investors who are willing to hold their
shares through periods of market fluctuations and the accompanying changes in
prices of the Funds' portfolio securities and, in the case of THIRD AVENUE HIGH
YIELD FUND, for investors seeking current income. The Funds are not intended for
investors seeking short-term price appreciation or for "market timers."
THIRD AVENUE HIGH YIELD FUND INTENDS TO INVEST AT LEAST 65% OF ITS TOTAL ASSETS
IN MEDIUM AND LOWER RATED AND COMPARABLE UNRATED FIXED INCOME AND OTHER DEBT
SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS." THESE SECURITIES ARE
CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT OF INTEREST AND RETURN
OF PRINCIPAL AND INVOLVE GREATER VOLATILITY OF PRICE THAN HIGHER QUALITY FIXED
INCOME SECURITIES. INVESTORS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH
AN INVESTMENT IN JUNK BONDS BEFORE INVESTING IN THIRD AVENUE HIGH YIELD FUND.
SEE "INVESTMENT IN HIGH YIELD DEBT SECURITIES."
Shares of each Fund are sold and redeemed at net asset value. See "How to
Purchase Shares" and "How to Redeem Shares."
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 3
<PAGE>
This Prospectus contains important information about the Funds that a
prospective investor should know before investing. It should be read and
retained for future reference. A Statement of Additional Information ("SAI"),
dated February 15, 1998, about the Funds has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. You
can obtain the SAI without charge by writing or calling the Funds at 767 Third
Avenue, New York, NY 10017-2023, (800) 443-1021 or (212) 888-6685. The SAI,
material incorporated by reference into this Prospectus, and any other
information regarding the Funds are maintained electronically with the
Securities and Exchange Commission at its Internet Web sight
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person is authorized by the Funds to give any information or make any
representation other than those contained herein or in other printed or written
material issued by the Funds, and no person is entitled to rely upon any other
information or representation.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 4
<PAGE>
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of the
Funds will incur.
<TABLE>
<CAPTION>
THIRD AVENUE
THIRD AVENUE SMALL-CAP THIRD AVENUE
VALUE FUND VALUE FUND HIGH YIELD FUND
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
Sales Load Imposed on Purchases None None None
Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fee Payable to the Fund None None 1.00%*
Exchange Fee Payable to the Fund None None 1.00%*
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees .90% .90% .90%
12b-1 Fees None None None
Other Expenses .23% .75% 1.00% (after waivers)
------ ------- -----
Total Fund Operating Expenses 1.13% 1.65% 1.90% (after waivers)
====== ======= =====
</TABLE>
Example
The following example illustrates the expenses that a shareholder would pay on a
$1,000 investment, assuming a 5% annual rate of return and redemption at the end
of each time period.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
THIRD AVENUE VALUE FUND $12 $36 $63 $138
THIRD AVENUE SMALL-CAP
VALUE FUND $17 $52 $90 $197
THIRD AVENUE HIGH YIELD FUND $19 $60
The purpose of this table is to assist investors in understanding the various
costs and expenses that investors will bear directly or indirectly. The expenses
of THIRD AVENUE VALUE FUND are based on actual expenses incurred for the fiscal
year ended October 31, 1997. The expenses of THIRD AVENUE SMALL-CAP VALUE FUND
are estimated based on actual expenses incurred for the period April 1, 1997,
commencement of operations, to October 31, 1997. THIRD AVENUE HIGH YIELD FUND
commenced operations on or about February __, 1998. Because THIRD AVENUE HIGH
YIELD FUND has no operating history, "Other Expenses" is based on estimated
amounts for the current fiscal year. From time to time, the Adviser may
voluntarily waive receipt of its fees and/or assume certain expenses of the
Funds which would have the effect of lowering the expense ratio and increasing
the yield to investors.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 5
<PAGE>
The expenses noted above for THIRD AVENUE HIGH YIELD FUND, without
reimbursement, would be: "Management Fees" .90%, "Other Expenses" 2.03% and
"Total Fund Operating Expenses" 2.93%. In addition, shareholders of each Fund
pay a $9 charge for redemptions by wire. For a further description of the
various costs and expenses incurred in the Funds' operations, as well as any
reimbursements or waiver arrangements, see "Management of the Funds." THIS
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
PERFORMANCE. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
* There may be a 1% fee retained by THIRD AVENUE HIGH YIELD FUND which is
imposed only on redemptions or exchanges of shares held less than one
year. For additional information, see "How to Redeem Shares - Early
Redemption Fee" and "How to Exchange Shares - Early Redemption Fee."
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Part-A; Draft Dated December 18, 1997 Page 6
<PAGE>
FINANCIAL HIGHLIGHTS
THIRD AVENUE TRUST
The following sets forth information for THIRD AVENUE VALUE FUND and THIRD
AVENUE SMALL-CAP VALUE FUND regarding per share income and capital changes from
each of the Fund's commencement of operations to October 31, 1997, the end of
the Funds' most recent fiscal year. These Financial Highlights have been audited
by Price Waterhouse LLP, independent accountants, whose unqualified report on
the October 31, 1997 financial statements appears in the Funds' Annual Report to
Shareholders. This information should be read in conjunction with the financial
statements and accompanying notes appearing in the 1997 Annual Report to
Shareholders which are incorporated by reference into the SAI.
Because the Trust's new Fund, THIRD AVENUE HIGH YIELD FUND, commenced investment
operations on or about February __, 1998, no financial highlights are available.
THIRD AVENUE VALUE FUND: SELECTED DATA AND RATIOS (Years Ended October 31,)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $24.26 $21.53 $18.01 $17.92 $13.57 $12.80 $10.00
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .48 .53 .38 .29 .18 .19 .15
Net gain on securities
(both realized and unrealized) 7.92 2.76 3.53 .16 4.77 .64 4.65
----- ----- ----- ---- ----- ---- -----
Total from Investment Operations 8.40 3.29 3.91 .45 4.95 .83 4.80
----- ----- ----- ---- ----- ---- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.57) (.41) (.25) (.22) (.24) (.02) (.15)
Distributions from net realized gains (.15) (.15) (.14) (.14) (.36) (.04) (1.85)
----- ------ ------ ------ ------ ------ -------
Total Distributions (.72) (.56) (.39) (.36) (.60) (.06) (2.00)
------ ------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF YEAR $31.94 $24.26 $21.53 $18.01 $17.92 $13.57 $12.80
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN
(not including sales load) 35.31% 15.55% 22.31% 2.56% 37.36% 6.50% 49.16%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year
(in thousands) $1,646,272 $566,847 $312,722 $187,192 $118,958 $31,387 $17,641
Ratio of Expenses to Average
Net Assets 1.13% 1.21% 1.25% 1.16% 1.42% 2.32% 2.50%
Ratio of Net Income to Average
Net Assets 2.10% 2.67% 2.24% 1.85% 1.45% 1.71% 1.71%
Portfolio Turnover Rate 10% 14% 15% 5% 17% 31% 67%
Average Commission Rate $0.0376 $0.0318 ------ ------ ------ ------ ------
</TABLE>
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 7
<PAGE>
THIRD AVENUE SMALL-CAP VALUE FUND: SELECTED DATA AND RATIOS (Period from
April 1, 1997* to Year Ended October 31,)
1997
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .05
Net gain on securities
(both realized and unrealized) 2.32
------
Total from Investment Operations 2.37
------
LESS DISTRIBUTIONS:
Dividends from net investment income .00
------
Total Distributions .00
------
NET ASSET VALUE, END OF PERIOD $12.37
======
TOTAL RETURN 23.70%(1)
(not including sales load)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $107,256
Ratio of Expenses to Average
Net Assets 1.65%(2)
Ratio of Net Income to Average
Net Assets 1.44%(2)
Portfolio Turnover Rate 7%(1)
Average Commission Rate $0.0339
1 Not Annualized
2 Annualized
* Commencement of investment operations
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 8
<PAGE>
ABOUT THE FUNDS
Third Avenue Trust (the "Trust") was organized as a business trust under the
laws of the state of Delaware pursuant to a Trust Instrument dated October 31,
1996. At the close of business on March 31, 1997, shareholders of Third Avenue
Value Fund, Inc. ("Third Avenue Maryland"), a Maryland corporation which was
incorporated on November 27, 1989 and began operations on October 9, 1990,
became shareholders of THIRD AVENUE VALUE FUND, a series of the Trust, pursuant
to a merger agreement which was approved by a majority of Third Avenue
Maryland's shareholders on December 13, 1996. Upon this merger, all assets,
privileges, powers, franchises, liabilities and obligations of Third Avenue
Maryland were assumed by the Trust. Except as noted herein, all information
about THIRD AVENUE VALUE FUND includes information about its predecessor, Third
Avenue Maryland. THIRD AVENUE SMALL-CAP VALUE FUND, a series of the Trust,
commenced investment operations on April 1, 1997.
INVESTMENT OBJECTIVES
The investment objective of each of THIRD AVENUE VALUE FUND and THIRD AVENUE
SMALL-CAP VALUE FUND is long-term capital appreciation. The investment
objectives of THIRD AVENUE HIGH YIELD FUND are current income and, secondarily,
capital appreciation. Each investment objective is a fundamental policy and may
not be changed without the affirmative vote of a majority of that Fund's
outstanding voting securities. In pursuit of the Funds' investment objectives,
the research efforts of the Funds' Adviser, EQSF Advisers, Inc., emphasize
analysis of documents, especially stockholder mailings and Securities and
Exchange Commission ("SEC") filings by issuers. The Adviser's intensive research
process, combined with the Adviser's investment philosophy, may mean that any or
all Funds may be constructed using a relatively limited number of securities.
THIRD AVENUE VALUE FUND seeks to achieve its objective by following a value
investing philosophy to acquire common stocks of well-financed companies at a
substantial discount to the Adviser's estimate of the issuing company's private
market value or takeover value. The Fund also seeks to acquire senior
securities, such as preferred stocks and debt instruments, that have strong
covenant protections and above-average current yields, yields to events, or
yields to maturity. See "Investment in Equity Securities" and "Investment in
Debt Securities."
THIRD AVENUE SMALL-CAP VALUE FUND seeks to achieve its objective by following a
value investing philosophy that seeks to acquire common stocks of well-financed
companies at a substantial discount to the Adviser's estimate of the issuing
company's private market value or takeover value. The Fund intends to invest at
least 65% of its total assets in the equity securities of companies whose
aggregate shares outstanding have a market value of less than $1 billion at the
time of investment. See "Investment in Equity Securities."
THIRD AVENUE HIGH YIELD FUND seeks to achieve its objective by following a value
investing philosophy that seeks to acquire senior securities such as debt
instruments and preferred securities, both straight and convertible, of
companies whose securities are rated primarily below investment grade. The Fund
intends to invest at least 65% of its assets in a portfolio of non-investment
grade fixed income and other debt securities of companies whose capital
structures have a market value priced below their private market values.
Securities emphasized will have above-average yields in the case of straight
senior issues, and in the case of convertible issues, the possibility of capital
appreciation should the underlying common stock increase in value. See
"Investment in High Yield
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 9
<PAGE>
Debt Securities" and "Convertible Securities."
The Adviser may seek investments in the securities of companies in industries
that are temporarily depressed. The Adviser also seeks investments for THIRD
AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND in equity securities of
companies where debt service1 consumes a small part of such companies' cash
flow.
INVESTMENT PHILOSOPHY AND APPROACH
VALUE DISCIPLINE
The Adviser adheres to a strict value discipline when selecting securities for
the Funds. Contrary to conventional wisdom, which says that you have to take
greater risks to reap greater rewards, the Adviser seeks to invest in a
portfolio of securities where the prices at the time of acquisition are low
enough so that the Adviser can conclude that both the risk is lowered and
appreciation potential is enhanced.
INTENSIVE RESEARCH
The Adviser believes that value is created more by past corporate prosperity
than by bear markets. For this reason, the Adviser conducts intensive bottom-up
research to identify investment opportunities, and ignores general stock market
conditions and other macro factors.
DIVERSIFICATION
The Adviser believes that knowledge gained through intensive research lends more
toward reducing investment risk than does diversification. However, the Funds
will remain diversified in general, although probably less diversified than
other mutual funds of comparable size.
BUY AND HOLD
The Adviser follows a strategy of "buy and hold." This approach to achieving
growth over the long term means that the Funds should experience low turnover,
minimizing transaction costs and tax consequences.
INVESTMENT IN EQUITY SECURITIES
In selecting equity securities, the Adviser seeks issuing companies that exhibit
the following characteristics:
(1) A strong financial position, as measured not only by balance sheet data
but also by off-balance sheet assets, liabilities and contingencies (as
disclosed in footnotes to financial statements and as determined through
research of public information).
(2) Responsible management and control groups, as gauged by managerial
competence as operators and investors as well as by an apparent absence
of intent to profit at the expense of stockholders.
(3) Availability of comprehensive and meaningful financial and related
information. A key disclosure is audited financial statements and
information which the Adviser believes are reliable benchmarks to aid in
understanding the business, its values and its dynamics.
1 "Debt Service" means the current annual required payment of interest and
principal to creditors.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 10
<PAGE>
(4) Availability of the security at a market price which the Adviser
believes is at a substantial discount to the Adviser's estimate of what
the issuer is worth as a private company or as a takeover or merger and
acquisition candidate.
Although the Adviser does not pay attention to market factors in making
investment decisions, the Funds are, of course, subject to the vagaries of the
markets. In particular, small-cap stocks have less market liquidity and tend to
have more price volatility than larger capitalization stocks.
INVESTMENT IN DEBT SECURITIES
Each of THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND intends its
investment in debt securities to be, for the most part, in securities which the
Adviser believes will provide above-average current yields, yields to events, or
yields to maturity. In selecting debt instruments for THIRD AVENUE VALUE FUND,
the Adviser requires the following characteristics:
1) Strong covenant protection, and
2) Yield to maturity at least 500 basis points above that of a comparable
credit.
In acquiring debt securities for THIRD AVENUE VALUE FUND, the Adviser generally
will look for covenants which protect holders of the debt issue from possible
adverse future events such as, for example, the addition of new debt senior to
the issue under consideration. Also, the Adviser will seek to analyze the
potential impacts of possible extraordinary events such as corporate
restructurings, refinancings, or acquisitions. The Adviser will also use its
best judgment as to the most favorable range of maturities. In general, THIRD
AVENUE VALUE Fund will acquire debt issues which have a senior position in an
issuer's capitalization and will avoid "mezzanine" issues such as
non-convertible subordinated debentures. THIRD AVENUE HIGH YIELD FUND may invest
in such "mezzanine" issues.
The market value of debt securities is affected by changes in prevailing
interest rates. When prevailing interest rates fall, the market values of debt
securities generally rise. Conversely, when interest rates rise, the market
values of debt securities generally decline. The magnitude of these fluctuations
will be greater when the average maturity of the portfolio securities is longer.
CONVERTIBLE SECURITIES
THIRD AVENUE HIGH YIELD FUND intends to invest in convertible securities, which
are bonds, debentures, notes, preferred stocks or other securities that may be
converted into or exchanged for a prescribed amount of equity securities
(generally common stock) of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities have
general characteristics similar to both fixed income and equity securities.
Yields for convertible securities tend to be lower than for non-convertible debt
securities but higher than for common stocks. Although to a lesser extent than
with fixed income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying security and therefore also
will react to variations in the general market for equity securities. While no
securities investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same issuer.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 11
<PAGE>
MORTGAGE-BACKED SECURITIES
Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND intend to invest
in mortgage-backed securities and derivative mortgage-backed securities,
including, with respect to THIRD AVENUE HIGH YIELD FUND, "principal only" and
"interest only" components. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. Those Funds intend to invest in
these securities only when they believe, after analysis, that there is unlikely
to ever be permanent impairment of capital as measured by whether there will be
a money default by either the issuer or the guarantor of these securities. These
securities do, nonetheless, entail considerable market risk, i.e., fluctuations
in quoted prices for the instruments, interest rate risk, prepayment risk and
inflation risk.
THIRD AVENUE VALUE FUND will not invest in non-investment grade subordinated
classes of residential mortgages and does not intend to invest in commercial
mortgage-backed securities. THIRD AVENUE HIGH YIELD FUND may invest in
commercial mortgage-backed securities if these securities are available at a
sufficient yield spread over risk-free investments. Prepayments of principal
generally may be made at any time without penalty on residential mortgages and
these prepayments are passed through to holders of one or more of the classes of
mortgage-backed securities. Prepayment rates may change rapidly and greatly,
thereby also affecting yield to maturity, reinvestment risk and market value of
the mortgage-backed securities. As a result, the high credit quality of many of
these securities may provide little or no protection against loss in market
value, and there have been periods during which many mortgage-backed securities
have experienced substantial losses in market value. The Adviser believes that,
under certain circumstances, many of these securities may trade at prices below
their inherent value on a risk-adjusted basis and believes that selective
purchases by a Fund may provide high yield and total return in comparison to
risk levels.
ASSET-BACKED SECURITIES
Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND also intend to
invest in asset-backed securities that, through the use of trusts and special
purpose vehicles, are securitized with various types of assets, such as
automobile receivables, credit card receivables and home-equity loans in
pass-through structures similar to the mortgage-related securities described
above. In general, the collateral supporting asset-backed securities is of
shorter maturity than the collateral supporting mortgage loans and is less
likely to experience substantial prepayments. However, asset-backed securities
are not backed by any governmental agency.
FLOATING RATE, INVERSE FLOATING RATE AND INDEX OBLIGATIONS
Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in debt
securities with interest payments or maturity values that are not fixed, but
float in conjunction with (or inversely to) an underlying index or price. These
securities may be backed by U.S. Government or corporate issuers, or by
collateral such as mortgages. The indices and prices upon which such securities
can be based include interest rates, currency rates and commodities prices.
However, neither Fund will invest in any instrument whose value is computed
based on a multiple of the change in price or value of an asset or an index of
or relating to assets in which that Fund cannot or will not invest.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 12
<PAGE>
Floating rate securities pay interest according to a coupon which is reset
periodically. The reset mechanism may be formula based, or reflect the passing
through of floating interest payments on an underlying collateral pool. Inverse
floating rate securities are similar to floating rate securities except that
their coupon payments vary inversely with an underlying index by use of a
formula. Inverse floating rate securities tend to exhibit greater price
volatility than other floating rate securities. Neither Fund intends to invest
more than 5% of its total assets in inverse floating rate securities. Floating
rate obligations generally exhibit a low price volatility for a given stated
maturity or average life because their coupons adjust with changes in interest
rates. Interest rate risk and price volatility on inverse floating rate
obligations can be high, especially if leverage is used in the formula. Index
securities pay a fixed rate of interest, but have a maturity value that varies
by formula, so that when the obligation matures a gain or loss may be realized.
The risk of index obligations depends on the volatility of the underlying index,
the coupon payment and the maturity of the obligation.
INVESTMENT IN HIGH YIELD DEBT SECURITIES
THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND intend to invest in
high yield debt securities, including those rated below Baa by Moody's Investors
Service, Inc. ("Moody's") and below BBB by Standard & Poor's Ratings Group
("Standard & Poor's") and unrated debt securities. THIRD AVENUE HIGH YIELD FUND
intends to invest at least 65% of its net assets, under normal market
conditions, in high yield fixed income and other debt securities, including
straight debt instruments, convertible debt, preferred securities and unrated
securities. See also "Investment in Debt Securities" and "Restricted and
Illiquid Securities." Such securities are predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligation, and may in fact be in default. The ratings of
Moody's and Standard & Poor's represent their opinions as to the credit quality
of the securities which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and, although ratings may be
useful in evaluating the safety of interest and principal payments, they do not
evaluate the market price risk of these securities. In seeking to achieve its
investment objective, each such Fund depends on the Adviser's credit analysis to
identify investment opportunities. For the Funds, credit analysis is not a
process of merely measuring the probability of whether a money default will
occur, but also measuring how the creditor would fare in a reorganization or
liquidation in the event of a money default.
Before investing in any high yield debt instruments, the Adviser will evaluate
the issuer's ability to pay interest and principal, as well as the seniority
position of such debt in the issuer's capital structure vis-a-vis any other
outstanding debt or potential debts. There appears to be a direct cause and
effect relationship between the weak financial conditions of issuers of high
yield bonds and the market valuation and prices of their credit instruments, as
well as a direct relationship between the weak financial conditions of such
issuers and the prospects that principal or interest may not be paid.
The market price and yield of bonds rated below Baa by Moody's and below BBB by
Standard & Poor's are more volatile than those of higher rated bonds due to such
factors as interest rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity and the risk of an issuer's inability
to meet principal and interest payments. In addition, the secondary market for
these bonds is generally less liquid than that for higher rated bonds.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 13
<PAGE>
Lower rated or unrated debt obligations also present reinvestment risks based on
payment expectations. If an issuer calls the obligation for redemption, the Fund
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors.
The market values of these higher yielding debt securities tend to be more
sensitive to economic conditions and individual corporate developments than
those of higher rated securities. Companies that issue such bonds often are
highly leveraged and may not have available to them more traditional methods of
financing. Under adverse economic conditions, there is a risk that highly
leveraged issuers may be unable to service their debt obligations or to repay
their obligations upon maturity. Under deteriorating economic conditions or
rising interest rates, the capacity of issuers of lower-rated securities to pay
interest and repay principal is more likely to weaken significantly than that of
issuers of higher-rated securities. Investors should carefully consider the
relative risks of investing in high yield securities and understand that such
securities are generally not meant for short term investing.
Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may also purchase
or retain debt obligations of issuers not currently paying interest or in
default. In addition, those Funds may purchase securities of companies that have
filed for protection under Chapter 11 of the United States Bankruptcy Code.
Defaulted securities will be purchased or retained if, in the opinion of the
Adviser, they may present an opportunity for subsequent price recovery, the
issuer may resume payments, or other advantageous developments appear likely.
ZERO COUPON AND PAY-IN-KIND SECURITIES
THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in zero
coupon and pay-in-kind ("PIK") securities. Zero coupon securities are debt
securities that pay no cash income but are sold at substantial discounts from
their value at maturity. PIK securities pay all or a portion of their interest
in the form of additional debt or equity securities. Because such securities do
not pay current cash income, the price of these securities can be volatile when
interest rates fluctuate. While these securities do not pay current cash income,
federal income tax law requires the holders of zero coupon and PIK securities to
include in income each year the portion of the original issue discount (or
deemed discount) and other non-cash income on such securities accrued during
that year. In order to continue to qualify for treatment as a "regulated
investment company" under the Internal Revenue Code and avoid a certain excise
tax, each Fund may be required to distribute a portion of such discount and
income and may be required to dispose of other portfolio securities, which may
occur in periods of adverse market prices, in order to generate cash to meet
these distribution requirements.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS
Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in
loans and other direct debt instruments owed by a borrower to another party.
They represent amounts owed to lenders or lending syndicates (loans and loan
participations) or to other parties. Direct debt instruments may involve a risk
of loss in case of default or insolvency of the borrower and may offer less
legal protection to a Fund in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending bank
or other financial intermediary. The markets in loans are not regulated by
federal securities laws or the SEC.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 14
<PAGE>
TRADE CLAIMS
Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in
trade claims. Trade claims are interests in amounts owed to suppliers of goods
or services and are purchased from creditors of companies in financial
difficulty. For purchasers such as a Fund, trade claims offer the potential for
profits since they are often purchased at a significant discount from face value
and, consequently, may generate capital appreciation in the event that the
market value of the claim increases as the debtor's financial position improves
or the claim is paid.
An investment in trade claims is speculative and carries a high degree of risk.
Trade claims are illiquid securities which generally do not pay interest and
there can be no guarantee that the debtor will ever be able to satisfy the
obligation on the trade claim. The markets in trade claims are not regulated by
federal securities laws or the SEC. Because trade claims are unsecured, holders
of trade claims may have a lower priority in terms of payment than certain other
creditors in a bankruptcy proceeding.
PORTFOLIO PRACTICES
FOREIGN SECURITIES
THIRD AVENUE VALUE FUND, THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH
YIELD FUND may invest in foreign securities. Each Fund's foreign securities
investments will have characteristics similar to those of domestic securities
selected for the Fund. Each Fund intends to limit its investments in foreign
securities to companies issuing U.S. dollar-denominated American Depository
Receipts or who otherwise comply substantially with SEC disclosure requirements.
By limiting their investments in this manner, the Funds seek to avoid investing
in securities where there is no compliance with SEC requirements to provide
public financial information, or such information is unreliable as a basis for
analysis.
Foreign securities markets generally are not as developed or efficient as those
in the United States. Securities of some foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. The Funds will be
subject to additional risks which include: possible adverse political and
economic developments, seizure or nationalization of foreign deposits and
adoption of governmental restrictions that may adversely affect the payment of
principal and interest on the foreign securities or currency blockage that would
restrict such payments from being brought back to the United States. Because
foreign securities often are purchased with and payable in foreign currencies,
the value of these assets as measured in U.S. dollars may be affected favorably
or unfavorably by changes in currency rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS
THIRD AVENUE VALUE FUND, THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH
YIELD 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 transactions 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
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 15
<PAGE>
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.
RESTRICTED AND ILLIQUID SECURITIES
None of THIRD AVENUE VALUE FUND, THIRD AVENUE SMALL-CAP VALUE FUND and THIRD
AVENUE HIGH YIELD FUND will purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets (taken at current market value) would be
invested in securities that are illiquid. Generally speaking, an illiquid
security is any asset or investment which a Fund cannot sell in the ordinary
course of business within seven days at approximately the value at which the
Fund has valued the asset or investment, including securities that cannot be
sold publicly due to legal or contractual restrictions.
Over the past several years, strong institutional markets have developed for
various types of restricted securities, including repurchase agreements,
commercial paper, and some corporate bonds and notes. Securities freely salable
among qualified institutional investors under special rules adopted by the SEC
or otherwise determined to be liquid may be treated as liquid if they satisfy
liquidity standards established by the Board of Trustees. The continued
liquidity of such securities is not as well assured as that of publicly traded
securities, and accordingly the Board of Trustees will monitor their liquidity.
The Board will review pertinent factors such as trading activity, reliability of
price information and trading patterns of comparable securities in determining
whether to treat any such security as liquid for purposes of the foregoing 15%
test. To the extent the Board treats such securities as liquid, temporary
impairments to trading patterns of such securities may adversely affect the
Fund's liquidity.
INVESTMENT IN RELATIVELY NEW ISSUES
Both THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND intend to
invest occasionally in the common stock of selected new issuers; THIRD AVENUE
HIGH YIELD FUND intends to invest occasionally in the debt securities of
selected new issuers. Investments in relatively new issuers, i.e., those having
continuous operating histories of less than three years, may carry special risks
and may be more speculative because such companies are relatively unseasoned.
Such companies may also lack sufficient resources, may be unable to generate
internally the funds
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 16
<PAGE>
necessary for growth and may find external financing to be unavailable on
favorable terms or even totally unavailable. Those companies will often be
involved in the development or marketing of a new product with no established
market, which could lead to significant losses.
TEMPORARY DEFENSIVE INVESTMENTS
When, in the judgment of the Adviser, a temporary defensive posture is
appropriate, a Fund may hold all or a portion of its assets in short-term U.S.
Government obligations, cash or cash equivalents. The adoption of a temporary
defensive posture does not constitute a change in such Fund's investment
objective.
BORROWING
THIRD AVENUE VALUE FUND, THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH
YIELD FUND may also make use of bank borrowing as a temporary measure for
extraordinary or emergency purposes, such as for liquidity necessitated by
shareholder redemptions, and may use securities as collateral for such
borrowing. Such temporary borrowing may not exceed 5% of the value of the
applicable Fund's total assets at the time of borrowing.
INVESTMENT IN OTHER INVESTMENT COMPANIES
THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in
securities of other investment companies, to the extent permitted under the
Investment Company Act of 1940, provided that after any purchase the Fund does
not own more than 3% of such investment company's outstanding stock. THIRD
AVENUE VALUE FUND may invest up to 10% of its total assets in securities of
other investment companies; up to 5% of its total assets may be invested in any
one investment company, provided that after its purchase no more than 3% of such
investment company's outstanding stock is owned by the Fund. The Adviser will
charge an advisory fee on the portion of a Fund's assets that are invested in
securities of other investment companies. Thus, shareholders will be responsible
for a "double fee" on such assets, since both investment companies will be
charging fees on such assets.
SIMULTANEOUS INVESTMENTS
Investment decisions for a Fund are made independently from those of the other
Funds advised by the Adviser. If, however, such other Funds wish to invest in,
or dispose of, the same securities as the Fund, available investments will be
allocated equitably to each Fund. This procedure may adversely affect the size
of the position obtained for or disposed of by a Fund or the price paid or
received by a Fund.
RESTRICTIONS ON INVESTMENTS
The Funds have adopted various investment restrictions, some of which are
fundamental policies that cannot be changed without shareholder approval and
others of which are operating investment restrictions that may be changed
without shareholder approval. Certain restrictions not described in this
Prospectus are set forth in full in the SAI. In the event any Fund changes an
operating investment restriction, the new restriction may not meet the
investment needs of every shareholder.
SECURITIES LENDING
THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND may lend
their portfolio securities to qualified institutions. By lending its portfolio
securities, a Fund attempts to
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 17
<PAGE>
increase its income through the receipt of interest on the loan. Any gain or
loss in the market price of the securities loaned that may occur during the term
of the loan will be for the account of the Fund. A Fund may lend its portfolio
securities so long as the terms and the structure of such loans are not
inconsistent with the requirements of the Investment Company Act of 1940, which
currently provide that (a) the borrower pledge and maintain with the Fund
collateral consisting of cash, a letter of credit issued by a domestic U.S.
bank, or securities issued or guaranteed by the U.S. government having a value
at all times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the value of the loan is "marked to the market" on a daily basis),
(c) the loan be made subject to termination by the Fund at any time and the
loaned securities be subject to recall within the normal and customary
settlement time for securities transactions and (d) the Fund receive reasonable
interest on the loan (which may include the Fund's investing any cash collateral
in interest bearing short-term investments), any distributions on the loaned
securities and any increase in their market value.
A Fund will not lend portfolio securities if, as a result, the aggregate of such
loans exceeds 33 1/3% of the value of its total assets (including such loans).
Loan arrangements made by a Fund will comply with all other applicable
regulatory requirements. All relevant facts and circumstances, including the
creditworthiness of the qualified institution, will be monitored by the Adviser,
and will be considered in making decisions with respect to lending of
securities, subject to review by the Fund's Board of Trustees.
A Fund may pay reasonable negotiated fees in connection with loaned securities,
so long as such fees are set forth in a written contract and approved by it's
Board of Trustees. In addition, the Fund shall, through the ability to recall
securities prior to any required vote, retain voting rights over the loaned
securities.
On behalf of THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND,
the Trust has entered into a master lending arrangement with Bear, Stearns
Securities Corp. in compliance with the foregoing requirements.
PORTFOLIO TURNOVER
The Funds' investment policies and objectives, which emphasize long-term
holdings, would tend to keep the number of portfolio transactions relatively
low. THIRD AVENUE VALUE FUND'S portfolio turnover rate for the years ended
October 31, 1996 and 1997 was 14% and 10%, respectively. THIRD AVENUE SMALL-CAP
VALUE FUND'S portfolio turnover rate for the period ended October 31, 1997 was
7%.
It is currently estimated that, under normal market conditions, the annual
portfolio turnover rate for THIRD AVENUE HIGH YIELD FUND will not exceed 75%.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 18
<PAGE>
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISER
EQSF Advisers, Inc. (the "Adviser") manages each Fund's investments, provides
various administrative services and supervises the Funds' daily business
affairs, subject to the authority of the Trust's Board of Trustees. The Adviser,
a New York corporation organized in 1986, is controlled by Martin J. Whitman and
has its offices at 767 Third Avenue, New York, NY 10017-2023.
Mr. Whitman, the Chairman, President and Chief Executive Officer of the Trust
and its Adviser, is responsible for the day-to-day management of the portfolios
of THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND. During the
past five years, he has also served in various executive capacities with M.J.
Whitman, Inc., the Fund's distributor and regular broker dealer and several
affiliated companies engaged in various investment and financial businesses; he
has served as a Distinguished Management Fellow at the Yale School of
Management; and has been a director of various public and private companies,
including Danielson Holding Corporation , an insurance holding company, and
Nabors Industries, Inc., an international oil drilling contractor.
Curtis Jensen has served as co-manager of THIRD AVENUE SMALL-CAP VALUE FUND
since inception. He has been employed by the Adviser since 1995 and also serves
as senior research analyst for THIRD AVENUE VALUE FUND. Prior to joining the
Adviser, Mr. Jensen was a graduate business student at the Yale School of
Management from 1993 to 1995 where he studied under Mr. Whitman. Prior to that,
Mr. Jensen was a director of and managed the operations of a specialty food
manufacturer.
Margaret Patel has served as the manager of THIRD AVENUE HIGH YIELD FUND since
inception. Prior to joining the Adviser, Ms. Patel was a portfolio manager of
several mutual funds which invested in high yield, convertible and government
securities at Northstar Investment Management Corp. from 1995 to 1997. Prior to
that, Ms. Patel was a portfolio manager of several mutual funds with investments
in high yield, convertibles, governments, and municipals at Boston Security
Counsellors, Inc., the investment advisor for the Advantage Funds, from 1988
until their acquisition by Northstar in 1995.
The portfolio managers and certain other persons related to the Adviser and the
Funds are subject to written policies and procedures designed to prevent abusive
personal securities trading and other activities.
ADVISORY FEES
Each of THIRD AVENUE VALUE FUND, THIRD AVENUE SMALL-CAP VALUE FUND and THIRD
AVENUE HIGH YIELD FUND has agreed to pay the Adviser a flat rate of .90% of its
average daily net assets. Each Fund pays all costs of leased office space of or
allocable to such Fund. The Adviser's fee for the previous month is paid at the
beginning of the next month based upon the average daily net assets during the
previous month.
Each Fund pays all of its expenses other than those assumed by the Adviser. Any
expense which cannot be allocated to a specific Fund will be allocated to each
of the Funds based on their relative net asset values on the date the expense is
incurred. From time to time, the Adviser may waive receipt of its fees and/or
assume certain expenses of a Fund, which would have the effect of lowering
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 19
<PAGE>
the expense ratio of the Fund and increasing yield to investors. Accordingly,
whenever in any fiscal year, a Fund's normal operating expenses, including the
investment advisory fee, but excluding brokerage commissions and interest and
taxes, exceeds 1.9% of the first $100 million of average daily net assets of the
Fund, and 1.5% of assets in excess of $100 million, the Adviser is obligated to
reimburse the Fund in an amount equal to that excess. If a Fund's operating
expenses fall below the expense limitation, that Fund will begin repaying the
Adviser for the amount contributed on behalf of the Fund. This repayment will
continue, subject to the expense limitation, until the Adviser has been paid for
the entire amount contributed. For the fiscal years ended October 31, 1996 and
1997, no reimbursement was required to be paid for THIRD AVENUE VALUE FUND. For
the period ended October 31, 1997, no reimbursement was required to be paid for
THIRD AVENUE SMALL-CAP VALUE FUND.
ADMINISTRATOR
FPS Services, Inc. ("FPS"), which has its principal business address at 3200
Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, serves as
administrator of the Funds pursuant to an Administrative Services Agreement. The
services that FPS provides to the Funds include: coordinating and monitoring of
any third parties furnishing services to the Funds; providing the necessary
office space, equipment and personnel to perform administrative and clerical
functions for the Funds; preparing, filing and distributing proxy materials,
periodic reports to shareholders, registration statements and other documents;
and responding to shareholder inquiries.
DISTRIBUTOR
M.J. Whitman, Inc. (together with its predecessors "MJW"), a registered
broker-dealer and member of the National Association of Securities Dealers
("NASD"), is the Distributor of the Funds' shares. MJW, whose business address
is 767 Third Avenue, New York, NY 10017-2023, is a wholly-owned subsidiary of
M.J. Whitman Holding Corp. ("MJWHC"). Martin J. Whitman, David M. Barse, Michael
Carney and Ian M. Kirschner are executive officers of the Trust, MJW and MJWHC,
as well as stockholders of MJWHC.
CUSTODIAN AND TRANSFER AGENT
The custodian acts as the depository for the Funds, is responsible for
safekeeping its portfolio securities, collects all income and other payments
with respect to portfolio securities, disburses monies at the Funds' request and
maintains records in connection with its duties. North American Trust Company,
525 B Street San Diego, CA 92101-4492, serves as custodian for THIRD AVENUE
VALUE FUND and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ
08540-6231, serves as custodian for THIRD AVENUE SMALL-CAP VALUE FUND and THIRD
AVENUE HIGH YIELD FUND (each a "Custodian" and, collectively the "Custodians").
FPS serves as the Funds' Transfer Agent and also performs certain accounting and
pricing services for the Funds. FPS maintains shareholder records, answers
shareholder inquiries concerning their accounts, processes purchases and
redemptions of the Funds' shares, acts as dividend and distribution disbursing
agent and performs other shareholder services. All shareholder inquiries should
be directed to FPS. You may write to: FPS Services, Inc., 3200 Horizon Drive,
P.O. Box 61503, King of Prussia, PA 19406-0903 or you may telephone toll free
(800) 443-1021.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 20
<PAGE>
PORTFOLIO TRADING PRACTICES
The Adviser is responsible on a day-to-day basis for executing the Funds'
portfolio transactions, and seeks to obtain the most favorable price and best
available execution of orders. In principal trades, it normally deals with
market makers and will not deal with any affiliated broker. In agency trades, it
seeks to obtain reasonable commissions and may have the Funds pay a higher
commission than the broker might otherwise charge if the Funds determine that
the commission is reasonable in relation to, among other things, the value of
brokerage or research services provided by the broker to the Adviser. In agency
trades, the Adviser generally uses the services of its affiliated brokers, if in
the judgment of the Adviser, such affiliates are able to obtain a price and
execution at least as favorable as other qualified brokers. For a more detailed
description of the Funds' portfolio trading practices, see "Portfolio Trading
Practices" in the SAI.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 21
<PAGE>
PERFORMANCE INFORMATION
PERFORMANCE ILLUSTRATION
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD
AVENUE VALUE FUND AND THE STANDARD & POOR'S 500 INDEX (S&P 500)
AVERAGE ANNUAL TOTAL RETURN
THIRD AVENUE VALUE FUND
YEAR VALUE OF
ENDED RETURN INVESTMENT INVESTMENT
----- ------ ---------- ----------
10/31/90 $10,000.00 $10,000.00
Year 1 10/31/91 49.15% $14,915.00
Year 2 10/31/92 6.50% $15,884.48
Year 3 10/31/93 37.36% $21,818.91
Year 4 10/31/94 2.56% $22,377.48
Year 5 10/31/95 22.31% $27,369.89
Year 6 10/31/96 15.55% $31,625.91
Year 7 10/31/97 35.31% $42,793.02
S&P Index
YEAR VALUE OF
ENDED RETURN INVESTMENT INVESTMENT
----- ------ ---------- ----------
10/31/90 $10,000.00 $10,000.00
Year 1 10/31/91 33.50% $13,350.00
Year 2 10/31/92 9.96% $14,679.66
Year 3 10/31/93 14.94% $16,872.80
Year 4 10/31/94 3.87% $17,525.78
Year 5 10/31/95 26.44% $22,159.59
Year 6 10/31/96 24.09% $27,498.71
Year 7 10/31/97 32.11% $36,328.55
THIRD AVENUE VALUE FUND Average Annual Return
1 Year 35.31%
2 Years 25.00%
3 Years 24.12%
4 Years 38.17%
5 Years 21.92%
6 Years 19.20%
7 Years 23.07%
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 22
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THIRD AVENUE SMALL-CAP VALUE FUND AND THE RUSSELL 2000 INDEX
AVERAGE ANNUAL TOTAL RETURN
THIRD AVENUE SMALL-CAP VALUE FUND
PERIOD VALUE OF
ENDED RETURN INVESTMENT INVESTMENT
------ ------ ---------- ----------
$10,000.00 $10,000.00
Year 1 10/31/97 23.70% $12,370.00
Russell 2000 Index
PERIOD VALUE OF
ENDED RETURN INVESTMENT INVESTMENT
------ ------ ---------- ----------
$10,000.00 $10,000.00
Year 1 10/31/97 28.11% $12,811.00
THIRD AVENUE SMALL-CAP VALUE FUND Actual Annual Return
1 Year 23.70%
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 23
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Each Fund expects to declare and pay distributions annually, generally in
December. The Funds will notify shareholders of the amount and tax status of
dividends and capital gain distributions.
Each Fund intends to qualify annually for treatment as a regulated investment
company under Subchapter M of the Internal Revenue Code, and thus not be subject
to Federal income tax on the portion of its net investment income and net
realized capital gains that it distributes to shareholders. Each Fund intends to
continue its qualification as a regulated investment company in future years,
unless it determines that such tax treatment would not be advantageous to the
Fund and its shareholders. Each Fund intends to distribute substantially all of
its net investment income and net realized capital gain.
For the year ended October 31, 1997, THIRD AVENUE VALUE FUND distributed net
investment income of approximately $13,987,128 and net realized capital gains on
investments of approximately $3,539,465. A distribution of $_______ per share,
consisting of $________ of income, $________ of short-term capital gain and
$_____ of long-term capital gain was distributed to shareholders of record on
December 30, 1997.
For the period ended October 31, 1997, THIRD AVENUE SMALL-CAP VALUE FUND
distributed net investment income of approximately $___________. A distribution
of $ per share, consisting solely of income, was distributed to shareholders of
record on December 30, 1997.
Distributions from net investment income and short-term capital gains are
taxable as ordinary income. A portion of these distributions may qualify for the
corporate dividends-received deduction available to corporate shareholders.
Distributions of net long-term capital gain realized by the Funds from the
purchase and sale of securities held by them for more than one year or eighteen
months, as the case may be, will be taxable to shareholders as a long-term
capital gain (even if the shareholder has held the shares for less than one
year) at the rate applicable to those respective holding periods. The Taxpayer
Relief Act of 1997 generally reduced the maximum federal tax rate for
noncorporate taxpayers on long-term capital gains generated from assets held
more than eighteen months from 28% to 20%. Capital gains from assets held for
more than twelve months but not more than eighteen months are still taxed at a
maximum 28% rate. If a shareholder who has received a capital gain distribution
suffers a loss on the sale of his shares not more than six months after
purchase, the loss will be treated as a long-term capital loss to the extent of
the capital gain distribution received.
Shareholders receiving distributions in the form of additional shares will be
treated for federal income tax purposes in the same manner as if they had
received cash distributions equal in value to the shares received, and will have
a cost basis for Federal income tax purposes in each share received equal to the
net asset value of a share of the applicable Fund on the date of distribution.
Shareholders will generally recognize taxable gain or loss on a redemption of
shares in an amount equal to the difference between the redemption proceeds and
the shareholder's basis in the shares redeemed. This gain or loss will generally
be capital, assuming that the shareholder held the shares
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 24
<PAGE>
as a capital asset, and will be long-term capital gain or loss if the shares
were held for longer than one year, with gain taxed at a lower rate if the
shares were held by a noncorporate taxpayer for longer than eighteen months. A
loss recognized on the disposition of shares of a Fund will be disallowed if
identical (or substantially identical) shares are acquired in a 61-day period
beginning 30 days before and ending 30 days after the date of disposition.
Depending on the residence of the shareholder for tax purposes, distributions
also may be subject to state and local taxes or withholding taxes. Shareholders
should consult their tax advisers as to the tax consequences to them of
ownership of shares of the Funds.
If a shareholder purchases shares shortly before the record date of a dividend
or capital gain distribution, such distribution will be taxable even though it
may represent in whole or in part a return of the purchase price, and the value
of the shares drops by the approximate amount of the distribution.
DISTRIBUTION OPTIONS
Shareholders should specify on their account application how they wish to
receive distributions. If no election is made on the account application, all
distributions will automatically be reinvested.
Each Fund offers four options:
(1) all income dividends and capital gain distributions paid in cash;
(2) income dividends paid in cash with capital gain distributions reinvested;
(3) income dividends reinvested with capital gain distributions paid in cash; or
(4) both distributions automatically reinvested in additional shares of that
Fund.
Any distribution payments returned by the post office as undeliverable will be
reinvested in additional shares of the applicable Fund at the net asset value
next determined.
WITHHOLDING
The Funds may be required to withhold Federal income tax at the rate of 31%
(backup withholding) from dividend, capital gain and redemption payments to
shareholders (a) who fail to furnish the Funds with and to certify the payee's
correct taxpayer identification number or social security number, (b) when the
Internal Revenue Service notifies the Funds that the payee has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect or (c) when the payee fails to certify that he is not
subject to backup withholding. Investors should be sure to provide this
information when they complete the application. Certain foreign accounts may be
subject to U.S. withholding tax on ordinary distributions. Investors should be
sure to provide their place of residence as well as citizenship status when
completing the application.
HOW TO PURCHASE SHARES
The price paid for shares is the net asset value next determined following
receipt of the purchase order in proper form by the applicable Fund or its
authorized service agent or sub-agent. See "Determining Net Asset Value" below.
All purchase orders should be directed to the Funds' transfer agent, FPS
Services, Inc. 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-
0903. The Funds reserve the right to reject any purchase order.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 25
<PAGE>
BUSINESS HOURS
The Funds are open for business each day the New York Stock Exchange ("NYSE") is
open. The NYSE and the Funds will be closed on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
DETERMINING NET ASSET VALUE
Net asset value per share is calculated as of the close of regular trading on
the NYSE, normally 4:00 p.m., Eastern time, each day the NYSE is open for
trading. Net asset value of each Fund is determined by dividing the value of all
portfolio securities, cash, and other assets, including accrued interest and
dividends, owned by the Fund, less all liabilities, including accrued expenses
of the Fund, by the total number of shares of each Fund outstanding.
Short-term securities with original or remaining maturities in excess of 60 days
are valued at the mean of their quoted bid and asked prices. Short-term
securities with 60 days or less to maturity are amortized to maturity based on
their cost to a Fund if acquired within 60 days of maturity or, if already held
by the Fund on the day, based on the value determined on the day. This amortized
cost method will be used unless the Board of Trustees determines that such
method does not represent fair value.
Securities traded on any securities exchange or other market trading system
which reports actual transaction prices on a contemporaneous basis are valued at
the last quoted sales price or, in the absence of closing sales prices on that
day, securities will be valued at the mean between the closing bid and asked
price. Other readily marketable securities are valued at the mean between the
closing bid and asked prices. A Fund may utilize the services of one or more
pricing services to assist it in valuing the Fund's securities. Illiquid
securities and other securities and assets for which market quotations are not
readily available are valued at "fair value", as determined in good faith by or
under the direction of the Board of Trustees of the Fund holding such
securities.
SHARE CERTIFICATES
Share certificates representing shares of a Fund will be delivered to
shareholders only upon written request.
THROUGH AN AUTHORIZED BROKER-DEALER OR INVESTMENT ADVISER
Shares of the Funds may also be purchased through an investor's broker-dealer or
investment adviser. The broker-dealer must be a member in good standing with the
NASD and have entered into a selling agreement with the Funds' distributor, MJW.
Investment advisers must be registered under federal securities laws.
Transactions in Fund shares made through an investor's broker-dealer or
investment adviser may be subject to charges imposed by the dealer or investment
adviser, who may also impose higher initial or additional amounts for investment
than those established by the Funds. In those situations, the investor's
broker-dealer or investment adviser is responsible for forwarding payment or
arranging for payment promptly. The Funds reserve the right to cancel any
purchase order for which payment has not been received by the third business day
following receipt of the purchase order. Telephone purchase orders will only be
accepted from financial institutions which have been approved previously by the
Funds or the Adviser.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 26
<PAGE>
NEW ACCOUNTS
An account application must be completed and signed for each new account opened,
regardless of the method chosen for making the initial investment.
INITIAL INVESTMENT
The minimum initial investment for each Fund is $1,000. Payment may be made by
check or moneyorder payable to "THIRD AVENUE VALUE FUND," "THIRD AVENUE
SMALL-CAP VALUE FUND" or "THIRD AVENUE HIGH YIELD FUND."
BY MAIL
THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE FUND or
THIRD AVENUE HIGH YIELD FUND
c/o FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903.
Checks will be accepted if drawn in U.S. currency on a domestic bank. Checks
drawn against a non-U.S. bank may be subject to collection delays and will be
accepted only upon actual receipt of the funds by the transfer agent, FPS. The
Funds will not accept a check endorsed over by a third-party. A charge (minimum
of $20) will be imposed if any check used for the purchase of Fund shares is
returned unpaid. Investors who purchase Fund shares by check or money order may
not receive redemption proceeds until there is reasonable belief that the check
has cleared, which may take up to fifteen calendar days after payment has been
received.
BY WIRE
Prior to sending wire instructions, notify FPS at (800) 443-1021, Option 2 to
insure proper credit to the shareholder's account. Direct shareholder's bank to
wire funds as follows:
UMB Bank KC NA
Kansas City, MO
ABA #: 10-10-00695
For FPS #: 98-7037-071-9
For further credit to: THIRD AVENUE VALUE FUND, THIRD AVENUE SMALL-CAP
VALUE FUND or THIRD AVENUE HIGH YIELD FUND (Shareholder's name, exact
account title and account number)
Heavy wire traffic over the Federal Reserve System may delay the arrival of
purchase orders made by wire.
ADDITIONAL INVESTMENTS BY MAIL
Subsequent investments should be accompanied by the "payment stub" attached to
the shareholder's account statement and may be made in minimum amounts of $1,000
and mailed to:
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 27
<PAGE>
THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE FUND or
THIRD AVENUE HIGH YIELD FUND
c/o FPS Services, Inc.
P.O. Box 412797
Kansas City, MO 64141-2797
At the sole discretion of the Adviser, the initial and any additional investment
minimums may be waived in new accounts opened by existing shareholders for
additional family members and by officers, trustees or employees of the Funds,
MJW, the Adviser or any affiliate of the Adviser (including their spouses and
children under age 21.)
ADDITIONAL INVESTMENTS THROUGH THE AUTOMATIC INVESTMENT PLAN
This Plan provides shareholders with a convenient method by which they may
automatically make subsequent monthly purchases. A predetermined amount,
selected by the shareholder, will be deducted from the shareholder's checking
account. Subsequent investments under this Plan are subject to a monthly minimum
of $200. The Automatic Investment Plan option may be elected on the application.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds' Individual Retirement Account ("IRA") application and additional
forms required may be obtained by contacting FPS at (800) 443-1021, Option 1.
For IRA's, the initial minimum is $500 and the minimum subsequent contribution
is $200. The account will be maintained by the custodian, Semper Trust Company,
which currently charges an annual maintenance fee of $12. Fees are subject to
change by Semper Trust Company.
OTHER RETIREMENT PLANS
Investors who are self-employed may purchase shares of the Funds through
tax-deductible contributions to retirement plans for self-employed persons,
known as Keogh or H.R. 10 plans. However, the Funds do not currently act as a
sponsor or administrator for such plans. Fund shares may also be purchased for
other types of qualified pension or profit sharing plans which are
employer-sponsored, including deferred compensation or salary reduction plans
known as "401(k) Plans", which give participants the right to defer portions of
their compensation for investment on a tax-deferred basis until distributions
are made from the plan.
HOW TO REDEEM SHARES
Shareholders may redeem shares on any business day during which the NYSE is
open. All redemption requests should be directed to FPS. Fund shares will be
redeemed at the net asset value next calculated after such request is received
by FPS in proper form. Redemption requests that contain a restriction as to the
time, date or share price at which the redemption is to be effective will not be
honored.
BY MAIL
Send a written request, together with any share certificates that have been
issued, to:
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 28
<PAGE>
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Written redemption requests, stock powers and any share certificates issued must
be submitted and signed exactly as the account is registered. Such requests
generally require a signature guarantee and additional documents. See "Signature
Guarantees/Other Documents."
TELEPHONE REDEMPTION SERVICE
Shareholders who wish to redeem shares by telephone may elect this service on
the application. Such shareholders may thereafter redeem unissued shares valued
at not less than $1,000 on any business day by calling FPS at (800) 443-1021,
Option 2, prior to 4:00 p.m. Eastern time.
The Funds and FPS will not be liable for following telephone instructions
reasonably believed to be genuine. In this regard, FPS will require personal
identification information before accepting a telephone redemption order. If the
transfer agent fails to use reasonable procedures, the Funds or FPS might be
liable for losses due to fraudulent instructions.
Shareholders who did not previously elect the Telephone Redemption Service on
their application, or who wish to change any information previously provided,
including the address of record or the bank to which redemption proceeds are to
be wired, must submit a signature guaranteed letter of instructions. See
"Signature Guarantees/Other Documents."
FEES
There is no charge for redemption of shares tendered directly to FPS, except as
described below under "Early Redemption Fee." FPS currently charges a wire fee
of $9 for payment of redemption proceeds by federal funds. FPS will
automatically deduct the wire fee from the redemption proceeds. Broker-dealers
handling redemption transactions generally will charge a service fee.
REDEMPTION WITHOUT NOTICE
The Funds have the right, at any time and without prior notice to a shareholder,
to redeem shares held in any account registered in the name of such shareholder
at current net asset value, if and to the extent that such redemption is
necessary to reimburse the Funds for any loss sustained by reason of the failure
of such shareholder to make full payment for shares of the Funds previously
purchased or subscribed for by such shareholder.
ACCOUNT MINIMUM
A shareholder selling a partial amount of shares must leave at least $500 worth
of shares to keep the account open, or in the case of an IRA account, at least
$200. The Funds may also, upon 30 days prior written notice to a shareholder,
redeem shares in any account, other than an IRA account, containing shares
currently having an aggregate net asset value, not attributed to market
fluctuations, of less than $500.
PAYMENT OF REDEMPTION PROCEEDS
A Fund will usually make payment for redemptions of Fund shares within one
business day, but not later than seven calendar days after receipt of such
redemption requests. However, if the Fund has
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 29
<PAGE>
not collected the purchase price of the shares being redeemed, the redemption
will not be processed until such collection has been completed.
Redemption of recently purchased Fund shares that have been paid for by check
may be delayed until the Fund has a reasonable belief that the check has
cleared, which may take up to fifteen calendar days after payment of the
purchase. Investors who anticipate that they may wish to redeem their shares
before fifteen calendar days are advised to pay for their shares by federal
funds wire.
WIRED PROCEEDS
In the case of redemption proceeds that are wired to a shareholder's bank,
payment will be transmitted only on days that commercial banks are open for
business and only to the bank and account previously authorized on the
application or shareholder's signature guaranteed letter of instruction. Neither
the Funds nor FPS will be responsible for any delays in wired redemption
proceeds due to heavy wire traffic over the Federal Reserve System.
SIGNATURE GUARANTEES/OTHER DOCUMENTS
Signatures on any (1) request for redemption, payable to the registered
shareholder involving $5,000 or more, (2) redemption proceeds payable to and/or
mailed to other than the registered shareholder, or (3) requests to transfer
shares, must be guaranteed by an "eligible guarantor institution" as such term
is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, which
includes certain banks, brokers, dealers, credit unions, securities exchanges
and associations, clearing agencies and savings associations. A notary public is
not an acceptable guarantor. ADDITIONAL DOCUMENTS MAY BE REQUIRED WHEN SHARES
ARE REGISTERED IN THE NAME OF A CORPORATION, PARTNERSHIP, ASSOCIATION, AGENT,
FIDUCIARY, TRUST, ESTATE OR OTHER ORGANIZATION. Additional tax documents may
also be required in the case of redemptions from IRA accounts. For further
information, call FPS toll free at (800) 443-1021, Option 2.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders owning or purchasing shares of the Funds having a current value of
at least $10,000 may participate in a Systematic Withdrawal Plan, which provides
for automatic redemption of at least $100 monthly, quarterly, semi-annually, or
annually. Shareholders may establish a Systematic Withdrawal Plan by sending a
letter to FPS. Notice of all changes concerning the Systematic Withdrawal Plan
must be received by FPS at least two weeks prior to the next scheduled payment.
Further information regarding the Systematic Withdrawal Plan and its
requirements can be obtained by contacting FPS at (800) 443-1021, Option 2.
EARLY REDEMPTION FEE
With respect to THIRD AVENUE HIGH YIELD FUND, upon the redemption or exchange of
shares held less than one year, a fee of 1% of the current net asset value of
the shares will be assessed and retained by the Fund for the benefit of the
remaining shareholders. This fee is intended to encourage long-term investment
in the Fund, to avoid transaction and other expenses caused by early
redemptions, and to facilitate portfolio management. The fee is not a deferred
sales charge, is not a commission paid to the Adviser, and does not benefit the
Adviser in any way. The Fund reserves the right to modify the terms of or
terminate this fee at any time. The fee applies to redemptions from the Fund and
exchanges to other THIRD AVENUE funds, but not to dividend or capital gains
distributions which have been automatically reinvested in the Fund. The fee is
applied to the shares
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 30
<PAGE>
being redeemed or exchanged in the order in which they were purchased. For the
foregoing purposes and without regard to the shares actually redeemed, shares
will be treated as redeemed as follows: first, reinvestment shares; second,
purchased shares held one year or more; and third, purchased shares held for
less than one year.
HOW TO EXCHANGE SHARES
INTER-FUND EXCHANGE PRIVILEGE
Shareholders may, in writing or by telephone, exchange shares of one Fund of the
Trust for shares of the other Fund at net asset value without the payment of any
fee or charge, except as noted below under "Early Redemption Fee." An exchange
is considered a sale of shares and may result in capital gain or loss for
federal income tax purposes. Shareholders who wish to use this exchange
privilege may elect the service on the account application.
If FPS receives exchange instructions in writing or by telephone at (800)
443-1021, in good order by the valuation time on any business day, the exchange
will be effected that day. For an exchange request to be in good order, it must
include the shareholder's name as it appears on the account, the account number,
the amount to be exchanged, the names of the Funds from which and to which the
exchange is to be made and a signature guarantee as may be required. A written
request for an exchange in excess of $5,000 must be accompanied by a signature
guarantee as described under "Signature Guarantees/Other Documents."
MONEY MARKET EXCHANGE PRIVILEGE
Shareholders may redeem any or all shares of the Funds and automatically invest
the proceeds through the Third Avenue Money Market Fund account, in the Cash
Account Trust Money Market Portfolio, an unaffiliated, separately managed, money
market mutual fund. The exchange privilege with the money market portfolio does
not constitute an offering or recommendation of the shares of the money market
portfolio by the Funds or the Distributor. The Adviser is compensated for
administrative services it performs with respect to the money market portfolio.
Shareholders who wish to use this exchange privilege may elect the service on
the account application. The Funds' shareholders should not order shares of the
Money Market Fund without first receiving the current prospectus for the Money
Market Fund. By giving exchange instructions, a shareholder will be deemed to
have represented that he has received the current prospectus for the Money
Market Fund. Exchanges of Fund shares are subject to the other requirements of
the Money Market Fund into which the exchange is made.
The Funds reserve the right to reject any exchange request or otherwise modify,
restrict or terminate the exchange privilege at any time upon at least 60 days
prior written notice.
Shareholders should be aware that an exchange is treated for federal income tax
purposes as a sale and a purchase of shares, which may result in realization of
a gain or loss.
EARLY REDEMPTION FEE
See "How to Redeem Shares - Early Redemption Fee" for an explanation of a fee
that might be applicable upon the exchange of shares of THIRD AVENUE HIGH YIELD
FUND held for less than one year.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 31
<PAGE>
SHAREHOLDER SERVICES
Each Fund provides you with helpful services and information about your account.
o A statement after every transaction.
o An annual account statement reflecting all transactions for the year.
o Tax information will be mailed by January 31 of each year, a copy of
which will also be filed with the Internal Revenue Service.
o The financial statements of the Fund with a summary of portfolio
composition and performance will be mailed at least twice a year.
o The Funds intend to continue to mail to shareholders quarterly
reports containing the Portfolio Manager's letter and a summary of
portfolio changes, composition and performance.
The Funds pay for shareholder services but not for special services such as
requests for historical transcripts of accounts. The Funds' transfer agent, FPS,
currently charges $10 per year for duplication of historical account activity
records, with a maximum fee of $100.
TELEPHONE INFORMATION
YOUR ACCOUNT: Questions about your account,
purchases, redemptions and
distributions can be answered by FPS
Monday through Friday, 9:00 AM to
7:00 PM (Eastern time). Call toll
free (800) 443-1021, Option 2 or
(610) 239-4600.
THE FUNDS: Questions about the Funds can be
answered by the Funds' telephone
representatives Monday through
Friday 9:00 AM to 5:00 PM (Eastern
time). Call toll free (800) 443-1021
or (212) 888-6685.
TO REDEEM SHARES: To redeem shares by telephone, call
FPS prior to 4:00 PM on the day you
wish to redeem, toll free (800)
443-1021, Option 2, or (610) 239-4600.
TRANSFER OF OWNERSHIP
A shareholder may transfer Fund shares or change the name or form in which the
shares are registered by writing to FPS. The letter of instruction must clearly
identify the account number, name(s) and number of shares to be transferred, and
provide a certified tax identification number by way of a completed new account
application or W-9 form, and include the signature(s) of all registered owners,
and any share certificates issued. The signature(s) on the transfer instructions
or any stock power must be guaranteed as described under "Signature
Guarantees/Other Documents."
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 32
<PAGE>
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
The ratings are based on current information furnished by the issuer or obtained
by Standard & Poor's from other sources it considers reliable. Standard & Poor's
does not perform any audit in connection with any rating and may, on occasion,
rely on unaudited financial information. The ratings may be changed, suspended
or withdrawn as a result of changes in, or unavailability of, such information
or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obliger as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation.
II. Nature and provisions of the obligation.
III. Protection afforded by, and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA - Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, CCC, CC, C - Debt rated "BB", "B", "CCC", "CC", and "C" is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. "BB" indicates the lowest degree of speculation
and "C" the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
BB - Debt rate "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "BBB" rating.
B - Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The "B"
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied "BB" or "BB-" rating.
CCC - Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and
economic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "B" or
"B-" rating.
CC - The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 33
<PAGE>
C - The rating "C" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
C1 - The rating "C1" is reserved for income bonds on which no interest
is being paid.
D - Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the
date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risk appear
somewhat greater than the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements:
their future cannot be considered as well-assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing. Moody's applies numerical
modifiers: 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates
that the security ranks in the higher end of its generic rating
category, the modifier 2 indicates a mid-range ranking, and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 34
<PAGE>
BOARD OF TRUSTEES
Phyllis W. Beck
Gerald Hellerman
Marvin Moser
Myron M. Sheinfeld
Martin Shubik
Charles C. Walden
Barbara Whitman
Martin J. Whitman
OFFICERS
Martin J. Whitman
Chairman, Chief Executive Officer, President
David M. Barse
Chief Operating Officer, Executive Vice President
Michael Carney
Chief Financial Officer, Treasurer
Kerri Weltz, Assistant Treasurer
Ian M. Kirschner, General Counsel and Secretary
INVESTMENT ADVISER
EQSF Advisers, Inc.
767 Third Avenue
New York, NY 10017-2023
DISTRIBUTOR
M.J. Whitman, Inc.
767 Third Avenue
New York, NY 10017-2023
TRANSFER AGENT
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(610) 239-4600
(800) 443-1021 (toll-free)
CUSTODIANS
THIRD AVENUE VALUE FUND THIRD AVENUE SMALL-CAP VALUE FUND
North American Trust Company THIRD AVENUE HIGH YIELD FUND
525 B Street Custodial Trust Company
San Diego, CA 92101-4492 101 Carnegie Center
Princeton, NJ 08540-6231
767 THIRD AVENUE
NEW YORK, NY 10017-2023
Phone (212) 888-6685
Toll Free (800) 443-1021
www.mjwhitman.com
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 35
<PAGE>
(LOGO)
STATEMENT OF
ADDITIONAL
INFORMATION
------------
February 15, 1998
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 1
<PAGE>
(LOGO)
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 15, 1998
THIRD AVENUE TRUST
THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE FUND
THIRD AVENUE HIGH YIELD FUND
This Statement of Additional Information is in addition to and serves to expand
and supplement the current Prospectus of Third Avenue Trust (the "Trust"), which
currently consists of three separate investment series: THIRD AVENUE VALUE FUND,
THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND (each a
"Fund" and collectively, the "Funds").
This Statement of Additional Information, dated February 15, 1998, is not a
Prospectus and should be read in conjunction with the Prospectus dated February
15, 1998. A copy of the Prospectus may be obtained without charge by contacting
the Funds at 767 Third Avenue, New York, NY 10017-2023, (800) 443-1021 or (212)
888-6685.
TABLE OF CONTENTS
GENERAL INFORMATION
INVESTMENT POLICIES
Loans and Other Direct Debt Instruments
Short Sales
INVESTMENT RESTRICTIONS
MANAGEMENT OF THE TRUST
COMPENSATION TABLE
INVESTMENT ADVISER
INVESTMENT ADVISORY AGREEMENT
ADMINISTRATOR
DISTRIBUTOR
PORTFOLIO TRADING PRACTICES
PURCHASE ORDERS
REDEMPTION OF SHARES
Redemption in Kind
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
General
Distributions
Redemption of Shares
Backup Withholding
PERFORMANCE INFORMATION
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 2
<PAGE>
GENERAL INFORMATION
Third Avenue Trust (the "Trust") was organized as a business trust under the
laws of the state of Delaware pursuant to a Trust Instrument dated October 31,
1996. At the close of business on March 31, 1997, shareholders of Third Avenue
Value Fund, Inc. ("Third Avenue Maryland"), a Maryland corporation which was
incorporated on November 27, 1989 and began operations on October 9, 1990,
became shareholders of THIRD AVENUE VALUE FUND, a series of the Trust, pursuant
to a merger agreement which was approved by a majority of Third Avenue
Maryland's shareholders on December 13, 1996. Upon this merger, all assets,
privileges, powers, franchises, liabilities and obligations of Third Avenue
Maryland were assumed by the Trust. Except as noted herein, all information
about THIRD AVENUE VALUE FUND or the Trust, as applicable, includes information
about its predecessor, Third Avenue Maryland.
INVESTMENT POLICIES
LOANS AND OTHER DIRECT DEBT INSTRUMENTS
THIRD AVENUE SMALL-CAP VALUE FUND may invest in loans and other direct debt
instruments but currently does not intend to do so except to the extent it has
excess cash or for temporary defensive purposes. THIRD AVENUE HIGH YIELD FUND
expects to invest in loans and other direct debt instruments.
SHORT SALES
Both THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND may, but
currently do not intend to, engage in short sales. In a short sale transaction,
the Fund sells a security it does not own in anticipation of a decline in the
market value of the security.
INVESTMENT RESTRICTIONS
For the benefit of shareholders, each Fund has adopted the following
restrictions, which are fundamental policies and cannot be changed without the
approval of a majority of such Fund's outstanding voting securities. (1)
The following investment restrictions apply to each of THIRD AVENUE VALUE FUND,
THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND. No Fund may:
1. Borrow money or pledge, mortgage or hypothecate any of its assets
except that each Fund may borrow on a secured or unsecured basis
as a temporary measure for extraordinary or emergency purposes.
Such temporary borrowing may not exceed 5% of the value of such
Fund's total assets when the borrowing is made.
2. Act as underwriter of securities issued by other persons, except
to the extent that, in connection with the disposition of
portfolio securities, it may technically be deemed to be an
underwriter under certain securities laws.
3. Invest in interests in oil, gas, or other mineral exploration or
development programs, although it may invest in the marketable
securities of companies which invest in or sponsor such programs.
4. Issue any senior security (as defined in the Investment Company
Act of 1940, as amended) (the "1940 Act"). Borrowings permitted
by Item 1 above are not senior securities.
5. Invest 25% or more of the value of its total assets in the
securities (other than Government Securities or the securities of
other regulated investment companies) of any one issuer, or of
two or more issuers which the Fund controls and which are
determined to be engaged in the same industry or similar trades
or businesses or related trades or businesses.
6. Invest 25% or more of the value of its total assets in any one
industry.
- ----------------
(1) As used in this Statement of Additional Information as to any matter
requiring shareholder approval, the phrase "majority of the outstanding
securities" means the vote at a meeting of (i) 67% or more of the shares present
or represented, if the holders of more than 50% of the outstanding voting
securities are present in person or represented by proxy, or (ii) more than 50%
of the outstanding voting securities, whichever is less.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 3
<PAGE>
The following investment restrictions apply only to THIRD AVENUE VALUE FUND. The
Fund may not:
1. Make short sales of securities or maintain a short position.
2. Buy or sell commodities or commodity contracts, futures contracts
or real estate or interests in real estate, although it may
purchase and sell securities which are secured by real estate and
securities of companies which invest or deal in real estate.
3. Invest in securities of other investment companies if the Fund,
after such purchase or acquisition owns, in the aggregate, (i)
more than 3% of the total outstanding voting stock of the
acquired company; (ii) securities issued by the acquired company
having an aggregate value in excess of 5% of the value of the
total assets of the Fund, or (iii) securities issued by the
acquired company and all other investment companies (other than
treasury stock of the Fund) having an aggregate value in excess
of 10% of the value of the total assets of the Fund.
4. Participate on a joint or joint and several basis in any trading
account in securities.
5. Make loans, except through (i) the purchase of bonds, debentures,
commercial paper, corporate notes, and similar evidences of
indebtedness of a type commonly sold to financial institutions,
and (ii) repurchase agreements . The purchase of a portion of an
issue of securities described under (i) above distributed
publicly, whether or not the purchase is made on the original
issuance, is not considered the making of a loan.
Each Fund is required to comply with the above fundamental investment
restrictions applicable to it only at the time the relevant action is taken. A
Fund is not required to liquidate an existing position solely because a change
in the market value of an investment or a change in the value of the Fund's net
or total assets causes it not to comply with the restriction at a future date. A
Fund will not purchase any portfolio securities while any borrowing exceeds 5%
of its total assets.
MANAGEMENT OF THE TRUST
Trustees and officers of the Funds, together with information as to their
principal business occupations during at least the last five years, are shown
below. Each trustee who is deemed to be an "interested person" of the Funds, as
defined in the 1940 Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
PHYLLIS W. BECK* 71 Trustee An Associate Judge (1981 to Present) of the Superior
GSB Bldg. Suite 800 Court of Pennsylvania; Trustee or Director of the
City Line & Belmont Ave. Trust or its predecessor since November, 1992.
Bala Cynwyd, PA
19004-1611
GERALD HELLERMAN 60 Trustee Managing Director (8/93 to Present) of Hellerman
10965 Eight Bells Lane Associates, a financial and corporate consulting
Columbia, MD 21044 firm; Chief Financial Analyst (1976 to 7/93) of the
Antitrust Division of U.S. Department of Justice;
Trustee or Director of the Trust or its predecessor
since September 1993.
</TABLE>
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
MARVIN MOSER, M.D. 74 Trustee Trustee (1992 to Present) of the Trudeau Institute,
13 Murray Hill Road a medical research institute; Clinical Professor of
Scarsdale, NY 10583 Medicine (1984 to Present) at Yale University
School of Medicine; Senior Medical Consultant
(1972 to Present) for the National High Blood Pressure
Education Program of the National Heart, Lung and
Blood Institute; Member of the Committee in 1980,
1984, 1988, 1992 and 1996 of the Joint National
Committee on Detection, Evaluation and Treatment of
High Blood Pressure for the National Heart, Lung and
Blood Institute; Director of AMBI Corp. (1997 to
Present); Trustee or Director of the Trust or its
predecessor since November, 1994.
MYRON M. SHEINFELD 67 Trustee Counsel to (12/96 to present) and Attorney and
1001 Fannin St., Suite 3700 Shareholder (1986 to 12/96) of Sheinfeld, Maley & Kay
Houston, TX 77002 Kay P.C., a law firm; Adjunct Professor (1975 to
1991) of the University of Texas Law School; Director
(1984 to 1992) of Equity Strategies Fund, Inc.;
Director (1988 to Present) of Nabors Industries,Inc.,
an international oil drilling contractor; former
Consultant (11/90 to 4/95) to Meyer Hendricks Victor
Osborn & Maledon, a law firm in Phoenix, Arizona; Co-
Editor and Co-Author "Collier on Bankruptcy 15th
Edition Revised" and "Collier on Bankruptcy
Taxation"; Trustee or Director of the Trust or its
predecessor since its inception.
MARTIN SHUBIK 71 Trustee Seymour H. Knox Professor (1975 to Present) of
Yale University Dept. of Mathematical and Institutional Economics, Yale
Economics University; Director (1984 to 4/94) of Equity
Box 2125, Yale Station Strategies Fund, Inc.; Trustee or Director of the
New Haven, CT 06520 Trust or its predecessor since its inception.
</TABLE>
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 5
<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
CHARLES C. WALDEN 53 Trustee Senior Vice-President--Investments (1973 to Present)
Knights of Columbus (Chief Investment Officer) of Knights of Columbus, a
1 Columbus Plaza fraternal benefit society selling life insurance
New Haven, CT 06510 and annuities; Chartered Financial Analyst; Trustee
or Director of the Trust or its predecessor
since May, 1996.
BARBARA WHITMAN* 39 Trustee Registered Securities Representative (11/96 to
767 Third Avenue Present) of M.J. Whitman, Inc.; Director (8/97 to
New York, NY 10017-2023 Present) of Riverside Stage Company, a theater;
Director (4/95 to Present) of EQSF Advisers, Inc.;
House Manager (1/94 to 8/94) of Whiting Auditorium,
a theater; Substitute Teacher (1/92 to 6/93) of
National-Louis University Movement Center, a
university. Trustee of the Trust since September, 1997.
MARTIN J. WHITMAN* 73 Chairman, President (1/91 to Present), Chairman and CEO (3/90
767 Third Avenue Chief to Present) of the Trust; Chairman, CEO (1/1/95 to
New York, NY 10017-2023 Executive Present), President (1/1/95 to 6/29/95) and Chief
Officer, Investment Officer (10/92 to Present) of
President, M.J. Whitman Advisers, Inc., a subsidiary of M.J.
and Trustee Whitman Holding Corp., (MJWHC), a holding company
managing investment subsidiaries and an investment
adviser to private and institutional clients;
Chairman, CEO (1/1/95 to Present) and President
(1/1/95 to 6/29/95) of MJWHC and of M.J. Whitman,
Inc., a subsidiary of MJWHC and the successor
broker-dealer of M.J. Whitman, L.P. (MJWLP), a
Delaware limited partnership which has been
dissolved; Distinguished Management Fellow (1972 to
Present) and Member of the Advisory Board (10/94 to
6/95) of the Yale School of Management at Yale
University; Director and Chairman (8/90 to Present),
President (8/90 to 12/90), CEO (8/96 to Present) and
Chief Investment Officer (12/90 to 8/96) of Danielson
Holding Corporation, and a Director of its
subsidiaries; Director (3/91 to Present) of Nabors
Industries, Inc., an international oil drilling
contractor; Chairman and CEO (4/86 to Present) and
President (1/91 to Present) of EQSF Advisers, Inc.,
investment adviser to the Trust; Director (8/97 to
Present) of Tejon Ranch Co.; President and CEO (10/74
to Present) of Martin J. Whitman & Co., Inc.,
(formerly M.J. Whitman & Co., Inc.), a private
investment company; Trustee or Director of the Trust
or its predecessor since its inception; Chartered
Financial Analyst.
DAVID M. BARSE 35 Executive President, Chief Operating Officer and Director
767 Third Avenue Vice (7/96 to Present) of Danielson Holding Corporation;
New York, NY 10017-2023 President Director (8/96 to Present) of National American
and Chief Insurance Company of California; Executive Vice
Operating President and Director (4/95 to Present) of EQSF
Officer Advisers, Inc.; President (6/95 to Present),
Director, Chief Operating Officer (COO) (1/95 to
Present), Secretary (1/95 to 1/96) and Executive Vice
</TABLE>
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 6
<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
DAVID M. BARSE President (1/95 to 6/95) of MJWHC ; President (6/95
Cont. to Present), Director and COO (1/95 to Present),
Secretary (1/95 to 1/96), Executive Vice President
(1/95 to 6/95) of M.J. Whitman, Inc.; President (6/95
to Present), Director and COO (1/95 to Present),
Executive Vice President (1/95 to 6/95) and Corporate
Counsel (10/92 to 12/95) of M.J. Whitman Advisers,
Inc.; Director (6/97 to Present) of CGA Group, Ltd.;
Director (7/94 to 12/94), Executive Vice President
and Secretary (1/92 to 12/94 of Whitman Securities
Corp.
MICHAEL CARNEY 44 Treasurer, Director, (1/1/95 to Present) Executive Vice
767 Third Avenue Chief President, Chief Financial Officer (6/29/95 to
New York, NY 10017-2023 Financial Present) of MJWHC and of M.J. Whitman, Inc.;
Officer Treasurer, Director (1/1/95 to Present), Executive
(CFO) Vice President (6/29/95 to Present) and CFO (10/92 to
Present) of M.J. Whitman Advisers, Inc.; Treasurer
(12/93 to 4/96) of Longstreet Investment Corp.; CFO
(3/26/93 to 6/95) of Danielson Trust Company; Limited
Partner (1/92 to 12/31/94) of M.J. Whitman, L.P.; CFO
of WHR Management Corporation (8/91 to Present),
Danielson Holding Corporation (8/90 to Present) and
Carl Marks Strategic Investments, L.P., an investment
partnership (1/90 to 4/94); CFO (1/90 to 4/94) of
Carl Marks & Co., Inc., a broker-dealer; CFO (8/89 to
12/90) of Whitman Advisors, Ltd.; CFO and Treasurer
(5/89 to 4/94) of Equity Strategies Fund, Inc.; CFO
and Treasurer (5/89 to Present) of EQSF Advisers,
Inc.; CFO (5/89 to Present) of Whitman Heffernan
Rhein & Co., Inc., Martin J. Whitman & Co., Inc.,
(formerly M.J. Whitman & Co., Inc.) and WHR
Management Company, L.P., a firm managing investment
partnerships.
</TABLE>
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 7
<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
KERRI WELTZ 30 Assistant Assistant Treasurer (5/96 to Present), Controller
767 Third Avenue Treasurer (1/96 to Present), Assistant Controller (1/93 to
New York, NY 10017-2023 12/95) and Staff Accountant (1/92 to 12/92) for the
Trust; Controller (1/96 to Present), Assistant
Controller (1/93 to 12/95), and Staff Accountant
(1/92 to 12/92) of EQSF Advisers, Inc.; Controller
(8/96 to Present), of Danielson Holding Corp.;
Controller (5/96 to Present) and Assistant Controller
(1/95 to 5/96) of Whitman Heffernan & Rhein Workout
Fund II, L.P. and Whitman Heffernan & Rhein Workout
Fund II-A, L.P.; Controller (5/96 to present) of WHR
Management Corp.; Controller (5/96 to present),
Assistant Controller (1/93 to 5/96) and Staff
Accountant (5/91 to 12/92), of Whitman Heffernan
Rhein & Co., Inc.; Controller (5/96 to Present) of
Martin J Whitman & Co., Inc.; Assistant Controller
(10/94 to 4/96) of Longstreet Investment Corp and
Emerald Investment Partners, L.P.; Assistant
Controller (1/93 to 4/94) and Staff Accountant (1/92
to 12/92) of Equity Strategies Fund, Inc.; Payroll
manager (5/91 to 12/93) of M.J. Whitman, L.P.
IAN M. KIRSCHNER 42 General General Counsel and Secretary (8/96 to Present) of
767 Third Avenue Counsel and Danielson Holding Corporation; General Counsel
New York, NY 10017-2023 Secretary and Secretary (1/96 to Present) of MJWHC , M.J.
Whitman, Inc., and M. J. Whitman Advisers, Inc.;
General Counsel and Secretary (1/97 to Present) of
the Trust; General Counsel and Secretary (1/97 to
Present) of EQSF Advisers, Inc.; Vice-President,
General Counsel and Secretary (2/93 to 6/95) of 2 I
Inc.; Of Counsel (10/90 to 10/92) to Morgan, Lewis &
Bockius.
</TABLE>
The Trust does not pay any fees to its officers for their services as such, but
does pay Trustees who are not affiliated with the Investment Adviser a fee of
$1,500 per Fund for each meeting of the Board of Trustees that they attend, in
addition to reimbursing all Trustees for travel and incidental expenses incurred
by them in connection with their attendance at Board meetings. The Trust also
pays the non-interested Trustees an annual stipend of $ 2,000 per Fund in
January of each year for the previous year's service. The Trust paid Trustees
in the aggregate, $76,550 in such fees and expenses for the year ended October
31, 1997. Trustees do not receive any pension or retirement benefits.
For the fiscal year ended October 31, 1997, the aggregate amount of compensation
paid to each Trustee by the Trust is listed below. No compensation was paid to
the Trustees with respect to THIRD AVENUE HIGH YIELD FUND because the Fund had
not commenced operations as of that date.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 8
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM REGISTRANT FOR FISCAL REGISTRANT AND FUND COMPLEX
NAME AND POSITION HELD YEAR ENDED OCTOBER 31, 1997* PAID TO TRUSTEES
- ---------------------- ---------------------------- ---------------------------
<S> <C> <C>
Phyllis W. Beck, Trustee $ 0 $ 0
Tibor Fabian, Trustee** $ 11,700 $ 11,700
Gerald Hellerman, Trustee $ 11,700 $ 11,700
Marvin Moser, M.D., Trustee $ 11,700 $ 11,700
Donald Rappaport, Trustee*** $ 8,700 $ 8,700
Myron M. Sheinfeld, Trustee $ 11,700 $ 11,700
Martin Shubik, Trustee $ 7,200 $ 7,200
Charles C. Walden, Trustee $ 11,700 $ 11,700
Barbara Whitman, Trustee $ 0 $ 0
Martin J. Whitman, Chairman/ $ 0 $ 0
Chief Executive Officer
and President
</TABLE>
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $11,550 for all Trustees as a group. For the fiscal year
ended October 31, 1998, it is anticipated that in addition to the
compensation payable to the Trustees of THIRD AVENUE VALUE FUND and THIRD
AVENUE SMALL-CAP VALUE FUND, the Trustees of THIRD AVENUE HIGH YIELD FUND
also shall receive compensation in an estimated amount equal to $4,500 per
Trustee and THIRD AVENUE HIGH YIELD FUND will reimburse the Trustees for
approximately $4,000 in expenses in the aggregate (such estimated amounts
are based upon the aggregate compensation received and expenses incurred by
the Trustees of THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL CAP VALUE
FUND for the fiscal year ended October 31, 1997).
** Mr. Fabian passed away on December 6, 1997.
*** Mr. Rappaport resigned as a Trustee on May 8, 1997.
The following persons beneficially own of record or are known to beneficially
own of record 5 percent or more of the outstanding common stock of THIRD AVENUE
VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND as set forth below as of
December 15, 1997. THIRD AVENUE HIGH YIELD FUND had not commenced operations as
of December 15, 1997.
THIRD AVENUE VALUE FUND
PERCENTAGE OF
NAME AND ADDRESS THIRD AVENUE VALUE FUND NUMBER OF SHARES
- ---------------- ----------------------- ----------------
Charles Schwab & Co., Inc.2 39.81% 21,168,513
101 Montgomery Street
San Francisco, CA 94104
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 9
<PAGE>
National Financial Services Corp.3 11.55% 6,144,692
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Donaldson Lufkin & Jenrette Securities
Corporation3 11.24% 5,976,224
Mutual Funds Dept. 5th Floor
P.O. Box 2052
Jersey City, NJ 07303
THIRD AVENUE SMALL-CAP VALUE FUND
PERCENTAGE OF
THIRD AVENUE
NAME AND ADDRESS SMALL-CAP VALUE FUND NUMBER OF SHARES
- ---------------- -------------------- ----------------
Charles Schwab & Co., Inc.2 33.36% 3,040,465
101 Montgomery Street
San Francisco, CA 94104
National Financial Services Corp.3 20.75% 1,891,356
P.O. Box 3908
Church Street Station
New York, NY 10008-39083
Bear Stearns Securities Corp.4 11.96% 1,090,004
One Metrotech Center North
Brooklyn, NY 11201-3859
Donaldson Lufkin & Jenrette Securities
Corporation3 5.98% 544,941
Mutual Funds Dept. 5th Floor
P.O. Box 2052
Jersey City, NJ 07303
- ----------
2 Charles Schwab & Co., Inc. is a discount broker-dealer acting as a nominee
for registered investment advisers whose clients have purchased shares of
the Fund, and also holds shares for the benefit of its clients.
3 Donaldson Lufkin & Jenrette Securities Corporation and National Financial
Services Corp. are broker-dealers holding shares for the benefit of their
respective clients.
4 Bear Stearns Securities Corp. is a broker-dealer holding shares for the
benefit of its clients, including, at such time, clients of MJW, the Funds'
affiliated broker-dealer, principal underwriter and distributor.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 10
<PAGE>
INVESTMENT ADVISER
The Investment Adviser to the Trust is EQSF Advisers, Inc. (the "Adviser").
Martin J. Whitman is a controlling person of the Adviser. His control is based
upon an irrevocable proxy signed by his children, who own in the aggregate 75%
of the outstanding common stock of the Adviser, pursuant to a shareholders'
agreement entered into by and among them. Mr. Whitman is Chairman, Chief
Executive Officer and President of the Adviser.
The following individuals are affiliated persons of the Trust and Adviser:
<TABLE>
<CAPTION>
<S> <C> <C>
CAPACITY WITH FUNDS CAPACITY WITH ADVISER
Martin J. Whitman Chairman, Chief Executive Chairman, Chief Executive
Officer and President Officer and President
David M. Barse Chief Operating Officer, Chief Operating Officer,
Executive Vice President Executive Vice President
Michael Carney Treasurer, Chief Financial Officer Treasurer, Chief Financial Officer
Ian M. Kirschner General Counsel and Secretary General Counsel and Secretary
Kerri Weltz Assistant Treasurer Assistant Treasurer
Barbara Whitman Trustee Director
</TABLE>
INVESTMENT ADVISORY AGREEMENT
The investment advisory services of the Adviser are furnished to each of THIRD
AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND pursuant to an
Investment Advisory Agreement dated February 28, 1997 and to THIRD AVENUE HIGH
YIELD FUND pursuant to an Investment Advisory Agreement dated February , 1998
(the "Investment Advisory Agreement"), each providing for an initial term of two
years. The Investment Advisory Agreement of THIRD AVENUE VALUE FUND and THIRD
AVENUE SMALL-CAP VALUE FUND were initially approved for each Fund on February
11, 1997 and the Investment Advisory Agreement of THIRD AVENUE HIGH YIELD FUND
was initially approved on February , 1998, in each case by the Board of Trustees
of the Trust, including a majority of the Trustees who are not "interested
persons" as defined in the 1940 Act, and by the sole shareholder of each Fund on
the same date. The Adviser has provided investment advisory services to the
Funds since their inception.
After the initial two-year term, each Investment Advisory Agreement will
continue from year to year if approved annually by the Board of Trustees of the
Trust or a majority of the outstanding voting securities of the Trust, and by
vote of a majority of the Trustees who are not parties to the Investment
Advisory Agreements or "interested persons" (as defined in the 1940 Act) of such
parties, cast in person at a meeting called for the purpose of voting on such
approval. The Investment Advisory Agreements may be terminated at any time
without penalty, upon 60 days written notice by either party to the other, and
will automatically be terminated upon any assignment thereof.
Under the Investment Advisory Agreements, the Adviser supervises and assists in
the management of the Trust, provides investment research and research
evaluation and makes and executes recommendations for the purchase and sale of
securities. The Adviser furnishes at its expense all necessary office equipment
and personnel necessary for performance of the obligations of the Adviser and
pays the compensation of officers of the Trust. However, in the event that any
person serving as an officer of the Trust has both executive duties attendant to
such offices and administrative duties to the Trust apart from such office, the
Adviser does not pay any amount relating to the performance of such
administrative duties.
All other expenses incurred in the operation of the Funds and the continuous
offering of its shares, including taxes, fees and commissions, bookkeeping
expenses, fund employees, expenses of redemption of shares, charges of
administrators, custodians and transfer agents, auditing and legal expenses,
fees of outside Trustees and rent are borne by the Funds. For the investment
advisory services provided by the Adviser, each Fund pays the Adviser a monthly
fee of 1/12 of .90% (an annual rate of .90%) on the average daily net assets in
the Fund during the prior month. During the fiscal years ended October 31, 1997,
1996 and 1995, THIRD AVENUE VALUE FUND paid investment advisory fees to the
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 11
<PAGE>
Adviser of $9,303,435, $3,976,741 and $1,926,686 , respectively. During the
period from inception to October 31, 1997, THIRD AVENUE SMALL-CAP VALUE FUND
paid investment advisory fees to the Adviser of $252,298.
ADMINISTRATOR
The Funds have entered into an Administration Services Agreement (the
"Administration Agreement") with FPS Services, Inc. ("FPS"). The Administration
Agreement provides that FPS shall provide all administrative services to each
Fund other than those relating to the investment portfolio of the Funds, the
distribution of the Funds and the maintenance of each Fund's financial records.
The Administration Agreement has an initial two year term and may be terminated
at any time (effective after such initial term) without penalty, upon 180 days
written notice by either party to the other, and will automatically be
terminated upon any assignment thereof.
DISTRIBUTOR
The distribution services of the Distributor are furnished to each Fund pursuant
to a Distribution Agreement (the "Distribution Agreement") dated February 28,
1997 in the case of THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE
FUND, and February , 1998 in the case of THIRD AVENUE HIGH YIELD FUND. Under
such agreements, the Distributor shall (1) assist in the sale and distribution
of each Fund's shares; and (2) qualify and maintain the qualification as a
broker-dealer in such states where shares of the Funds are registered for sale.
Each Distribution Agreement will remain in effect provided that it is approved
at least annually by the Board of Trustees or by a majority of the Fund's
outstanding shares, and in either case, by a majority of the Trustees who are
not parties to the Distribution Agreement or interested persons of any such
party. Each Distribution Agreement terminates automatically if it is assigned
and may be terminated without penalty by either party on not less than 60 days
written notice.
CUSTODIAN
North American Trust Company ("North American"), 525 B Street, San Diego, CA
92101-4492 serves as custodian for THIRD AVENUE VALUE FUND and Custodial Trust
Company, 101 Carnegie Center, Princeton, NJ 08540-6231, serves as custodian for
THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE HIGH YIELD FUND pursuant to
custodian agreements. Under such agreements, each Custodian (1) maintains a
separate account or accounts in the name of the Fund for which it is Custodian;
(2) holds and transfers portfolio securities on account of such Fund; (3)
accepts receipts and makes disbursements of money on behalf of such Fund; (4)
collects and receives all income and other payments and distributions on account
of such Fund's securities; and (5) makes periodic reports to the Board of
Trustees concerning such Fund's operations.
PORTFOLIO TRADING PRACTICES
Under the Investment Advisory Agreement between the Trust and the Adviser, the
Adviser has the responsibility of selecting brokers and dealers. The Adviser
must place portfolio transactions with brokers and dealers who render
satisfactory service in the execution of orders at the most favorable prices and
at reasonable commission rates, but has discretion to pay a greater amount if
it, in good faith, determines that such commission was reasonable in relation to
the value of the brokerage and research services provided by such broker or
dealer, either in terms of that particular transaction or in fulfilling the
overall responsibilities of the Adviser to the Funds. Where transactions are
executed in the over-the-counter market, or in the "third market" (the
over-the-counter market in listed securities), the Fund will normally first seek
to deal with the primary market makers. However, when the Funds consider it
advantageous to do so, they will utilize the services of brokers, but will, in
all cases, attempt to negotiate the best price and execution. The determination
of what may constitute the most favorable price and execution in a securities
transaction by a broker involves a number of considerations, including, without
limitation, the overall direct net economic result to the Funds (involving both
price paid or received and any commissions or other costs paid), the efficiency
with which the transaction is effected, the ability to effect the transaction at
all if selling large blocks is involved, the availability of the broker to stand
ready to execute possibly difficult transactions in the future and the financial
strength and stability of the broker. Such considerations are judgmental and are
weighed by management in determining the overall reasonableness of brokerage
commissions paid. In allocating any such portfolio brokerage on a national
securities exchange, the Funds may consider the research, statistical and other
factual information and services provided by brokers from time to time to the
Adviser. Such services and information are available to the Adviser for the
benefit of
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 12
<PAGE>
all clients of the Adviser and its affiliates and it is not practical for the
Adviser to assign a particular value to any such service.
The Adviser intends to use brokers affiliated with the Adviser as brokers for
the Funds where, in its judgment, such firms will be able to obtain a price and
execution at least as favorable as other qualified brokers. Martin J. Whitman,
David M. Barse, Michael Carney and Ian M. Kirschner, who are executive officers
of the Trust and the Adviser, are also executive officers of MJW and M.J.
Whitman Senior Debt Corp. ("Senior Debt Corp."), a broker of private debt
instruments under common control with MJW.
In determining the commissions to be paid to MJW and Senior Debt Corp., it is
the policy of the Funds that such commissions will, in the judgment of the
Adviser, be (i) at least as favorable as those which would be charged by other
qualified brokers having comparable execution capability and (ii) at least as
favorable as commissions contemporaneously charged by MJW or Senior Debt Corp.,
as the case may be, on comparable transactions for its most favored unaffiliated
customers, except for any customers of MJW or Senior Debt Corp., as the case may
be, considered by a majority of the disinterested Trustees not to be comparable
to the Funds. The Funds do not deem it practicable and in their best interests
to solicit competitive bids for commission rates on each transaction. However,
consideration is regularly given to information concerning the prevailing level
of commissions charged on comparable transactions by other qualified brokers.
The Trustees from time to time, at least on a quarterly basis, will review,
among other things, all the Funds' portfolio transactions including information
relating to the commissions charged by MJW and Senior Debt Corp. to the Funds
and to their other customers, and information concerning the prevailing level of
commissions charged by other qualified brokers. In addition, the procedures
pursuant to which MJW and Senior Debt Corp. effects brokerage transactions for
the Funds must be reviewed and approved no less often than annually by a
majority of the disinterested Trustees.
The Adviser expects that it will execute a portion of the Funds' transactions
through qualified brokers other than MJW and Senior Debt Corp. In selecting such
brokers, the Adviser will consider the quality and reliability of the brokerage
services, including execution capability and performance, financial
responsibility, and investment information and other research provided by such
brokers. Accordingly, the commissions charged by any such broker may be greater
than the amount another firm might charge if management of the Trust determines
in good faith that the amount of such commissions is reasonable in relation to
the value of the brokerage services and research information provided by such
broker to the Funds. Management of the Trust believes that the research
information received in this manner provides the Funds with benefits by
supplementing the research otherwise available to the Funds. Over-the-counter
purchases and sales will be transacted directly with principal market makers,
except in those circumstances where the Funds can, in the judgment of their
management, otherwise obtain better prices and execution of orders. During the
fiscal year ended October 31, 1997, the amount of brokerage transactions and
related commissions that THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP
VALUE FUND directed to brokers due to research services provided were
$75,880,891 and $156,693, and $39,274,127 and $78,938, respectively.
To the knowledge of the Funds, no affiliated person of the Funds receives
give-ups or reciprocal business in connection with security transactions of the
Funds. The Funds do not effect securities transactions through brokers in
accordance with any formula, nor will they take the sale of Fund shares into
account in the selection of brokers to execute security transactions. However,
brokers who execute brokerage transactions for the Funds, including MJW and
Senior Debt Corp., from time to time may effect purchases of Fund shares for
their customers.
For the fiscal year ended October 31, 1997, THIRD AVENUE VALUE FUND incurred
total brokerage commissions of $620,345 of which approximately $460,641 (or
74.26%) was paid to MJW and $18,047 (or 2.91%) was paid to Senior Debt Corp. For
the fiscal year ended October 31, 1996, THIRD AVENUE VALUE FUND incurred total
brokerage commissions of $447,855 of which approximately $329,168 (or 73%) was
paid to MJW and $70,250 (or 16%) was paid to Senior Debt Corp. For the year
ended October 31, 1995, the Fund incurred total brokerage commissions of
$320,517, of which approximately $269,152 (or 84%) was paid to MJW and $22,689
(or 7%) was paid to Senior Debt Corp.
For the fiscal year ended October 31, 1997, THIRD AVENUE SMALL-CAP VALUE FUND
incurred total brokerage commissions of $78,938 of which approximately $50,977
(or 64.58%) was paid to MJW.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 13
<PAGE>
These amounts include fees paid by MJW to its clearing agents. Commissions paid
by the Funds to MJW are paid at an average discount of at least 20% to the
normal fees charged by MJW.
For the fiscal year ended October 31, 1997, THIRD AVENUE VALUE FUND effected 37%
and 3% of its total transactions for which commissions were paid through MJW and
Senior Debt Corp., respectively. For the fiscal year ended October 31, 1997,
THIRD AVENUE SMALL-CAP VALUE FUND effected 32% of its total transactions for
which commissions were paid through MJW.
At October 31, 1997, THIRD AVENUE VALUE FUND held no securities of the Fund's
regular broker-dealers or their parents.
PURCHASE ORDERS
Each Fund reserves the right, in its sole discretion, to refuse purchase orders.
Without limiting the foregoing, a Fund will consider exercising such refusal
right when it determines that it cannot effectively invest the available funds
on hand in accordance with the Fund's investment policies.
REDEMPTION OF SHARES
The procedure for redemption of Fund shares under ordinary circumstances is set
forth in the Prospectus. In unusual circumstances, such as in the case of a
suspension of the determination of net asset value, the right of redemption is
also suspended and, unless redeeming shareholders withdraw their certificates
from deposit, they will receive payment of the net asset value next determined
after termination of the suspension. The right of redemption may be suspended or
payment upon redemption deferred for more than seven days: (a) when trading on
the New York Stock Exchange (the "NYSE") is restricted; (b) when the NYSE is
closed for other than weekends and holidays; (c) when the Securities and
Exchange Commission (the "SEC") has by order permitted such suspension; or (d)
when an emergency exists making disposal of portfolio securities or valuation of
net assets of a Fund not reasonably practicable; provided that applicable rules
and regulations of the SEC shall govern as to whether the conditions prescribed
in (a), (c) or (d) exist.
REDEMPTION IN KIND
Each Fund has elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940 pursuant to which such Fund is obligated during any 90 day period to
redeem shares for any one shareholder of record solely in cash up to the lesser
of $250,000 or 1% of the net asset value of such Fund at the beginning of such
period. Should a redemption exceed such limitation, a Fund may deliver, in lieu
of cash, readily marketable securities from its portfolio. The securities
delivered will be selected at the sole discretion of such Fund, will not
necessarily be representative of the entire portfolio and may be securities
which the Fund would otherwise sell. The redeeming shareholder will usually
incur brokerage costs in converting the securities to cash. The method of
valuing securities used to make the redemptions in kind will be the same as the
method of valuing portfolio securities and such valuation will be made as of the
same time the redemption price is determined. See "Calculation of Net Asset
Value."
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
GENERAL
Each Fund intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If they so qualify, the Funds will not be subject to
Federal income tax on their net investment income and net short-term capital
gain, if any, realized during any fiscal year to the extent that they distribute
such income and gain to their shareholders.
Each Fund will either distribute or retain for reinvestment all or part of any
net long-term capital gain. If any such net capital gain is retained, the Fund
will be subject to a tax of 35% of such amount. In that event, the Fund expects
to designate the retained amount as undistributed capital gains in a notice to
its shareholders, each of whom (1) will be required to include in income for tax
purposes, as long-term capital gains, its share of such undistributed amount,
(2) will be entitled to credit its proportionate share of the tax paid by the
Fund against its Federal income tax liability and to claim refunds to the extent
the credit exceeds such liability, and (3) will increase its basis in its shares
of such Fund by an amount equal to 65% of the amount of the undistributed
capital gains included in such shareholder's gross income.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 14
<PAGE>
A distribution by a Fund will be treated as paid during any calendar year if it
is declared by the Fund in October, November or December of that year, payable
to shareholders of record on a date during such month and paid by the Fund
during January of the following year. Any such distribution paid during January
of the following year will be deemed to be received on December 31 of the year
the distribution is declared, rather than when the distribution is received.
Under the Code, amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a 4% excise tax. To avoid
the tax, each Fund must distribute during each calendar year, an amount equal to
at least the sum of (1) 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (2) 98% of its capital gains in
excess of its capital losses for the twelve-month period ending on October 31 of
the calendar year (unless an election is made by a Fund with a November or
December year end to use the Fund's fiscal year), and (3) all ordinary income
and net capital gains for previous years that were not previously distributed.
Gains or losses on the sales of securities by a Fund will be treated as
long-term capital gains or losses if the securities have been held by such Fund
for more than twelve months, with gains taxable at a lower rate if the
securities were held by the Fund for more than eighteen months. The Taxpayer
Relief Act of 1997 generally reduced the maximum federal tax rate for
noncorporate taxpayers on long-term capital gains generated from assets held
more than eighteen months from 28% to 20%. Capital gains from assets held for
more than twelve months but not more than eighteen months are still taxed at a
maximum 28% rate. After the close of each calendar year, the shareholders of
each Fund will receive information regarding the amount and the tax character of
that Fund's distributions. Gains or losses on the sale of securities held for
twelve months or less will be short-term capital gains or losses.
The Federal income tax treatment of the various high yield debt securities and
other debt instruments (collectively, "Instruments" and individually, an
"Instrument") to be acquired by the Funds will depend, in part, on the nature of
those Instruments and the application of various tax rules. The Funds may derive
interest income through the accrual of stated interest payments or through the
application of the original issue discount rules, the market discount rules or
other similar provisions. The Funds may be required to accrue original issue
discount income, and in certain circumstances the Funds may be required to
accrue stated interest even though no concurrent cash payments will be received.
Moreover, it is the position of the IRS that a holder of a debt instrument
subject to the original issue discount rules is required to recognize interest
income regardless of the financial condition of the obligor, even where there is
no reasonable expectancy that the Instrument will be redeemed according to its
terms. If a Fund acquires an Instrument at a discount and the terms of that
Instrument are subsequently modified, the Fund could be required to recognize
gain at the time of the modification even though no cash payments will have been
received at that time. The market discount rules, as well as certain other
provisions, may require that a portion of any gain recognized on the sale,
redemption or other disposition of an Instrument to be treated as ordinary
income as opposed to capital gain. Also, under the market discount rules, if a
Fund were to receive a partial payment on an Instrument, the Fund could be
required to recognize ordinary income at the time of the partial payment, even
though the Instrument may ultimately be settled at an overall loss. As a result
of these and other rules, the Funds may be required to recognize taxable income
which they would be required to distribute, even though the underlying
Instruments have not made concurrent cash distributions to the Funds.
The body of law governing these Instruments is complex and not well developed.
Thus the Funds and their advisors may be required to interpret various
provisions of the Internal Revenue Code and Regulations and take certain
positions on the Funds' tax returns, in situations where the law is somewhat
uncertain.
DISTRIBUTIONS
Distributions of investment company taxable income (which includes taxable
interest income and the excess of net short-term capital gain over net long-term
capital loss) are taxable to a U.S. shareholder as ordinary income, whether paid
in cash or in additional Fund shares. Dividends paid by a Fund will qualify for
the 70% deduction for dividends received by corporations to the extent the
Fund's income consists of qualified dividends received from U.S. corporations.
Distributions of net capital gain (which consists of the excess of net long-term
capital gain over net short-term capital loss), if any, are taxable as long-term
capital gain, whether paid in cash or in shares, regardless of how long the
shareholder has held the applicable Fund's shares, and are not eligible for the
dividends received deduction. Shareholders receiving distributions in the form
of newly issued shares will have a basis in such shares equal to the fair market
value of such shares on the distribution date. If the net asset value of shares
is reduced below a shareholder's cost as a result of a distribution by a Fund,
such distribution may be taxable even though it represents a return of invested
capital. The price of shares purchased at any time may reflect the amount of a
forthcoming distribution. Those purchasing shares just prior to distribution
will receive a distribution which will be taxable to them, even though the
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 15
<PAGE>
distribution represents in part a return of their invested capital.
REDEMPTION OF SHARES
Upon a redemption of shares, a shareholder will realize a taxable gain or loss
equal to the difference between the redemption proceeds and the basis in the
shares redeemed. Shareholders should consult their tax advisors regarding the
determination of the basis in any shares redeemed. Such gain or loss will
generally be treated as long-term capital gain or loss if the shares have been
held for more than twelve months, with gains taxable at a lower rate if the
securities were held by the Fund for more than eighteen months. Any loss
realized on a sale will be disallowed to the extent the shares disposed of are
replaced within a 61-day period beginning 30 days before and ending 30 days
after the date the shares are disposed of. In such case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of a Fund's shares held by the
shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any distributions of net capital gain
received by the shareholder with respect to such shares.
BACKUP WITHHOLDING
The Funds may be required to withhold Federal income tax at a rate of 31% on all
taxable distributions payable to shareholders who fail to provide the Funds with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the Internal Revenue Service that they are subject
to backup withholding. Backup withholding is not an additional tax; any amounts
withheld may be credited against the shareholder's Federal income tax liability.
PERFORMANCE INFORMATION
Performance information for the Funds may appear in advertisements, sales
literature, or reports to shareholders or prospective shareholders. Performance
information in advertisements and sales literature may be expressed as "average
annual return" and "total return."
Each Fund's average annual return quotation is computed in accordance with a
standardized method prescribed by rules of the SEC. The average annual return
for a specific period is found by first taking a hypothetical $1,000 investment
("initial investment") in the Fund's shares on the first day of the period and
computing the redeemable value of that investment at the end of the period. The
redeemable value is then divided by the initial investment, and this quotient is
taken to the Nth root (N representing the number of years in the period) and is
subtracted by the result, which is then expressed as a percentage. The
calculation assumes that all income and capital gains dividends paid by the Fund
have been reinvested at net asset value on the reinvestment dates during the
period.
Calculation of a Fund's total return is not subject to a standardized formula.
Total return performance for a specific period is calculated by taking an
initial investment in the Fund's shares on the first day of the period and
computing the redeemable value of that investment at the end of the period. The
total return percentage is then determined by subtracting the initial investment
from the redeemable value and dividing the remainder by the initial investment
and expressing the result as a percentage. The calculation assumes that all
income and capital gains dividends by the Fund have been reinvested at net asset
value on the reinvestment dates during the period. Total return may also be
shown as the increased dollar value of the hypothetical investment over the
period.
THIRD AVENUE VALUE FUND'S total return from inception (November 1 ), through
fiscal year ended October 31, 1997, was 327.92%. THIRD AVENUE VALUE FUND'S
average annual return from inception through fiscal year ended October 31, 1997,
was 23.07%.
THIRD AVENUE SMALL-CAP VALUE FUND'S total return from inception (April 1, 1997),
through fiscal year ended October 31, 1997, was 23.70%. THIRD AVENUE SMALL-CAP
VALUE FUND'S average annual return from inception through fiscal year ended
October 31, 1997, was 43.97%.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 16
<PAGE>
FINANCIAL STATEMENTS
The Funds' financial statements and notes thereto appearing in their Annual
Report to Shareholders and report thereon of Price Waterhouse LLP, independent
accountants, appearing therein, are incorporated by reference in this Statement
of Additional Information. The Funds will issue unaudited semi-annual and
audited annual financial statements.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 17
<PAGE>
BOARD OF TRUSTEES
Phyllis W. Beck
Gerald Hellerman
Marvin Moser
Myron M. Sheinfeld
Martin Shubik
Charles C. Walden
Barbara Whitman
Martin J. Whitman
OFFICERS
Martin J. Whitman
Chairman, Chief Executive Officer, President
David M. Barse
Chief Operating Officer, Executive Vice President
Michael Carney
Chief Financial Officer, Treasurer
Kerri Weltz, Assistant Treasurer
Ian M. Kirschner, General Counsel and Secretary
INVESTMENT ADVISER
EQSF Advisers, Inc.
767 Third Avenue
New York, NY 10017-2023
DISTRIBUTOR
M.J. Whitman, Inc.
767 Third Avenue
New York, NY 10017-2023
TRANSFER AGENT
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(610) 239-4600
(800) 443-1021 (toll-free)
CUSTODIANS
THIRD AVENUE VALUE FUND THIRD AVENUE SMALL-CAP VALUE FUND
North American Trust Company THIRD AVENUE HIGH YIELD FUND
525 B Street Custodial Trust Company
San Diego, CA 92101-4492 101 Carnegie Center
Princeton, NJ 08540-6231
[LOGO]
767 THIRD AVENUE
NEW YORK, NY 10017
Phone (212) 888-6685
Toll Free (800) 443-1021
www.mjwhitman.com
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 21
<PAGE>
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Included in Part A:
Financial Highlights for THIRD AVENUE VALUE FUND for each of
the seven years in the period ended October 31, 1997.
Financial Highlights for THIRD AVENUE SMALL-CAP VALUE FUND for
the period from commencement of operations to October 31,
1997.
Included in Part B of the Registration Statement:
THIRD AVENUE VALUE FUND
Portfolio of Investments at October 31, 1997, Statement of
Assets and Liabilities at October 31, 1997, Statements of
Operations for the year ended October 31, 1997, Statement of
Changes in Net Assets for the year ended October 31, 1997,
Statement of Changes in Net Assets for the years ended October
31, 1997 and 1996, Financial Highlights for the years ended
October 31, 1997, 1996, 1995, 1994 and 1993 and Notes to
Financial Statements for the year ended October 31, 1997.
Reports of Independent Accountants. Incorporated by reference
to the Statement of Additional Information.
THIRD AVENUE SMALL-CAP VALUE FUND
Portfolio of Investments at October 31, 1997, Statement of
Assets and Liabilities at October 31, 1997, Statements of
Operations for the period ended October 31, 1997, Statement of
Changes in Net Assets for the period ended October 31, 1997,
Statement of Changes in Net Assets for the period ended
October 31, 1997, Financial Highlights for the period ended
October 31, 1997 and Notes to Financial Statements for the
period ended October 31, 1997. Reports of Independent
Accountants. Incorporated by reference to the Statement of
Additional Information.
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument and Certificate of Trust are
incorporated by reference to Exhibit No. (1) of
Registration Statement No. 333-20891 filed on January
31, 1997.
(2) By-Laws are incorporated by reference to Exhibit No. (2)
of Registration Statement No. 333- 20891 filed on
January 31, 1997.
(5) Investment Advisory Contracts for THIRD AVENUE VALUE
FUND and THIRD AVENUE SMALL-CAP VALUE FUND are
incorporated by reference to Exhibit No. (5) of
Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-20891 filed March 25, 1997. Investment
Advisory Contract for the THIRD AVENUE HIGH YIELD FUND
to be filed with Post-Effective Amendment No. 3.
(6) Distribution Agreements for THIRD AVENUE VALUE FUND and
THIRD AVENUE SMALL-CAP VALUE FUND are incorporated by
reference to Exhibit No. (6) of Pre-Effective Amendment
No. 1 to the Registration Statement No. 333-20891 filed
March 25, 1997. Distribution Agreement for THIRD AVENUE
HIGH YIELD FUND to be filed with Post-Effective
Amendment No. 3.
(8) Custodian Agreements
(a) Custody Agreement between Third Avenue Trust on
behalf of THIRD AVENUE VALUE FUND and North
American Trust Company is incorporated by
reference to Exhibit No. (8)(a) of Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-20891 filed March 25, 1997.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 1
<PAGE>
(b) Custody Agreement between Third Avenue Trust on
behalf of THIRD AVENUE SMALL-CAP VALUE FUND and
Custodial Trust Company is incorporated by
reference to Exhibit No. (8)(b) of Pre-Effective
Amendment No. 1 to the Registration Statement No.
333-20891 filed March 25, 1997.
Amendment to Custody Agreement to include THIRD
AVENUE HIGH YIELD FUND to be filed with
Post-Effective Amendment No. 3.
(9) (a) Transfer Agent Services Agreement for THIRD AVENUE
VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND
is incorporated by reference to Exhibit No. (9)(a)
of Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-20891 filed March
25, 1997.
Amendment to Transfer Agent Services Agreement to
include THIRD AVENUE HIGH YIELD FUND to be filed
with Post-Effective Amendment No. 3.
(b) Administration Agreement for THIRD AVENUE VALUE
FUND and THIRD AVENUE SMALL-CAP VALUE FUND is
incorporated by reference to Exhibit No. (9)(b) of
Pre- Effective Amendment No. 1 to the Registration
Statement No. 333-20891 filed March 25, 1997.
Amendment to Administration Agreement to include
THIRD AVENUE HIGH YIELD FUND to be filed with
Post-Effective Amendment No. 3.
(c) Accounting Services Agreement for THIRD AVENUE
VALUE FUND and THIRD AVENUE SMALL-CAP VALUE FUND
is incorporated by reference to Exhibit No. (9)(c)
of Pre- Effective Amendment No. 1 to the
Registration Statement No. 333-20891 filed March
25, 1997.
Amendment to Accounting Services Agreement to
include THIRD AVENUE HIGH YIELD FUND to be filed
with Post-Effective Amendment No. 3.
(10) (a) Opinion and Consent of Counsel regarding the
legality of the securities being issued is
incorporated by reference to Exhibit No. (10) of
Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-20891 filed March 25, 1997.
(11) Consent of Independent Auditors -- To be filed with
Post-Effective Amendment No. 3.
(14) Individual Retirement Account Disclosure Statement and
Custodial Account Agreement is incorporated by reference
to Exhibit No. (14) of Pre-Effective Amendment No. 1 to
the Registration Statement No. 333-20891 filed March 25,
1997.
(17) Financial Data Schedule
THIRD AVENUE VALUE FUND -- To be filed with
Post-Effective Amendment No. 3. THIRD AVENUE
SMALL-CAP VALUE FUND -- To be filed with
Post-Effective Amendment No.3.
(19) Trustees' Powers of Attorney are incorporated by
reference to Exhibit No. (19) of Registration Statement
No. 333-20891 filed on January 31, 1997.
Item 25. Persons Controlled By or Under Common Control with Registrant.
Not Applicable.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 2
<PAGE>
Item 26. Number of holders of securities.
Title of Class
Common Stock Number of Record Holders
(Par Value $.001) As of December 15, 1997
THIRD AVENUE VALUE FUND 33,857
THIRD AVENUE SMALL-CAP VALUE FUND 3,211
Item 27. Indemnification.
Reference is made to Article X of the Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to
the Trust's Trust Instrument, its By-Laws or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and, therefore, is unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or controlling
persons in connection with shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issues.
Item 28. Business and other connections of investment adviser.
EQSF Advisers, Inc., 767 Third Avenue, New York, New York 10017-2023
provides investment advisory services to investment companies and as
of December 15, 1997 had approximately $1,775 million in assets under
management.
For information as to any other business, vocation or employment of a
substantial nature in which each Director or officer of the
Registrant's investment adviser has been engaged for his own account
or in the capacity of Director, officer, employee, partner or
trustee, reference is made to Form ADV (File #801-27792) filed by it
under the Investment Advisers Act of 1940.
Item 29. Principal underwriters.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
Item 30. Location of accounts and records.
All records described in Section 31 (a) of the Investment Company Act of 1940,
as amended and Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Trust's Investment Adviser, EQSF Advisers, Inc. 767 Third
Avenue, NY, NY 10017-2023, except for those records maintained by the Trust's
Custodians, North American Trust Company, 525 B Street, San Diego, CA 92101-4492
and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ 08540-6231, and
the Trust's Shareholder Service and Fund Accounting and Pricing Agent, FPS
Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.
Item 31. Management services.
None.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 3
<PAGE>
Item 32. Undertakings.
a) THIRD AVENUE HIGH YIELD FUND hereby undertakes to file a
post-effective amendment within four to six months from the
effective date of Post-Effective Amendment No. 3 under the
Securities Act of 1933. THIRD AVENUE HIGH YIELD FUND
understands that such post-effective amendment will contain
reasonably current financial statements which need not be
certified by independent public accountants.
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 2 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York on the ___th day of December, 1997.
THIRD AVENUE TRUST
Registrant
/s/ Martin J. Whitman
----------------------------
Martin J. Whitman, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 2 to the Registration Statement of Third Avenue Trust has been
signed below by the following persons in the capacities and on the date
indicated.
Signature Capacity Date
/s/ MARTIN J. WHITMAN
- ---------------------
Martin J. Whitman Trustee
/s/ PHYLLIS W. BECK
- -------------------
Phyllis W. Beck Trustee
/s/ MARTIN SHUBIK
- -----------------
Martin Shubik Trustee
/s/ MYRON M. SHEINFELD
- ----------------------
Myron M. Sheinfeld Trustee
/s/ GERALD HELLERMAN
- --------------------
Gerald Hellerman Trustee
/s/ CHARLES C. WALDEN
- ---------------------
Charles C. Walden Trustee
/s/ MARVIN MOSER
- ----------------
Marvin Moser Trustee
/s/ BARBARA WHITMAN Trustee
- -------------------
Barbara Whitman
- --------------------------------------------------------------------------------
Third Avenue Trust -- Post-Effective Amendment No. 2
Page 5