April 14, 1997
THIRD AVENUE SMALL-CAP VALUE FUND
THIRD AVENUE VALUE FUND
The following information supplements the information
contained in the section entitled "Investment Philosophy
and Approach" of the Funds' Prospectus dated April 1,
1997.
FOREIGN CURRENCY TRANSACTIONS
BOTH THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP
VALUE FUND may, from time to time, engage in foreign
currency transactions in order to hedge the value of
their respective portfolio holdings denominated in
foreign currencies against fluctuations in foreign
currency prices versus the U.S. dollar. These
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 closely related currency.
If the Fund enters into a hedging transaction in which
the 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
the 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, relative
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 the 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 the Fund. The
requirements for qualification as a regulated investment
company under the Internal Revenue Code of 1986, as
amended (the "Code"), may cause the Fund to restrict the
degree to which it engages in currency hedging
transactions.
