AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MARCH 25, 1997 REGISTRATION NOS.: 333-20891
811-8039
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. [ 1 ]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. [ 1 ] ---
THIRD AVENUE TRUST
------------------
(Exact name of registrant as specified in Charter)
767 Third Avenue, New York, New York 10017-2023
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(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)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING
[X] On April 1, 1997 or as soon as practicable after the effective date of
this Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended,
registrant has elected to register an indefinite number of its shares of
beneficial interest. The Registrant filed a notice under such Rule for its
fiscal year ended October 31, 1996 on December 27, 1996.
<PAGE>
THIRD AVENUE TRUST
CROSS-REFERENCE SHEET
[AS REQUIRED BY RULE 495A]
PART A.
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM NO. PROSPECTUS CAPTION
- -------- ------------------
Item 1. Cover Page Cover Page
Item 2. Synopsis Overview; 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
<PAGE>
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;
Investment Adviser
Item 15. Control Persons and Principal Management of the
Holders of Securities Trust;
Investment Adviser
Item 16. Investment Advisory and Other Investment Adviser;
Services Investment Advisory
Agreement
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
</TABLE>
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 Pre-Effective Amendment No. 1 to the
Registration Statement.
<PAGE>
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(Third Avenue Trust Logo)
PROSPECTUS
April 1, 1997
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Page 1
<PAGE>
Contents
FUND EXPENSES .....................................................4
FINANCIAL HIGHLIGHTS ..............................................5
ABOUT THE FUNDS ...................................................6
Investment Objectives .............................................6
INVESTMENT PHILOSOPHY AND APPROACH ................................7
Value Discipline ..................................................7
Intensive Research ................................................7
Diversification ...................................................7
Buy and Hold ......................................................7
Investment in Equity Securities ...................................7
Investment in Debt Securities .....................................8
Mortgage-Backed Securities ...................................8
Asset-Backed Securities ......................................9
Floating Rate, Inverse Floating Rate and Index Obligations ...9
Investment in High Yield Debt Securities .....................9
Loans and Other Direct Debt Instruments ......................1
Trade Claims ................................................11
Portfolio Practices ..............................................11
Foreign Securities ..........................................11
Restricted and Illiquid Securities ..........................11
Investment in Relatively New Issues .........................12
Temporary Defensive Investments .............................12
Borrowing ...................................................12
Investment in Other Investment Companies ....................13
Simultaneous Investments ....................................13
Restrictions on Investments .................................13
Portfolio Turnover ..........................................13
MANAGEMENT OF THE FUNDS ..........................................14
The Investment Adviser ......................................14
Advisory Fees ...............................................14
Administrator ...............................................15
Distributor .................................................15
Custodian and Transfer Agent ................................15
Portfolio Trading Practices .................................16
PERFORMANCE INFORMATION ..........................................17
Performance Illustration .........................................17
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES ..................18
Distribution Options .............................................19
Withholding ......................................................19
HOW TO PURCHASE SHARES ...........................................19
Business Hours ...................................................20
Determining Net Asset Value ......................................20
Share Certificates ...............................................20
Through an Authorized Broker-Dealer or Investment Adviser ........20
New Accounts .....................................................21
Initial Investment ...............................................21
By Mail ..........................................................21
By Wire ..........................................................21
Additional Investments By Mail ...................................22
Additional Investments Through the Automatic Investment Plan .....22
Individual Retirement Accounts .................................22
Other Retirement Plans ...........................................22
HOW TO REDEEM SHARES .............................................23
By Mail ..........................................................23
Telephone Redemption Service .....................................23
Fees .............................................................23
Redemption Without Notice ........................................24
Account Minimum ..................................................24
Payment of Redemption Proceeds ...................................24
Wired Proceeds ...................................................24
Signature Guarantees/Other Documents .............................24
Systematic Withdrawal Plan .......................................25
HOW TO EXCHANGE SHARES ...........................................25
Inter-Fund Exchange Privilege ....................................25
Money Market Exchange Privilege ..................................25
SHAREHOLDER SERVICES .............................................26
Telephone Information ............................................26
Transfer of Ownership ............................................26
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Page 2
<PAGE>
Third Avenue Trust (the "Trust") is an open-end management investment company
organized as a Delaware business trust. The Trust currently consists of two
separate investment series; THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP
VALUE FUND (each a "Fund" and, collectively, the "Funds").
Each Fund seeks to achieve its investment objective of long-term capital
appreciation by adhering to a strict value discipline when selecting securities.
While both Funds pursue a capital appreciation objective, each Fund has a
distinct investment approach.
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.
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
share prices. The Funds are not intended for investors seeking short-term price
appreciation or for "market timers."
Shares of each Fund are sold and redeemed at net asset value. See "How to
Purchase Shares" and "How to Redeem Shares."
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 April 1, 1997, 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 U.S.
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.
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Page 3
<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
VALUE FUND SMALL-CAP VALUE FUND
---------- --------------------
<S> <C> <C>
Shareholder Transaction Expenses:
- ---------------------------------
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fee None None
Annual Fund Operating Expenses:
- -------------------------------
(as a percentage of net assets)
Management Fees .90% .90%
12b-1 Fees None None
Other Expenses .31% 1.00% (after waivers)
--- ----
Total Fund Operating Expenses 1.21% 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.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
THIRD AVENUE VALUE FUND $12 $39 $67 $147
THIRD AVENUE SMALL-CAP
VALUE FUND $19 $60 ------ ------
</TABLE>
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 of its predecessor Fund,
Third Avenue Value Fund, Inc., for the year ended October 31, 1996. THIRD AVENUE
SMALL-CAP VALUE FUND commenced investment operations on or about April 1, 1997.
Because THIRD AVENUE SMALL-CAP VALUE 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. The expenses noted above
for THIRD AVENUE SMALL-CAP VALUE FUND, without reimbursement, would be:
"Management Fees" .90%, "Other Expenses" 1.64% and "Total Fund Operating
Expenses" 2.54%. 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.
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Page 4
<PAGE>
FINANCIAL HIGHLIGHTS
THIRD AVENUE TRUST
The following sets forth information for THIRD AVENUE VALUE FUND regarding per
share income and capital changes for each of the six years in the period ended
October 31, 1996, which have been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report on the October 31, 1996 financial
statements appears in the Fund's Annual Report to Shareholders. THIRD AVENUE
VALUE FUND is the successor by merger on March 31, 1997 to Third Avenue Value
Fund, Inc., a Maryland corporation. This information should be read in
conjunction with the financial statements and accompanying notes appearing in
the 1996 Annual Report to Shareholders which are incorporated by reference into
the Statement of Additional Information.
Because the Trust's new Fund, THIRD AVENUE SMALL-CAP VALUE FUND, commenced
investment operations on or about April 1, 1997, no financial highlights are
available.
<TABLE>
<CAPTION>
THIRD AVENUE VALUE FUND: SELECTED DATA AND RATIOS (Years Ended October 31,)
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $21.53 $18.01 $17.92 $13.57 $12.80 $10.00
INCOME FROM INVESTMENT OPERATIONS: ------ ------ ------ ------ ------ ------
Net investment income .53 .38 .29 .18 .19 .15
Net gain on securities
(both realized and unrealized) 2.76 3.53 .16 4.77 .64 4.65
----- ----- ---- ----- ---- -----
Total from Investment Operations 3.29 3.91 .45 4.95 .83 4.80
----- ----- ---- ----- ---- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.41) (.25) (.22) (.24) (.02) (.15)
Distributions from net realized gains (.15) (.14) (.14) (.36) (.04) (1.85)
----- ----- ---- ----- ---- -----
Total Distributions (.56) (.39) (.36) (.60) (.06) (2.00)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $24.26 $21.53 $18.01 $17.92 $13.57 $12.80
====== ====== ====== ====== ====== ======
TOTAL RETURN
(NOT INCLUDING SALES LOAD) 15.55% 22.31% 2.56% 37.36% 6.50% 49.16%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year
(in thousands) $566,847 $312,722 $187,192 $118,958 $31,387 $17,641
Ratio of Expenses to Average
Net Assets 1.21% 1.25% 1.16% 1.42% 2.32% 2.50%
Ratio of Net Income to Average
Net Assets 2.67% 2.24% 1.85% 1.45% 1.71% 1.71%
Portfolio Turnover Rate 14% 15% 5% 17% 31% 67%
Average Commission Rate $0.0318 ------ ------ ------ ------ ------
</TABLE>
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Page 5
<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.
INVESTMENT OBJECTIVES
The investment objective of each Fund is long-term 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 either or both 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 (i.e. take-over 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 (i.e. take-over 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."
The Adviser may seek investments in the securities of companies in industries
that are temporarily depressed. The Adviser also seeks investments in equity
securities of companies where debt service1 consumes a small part of such
companies' cash flow.
1 "Debt Service" means the current annual required payment of interest and
principal to creditors.
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Page 6
<PAGE>
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 the general stock
market 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.
(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.
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Page 7
<PAGE>
INVESTMENT IN DEBT SECURITIES
THIRD AVENUE VALUE 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, 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, 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, the 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.
MORTGAGE-BACKED SECURITIES
THIRD AVENUE VALUE FUND intends to invest in mortgage-backed securities and
derivative mortgage-backed securities, including "principal only" but not
"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. The Fund intends to invest in
these securities only when it believes, 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.
The Fund will not invest in non-investment grade subordinated classes of
residential mortgages and does not intend to invest in commercial
mortgage-backed securities. 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 the Fund may provide high yield and total return in comparison to
risk levels.
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Page 8
<PAGE>
ASSET-BACKED SECURITIES
THIRD AVENUE VALUE FUND also intends 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 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
THIRD AVENUE VALUE 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, the Fund will not 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 the Fund cannot
or will not invest.
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. The Fund does not intend 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 will not purchase or hold in excess of 35% of its net
assets 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. 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, the Fund depends on
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Page 9
<PAGE>
the Adviser's credit analysis to identify investment opportunities. For the
Fund, 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. In
addition, the secondary market for these bonds is generally less liquid than
that for higher rated bonds.
The market values of certain 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. Furthermore, high yield bonds structured as zero coupon or
pay-in-kind securities are affected to a greater extent by interest rate changes
and therefore tend to be more volatile than securities which pay interest
periodically and in cash.
The Fund may also in the future purchase or retain debt obligations of issuers
not currently paying interest or in default. In addition, the Fund 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.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS
THIRD AVENUE VALUE 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 the 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.
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Page 10
<PAGE>
TRADE CLAIMS
THIRD AVENUE VALUE 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 the 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
Both THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE 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 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.
RESTRICTED AND ILLIQUID SECURITIES
Neither THIRD AVENUE VALUE FUND nor THIRD AVENUE SMALL-CAP VALUE 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.
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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
Securities and Exchange Commission 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. 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 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
Both THIRD AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP VALUE 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.
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INVESTMENT IN OTHER INVESTMENT COMPANIES
THIRD AVENUE SMALL-CAP VALUE 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 the Fund or the price paid or
received by the 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 Statement of Additional Information. In
the event either Fund changes an operating investment restriction, the new
restriction may not meet the investment needs of every shareholder.
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, 1995 and 1996 was 15% and 14%, respectively.
It is currently estimated that, under normal market conditions, the annual
portfolio turnover rate for THIRD AVENUE SMALL-CAP VALUE FUND will not exceed
75%.
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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 Funds'
portfolios. 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 ("DHC"), 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.
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 Fund has agreed to pay the Adviser a flat rate of .90% of its average daily
net assets, and 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 value 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 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
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<PAGE>
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, 1995 and
1996, no reimbursement was required to be paid for Third Avenue Value Fund, Inc.
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 THIRD AVENUE VALUE FUND'S
custodian and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ 08540-
6231, serves as THIRD AVENUE SMALL-CAP VALUE FUND'S custodian (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.
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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.
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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
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
THIRD AVENUE VALUE FUND Average Annual Return
1 Year 15.55%
2 Years 18.88%
3 Years 13.17%
4 Years 18.79%
5 Years 16.22%
6 Years 21.15%
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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 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, 1996, THIRD AVENUE VALUE FUND distributed net
investment income of approximately $6,118,869 and net realized capital gains on
investments of approximately $2,245,595. A distribution of $0.72 per share,
consisting of $0.573 of income, $0.065 of short-term capital gain and $0.08 of
long-term capital gain was distributed to shareholders of record on December 30,
1996.
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 will be
taxable to shareholders as a long-term capital gain (even if the shareholder has
held the shares for less than one year.) However, 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 as a capital asset,
and will be long-term capital gain or loss if the shares were held for longer
than one year. 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.
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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.
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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, 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
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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.
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 money order payable to "THIRD AVENUE VALUE FUND" or "THIRD AVENUE
SMALL-CAP VALUE FUND."
BY MAIL
THIRD AVENUE VALUE FUND or
THIRD AVENUE SMALL-CAP VALUE 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 or THIRD AVENUE SMALL-CAP
VALUE 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.
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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 VALUE FUND
or
THIRD AVENUE SMALL-CAP VALUE 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.
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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:
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. 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.
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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 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.
- --------------------------------------------------------------------------------
Page 24
<PAGE>
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.
HOW TO EXCHANGE SHARES
INTER-FUND EXCHANGE PRIVILEGE
Shareholders may 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 in
writing or by telephone. 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.
- --------------------------------------------------------------------------------
Page 25
<PAGE>
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.
SHAREHOLDER SERVICES
Each Fund provides you with helpful services and information about your account.
* A statement after every transaction.
* Annual account statement reflecting all transactions for the year.
* Tax information will be mailed by January 31 of each year, a copy of
which will also be filed with the Internal Revenue Service.
* The financial statements of the Fund with a summary of
portfolio composition and performance will be mailed at least
twice a year.
* The Funds intend to continue to mail to shareholders quarterly reports
containing the Chairman of the Board'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) 239-4500.
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 p.m.
on the day you wish to redeem, toll free (800) 443-1021,
Option 2, or (610) 239-4500.
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."
- --------------------------------------------------------------------------------
Page 26
<PAGE>
BOARD OF TRUSTEES
Phyllis W. Beck
Tibor Fabian
Gerald Hellerman
Marvin Moser
Donald Rappaport
Myron M. Sheinfeld
Martin Shubik
Charles C. Walden
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) 239-4500
(800) 443-1021 (toll-free)
CUSTODIANS
THIRD AVENUE VALUE FUND THIRD AVENUE SMALL-CAP VALUE FUND
North American Trust Company Custodial Trust Company
525 B Street 101 Carnegie Center
San Diego, CA 92101-4492 Princeton, NJ 08540-6231
[LOGO]
767 THIRD AVENUE
NEW YORK, NY 10017-2023
Phone (212) 888-6685
Toll Free (800) 443-1021
www.mjwhitman.com
- --------------------------------------------------------------------------------
Page 27
<PAGE>
(LOGO)
STATEMENT OF
ADDITIONAL
INFORMATION
------------
April 1, 1997
- --------------------------------------------------------------------------------
Page 1
<PAGE>
(LOGO)
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 1, 1997
THIRD AVENUE TRUST
THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE 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 two separate investment series: THIRD AVENUE VALUE FUND
and THIRD AVENUE SMALL-CAP VALUE FUND (each a "Fund" and collectively, the
"Funds").
This Statement of Additional Information, dated April 1, 1997, is not a
Prospectus and should be read in conjunction with the Prospectus dated April 1,
1997. 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 ...................................3
INVESTMENT POLICIES ...................................3
Loans and Other Direct Debt Instruments ..........3
Short Sales ......................................3
INVESTMENT RESTRICTIONS ...............................3
MANAGEMENT OF THE TRUST ...............................4
COMPENSATION TABLE ....................................8
INVESTMENT ADVISER ....................................9
INVESTMENT ADVISORY AGREEMENT ........................10
ADMINISTRATOR ........................................11
DISTRIBUTOR ..........................................11
PORTFOLIO TRADING PRACTICES ..........................11
PURCHASE ORDERS ......................................13
REDEMPTION OF SHARES .................................13
Redemption in Kind ..............................13
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES ......13
General .........................................13
Distributions ...................................14
Redemption of Shares ............................14
Backup Withholdin ...............................15
PERFORMANCE INFORMATION ..............................15
FINANCIAL STATEMENTS .................................15
APPENDIX .............................................16
DESCRIPTION OF CORPORATE BOND RATINGS ...............16
Standard & Poor's Ratings Group ................16
Moody's Investors Service, Inc. .................17
- --------------------------------------------------------------------------------
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.
SHORT SALES
THIRD AVENUE SMALL-CAP VALUE FUND may, but currently does 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 both THIRD AVENUE VALUE FUND and
THIRD AVENUE SMALL-CAP VALUE FUND. Neither 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.
- --------------------------------------------------------------------------------
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.
The Fund will not purchase any portfolio securities while any borrowing exceeds
5% of the 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>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
PHYLLIS W. BECK* 70 Trustee An Associate Judge (1981 to Present) of the Superior Court
GSB Bldg. Suite 800 of Pennsylvania; Trustee or Director of the Trust or its
City Line & Belmont Ave. predecessor since November, 1992.
Bala Cynwyd, PA
19004-1611
TIBOR FABIAN 74 Trustee A Consultant (1984 to Present) on financial and
44 West 62nd Street organizational matters; Director (1984 to Present) of Rex
New York, NY 10023 Stores, Inc., a chain of discount electronic stores,
formerly Audio/Video Affiliates, Inc.; Member, Board of
Trustees (1979 to Present) of the Hospital for Joint
Diseases Orthopedic Institute, NY; Trustee or Director of
the Trust or its predecessor since its inception.
</TABLE>
- --------------------------------------------------------------------------------
Page 4
<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
GERALD HELLERMAN 59 Trustee Managing Director (8/93 to Present) of Hellerman Associates,
10965 Eight Bells Lane a financial and corporate consulting firm; Chief Financial
Columbia, MD 21044 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.
MARVIN MOSER, M.D. 73 Trustee Trustee (1992 to Present) of the Trudeau Institute, a
13 Murray Hill Road medical research institute; Clinical Professor of Medicine
Scarsdale, NY 10583 (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; Emeritus Chief of Cardiology,
Attending Physician in Medicine and Cardiology (1954 to
1995) of the White Plains, NY Hospital Medical Center;
Chairman (1977) and a 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; Trustee or
Director of the Trust or its predecessor since November,
1994.
DONALD RAPPAPORT 71 Trustee President & Chief Operating Officer (3/90 to 12/90) of Third
1619 31st Street, N.W. Avenue Value Fund, Inc. and Equity Strategies Fund, Inc.
Washington, DC 20007 (1984 to 12/90); Director (1987 to 4/94) of Equity
Strategies Fund, Inc.; President (1989 to 12/90) of Whitman
Advisors, Ltd., an investment adviser; Registered Securities
Representative (1989 to 1991) of M.J. Whitman & Co., Inc., a
former broker-dealer; a private investor and consultant
(1987 to present); Trustee or Director of the Trust or its
predecessor since its inception.
MYRON M. SHEINFELD 66 Trustee Counsel to (12/31 to present) and Attorney and Shareholder
1001 Fannin St., Suite 3700 (1986 to 12/31) of Sheinfeld, Maley & Kay P.C., a law firm;
Houston, TX 77002 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; Trustee or
Director of the Trust or its predecessor since its
inception.
MARTIN SHUBIK 70 Trustee Seymour H. Knox Professor (1975 to Present) of Mathematical
Yale University Dept. of and Institutional Economics, Yale University; Director (1984
Economics to 4/94) of Equity Strategies Fund, Inc.; Trustee or
Box 2125, Yale Station Director of the Trust or its predecessor since its
New Haven, CT 06520 inception.
</TABLE>
- --------------------------------------------------------------------------------
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<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
CHARLES C. WALDEN 52 Trustee Senior Vice-President--Investments (1973 to present) (Chief
Knights of Columbus Investment Officer) of Knights of Columbus, a fraternal
1 Columbus Plaza benefit society selling life insurance and annuities;
New Haven, CT 06510 Chartered Financial Analyst; Trustee or Director of the
Trust or its predecessor since May, 1996.
MARTIN J. WHITMAN* 72 Chairman, President (1/91 to Present), Chairman and CEO (3/90 to
767 Third Avenue Chief Present) of the Trust; Chairman, CEO (1/1/95 to Present),
New York, NY 10017-2023 Executive President (1/1/95 to 6/29/95) and Chief Investment Officer
Officer, (10/92 to Present) of M.J. Whitman Advisers, Inc., a
President, subsidiary of M.J. Whitman Holding Corp., (MJWHC), a holding
and Trustee 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; 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 34 Executive President, Chief Operating Officer and Director (7/96 to
767 Third Avenue Vice Present) of Danielson Holding Corporation; Director (8/96 to
New York, NY 10017-2023 President and Present) of National American Insurance Company of
Chief California; Executive Vice President and Director (4/95 to
Operating Present) of EQSF Advisers, Inc.; President (6/95 to
Officer Present), Director, Chief Operating Officer (COO) (1/95 to
Present), Secretary (1/95 to 1/96) and Executive Vice
President (1/95 to 6/95) of M.J. Whitman Holding Corp.;
President (6/95 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 (7/94 to
12/94), Executive Vice President and Secretary (1/92 to
12/94) of Whitman Securities Corp.; Vice President and
Corporate Counsel (5/94 to 1/95) of the Trust; Counsel (1/94
to 10/94) of Carl Marks Strategic Investments, L.P.
</TABLE>
- --------------------------------------------------------------------------------
Page 6
<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
MICHAEL CARNEY 43 Treasurer, Director, (1/1/95 to Present) Executive Vice President,
767 Third Avenue Chief Chief Financial Officer (6/29/95 to Present) of M.J. Whitman
New York, NY 10017-2023 Financial Holding Corp. and of M.J. Whitman, Inc.; Treasurer, Director
Officer (1/1/95 to Present), Executive Vice President (6/29/95 to
(CFO) 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.
KERRI WELTZ 29 Assistant Assistant Treasurer (5/96 to Present), Controller (1/96 to
767 Third Avenue Treasurer Present), Assistant Controller (1/93 to 12/95) and Staff
New York, NY 10017-2023 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.
</TABLE>
- --------------------------------------------------------------------------------
Page 7
<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
IAN M. KIRSCHNER 41 General General Counsel and Secretary (8/96 to Present) of Danielson
767 Third Avenue Counsel and Holding Corporation; General Counsel and Secretary (1/96 to
New York, NY 10017-2023 Secretary Present) of M.J. Whitman Holding Corp., 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 $1,200 per Fund in January
of each year for the previous year's service. Third Avenue Value Fund, Inc., the
predecessor to the THIRD AVENUE VALUE FUND Series of the Trust, paid Trustees in
the aggregate, $65,058 in such fees and expenses for the year ended October 31,
1996. Trustees do not receive any pension or retirement benefits.
For the fiscal year ended October 31, 1996, the aggregate amount of compensation
paid to each Trustee by THIRD AVENUE VALUE FUND is listed below. No compensation
was paid to the Trustees with respect to THIRD AVENUE SMALL-CAP VALUE FUND
because the Fund had not commenced operations as of that date.
<TABLE>
<CAPTION>
COMPENSATION TABLE
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM FUND FOR FISCAL YEAR FUND AND FUND COMPLEX PAID
NAME AND POSITION HELD ENDED OCTOBER 31, 1996* TO TRUSTEES
- ---------------------- ------------------------- --------------------------
<S> <C> <C>
Phyllis W. Beck, Trustee $ 0 $ 0
Tibor Fabian, Trustee $ 7,200 $ 7,200
Gerald Hellerman, Trustee $ 5,700 $ 5,700
Marvin Moser, M.D., Trustee $ 7,200 $ 7,200
Donald Rappaport, Trustee $ 7,200 $ 7,200
Myron M. Sheinfeld, Trustee $ 7,200 $ 7,200
Martin Shubik, Trustee $ 7,200 $ 7,200
Charles C. Walden, Trustee $ 3,000 $ 3,000
Jack Weprin, Trustee** $ 4,200 $ 4,200
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 $16,158 for all Trustees as a group. For the fiscal year
ended October 31, 1997, it is anticipated that in addition to the
compensation payable to the Trustees of THIRD AVENUE VALUE FUND, the
Trustees of THIRD AVENUE SMALL-CAP VALUE FUND also shall receive
compensation in an estimated amount equal to $7,200 per Trustee and Third
Avenue Small-Cap Value Fund will reimburse Trustees for approximately
$8,000 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 for the fiscal year ended October 31, 1996).
** Mr. Weprin passed away on March 10, 1996.
- --------------------------------------------------------------------------------
Page 8
<PAGE>
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 the
predecessor fund of THIRD AVENUE VALUE FUND as set forth below as of March 17,
1997. THIRD AVENUE SMALL-CAP VALUE FUND had not commenced operations as of March
17, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS THIRD AVENUE VALUE FUND NUMBER OF SHARES
- ---------------- ----------------------- ----------------
<S> <C> <C>
Charles Schwab & Co., Inc.2 37.65% 12,105,232
101 Montgomery Street
San Francisco, CA 94104
Donaldson Lufkin & Jenrette Securities 11.50% 3,700,596
Corporation3
Mutual Funds Dept. 5th Floor
P.O. Box 2052
Jersey City, NJ 07303
National Financial Securities Corp.3 7.19% 2,314,259
P.O. Box 3908
Church Street Station
New York, NY 10008-39083
Bear Stearns Securities Corp.4 5.50% 1,783,558
One Metrotech Center North
Brooklyn, NY 11201-3859
</TABLE>
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.
- ----------
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.
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<PAGE>
The following individuals are affiliated persons of the Trust and Adviser:
<TABLE>
<CAPTION>
CAPACITY WITH FUNDS CAPACITY WITH ADVISER
------------------- ---------------------
<S> <C> <C>
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
</TABLE>
INVESTMENT ADVISORY AGREEMENT
The investment advisory services of the Adviser are furnished to each Fund
pursuant to an Investment Advisory Agreement (the "Investment Advisory
Agreement") dated February 28, 1997 providing for an initial term of two years.
The Investment Advisory Agreement was initially approved for each Fund on
February 11, 1997 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 the Trust on February 11, 1997. 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, 1996, 1995 and 1994, THIRD AVENUE VALUE FUND paid investment
advisory fees to the Adviser of $3,976,741, $1,926,686 and $1,080,459,
respectively.
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<PAGE>
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. 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 THIRD AVENUE VALUE FUND's custodian and Custodial Trust
Company ("Custodial Trust"), 101 Carnegie Center, Princeton, NJ 08540-6231,
serves as THIRD AVENUE SMALL-CAP VALUE FUND's custodian of assets 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
- --------------------------------------------------------------------------------
Page 11
<PAGE>
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 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, 1996, the amount of brokerage transactions and
related commissions that THIRD AVENUE VALUE FUND directed to brokers due to
research services provided were $26,766,137 and $15,500, 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, 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 year
- --------------------------------------------------------------------------------
Page 12
<PAGE>
ended October 31, 1994, the Fund incurred total brokerage commissions of
$250,901, of which approximately $184,209 (or 73%) was paid to MJW and $32,007
(or 13%) was paid to Senior Debt Corp. These amounts include fees paid by MJW to
its clearing agents. Commissions paid by the Fund 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, 1996, THIRD AVENUE VALUE FUND effected 58%
and 0.3% of its total transactions for which commissions were paid through MJW
and Senior Debt Corp., respectively.
At October 31, 1996, THIRD AVENUE VALUE FUND held securities of the following of
the Fund's regular broker-dealers or their parents: Legg Mason Inc. (the market
value of which was $10,803,750 as of October 31, 1996) and Alex Brown Inc. (the
market value of which was $6,702,175 as of October 31, 1996).
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 has qualified and intends 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.
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Page 13
<PAGE>
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.
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. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses.
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
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 one year. 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.
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<PAGE>
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 (October, 1990), through
fiscal year ended October 31, 1996, was 216.25%. THIRD AVENUE VALUE FUND'S
average annual return from inception through fiscal year ended October 31, 1996,
was 21.15 %.
FINANCIAL STATEMENTS
Third Avenue Value Fund, Inc. (the predecessor of THIRD AVENUE VALUE FUND) 1996
financial statements and notes thereto appearing in its 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.
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<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.
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<PAGE>
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.
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.
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<PAGE>
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.
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<PAGE>
BOARD OF TRUSTEES
Phyllis W. Beck
Tibor Fabian
Gerald Hellerman
Marvin Moser
Donald Rappaport
Myron M. Sheinfeld
Martin Shubik
Charles C. Walden
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) 239-4500
(800) 443-1021 (toll-free)
CUSTODIANS
THIRD AVENUE VALUE FUND THIRD AVENUE SMALL-CAP VALUE FUND
North American Trust Company Custodial Trust Company
525 B Street 101 Carnegie Center
San Diego, CA 92101-4492 Princeton, NJ 08540-6231
[LOGO]
767 THIRD AVENUE
NEW YORK, NY 10017
Phone (212) 888-6685
Toll Free (800) 443-1021
www.mjwhitman.com
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Page 19
<PAGE>
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Included in Part A:
Financial Highlights for each of the five years in the period
ended October 31, 1996.
Included in Part B of the Registration Statement: Portfolio of
Investments at October 31, 1996, Statement of Assets and
Liabilities at October 31, 1996, Statements of Operations for
the year ended October 31, 1996, Statement of Changes in Net
Assets for the year ended October 31, 1996, Statement of
Changes in Net Assets for the years ended October 31, 1996 and
1995, Financial Highlights for the years ended October 31,
1996, 1995, 1994, 1993 and 1992 and Notes to Financial
Statements for the year ended October 31, 1996. 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 -- Filed herewith.
(6) Distribution Agreements -- Filed herewith.
(8) Custodian Agreements
(a) Custody Agreement between Third Avenue Trust
on behalf of THIRD AVENUE VALUE FUND and
North American Trust Company -- Filed
herewith.
(b) Custody Agreement between Third Avenue Trust
on behalf of THIRD AVENUE SMALL-CAP VALUE
FUND and Custodial Trust Company -- Filed
herewith.
(9) (a) Transfer Agent Services Agreement -- Filed
herewith.
(b) Administration Agreement -- Filed herewith.
(c) Accounting Services Agreement -- Filed
herewith.
(10) (a) Opinion and Consent of Counsel regarding the
legality of the securities being issued --
Filed herewith.
(11) Consent of Independent Auditors -- Filed herewith.
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Page 1
<PAGE>
(14) Individual Retirement Account Disclosure Statement
and Custodial Account Agreement -- Filed herewith.
(17) Financial Data Schedule -- None.
(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.
Item 26. Number of holders of securities.
Number of Record Holders
Title of Class As of March 17, 1997
Common Stock 20,982
(Par Value $.001)
Item 27. Indemnification.
Reference is made to Article X of the Registrant's Trust
Instrument (filed herewith).
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 March 17, 1997 had approximately $876
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.
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Page 2
<PAGE>
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.
Item 32. Undertakings.
(a) THIRD AVENUE SMALL-CAP VALUE FUND hereby undertakes
to file a post-effective amendment within four to six
months from the effective date of this registration
Statement under the Securities Act of 1933. THIRD
AVENUE SMALL-CAP VALUE FUND understands that such
post-effective amendment will contain reasonably
current financial statements which need not be
certified by independent public accountants.
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Page 3
<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
Pre-Effective Amendment No. 1 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 21st day of March, 1997.
THIRD AVENUE TRUST
Registrant
/s/ Martin J. Whitman
---------------------
Martin J. Whitman, President
Pursuant to the requirements of the Securities Act of 1933, this 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 March 21, 1997
/s/ DONALD RAPPAPORT
- --------------------
Donald Rappaport Trustee March 21, 1997
/s/ PHYLLIS W. BECK
- -------------------
Phyllis W. Beck Trustee March 21, 1997
/s/ MARTIN SHUBIK
- -----------------
Martin Shubik Trustee March 21, 1997
/s/ TIBOR FABIAN
- ----------------
Tibor Fabian Trustee March 21, 1997
/s/ MYRON M. SHEINFELD
- ----------------------
Myron M. Sheinfeld Trustee March 21, 1997
/s/ GERALD HELLERMAN
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Gerald Hellerman Trustee March 21, 1997
/s/ CHARLES C. WALDEN
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Charles C. Walden Trustee March 21, 1997
/s/ MARVIN MOSER
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Marvin Moser Trustee March 21, 1997
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Page 4
<PAGE>
SCHEDULE OF EXHIBITS TO FORM N-1A
Exhibit
Number Exhibit
5. Investment Advisory Contracts
6. Distribution Agreements
8. Custodian Agreements
9(a). Transfer Agent Services Agreement
9(b). Administration Agreement
9(c). Accounting Services Agreement
10(a). Opinion and Consent of Counsel
11 Consent of Independent Auditors
14. Individual Retirement Account Disclosure Statement
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Third Avenue Trust -- Draft Dated March 21, 1997
Page 5
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") made this 28th day of February
1997, by and between THIRD AVENUE TRUST, a Delaware trust (the "Trust"), on
behalf of the Third Avenue Value Fund series of the Trust (the "Fund"), and EQSF
ADVISERS, INC., a New York corporation (the "Adviser").
RECITALS:
The Fund and the Adviser wish to enter into an Agreement setting forth the terms
and conditions under which the Adviser will perform certain investment advisory
and management services for the Fund, and be compensated for such services by
the Fund.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the Fund and the Adviser hereby agree as follows:
1. Investment Advisory Services.
1.1 During the Term (as such term is defined in Section 5 hereof) of this
Agreement, the Adviser shall serve as the investment adviser (within the meaning
of the Investment Advisers Act of 1940, as amended) of the Fund. In such
capacity, the Adviser shall render the following services and perform the
following functions for and on behalf of the Fund:
(a) Furnish continuous advice and recommendations to the Fund with respect to
the acquisition, holding or disposition of any or all of the securities or other
assets which the Fund may own or contemplate acquiring from time to time;
(b) Cause its officers to attend meetings and furnish oral or written reports,
as the Fund reasonably may request, in order to keep the Trustees and
appropriate officers of the Fund fully informed regarding the investment
portfolio of the Fund, the investment recommendations of the Adviser, and the
considerations which form the basis for such recommendations; and
(c) Supervise the purchase and sale of securities in accordance with the
direction of the appropriate officers of the Fund.
1.2 The services of the Adviser to the Fund are not exclusive, and nothing
contained herein shall be deemed or construed to prohibit, limit, or otherwise
restrict the Adviser from rendering investment or other advisory services to any
third person, whether similar to those to be provided to the Fund hereunder or
otherwise.
2. Compensation of Adviser.
2.1 For its services hereunder, the Fund shall pay the Adviser a fee (the
"Fee"), payable monthly in arrears, in an amount which shall be calculated as
follows, subject to the provisions of Section 2.2 hereof:
(a) 1/12 of .90% of the average daily net assets of the Fund for such
month.
2.2 Notwithstanding the provisions of Section 2.1 hereof, the amount of the Fee
to be paid with respect to the first and last months of this Agreement shall be
pro rated based on the number of calendar days in such quarter.
<PAGE>
3. Expenses Paid by the Adviser.
3.1 Subject to the provisions of Section 3.2 hereof, the Adviser shall pay the
following expenses relating to the management and operation of the Fund:
(a) All reasonable fees, charges, costs and expenses (collectively, "Costs") and
all reasonable compensation of all officers and trustees of the Fund relating to
the performance of their duties to the Fund; provided, however, that the Adviser
shall not pay any such amounts to any Outside Trustees (for purposes of this
Agreement, an "Outside Trustee" is any trustee of the Fund who is not an
"Interested Person," within the meaning of Section 2(a)(19) of the Investment
Company Act of 1940, as amended (the "1940 Act")); and provided, further, that
in the event that any person serving as an officer of the Fund has both
executive duties attendant to such office and administrative duties to the Fund
apart from such office, the Adviser shall not pay any amounts relating to the
performance of such administrative duties;
(b) All Costs of office equipment and personnel necessary for and allocable to
the performance of the obligations of the Adviser hereunder.
3.2 Except as provided in this Section 3 hereof, nothing contained in this
Agreement shall be deemed or construed to impose upon the Adviser any obligation
to incur, pay, or reimburse the Fund for any other Costs of or relating to the
Fund.
4. Expenses Paid by the Fund.
4.1 Except as provided in Section 3 hereof, the Fund hereby assumes and shall
pay all fees, costs and expenses incurred by, or on behalf, or for the benefit
of the Fund, including without limitation:
(a) All Costs of any custodian or depository;
(b) All Costs for bookkeeping, accounting and auditors' services;
(c) All Costs of leased office space of or allocable to the Fund within the
offices of the Adviser or in such other place as may be mutually agreed upon
between the parties from time to time; and
(d) All Costs of any transfer agent and registrar of shares of the Fund
("Shares");
(e) All Costs incurred by any Outside Trustee of the Fund in connection with the
performance of his duties relating to the affairs of the Fund in such capacity
as an Outside Trustee of the Fund, and Costs relating to the performance by any
officer of the Fund, performing duties on behalf of the Fund apart from such
office, all in accordance with Section 3.1 (a) hereof;
(f) All brokers' commissions and other Costs incurred in connection with the
execution of Fund portfolio transactions;
(g) All taxes and other Costs payable by or on behalf of the Fund to federal,
state or other governmental agencies;
(h) All Costs of printing, recording and transferring certificates representing
Shares;
<PAGE>
(i) All Costs in connection with the registration of the Fund and the Shares
with the Securities and Exchange Commission ("SEC"), and the continuous
maintenance of the effectiveness of such registrations, and the registration and
qualification of shares of the Fund under state or other securities laws,
including, without limitation, the preparation and printing of registration
statements, prospectuses and statements of additional information for filing
with the SEC and other authorities;
(j) All Costs of preparing, printing and mailing prospectuses, statements of
additional information and reports to holders of Shares;
(k) All Costs of shareholders' and Trustees' meetings and of preparing, printing
and mailing all information and documents, including without limitation all
notices, financial reports and proxy materials, to holders of Shares;
(1) All Costs of legal counsel for the Fund and for Trustees of the Fund in
connection with the rendering of legal advice to or on behalf of the Fund,
including, without limitation, legal services rendered in connection with the
Fund's existence, corporate and financial structure and relations with its
shareholders, registrations and qualifications of securities under federal,
state and other laws, issues of securities, expenses which the Fund has herein
assumed whether customary or not, and extraordinary matters, including, without
limitation, any litigation involving the Fund, Trustees, or officers of the Fund
relating to the affairs of the Fund, employees or agents of the Fund; and
(m) All Costs of filing annual and other reports with the SEC and other
regulatory authorities.
In the event that the Adviser provides any of the foregoing services or pays any
of these expenses, the Fund promptly shall reimburse the Adviser therefor.
5. Term; Termination.
5.1 This Agreement shall continue in effect, unless sooner terminated in
accordance with the provisions of Section 5.2 hereof, for a period of two years
beginning the date hereof, and shall continue in effect from year to year
thereafter (collectively, the "Term"); provided, however, that any such
continuation shall be expressly approved at least annually either by the Board
of Trustees of the Fund, including a majority of the directors who are not
parties hereto or Interested Persons of any such party, cast at a meeting called
for the purpose of voting on such renewal, or the affirmative vote of a majority
of the Outstanding Voting Securities (as such term is defined in Section
2(a)(42) of the 1940 Act) of the Fund.
(a) Any continuation of this Agreement pursuant to Section 5.1 hereof shall be
deemed to be specifically approved if such approval occurs:
(i) with respect to the first continuation hereof, during the 60 days prior to
and including the earlier of (A) the date specified herein for the termination
of this Agreement in the absence of such approval, or (B) the second anniversary
of the execution of this Agreement; and
(ii) with respect to any subsequent continuation hereof, during the 60 days
prior to and including the first anniversary of the date upon which the most
recent previous annual continuance of this Agreement became effective; or
<PAGE>
(iii) at such other date or time provided in or permitted by Rule 15a-2 of the
1940 Act.
5.2 This Agreement may be terminated at any time, without penalty, as follows:
(a) By a majority of the Trustees of the Fund who are not parties hereto or
Interested Persons of any such party, or by the affirmative vote of a majority
of the Outstanding Voting Securities of the Fund, upon at least 60 days' prior
written notice to the Adviser at its principal place of business; and
(b) By the Adviser, upon at least 60 days' written notice to the Fund at its
principal place of business.
6. Retention of Control by Fund. The Fund acknowledges that the investment
advice and recommendations to be provided by the Adviser hereunder are advisory
in nature only. The Fund further acknowledges that, at all times during the Term
hereof, the Fund (and not the Adviser) shall retain full control over the
investment policies of the Fund. Nothing contained herein shall be deemed or
construed to limit, prohibit or restrict the right or ability of the trustees of
the Fund to delegate to the appropriate officers of the Fund, or to a committee
of trustees of the Fund, the power to authorize purchases, sales or other
actions affecting the portfolio of the Fund between meetings of the Board of
Trustees of the Fund; provided, however, that all such purchases, sales or other
actions so taken during such time shall be consistent with the investment policy
of the Fund and shall be reported to the Board of Trustees of the Fund at its
next regularly scheduled meeting.
7. Brokers and Brokerage Commissions.
7.1 For purposes of this Agreement, brokerage commissions paid by the Fund upon
the purchase or sale of the Fund's portfolio securities shall be considered a
cost of securities of the Fund and shall be paid by the Fund in accordance with
Section 4.1(e) hereof.
7.2 The Adviser shall place Fund 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; provided, however, that the Adviser
may pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting such transaction, if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, in terms
of either that particular transaction or the overall responsibilities of the
Adviser.
7.3 In placing portfolio business with broker-dealers for or on behalf of the
Fund, the Adviser shall seek the best execution of each such transaction, and
all such brokerage placements shall be consistent with the Rules of Conduct of
the National Association of Securities Dealers, Inc. Notwithstanding the
foregoing, the Fund shall retain the right to direct the placement of all
portfolio transactions for or on behalf of the Fund, and, in furtherance
thereof, the Fund may establish policies or guidelines to be followed by the
Adviser in its placement of Fund portfolio transactions pursuant to the
foregoing provisions. The Adviser shall report to the Board of Trustees of the
Fund at least on a quarterly basis regarding the placement of Fund portfolio
transactions.
<PAGE>
7.4 The Adviser shall not deal with any affiliate in any transaction hereunder
in which such affiliate acts as a principal, nor shall the Adviser, in rendering
services to the Fund hereunder, execute any negotiated trade with any affiliate
if execution thereof involves such affiliate's acting as a principal with
respect to any part of an order for or on behalf of the Fund.
8. Purchases by Affiliates. Neither the Adviser nor any officer or director
thereof shall take a short position in Shares of the Fund. Any direct purchase
of Shares of the Fund by any officer or director of the Fund (or by any defined
benefit plan established for the benefit of such officer or director) shall be
made for investment purposes at the current price for such Shares available to
the public.
9. Assignment. This Agreement may not be assigned by either party hereto. This
Agreement shall terminate automatically in the event of any assignment (as such
term is defined in Section 2(a)(4) of the 1940 Act). Any attempted assignment of
this Agreement shall be of no force and effect.
10. Amendments. This Agreement may be amended in writing signed by both parties
hereto; provided, however, that no such amendment shall be effective unless
approved by a majority of the trustees of the Fund who are not parties hereto or
Interested Persons of any such party cast at a meeting called for the purpose of
voting on such amendment and by the affirmative vote of a majority of the
outstanding Voting Securities of the Fund.
11. Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
reference to the conflict of laws provisions thereof. In the event of any
inconsistency between this Agreement and the 1940 Act, the 1940 Act shall
govern, and the inconsistent provisions of this Agreement shall be construed so
as to eliminate such inconsistency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
The Fund:
THIRD AVENUE TRUST, for the Third Avenue Value Fund series
By:
David M. Barse
Executive Vice President
The Adviser:
EQSF ADVISERS, INC.
By:
Martin J. Whitman
President
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") made this 28th day of February
1997, by and between THIRD AVENUE TRUST, a Delaware trust (the "Trust"), on
behalf of the Third Avenue Small-Cap Value Fund series of the Trust (the
"Fund"), and EQSF ADVISERS, INC., a New York corporation (the "Adviser").
RECITALS:
The Fund and the Adviser wish to enter into an Agreement setting forth the terms
and conditions under which the Adviser will perform certain investment advisory
and management services for the Fund, and be compensated for such services by
the Fund.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the Fund and the Adviser hereby agree as follows:
1. Investment Advisory Services.
1.1 During the Term (as such term is defined in Section 5 hereof) of this
Agreement, the Adviser shall serve as the investment adviser (within the meaning
of the Investment Advisers Act of 1940, as amended) of the Fund. In such
capacity, the Adviser shall render the following services and perform the
following functions for and on behalf of the Fund:
(a) Furnish continuous advice and recommendations to the Fund with respect to
the acquisition, holding or disposition of any or all of the securities or other
assets which the Fund may own or contemplate acquiring from time to time;
(b) Cause its officers to attend meetings and furnish oral or written reports,
as the Fund reasonably may request, in order to keep the Trustees and
appropriate officers of the Fund fully informed regarding the investment
portfolio of the Fund, the investment recommendations of the Adviser, and the
considerations which form the basis for such recommendations; and
(c) Supervise the purchase and sale of securities in accordance with the
direction of the appropriate officers of the Fund.
1.2 The services of the Adviser to the Fund are not exclusive, and nothing
contained herein shall be deemed or construed to prohibit, limit, or otherwise
restrict the Adviser from rendering investment or other advisory services to any
third person, whether similar to those to be provided to the Fund hereunder or
otherwise.
2. Compensation of Adviser.
2.1 For its services hereunder, the Fund shall pay the Adviser a fee (the
"Fee"), payable monthly in arrears, in an amount which shall be calculated as
follows, subject to the provisions of Section 2.2 hereof:
(a) 1/12 of .90% of the average daily net assets of the Fund for such month.
2.2 Notwithstanding the provisions of Section 2.1 hereof, the amount of the Fee
to be paid with respect to the first and last months of this Agreement shall be
pro rated based on the number of calendar days in such quarter.
<PAGE>
3. Expenses Paid by the Adviser.
3.1 Subject to the provisions of Section 3.2 hereof, the Adviser shall pay the
following expenses relating to the management and operation of the Fund:
(a) All reasonable fees, charges, costs and expenses (collectively, "Costs") and
all reasonable compensation of all officers and trustees of the Fund relating to
the performance of their duties to the Fund; provided, however, that the Adviser
shall not pay any such amounts to any Outside Trustees (for purposes of this
Agreement, an "Outside Trustee" is any trustee of the Fund who is not an
"Interested Person," within the meaning of Section 2(a)(19) of the Investment
Company Act of 1940, as amended (the "1940 Act")); and provided, further, that
in the event that any person serving as an officer of the Fund has both
executive duties attendant to such office and administrative duties to the Fund
apart from such office, the Adviser shall not pay any amounts relating to the
performance of such administrative duties;
(b) All Costs of office equipment and personnel necessary for and allocable to
the performance of the obligations of the Adviser hereunder.
3.2 Except as provided in this Section 3 hereof, nothing contained in this
Agreement shall be deemed or construed to impose upon the Adviser any obligation
to incur, pay, or reimburse the Fund for any other Costs of or relating to the
Fund.
4. Expenses Paid by the Fund.
4.1 Except as provided in Section 3 hereof, the Fund hereby assumes and shall
pay all fees, costs and expenses incurred by, or on behalf, or for the benefit
of the Fund, including without limitation:
(a) All Costs of any custodian or depository;
(b) All Costs for bookkeeping, accounting and auditors' services;
(c) All Costs of leased office space of or allocable to the Fund within the
offices of the Adviser or in such other place as may be mutually agreed upon
between the parties from time to time; and
(d) All Costs of any transfer agent and registrar of shares of the Fund
("Shares");
(e) All Costs incurred by any Outside Trustee of the Fund in connection with the
performance of his duties relating to the affairs of the Fund in such capacity
as an Outside Trustee of the Fund, and Costs relating to the performance by any
officer of the Fund, performing duties on behalf of the Fund apart from such
office, all in accordance with Section 3.1 (a) hereof;
(f) All brokers' commissions and other Costs incurred in connection with the
execution of Fund portfolio transactions;
(g) All taxes and other Costs payable by or on behalf of the Fund to federal,
state or other governmental agencies;
(h) All Costs of printing, recording and transferring certificates representing
Shares;
<PAGE>
(i) All Costs in connection with the registration of the Fund and the Shares
with the Securities and Exchange Commission ("SEC"), and the continuous
maintenance of the effectiveness of such registrations, and the registration and
qualification of shares of the Fund under state or other securities laws,
including, without limitation, the preparation and printing of registration
statements, prospectuses and statements of additional information for filing
with the SEC and other authorities;
(j) All Costs of preparing, printing and mailing prospectuses, statements of
additional information and reports to holders of Shares;
(k) All Costs of shareholders' and Trustees' meetings and of preparing, printing
and mailing all information and documents, including without limitation all
notices, financial reports and proxy materials, to holders of Shares;
(1) All Costs of legal counsel for the Fund and for Trustees of the Fund in
connection with the rendering of legal advice to or on behalf of the Fund,
including, without limitation, legal services rendered in connection with the
Fund's existence, corporate and financial structure and relations with its
shareholders, registrations and qualifications of securities under federal,
state and other laws, issues of securities, expenses which the Fund has herein
assumed whether customary or not, and extraordinary matters, including, without
limitation, any litigation involving the Fund, Trustees, or officers of the Fund
relating to the affairs of the Fund, employees or agents of the Fund; and
(m) All Costs of filing annual and other reports with the SEC and other
regulatory authorities.
In the event that the Adviser provides any of the foregoing services or pays any
of these expenses, the Fund promptly shall reimburse the Adviser therefor.
5. Term; Termination.
5.1 This Agreement shall continue in effect, unless sooner terminated in
accordance with the provisions of Section 5.2 hereof, for a period of two years
beginning the date hereof, and shall continue in effect from year to year
thereafter (collectively, the "Term"); provided, however, that any such
continuation shall be expressly approved at least annually either by the Board
of Trustees of the Fund, including a majority of the directors who are not
parties hereto or Interested Persons of any such party, cast at a meeting called
for the purpose of voting on such renewal, or the affirmative vote of a majority
of the Outstanding Voting Securities (as such term is defined in Section
2(a)(42) of the 1940 Act) of the Fund.
(a) Any continuation of this Agreement pursuant to Section 5.1 hereof shall be
deemed to be specifically approved if such approval occurs:
(i) with respect to the first continuation hereof, during the 60 days prior to
and including the earlier of (A) the date specified herein for the termination
of this Agreement in the absence of such approval, or (B) the second anniversary
of the execution of this Agreement; and
(ii) with respect to any subsequent continuation hereof, during the 60 days
prior to and including the first anniversary of the date upon which the most
recent previous annual continuance of this Agreement became effective; or
<PAGE>
(iii) at such other date or time provided in or permitted by Rule 15a-2 of the
1940 Act.
5.2 This Agreement may be terminated at any time, without penalty, as follows:
(a) By a majority of the Trustees of the Fund who are not parties hereto or
Interested Persons of any such party, or by the affirmative vote of a majority
of the Outstanding Voting Securities of the Fund, upon at least 60 days' prior
written notice to the Adviser at its principal place of business; and
(b) By the Adviser, upon at least 60 days' written notice to the Fund at its
principal place of business.
6. Retention of Control by Fund. The Fund acknowledges that the investment
advice and recommendations to be provided by the Adviser hereunder are advisory
in nature only. The Fund further acknowledges that, at all times during the Term
hereof, the Fund (and not the Adviser) shall retain full control over the
investment policies of the Fund. Nothing contained herein shall be deemed or
construed to limit, prohibit or restrict the right or ability of the trustees of
the Fund to delegate to the appropriate officers of the Fund, or to a committee
of trustees of the Fund, the power to authorize purchases, sales or other
actions affecting the portfolio of the Fund between meetings of the Board of
Trustees of the Fund; provided, however, that all such purchases, sales or other
actions so taken during such time shall be consistent with the investment policy
of the Fund and shall be reported to the Board of Trustees of the Fund at its
next regularly scheduled meeting.
7. Brokers and Brokerage Commissions.
7.1 For purposes of this Agreement, brokerage commissions paid by the Fund upon
the purchase or sale of the Fund's portfolio securities shall be considered a
cost of securities of the Fund and shall be paid by the Fund in accordance with
Section 4.1(e) hereof.
7.2 The Adviser shall place Fund 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; provided, however, that the Adviser
may pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting such transaction, if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, in terms
of either that particular transaction or the overall responsibilities of the
Adviser.
7.3 In placing portfolio business with broker-dealers for or on behalf of the
Fund, the Adviser shall seek the best execution of each such transaction, and
all such brokerage placements shall be consistent with the Rules of Conduct of
the National Association of Securities Dealers, Inc. Notwithstanding the
foregoing, the Fund shall retain the right to direct the placement of all
portfolio transactions for or on behalf of the Fund, and, in furtherance
thereof, the Fund may establish policies or guidelines to be followed by the
Adviser in its placement of Fund portfolio transactions pursuant to the
foregoing provisions. The Adviser shall report to the Board of Trustees of the
Fund at least on a quarterly basis regarding the placement of Fund portfolio
transactions.
<PAGE>
7.4 The Adviser shall not deal with any affiliate in any transaction hereunder
in which such affiliate acts as a principal, nor shall the Adviser, in rendering
services to the Fund hereunder, execute any negotiated trade with any affiliate
if execution thereof involves such affiliate's acting as a principal with
respect to any part of an order for or on behalf of the Fund.
8. Purchases by Affiliates. Neither the Adviser nor any officer or director
thereof shall take a short position in Shares of the Fund. Any direct purchase
of Shares of the Fund by any officer or director of the Fund (or by any defined
benefit plan established for the benefit of such officer or director) shall be
made for investment purposes at the current price for such Shares available to
the public.
9. Assignment. This Agreement may not be assigned by either party hereto. This
Agreement shall terminate automatically in the event of any assignment (as such
term is defined in Section 2(a)(4) of the 1940 Act). Any attempted assignment of
this Agreement shall be of no force and effect.
10. Amendments. This Agreement may be amended in writing signed by both parties
hereto; provided, however, that no such amendment shall be effective unless
approved by a majority of the trustees of the Fund who are not parties hereto or
Interested Persons of any such party cast at a meeting called for the purpose of
voting on such amendment and by the affirmative vote of a majority of the
outstanding Voting Securities of the Fund.
11. Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
reference to the conflict of laws provisions thereof. In the event of any
inconsistency between this Agreement and the 1940 Act, the 1940 Act shall
govern, and the inconsistent provisions of this Agreement shall be construed so
as to eliminate such inconsistency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
The Fund:
THIRD AVENUE TRUST, for the Third Avenue Small-Cap Value Fund series
By:
David M. Barse
Executive Vice President
The Adviser:
EQSF ADVISERS, INC.
By:
Martin J. Whitman
President
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of February 28, 1997 between
THIRD AVENUE TRUST, a Delaware trust (the "Trust") on behalf of the Third Avenue
Value Fund series of the Trust (the "Fund"), and M.J. WHITMAN, INC., a New York
corporation (the "Distributor").
RECITALS
1. The Trust is registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), as an open-end management investment company and
it is affirmatively in the interest of the Fund to offer its shares for sales
continuously.
2. The Distributor is a broker-dealer registered under the Securities Exchange
Act of 1934, as amended.
3. The Fund and the Distributor wish to enter into an agreement with each other
with respect to the continuous offering of the Fund's Common Stock $.001 par
value (the "shares") in order to assist in the sale and distribution of shares
of the Fund.
In consideration of the promises and the covenants hereinafter contained, the
Fund and the Distributor hereby agree as follows:
1. Appointment of the Distributor. The Fund hereby appoints the Distributor as
agent for the Fund, to assist in the sale and distribution of shares of the Fund
to the public, upon the terms and conditions and during the term of this
Agreement, and the Distributor hereby accepts such appointment and agrees to act
hereunder.
2. Nature of Duties. The Distributor shall (i) assist in the sale and
distribution of the Fund's shares and (ii) qualify and maintain the
qualification as a broker-dealer in such states where shares of the Fund are
registered for sale.
3. Sale of Shares of the Fund.
3.1. The Distributor will have the right to sell on behalf of the Fund, as its
agent, any shares needed but not more than the shares needed (except for
clerical errors in transmission) to fill unconditional orders for shares of the
Fund placed with the Distributor by investors. The Distributor agrees that the
Fund shall receive 100% of the net asset value, determined as set forth in the
Prospectus, for all shares sold by the Distributor.
3.2. The shares are to be sold by or through the Distributor to investors at a
price per share ("offering price") equal to the sum of the net asset value per
share determined as set forth in the Prospectus.
3.3. The Fund shall have the right to suspend the sale of shares at times when
redemption is suspended pursuant to the conditions set forth in subsection 4.2.
The Fund shall also have the right to suspend the sale of shares if a banking
moratorium shall have been declared by federal or New York authorities, if there
shall have been some other event, that, in the judgment of the Trustees of the
Fund makes it impracticable or inadvisable to sell shares, or if in the judgment
of the Trustees, the suspension of the sale of shares is in the best interests
of the Fund.
<PAGE>
3.4. The Fund, or any agent of the Fund designated in writing by the Fund, shall
be promptly advised of all purchase orders for shares received by the
Distributor. Any order may be rejected by the Fund for any reason whatsoever.
The Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its agent) of payment
therefore, will deliver deposit receipts or certificates for such shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds, or by federal funds wire, cashiers check
or certified check. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
4. Repurchase or Redemption of Shares of the Fund.
4.1. Any of the outstanding shares may be tendered for redemption at any time,
and the Fund agrees to repurchase or redeem the shares so tendered in accordance
with its obligations set forth in Article IX of the Trust Instrument of the
Trust, as amended from time to time, and the applicable provision set forth in
the Prospectus.
4.2. Redemption of shares or payment may be suspended: 1) at times when the New
York Stock Exchange is closed other than customary weekend closings and holiday
closings, 2) when pursuant to rules and regulations of the Securities and
Exchange Commission (the "SEC"), trading on said Exchange is restricted or an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or 3) during any other
period when the SEC, by order, so permits.
5. Duties of the Fund.
5.1. The Fund shall make available to the Distributor, at the Fund's expense,
such number of copies of its Prospectus, quarterly reports and annual financial
statements as the Distributor shall reasonably request.
5.2. The Fund will qualify and maintain the qualifications, at the Fund's
expense, of an appropriate number of its shares for sale under the securities
laws of such state as selected by the Fund.
6. Duties of the Distributor.
6.1. The Distributor shall devote reasonable time and effort to effect sales of
shares of the Fund, but shall not be obligated to sell any specific number of
shares. The Distributor will qualify and maintain the qualifications, at the
Distributor's expense, of its registration as a broker-dealer in such states
where shares of the Fund are qualified for sale.
The services of the Distributor to the Fund hereunder are not to be deemed
exclusive and nothing contained herein shall prevent the Distributor from
entering into like arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
6.2. In selling the shares of the Fund, the Distributor shall use all reasonable
efforts to conform in all respects with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any other person is authorized by the Fund to give any information or to make
any representations other than those contained in the Registration Statement or
related Prospectus or in any sales literature
<PAGE>
specifically approved in writing by the Fund.
6.3. The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors, the collection
of amounts payable by investors on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (the "NASD"), as such
requirements may from time to time exist.
6.4. The Distributor warrants and represents that it is, and agrees to use all
commercially reasonable efforts to remain at all times, a member in good
standing of the NASD with authority to act as the Distributor.
7. Allocation of Expenses.
7.1. The Distributor shall bear all expenses incurred by it in connection with
its duties and activities under this Agreement, including the costs and expenses
of qualifying and maintaining the qualifications of its registration as a
broker-dealer in such states where shares of the Fund are qualified for sale,
preparing, printing and distributing any sales literature, advertising and other
materials which it creates for its use as Distributor.
7.2. Except as provided in subsection 7.1 hereof, nothing contained in this
Agreement shall be deemed or construed to impose upon the Distributor any
obligation to incur, pay, or reimburse the Fund for any other costs and
expenses.
7.3. The Fund shall bear the following costs and expenses related to the
continuous offering of its shares, including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required registration statements and Prospectuses under the Investment Company
Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such registration statements, Prospectuses, annual or interim reports or proxy
materials).
7.4. Except as provided in subsection 7.3 hereof, nothing contained in this
Agreement shall be deemed or construed to impose upon the Fund any obligation to
incur, pay, or reimburse the Distributor for any other costs and expenses.
8. Indemnification.
8.1. The Fund agrees to indemnify, defend and hold harmless the Distributor, its
officers, directors, employees, agents, and any person who controls the
Distributor, if any, within the meaning of Section 15 of the Securities Act
(each, an "Indemnified Distributor Party" and collectively, the "Indemnified
Distributor Parties"), from and against any and all claims, demands, actions,
liabilities, losses, costs and expenses (including the cost of investigating or
defending same, and any reasonable attorneys' fees and expenses incurred in
connection therewith) (collectively, "Liabilities") which the Indemnified
Distributor Parties may incur which arise out of or are based upon (a) any
untrue statement of a material fact contained in the Registration Statement,
Prospectus or annual or interim report or (b) any omission to state a material
fact required to be stated in any thereof or necessary to make the statements in
any thereof not misleading, except insofar as such Liabilities arise out of or
are based upon any such untrue statement or omission or untrue statement or
<PAGE>
omission made in reliance upon and in conformity with information furnished to
the Fund in writing in connection therewith by or on behalf of the Distributor;
provided, however, that the indemnity agreement in this Section 8.1 shall not
inure to the benefit of any Indemnified Distributor Party unless (i) a court of
competent jurisdiction shall have determined, in a final unappealable decision
on the merits, that such Indemnified Distributor Party was not liable, by reason
of willful misfeasance, bad faith, or gross negligence in the performance of its
or his duties, or by reason of its or his reckless disregard of its or his
obligations under this Agreement (collectively, "disabling conduct"), or (ii) in
the absence of such a judicial decision, a reasonable determination, based upon
a review of the facts, that the indemnified person was not liable by reason of
disabling conduct, evidenced by either (A) the vote of a majority of trustees
who are neither "interested persons" of the Fund as defined in Section 2(a) (19)
of the Securities Act nor parties to the proceeding or matter in question, or
(B) the written opinion of independent legal counsel. The Fund's indemnification
obligation as aforesaid is expressly conditioned upon the Fund's being promptly
notified, by letter or telegram addressed to the Fund at its principal business
office, of any Liability of or against any Indemnified Distributor Person. The
Fund agrees promptly to notify the Distributor of the commencement of any
litigation or proceeding against the Fund or any Indemnified Fund Parties (as
defined below) in connection with the issue and sale of any Fund shares.
8.2. The Distributor agrees to indemnify, defend and hold harmless the Fund, its
officers, directors, employees, agents and any person who controls the Fund, if
any, within the meaning of Section 15 of the Securities Act (each, an
"Indemnified Fund Party" and collectively, the "Indemnified Fund Parties"), from
and against any and all Liabilities which the Indemnified Fund Parties may incur
which arise out of or are based upon (a) any untrue statement of a material fact
contained in information furnished to the Fund in writing by or on behalf of the
Distributor for use in the Registration Statement or Prospectus or any omission
to state a material fact in connection with such information required to be
stated in the Registration Statement, Prospectus or annual or interim report or
necessary to make such information not misleading; or (b) any acts or omissions
by the Indemnified Distributor Parties in connection with the performance of the
Distributor's obligations hereunder. The Distributor's indemnification agreement
as aforesaid is expressly conditioned upon the Distributor's being promptly
notified, by letter or telegram addressed to the Distributor at its principal
business office, of any Liability of or against any Indemnified Distributor
Party.
9. Duration and Termination of the Agreement.
9.1. This Agreement shall become effective as of the date first written above
and shall remain in force from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Fund's Board
of Trustees or by the vote of a majority of the outstanding voting securities
of the Fund, and (ii) by the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting or meetings called for the purpose of voting on such
approval.
9.2. This Agreement may be terminated at any time, without the payment of any
penalty, by the Fund's Board of Trustees or by vote of a vote of a majority of
the outstanding voting securities of the Fund, or by the Distributor, on sixty
days written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
<PAGE>
10. Definition of Certain Terms. The terms "vote of a majority of the
outstanding voting securities," "assignment," "affiliated person," and
"interested person," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act and the rules and regulations
of the Commission thereunder.
11. Amendments of This Agreement. This Agreement may be amended by the parties
only if such amendment is specifically approved by (i) the Fund's Board of
Trustees or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those trustees of the Fund who are
not interested persons of either party to this Agreement, cast in person at a
meeting or meetings called for the purpose of voting on such approval.
12. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York, and the
applicable provisions of the Investment Company Act. To the extent that the
applicable laws of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act or the
rules and regulations thereunder, the latter shall control.
The parties hereto have executed this Agreement as of the day and year first
above written.
THIRD AVENUE TRUST, for the Third Avenue Value Fund series
By:
Name: Martin J. Whitman
Title: President
M. J. WHITMAN, INC
By:
Name: David Barse
Title: President
<PAGE>
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of February 28, 1997 between
THIRD AVENUE TRUST, a Delaware trust (the "Trust") on behalf of the Third Avenue
Small-Cap Value Fund series of the Trust (the "Fund"), and M.J. WHITMAN, INC., a
New York corporation (the "Distributor").
RECITALS
1. The Trust is registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), as an open-end management investment company and
it is affirmatively in the interest of the Fund to offer its shares for sales
continuously.
2. The Distributor is a broker-dealer registered under the Securities Exchange
Act of 1934, as amended.
3. The Fund and the Distributor wish to enter into an agreement with each other
with respect to the continuous offering of the Fund's Common Stock $.001 par
value (the "shares") in order to assist in the sale and distribution of shares
of the Fund.
In consideration of the promises and the covenants hereinafter contained, the
Fund and the Distributor hereby agree as follows:
1. Appointment of the Distributor. The Fund hereby appoints the Distributor as
agent for the Fund, to assist in the sale and distribution of shares of the Fund
to the public, upon the terms and conditions and during the term of this
Agreement, and the Distributor hereby accepts such appointment and agrees to act
hereunder.
2. Nature of Duties. The Distributor shall (i) assist in the sale and
distribution of the Fund's shares and (ii) qualify and maintain the
qualification as a broker-dealer in such states where shares of the Fund are
registered for sale.
3. Sale of Shares of the Fund.
3.1. The Distributor will have the right to sell on behalf of the Fund, as its
agent, any shares needed but not more than the shares needed (except for
clerical errors in transmission) to fill unconditional orders for shares of the
Fund placed with the Distributor by investors. The Distributor agrees that the
Fund shall receive 100% of the net asset value, determined as set forth in the
Prospectus, for all shares sold by the Distributor.
3.2. The shares are to be sold by or through the Distributor to investors at a
price per share ("offering price") equal to the sum of the net asset value per
share determined as set forth in the Prospectus.
3.3. The Fund shall have the right to suspend the sale of shares at times when
redemption is suspended pursuant to the conditions set forth in subsection 4.2.
The Fund shall also have the right to suspend the sale of shares if a banking
moratorium shall have been declared by federal or New York authorities, if there
shall have been some other event, that, in the judgment of the Trustees of the
Fund makes it impracticable or inadvisable to sell shares, or if in the judgment
of the Trustees, the suspension of the sale of shares is in the best interests
of the Fund.
<PAGE>
3.4. The Fund, or any agent of the Fund designated in writing by the Fund, shall
be promptly advised of all purchase orders for shares received by the
Distributor. Any order may be rejected by the Fund for any reason whatsoever.
The Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its agent) of payment
therefore, will deliver deposit receipts or certificates for such shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds, or by federal funds wire, cashiers check
or certified check. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
4. Repurchase or Redemption of Shares of the Fund.
4.1. Any of the outstanding shares may be tendered for redemption at any time,
and the Fund agrees to repurchase or redeem the shares so tendered in accordance
with its obligations set forth in Article IX of the Trust Instrument of the
Trust, as amended from time to time, and the applicable provision set forth in
the Prospectus.
4.2. Redemption of shares or payment may be suspended: 1) at times when the New
York Stock Exchange is closed other than customary weekend closings and holiday
closings, 2) when pursuant to rules and regulations of the Securities and
Exchange Commission (the "SEC"), trading on said Exchange is restricted or an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or 3) during any other
period when the SEC, by order, so permits.
5. Duties of the Fund.
5.1. The Fund shall make available to the Distributor, at the Fund's expense,
such number of copies of its Prospectus, quarterly reports and annual financial
statements as the Distributor shall reasonably request.
5.2. The Fund will qualify and maintain the qualifications, at the Fund's
expense, of an appropriate number of its shares for sale under the securities
laws of such state as selected by the Fund.
6. Duties of the Distributor.
6.1. The Distributor shall devote reasonable time and effort to effect sales of
shares of the Fund, but shall not be obligated to sell any specific number of
shares. The Distributor will qualify and maintain the qualifications, at the
Distributor's expense, of its registration as a broker-dealer in such states
where shares of the Fund are qualified for sale.
The services of the Distributor to the Fund hereunder are not to be deemed
exclusive and nothing contained herein shall prevent the Distributor from
entering into like arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
6.2. In selling the shares of the Fund, the Distributor shall use all reasonable
efforts to conform in all respects with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any other person is authorized by the Fund to give any information or to make
any representations other than those contained in the Registration Statement or
related Prospectus or in any sales literature
<PAGE>
specifically approved in writing by the Fund.
6.3. The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors, the collection
of amounts payable by investors on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (the "NASD"), as such
requirements may from time to time exist.
6.4. The Distributor warrants and represents that it is, and agrees to use all
commercially reasonable efforts to remain at all times, a member in good
standing of the NASD with authority to act as the Distributor.
7. Allocation of Expenses.
7.1. The Distributor shall bear all expenses incurred by it in connection with
its duties and activities under this Agreement, including the costs and expenses
of qualifying and maintaining the qualifications of its registration as a
broker-dealer in such states where shares of the Fund are qualified for sale,
preparing, printing and distributing any sales literature, advertising and other
materials which it creates for its use as Distributor.
7.2. Except as provided in subsection 7.1 hereof, nothing contained in this
Agreement shall be deemed or construed to impose upon the Distributor any
obligation to incur, pay, or reimburse the Fund for any other costs and
expenses.
7.3. The Fund shall bear the following costs and expenses related to the
continuous offering of its shares, including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required registration statements and Prospectuses under the Investment Company
Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such registration statements, Prospectuses, annual or interim reports or proxy
materials).
7.4. Except as provided in subsection 7.3 hereof, nothing contained in this
Agreement shall be deemed or construed to impose upon the Fund any obligation to
incur, pay, or reimburse the Distributor for any other costs and expenses.
8. Indemnification.
8.1. The Fund agrees to indemnify, defend and hold harmless the Distributor, its
officers, directors, employees, agents, and any person who controls the
Distributor, if any, within the meaning of Section 15 of the Securities Act
(each, an "Indemnified Distributor Party" and collectively, the "Indemnified
Distributor Parties"), from and against any and all claims, demands, actions,
liabilities, losses, costs and expenses (including the cost of investigating or
defending same, and any reasonable attorneys' fees and expenses incurred in
connection therewith) (collectively, "Liabilities") which the Indemnified
Distributor Parties may incur which arise out of or are based upon (a) any
untrue statement of a material fact contained in the Registration Statement,
Prospectus or annual or interim report or (b) any omission to state a material
fact required to be stated in any thereof or necessary to make the statements in
any thereof not misleading, except insofar as such Liabilities arise out of or
are based upon any such untrue statement or omission or untrue statement or
<PAGE>
omission made in reliance upon and in conformity with information furnished to
the Fund in writing in connection therewith by or on behalf of the Distributor;
provided, however, that the indemnity agreement in this Section 8.1 shall not
inure to the benefit of any Indemnified Distributor Party unless (i) a court of
competent jurisdiction shall have determined, in a final unappealable decision
on the merits, that such Indemnified Distributor Party was not liable, by reason
of willful misfeasance, bad faith, or gross negligence in the performance of its
or his duties, or by reason of its or his reckless disregard of its or his
obligations under this Agreement (collectively, "disabling conduct"), or (ii) in
the absence of such a judicial decision, a reasonable determination, based upon
a review of the facts, that the indemnified person was not liable by reason of
disabling conduct, evidenced by either (A) the vote of a majority of trustees
who are neither "interested persons" of the Fund as defined in Section 2(a) (19)
of the Securities Act nor parties to the proceeding or matter in question, or
(B) the written opinion of independent legal counsel. The Fund's indemnification
obligation as aforesaid is expressly conditioned upon the Fund's being promptly
notified, by letter or telegram addressed to the Fund at its principal business
office, of any Liability of or against any Indemnified Distributor Person. The
Fund agrees promptly to notify the Distributor of the commencement of any
litigation or proceeding against the Fund or any Indemnified Fund Parties (as
defined below) in connection with the issue and sale of any Fund shares.
8.2. The Distributor agrees to indemnify, defend and hold harmless the Fund, its
officers, directors, employees, agents and any person who controls the Fund, if
any, within the meaning of Section 15 of the Securities Act (each, an
"Indemnified Fund Party" and collectively, the "Indemnified Fund Parties"), from
and against any and all Liabilities which the Indemnified Fund Parties may incur
which arise out of or are based upon (a) any untrue statement of a material fact
contained in information furnished to the Fund in writing by or on behalf of the
Distributor for use in the Registration Statement or Prospectus or any omission
to state a material fact in connection with such information required to be
stated in the Registration Statement, Prospectus or annual or interim report or
necessary to make such information not misleading; or (b) any acts or omissions
by the Indemnified Distributor Parties in connection with the performance of the
Distributor's obligations hereunder. The Distributor's indemnification agreement
as aforesaid is expressly conditioned upon the Distributor's being promptly
notified, by letter or telegram addressed to the Distributor at its principal
business office, of any Liability of or against any Indemnified Distributor
Party.
9. Duration and Termination of the Agreement.
9.1. This Agreement shall become effective as of the date first written above
and shall remain in force from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Fund's Board
of Trustees or by the vote of a majority of the outstanding voting securities
of the Fund, and (ii) by the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting or meetings called for the purpose of voting on such
approval.
9.2. This Agreement may be terminated at any time, without the payment of any
penalty, by the Fund's Board of Trustees or by vote of a vote of a majority of
the outstanding voting securities of the Fund, or by the Distributor, on sixty
days written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
<PAGE>
10. Definition of Certain Terms. The terms "vote of a majority of the
outstanding voting securities," "assignment," "affiliated person," and
"interested person," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act and the rules and regulations
of the Commission thereunder.
11. Amendments of This Agreement. This Agreement may be amended by the parties
only if such amendment is specifically approved by (i) the Fund's Board of
Trustees or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those trustees of the Fund who are
not interested persons of either party to this Agreement, cast in person at a
meeting or meetings called for the purpose of voting on such approval.
12. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York, and the
applicable provisions of the Investment Company Act. To the extent that the
applicable laws of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act or the
rules and regulations thereunder, the latter shall control.
The parties hereto have executed this Agreement as of the day and year first
above written.
THIRD AVENUE TRUST, for the Third Avenue
Small-Cap Value Fund series
By:
Name: Martin J. Whitman
Title: President
M. J. WHITMAN, INC
By:
Name: David Barse
Title: President
CUSTODY AGREEMENT
AGREEMENT made as of the 6th day of March 1997, by and between Third Avenue
Trust (the "Trust"), on behalf of the Third Avenue Value Fund series of the
Trust (hereinafter called the "Fund") and NORTH AMERICAN TRUST COMPANY, a state
chartered trust company existing under the laws of California (hereinafter
called the "Custodian").
WITNESSETH
WHEREAS, the Fund desires that its securities and funds shall be hereafter
held and administered by the Custodian pursuant to the terms of this agreement:
WHEREAS, pursuant to a separate agreement, FPS Services Inc.("FPS"), a
FinDaTex, Inc. company, will perform the duties of Transfer-Agent, Accounting
Services Agent, and Dividend Disbursing Agent.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and the Custodian agree as follows:
SECTION 1. Definitions
Securities: The word securities as used herein includes units of limited
partnership interest, stocks, shares, bonds, debentures, bills, notes,
mortgages, certificates of deposit, bank time deposits, bankers' acceptances,
commercial paper, scrip, warrants, participation certificates, choses in action,
evidences of indebtedness or other obligations and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any other property or assets of any kind.
Oral Instructions: The term Oral Instructions shall mean an authorization,
instruction, approval, item or set of data, or information of any kind
transmitted to the Custodian in person or by telephone, telegram, telecopy or
other mechanical or documentary means lacking original signature, by an officer
or employee of the Fund or an employee of FPS in its capacity as Transfer Agent,
Accounting Services Agent, and Dividend Disbursing Agent, authorized by a
resolution of the Board of Trustees of the Fund to give Oral Instructions on
behalf of the Fund.
Written Instructions: The term Written Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to the Custodian containing original signatures or a copy of
such document transmitted by telecopy including transmission of such signature,
reasonably believed by the Custodian to be the signature of officers or employee
of the Fund or an employee of FPS in its capacity as Transfer Agent, Accounting
Services Agent, and Dividend Disbursing Agent, authorized by a resolution of the
Board of Trustees of the Fund to give written instructions on behalf of the
Fund.
Securities Depository: The term Securities Depository shall mean a system
for the central handling of securities where all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without physical
delivery of securities.
Book-Entry Securities: The term Book-Entry Securities shall mean securities
issued by the Treasury of the United States of America and federal agencies of
the United States of America which are maintained in the book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31
CFR Part 350, and the book-entry regulations of federal agencies substantially
in the form of Subpart O and the term Book-Entry Account shall mean an account
maintained by a Federal Reserve Bank in accordance with the aforesaid Circular
and regulations.
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SECTION 2.
The Fund shall from time to time file with the Custodian a certified copy
of each resolution of its Board of Trustees authorizing execution of Written
Instructions and the number of signatories required, together with certified
signatures of the officers and other signatories authorized to sign, which shall
constitute conclusive evidence of the authority of the officers and other
signatories designated therein to act, and shall be considered in full force and
effect with the Custodian fully protected in acting in reliance thereon until it
receives a new certified copy of a resolution adding or deleting a person or
persons with authority to give Written Instructions. If the certifying officer
is authorized to sign Written Instructions, the certification shall also be
signed by a second officer of the Fund. The Fund also agrees that Custodian may
rely on Written Instructions received from FPS as Agent for the Fund acting in
its capacity as Transfer Agent, Accounting Service Agent or Dividend Disbursing
Agent, if those Written Instructions are given by persons having such authority
pursuant to resolutions of the Boards of Trustees of the Fund.
The Fund shall from time to time file with the Custodian a certified copy
of each resolution of its Board of Trustees authorizing the transmittal of Oral
Instructions and specifying the person or persons authorized to give Oral
Instructions in accordance with this Agreement. The Fund agrees that Custodian
may rely on Oral Instructions received from FPS as Agent for the Fund acting in
its capacity as Transfer Agent, Accounting Service Agent or Dividend Disbursing
Agent, if those instructions are given by persons having such authority pursuant
to resolutions adopted by the Boards of Trustees of the Fund. Any resolution so
filed with the Custodian shall be considered in full force and effect and the
Custodian shall be fully protected in acting in reliance thereon until it
actually receives a new certified copy of a resolution adding or deleting a
person or persons with authority to give Oral Instructions. If the certifying
officer is authorized to give Oral Instructions, the certification shall also be
signed by a second officer of the Fund.
SECTION 3. Receipt and Disbursement of Funds
A. The Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement. The Custodian shall hold in such
account or accounts, subject to the provisions hereof, all funds received by it
from or for the account of the Fund. The Fund will deliver or cause to be
delivered to the Custodian all funds owned by the Fund, including cash received
for the issuance of its shares during the period of this Agreement. The
Custodian shall make payments of funds to, or for the account of, the Fund from
such funds only: (a) for the purchase of securities for the portfolio of the
Fund (i) upon the delivery of such securities to the Custodian (or to any bank,
banking firm or trust company doing business in the United States and designated
by the Custodian as its sub-custodian or agent for this purpose), registered (if
registerable) in the name of Fund or of the nominee of the Custodian referred to
in Section 8 or in proper form for transfer, or (ii) in the case of repurchase
agreements entered into between the Fund and a bank, upon delivery of the
receipt evidencing purchase by the Fund of securities owned by the bank along
with written evidence of the Agreement by the bank to repurchase such securities
from the Fund; (b) for the repurchase or redemption of shares of the Fund upon
written advice thereof to the Custodian from the Fund's Transfer Agent, in the
amount specified in such advice; (c) for the payment of interest, dividends,
taxes, management or supervisory fees, or operating expenses (including, without
limitation thereto, trustees' fees and expenses, and fees for legal, accounting
and auditing services); (d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund held by
or to be delivered to
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the Custodian; (e) for the payment to any bank of interest on or any portion of
the Fund of any loan made by such bank to the Fund; (f) for the payment to any
person, firm or corporation who has borrowed the Fund's portfolio securities the
amount deposited with the Custodian as collateral for such borrowing upon the
delivery of such securities to the Custodian, registered (if registerable) in
the name of the Fund or of the nominee of the Custodian referred to in Section 8
or in proper form for transfer or (g) for other proper purposes of the Fund.
Before making any such payment the Custodian shall receive (and may rely upon)
Oral Instructions or Written Instructions directing such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c), (d),
(e) or (f) of this subsection A. In respect of item (g), the Custodian will take
such action only upon receipt of instructions and a certified copy of a
resolution of the Board of Trustees of the Fund, and certified by the Secretary
or an Assistant Secretary, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such purpose to be a
proper purpose of the Fund, and naming the person or persons to whom such
payment is to be made. In respect of item (f), the Custodian shall make payment
to the borrower of securities loaned by the Fund of part of the collateral
deposited with the Custodian upon receipt of instructions stating that the
market value of the securities loaned has declined and specifying the amount to
be paid by the Custodian without receipt or return of any of the securities
loaned by the Fund. In respect of item (a), in the case of repurchase agreements
entered into with a bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank prior to receipt of the
safekeeping receipt and repurchase agreement, provided that such documents are
received prior to the close of business on the same day.
B. Notwithstanding anything herein to the contrary, the Custodian may at
any time or times, appoint (and may at any time remove) any other bank or trust
company as its sub-custodian or agent to carry out such of the provisions of
Subsection A of this Section 3 as instructions from Custodian may from time to
time request; provided, however, that the appointment of such sub-custodian or
agent shall not relieve the Custodian of any of its responsibilities hereunder;
and provided, further, that the instructions will not request the appointment of
any bank or trust company as sub-custodian unless it meets the requirements of
Section 26 of the Investment Company Act of 1940 as amended (the "Investment
Company Act".)
C. The Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by the Custodian for
the account of the Fund.
SECTION 4. Receipt of Securities
A. The Custodian shall hold in a separate account, and physically
segregated at all times from those of any other persons, firms, corporations or
trusts, pursuant to the provisions hereof, all securities received by it from or
for the account of the Fund, and the Fund will deliver or cause to be delivered
to the Custodian all securities owned by the Fund. All such securities are to be
held or disposed of by the Custodian for, and subject at all times to the
instructions pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
such securities and investments, except pursuant to instructions and only for
the account of the Fund as set forth in Section 5 of this Agreement.
B. Notwithstanding anything herein to the contrary, the Custodian may at
any time or times, appoint (and may at any time remove) any other bank or trust
company as its sub-custodian or agent to carry out such of the provisions of
Subsection A of this Section 4 and of Section 5 of this Agreement, as
instructions may from time to time request from the Custodian; provided;
however, that the appointment of such sub-custodian or
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agent shall not relieve the Custodian of any of its responsibilities hereunder,
and provided, further, that instructions will not request the appointment of any
bank or trust company as sub-custodian unless it meets the requirements of
Section 26 of the Investment Company Act.
SECTION 5. Transfer, Exchange, Redelivery, etc. of Securities
The Custodian shall have sole power to release or deliver any securities of
the Fund held by it pursuant to this Agreement. The Custodian agrees to
transfer, exchange or deliver securities held by it hereunder only: (a) for
sales of such securities for the account of the Fund upon receipt by the
Custodian of payment therefor, (b) when such securities mature or are called,
redeemed or retired or otherwise become payable, (c) for examination by any
broker selling any such securities in accordance with "street delivery" custom,
(d) in exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other securities, (f)
upon exercise of subscription, purchase or other similar rights represented by
such securities, (g) for the purpose of exchanging interim receipts for
temporary securities for definitive securities, (h) for the purpose of effecting
a loan of the Fund's portfolio securities to any person, firm, corporation or
trust upon the receipt by the Custodian of cash or cash equivalent collateral at
least equal to the market value of the securities loaned, (i) to any bank for
the purpose of collateralizing the obligation of the Fund to repay any monies
borrowed by the Fund from such bank; provided, however, that the Custodian may
at the option of such lending bank keep such collateral in its possession,
subject to the rights of such bank given to it by virtue of any promissory note
or agreement executed and delivered by the Fund to such bank, or (j) for other
proper purposes of the Fund. As to any deliveries made by the Custodian pursuant
to items (a), (b), (c), (d), (e), (f), (g) and (h), securities or funds
receivable in exchange therefor shall be deliverable to the Custodian. Before
making any such transfer, exchange or delivery, the Custodian shall receive (and
may rely upon) instructions requesting such transfer, exchange, or delivery and
stating that it is for a purpose permitted under the terms of items (a), (b),
(c), (d), (e), (f), (g), (h) or (i) of this Section 5, and, in respect of item
(j), upon receipt of instructions of person or persons authorized by the Board
of Trustees of the Fund, specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such purpose
to be a proper purpose of the Fund, and naming the person or persons to whom
delivery of such securities shall be made. In respect of item (h), the
instructions shall state the market value of the securities to be loaned and the
corresponding amount of collateral to be deposited with the Custodian;
thereafter, upon receipt of instructions stating that the market value of the
securities loaned has increased and specifying the amount of increase, the
Custodian shall collect from the borrower additional cash collateral in such
amount.
SECTION 6. Federal Reserve Book-Entry System
Notwithstanding any other provision of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the performance of its
duties hereunder to deposit in the book-entry deposit system operated by the
Federal Reserve Bank (the "System"), United States government, instrumentality
and agency securities and any other securities deposited in the System
("Securities") and to use the facilities of the System, as permitted by Rule
17f-4 under the Investment Company Act of 1940, in accordance with the following
terms and provisions:
(a) The Custodian may keep securities of the Fund in the System provided
that such Securities are represented in an account ("Account") of
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the Custodian's in the System which shall not include any assets of the
Custodian other than assets held in a fiduciary or custodian capacity.
(b) The records of the Custodian with respect to the Fund's participation
in the System through the Custodian shall identify by book entry securities
belonging to the Fund which are included with other securities deposited in the
Account and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission.
(c) The Custodian shall pay for securities purchased for the account of the
Fund upon: (i) receipt of advice from the System that such securities have been
transferred to the Account and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of the Fund upon: (i)
receipt of advice from the System that payment for such securities has been
transferred to the Account and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of the Fund. The
Custodian shall send the Fund a confirmation of any transfers to or from the
account of the Fund.
(d) The Custodian will provide the Fund with any report obtained by the
Custodian on the System's account system, internal accounting control and
procedures for safeguarding securities deposited in the System. The Custodian
will provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities including
securities deposited in the System relating to the services provided by the
Custodian under this Agreement; such reports shall detail material inadequacies
disclosed by such examination, and, if there are no such inadequacies, shall so
state, and shall be of such scope and in such detail as the Fund may reasonably
require and shall be of sufficient scope to provide reasonable assurance that
any material inadequacies would be disclosed.
SECTION 6A. Use of Clearing Facilities
Notwithstanding any other provisions of the Agreement, the Custodian may,
in connection with transactions in portfolio securities by the Fund, use the
facilities of the Depository Trust Company ("DTC"), and the Participants Trust
Company ("PTC"), as permitted by Rule 17f-4 under the Investment Company Act, in
accordance with the following terms and provisions:
(a) DTC and PTC may be used to receive and hold eligible securities owned
by the Fund; (b) payment for securities purchased may be made through the
clearing medium employed by DTC and PTC for transactions of participants' action
through them; (c) securities of the Fund deposited in DTC and PTC will at all
times be segregated from any assets and cash controlled by the Custodian in
other than a fiduciary or custodian capacity but may be commingled with other
assets held in such capacities. Subject to the provisions of the Agreement with
regard to "Officers' Certificates," the Custodian will pay out money only upon
receipt of securities or notification thereof and will deliver securities only
upon the receipt of money or notification thereof; (d) all books and records
maintained by the Custodian which relate to the Fund's participation in DTC and
PTC shall identify by book entry securities belonging to the Fund which are
deposited in DTC and PTC and shall at all times during the Custodian's regular
business hours be open to inspection by the Fund's duly authorized officers,
employees, agents and auditors, and the Fund will be furnished with all the
information in respect of the services rendered to it as it may require; (e) the
Custodian will make available to the Fund copies of any internal control reports
concerning DTC and PTC to it by either
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internal or external auditors within ten days after receipt of such a report by
the Custodian; and (f) confirmations of transactions using the facilities of DTC
and PTC shall be provided as set forth in Rule 17f-4.
SECTION 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives Oral or Written Instructions to the
contrary, the Custodian shall:
(a) Present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation and hold the
funds received by it upon such payment for the account of the Fund; (b) collect
interest and cash dividends received, with notice to the Fund, for the account
of the Fund; (c) hold for the account of the Fund hereunder all stock dividends,
rights and similar securities issued with respect to any securities held by it
hereunder; (d) execute as agent on behalf of the Fund all necessary ownership
certificates required by the Internal Revenue Code or the Income Tax Regulations
of the United States Treasury Department or under the laws of any state now or
hereafter in effect, inserting the Fund's name on such certificates as the owner
of the securities covered thereby, to the extent it may lawfully do so; (e)
transmit promptly to the Fund all reports, notices and other written information
received by the Custodian from or concerning issuers of the Fund's portfolio
securities; and (f) collect from the borrower the securities loaned and
delivered by the Custodian pursuant to item (h) of Section 5 hereof, any
interest or cash dividends paid on such securities, and all stock dividends,
rights and similar securities issued with respect to any such loaned securities.
With respect to securities of foreign issue, it is expected that the
Custodian will use its best efforts to effect collection of dividends, interest
and other income, and to notify the Fund of any call for redemption, offer of
exchange, right of subscription, reorganization, or other proceedings affecting
such securities, or any default in payments due thereon. It is understood,
however, that the Custodian shall be under no responsibility for any failure or
delay in effecting such collections or giving such notice with respect to
securities of foreign issue, regardless of whether or not the relevant
information is published in any financial service available to it unless such
failure or delay is due to its negligence; however, this sentence shall not be
construed as creating any such responsibility with respect to securities of
non-foreign issue, other than such responsibility as may be part of the general
responsibility of the Custodian as stated in this Section 7. Collections of
income in foreign currency are, to the extent possible, to be converted into
United States dollars unless otherwise instructed in writing, and in effecting
such conversion the Custodian may use such methods or agencies as it may see
fit, including the facilities of its own foreign division at customary rates.
All risk and expenses incident to such collection and conversion is for the
account of the Fund and the Custodian shall have no responsibility for
fluctuations in exchange rates affecting any such conversion.
SECTION 8. Registration of Securities
Except as otherwise directed by instructions, the Custodian shall register
all securities, except such as are in bearer form, in the name of a registered
nominee of the Custodian as defined in the Internal Revenue Code and any
Regulation of the Treasury Department issued thereunder or in any provision of
any subsequent Federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or Regulations or under the
laws of any State. The Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
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The Fund shall from time to time furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any securities
which it may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
SECTION 9. Voting and Other Actions
Neither the Custodian nor any nominee of the Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with instructions. The Custodian shall execute and deliver, or cause
to be executed and delivered, to the Fund all notices, proxies and proxy
soliciting materials with relation to such securities (excluding any securities
loaned and delivered by the Custodian pursuant to item (h) of Section 5 hereof),
such proxies to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Fund), but without indicating the
manner in which such proxies are to be voted.
SECTION 10. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse the Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder and for all
other necessary and proper disbursements and expenses made or incurred by the
Custodian in the performance of this Agreement.
The Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be required
under the provision of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State, to exempt
from taxation any exemptible transfers and/or deliveries of any such securities.
SECTION 11. Concerning the Custodian
A. The Custodian's compensation shall be set forth pursuant to an agreement
between the Fund and the Custodian, exhibit A, as may be amended.
B. The Custodian shall not be liable for any action taken in good faith
upon instructions as herein defined from a person authorized by resolution of
the Board of Trustees of the Fund, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly executed.
C. The Custodian shall not be liable for any loss or damage, resulting from
its action or omission to act or otherwise, except for any such loss or damage
arising out of its own negligence or willful misconduct and except that the
Custodian shall be responsible for the acts of any sub-custodian or agent
appointed hereunder and approved by the Board of Trustees of the Fund. At any
time, the Custodian may seek advice from legal counsel for the Fund or its own
counsel with respect to any matter arising in connection with this Agreement,
and it shall not be liable for any action taken or not taken or suffered by it
in good faith in accordance with the opinion of counsel for the Fund, or its own
legal counsel; provided, however, that the Custodian may not rely upon legal
counsel other than the Fund's legal counsel for any question of law which could
reasonably be expected to expose the Fund to a possible loss of $20,000 or more.
D. Without limiting the generality of the foregoing, the Custodian shall be
under no duty or obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any securities purchased by or for the
Fund, the legality of the purchase thereof, or the propriety of the amount paid
therefor;
(b) The legality of the issue or sale of any securities by or for the Fund,
or the propriety of the amount for which the same are sold;
(c) The legality of the issue or sale of any shares of the Fund, or the
sufficiency of the amount to be received therefor;
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(d) The legality of the redemption of any shares of the Fund, or the
propriety of the amount to be paid therefore;
(e) The legality of the declaration of any dividend or distribution by the
Fund, or the legality of the issue of any shares of the Fund in payment of any
dividend or distribution in shares;
(f) The legality of the delivery of any securities held for the Fund for
the purpose of collateralizing the obligation of the Fund to repay any monies
borrowed by the Fund; or
(g) The legality of the delivery of any securities held for the Fund for
the purpose of lending said securities to any person, firm or corporation.
E. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by
written instructions signed in the name of the Fund by one of its executive
officers, and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
F. The Custodian shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to or held by it for the account of
the Fund, are such as may properly be held by the Fund under the provisions of
the Trust Instrument of the Trust as amended from time to time.
G. The Fund agrees to indemnify and hold harmless the Custodian and its
nominee from all taxes, charges, expenses, assessments, claims, liabilities, and
losses (including reasonable counsel fees) incurred or assessed against it or
its nominee in connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct. The Custodian is authorized to charge any account of
the Fund for such items. In the event of any advance of funds for any purpose
made by the Custodian resulting from orders or instructions, or in the event
that the Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security therefor.
H. In the event that, pursuant to this Agreement, instructions direct the
Custodian to pay for securities on behalf of the Fund, the Fund hereby grants to
the Custodian a security interest in such securities, until the Custodian has
been reimbursed by the Fund in immediately available funds. The instructions
designating the securities to be paid for shall be considered the requisite
description and designation of the securities pledged to the Custodian for
purposes of the requirements of the Uniform Commercial Code.
SECTION 12.
The Fund shall from time to time engage in the purchase and sale of put and
call options subject to the following provisions:
a. Put and call option contracts which are purchased or sold by the Fund
shall be treated as any other security owned by the Fund except as expressly set
forth in this paragraph a. Written or oral instructions with respect to such
purchase or sale contracts shall, insofar as applicable, also state: (a) the
price at which the underlying security may be bought or sold, (b) the issuer,
the title and number of the shares or Fund amounts of
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such security, (c) the premium to be paid, (d) the expiration date, and whether
or not the transaction, if a sale, is a Closing Sale Transaction requiring
delivery to the broker through whom it is made of a certificate of ownership.
Written or Oral Instructions with respect to the purchase of an option contract
shall also provide receipt of the certificate of ownership executed by the
broker through whom the purchase was made.
b. The Fund shall deliver Written or Oral Instructions to the Custodian
promptly after the Fund sells a put or call option contract stating: (a) the
name of the issuer and title and number of shares or the Fund amount of the
security subject to the option, (b) the exercise price, (c) the expiration date,
(d) the premium to be received by the Fund, (e) the name of the person or broker
from whom the premium is to be received, and (f) whether or not such option, if
a call, is covered.
If the option sold is a put or uncovered call, the Written or Oral
Instructions shall also state either (a) the amount and kind of assets of the
Fund, if any, which shall be segregated from the general assets of the Fund and
shall be held by the Custodian in a segregated option account (the "Option
Account"). The Custodian shall set up and maintain the Option Account as it
shall be directed by Written or Oral Instructions and shall increase or decrease
the assets in such Option Account only as it shall be so directed by subsequent
Written or Oral Instructions.
c. If the Custodian either (a) acts as escrow agent with respect to a
covered call, or securities underlying such covered call are maintained by the
Custodian with a securities depository, or (b) holds assets in the Option
Account in connection with a put or uncovered call, the Custodian shall deliver
or cause to be delivered such receipts as are required in accordance with the
customs prevailing among dealers in such securities.
d. If an option contract purchased or sold by the Fund expires, the Fund
will deliver to the Custodian Written or Oral Instructions containing the
information specified in paragraph b. above and instruct the Custodian to (a)
delete such option contract from the list of holdings that the Custodian
maintains for the Fund and (b) to either remove from the Option Account the
assets held herein with respect to such option (which assets shall be specified
in such Written or Oral Instructions), or to remove the restriction on any
securities underlying a covered call, as the case may be. Upon the return and/or
cancellation or expiration of any receipts issued pursuant to paragraph c.
above, the Custodian shall remove such restrictions, delete the option from the
list of holdings maintained by the Custodian, and transfer such assets to the
general account maintained by the Custodian for the benefit of the Fund.
Collateral delivered by the broker with whom it was previously deposited
pursuant to paragraph b. above shall, if identical to the collateral specified
in the receipt previously issued by such broker be accepted by the Custodian and
held in the general account maintained by the Custodian for the benefit of the
Fund. The Custodian shall accept delivery of collateral not specified in such a
receipt only upon receipt of Written or Oral Instructions.
e. If a call option written by the Fund is exercised, the Fund shall
promptly furnish the Custodian with Written or Oral Instructions stating: (a)
that the Custodian shall deliver the underlying securities, (b) the name of the
issuer and title and number of shares or the Fund amount of the security subject
to the option, (c) the person to whom the underlying securities are to be
delivered, (d) the amount to be received by the Custodian to hold for the Fund
upon such delivery, and (e) the assets, if any, to be removed from the Option
Account. If a put option sold by the Fund is exercised, the Fund shall promptly
furnish the Custodian with Written or Oral Instructions stating: (a) that the
Custodian shall make payment for the securities subject to the put, (b) the name
of the issuer and title and number of shares or the principal amount of the
security subject to the option, (c) the name of the person to whom payment will
be made against receipt of such security, (d) the amount of such payment, and
<PAGE>
(e) the assets, if any, to be removed from the Option Account. Assets of the
Fund freed of restrictions imposed by reason of an option shall be held by the
Custodian in accordance with this Agreement.
f. In the event the Fund purchases an option identical to previously
written by the Fund in a "Closing Purchase Transaction" in order to liquidate
its position as a seller of a call option, the Fund will deliver to the
Custodian Written or Oral Instructions stating: (a) the name of the issuer and
title and number of shares or the Fund amount of the security subject to the
option, (b) the exercise price, (c) the premium to be paid by the Fund, (d) the
expiration date, and (e) the name of the person to whom the premium is to be
paid. Upon the Custodian's payment of the premium and the return and/or
cancellation of any receipts issued pursuant to paragraph c. above, the
Custodian shall (1) either remove from the Option Account the assets held
therein or remove the previously imposed restrictions on the securities
underlying the option that is liquidated by reason of the Closing Purchase
Transaction, (2) delete such option from the list of holding maintained by the
Fund, and (3) transfer such securities or assets to the general account
maintained by the Custodian for the benefit of the Fund.
g. If the Fund exercises an option contract held by the Custodian, the Fund
shall deliver to the Custodian at least 24 hours before the last day on which
such option contract may be exercised Written or Oral Instructions which contain
the information required under paragraph a. above and which instruct the
Custodian (i) in the case of a put, to deliver the securities subject to the put
to the broker specified in the Written or Oral Instructions against receipt of
the exercise price, and (ii) in the case of a call, to make payment of the
exercise price to the broker specified in the Written or Oral Instructions
against receipt of the securities subject to the call.
h. The Custodian shall have no responsibility for the legality of any put
or call option contract written by the Fund, the propriety of any such purchase
or sale, and the adequacy of any collateral delivered to a broker in connection
with an option or held in the Option Account. The Custodian specifically, but
not by way of limitation, shall not be under any duty or obligation (i) to
periodically check or notify the Fund that the amount of assets held in the
Option Account is sufficient to protect such broker or the Fund against any
loss, or (ii) to advise the Fund that any option it holds is about to expire.
Such duties or obligations shall be the sole responsibility of the Fund.
SECTION 13. Reports by the Custodian
A. The Custodian shall furnish the Fund daily with a statement summarizing
all transactions and entries for the account of the Fund. The Custodian shall
furnish the Fund at the end of every month with a list of the portfolio
securities held by it as Custodian for the Fund, adjusted for all commitments
confirmed by instructions as of such time. The books and records of the
Custodian pertaining to its actions under this Agreement shall be open to
inspection and audit at reasonable times by officers of the Fund, its
independent accountants and officers of its investment advisors.
B. The Custodian will maintain such books and records relating to
transactions effected by it as are required by the Investment Company Act, and
any rule or regulation thereunder; or by any other applicable provision of the
law to be maintained by the Fund or its Custodian, with respect to such
transactions, and preserving or causing to be preserved, any such books and
records for such periods as may be required by any such rule or regulation.
<PAGE>
SECTION 14. Termination or Assignment
This agreement may be terminated by the Fund, or by the Custodian, on sixty
(60) days' notice, given in writing and sent by registered mail to the
Custodian, or to the Fund, as the case may be, at the address hereinafter set
forth. Upon any termination of this Agreement, pending appointment of a
successor to the Custodian or a vote of the shareholders of the Fund to dissolve
or to function without a Custodian of its funds, securities and other property,
the Custodian shall not deliver funds, securities or other property of the Fund
to the Fund, but may deliver them to a bank or trust company of its own
selection having an aggregate capital, surplus and undivided profits, as shown
by its last published report of not less than ten million dollars ($10,000,000)
as a Custodian for the Fund to be held under terms similar to those of this
Agreement; provided, however, that the Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by the Fund
of all liabilities constituting a charge against the Custodian, and until full
payment shall have been made to the Custodian of all its fees, compensations,
costs and expenses, subject to the provisions of Section II of this Agreement.
SECTION 15. Miscellaneous
A. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its office at 525 B
Street, 16th Floor, San Diego, California 92101, or at such other place as the
Custodian may from time to time designate in writing.
B. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund, shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at the office of FPS in its capacity
as the Fund's Transfer Agent, Accounting Services Agent, and Dividend Disbursing
Agent at 3200 Horizon Dr. P.O. Box 61503, King of Prussia, Pennsylvania
19406-0903, with a copy thereof mailed or delivered to the President of the Fund
at 767 Third Avenue, New York, New York 10017, or at such other place as the
Fund may from time to time designate in writing.
C. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, and authorized or approved by a resolution of the Board of Trustees
of the Fund.
D. This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of the
Custodian or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of its Board of Trustees.
E. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute but one instrument.
F. This Agreement and the rights and obligations of the Fund and the
Custodian hereunder shall be construed and interpreted in accordance with the
laws of the State of California.
G. The Custodian agrees that the Fund's obligations hereunder shall be
limited to the Fund, and that the Custodian shall not seek satisfaction of any
such obligation from the Trust or any other series of the Trust, the
shareholders of the Fund nor from any director, officer, employee, or agent of
the Trust or the Fund.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement
to be signed and witnessed by duly authorized persons as of the date first
written above.
Executed in several counterparts, each of which is an original
<PAGE>
NORTH AMERICAN TRUST COMPANY
Attest: --------------------- By---------------------------
Title------------------------
By---------------------------
Title------------------------
THIRD AVENUE TRUST ON BEHALF OF THE THIRD AVENUE VALUE FUND SERIES
Attest:--------------------- By---------------------------
Title------------------------
By---------------------------
Title------------------------
CUSTODY AGREEMENT
AGREEMENT, dated as of March __, 1997 by and between THIRD AVENUE TRUST
(the "Trust"), a business trust organized and existing under the laws of the
State of Delaware, acting with respect to and on behalf of each of the series of
the Trust that are identified on Exhibit A hereto (each, a "Portfolio"), and
CUSTODIAL TRUST COMPANY, a bank organized and existing under the laws of the
State of New Jersey (the "Custodian").
WHEREAS, the Trust desires that the securities, funds and other assets
of the Portfolios be held and administered by Custodian pursuant to this
Agreement;
WHEREAS, each Portfolio is an investment portfolio represented by a
series of Shares included among the shares of beneficial interest issued by the
Trust, an open-end management investment company registered under the 1940 Act;
WHEREAS, Custodian represents that it is a bank having the
qualifications prescribed in the 1940 Act to act as custodian for management
investment companies registered under the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever used in this Agreement, the following terms, unless the
context otherwise requires, shall mean:
1.1 "AUTHORIZED PERSON" means any person authorized by resolution of
the Board of Trustees to give Oral Instructions and Written Instructions on
behalf of the Trust and identified, by name
<PAGE>
or by office, in Exhibit B hereto or any person designated to do so by an
investment adviser of any Portfolio who is named by the Trust in Exhibit C
hereto.
1.2 "BOARD OF TRUSTEES" means the Board of Trustees of the Trust or,
when permitted under the 1940 Act, the Executive Committee thereof, if any.
1.3 "BOOK-ENTRY SYSTEM" means a book-entry system maintained by a
Federal Reserve Bank for securities of the United States government or of
agencies or instrumentalities thereof (including government-sponsored
enterprises).
1.4 "BUSINESS DAY" means any day on which banks in the State of New
Jersey and New York are open for business.
1.5 "CUSTODY ACCOUNT" means, with respect to a Portfolio, the account
in the name of such Portfolio, which is provided for in Section 3.2 below.
1.6 "DOMESTIC SECURITIES DEPOSITORY" means The Depository Trust Company
and any other clearing agency registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, which acts as a securities
depository.
1.7 "ELIGIBLE DOMESTIC BANK" means a bank as defined in the 1940 Act.
1.8 "ELIGIBLE FOREIGN ENTITY" means any banking institution, trust
company, securities depository or clearing agency, or other entity organized
under the laws of a country other than the United States which is eligible under
the 1940 Act to act as a custodian for securities and other assets of a
Portfolio held outside the United States.
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<PAGE>
1.9 "FOREIGN SECURITIES DEPOSITORY" means a foreign securities
depository or clearing agency as defined in the 1940 Act.
1.10 [ RESERVED ]
1.11 [ RESERVED ]
1.12 "1940 ACT" means the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
1.13 "ORAL INSTRUCTIONS" means instructions orally transmitted to and
accepted by Custodian which are (a) reasonably believed by Custodian to have
been given by an Authorized Person, (b) recorded and kept among the records of
Custodian made in the ordinary course of business, and (c) completed in
accordance with Custodian's requirements from time to time as to content of
instructions and their manner and timeliness of delivery by the Trust.
1.14 "PROPER INSTRUCTIONS" means Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by the Trust and Custodian.
1.15 "SECURITIES DEPOSITORY" means any Domestic Securities Depository
or Foreign Securities Depository.
1.16 "SHARES" means, with respect to a Portfolio, those shares in a
series or class of beneficial interests of the Trust that represent interests in
such Portfolio.
1.16 "WRITTEN INSTRUCTIONS" means written communications received by
Custodian that are (a) reasonably believed by Custodian to have been signed or
sent by an Authorized Person, (b) sent or transmitted by letter, facsimile,
central processing unit connection, on-line terminal or magnetic tape, and (c)
completed in accordance with Custodian's requirements from time to time as to
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<PAGE>
content of instructions and their manner and timeliness of delivery by the
Trust.
ARTICLE II
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby appoints Custodian as custodian of
all such securities, funds and other assets of each Portfolio as may be
reasonably acceptable to Custodian and from time to time delivered to it by the
Trust or others for the account of such Portfolio.
2.2 ACCEPTANCE. Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF SECURITIES, FUNDS AND OTHER ASSETS
---------------------------------------------
3.1 SEGREGATION. All securities and non-cash property of a Portfolio in
the possession of Custodian (other than securities maintained by Custodian with
a sub-custodian appointed pursuant to this Agreement or in a Securities
Depository or Book-Entry System) shall be physically segregated from other such
securities and non-cash property in the possession of Custodian. All cash,
securities and other non-cash property of a Portfolio shall be identified as
belonging to such Portfolio.
3.2 CUSTODY ACCOUNT. (a) Custodian shall open and maintain in its trust
department a custody account in the name of each Portfolio, subject only to
draft or order of Custodian, in which Custodian shall enter and carry all
securities, funds and other assets of such Portfolio which are delivered to
Custodian and accepted by it.
(b) If, with respect to any Portfolio, Custodian at any time fails to
receive any of the documents referred to in Section
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<PAGE>
3.10(a) below, then, until such time as it receives such document, it shall not
be obligated to receive any securities into the Custody Account of such
Portfolio and shall be entitled to return to such Portfolio any securities that
it is holding in such Custody Account.
3.3 SECURITIES IN PHYSICAL FORM. Custodian may, but shall not be
obligated to, hold securities that may be held only in physical form.
3.4 DISCLOSURE TO ISSUERS OF SECURITIES. Custodian is authorized to
disclose the Trust's and any Portfolio's names and addresses, and the securities
positions in such Portfolio's Custody Account, to the issuers of such securities
when requested by them to do so.
3.5 APPOINTMENT OF DOMESTIC SUB-CUSTODIANS. In its discretion,
Custodian may at any time and from time to time appoint, and at any time remove,
any Eligible Domestic Bank as sub-custodian to hold securities and other assets
of a Portfolio that are maintained in the United States and to carry out such
other provisions of this Agreement as it may determine. The appointment of any
such sub-custodian shall be at Custodian's expense and shall not relieve
Custodian of any of its obligations or liabilities under this Agreement.
3.6 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. (a) At any time and from
time to time, Custodian in its discretion may appoint in accordance with the
1940 Act (i) any overseas branch of any Eligible Domestic Bank, or (ii) any
Eligible Foreign Entity, in each case as a foreign sub-custodian for securities
and other assets of a Portfolio that are maintained outside the United States,
provided, however, that any such appointment shall be subject to prior written
approval thereof by the Trust and, further, to prior written approval by the
Trust of (A) the agreement pursuant to which Custodian proposes to employ such
-5-
<PAGE>
overseas branch or Eligible Foreign Entity, and (B) in the case of any Eligible
Foreign Entity, the country or countries in which such Foreign Eligible Entity
is to be authorized to hold securities and other assets of such Portfolio.
(b) Set forth on Exhibit D hereto are the foreign sub-custodians that
Custodian, subject to Section 3.6(a) above, may appoint and the countries in
which, subject to Section 3.6(a) above, such foreign sub-custodians may hold
Portfolio securities and other Portfolio assets. Custodian may from time to
time, at its discretion, add or delete foreign sub-custodians and countries to
and from Exhibit D, and Exhibit D shall be revised accordingly.
(c) The Trust shall inform Custodian sufficiently in advance of a
proposed investment which is to be held outside the United States to allow the
Trust to consider and give the approvals required under Section 3.6(a) above and
for Custodian to put appropriate arrangements in place with a foreign
sub-custodian. If a Portfolio invests in a security or other asset to be held
outside the United States before such approvals are given and such arrangements
are put in place, then such security or other asset may be held by such agent as
Custodian, in its discretion, may appoint.
(d) Notwithstanding anything to the contrary in Section 8.1 below,
Custodian shall have no greater liability to any Portfolio or the Trust for the
actions or omissions of any foreign sub-custodian appointed pursuant to this
Agreement (or any agent appointed pursuant to Section 3.6(c) above) than any
such foreign sub-custodian (or such agent) has to Custodian, and Custodian shall
not be required to discharge any such liability which may be imposed on it
unless and until such foreign sub-custodian (or agent) has effectively
indemnified Custodian against it or has otherwise discharged its liability to
Custodian in full.
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<PAGE>
(e) Upon the request of the Trust, Custodian shall annually furnish to
the Trust information concerning all foreign sub-custodians appointed pursuant
to this Agreement which shall be similar in kind and scope to that furnished to
the Trust in connection with the initial approval by the Trust of the agreements
pursuant to which Custodian employs such foreign sub-custodians or as otherwise
required by the 1940 Act.
3.7 APPOINTMENT OF OTHER AGENTS. Custodian may employ other suitable
agents, which may include affiliates of Custodian such as Bear, Stearns & Co.
Inc. ("Bear Stearns") or Bear, Stearns Securities Corp.("BS Securities"), both
of which are securities broker-dealers, provided, however, that Custodian shall
not employ (a) BS Securities to hold any collateral pledged by BS Securities
under any securities loan agreement between the Trust and BS Securities, whether
now or hereafter in effect, or (b) Bear Stearns to hold any securities purchased
from Bear Stearns under any repurchase agreement between the Trust and Bear
Stearns, whether now or hereafter in effect. The appointment of any agent
pursuant to this Section 3.7 shall not relieve Custodian of any of its
obligations or liabilities under this Agreement.
3.8 BANK ACCOUNTS. In its discretion and from time to time, Custodian
may open and maintain one or more demand deposit accounts with any Eligible
Domestic Bank (any such accounts to be in the name of Custodian and subject only
to its draft or order), provided, however, that the opening and maintenance of
any such account shall be at Custodian's expense and shall not relieve Custodian
of any of its obligations or liabilities under this Agreement.
3.9 DELIVERY OF ASSETS TO CUSTODIAN. Provided they are acceptable to
Custodian, the Trust shall deliver to Custodian the securities, funds and other
assets of each Portfolio, including (a) payments of income, payments of
principal and capital distributions received by such Portfolio with respect to
securities, funds or
-7-
<PAGE>
other assets owned by such Portfolio at any time during the term of this
Agreement, and (b) funds received by such Portfolio for the issuance, at any
time during such term, of Shares of such Portfolio. Custodian shall not be under
any duty or obligation to require the Trust to deliver to it any securities or
other assets owned by a Portfolio and shall have no responsibility or liability
for or on account of securities or other assets not so delivered.
3.10 DOMESTIC SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. Custodian
and any sub-custodian appointed pursuant to Section 3.5 above may deposit and/or
maintain securities of any Portfolio in a Domestic Securities Depository or in a
Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of securities of a Portfolio in any Domestic
Securities Depository or Book-Entry System, the Trust shall deliver to Custodian
a resolution of the Board of Trustees, certified by an officer of the Trust,
authorizing and instructing Custodian (and any sub-custodian appointed pursuant
to Section 3.5 above) on an on-going basis to deposit in such Domestic
Securities Depository or Book-Entry System all securities eligible for deposit
therein and to make use of such Domestic Securities Depository or Book-Entry
System to the extent possible and practical in connection with the performance
of its obligations hereunder (or under the applicable sub-custody agreement in
the case of such sub-custodian), including, without limitation, in connection
with settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of collateral consisting of securities.
(b) Securities of a Portfolio kept in a Book-Entry System or Domestic
Securities Depository shall be kept in an account ("Depository Account") of
Custodian (or of any sub-custodian appointed pursuant to Section 3.5 above) in
such Book-Entry System or Domestic Securities Depository which includes only
assets held
-8-
<PAGE>
by Custodian (or such sub-custodian) as a fiduciary, custodian or otherwise for
customers.
(c) The records of Custodian with respect to securities of a Portfolio
that are maintained in a Book-Entry System or Domestic Securities Depository
shall at all times identify such securities as belonging to such Portfolio.
(d) If securities purchased by a Portfolio are to be held in a
Book-Entry System or Domestic Securities Depository, Custodian (or any
sub-custodian appointed pursuant to Section 3.5 above) shall pay for such
securities upon (i) receipt of advice from the Book-Entry System or Domestic
Securities Depository that such securities have been transferred to the
Depository Account, and (ii) the making of an entry on the records of Custodian
(or of such sub-custodian) to reflect such payment and transfer for the account
of such Portfolio. If securities sold by a Portfolio are held in a Book-Entry
System or Domestic Securities Depository, Custodian (or such sub-custodian)
shall transfer such securities upon (A) receipt of advice from the Book-Entry
System or Domestic Securities Depository that payment for such securities has
been transferred to the Depository Account, and (B) the making of an entry on
the records of Custodian (or of such sub-custodian) to reflect such transfer and
payment for the account of such Portfolio.
(e) Custodian shall provide the Trust with copies of any report
obtained by Custodian (or by any sub-custodian appointed pursuant to Section 3.5
above) from a Book-Entry System or Domestic Securities Depository in which
securities of a Portfolio are kept on the internal accounting controls and
procedures for safeguarding securities deposited in such Book-Entry System or
Domestic Securities Depository.
(f) At its election, the Trust shall be subrogated to the rights of
Custodian (or of any sub-custodian appointed pursuant to Section 3.5 above) with
respect to any claim against a Book-Entry
-9-
<PAGE>
System or Domestic Securities Depository or any other person for any loss or
damage to a Portfolio arising from the use of such Book-Entry System or Domestic
Securities Depository, if and to the extent that such Portfolio has not been
made whole for any such loss or damage.
3.11 FOREIGN SECURITIES DEPOSITORIES. Custodian or any sub-custodian
appointed pursuant to Section 3.6 above may maintain securities of any Portfolio
in any Foreign Securities Depository in accordance with the 1940 Act. Set forth
on Exhibit D hereto are the Foreign Securities Depositories that the Trust may
authorize Custodian or any such sub-custodian to employ. Custodian may from time
to time, at its discretion, add or delete Foreign Securities Depositories to and
from Exhibit D, and Exhibit D shall be revised accordingly.
3.12 RELATIONSHIP WITH SECURITIES DEPOSITORIES. No Book-Entry System,
Securities Depository, or other securities depository or clearing agency
(whether foreign or domestic) which it is or may become standard market practice
to use for the comparison and settlement of trades in securities shall be an
agent or sub-contractor of Custodian for purposes of Section 3.7 above or
otherwise.
3.13 PAYMENTS FROM CUSTODY ACCOUNT. Upon receipt of Proper Instructions
with respect to a Portfolio but subject to its right to foreclose upon and
liquidate collateral pledged to it pursuant to Section 9.3 below, Custodian
shall make payments from the Custody Account of such Portfolio, but only in the
following cases, provided, first, that there are sufficient funds in such
Custody Account to make such payments, whether belonging to such Portfolio or
advanced to it by Custodian in its sole and absolute discretion as set forth in
Section 3.19 below, and, second, that after the making of such payments, such
Portfolio would not be in violation of any margin or other requirements agreed
upon pursuant to Section 3.19 below:
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<PAGE>
(a) For the purchase of securities for such Portfolio but only (i) in
the case of securities (other than options on securities, futures contracts and
options on futures contracts), against the delivery to Custodian (or any
sub-custodian appointed pursuant to this Agreement) of such securities
registered as provided in Section 3.21 below or in proper form for transfer or,
if the purchase of such securities is effected through a Book-Entry System or
Domestic Securities Depository, in accordance with the conditions set forth in
Section 3.10 above, and (ii) in the case of options, futures contracts and
options on futures contracts, against delivery to Custodian (or such
sub-custodian) of evidence of title thereto in favor of such Portfolio, the
Custodian, any such sub-custodian, or any nominee referred to in Section 3.21
below;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.14(f) below, of securities owned by such Portfolio;
(c) For transfer in accordance with the provisions of any agreement
among the Trust, Custodian and a securities broker-dealer, relating to
compliance with rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions of such
Portfolio;
(d) For transfer in accordance with the provisions of any agreement
among the Trust, Custodian and a futures commission merchant, relating to
compliance with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations) regarding margin
or other deposits in connection with transactions of such Portfolio;
(e) For the funding of any time deposit (whether certificated or not)
or other interest-bearing account with any banking
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<PAGE>
institution (including Custodian), provided that Custodian shall receive and
retain such certificate, advice, receipt or other evidence of deposit (if any)
as such banking institution may deliver with respect to any such deposit or
account;
(f) For the purchase from a banking or other financial institution of
loan participations, but only if Custodian has in its possession a copy of the
agreement between the Trust and such banking or other financial institution with
respect to the purchase of such loan participations and provided that Custodian
shall receive and retain such participation certificate or other evidence of
participation (if any) as such banking or other financial institution may
deliver with respect to any such loan participation;
(g) For the purchase and/or sale of foreign currencies or of options to
purchase and/or sell foreign currencies, for spot or future delivery, for the
account of such Portfolio pursuant to contracts between the Trust and any
banking or other financial institution (including Custodian, any sub-custodian
appointed pursuant to this Agreement and any affiliate of Custodian);
(h) For transfer to a securities broker-dealer as margin for a short
sale of securities for such Portfolio, or as payment in lieu of dividends paid
on securities sold short for such Portfolio;
(i) For the payment as provided in Article IV below of any dividends,
capital gain distributions or other distributions declared on the Shares of such
Portfolio;
(j) For the payment as provided in Article IV below of the redemption
price of the Shares of such Portfolio;
(k) For the payment of any expense or liability incurred by such
Portfolio, including but not limited to the following payments for the account
of such Portfolio: interest, taxes, and
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<PAGE>
administration, investment advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees, and other operating expenses of such
Portfolio; in all cases, whether or not such expenses are to be in whole or in
part capitalized or treated as deferred expenses; and
(l) For any other proper purpose, but only upon receipt of Proper
Instructions, specifying the amount and purpose of such payment, certifying such
purpose to be a proper purpose of such Portfolio, and naming the person or
persons to whom such payment is to be made.
3.14 DELIVERIES FROM CUSTODY ACCOUNT. Upon receipt of Proper
Instructions with respect to a Portfolio but subject to its right to foreclose
upon and liquidate collateral pledged to it pursuant to Section 9.3 below,
Custodian shall release and deliver securities and other assets from the Custody
Account of such Portfolio, but only in the following cases, provided, first,
that there are sufficient amounts and types of securities or other assets in
such Custody Account to make such delivery, and, second, that after the making
of such delivery, such Portfolio would not be in violation of any margin or
other requirements agreed upon pursuant to Section 3.19 below:
(a) Upon the sale of securities for the account of such Portfolio but,
subject to Section 3.15 below, only against receipt of payment therefor or, if
such sale is effected through a Book-Entry System or Domestic Securities
Depository, in accordance with the provisions of Section 3.10 above;
(b) To an offeror's depository agent in connection with tender or other
similar offers for securities of such Portfolio; provided that, in any such
case, the funds or other consideration for such securities is to be delivered to
Custodian;
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(c) To the issuer thereof or its agent when such securities are called,
redeemed or otherwise become payable, provided that in any such case the funds
or other consideration for such securities is to be delivered to Custodian;
(d) To the issuer thereof or its agent for exchange for a different
number of certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new securities
are to be delivered to Custodian;
(e) To the securities broker (or its clearing agent) through whom
securities are being sold for such Portfolio, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the issuer of
such securities, or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement, including surrender or receipt
of underlying securities in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the new securities and
funds, if any, are to be delivered to Custodian;
(g) In the case of warrants, rights or similar securities, to the
issuer of such warrants, rights or similar securities, or its agent, upon the
exercise thereof, provided that, in any such case, the new securities and funds,
if any, are to be delivered to Custodian;
(h) To the borrower thereof, or its agent, in connection with any loans
of securities for such Portfolio pursuant to any securities loan agreement
entered into by the Trust, but only against receipt by Custodian of such
collateral as is required under such securities loan agreement;
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(i) To any lender, or its agent, as collateral for any borrowings from
such lender by such Portfolio that require a pledge of assets of such Portfolio,
but only against receipt by Custodian of the amounts borrowed;
(j) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of such Portfolio or the Trust;
(k) For delivery in accordance with the provisions of any agreement
among the Trust, Custodian and a securities broker-dealer, relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection with
transactions of such Portfolio;
(l) For delivery in accordance with the provisions of any agreement
among the Trust, Custodian, and a futures commission merchant, relating to
compliance with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations) regarding margin
or other deposits in connection with transactions of such Portfolio;
(m) For delivery to a securities broker-dealer as margin for a short
sale of securities for such Portfolio;
(n) To the issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter, collectively, "ADRs") for such securities, or
its agent, against a written receipt therefor adequately describing such
securities, provided that such securities are delivered together with
instructions to issue ADRs in the name of Custodian or its nominee and to
deliver such ADRs to Custodian;
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(o) In the case of ADRs, to the issuer thereof, or its agent, against a
written receipt therefor adequately describing such ADRs, provided that such
ADRs are delivered together with instructions to deliver the securities
underlying such ADRs to Custodian or an agent of Custodian; or
(p) For any other proper purpose, but only upon receipt of Proper
Instructions, specifying the securities or other assets to be delivered, setting
forth the purpose for which such delivery is to be made, certifying such purpose
to be a proper purpose of such Portfolio, and naming the person or persons to
whom delivery of such securities or other assets is to be made.
3.15 DELIVERY PRIOR TO FINAL PAYMENT. When instructed by the Trust to
deliver securities of a Portfolio against payment, Custodian shall be entitled,
but only if in accordance with generally accepted market practice, to deliver
such securities prior to actual receipt of final payment therefor and,
exclusively in the case of securities in physical form, prior to receipt of
payment therefor. In any such case, such Portfolio shall bear the risk that
final payment for such securities may not be made or that such securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and Custodian shall have no liability for any of the foregoing.
3.16 CREDIT PRIOR TO FINAL PAYMENT. In its sole discretion and from
time to time, Custodian may credit the Custody Account of a Portfolio, prior to
actual receipt of final payment thereof, with (a) proceeds from the sale of
securities of such Portfolio which it has been instructed to deliver against
payment, (b) proceeds from the redemption of securities or other assets in such
Custody Account, and (c) income from securities, funds or other assets in such
Custody Account. Any such credit shall be conditional upon actual receipt by
Custodian of final payment and may be reversed if final payment is not actually
received in full. Custodian may, in its sole discretion and from time to time,
permit a Portfolio to
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use funds so credited to its Custody Account in anticipation of actual receipt
of final payment. Any funds so used shall constitute an advance subject to
Section 3.19 below.
3.17 DEFINITION OF FINAL PAYMENT. For purposes of this Agreement,
"final payment" means payment in funds which are (or have become) immediately
available, under applicable law are irreversible, and are not subject to any
security interest, levy, lien or other encumbrance.
3.18 PAYMENTS AND DELIVERIES OUTSIDE UNITED STATES. Notwithstanding
anything to the contrary that may be required by Section 3.13 or Section 3.14
above, or elsewhere in this Agreement, in the case of securities and other
assets maintained outside the United States and in the case of payments made
outside the United States, Custodian and any sub-custodian appointed pursuant to
this Agreement may receive and deliver such securities or other assets, and may
make such payments, in accordance with the laws, regulations, customs,
procedures and practices applicable in the relevant local market outside the
United States;
3.19 CLEARING CREDIT. Custodian may, in its sole discretion and from
time to time, advance funds to the Trust to facilitate the settlement of a
Portfolio's transactions in the Custody Account of such Portfolio. Any such
advance (a) shall be repayable immediately upon demand made by Custodian, (b)
shall be fully secured as provided in Section 9.3 below, and (c) shall bear
interest at such rate, and be subject to such other terms and conditions, as
Custodian and the Trust may agree.
3.20 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise
instructed by the Trust, Custodian shall with respect to all securities and
other assets held for a Portfolio:
(a) Subject to Section 8.4 below, receive into the Custody Account of
such Portfolio any funds or other property, including
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payments of principal, interest and dividends, due and payable on or on account
of such securities and other assets;
(b) Deliver securities of such Portfolio to the issuers of such
securities or their agents for the transfer thereof into the name of such
Portfolio, Custodian or any of the nominees referred to in Section 3.21 below;
(c) Endorse for collection, in the name of such Portfolio, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or securities in temporary form for
securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws of the United States, or the laws
or regulations of any other taxing authority, in connection with the transfer of
such securities or other assets or the receipt of income or other payments with
respect thereto;
(f) Receive and hold for such Portfolio all rights and similar
securities issued with respect to securities or other assets of such Portfolio;
(g) As may be required in the execution of Proper Instructions,
transfer funds from the Custody Account of such Portfolio to any demand deposit
account maintained by Custodian pursuant to Section 3.8 above; and
(h) In general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase and transfer of, and other
dealings in, such securities and other assets.
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3.21 REGISTRATION AND TRANSFER OF SECURITIES. All securities held for a
Portfolio that are issuable only in bearer form shall be held by Custodian in
that form, provided that any such securities shall be held in a Securities
Depository or Book-Entry System if eligible therefor. All other securities and
all other assets held for a Portfolio may be registered in the name of (a)
Custodian as agent, (b) any sub-custodian appointed pursuant to this Agreement,
(c) any Securities Depository, or (d) any nominee or agent of any of them. The
Trust shall furnish to Custodian appropriate instruments to enable Custodian to
hold or deliver in proper form for transfer, or to register as in this Section
3.21 provided, any securities or other assets delivered to Custodian which are
registered in the name of a Portfolio.
3.22 RECORDS. (a) Custodian shall maintain complete and accurate
records with respect to securities, funds and other assets held for a Portfolio,
including (i) journals or other records of original entry containing an itemized
daily record in detail of all receipts and deliveries of securities and all
receipts and disbursements of funds; (ii) ledgers (or other records) reflecting
(A) securities in transfer, if any, (B) securities in physical possession, (C)
monies and securities borrowed and monies and securities loaned (together with a
record of the collateral therefor and substitutions of such collateral), (D)
dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related thereto. Custodian
shall keep such other books and records with respect to securities, funds and
other assets of a Portfolio which are held hereunder as the Trust may reasonably
request.
(b) All such books and records maintained by Custodian for a Portfolio
shall (i) be maintained in a form acceptable to the Trust and in compliance with
rules and regulations of the Securities and Exchange Commission, (ii) be the
property of such Portfolio and at all times during the regular business hours of
Custodian be made available upon request for inspection by duly authorized
officers,
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employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained under the 1940 Act,
be preserved for the periods prescribed therein.
3.23 ACCOUNT REPORTS BY CUSTODIAN. Custodian shall furnish the Trust
with a daily activity statement, including a summary of all transfers to or from
the Custody Account of each Portfolio (in the case of securities and other
assets maintained in the United States, on the day following such transfers). At
least monthly and from time to time, Custodian shall furnish the Trust with a
detailed statement of the securities, funds and other assets held for each
Portfolio under this Agreement.
3.24 OTHER REPORTS BY CUSTODIAN. Custodian shall provide the Trust with
such reports as the Trust may reasonably request from time to time on the
internal accounting controls and procedures for safeguarding securities which
are employed by Custodian or any sub-custodian appointed pursuant to this
Agreement.
3.25 PROXIES AND OTHER MATERIALS. (a) Unless otherwise instructed by
the Trust, Custodian shall promptly deliver to the Trust all notices of
meetings, proxies and proxy materials which it receives regarding securities
held in the Custody Account of a Portfolio. Before delivering them to the Trust,
Custodian shall cause all proxies relating to such securities which are not
registered in the name of a Portfolio to be promptly executed by the registered
holder of such securities, without indication of the manner in which such
proxies are to be voted. Unless otherwise instructed by the Trust, neither
Custodian nor any of its agents shall exercise any voting rights with respect to
securities held hereunder.
(b) Unless otherwise instructed by the Trust, Custodian shall promptly
transmit to the Trust all other written information received by Custodian from
issuers of securities held in the
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Custody Account of any Portfolio. With respect to tender or exchange offers for
such securities, Custodian shall promptly transmit to the Trust all written
information received by Custodian from the issuers of the securities whose
tender or exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Trust desires to take action with respect to
any tender offer, exchange offer or other similar transaction, the Trust shall
notify Custodian (i) in the case of securities maintained outside the United
States, such number of Business Days prior to the date on which Custodian is to
take such action as will allow Custodian to take such action in the relevant
local market for such securities in a timely fashion, and (ii) in the case of
all other securities, at least five Business Days prior to the date on which
Custodian is to take such action.
3.26 CO-OPERATION. Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Trust to keep the books
of account of a Portfolio and/or to compute the value of the assets of a
Portfolio.
ARTICLE IV
REDEMPTION OF PORTFOLIO SHARES;
DIVIDENDS AND OTHER DISTRIBUTIONS
4.1 TRANSFER OF FUNDS. From such funds as may be available for the
purpose in the Custody Account of a Portfolio, and upon receipt of Proper
Instructions specifying that the funds are required to redeem Shares of such
Portfolio or to pay dividends or other distributions to holders of Shares of
such Portfolio, Custodian shall transfer each amount specified in such Proper
Instructions to such account of such Portfolio or of an agent thereof (other
than Custodian), at such bank, as the Trust may designate therein with respect
to such amount.
4.2 SOLE DUTY OF CUSTODIAN. Custodian's sole obligation with respect to
the redemption of Shares of a Portfolio and the payment of dividends and other
distributions thereon shall be its
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obligation set forth in Section 4.1 above, and Custodian shall not be required
to make any payments to the various holders from time to time of Shares of a
Portfolio nor shall Custodian be responsible for the payment or distribution by
the Trust, or any agent designated in Proper Instructions given pursuant to
Section 4.1 above, of any amount paid by Custodian to the account of the Trust
or such agent in accordance with such Proper Instructions.
ARTICLE V
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions to do so, Custodian shall establish
and maintain a segregated account or accounts for and on behalf of any
Portfolio, into which account or accounts may be transferred funds and/or
securities, including securities maintained in a Securities Depository:
(a) in accordance with the provisions of any agreement among the Trust,
Custodian and a securities broker-dealer (or any futures commission merchant),
relating to compliance with the rules of The Options Clearing Corporation or of
any registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions of such Portfolio,
(b) for purposes of segregating funds or securities in connection with
securities options purchased or written by such Portfolio or in connection with
financial futures contracts (or options thereon) purchased or sold by such
Portfolio,
(c) which constitute collateral for loans of securities made
by such Portfolio,
(d) for purposes of compliance by such Portfolio with requirements
under the 1940 Act for the maintenance of segregated
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accounts by registered management investment companies in connection with
reverse repurchase agreements, when-issued, delayed delivery and firm commitment
transactions, and short sales of securities, and
(e) for other proper purposes, but only upon receipt of Proper
Instructions, specifying the purpose or purposes of such segregated account and
certifying such purposes to be proper purposes of such Portfolio.
ARTICLE VI
[ RESERVED ]
ARTICLE VII
[ RESERVED ]
ARTICLE VIII
CONCERNING THE CUSTODIAN
8.1 STANDARD OF CARE. Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to any Portfolio or the Trust for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim which
does not arise from willful misfeasance, bad faith or negligence on the part of
Custodian. Custodian shall be entitled to rely on and may act upon advice of
counsel in all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. In no event shall Custodian be liable
for special, incidental or consequential damages, even if Custodian has been
advised of the possibility of such damages, or be liable in any manner
whatsoever for any action taken or omitted upon instructions from the Trust or
any agent of the Trust.
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8.2 ACTUAL COLLECTION REQUIRED. Custodian shall not be liable for, or
considered to be the custodian of, any funds belonging to a Portfolio or any
money represented by a check, draft or other instrument for the payment of
money, until Custodian or its agents actually receive such funds or collect on
such instrument.
8.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that
it is in the exercise of reasonable care, Custodian shall not be responsible for
the title, validity or genuineness of any assets or evidence of title thereto
received or delivered by it or its agents.
8.4 LIMITATION ON DUTY TO COLLECT. Custodian shall promptly notify the
Trust whenever any money or property due and payable from or on account of any
securities or other assets held hereunder for a Portfolio is not timely received
by it. Custodian shall not, however, be required to enforce collection, by legal
means or otherwise, of any such money or other property not paid when due, but
shall receive the proceeds of such collections as may be effected by it or its
agents in the ordinary course of Custodian's custody and safekeeping business or
of the custody and safekeeping business of such agents.
8.5 EXPRESS DUTIES ONLY. Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against Custodian. Custodian shall have no discretion whatsoever with respect to
the management, disposition or investment of the Custody Account of any
Portfolio and is not a fiduciary to any Portfolio or the Trust. In particular,
Custodian shall not be under any obligation at any time to monitor or to take
any other action with respect to compliance by any Portfolio or the Trust with
the 1940 Act, the provisions of the Trust's trust instruments or by-laws, or any
Portfolio's investment objectives, policies and limitations as in effect from
time to time.
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ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY PORTFOLIO. Each Portfolio shall indemnify and
hold harmless Custodian, any sub-custodian appointed pursuant to this Agreement
and any nominee of any of them, from and against any loss, damages, cost,
expense (including reasonable attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the Securities Exchange Act of 1934, the 1940 Act, and any federal, state
or foreign securities and/or banking laws) or claim arising directly or
indirectly (a) from the fact that securities or other assets in the Custody
Account of such Portfolio are registered in the name of any such nominee, or (b)
from any action or inaction, with respect to such Portfolio, by Custodian or
such sub-custodian or nominee (i) at the request or direction of or in reliance
on the advice of the Trust or any of its agents, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement with respect to such Portfolio, provided that Custodian, any such
sub-custodian or any nominee of any of them shall not be indemnified and held
harmless from and against (A) any such loss, damage, cost, expense, liability or
claim arising from willful misfeasance, bad faith or negligence on the part of
Custodian or any such sub-custodian or nominee, or (B) any special, incidental
or consequential damages, even if such Portfolio has been advised of the
possibility of such damages.
9.2 INDEMNITY TO BE PROVIDED. If the Trust requests Custodian to take
any action with respect to securities or other assets of a Portfolio, which may,
in the opinion of Custodian, result in Custodian or its nominee becoming liable
for the payment of money or incurring liability of some other form, Custodian
shall not be required to take such action until such Portfolio shall have
provided indemnity therefor to Custodian in an amount and form satisfactory to
Custodian.
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9.3 INDEMNIFICATION BY CUSTODIAN. Custodian shall indemnify and hold
harmless the Trust and each Portfolio from and against any loss, damages, cost,
expense (including reasonable attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the Securities Exchange Act of 1934, the 1940 Act, and any federal, state
or foreign securities and/or banking laws) or claim arising from Custodian's
willful misfeasance, bad faith or negligence in the performance of its
obligations under this Agreement, provided that neither the Trust nor such
Portfolio shall be indemnified and held harmless from and against (A) any such
loss, damage, cost, expense, liability or claim arising from willful
misfeasance, bad faith or negligence on the part of the Trust or any Portfolio,
or (B) any special, incidental or consequential damages, even if Custodian has
been advised of the possibility of such damages.
9.4 SECURITY. As security for the payment of any present or future
obligation or liability of any kind which a Portfolio may have to Custodian with
respect to or in connection with the Custody Account of such Portfolio or this
Agreement, the Trust hereby pledges to Custodian all securities, funds and other
assets of every kind which are in such Custody Account or otherwise held for
such Portfolio pursuant to this Agreement, and hereby grants to Custodian a
lien, right of set-off and continuing security interest in such securities,
funds and other assets.
ARTICLE X
FORCE MAJEURE
Custodian shall not be liable for any failure or delay in performance
of its obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; strikes; epidemics; riots; power failures; computer
failure and any such circumstances beyond its reasonable control as
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may cause interruption, loss or malfunction of utility, transportation, computer
(hardware or software) or telephone communication service; accidents; labor
disputes; acts of civil or military authority; actions by any governmental
authority, de jure or de facto; or inability to obtain labor, material,
equipment or transportation.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 REPRESENTATIONS WITH RESPECT TO PORTFOLIOS. The Trust represents
and warrants that (a) it has all necessary power and authority to perform the
obligations hereunder of each Portfolio, (b) the execution and delivery by it of
this Agreement, and the performance by it of the obligations hereunder of each
Portfolio, have been duly authorized by all necessary action and will not
violate any law, regulation, charter, by-law, or other instrument, restriction
or provision applicable to it or such Portfolio or by which it or such
Portfolio, or their respective assets, may be bound, and (c) this Agreement
constitutes a legal, valid and binding obligation of each Portfolio, enforceable
against it in accordance with its terms.
11.2 REPRESENTATIONS OF CUSTODIAN. Custodian represents and warrants
that (a) it has all necessary power and authority to perform its obligations
hereunder, (b) the execution and delivery by it of this Agreement, and the
performance by it of its obligations hereunder, have been duly authorized by all
necessary action and will not violate any law, regulation, charter, by-law, or
other instrument, restriction or provision applicable to it or by which it or
its assets may be bound, and (c) this Agreement constitutes a legal, valid and
binding obligation of it, enforceable against it in accordance with its terms.
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ARTICLE XII
COMPENSATION OF CUSTODIAN
Each Portfolio shall pay Custodian such fees and charges as are set
forth in Exhibit E hereto, as such Exhibit E may from time to time be revised by
Custodian upon 65 days' prior written notice to the Trust. Any annual fee
payable by a Portfolio shall be calculated on the basis of the total market
value of the assets in the Custody Account of such Portfolio as determined on
the last Business Day of the month for which such fee is charged; and such fee,
and any transaction charges payable by such Portfolio, shall be paid monthly by
automatic deduction from such Custody Account. Out-of-pocket expenses incurred
by Custodian in the performance of its services hereunder, and all other proper
charges and disbursements of the Custody Account of any Portfolio, shall be
charged to such Custody Account by Custodian and paid therefrom, and Custodian
shall promptly provide the Trust with supporting evidence for such out-of-pocket
expenses, charges and disbursements.
ARTICLE XIII
TAXES
13.1 TAXES PAYABLE BY PORTFOLIOS. Any and all taxes, including any
interest and penalties with respect thereto, which may be levied or assessed
under present or future laws or in respect of the Custody Account of any
Portfolio or any income thereof shall be charged to such Custody Account by
Custodian and paid therefrom.
13.2 TAX RECLAIMS. Upon the written request of the Trust, Custodian
shall exercise, on behalf of any Portfolio, any tax reclaim rights of such
Portfolio which arise in connection with foreign securities in the Custody
Account of such Portfolio.
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ARTICLE XIV
AUTHORIZED PERSONS; NOTICES
14.1 AUTHORIZED PERSONS. Custodian may rely upon and act in accordance
with any notice, confirmation, instruction or other communication received by it
from the Trust which is reasonably believed by Custodian to have been given or
signed on behalf of the Trust by one of the Authorized Persons designated by the
Trust in Exhibit B hereto, as it may from time to time be revised. The Trust may
revise Exhibit B hereto at any time by notice in writing to Custodian given in
accordance with Section 14.4 below, but no revision of Exhibit B hereto shall be
effective until Custodian actually receives such notice.
14.2 INVESTMENT ADVISERS. Custodian may also act in accordance with any
Written or Oral Instructions given with respect to a Portfolio which are
reasonably believed by Custodian to have been given or signed by one of the
persons designated from time to time by any of the investment advisers of such
Portfolio who are specified in Exhibit C hereto (if any) as it may from time to
time be revised. The Trust may revise Exhibit C hereto at any time by notice in
writing to Custodian given in accordance with Section 14.4 below, and each
investment adviser specified in Exhibit C hereto (if any) may at any time by
like notice designate an Authorized Person or remove an Authorized Person
previously designated by it, but no revision of Exhibit C hereto (if any) and no
designation or removal by such investment adviser shall be effective until
Custodian actually receives such notice.
14.3 ORAL INSTRUCTIONS. Custodian may rely upon and act in accordance
with Oral Instructions. All Oral Instructions shall be confirmed to Custodian in
Written Instructions. However, if Written Instructions confirming Oral
Instructions are not received by Custodian prior to a transaction, it shall in
no way affect the validity of the transaction authorized by such Oral
Instructions or the authorization given by an Authorized Person to effect such
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transaction. Custodian shall incur no liability to any Portfolio or the Trust in
acting upon Oral Instructions. To the extent such Oral Instructions vary from
any confirming Written Instructions, Custodian shall advise the Trust of such
variance but unless confirming Written Instructions are timely received, such
Oral Instructions shall govern.
14.4 ADDRESSES FOR NOTICES. Unless otherwise specified herein, all
demands, notices, instructions, and other communications to be given hereunder
shall be sent, delivered or given to the recipient at the address, or the
relevant telephone number, set forth after its name hereinbelow, and if so sent
shall be effective upon receipt:
If to the Trust:
THIRD AVENUE TRUST
for [INSERT NAME OF PORTFOLIO]
767 Third Avenue
New York, NY 10017-2023
Attention: General Counsel
Telephone: (212) 888-6685
Facsimile: (212) 735-0003
If to Custodian:
CUSTODIAL TRUST COMPANY
101 Carnegie Center
Princeton, New Jersey 08540-6231
Attention: Vice President - Trust Operations
Telephone: (609) 951-2320
Facsimile: (609) 951-2327
or at such other address as either party hereto shall have provided to the other
by notice given in accordance with this Section 14.4. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
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14.5 REMOTE CLEARANCE. Written Instructions for the receipt, delivery
or transfer of securities may include, and Custodian shall accept, Remote
Clearance Instructions (as defined hereinbelow) and Bulk Input Instructions (as
defined hereinbelow), provided that such Instructions are given in accordance
with the procedures prescribed by Custodian from time to time as to content of
instructions and their manner and timeliness of delivery by Customer. Custodian
shall be entitled to conclusively assume that all Remote Clearance Instructions
and Bulk Input Instructions have been given by an Authorized Person, and
Custodian is hereby irrevocably authorized to act in accordance therewith. For
purposes of this Agreement, "Remote Clearance Instructions" means instructions
that are input directly via a remote terminal which is located on the premises
of the Trust, or of an investment adviser named in Exhibit C hereto, and linked
to Custodian; and "Bulk Input Instructions" means instructions that are input by
bulk input computer tape delivered to Custodian by messenger or transmitted to
it via such transmission mechanism as the Trust and Custodian shall from time to
time agree upon.
ARTICLE XV
TERMINATION
Either party hereto may terminate this Agreement with respect to one or
more of the Portfolios by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than sixty (60)
days after the date of the giving of such notice. Upon the date set forth in
such notice this Agreement shall terminate with respect to each Portfolio
specified in such notice, and Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on that date (a) deliver directly to the
successor custodian or its agents all securities (other than securities held in
a Book-Entry System or Securities Depository) and other assets then owned by
such Portfolio and held by Custodian as custodian, and (b) transfer any
securities held in a Book-Entry System or Securities Depository to an account of
or
-31-
<PAGE>
for the benefit of such Portfolio, provided that such Portfolio shall have paid
to Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled.
ARTICLE XVI
LIMITATION OF LIABILITIES
To the extent that the trustees of the Trust are regarded as entering
into this Agreement, they do so only as trustees of the Trust and not
individually. The obligations under this Agreement of the Trust or any Portfolio
shall not be binding upon any trustee, officer or employee of the Trust
individually, or upon any holder of Shares individually, or upon any other
series of the Trust or any holder, individually, of shares of such other series,
but shall be binding only upon the assets and property of such Portfolio. Such
trustees, officers, employees and holders, when acting in such capacities, shall
not be personally liable under this Agreement, and Custodian shall look solely
to the assets and property of each Portfolio for the performance of this
Agreement with respect to such Portfolio and the payment of any claim against
such Portfolio under this Agreement.
ARTICLE XVII
MISCELLANEOUS
17.1 BUSINESS DAYS. Nothing contained in this Agreement shall require
Custodian to perform any function or duty on a day other than a Business Day.
17.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflict of law principles thereof.
17.3 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed
-32-
<PAGE>
matter contained in the prospectus or statement of additional information for a
Portfolio and such other printed matter as merely identifies Custodian as
custodian for a Portfolio. The Trust shall submit printed matter requiring
approval to Custodian in draft form, allowing sufficient time for review by
Custodian and its counsel prior to any deadline for printing.
17.4 NO WAIVER. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
17.5 AMENDMENTS. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
17.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
17.7 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
17.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party. Any
purported assignment in violation of this Section 17.8 shall be void.
-33-
<PAGE>
17.9 JURISDICTION. Any suit, action or proceeding with respect to this
Agreement may be brought in the Supreme Court of the State of New York, County
of New York, or in the United States District Court for the Southern District of
New York, and the parties hereto hereby submit to the non-exclusive jurisdiction
of such courts for the purpose of any such suit, action or proceeding, and
hereby waive for such purpose any other preferential jurisdiction by reason of
their present or future domicile or otherwise.
17.10 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its representative
thereunto duly authorized, all as of the day and year first above written.
THIRD AVENUE TRUST
By: --------------------
Name:
Title:
CUSTODIAL TRUST COMPANY
By: ---------------------
Name:
Title:
-34-
<PAGE>
EXHIBIT A
PORTFOLIOS
----------
- Third Avenue Small-Cap Value Fund
-35-
<PAGE>
EXHIBIT B
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Custody Accounts of the Portfolios.
Name Signature
---- ---------
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
-36-
<PAGE>
EXHIBIT C
INVESTMENT ADVISERS
-------------------
ALL PORTFOLIOS
EQSF Advisers, Inc.
-37-
<PAGE>
EXHIBIT D
ELIGIBLE FOREIGN SUB-CUSTODIANS AND SECURITIES DEPOSITORIES
-----------------------------------------------------------
ALL PORTFOLIOS
Foreign Sub-custodian Country(ies) Securities Depositories
- --------------------- ------------ -----------------------
- - Skandinaviska The Swedish Securities
Enskilda Banken Sweden Register Center
(Vardepapperscentralen)
- - Standard Bank of
South Africa South Africa The Central Depository
Botswana (Pty) Ltd.
Zimbabwe
Ghana
Kenya
- - For others: SEE ATTACHMENT OF SIX PAGES FROM CITIBANK, N.A.
SEC RULE 17F-5 INFORMATION PACKAGE OF JULY 1996
ENTITLED "SECTION 2: OVERVIEW OF FOREIGN SUB-
CUSTODIANS & DEPOSITORIES"
-38-
<PAGE>
- --------------------------------------------------------------------------------
CITIBANK, N.A.
SEC RULE 17f-5 INFORMATION PACKAGE
July 1996
SECTION 2: OVERVIEW OF FOREIGN SUBCUSTODIANS & DEPOSITORIES
- --------------------------------------------------------------------------------
2-01.0 SUBCUSTODIAN NETWORK
Argentina: Citibank, N.A. (Argentina)
Bartolome Mitre 502/30
1036 Buenos Aires, Argentina
Australia: Citicorp Nominees Pty. Ltd.
101 Collins Street
Melbourne, VIC 3000
Australia
Austria: Citibank International PLC
(Austria)
Postfach 90
Lothringerstrasse 7
A-1015 Vienna, Austria
Belgium: Generale Bank
Montagne du Parc 3
1000 Brussels
Belgium
Botswana: Barclays Bank of Botswana
Ltd.
Barclays House
5th Floor Khama Crescent
P.O. Box 1368
Gaborone, Botswana
Barclays Bank PLC
P.O. Box 1043
Willow Grove House
Windsor Road, Trowbridge,
Wiltshire BA14 OYT
United Kingdom
Brazil: Citibank, N.A. (Brazil)
Avenida Paulista 1111
Sao Paulo 01311-920
Brazil
Canada: Citibank Canada
123 Front Street West
Toronto, Ontario M5J 2M3
Canada
Chile: Citibank, N.A. (Chile)
Ahumada 40
Santiago, Chile
China: Citibank, N.A. (Hong Kong)
Citibank Tower, Citibank Plaza,
3 Garden Road
Central, Hong Kong
Colombia: Cititrust Colombia S.A.
Carrera 9A, No 99-02,
Bogota, Colombia
Czech Republic:
Citibank a.s.
Evropska 178
166 40
Praha, Czech Republic
Denmark: Den Danske Bank
2-12 Holmens Kanal
DK-1092 Copenhagen K
Denmark
Ecuador: Citibank, N.A. (Ecuador)
Juan Leon Mera
130 y Patria
Quito 06995, Ecuador
Egypt: Citibank, N.A. (Egypt)
Cairo Branch
4 Ahmed Pasha Street
Garden City, Cairo
Egypt
Finland: Merita Bank Ltd.
Aleksanterinkatu 30
FIN-0020 Merita
Helsinki, Finland
- --------------------------------------------------------------------------------
Prepared by Worldwide Securities Services Division, part of Citibank, N.A.'s
Global Transaction Services Group; July 1996
Copyright 1996. All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
CITIBANK, N.A.
SEC RULE 17f-5 INFORMATION PACKAGE
July 1996
SECTION 2: OVERVIEW OF FOREIGN SUBCUSTODIANS & DEPOSITORIES
- --------------------------------------------------------------------------------
2-01.0 SUBCUSTODIAN NETWORK (cont'd.)
France: Citibank, S.A. (France)
Citicenter, 19 Le Parvis
Cedex 36
92073 Paris la Defense,
France
Banque Paribas
3 Rue D'Antin
75002 Paris, France
Germany: Citibank Aktiengesellschaft
Neue Mainzer Str. 75
60311 Frankfurt/Main
Germany
Greece: Citibank, N.A. (Greece)
Athens Branch
Othonos 8
Athens 10557, Greece
Hong Kong: Citibank, N.A. (Hong Kong)
Citibank Tower
Citibank Plaza
3 Garden Road
Central, Hong Kong
Hungary: Citibank Budapest Rt.
Vaci Utca 19-21
1052 Budapest V
Hungary
India: Citibank, N.A. (India)
Sakhar Bhavan
230 Backbay Reclamation
Nariman Point
Bombay 400 021, India
Indonesia: Citibank, N.A. (Jakarta)
Jalan Jendral Sudirman No. 1
Jakarta 12910, Indonesia
Ireland: Citibank, N.A. (Ireland)
IFSC House, Custom House
Quay
Dublin 1, Ireland
Israel: Bank Hapoalim
62, Yehvda Halevi Street
65227 Tel Aviv
Israel
Italy: Citibank, N.A. (Italy)
Foro Buonaparte 16
Casella Postale 10932
20121 Milan, Italy
Japan: Citibank, N.A. (Japan)
Citicorp Center
2-3-14 Higashi Shinagawa
Shinagawa - ku,
Tokyo, Japan
Jordan: Citibank, N.A. (Jordan)
3rd Circle, Jordan Insurance
Building
Prince Mohammed Street
P.O. Box 5055
Amman, 11183 Jordan
Korea: Citibank, N.A.
89-29 Shinmun-Ro,
Chongro-ku
Seoul, Korea
Luxembourg: Cedel S.A.
67 Boulevard
Grande-Duchesse Charlotte
L-1010, Luxembourg
Malaysia: Citibank Berhad
8 Jalan Munshi Abdullah
Kuala Lumpur 50100,
Malaysia
Mexico: Citibank, S.A. (Mexico)
Paseo de la Reforma 390
Mexico D.F. 06695
Mexico
- --------------------------------------------------------------------------------
Prepared by Worldwide Securities Services Division, part of Citibank, N.A.'s
Global Transaction Services Group; July 1996
Copyright 1996. All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
CITIBANK, N.A.
SEC RULE 17f-5 INFORMATION PACKAGE
July 1996
SECTION 2: OVERVIEW OF FOREIGN SUBCUSTODIANS & DEPOSITORIES
- --------------------------------------------------------------------------------
2-01.0 SUBCUSTODIAN NETWORK (CONT'D)
Morocco: Citibank Maghreb
(Morocco)
52 Avenue Hassan II
Casablanca, Morocco
Netherlands: Citibank, N.A. (Netherlands)
"Europlaza",
Hoogoorddreef 54 B,
1101 BE Amsterdam z.o.,
The Netherlands
New Zealand: Citibank Nominees (New
Zealand) Ltd.
Citibank Center
23 Customs Street East
Auckland 1, New Zealand
Norway: Christiania Bank og
Kreditkasse ("CBK")
P.O. Box 1166 Sentrum
0107 Oslo 1, Norway
Pakistan: Citibank, N.A. (Pakistan)
State Life Bldg. No. 1
Chundrigar Road
Karachi 74200
Pakistan
Peru: Citibank, N.A. (Lima)
AV. Camino Real 456
Torre Real
Lima 27, Peru
Philippines: Citibank, N.A. (Philippines)
Citibank Center Tower,
Citibank Plaza
8741 Paseo de Roxas
Makati City
Manila, Philippines
Poland: Citibank Poland S.A.
Sentorska 12,
00-082 Warsaw,
Poland
Portugal: Citibank Portugal S.A.
Rua Barata, Salgueiro 30
1200 Lisbon
Portugal
Singapore: Citibank, N.A. (Singapore)
5 Shenton Way
UIC Building
Singapore 068808
South Africa: First National Bank of
Southern Africa Ltd.
Mezzanine Floor
3 First Place,
Post Box 7713
Johannesburg, 2000
Republic of South Africa
Spain: Citibank, N.A. (Spain)
Jose Ortega Y Gasset 29
28006 Madrid, Spain
Sri Lanka: Citibank, N.A. (Sri Lanka)
67 Dharmapala Mawatha
P.O. Box 888
Colombo 7, Sri Lanka
Sweden: Skandinaviska Enskilda
Banken ("SEB")
Sergels Torg 2
10640 Stockholm, Sweden
Switzerland: Citibank (Switzerland)
Bahnhofstrass 63
P.O. Box 24
8021 Zurich, Switzerland
Taiwan: Citibank, N.A. (Taiwan)
Taipei Branch
No. 52 Ming Sheng East
Road Sec. 4
Taipi, Taiwan R.O.C.
- --------------------------------------------------------------------------------
Prepared by Worldwide Securities Services Division, part of Citibank, N.A.'s
Global Transaction Services Group; July 1996
Copyright 1996. All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
CITIBANK, N.A.
SEC RULE 17f-5 INFORMATION PACKAGE
July 1996
SECTION 2: OVERVIEW OF FOREIGN SUBCUSTODIANS & DEPOSITORIES
- --------------------------------------------------------------------------------
2-01.0 SUBCUSTODIAN NETWORK (cont'd.)
Thailand: Citibank, N.A.-(Thailand)
82 North Sathom Road
Bangrak, Bangkok 10500
Thailand
Turkey: Citibank, N.A. (Turkey)
Buyukdere Caddessi No. 100
Esentepe, Istanbul 80280
Turkey
United Kingdom: Citibank, N.A. (United Kingdom)
25 Molesworth St.
Lewisham, London
SE 13 7EX
United Kingdom
The First National Bank of Chicago
First Chicago Clearing Centre ("FCCC")
27 Leadenhall Street
London EC3A 1AA
United Kingdom
Uruguay: Citibank, N.A. (Uruguay)
Cerrito 455
P.O. Box 690
Montevideo 11000
Uruguay
Venezuela: Citibank, N.A. (Caracas)
Carmelitas a Altagracia
Edificio Citibank
Caracas 1010, Venezuela
Zimbabwe: Barclays Bank of Zimbabwe Ltd.
Barclays House
Corner First Street
Jason Mayo Avenue
Harare (P.O. Box 1279)
Zimbabwe
Barclays Bank PLC
P.O. Box 1043
Willow Grove House
Windsor Road, Trowbridge,
Wiltshire BA 14 OYT
United Kingdom
- --------------------------------------------------------------------------------
Prepared by Worldwide Securities Services Division, part of Citibank, N.A.'s
Global Transaction Services Group; July 1996
Copyright 1996. All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
CITIBANK, N.A.
SEC RULE 17f-5 INFORMATION PACKAGE
July 1996
SECTION 2: OVERVIEW OF FOREIGN SUBCUSTODIANS & DEPOSITORIES
- --------------------------------------------------------------------------------
2-01.0 Depositories
Argentina: Caja de Valores ("CDV")
Australia: The Reserve Bank Information
and Transfer Systems ("RITS")
Austraclear
CHESS
Austria: Wertpapiersammelbank
bei der Oesterreichische
Kontrollbank ("OEKBAG")
Belgium: Caisse Interprofessionelle
de Depots et de Virements
de Titres S.A. ("CIK")
Banque Nationale
de Belgique ("BNB")
Brazil: BOVESPA's Registered
Shares Fungible Custody
("BOVESPA")
Canada: The Canadian Depository for
Securities Limited ("CDS")
China: The Shanghai Securities
Central Clearing and
Registration Corporation
("SSCCRC")
The Shenzhen Securities
Clearing Co. Ltd. ("SSCCL")
Czech The Registration Centre
Republic: Stredisko Cennych Papiru
(Central Securities Registry)
Denmark: Vaerdipapircentralen ("VP")
Finland Central Share Registry
(CSR)
The Helsinki Money Market
Center ("HMMC")
France: Societe Interprofessionnelle
pour la Compensation de
Valeurs Mobilieres
("SICOVAM")
Banque de France
Germany: Deutscher Kassenverein A.G.
("DKV")
Greece: Central Securities Depository,
S.A. ("CSD")
Hong Kong: Central Clearing and
Settlement System ("CCASS")
Ireland: Gilt Settlement Office ("GSO")
Hungary: The Central Depository and
Clearing House ("CDCH")
Italy: Monte Titoli S.P.A. Institutoper
la Custodia e
l'Amministrazione Accentrata
di Valori Mobiliar ("Monte
Titoli")
Banca d' Italia (The Bank of
Italy)
Japan: The Bank of Japan ("BOJ")
Japan Securities Depository
Center ("JASDEC")
Korea: The Korea Securities
(Depository ("KSD")
Luxembourg: Cedel Bank S.A. ("Cedel")
Malaysia: Malaysian Central
Depository Sdn. Bhd.
("MCD")
- --------------------------------------------------------------------------------
Prepared by Worldwide Securities Services Division, part of Citibank, N.A.'s
Global Transaction Services Group; July 1996
Copyright 1996. All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
CITIBANK, N.A.
SEC RULE 17f-5 INFORMATION PACKAGE
July 1996
SECTION 2: OVERVIEW OF FOREIGN SUBCUSTODIANS & DEPOSITORIES
- --------------------------------------------------------------------------------
2-02.0 Depositories (cont'd.)
Mexico: Instituto para el Deposito de
Valores ("S.D. Indeval")
Banco de Mexico
Netherlands: Netherlands Centraal Instituut
voor Giraal Effectenverkeer
B.V. ("Necigef")
Nederlandsche Bank ("DNB")
New Zealand: Austraclear
Norway: The Norwegian Registry of Securities -
Verdipapirsentralen ("VPS")
Peru: Caja de Valores ("CAVAL")
Poland: The National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych)
Portugal: Central de Valores Mobiliarios
("CVM")
Singapore: Central Depository (PTE) Ltd.
South Africa: The Central Depository (Pty) Ltd.
Spain: Servico de Compensacion y
Liquidacion de Valores
("SCLV")
Sri Lanka: Central Depository System
(Pvt) Limited
Sweden: The Swedish Securities
Register Center
Vardepapperscentralen
VPC AB ("VPC")
Switzerland: Schwerzerische
Effekten-Giro AG ("SEGA")
Taiwan: Taiwan Securities Central
Depository Co., Ltd. ("TSCD")
Thailand: The Thailand Securities
Depository Co., Ltd. ("TSD")
Turkey: Istanbul Stock Excange
Settlement and Custody
Company, Inc. ("ISESC"), new
name Takasbank A.S.
United Kingdom: Central Gilts Office ("CGO")
Central Moneymarkets Office
("CMO")
- --------------------------------------------------------------------------------
Prepared by Worldwide Securities Services Division, part of Citibank, N.A.'s
Global Transaction Services Group; July 1996
Copyright 1996. All rights reserved.
<PAGE>
EXHIBIT E
CUSTODY FEES AND TRANSACTION CHARGES
------------------------------------
All fees and charges set forth in this Exhibit E shall be calculated
and paid in the manner provided in Article XII above.
DOMESTIC FEES. Each Portfolio shall pay Custodian the following fees
for assets maintained by such Portfolio in the United States ("Domestic Assets")
and charges for transactions by such Portfolio in the United States, all such
fees and charges to be payable monthly:
(1) an annual fee of the greater of 0.01% (one basis point) per annum
of the value of the Domestic Assets in the Custody Account of such Portfolio or
$6,000;
(2) a transaction charge of $12 for each receive or deliver of
book-entry securities into or from the Custody Account of such Portfolio (but
not for any such receive or deliver in a repurchase transaction representing a
cash sweep investment for such Portfolio's account);
(3) a transaction charge of $40 for each receive or deliver into or
from such Portfolio's Custody Account of securities in physical form;
(4) a transaction charge for each repurchase transaction in the Custody
Account of such Portfolio which represents a cash sweep investment for such
Portfolio's account, computed at a rate of 0.10% (ten basis points) per annum on
the amount of the purchase price paid by such Portfolio in such repurchase
transaction;
(5) a charge of $7 for each "free" wire transfer of funds from the
Custody Account of such Portfolio;
-39-
<PAGE>
(6) a charge of $5 for each disbursement of funds made by check; and
(7) a service charge for each holding of securities or other assets of
such Portfolio that are sold by way of private placement or in such other manner
as to require services by Custodian which in its reasonable judgment are
materially in excess of those ordinarily required for the holding of publicly
traded securities in the United States.
INTERNATIONAL FEES. Each Portfolio shall pay Custodian fees for assets
maintained by such Portfolio outside the United States ("Foreign Assets") and
charges for transactions by such Portfolio outside the United States (including,
without limitation, charges for funds transfers and tax reclaims) in accordance
with such schedule of fees and charges for each country in which Foreign Assets
of such Portfolio are held as Custodian shall from time to time provide to the
Trust. Any asset-based fee shall be based upon the total market value of the
applicable Foreign Assets as determined on the last Business Day of the month
for which such fee is charged.
-40-
TRANSFER AGENT SERVICES AGREEMENT
This Agreement, dated as of the 24th day of March , 1997, made by and
between THIRD AVENUE TRUST (the "Trust"), a Delaware business trust operating as
a registered investment company under the Investment Company Act of 1940, as
amended (the "Act"), and duly organized and existing under the laws of the State
of Delaware, and FPS SERVICES, INC. ("FPS"), a corporation duly organized and
existing under the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Declaration of Trust ("Trust
Instrument") to issue separate series of shares representing interests in
separate investment portfolios (the "Series"), certain of which Series are
identified on Schedule "C" attached hereto and made a part hereof, and which
Schedule "C" may be amended from time to time by mutual agreement of the Trust
and FPS; and
WHEREAS, the Trust desires to appoint FPS as the transfer agent,
dividend disbursing agent and agent in connection with certain other activities
for the Series as set forth in this Agreement and in Schedule "A" attached
hereto and FPS desires to accept such appointment; and
WHEREAS, FPS is registered with the U.S. Securities and Exchange
Commission as a transfer agent as required under Section 17(A)(c) of the
Securities Exchange Act of 1934, as amended ("1934 Act");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency of which is hereby acknowledged, the Parties hereto, intending to be
legally bound, agree as follows:
SECTION 1. APPOINTMENT OF FPS. The Trust hereby appoints FPS as
transfer agent, registrar and dividend disbursing agent for Shares of the Series
and as shareholder servicing agent for the Series. FPS hereby accepts such
appointments and agrees to perform the duties hereinafter set forth.
In order that FPS may perform its duties under the terms of this
Agreement, the Board of
- --------------------------------------------------------------------------------
Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 1 of 12
<PAGE>
Trustees of the Trust shall direct the officers, investment adviser, legal
counsel, independent accountants and custodian of the Trust to cooperate fully
with FPS and, upon request of FPS, to provide such information, documents and
advice relating to the Series which FPS requires to execute its responsibilities
hereunder. In connection with its duties, FPS will be entitled to rely, and will
be held harmless by the Series when acting in reasonable reliance, upon the
instruction, advice or any documents relating to the Series as provided to FPS
by any of the aforementioned persons on behalf of the Series. All fees charged
by any such persons acting on behalf of a Series will be deemed an expense of
that Series.
Nothing in this Agreement will prevent FPS or any officer
thereof from providing the same or comparable services for or with any other
person, firm or corporation. While the services supplied to the Series may be
different than those supplied to other persons, firms or corporations, FPS will
provide the Series equitable treatment in supplying services. The Series
recognize that they will not receive preferential treatment from FPS as compared
with the treatment provided to other FPS clients.
SECTION 2. DEFINITIONS. Whenever used in this Agreement, or in any
amendment or supplement hereto, the following words and phrases will have the
following meanings, unless the context otherwise requires.
(a) "Authorized Person" will be deemed to include any person, whether
or not such person is an officer or employee of the Trust, duly authorized to
give Oral Instructions or Written Instructions on behalf of the Trust by a
resolution of the Board of Trustees of the Trust, as may be received by FPS from
time to time.
(b) "Share Certificates" will mean the certificates representing shares
of beneficial interest of the applicable Series.
(c) "Shareholders" will mean the registered owners of the Shares of a
Series in accordance with the share registry records maintained by FPS on behalf
of the Series.
(d) "Shares" will mean the issued and outstanding shares of beneficial
interest of a Series.
(e) "Signature Guarantee" will mean the guarantee of signatures by an
"eligible guarantor
- --------------------------------------------------------------------------------
Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 2 of 12
<PAGE>
institution" as defined in rule 17Ad-15 under the 1934 Act. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. Broker-dealers guaranteeing signatures must be members of a
clearing corporation or maintain net capital of at least $100,000. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program.
(f) "Oral Instruction" will mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted to FPS in
person or by telephone, telegram, telecopy or other mechanical or documentary
means LACKING ORIGINAL SIGNATURE, by a person or persons reasonably identified
to FPS to be an Authorized Person to give Oral Instructions to FPS on behalf of
a Series.
(g) "Written Instruction" will mean an authorization, instruction,
approval, item or information of any kind transmitted to FPS in an original
writing CONTAINING AN ORIGINAL SIGNATURE or a copy of such document transmitted
by telecopy including transmission of such signature reasonably identified to
FPS to be the signature of a person or persons so authorized by a resolution of
the Board of Trustees of the Trust, or so identified by the Trust to give
Written Instructions to FPS on behalf of a Series.
The Trust will file with FPS a certified copy of each resolution of its
Board of Trustees authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
SECTION 3. DUTIES OF FPS. FPS will be responsible for administering
and/or performing those functions typically performed by a transfer agent; for
acting as service agent in connection with dividend and distribution functions;
and for performing shareholder account and administrative agent functions in
connection with the issuance, transfer and redemption or repurchase (including
coordination with the applicable Custodian) of Shares in accordance with the
terms of each Series' Prospectus, applicable law and this Agreement, including
without limitation, those duties specified in Schedule "A" attached hereto. In
addition, each Series will deliver to FPS all notices issued by the Series with
respect to its Shares in accordance with and pursuant to the Declaration of
Trust or By-laws of the Trust or as required by law and will perform such other
specific duties as are set forth in the Trust Instrument, including the giving
- --------------------------------------------------------------------------------
Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 3 of 12
<PAGE>
of notice of any special or annual meetings of Shareholders and any other
notices required thereby.
SECTION 4. RECORD KEEPING AND OTHER INFORMATION. FPS will create and
maintain all records required of it pursuant to its duties hereunder and as set
forth in Schedule "A" in accordance with all applicable laws, rules and
regulations, including records required by Section 31(a) of the Act. All such
records will be the property of the applicable Series and will be available
during regular business hours for inspection, copying and use by the Series.
Where applicable, such records will be maintained by FPS for the periods and in
the places required by Rule 31a-2 under the Act. Upon termination of this
Agreement, FPS will deliver all such records to the Trust or such person as the
Trust may designate.
In case of any request or demand for the inspection of the Share
records of a Series, FPS shall notify the Series and secure instructions as to
permitting or refusing such inspection. FPS may, however, exhibit such records
to any person in any case where it is advised by its counsel that it may be held
liable for failure to do so.
SECTION 5. OTHER DUTIES. In addition to the duties set forth in
Schedule "A," FPS will perform such other duties and functions, and will be paid
such amounts therefor, as may from time to time be agreed upon in writing
between a Series and FPS. The compensation for such other duties and functions
will be reflected in a written amendment to Schedule "B" and the duties and
functions will be reflected in an amendment to Schedule "A," dated and signed by
Authorized Persons of the Parties hereto.
SECTION 6. RELIANCE BY FPS; INSTRUCTIONS.
(a) Provided the standard of care in Section 9 has been met,
FPS will have no liability when acting upon Written or Oral Instructions
believed to have been executed or orally communicated by an Authorized Person
and will not be held to have any notice of any change of authority of any person
until receipt of a Written Instruction thereof from the Trust pursuant to
Section 1(g). Provided the standard of care in Section 9 has been met, FPS will
also have no liability when processing Share Certificates which it reasonably
believes to bear the proper manual or facsimile signatures of the officers of
the Trust and the proper countersignature of FPS.
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 4 of 12
<PAGE>
(b) At any time, FPS may apply to any Authorized Person of the
Trust for Written Instructions and may seek advice from legal counsel for the
Trust, or its own legal counsel, with respect to any matter arising in
connection with this Agreement, and provided the standard of care in Section 9
has been met, it will not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Trust or for FPS. Written
Instructions requested by FPS will be provided by the Series within a reasonable
period of time. In addition, FPS, its officers, agents or employees, will accept
Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Trust only if said representative is an
Authorized Person. The Trust agrees that all Oral Instructions will be followed
within one business day by confirming Written Instructions, and that the Trust's
failure to so confirm will not impair in any respect FPS' right to rely on Oral
Instructions. FPS will have no duty or obligation to inquire into, nor will FPS
be responsible for, the legality of any act done by it upon the request or
direction of a person reasonably believed by FPS to be an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, FPS will be under no duty or obligation to inquire into, and will not
be liable for: (i) the legality of the issuance or sale of any Shares or the
sufficiency of the amount to be received therefor; (ii) the legality of the
redemption of any Shares, or the propriety of the amount to be paid therefor;
(iii) the legality of the declaration of any dividend by the Board of Trustees,
or the legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the Shares.
SECTION 7. DAYS OF OPERATION. Nothing contained in this Agreement is
intended to or will require FPS, in any capacity hereunder, to perform any
functions or duties on any day on which the New York Stock Exchange ("NYSE") is
closed. Functions or duties normally scheduled to be performed on such days will
be performed on, and as of, the next succeeding business day on which the NYSE
is open.
SECTION 8. ACTS OF GOD, ETC. FPS will not be liable or responsible for
delays or errors caused by acts of God or by reason of circumstances beyond its
control, including acts
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
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<PAGE>
of civil or military authority, national emergencies, mechanical breakdown,
insurrection, war, riots, or failure or unavailability of transportation,
communication or power supply, fire, flood or other catastrophe.
In the event of equipment failures beyond FPS' control, FPS will, at no
additional expense to the Series, take reasonable steps to minimize service
interruptions but will have no liability with respect thereto. The foregoing
obligation will not extend to computer terminals located outside of premises
maintained by FPS. FPS will enter into and will maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available.
Section 9. DUTY OF CARE AND INDEMNIFICATION. FPS will be obligated to
exercise care and diligence and to act in good faith and to use its best efforts
within commercially reasonable limits to insure the accuracy and completeness of
all services performed under this Agreement.
FPS shall indemnify and hold the Trust and any of its Series harmless
from and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributed to any action or
failure or omission to act by FPS as a result of FPS' lack of good faith,
negligence, willful misconduct or negligence.
Any person, even though also a director, officer, employee, shareholder
or agent of FPS, who may be or become an officer, trustee, employee or agent of
the Trust, will be deemed, when rendering services to the Series, or acting on
any business of the Trust (other than services or business in connection with
FPS' duties hereunder), to be rendering such services to or acting solely for
the Trust and not as a director, officer, employee, shareholder or agent of, or
one under the control or direction of FPS even though such person may be
receiving compensation from FPS.
Each Series shall indemnify and hold FPS harmless, together with its
directors, officers, employees, shareholders and agents from and against any and
all claims, demands, expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which FPS may sustain or incur or which may
be asserted against FPS by any person by reason of, or as a result of:
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 6 of 12
<PAGE>
(i) any action taken or omitted to be taken by FPS except
claims, demands, expenses and liabilities arising from willful misfeasance, bad
faith, negligence or reckless disregard on the part of FPS in the performance of
its obligations and duties under this Agreement; or
(ii) any action taken or omitted to be taken by FPS in
reliance upon any Certificate, instrument, order or stock certificate or other
document reasonably believed by FPS to be genuine and signed, countersigned or
executed by any duly Authorized Person, upon the Oral Instructions or Written
Instructions of an Authorized Person of the Trust, or upon the written opinion
of legal counsel for the Trust or FPS.
If a claim is made against any Party as to which such Party may seek
indemnity under this Section, such Party will notify the other Party promptly
after any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and will notify the other Party promptly of any
action commenced against such Party within ten (10) days after such Party has
been served with a summons or other legal process, giving information as to the
nature and basis of the claim. Failure to notify the other Party will not,
however, relieve the other Party from any liability which it may have on account
of the indemnity under this Section so long as the other Party has not been
prejudiced in any material respect by such failure.
The Parties will cooperate in the control of the defense of any action,
suit or proceeding in which one Party is involved and for which indemnity is
being provided to such Party by the other Party. The indemnifying Party may
negotiate the settlement of any action, suit or proceeding subject to the other
Party's approval, which will not be unreasonably withheld. The other Party
reserves the right, but not the obligation, to participate in the defense or
settlement of a claim, action or proceeding with its own counsel. Costs or
expenses incurred by the other Party in connection with, or as a result of, such
participation will be borne solely by the indemnifying Party if:
(i) the other Party has received an opinion of counsel from
counsel to the indemnifying Party stating that the use of the indemnifying
Party's counsel by the other Party would present an impermissible conflict of
interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
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<PAGE>
Parties, and legal counsel to the other Party has reasonably concluded that
there are legal defenses available to it which are different from or additional
to those available to the indemnifying Party or which may be adverse to or
inconsistent with defenses available to the indemnifying Party (in which case
the indemnifying Party will not have the right to direct the defense of such
action on behalf of the other Party); or
(iii) the indemnifying Party authorizes the other Party to
employ separate counsel at the expense of the indemnifying Party.
The terms of this Section will survive the termination of this
Agreement.
SECTION 10. LIMITATION OF LIABILITY. FPS is expressly put on notice of
the limitation of liability as set forth in the Trust Instrument and agrees that
the obligations assumed by the Trust pursuant to this Agreement shall be limited
in any case to the Trust and its assets and that FPS shall not seek satisfaction
of any such obligations from the shareholders of the Trust, the Trustees,
officers, employees or agents of the Trust, or any of them.
SECTION 11. COMPENSATION. The Series agree to pay FPS compensation for
its services, and to reimburse it for expenses, at the rates, times and amounts
as set forth in Schedule "B" attached hereto and incorporated herein by
reference, and as will be set forth in any amendments to such Schedule "B"
agreed upon in writing by the Trust and FPS.
FPS will transmit an invoice to each Series as soon as practicable
after the end of each calendar month which will be detailed in accordance with
Schedule "B," and that Series will pay to FPS the amount of such invoice within
ten (10) days after its receipt of the invoice.
In addition, each Series agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by FPS with respect to the Series in the
performance of its duties hereunder. Out-of-pocket expenses will include, but
will not be limited to, the items specified in Schedule "B." Unspecified
out-of-pocket expenses will be limited to those out-of-pocket expenses
reasonably incurred by FPS in the performance of its obligations hereunder.
Reimbursement by the Series for expenses incurred by FPS will be made as soon as
practicable but no later than ten (10) days after the receipt of an itemized
invoice from FPS.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 8 of 12
<PAGE>
this Agreement specifying the additional services and corresponding compensation
will be executed by both FPS and the Trust.
SECTION 12. TERM AND TERMINATION.
(a) The initial term of this Agreement (the "Initial Term") will be for
the period of one (1) year commencing on the date first above written and will
continue thereafter subject to termination by either Party as set forth in
subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be
fixed for one (1) year commencing on the Effective Date of this Agreement and
will continue thereafter subject to their review and any adjustment.
(c) After the Initial Term of this Agreement, the Trust on behalf of
one or more of the Series or FPS may give written notice to the other of the
termination of this Agreement with respect to the Series identified in the
written notice, such termination to take effect at the time specified in the
notice, which date will not be less than one hundred eighty (180) days after the
date of receipt of such notice ( the "Notice Period"). Prior to the effective
termination date, the Trust on behalf of each applicable Series will pay to FPS
such compensation as may be due as of the date of termination and will likewise
reimburse FPS for any out-of-pocket expenses and disbursements reasonably
incurred by FPS on behalf of each applicable Series to such date.
(d) In connection with the termination of this Agreement, if a
successor to any of FPS' duties or responsibilities under this Agreement is
designated by the Trust by written notice to FPS, FPS will promptly, upon such
termination and at the expense of the Trust, transfer all records which belong
to the Trust and will provide reasonable cooperation in transferring such
records to the named successor.
(e) Should the Trust desire to move any of the services outlined in
this Agreement to a successor service provider prior to the expiration of the
Notice Period, FPS shall make a reasonable effort to facilitate the conversion
on such prior date; however, there can be no guarantee that FPS will be able to
facilitate a conversion of services prior to the end of the Notice Period.
Should services be converted to a successor service provider prior to the end of
the Notice Period, or the Trust is liquidated or its assets merged with or
purchased by another entity, payment of fees to FPS shall be accelerated to a
date prior to the conversion or termination of
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Inc. Page 9 of 12
<PAGE>
services and calculated as if the services had remained at FPS until the
expiration of the Notice Period and at the asset levels on the date of
conversion or termination.
(f) Notwithstanding the foregoing, this Agreement may be terminated at
any time by either Party in the event of a material breach by the other Party
involving gross negligence, willful misfeasance, bad faith or a reckless
disregard of its obligations and duties under this Agreement and such breach, if
capable of being remedied, shall have remained unremedied for thirty (30) days
or more after receipt of written specification thereof.
SECTION 13. CONFIDENTIALITY. Both Parties hereto agree that any
non-public information obtained hereunder concerning the other Party is
confidential and may not be disclosed to any other person without the consent of
the other Party, except as may be required by applicable law or at the request
of the U.S. Securities and Exchange Commission or other governmental agency. FPS
agrees that it will not use any non-public information for any purpose other
than performance of its duties or obligations hereunder. The obligations of the
Parties under this Section will survive the termination of this Agreement. The
Parties further agree that a breach of this Section would irreparably damage the
other Party and accordingly agree that each of them is entitled, without bond or
other security, to an injunction or injunctions to prevent breaches of this
provision. Without limiting the foregoing, FPS agrees on behalf of itself and
its nominees, sub-contractors and employees to treat confidentially all records
and other information relative to the each Series and its prior, present or
prospective Shareholders.
SECTION 14. AMENDMENT. This Agreement may only be amended or modified
by a written instrument executed by both Parties.
SECTION 15. MISCELLANEOUS.
(a) Notices. Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Trust or FPS, will be sufficiently
given if addressed to that Party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 10 of 12
<PAGE>
To the Trust:
Third Avenue Trust
767 Third Avenue
New York, NY 10017
Attn: Ian M. Kirschner, General Counsel
To FPS Services, Inc.:
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Attn: Kenneth J. Kempf, President
(b) Assignment. This Agreement will extend to and be binding
upon the Parties hereto and their respective successors and assigns; provided,
however, that this Agreement will not be assignable by the Trust without the
written consent of FPS or by FPS without the written consent of the Trust
authorized or approved by a resolution by its respective Boards of Directors and
Trustees.
(c) Governing Law. This Agreement will be governed exclusively
by the laws of the Commonwealth of Pennsylvania without reference to the choice
of law provisions thereof.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original; but such
counterparts will, together, constitute only one instrument.
(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the Parties hereto
relating to the matters covered hereby and supersede any previous agreements. If
any provision is held to be illegal, unenforceable or invalid for any reason,
the remaining provisions will not be affected or impaired thereby.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting in its entirety, of twelve typewritten pages, together with Schedules
"A," "B" and "C," to be signed by their duly authorized officers as of the day
and year first above written.
Third Avenue Trust on behalf of
the Series identified on Schedule C FPS Services, Inc.
By: ---------------------------- By: --------------------------
Martin J. Whitman, President Kenneth J. Kempf, President
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Page 12 of 12
<PAGE>
Schedule "A"
Dated: ________, 1997
SUMMARY OF SERVICES TO BE PROVIDED BY FPS SERVICES, INC. ("FPS")
The services to be performed by the FPS will include the following:
A. SHAREHOLDER FILE
1. Establish new accounts and enter demographic data into
shareholder base. Includes in-house processing and NSCC -
Fund/SERV - Networking transmissions.
2. Create Customer Information File (CIF) to link accounts within
the Trust and across Series within the Trust. Facilitates
account maintenance, lead tracking, quality control, household
mailings and combined statements.
3. Maintain account and customer file records, based on
shareholder request and routine quality review.
4. 100% quality control of new account information, including
verification of initial investment.
5. Maintain tax ID certification and NRA records for each
account, including backup withholding.
6. Provide written confirmation of address changes.
7. Produce shareholder statements for daily activity, dividends,
on-request, third party and periodic mailings.
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
8. Establish and maintain dealer file by fund group, including
dealer, branch, representative number and name.
9. Automated processing of dividends and capital gains with
daily, monthly, quarterly or annual distributions. Payment
options include reinvestment, directed payment to another
fund, cash via mail, Fed wire or ACH.
10. Image all applications, account documents, data changes,
correspondence, monetary transactions, and other pertinent
shareholder documents.
B. SHAREHOLDER SERVICES
1. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases,
redemptions, exchanges systematic withdraws, pre-authorized
drafts, Fund/SERV and wire order trades, problem solving and
process telephone transactions.
2. Silent monitoring of telephone representative calls by the
phone supervisor during live conversations to ensure
exceptional customer service.
3. Record and maintain tape recordings of all shareholder calls
for a six-month period.
4. Phone Supervisor produces daily management reports of
shareholder calls which include tracking volumes, call
lengths, average wait time and abandoned call rates to ensure
quality service.
5. Provide quality assurance of phone routing by the unit
Assistant Phone Supervisor through verification of the Rolm in
house computer terminal linkage.
6. Customer inquiries received by letter or telephone are
researched by a correspondence team.
7. Provide written correspondence in response to shareholder
inquiries and requests through the CORRO Letter Writing
System. Provide written requests for informational purposes
(e.g., received unclear shareholder instructions).
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
Whenever possible, unclear shareholder instructional letters
are handled by a phone call to the shareholder from our phone
representatives to avoid a delay in processing the request.
C. INVESTMENT/PURCHASE PROCESSING
1. Initial investment processing (checks or Fed wires).
2. Subsequent investments processed through lock box.
3. Pre-authorized investments (PAD) through ACH system.
4. Government allotments through ACH system.
5. Prepare and process daily bank deposit of shareholder
investments.
D. REDEMPTION PROCESSING
1. Process letter redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal file and process automated
transactions on monthly basis.
4. Redemption proceeds distributed to shareholder by check, Fed
wire or ACH processing.
E. EXCHANGE & TRANSFER PROCESSING
1. Process legal transfers.
2. Issue and cancel Share Certificates.
3. Replace Share Certificates through surety bonds (separate
charge to shareholder).
4. Process Automated Customer Account Transfer Service (ACATS)
transfers.
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
5. Process exchange transactions (letter and telephone requests).
F. RETIREMENT PLANS
1. Trust sponsored IRAs offered using Semper Trust Company as
custodian. Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 1/2 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Trust sponsored SEP-IRA plans offered using Semper Trust Company
as custodian. Services include those listed under IRAs and
identification of employer contributions
3. Trust sponsored Qualified plans offered:
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
G. DISTRIBUTIONS
1. Five business days prior notice of any distribution is required
to FPS so that FPS may properly plan to process such
distribution.
H. SETTLEMENT & CONTROL
1. Daily review of processed shareholder transactions to assure
input was processed correctly. Accurate trade activity figures
passed to the Series' agent which provides portfolio valuations
and investment company accounting by 11:00 a.m. EST.
2. Preparation of daily cash movement sheets to be passed to the
each Series' accounting agent and custodian bank by 10:00 a.m.
EST for use in determining the Series' daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on
the Transfer Agent system to those on the books of the Series.
4. Resolve any outstanding share or cash issues that are not
cleared by trade date + 2.
5. Process shareholder adjustments including the proper
notification of any booking entries needed, as well as any
necessary cash movement.
6. Settlement and review of each Series' declared dividends and
capital gains to include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is
posted. Verify the posting date shares, the rate used and the
NAV price of reinvest date to ensure dividend was posted
properly.
c. Distribute copies to the Series' agent which provides
portfolio valuations and investment company accounting.
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement sheets for the cash portion of
the dividend payout on payable date.
7. Placement of stop payments on dividend and liquidation checks as
well as the issuance of their replacements.
8. Maintain inventory control for Share Certificates and dividend
check form.
9. Aggregate tax filings for all FPS clients. Monthly deposits to
the IRS of all taxes withheld from shareholder disbursements,
distributions and foreign account distributions. Correspond with
the IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC/Fund/SERV
activity.
11. Uniform Commercial Code or written opinion of counsel shall
control any transaction which does not include complete
documentation.
I. YEAR-END PROCESSING
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid Tax IDs. This includes initiating
31% backup withholding and notifying shareholders of their tax
status and the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts.
Update account tax status to reflect backup withholding or
certified status depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of
forms to ensure compliance.
5. Coordinate year end activity with client. Activities include
producing year end
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
statements, scheduling record dates for year end dividends and
capital gains, production of combined statements and printing of
inserts to be mailed with tax forms.
6. Prepare Tax year-end confirmation letter for Series' approval
regarding all distributions made throughout year. Dates and
rates must be confirmed by the Series so that they can be used
for reporting to the IRS.
7. Coordinate the ordering of form stock envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to
ensure accuracy. Upon receipt of forms and envelopes allocate
space for storage.
8. Prepare form flashes for the microfiche vendor. Test and oversee
the production of fiche for year end statements and tax forms.
9. Match and settle tax reporting totals to fund records and
on-line data from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as cross over
dividends and prior year IRA contributions.
12. Prepare IRS magnetic tapes and appropriate forms for the filing
of all reportable activity to the Internal Revenue Service.
J. CLIENT SERVICES
1. An Account Manager is assigned to each transfer agency
relationship. The Account Manager is the liaison between each
Series and the Transfer Agency staff. Responsibilities include
scheduling of events, system enhancement implementation, special
promotion/event implementation and follow-up, and constant
Series interaction on daily operational issues.
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
Specifically:
a. Scheduling of dividends, proxies, report mailings and
special mailings.
b. Coordinate with each Series shipment of materials for
scheduled mailings.
c. Liaison between each Series and support services for
preparation of proofs and eventual printing of statement
forms, proxy cards, envelopes, etc.
d. Handle all notification to the client regarding proxy
tabulation through the meeting. Coordinate scheduling of
materials including voted cards, tabulation letters, and
shareholder list to be available for the meeting.
e. Order special reports, tapes, discs for special systems
requests received.
f. Implement new operational procedures, e.g., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions, etc.
g. Coordinate with systems, services and operations, special
events, e.g., mergers, new fund start-ups, household
mailings, additional mail files.
h. Prepare standard operating procedures and review
prospectuses for new start up funds and our current client
base. Coordinate implementation of suggested changes with
each Series.
i. Liaison between each Series and the Transfer Agency staff
regarding all service and operational issues.
2. Proxy Processing (Currently one free per year)
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager and
mailroom. Tabulation of returned cards.
c. Provide daily report totals to Account Manager for client
notification.
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
a. Maintain file with additions, deletions, changes and updates
at each Series' direction.
b. Provide daily and monthly reports to enable each Series to
do necessary State filings.
THE FOLLOWING SERVICES ARE AVAILABLE UNDER A SUPPLEMENTARY SCHEDULE OF FEES:
1. Produce shareholder lists, labels and ad hoc reports for Advisor
as requested.
2. Systematic linkage of shareholder accounts with exact matches on
social security number and address for the purpose of
consolidated account history reporting. Periodic production of
laser printed combined statements.
3. Production of household mailing labels which enable each Series
to do special mailings to each address in the Series rather than
each account.
4. Wire order and NSCC - Fund/SERV trade processing.
DAILY REPORTS
-------------
REPORT NUMBER REPORT DESCRIPTION
------------- ------------------
-- Daily Activity Register
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
MONTHLY REPORTS
---------------
REPORT DESCRIPTION
------------------
Blue Sky
Share Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
Month To Date Sales - Demographics by Account Group
Account Analysis by Type
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Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc. Schedule A
<PAGE>
SCHEDULE "B"
SHAREHOLDER SERVICES AND TRANSFER AGENT FEE SCHEDULE
FOR
THIRD AVENUE TRUST
Dated: ------ --, 1997
THIS FEE SCHEDULE IS FIXED FOR THE INITIAL TERM AS THAT TERM IS
DEFINED IN THE AGREEMENT.
I. A) BASE FEE
$15.00 per Account per Year per Series Annual Maintenance Fee subject to a
minimum monthly fee of $2,250 for each Series.
Note: This fee will be reduced to $2,000 per month per Series for the first
two years on the signing of a three year contract.
B) IRA'S, 403(B) PLANS, DEFINED CONTRIBUTION/BENEFIT PLANS:
$12.00 per Account per Year Annual Maintenance Fee (Normally charged to
participants)
II. OUT OF POCKET EXPENSES:
Each Series will reimburse FPS Services monthly for all reasonable
out-of-pocket expenses with respect to such Series, including postage,
Fund/SERV and Networking expenses, stationery (statements),
telecommunications (telephone, fax, dedicated 800 line, on-line access),
special reports, transmissions, records retention, tapes, couriers and any
pre-
- --------------------------------------------------------------------------------
Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc.
J:\WDATA\ADMIN\3rdave\CONTRACT\TRANSFER.AGR; March 21, 1997 Schedule "B"
<PAGE>
approved travel expenses.
III. Other Services Not Covered By This Agreement
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies are not included
herein, and will be quoted separately. To the extent a Series should decide
to issue multiple/separate classes of shares, additional fees will apply.
Any enhanced services, programming requests or reports will be quoted upon
request.
Third Avenue Trust FPS Services, Inc.
By: ---------------------------- By:---------------------------
Martin J. Whitman, President Kenneth J. Kempf, President
- --------------------------------------------------------------------------------
Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc.
J:\WDATA\ADMIN\3rdave\CONTRACT\TRANSFER.AGR; March 21, 1997 Schedule "B"
<PAGE>
SCHEDULE "C"
Dated: ------- --, 1997
Identification of Series
------------------------
Below are listed the "Series" of Third Avenue Trust to which services under this
Agreement are to be performed as of the execution date of the Agreement:
1. Third Avenue Value Fund
2. Third Avenue Small-Cap Value Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
Third Avenue Trust FPS Services, Inc.
By: ----------------------------- By:---------------------------
Martin J. Whitman, President Kenneth J. Kempf, President
- --------------------------------------------------------------------------------
Transfer Agent Services Agreement between Third Avenue Trust and FPS Services,
Inc.
J:\WDATA\ADMIN\3rdave\CONTRACT\TRANSFER.AGR; March 21, 1997 Schedule "C"
ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT
This Agreement, dated as of the first day of January, 1997, made by and
between Third Avenue Trust ("Third Avenue"), a Delaware Business Trust expected
to operate as a registered investment company under the Investment Company Act
of 1940, as amended (the "Act"), and duly organized and existing under the laws
of the State of Delaware and FPS Services, Inc. ("FPS Services"), a corporation
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Parties desire to enter into an agreement whereby FPS
Services will provide certain services to Third Avenue on the terms and
conditions set forth in this Agreement and as set forth in Exhibit A, attached
hereto; and
WHEREAS, FPS Services is willing to serve in such capacity and perform
such services under the terms and conditions set forth below; and
WHEREAS, Third Avenue will provide all necessary information to FPS
Services concerning the Series so that FPS Services may appropriately execute
its responsibilities hereunder;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
SECTION 1. APPOINTMENT Third Avenue hereby appoints FPS Services to
serve as administrator and to perform Blue Sky services and FPS Services hereby
accepts such appointment.
SECTION 2. DUTIES AND OBLIGATIONS OF FPS SERVICES
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of Third Avenue, FPS Services
shall provide to Third Avenue all administrative services set forth in Schedule
"A" attached hereto, which Schedule is incorporated by reference in its entirety
into this Agreement. In addition to the obligations set forth in Schedule "A,"
FPS Services shall (i) provide its own office space, facilities, equipment and
personnel for the performance of its duties under this Agreement; and (ii) take
all actions it deems necessary to properly execute the administrative
responsibilities of Third Avenue.
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Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
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(b) So that FPS Services may perform its duties under the terms of this
Agreement, the Board of Trustees of Third Avenue shall direct the officers,
investment advisor, distributor, legal counsel, independent accountants and
custodian of Third Avenue to cooperate fully with FPS Services and to provide
such information, documents and advice relating to Third Avenue as is within the
possession or knowledge of such persons provided that no such person need
provide any information to FPS Services if to do so would, in the reasoned
opinion of counsel to Third Avenue, result in the loss of any privilege or
confidential treatment with respect to such information. In connection with its
duties, FPS Services shall be entitled to rely, and shall be held harmless by
Third Avenue when acting in reasonable reliance upon the instruction, advice or
any documents provided by Third Avenue to FPS Services by any of the
aforementioned persons. All fees charged by any such persons shall be deemed an
expense of Third Avenue.
(c) Any activities performed by FPS Services under this Agreement
shall conform to the requirements of:
(1) the provisions of the Act and the Securities Act of
1933, as amended, and of any rules or regulations in force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of Third Avenue's Trust Instrument,
as amended from time to time;
(4) any policies and determinations of the Board of Trustees
of Third Avenue communicated to FPS Services; and
(5) the fundamental policies of Third Avenue as reflected in
its registration statement filed pursuant to the Act.
FPS Services acknowledges that all records that it maintains for Third
Avenue are the property of Third Avenue and will be surrendered promptly to
Third Avenue upon written request. FPS Services will preserve, for the periods
prescribed under Rule 31a-2 under the Act, all such records required to be
maintained under Rule 31a-1 of the Act.
(d) Nothing in this Agreement shall prevent FPS Services or any officer
thereof from acting as administrator for any other person, firm or corporation.
While the administrative services supplied to Third Avenue may be different than
those supplied to other persons, firms or corporations, FPS Services shall
provide Third Avenue equitable treatment in supplying services. Third Avenue
recognizes that it will not receive preferential treatment
- --------------------------------------------------------------------------------
Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
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<PAGE>
from FPS Services as compared with the treatment provided to other FPS Services'
clients. FPS Services agrees to maintain the records and all other information
of Third Avenue in a confidential manner and shall not use such information for
any purpose other than the performance of FPS Services' duties under this
Agreement.
SECTION 3. ALLOCATION OF EXPENSES All costs and expenses of Third
Avenue shall be paid by Third Avenue including, but not limited to:
(a) fees paid to an investment adviser (the "Adviser");
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are not affiliated persons
of the Adviser;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder servicing agent, fees and
expenses;
(h) fees and expenses incident to the registration of the shares of Third
Avenue under Federal or state securities laws;
(i) expenses related to preparing, setting in type,
printing and mailing prospectuses, statements of
additional information, reports and notices and proxy
material to shareholders of Third Avenue;
(j) all expenses incidental to holding meetings of stockholders and Trustees
of Third Avenue;
(k) such extraordinary expenses as may arise, including
litigation, affecting Third Avenue and the legal
obligations which Third Avenue may have regarding
indemnification of its officers and trustees; and
(l) fees and out-of-pocket expenses paid on behalf of Third Avenue by FPS
Services.
SECTION 4. COMPENSATION OF FPS SERVICES Third Avenue agrees to pay FPS
Services compensation for its services and to reimburse it for expenses, at the
rates and amounts as set forth in Schedule "B" attached hereto, and as shall be
set forth in any amendments to such Schedule "B" approved by Third Avenue and
FPS Services. Third Avenue agrees and understands that FPS Services'
compensation be comprised of two components and payable on a monthly basis as
follows:
(i) an asset based fee calculated on Third Avenue's total assets, which fee
is subject to a minimum fee. Third Avenue agrees to remit payment within ten
(10) business days of receipt of FPS Services' invoices; and
(ii) reimbursement of any out-of-pocket expenses paid by FPS Services on
behalf of Third Avenue, which out-of-pocket expenses will be billed to Third
Avenue within the first ten
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Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; January 14, 1997 Page 3 of 8 pages.
<PAGE>
calendar days of the month following the month in which such out-of-pocket
expenses were incurred. Third Avenue agrees to reimburse FPS Services for such
expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to FPS Services, the value
of Third Avenue's net assets shall be computed at the times and in the manner
specified in Third Avenue's Prospectus and Statement of Additional Information
then in effect.
During the term of this Agreement, should Third Avenue seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both FPS Services and Third
Avenue.
SECTION 5. DURATION
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on January 1, 1997, ("Effective Date"). If either party wishes to
terminate this Agreement at the conclusion of its initial term, it may do so
only be upon written notice to the other, which notice shall be received not be
less than one hundred eighty (180) before the desired day of termination. After
the initial term, this Agreement shall continue thereafter subject to
termination by either Party set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for two (2) years commencing on the Effective Date of this Agreement and shall
continue thereafter subject to review and adjustment as determined by the
Parties.
(c) After the initial term of this Agreement, Third Avenue or FPS
Services may give written notice to the other of the termination of this
Agreement, such termination to take effect at the time specified in the notice,
which date shall not be less than one hundred eighty (180) days after the date
of receipt of such notice. Upon the effective termination date, Third Avenue
shall pay to FPS Services such compensation as may be due as of the date of
termination and shall likewise reimburse FPS Services for any out-of-pocket
expenses and disbursements reasonably incurred by FPS Services to such date.
(d) If a successor to any of FPS Services' duties or responsibilities
under this Agreement is designated by Third Avenue by written notice to FPS
Services in connection with the termination of this Agreement, FPS Services
shall promptly, upon such termination and at the expense of Third Avenue,
transfer all records which are the property of Third
- --------------------------------------------------------------------------------
Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; January 14, 1997 Page 4 of 8 pages.
<PAGE>
Avenue and shall cooperate in the transfer of such records and its duties and
responsibilities under the Agreement.
SECTION 6. AMENDMENT No provision of this Agreement may be amended or
modified, in any manner except by a written agreement properly authorized and
executed by FPS Services and Third Avenue.
SECTION 7. APPLICABLE LAW This Agreement shall be governed by the laws
of the Commonwealth of Pennsylvania and the exclusive venue of any action
arising under this Agreement shall be Montgomery County, Commonwealth of
Pennsylvania.
SECTION 8. AUTHORITY OF SIGNATORIES The Parties represent and warrant
to each other that the execution and delivery of this Agreement by the
undersigned officer of each Party has been duly and validly authorized; and,
when duly executed, this Agreement will constitute a valid and legally binding
enforceable obligation of each Party. The obligations under this Agreement shall
be binding upon the assets and property of Third Avenue and shall not be binding
upon any officer or shareholder of any Series of Third Avenue individually.
SECTION 9. LIMITATION OF LIABILITY
(a) FPS Services, its directors, officers, employees, stockholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by Third Avenue in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of FPS Services in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee, stockholder
or agent of FPS Services, who may be or become an officer, director, employee or
agent of Third Avenue, shall be deemed when rendering services to such entity or
acting on any business of such entity (other than services or business in
connection with FPS Services' duties under the Agreement), to be rendering such
services to or acting solely for Third Avenue and not as a director, officer,
employee, stockholder or agent of, or under the control or direction of FPS
Services even though such person may receive compensation from FPS Services.
(c) Notwithstanding any other provision of this Agreement, Third Avenue
shall indemnify and hold FPS Services harmless, together with its directors,
officers, employees, stockholders and agents from and against any and all
claims, demands, expenses and liabilities (whether with or without basis in fact
or law) of any and every nature which FPS Services may sustain or incur or which
may be asserted against FPS Services by any person by reason
- --------------------------------------------------------------------------------
Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; January 14, 1997 Page 5 of 8 pages.
<PAGE>
of, or as a result of (i) any action taken or omitted to be taken by FPS
Services in good faith, (ii) any action taken or omitted to be taken by FPS
Services in good faith in reliance upon any certificate, instrument, order or
stock certificate or other document reasonably believed by FPS Services to be
genuine and signed, countersigned or executed by any duly authorized person,
upon the oral or written instruction of an authorized person of Third Avenue or
upon the opinion of legal counsel to Third Avenue; or (iii) any action taken in
good faith or omitted to be taken by FPS Services in connection with its
appointment in reliance upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been altered, changed, amended or
repealed. Indemnification under this subparagraph shall not apply, however, to
actions or omissions of FPS Services or its directors, officers, employees,
stockholders or agents in cases of its or their willful misfeasance, bad faith,
gross negligence or reckless disregard of its or their duties hereunder.
FPS Services shall not accept any responsibility what-so-ever for any
act or omission which occurred before the date hereinabove first written which
may cause any harm to Third Avenue. Third Avenue and the Advisor agree to inform
FPS Services of any circumstance which comes to Third Avenue's or the Advisor's
attention which may have a negative impact on Third Avenue.
If a claim is made against FPS Services as to which FPS Services may
seek indemnity under this Section, FPS Services shall notify Third Avenue
promptly after any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and shall notify Third Avenue promptly
of any action commenced against FPS Services within ten (10) days after FPS
Services shall have been served with a summons or other legal process, giving
information as to the nature and basis of the claim. Failure so to notify Third
Avenue shall not, however, relieve Third Avenue from any liability which it may
have on account of the indemnity under this Section 9(c) if Third Avenue has not
been prejudiced in any material respect by such failure.
Third Avenue and FPS Services shall cooperate in the control of the
defense of any action, suit or proceeding in which FPS Services is involved and
for which indemnity is being provided by Third Avenue to FPS Services. Third
Avenue may negotiate the settlement of any action, suit or proceeding subject to
FPS Services' approval, which shall not be unreasonably withheld. FPS Services
shall have the right, but not the obligation, to participate in the defense or
settlement of a claim or action, with its own counsel, but any costs or expenses
- --------------------------------------------------------------------------------
Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; January 14, 1997 Page 6 of 8 pages.
<PAGE>
incurred by FPS Services in connection with, or as a result of, such
participation will be borne solely by FPS Services.
FPS Services shall have the right to participate in the defense of an
action or proceeding and to retain its own counsel, and the reasonable fees and
expenses of such counsel shall be borne by Third Avenue (which shall pay such
fees, costs and expenses at least quarterly) if:
(i) FPS Services has received an opinion of counsel stating
that the use of counsel chosen by Third Avenue to represent FPS
Services would present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both FPS Services and Third Avenue, and legal
counsel to FPS Services shall have reasonably concluded that there are
legal defenses available to it which are different from or additional
to those available to Third Avenue or which may be adverse to or
inconsistent with defenses available to Third Avenue (in which case
Third Avenue shall not have the right to direct the defense of such
action on behalf of FPS Services); or
(iii) Third Avenue shall authorize FPS Services to employ
separate counsel at the expense of Third Avenue. Notwithstanding
anything to the contrary herein, it is understood that Third Avenue
shall not, in connection with any action, suit or proceeding or related
action, suit or proceeding, be liable under this Agreement for the fees
and expenses of more than one firm.
(d) The terms of this Section 9 shall survive the termination of
this Agreement.
SECTION 10. NOTICES Except as otherwise provided in this Agreement,
any notice or other communication required by or permitted to be given in
connection with this Agreement shall be in writing, and shall be delivered in
person or sent by first class mail or by overnight delivery, postage prepaid to
the respective parties as follows:
If to the Fund: If to FPS Services:
- --------------- -------------------
Third Avenue Trust FPS Services, Inc.
767 Third Avenue - 5th Floor 3200 Horizon Drive, P.O. Box 61503
New York, New York 10017 King of Prussia, PA 19406-0903
Attention: David Barse, President Attention: Kenneth J. Kempf, President
SECTION 11. SEVERABILITY If any part, term or provision of this
Agreement is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be considered
severable and not be affected, and the rights and obligations of the
- --------------------------------------------------------------------------------
Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; January 14, 1997 Page 7 of 8 pages.
<PAGE>
parties shall be construed and enforced as if the Agreement did not contain the
particular part, term or provision held to be illegal or invalid, provided that
the basic agreement is not thereby substantially impaired.
SECTION 12. ASSIGNMENT This Agreement shall extend to and shall be
binding upon the Parties and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by Third Avenue without the
written consent of FPS Services or by FPS Services without the written consent
of Third Avenue, authorized or approved by a resolution of their respective
Boards of Trustees/Directors.
SECTION 13. COUNTERPARTS This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original,
but such counterparts shall together constitute but one and the same instrument.
SECTION 14. SECTION HEADINGS Section and paragraph headings are for
convenience only and shall not be construed as part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eight typewritten pages, together with Schedules "A", "B", and
"C", to be signed by their duly authorized officers as of the day and year first
above written.
THIRD AVENUE TRUST FPS SERVICES, INC.
- ------------------ ------------------
- -------------------------- --------------------------------
By: David Barse, President By: Kenneth J. Kempf, President
- --------------------------------------------------------------------------------
Administration and Blue Sky Services Agreement between Third Avenue Value Fund,
Inc. and FPS Services, Inc.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; January 14, 1997 Page 8 of 8 pages.
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SCHEDULE "A"
------------
ADMINISTRATION SERVICES
FOR
THIRD AVENUE TRUST
I. REGULATORY COMPLIANCE
- -- ---------------------
Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. distribution (12b-1) plans
e administration contracts
f. accounting contracts
g. custody administration contracts
h. transfer agent and stockholder services
2. Filings
a. N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective
amendments and supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing stockholder reports under 30b2-1
3. Annual up-dates of biographical information and
questionnaires for Trustees and Officers
II. CORPORATE BUSINESS AND STOCKHOLDER/PUBLIC INFORMATION
- --- -----------------------------------------------------
A. Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
- --------------------------------------------------------------------------------
ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
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C. Maintain Corporate Calendars and Files
D. Release Corporate Information
1. To stockholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management e. funds' performance
4. Respond to:
a. financial press
b. miscellaneous stockholders inquiries
c. industry questionnaires
E. Communications to Stockholders
1. Coordinate printing and distribution of annual, semi-
annual reports and prospectus
III. FINANCIAL AND MANAGEMENT REPORTING
----------------------------------
A. Income and Expenses
1. Monitoring of expenses and expense accruals (monthly)
2. Approve and coordinate payment of expenses
3. Checking Account Reconciliation (monthly)
4. Calculation of advisory fee, 12b-1 fee and reimbursements
to Fund, (if applicable)
5. Authorize the recording and amortization of
organizational costs and pre-paid expenses (supplied by
advisor), for start-up funds and reorganizations.
6. Calculation of average net assets.
B. Distributions to Stockholders
1. Projections of distribution amounts
2. Calculations of dividends and capital gain distributions
(in conjunction with the Funds and their auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940
C. Financial Reporting
1. Liaison between fund management, independent auditors
and printers for stockholder reports
2. Preparation of semi-annual and annual reports to
stockholders
- --------------------------------------------------------------------------------
ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
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3. Preparation of semi-annual and annual N-SAR's
(Financial Data)
4. Preparation of financial statements for required
SEC post-effective filings (if applicable).
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
E. Other Financial Analyses
1. Upon request from fund management, other budgeting
and analyses can be constructed to meet specific
needs (additional fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Assist independent auditors on return of capital
presentation, excise tax calculation
4. Performance (total return) calculation (monthly)
5. IRS Form 1099 Miscellaneous - prepared for Trustees
(annual)
6. Analysis of interest derived from various Government
obligations (annual) (if interest income was
distributed in a calendar year)
7. Income by state analysis for Municipal Bond Funds.
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to
ensure proper update
2. Perform various reviews to ensure accuracy of
subscription/liquidation schedules, Accounting (the
monthly expense analysis) and Custody (review of
daily bank statements to ensure accurate money
movement).
3. Review accruals and expenditures where applicable
G. Preparation and distribution of monthly operational
reports to management by 10th Business day
1. Management Statistics (Recap)
a. portfolio
b. book gains/losses/per share
c. net income, book income/per share
d. capital stock activity
e. distributions
2. Performance Analysis
a. total return
b. monthly, quarterly, year to date, average annual
3. Expense Analysis
a. schedule
b. summary of due to/from advisor
c. expenses paid
- --------------------------------------------------------------------------------
ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
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d. expense cap
e. accrual monitoring
f. advisory fee
4. Short-Short Analysis
a. short-short income
b. gross income (components)
5. Portfolio Turnover
a. market value
b. cost of purchases
c. net proceeds of sales
d. average market value
6. Asset Diversification Test
a. gross assets
b. non-qualifying assets
7. Activity Summary
a. shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requested
(monthly/quarterly)
I. Standard schedules for Board Package (Quarterly)
1. Activity Summary (III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided (additional fees
may apply)
IV. SPECIAL ISSUES RELATED TO FOREIGN SECURITIES
--------------------------------------------
A. Financial Reporting
1. Work with Custodian to supply tax reclaim report
chronologically, by country and type; report on same
to Fund management
2. Review and provide reports on the treatment of
currency gain/loss and capital gain/loss in
conjunction with the Funds's Independent Auditors
a. Section 988 transactions
b. Section 1256 contracts
c. Section 1092 deferrals
3. Tax Reporting (depending on the level of assistance
required by the Funds's independent auditors,
additional fees may apply)
a. Analyze tax treatment of foreign investments
based on the Funds's elections and their impact
on:
1. Subchapter M test --e.g. diversification,
qualified income, short-short (30% tests)
2. Taxable income and capital gains
3. Prepare excise tax worksheets
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ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
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b. Calculate distributions to stockholders
1. Monitor character and impact of realized
currency gain/loss on distribution amount
4. Assist the Advisor and work with the Independent
Auditors in identification of PFIC's (by providing a
list of potential PFIC's that the Funds may be
holding).
BLUE SKY SERVICES
FOR
THIRD AVENUE TRUST
FPS Services subscribes to Price Waterhouse's Blue2 Compliance Support System
for Blue Sky Administration. This system permits FPS Services to monitor state
securities law compliance each day; tracking sales in each state, producing and
updating daily all reports associated with each state's filing requirements.
I. SALES DATA
1. Receive daily sales figures through SUNGARD interface with Price
Waterhouse Blue2 System.
2. Receive daily sales figures broken down by state from Charles Schwab
(if applicable).
3. Produce daily warning report for sales in excess of pre-determined
percentage.
4. Analysis of all sales data to determine trends within certain
states.
II. FILINGS
1. Produce and mail the following required filings:
A. Initial Filings - produce all required forms and follow-up on
any comments, including notification of SEC Effectiveness.
B. Renewals - produce all renewal documents and mail to states,
includes follow-up to ensure all is in order to continue
selling in states.
C. Sales Reports - produce all relevant sales reports for the
states and complete necessary documents to properly file sales
reports with states.
D. Annual Report Filings - file copies of all annual reports with
states.
E. Prospectus Filings - file all copies of Definitive SAI &
Prospectuses with the states.
- --------------------------------------------------------------------------------
ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
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<PAGE>
F. Post-Effective Amendment Filing - file all Post-Effective
Amendments with the states, as well as, any other required
documents.
2. On demand additional states - complete filing for any states that
you would like to add. This includes all of the items in 1(A).
3. Amendments to current permits - file in a timely manner any
amendment to registered share amounts.
4. Update and file hard copy of all data pertaining to individual
permits.
III. CONSULTING AND ANALYSIS - We will supply you with the most current fee
structure for each state and help you decide what course of action to
take in each state to minimize the amount of money spent on Blue Sky
Registration.
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ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; JANUARY 14, 1997 SCHEDULE "A": PAGE 6
<PAGE>
SCHEDULE "B"
------------
ADMINISTRATION AND BLUE SKY SERVICES FEE SCHEDULE
FOR
THIRD AVENUE TRUST
THIS FEE SCHEDULE IS FIXED FOR A PERIOD OF TWO (2) YEARS FROM THE EFFECTIVE
DATE AS THAT TERM IS DEFINED IN THE AGREEMENT
I. A) $150,000 per annum plus:
i) $12,000.00 per annum for each additional separate series of
shares; and
ii)0.01% per annum on the combined total assets of all
separate series and classes excess of one billion dollars.
NOTE: The above fee will cover normal business filings described in our
outline. An additional fee of $25 per filing will be charged for
non-standard filings such as secondary post effective amendments,
additional classes of shares or mergers and acquisitions.
III. Out-of-Pocket Expenses:
-----------------------
Third Avenue will reimburse FPS Services monthly for all reasonable
out-of-pocket expenses, including telephone, postage, overdraft
charges, EDGAR transmissions, telecommunications, special reports,
record retention, special transportation costs, copying and sending
materials to auditors and/or regulatory agencies as incurred and
approved.
IV. Additional Services
-------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and stockholder meetings/proxies, are not
included herein, and will be quoted separately. To the extent Third
Avenue should decide to issue multiple/separate classes of shares,
additional fees will apply. Any additional/enhanced services or reports
will be quoted upon request.
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ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; JANUARY 14, 1997 SCHEDULE "B"
<PAGE>
SCHEDULE "C"
------------
IDENTIFICATION OF SERIES
------------------------
Below are listed the Series to which services under this Agreement are to be
performed as of the execution date of this Agreement:
THIRD AVENUE TRUST
------------------
THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE FUND
This Schedule "C" may be amended from time to time by agreement of the parties.
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ADMINISTRATION AND BLUE SKY SERVICES AGREEMENT BETWEEN THIRD AVENUE VALUE FUND,
INC. AND FPS SERVICES, INC.
K:\WDATA\ADMIN\3D-AVE\CONTRACT\ADMIN.AGR; JANUARY 14, 1997 SCHEDULE "C"
ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the 24th day of March , 1997, made by and
between THIRD AVENUE TRUST (the "Trust"), a Delaware business trust operating as
a registered investment company under the Investment Company Act of 1940, as
amended (the "Act"), and duly organized and existing under the laws of the State
of Delaware, and FPS SERVICES, INC. ("FPS"), a corporation duly organized and
existing under the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Declaration of Trust ("Trust
Instrument") to issue separate series of shares representing interests in
separate investment portfolios (the "Series"), certain of which Series are
identified on Schedule "C" attached hereto and made a part hereof, and which
Schedule "C" may be amended from time to time by mutual agreement of the Trust
and FPS; and
WHEREAS, the Trust desires to appoint FPS as the Accounting Services
Agent for the Series to maintain and keep current the books, accounts, records,
journals and other records of original entry relating to the businesses of the
Series as set forth in this Agreement and in Schedule "A" attached hereto and
incorporated herein, and FPS desires to accept such appointment;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency of which is hereby acknowledged, the Parties hereto, intending to be
legally bound, agree as follows:
Section 1. APPOINTMENT OF FPS. The Trust hereby appoints FPS as
Accounting Services Agent to the Series and FPS hereby accepts such appointment
and agrees to perform the duties hereinafter set forth.
In order that FPS may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the officers,
investment adviser, legal counsel, independent accountants and custodian of the
Series to cooperate fully with FPS and, upon request of FPS, to provide such
information, documents and advice relating to the Series which FPS requires to
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 1 of 11 pages.
<PAGE>
execute its responsibilities hereunder. In connection with its duties, FPS will
be entitled to rely, and will be held harmless by each Series when acting in
reasonable reliance, upon the instruction, advice or any documents relating to
that Series as provided to FPS by any of the aforementioned persons on behalf of
that Series. All fees charged by any such persons acting on behalf of a Series
will be deemed an expense of that Series.
Nothing in this Agreement will prevent FPS or any officer
thereof from providing the same or comparable services for or with any other
person, firm or corporation. While the services supplied to the Series may be
different than those supplied to other persons, firms or corporations, FPS will
provide the Series equitable treatment in supplying services. The Series
recognize that they will not receive preferential treatment from FPS as compared
with the treatment provided to other FPS clients.
SECTION 2. DEFINITIONS. Whenever used in this Agreement, or in any
amendment or supplement hereto, the following words and phrases will have the
following meanings, unless the context otherwise requires.
(a) "Authorized Person" will be deemed to include any person, whether
or not such person is an officer or employee of the Trust, duly authorized to
give Oral Instructions or Written Instructions on behalf of the Series by a
resolution of the Board of Trustees of the Trust, as may be received by FPS from
time to time.
(b) "Oral Instruction" will mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted to FPS in
person or by telephone, telegram, telecopy or other mechanical or documentary
means LACKING ORIGINAL SIGNATURE, by a person or persons reasonably identified
to FPS to be an Authorized Person to give Oral Instructions to FPS on behalf of
a Series.
(c) "Written Instruction" will mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted to FPS in
an original writing CONTAINING AN ORIGINAL SIGNATURE or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to FPS to be the signature of a person or persons so authorized by a
resolution of the Board of Trustees of the Trust, or so identified by the Trust
to give Written Instructions to FPS on behalf of a Series.
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 2 of 11 pages.
<PAGE>
The Trust will file with FPS a certified copy of each resolution of its
Board of Trustees authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
SECTION 3. DUTIES OF FPS. FPS will be responsible for administering
and/or performing those functions typically performed by a fund accounting agent
in accordance with the terms of each Series' current Prospectus and Statement of
Additional Information, applicable law and this Agreement, including without
limitation, those duties specified in Schedule "A" attached hereto.
SECTION 4. RECORD KEEPING AND OTHER INFORMATION. FPS will create and
maintain all records required of it pursuant to its duties hereunder and as set
forth in Schedule "A" in accordance with all applicable laws, rules and
regulations. All such records will be the property of the applicable Series and
will be available during regular business hours for inspection, copying and use
by the Series. Where applicable, such records will be maintained by FPS for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, FPS will deliver all such records to the Trust or such person
as the Trust may designate.
In case of any request or demand for the inspection of the Share
records of a Series, FPS shall notify the Series and secure instructions as to
permitting or refusing such inspection. FPS may, however, exhibit such records
to any person in any case where it is advised by its counsel that it may be held
liable for failure to do so.
SECTION 5. OTHER DUTIES. In addition to the duties set forth in
Schedule "A," FPS may perform such other duties and functions, and will be paid
such amounts therefor, as may from time to time be agreed upon in writing
between the Trust and FPS. The compensation for such other duties and functions
will be reflected in a written amendment to Schedule "B" and the duties and
functions will be reflected in an amendment to Schedule "A," dated and signed by
an officer of the respective Parties hereto.
SECTION 6. RELIANCE BY FPS; INSTRUCTIONS.
(a) Provided the standard of care in Section 9 has been met,
FPS will have no liability when acting upon Written or Oral Instructions
believed to have been executed or
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 3 of 11 pages.
<PAGE>
orally communicated by an Authorized Person and will not be held to have any
notice of any change of authority of any person until receipt of a Written
Instruction thereof from the Trust pursuant to Section 1(c).
(b) At any time, FPS may apply to any Authorized Person of the
Trust for Written Instructions and may seek advice from legal counsel for the
Trust, or its own legal counsel, with respect to any matter arising in
connection with this Agreement, and provided the standard of care in Section 9
has been met, it will not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Trust or for FPS. Written
Instructions requested by FPS will be provided by the Trust within a reasonable
period of time. In addition, FPS, its officers, agents or employees, will accept
Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Trust only if said representative is an
Authorized Person. The Trust agrees that all Oral Instructions will be followed
within one business day by confirming Written Instructions, and that the Trust's
failure to so confirm will not impair in any respect FPS' right to rely on Oral
Instructions. FPS will have no duty or obligation to inquire into, nor will FPS
be responsible for, the legality of any act done by it upon the request or
direction of a person reasonably believed by FPS to be an Authorized Person.
SECTION 7. DAYS OF OPERATION. Nothing contained in this Agreement is
intended to or will require FPS, in any capacity hereunder, to perform any
functions or duties on any day on which the New York Stock Exchange ("NYSE") is
closed. Functions or duties normally scheduled to be performed on such days will
be performed on, and as of, the next succeeding business day on which the NYSE
is open. Notwithstanding the foregoing, FPS will compute the net asset value of
each Series on each day required pursuant to Rule 22c-1 promulgated under the
Act.
SECTION 8. ACTS OF GOD, ETC. FPS will not be liable or responsible for
delays or errors caused by acts of God or by reason of circumstances beyond its
control, including acts of civil or military authority, national emergencies,
mechanical breakdown, insurrection, war, riots, or failure or unavailability of
transportation, communication or power supply, fire, flood or other
- --------------------------------------------------------------------------------
Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 4 of 11 pages.
<PAGE>
catastrophe.
In the event of equipment failures beyond FPS' control, FPS will, at no
additional expense to the Series, take reasonable steps to minimize service
interruptions but will have no liability with respect thereto. The foregoing
obligation will not extend to computer terminals located outside of premises
maintained by FPS. FPS will enter into and will maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available.
SECTION 9. DUTY OF CARE AND INDEMNIFICATION. FPS will be obligated to
exercise care and diligence and to act in good faith and to use its best efforts
within commercially reasonable limits to insure the accuracy and completeness of
all services performed under this Agreement.
FPS shall indemnify and hold the Trust and any of its Series harmless
from and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributed to any action or
failure or omission to act by FPS as a result of FPS' lack of good faith,
negligence or willful misconduct.
Any person, even though also a director, officer, employee, shareholder
or agent of FPS, who may be or become an officer, trustee, employee or agent of
the Trust, will be deemed, when rendering services to the Series, or acting on
any business of the Trust (other than services or business in connection with
FPS' duties hereunder), to be rendering such services to or acting solely for
the Trust and not as a director, officer, employee, shareholder or agent of, or
one under the control or direction of FPS even though such person may be
receiving compensation from FPS.
Each Series shall indemnify and hold FPS harmless, together with its
directors, officers, employees, shareholders and agents from and against any and
all claims, demands, expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which FPS may sustain or incur or which may
be asserted against FPS by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by FPS except
claims, demands, expenses and liabilities arising from willful misfeasance, bad
faith, negligence or reckless
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 5 of 11 pages.
<PAGE>
disregard on the part of FPS in the performance of its obligations and duties
under this Agreement; or
(ii) any action taken or omitted to be taken by FPS in
reliance upon any Certificate, instrument, order or stock certificate or other
document reasonably believed by FPS to be genuine and signed, countersigned or
executed by any duly Authorized Person, upon the Oral Instructions or Written
Instructions of an Authorized Person of the Trust, or upon the written opinion
of legal counsel for the Trust or FPS.
If a claim is made against any Party as to which such Party
may seek indemnity under this Section, such Party will notify the other Party
promptly after any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and will notify the other Party
promptly of any action commenced against such Party within ten (10) days after
such Party has been served with a summons or other legal process, giving
information as to the nature and basis of the claim. Failure to notify the other
Party will not, however, relieve the other Party from any liability which it may
have on account of the indemnity under this Section so long as the other Party
has not been prejudiced in any material respect by such failure.
The Parties will cooperate in the control of the defense of
any action, suit or proceeding in which one Party is involved and for which
indemnity is being provided to such Party by the other Party. The indemnifying
Party may negotiate the settlement of any action, suit or proceeding subject to
the other Party's approval, which will not be unreasonably withheld. The other
Party reserves the right, but not the obligation, to participate in the defense
or settlement of a claim, action or proceeding with its own counsel. Costs or
expenses incurred by the other Party in connection with, or as a result of, such
participation will be borne solely by the indemnifying Party if:
(i) the other Party has received an opinion of counsel from
counsel to the indemnifying Party stating that the use of the indemnifying
Party's counsel by the other Party would present an impermissible conflict of
interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both Parties, and legal counsel to the other Party has
reasonably concluded that there are legal
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 6 of 11 pages.
<PAGE>
defenses available to it which are different from or additional to those
available to the indemnifying Party or which may be adverse to or inconsistent
with defenses available to the indemnifying Party (in which case the
indemnifying Party will not have the right to direct the defense of such action
on behalf of the other Party); or
(iii) the indemnifying Party authorizes the other Party to
employ separate counsel at the expense of the indemnifying Party.
The terms of this Section will survive the termination of this
Agreement.
SECTION 10. LIMITATION OF LIABILITY. FPS is expressly put on notice of
the limitation of liability as set forth in the Trust Instrument and agrees that
the obligations assumed by the Trust pursuant to this Agreement shall be limited
in any case to the Trust and its assets and that FPS shall not seek satisfaction
of any such obligations from the shareholders of the Trust, the Trustees,
officers, employees or agents of the Trust, or any of them.
SECTION 11. COMPENSATION. Each Series agrees to pay FPS compensation
for its services, and to reimburse it for expenses, at the rates, times and
amounts as set forth in Schedule "B" attached hereto and incorporated herein by
reference, and as will be set forth in any amendments to such Schedule "B"
agreed upon in writing by the Trust and FPS.
For the purpose of determining fees payable to FPS, the value of each
Series' net assets will be computed at the times and in the manner specified in
that Series' Prospectus and Statement of Additional Information then in effect.
FPS will transmit an invoice to each Series as soon as practicable after the end
of each calendar month which will be detailed in accordance with Schedule "B,"
and that Series will pay to FPS the amount of such invoice within ten (10) days
after its receipt of the invoice.
In addition, each Series agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by FPS with respect to such Series in the
performance of its duties hereunder. Out-of-pocket expenses will include, but
will not be limited to, the items specified in Schedule "B." Unspecified
out-of-pocket expenses will be limited to those out-of-pocket expenses
reasonably incurred by FPS in the performance of its obligations hereunder.
Reimbursement by a Series for expenses incurred by FPS in any month will be made
as soon as practicable but no later than ten (10) days after the receipt of an
itemized invoice from FPS.
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 7 of 11 pages.
<PAGE>
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by both FPS and the Trust.
SECTION 12. TERM AND TERMINATION.
(a) The initial term of this Agreement (the "Initial Term") will be for
the period of one (1) year commencing on the date first above written and will
continue thereafter subject to termination by either Party as set forth in
subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be
fixed for one (1) year commencing on the Effective Date of this Agreement and
will continue thereafter subject to their review and any adjustment.
(c) After the Initial Term of this Agreement, the Trust on behalf of
one or more of the Series or FPS may give written notice to the other of the
termination of this Agreement with respect to the Series identified in the
written notice, such termination to take effect at the time specified in the
notice, which date will not be less than one hundred eighty (180) days after the
date of receipt of such notice ( the "Notice Period"). Prior to the effective
termination date, each Series will pay to FPS such compensation as may be due as
of the date of termination and will likewise reimburse FPS for any out-of-pocket
expenses and disbursements reasonably incurred by FPS on behalf of each
applicable Series to such date.
(d) In connection with the termination of this Agreement, if a
successor to any of FPS' duties or responsibilities under this Agreement is
designated by the Trust by written notice to FPS, FPS will promptly, upon such
termination and at the expense of the Trust, transfer all records which belong
to the Trust and will provide reasonable cooperation in transferring such
records to the named successor.
(e) Should the Trust desire to move any of the services outlined in
this Agreement to a successor service provider prior to the expiration of the
Notice Period, FPS shall make a reasonable effort to facilitate the conversion
on such prior date; however, there can be no guarantee that FPS will be able to
facilitate a conversion of services prior to the end of the Notice Period.
Should services be converted to a successor service provider prior to the end of
the
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 8 of 11 pages.
<PAGE>
Notice Period, or the Trust is liquidated or its assets merged with or purchased
by another entity, payment of fees to FPS shall be accelerated to a date prior
to the conversion or termination of services and calculated as if the services
had remained at FPS until the expiration of the Notice Period and at the asset
levels on the date of conversion or termination.
(f) Notwithstanding the foregoing, this Agreement may be terminated at
any time by either Party in the event of a material breach by the other Party
involving gross negligence, willful misfeasance, bad faith or a reckless
disregard of its obligations and duties under this Agreement and such breach, if
capable of being remedied, shall have remained unremedied for thirty (30) days
or more after receipt of written specification thereof.
SECTION 13. RIGHTS OF OWNERSHIP. All computer programs and procedures
developed to perform services required to be provided by FPS under this
Agreement are the property of FPS. All records and other data except such
computer programs and procedures are the exclusive property of the Series and
all such other records and data will be furnished to the Series in appropriate
form as soon as practicable after termination of this Agreement for any reason.
SECTION 14. AMENDMENTS TO DOCUMENTS. The Trust will furnish FPS written
copies of any amendments to, or changes in, the Trust's Declaration of Trust or
By-Laws, and each Series' Prospectus or Statement of Additional Information
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Trust which have the effect of changing the
procedures employed by FPS in providing the services agreed to hereunder or
which amendment affects the duties of FPS hereunder unless the Trust first
obtains FPS' approval of such amendments or changes, which approval shall not be
unreasonably withheld or delayed.
SECTION 15. CONFIDENTIALITY. Both Parties hereto agree that any
non-public information obtained hereunder concerning the other Party is
confidential and may not be disclosed to any other person without the consent of
the other Party, except as may be required by applicable law or at the request
of the U.S. Securities and Exchange Commission or other governmental agency. FPS
agrees that it will not use any non-public information for any
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 9 of 11 pages.
<PAGE>
purpose other than performance of its duties or obligations hereunder. The
obligations of the Parties under this Section will survive the termination of
this Agreement. The Parties further agree that a breach of this Section would
irreparably damage the other Party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
SECTION 16. AMENDMENT. This Agreement may only be amended or modified by
a written instrument executed by both Parties.
SECTION 17. MISCELLANEOUS.
(a) Notices. Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Trust or FPS, will be
sufficiently given if addressed to that Party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Trust:
Third Avenue Trust
767 Third Avenue
New York, NY 10017
Attn.: Ian M. Kirschner, General Counsel
To FPS Services, Inc.:
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Attn: Kenneth J. Kempf, President
(b) Assignment. This Agreement will extend to and be binding
upon the Parties hereto and their respective successors and assigns; provided,
however, that this Agreement will not be assignable by the Trust without the
written consent of FPS or by FPS without the written consent of the Trust
authorized or approved by a resolution by its respective Boards of Directors and
Trustees.
(c) Governing Law. This Agreement will be governed exclusively
by the laws of the Commonwealth of Pennsylvania without reference to the choice
of law provisions
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 10 of 11 pages.
<PAGE>
thereof.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original; but such
counterparts will, together, constitute only one instrument.
(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the Parties hereto
relating to the matters covered hereby and supersede any previous agreements. If
any provision is held to be illegal, unenforceable or invalid for any reason,
the remaining provisions will not be affected or impaired thereby.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting in its entirety, of eleven typewritten pages, together with Schedules
"A," "B" and "C," to be signed by their duly authorized officers as of the day
and year first above written.
Third Avenue Trust on behalf of the FPS Services, Inc.
Series identified on Schedule C
By:------------------------ By:------------------------
Martin J. Whitman, President Kenneth J. Kempf, President
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Page 11 of 11 pages.
<PAGE>
SCHEDULE "A"
ACCOUNTING & PORTFOLIO VALUATION
FOR
THIRD AVENUE TRUST
Dated: ------ --, 1997
I. SERVICES RELATED TO PORTFOLIO VALUATION AND ACCOUNTING
All financial data provided to, processed, and reported by FPS under
this Agreement shall be stated in U. S. dollars. FPS' obligation to
convert, equate or deal in foreign currencies or values extends only to
the accurate transposition of information received from the various
pricing and information services.
A. DAILY ACCOUNTING SERVICES
1. CALCULATE NET ASSET VALUE ("NAV") AND OFFERING PRICE PER
SHARE:
o Update the daily market value of securities held by the
Series using FPS' standard agents for pricing domestic
equity and bond securities. The domestic equity pricing
services employed by FPS are Reuters, Inc., Muller Data
Corporation, J.J. Kenny Co., Inc. and Interactive Data
Cor poration (IDC). Muller Data, Telerate Systems, Inc.,
J.J. Kenny Co., Inc. and IDC are employed by FPS for
bond and money market prices/yields. Bloomberg is
available and used for price research.
o Enter limited number of manual prices supplied by the
Series.
o Prepare NAV proof sheets. Review components of change in
NAV for reasonableness.
o Review variance reporting on-line and in hard copy for
price changes in individual securities using variance
levels established by the Series. Verify U.S. dollar
security prices exceeding variance levels by notifying
the Series and pricing sources of noted variances.
o Review for ex-dividend items indicated by pricing
sources; trace to Series' general ledger for agreement.
o Communicate required pricing information (NAV/Offering
Price) to the Trust's Advisor, agent performing
shareholder servicing and electronically to NASDAQ.
2. DETERMINE AND REPORT CASH AVAILABILITY TO TRUST BY
APPROXIMATELY 9:30 A.M. EASTERN TIME:
o Receive daily cash and transaction statements from the
Custodians
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<PAGE>
by 8:30 a.m. Eastern time.
o Receive previous day shareholder activity reports from
the Trust's agents providing services related to
shareholders and share transactions by 8:30 a.m. Eastern
time.
o Fax hard copy of Cash Availability calculations with all
details to the Series.
o Supply the Series with 3-day cash projection report.
o Prepare and complete daily bank cash reconciliations
including documentation of any reconciling items and
notify the Series and the Custodians.
3. RECONCILE AND RECORD ALL DAILY EXPENSE ACCRUALS:
o Accrue expenses based on budget supplied by the Advisor
either as percentage of net assets or specific dollar
amounts.
o If applicable, monitor expense limitations established
by the Advisor.
o If applicable, accrue daily amortization of
organizational expense.
o If applicable, completed daily accrual of 12b-1
expenses.
4. VERIFY AND RECORD ALL DAILY INCOME ACCRUALS FOR DEBT ISSUES:
o Review and verify all system generated interest and
amortization reports.
o Establish unique security codes for bond issues to
permit segregated trial balance income reporting.
5. MONITOR DOMESTIC SECURITIES HELD FOR CASH DIVIDENDS,
CORPORATE ACTIONS AND CAPITAL CHANGES SUCH AS SPLITS,
MERGERS, SPINOFFS, ETC. AND PROCESS APPROPRIATELY.
o Monitor electronically received information from Muller
Data Corporation for all domestic securities.
o Review current daily security trades for dividend
activity.
o Interface with the Custodians to monitor timely
collection and postings of corporate actions, dividends
and interest.
6. ENTER ALL SECURITY TRADES ON INVESTMENT ACCOUNTING SYSTEM
(IAS) based on written instructions from Trust's Advisor.
o Review system verification of trade and interest
calculations.
o Verify settlement through the statements supplied by the
Custodians.
o Maintain security ledger transaction reporting.
o Maintain tax lot holdings.
o Determine realized gains or losses on security trades.
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
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o Provide complete broker commission reporting.
7. ENTER ALL FUND SHARE TRANSACTIONS ON IAS:
o Process activity identified on reports supplied by the
Trust's agent providing services related to shareholders
and share transactions.
o Verify settlement through the statements supplied by the
Trust's Custodians.
o Reconcile report balances to the Trust's agent providing
services related to shareholders and share transactions.
8. PREPARE AND RECONCILE/PROVE ACCURACY OF THE DAILY TRIAL
BALANCE (listing all asset, liability, equity, income and
expense accounts)
o Post manual entries to the general ledger.
o Post custodian bank activity.
o Post shareholder and security transactions.
o Post and verify system generated activity, i.e., income
and expense accruals.
o Prepare Series' general ledger net cash proof used in
NAV calculation.
9. REVIEW AND RECONCILE WITH CUSTODIANS' STATEMENTS:
o Verify all posted interest, dividends, expenses, and
shareholder and security payments/receipts, etc.
(Discrepancies will be reported to and resolved by the
Custodians.)
o Post all cash settlement activity to the Trial Balance.
o Reconcile to ending cash balance accounts.
o Clear IAS subsidiary reports with settled amounts.
o Track status of past due items and failed trades
handled by the Custodians.
10. SUBMISSION OF DAILY ACCOUNTING REPORTS TO SERIES:
(Additional reports readily available.)
o Trial Balance
o Portfolio Valuation (listing inclusive of holdings,
costs, market values, unrealized appreciation/
depreciation and percentage of portfolio comprised of
each security).
o NAV Calculation Report.
o Cash availability and 3-day Cash Projection Report.
B. MONTHLY ACCOUNTING SERVICES
1. FULL FINANCIAL STATEMENT PREPARATION (automated Statement of
Assets and
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Liabilities, Statement of Operations and Statement of
Changes in Net Assets) and submission to Advisor by 10th
business day.
2. SUBMISSION OF MONTHLY AUTOMATED IAS REPORTS TO ADVISOR:
o Security Purchase/Sales Journal
o Interest and Maturity Report
o Brokers Ledger (Commission Report)
o Security Ledger Transaction Report with Realized
Gains/Losses
o Security Ledger Tax Lot Holdings Report
o Additional reports available upon request
3. RECONCILE ACCOUNTING ASSET LISTING TO CUSTODIAN ASSET
LISTING:
o Report any security balance discrepancies to the
applicable Custodians and the Advisor.
4. PROVIDE MONTHLY ANALYSIS AND RECONCILIATION OF ADDITIONAL
TRIAL BALANCE ACCOUNTS,
such as:
o Security cost and realized gains/losses
o Interest/dividend receivable and income
o Payable/receivable for securities purchased and sold
o Payable/receivable for Series' shares; issued and
redeemed
o Expense payments and accruals analysis
5. If Appropriate, Prepare and Submit to the Trust (additional
fees may apply):
o SEC yield reporting (non-money market funds with
domestic and ADR securities only).
o Income by state reporting.
o Standard Industry Code Valuation Report.
o Alternative Minimum Tax Income segregation schedule.
C. ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES
1. Annually assist and supply auditors with schedules
supporting securities and shareholder transactions, income
and expense accruals, etc. during the year in accordance
with standard audit assistance requirements.
2. Provide semi-annual N-SAR Reporting (Accounting Questions):
If applicable for the Series, answer the following items: 2,
12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53,
55, 62, 63, 64B,
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<PAGE>
71, 72, 73, 74, 75 and 76.
D. ACCOUNTS AND RECORDS
On each day the NYSE is open for regular trading and subject to the
proper receipt (via Oral or Written Instructions) by FPS of all
information required to fulfill its duties under this Agreement, FPS
will maintain and keep current the following Accounts and Records and
any other records required to be kept pursuant to Rule 31a-1 of the Act
relating to the business of the Series in such form as may be mutually
agreed upon between the Trust and FPS:
(1) Net Asset Value Calculation Reports;
(2) Cash Receipts Report;
(3) Cash Disbursements Report;
(4) Dividends Paid and Payable Schedule;
(5) Purchase and Sales Journals - Portfolio Securities;
(6) Subscription and Redemption Reports;
(7) Security Ledgers - Transaction Report and Tax Lot
Holdings Report;
(8) Broker Ledger - Commission Report;
(9) Daily Expense Accruals;
(10) Daily Interest Accruals;
(11) Daily Trial Balance;
(12) Portfolio Interest Receivable and Income Reports;
(13) Portfolio Dividend Receivable and Income Reports;
(14) Listing of Portfolio Holdings - showing cost, market
value and percentage of portfolio comprised of each
security; and
(15) Average Daily Net assets provided on monthly basis.
E. PROTOCOL CONCERNING ACCURACY OF PRICING PORTFOLIO SECURITIES
FPS shall perform the ministerial calculations necessary to calculate
the net asset value each day that the New York Stock Exchange is open
for business, in accordance with; (i) the current Prospectus and
Statement of Additional Information for each Series, and (ii)
procedures with respect thereto approved by the Board of Trustees of
the Trust and supplied in writing to FPS. Portfolio items for which
market quotations are available by FPS' use of an automated financial
information service (the "Service") shall be based on the closing
prices of such Service except where a Series or the Advisor has given
or caused to be given specific Written or Oral Instructions to utilize
a different value subject to the appropriate provisions in each Series'
Prospectus and Statement of Additional Information then in effect. All
of the portfolio securities shall be given such values as the
applicable Series or the Advisor provides by Written or Oral
Instructions including all restricted securities and other securities
requiring valuation not readily ascertainable
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<PAGE>
solely by such Service subject to the appropriate provisions in the
Series' Prospectus and Statement of Additional Information then in
effect.
FPS will have no responsibility or liability for (i) the accuracy of
prices quoted by such Service; (ii) the accuracy of the information
supplied by the a Series; or (iii) any loss, liability, damage, or cost
arising out of any inaccuracy of such data. FPS will have no
responsibility or duty to include information or valuations to be
provided by a Series in any computation unless and until it is timely
supplied to FPS in usable form. FPS will record corporate action
information as received from the Custodians, the Service or a Series.
FPS will not have any duty to gather or record corporate action
information not supplied by these sources.
FPS will assume no liability for price changes caused by the Advisor or
any subadvisor, Custodian, suppliers of security prices, corporate
action and dividend information, or any party other than FPS itself.
F. PROTOCOL REGARDING RECEIPT OF INSTRUCTIONS
For all purposes under this Agreement, FPS is authorized to act upon
receipt of the first of any Written or Oral Instruction it receives
from the Trust on behalf of a Series or its agents on behalf of the
Trust. In cases where the first instruction is an Oral Instruction that
is not in the form of a document or written record, a confirmatory
Written Instruction or Oral Instruction in the form of a document or
written record will be delivered, and in cases where FPS receives an
Instruction, whether Written or Oral, to enter a portfolio transaction
on the records, the Trust will cause the broker/dealer to send a
written confirmation to the Custodian. FPS will be entitled to rely on
the first Oral or Written Instruction received and any act or omission
undertaken in compliance therewith will be free of liability and fully
indemnified and held harmless by the applicable Series, provided,
however, that in the event a Written or Oral Instruction received by
FPS is countermanded by a subsequent Written or Oral Instruction
received by FPS prior to acting upon such countermanded Instruction,
FPS will act upon such subsequent Written or Oral Instruction. The sole
obligation of FPS with respect to any follow-up or confirmatory Written
Instruction or Oral Instruction in documentary or written form will be
to make reasonable efforts to detect any such discrepancy between the
original Instruction and such confirmation and to report such
discrepancy to the applicable Series. The Series will be responsible,
at the Series' expense, for taking any action, including any
reprocessing, necessary to correct any discrepancy or error. To the
extent such action requires FPS to act, the Trust will give FPS
specific Written Instruction as to the action required.
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II. ASSUMPTIONS REGARDING PORTFOLIO VALUATION AND ACCOUNTING
--------------------------------------------------------
(The Fees as set forth in Schedule "B" are based on the following
assumptions. To the extent these assumptions are inaccurate or
requirements change, fee revisions may be necessary.)
BASIC ASSUMPTIONS:
------------------
1. The Series' portfolio asset composition will be primarily
domestic equities. Trading activity is expected to be moderate
with an annual turnover rate not to exceed 100%.
2. Each Series has a tax year-end which coincides with its fiscal
year-end. No additional accounting requirements are necessary
to identify or maintain book-tax differences. FPS does not
provide security tax accounting which differs from its book
accounting under this fee schedule.
3. Each Series agrees to the use of FPS' standard current pricing
services for domestic equity and debt securities.
It is assumed that FPS will work closely with each Series to
ensure the accuracy of the Series' NAV and to obtain the most
satisfactory pricing sources and specific methodologies prior
to the actual start-up date. Each Series will establish
security variance procedures to minimize NAV miscalculations.
4. To the extent a Series requires a limited number of daily
security prices from specific brokers for domestic securities
(as opposed to pricing information received electronically),
these manual prices will be obtained by the Series' Advisor
and faxed to FPS by 4:00 p.m. Eastern time for inclusion in
the NAV calculations. The Advisor will supply FPS with the
appropriate pricing contacts for these manual quotes.
5. Procedural discussions between FPS and a Series are required
to clarify the appropriate pricing and dividend rate sources
if the Series invests in open-end regulated investment
companies (RIC's). Depending on the methodologies selected by
the Series, additional fees may apply.
6. FPS will supply daily Portfolio Valuation Reports to each
Series' Advisor identifying current security positions,
original/amortized cost, security market values and changes in
unrealized appreciation/depreciation. It will be the
responsibility of the Advisor to review these reports and to
promptly notify FPS of any possible problems, trade
discrepancies, incorrect security prices or corporate
action/capital change information that could result in a
misstated NAV.
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7. The Series do not currently expect to invest in swaps,
futures, hedges or derivatives. To the extent these investment
strategies should change, additional fees will apply after the
appropriate procedural discussions have taken place between
FPS and Series management. (Two weeks advance notice is
required should the Series commence trading in these
investments.)
8. Each Series will supply FPS with critical income information
such as accrual methods, interest payment frequency details,
coupon payment dates, floating rate reset dates, and complete
security descriptions with issue types and CUSIP numbers for
all debt issues. If applicable, the Series' Advisor shall
supply the yield to maturity and related cash flow schedules
for any mortgage/asset-backed securities held in the Series.
9. The Advisor will supply/support FPS in timely receipt of
dividend information and return of capital characterization
for the REITs held in each Series. To the extent applicable,
FPS will maintain on a daily basis U.S. dollar-denominated
qualified covered call options and index options reporting on
the daily Trial Balance and value the respective options and
underlying positions. This Agreement does not provide for tax
classifications if they are required.
10. Each Series is responsible for the establishment and
monitoring of any segregated accounts pertaining to any Line
of Credit for temporary administrative purposes, and/or
leveraging the portfolio. FPS will reflect appropriate Trial
Balance account entries and interest expense accrual charges
on the daily Trial Balance adjusting as necessary at
month-end.
11. If a Series commences participation in security lending or
short sales within its portfolio securities, additional fees
may apply. Should a Series require these additional services,
procedural discussions must take place between FPS and the
Series' Advisor to clarify responsibilities. (Two weeks
advance notice to FPS is required should a Series desire to
participate in the above.)
12. Each Series will supply FPS with portfolio specific expense
accrual procedures and monitor the expense accrual balances
for adequacy based on outstanding liabilities monthly.
13. Specific deadlines will be met and complete information will
be supplied by each Series in order to minimize any settlement
problems, NAV miscalculations or income accrual adjustments.
Each Series will direct its Advisor to provide Trade
Authorization Forms to FPS
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with the appropriate officer's signature on all security
trades placed by the Series no later than 12:30 p.m. Eastern
time on settlement/value date for short term money market
securities issues (assuming that trade date equals settlement
date); and by 11:00 a.m. Eastern time on trade date plus one
for non-money market securities. Receipt by FPS of trade
information within these identified deadlines may be via
telex, fax or on-line system access. The Advisor will supply
FPS with the trade details in accordance with the above stated
deadlines.
The Advisor will provide all information required by FPS,
including CUSIP numbers and/or ticker symbols for all U.S.
dollar-denominated trades on the Trade Authorization, telex or
on-line support. FPS will supply the Advisor with recommended
trade ticket documents to minimize receipt of incomplete
information. FPS will not be responsible for NAV changes or
distribution rate adjustments that result from incomplete
trade information.
14. To the extent a Series utilizes purchases in-kind (U.S. dollar
denominated securities only) as a method for shareholder
subscriptions, FPS will provide the Series with procedures to
properly handle and process such transactions. Should a Series
prefer procedures other than those provided by FPS, additional
fees may apply. Discussions shall take place at least two
weeks in advance between FPS and the Series to clarify the
appropriate in-kind operational procedures to be followed.
15. The Parties will establish mutually agreed upon amortization
procedures and accretion requirements for debt issues held by
the Series prior to commencement of operations. Adjustments
for financial statements regarding any issues with original
issue discount (OID) are not included under this Agreement.
Each Series will direct its independent auditors to complete
the necessary OID adjustments for financial statements and/or
tax reporting.
16. No Series is currently expected to issue separate classes of
shares. To the extent it does, additional fees will be
negotiated.
17. Each Series shall direct its Custodian to provide FPS with
daily custodian statements (or on-line access to the custody
system) reflecting all prior day cash activity on behalf of
each portfolio by 8:30 a.m. Eastern time. Complete
descriptions of any postings, inclusive of Sedol/CUSIP
numbers, interest/dividend payment dates, capital stock
details, expense authorizations, beginning/ending cash
balances, etc. will be provided by the Custodian's reports or
system.
18. Each Series shall direct its Custodian to supply the dividend,
capital change information and interest rate changes to FPS in
a timely manner. The Advisor
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will supplement and support as appropriate.
19. Each Series shall direct its Custodian to handle and report
upon all settlement problems, failed trades and resolve
unsettled dividends/interest/pay downs and capital changes.
The Custodians will process all applicable capital change
paperwork based upon the advice from the Advisor. FPS agrees
to supply segregated Trial Balance reporting and supplemental
reports to assist in this process.
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<PAGE>
SCHEDULE "B"
ACCOUNTING SERVICES AGENT FEE SCHEDULE
FOR
THIRD AVENUE TRUST
Dated: ------ --, 1997
THIS FEE SCHEDULE IS FIXED FOR THE INITIAL TERM AS THAT TERM IS DEFINED IN
THE AGREEMENT.
I. FEES RELATED TO PORTFOLIO VALUATION AND ACCOUNTING
A. ANNUAL FEE SCHEDULE FOR THE THIRD AVENUE VALUE FUND(U.S.
DOLLAR-DENOMINATED SECURITIES ONLY)(1/12TH PAYABLE MONTHLY IN
ADVANCE BASED ON THE PRIOR MONTH'S AVERAGE DAILY NET ASSETS):
$24,000 Minimum to $ 10 Million of Average Net Assets
.0004 On the Next $ 40 Million of Average Net Assets
.0003 On the Next $ 50 Million of Average Net Assets
.0001 On the Next $100 Million of Average Net Assets
.00005 On the Next $800 Million of Average Net Assets
.000025 Over $ 1 Billion of Average Net Assets
If the Fund holds 10 or less non-U.S. Dollar denominated securities,
the fee schedule will remain unchanged.
If the Fund purchases more than 10 non-U.S. dollar denominated
securities, the annual minimum of the Series will increase from
$24,000 to $34,000.
If the Fund holds more than 50% of its securities in non-U.S. dollar
denominated assets, the annual minimum of the Series will increase
from $24,000 to $40,000.
B. Annual Fee Schedule for the Third Avenue Small-Cap Value Fund(U.S.
DOLLAR-DENOMINATED SECURITIES ONLY)(1/12TH PAYABLE MONTHLY IN ADVANCE
BASED ON THE PRIOR MONTH'S AVERAGE DAILY NET ASSETS):
$24,000 Minimum to $ 20 Million of Average Net Assets
.0003 On the Next $ 30 Million of Average Net Assets
.0002 On the Next $ 50 Million of Average Net Assets
.0001 On the Next $100 Million of Average Net Assets*
If the Fund holds 10 or less non-U.S. Dollar denominated securities,
the fee Schedule will remain unchanged.
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<PAGE>
If the Fund purchases more than 10 non-U.S. dollar denominated
securities, the annual minimum of the Series will increase
from $24,000 to $34,000. If the Fund holds more than 50% of
its securities in non-U.S. dollar denominated assets, the
annual minimum of the Series will increase from $24,000 to
$40,000.
*When the assets reach $200 million, fees will be subject to
further negotiation.
C. Pricing Services Quotation Fee (based on individual CUSIP or
security identification number.) Specific costs will be identified
based upon options selected by each Series and will be billed
monthly.
<TABLE>
<CAPTION>
=======================================================================================================
MULLER DATA INTERACTIVE J.J. KENNY
SECURITY TYPES CORP.* DATA CORP.* CO., INC.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Bonds $ .50 $ .50 $ .25 (a)
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
Corporate Bonds (short and long term) .50 .50 .25 (a)
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
Convertible Bonds .50 .50 1.00 (a)
High Yield Bonds .50 .50 1.00 (a)
Mortgage-Backed Factors (per Issue per Month) 1.00 n/a n/a
Domestic Equities (d) .15 n/a
Domestic Options n/a .15 n/a
Domestic Dividends & Capital Changes (d) 3.50 n/a
(per Issue per month)
Foreign Securities .50 .50 n/a
Foreign Securities Dividends & Capital Changes
(per Issue per Month) 2.00 4.00 n/a
Set-up Fees n/a n/a(e) .25 (c)
All Added Items n/a n/a .25 (c)
=======================================================================================================
</TABLE>
* Based on current Vendor costs, subject to change. Costs are
quoted based on individual security CUSIP/identifiers and are
per issue per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to FPS clients
<PAGE>
(e) Interactive Data also charges monthly
transmission costs and disk storage charges.
1) Futures and Currency Forward Contracts - $2.00 per Issue per Day
2) Reuters, Inc.*
*Based on current vendor costs, subject to change. FPS
does not currently pass along the charges for the domestic
security prices supplied by Reuters, Inc.
3) Telerate Systems, Inc.* (IF APPLICABLE)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected
and will be billed monthly.
D. SEC Yield Calculation: (IF APPLICABLE)
-- --------------------------------------
Provide up to 12 reports per year to reflect the yield calculations
for non-money market funds required by the SEC, $1,000 per year per
fund. For multiple class funds, $1,000 per year per class. Daily SEC
yield reporting is available at $3,000 per year per fund (U.S.
DOLLAR-DENOMINATED SECURITIES ONLY).
II. OUT-OF-POCKET EXPENSES
- --- ----------------------
Each Series will reimburse FPS monthly for all applicable out-of-pocket
expenses which include, but are not limited to, the following: postage,
telecommunications (telephone, fax, on-line access), special reports,
transmissions, approved record retention, pre-approved travel expenses and
copying and sending materials to auditors and/or regulatory agencies for
off-site examinations.
III. ADDITIONAL SERVICES
- ---- -------------------
Activities of a non-recurring nature, including but not limited to,
shareholder in-kinds, fund consolidations, mergers, acquisitions,
reorganizations are not included herein, and will be quoted separately. To
the extent the Advisor should decide to issue additional separate classes of
shares, additional fees will apply. Any enhanced services, programming
requests or reports will be quoted upon request.
To the extent the a Series commences using investment techniques such as
security lending, short sales, swaps, futures, leveraging, reverse
repurchase agreements and foreign securities, additional fees will be
negotiated.
<PAGE>
SCHEDULE "C"
Dated: ------ --, 1997
Identification of Series
------------------------
Below are listed the "Series" of Third Avenue Trust to which services under this
Agreement are to be performed as of the execution date of the Agreement:
1. Third Avenue Value Fund
2. Third Avenue Small-Cap Value Fund
This Schedule "C" may be amended from time to time by agreement of the Parties.
Third Avenue Trust FPS Services, Inc.
By: By:
- --------------------------- ---------------------------
Martin J. Whitman, President Kenneth J. Kempf, President
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Accounting Services Agreement between Third Avenue Trust and FPS Services, Inc.
Schedule "C"
[LETTERHEAD SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
919 THIRD AVENUE
NEW YORK 10022-3897
TEL: (212) 735-3000
FAX: (212) 735-2000
March 21, 1997
Third Avenue Trust
767 Third Avenue
New York, New York 10022-2023
Re: Third Avenue Trust --
Registration Statement on Form N-1A
(File Nos. 33-20891 and 811-8039)
Ladies and Gentleman:
We have acted as counsel to Third Avenue Trust, a Delaware business
trust (the "Trust"), in connection with the Trust's Registration Statement on
Form N1-A filed with the Securities and Exchange Commission (the "Commission")
on January 28, 1997 (the "Registration Statement") and relating to the issuance
by the Trust of an indefinite number of shares of beneficial interest, par value
of $0.001 per share (the "Shares"), pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended (the "Act"). Two series of the Trust have been
authorized, Third Avenue Value Fund and Third Avenue Small-Cap Value Fund.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement, (ii) the Trust's Agreement and Declaration of Trust (the "Declaration
of Trust") and the By-laws of the Trust, (iii) the Trust's Certificate of Trust,
(iv) copies of the resolutions adopted by the Board of Trustees of the Trust
relating to the authorization, issuance and sale of Shares, the filing of any
Registration Statement and any amendments or supplements thereto and related
matters and (v) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth herein. In such examination, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified,
conformed or photostatic copies, the genuineness of all signatures, and the
legal capacity of all natural persons. As to any facts material to the opinions
expressed herein which we have not independently established or verified, we
have relied upon statements and representations of officers and other
representatives of the Trust and others.
Members of our firm are admitted to the Bar in the State of New York,
and we do not express any opinion as to the laws of any other jurisdiction other
than the Business Trust Act of the State of Delaware.
<PAGE>
Based on the foregoing and our examination of such questions of law as
we have deemed necessary and appropriate for the purpose of this opinion, and
assuming that (i) all of the Shares will be issued and sold for cash at the
per-share public offering price on the date of their issuance in accordance with
statements in the Trust's prospectus included in the Registration Statement and
in accordance with the Declaration of Trust, (ii) all consideration for the
Shares will be actually received by the Trust, and (iii) all applicable
securities laws will be complied with, it is our opinion that, when issued and
sold by the Trust, the Shares will be legally issued, fully paid and
nonassessable.
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. Except as specifically set forth
herein, this opinion is not to be used, circulated, quoted or otherwise referred
to or relied on for any other purpose or by any other person without our express
written permission.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 10 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Counsel" in the Registration Statement. In
giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the 1933 Act or the rules
and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
--------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Pre-Effective
Amendment No.1 to the registration statement on Form N-1A (the "Registration
Statement") for Third Avenue Trust of our report dated December 11, 1996,
relating to the financial statements and financial highlights appearing in the
October 31, 1996 Annual Report to Shareholders of Third Avenue Value Fund, Inc.,
which is also incorporated by reference into the Registration Statement. We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Financial Statements" in the Statement of
Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 19, 1997
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- --------------------------------------------------------------------------------
INDIVIDUAL
RETIREMENT
ACCOUNT
- --------------------------------------------------------------------------------
DISCLOSURE STATEMENT
CUSTODIAL ACCOUNT
AGREEMENT
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
DISCLOSURE STATEMENT
RIGHT TO REVOKE YOUR IRA
If you receive this Disclosure Statement at the time you establish your IRA, you
have the right to revoke your IRA within seven (7) days of its establishment. If
revoked, you are entitled to a full return of the contribution you made to your
IRA. The amount returned to you would not include an adjustment for such items
as sales commissions, administrative expenses, or fluctuation in market value.
You may make this revocation only by mailing or delivering a written notice to
the Custodian at:
FPS Services, Inc.
3200 Horizon Drive
King of Prussia, PA 19406-0903
If you send your notice by first-class mail, your revocation will be deemed
mailed as of the date of the postmark.
If you have any questions about the procedure for revoking your IRA, please call
the Custodian at the telephone number listed on the Application.
REQUIREMENTS OF AN IRA
A. CASH CONTRIBUTIONS - Your contribution must be in cash, unless it is a
rollover contribution.
B. MAXIMUM CONTRIBUTION - The total amount you may contribute to an IRA for any
taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation.
C. NONFORFEITABILITY - Your interest in your IRA is nonforfeitable.
D. ELIGIBLE CUSTODIANS - The Custodian of your IRA must be a bank, savings and
loan association, credit union, or a person approved by the Secretary of the
Treasury.
E. COMMINGLING ASSETS - The assets of your IRA cannot be commingled with other
property except in a common trust fund or common investment fund.
F. LIFE INSURANCE - No portion of your IRA may be invested in life insurance
contracts.
G. COLLECTIBLES - You may not invest the assets of your IRA in collectibles
(within the meaning of Internal Revenue Code (IRC) Section 408(m)). A
collectible is defined as any work of art, rug or antique, metal or gem,
stamp or coin, alcoholic beverage, or any other tangible personal property
specified by the Internal Revenue Service. Specially minted United States
gold and silver bullion coins and certain state-issued coins are permissible
IRA investments.
H. REQUIRED MINIMUM DISTRIBUTIONS - You are required to take minimum
distributions from your IRA at certain times in accordance with Proposed
Treasury Regulations Section 1.408-8. Below is a summary of the IRA
distribution rules.
1. You are required to take a minimum distribution from your IRA for the
year in which you reach age 70 1/2 and for each year thereafter. You must
take your first payout by your required beginning date, April 1 of the
year following the year you attain age 70 1/2. The minimum distribution
for any taxable year is equal to the amount obtained by dividing the
account balance at the end of the prior year (less any required
distribution taken between January 1 and April 1 of the year following
the year you attain age 70 1/2) by the joint life expectancy of you and
your designated beneficiary. If you have not
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designated a beneficiary for your IRA by your required beginning date,
your single life expectancy will be used.
2. Your single or joint life expectancy is determined by using the IRS
unisex life expectancy tables. You can find these tables in Treasury
Regulation Section 1.72-9.
We may establish a policy dictating whether or not life expectancies may
be recalculated in determining required minimum distributions from your
IRA. Alternatively, we may allow you to elect whether or not to
recalculate your life expectancies.
You may choose (within the limits set forth in the distribution rules and
our life expectancy recalculation policy) how you want your required
minimum distributions structured. You must make your payment elections no
later than April 1 following your 70 1/2 year. If you do not make an
election by that date, we may do any one of the following:
(a) make no payment until you give us a proper payout request,
(b) pay your entire IRA to you in a single sum payment, or
(c) determine your required minimum distribution each year based on your
single life expectancy (not recalculated) and pay those distributions
to you until you direct otherwise.
3. If you name someone other than your spouse as your beneficiary, and your
beneficiary is more than 10 years younger than you, your required minimum
distributions must satisfy the Minimum Distribution Incidental Benefit
(MDIB) rule. The MDIB rule generally requires that your required minimum
distributions be calculated as if your beneficiary were exactly 10 years
younger than you.
4. If you die:
(a) on or after your required beginning date, distributions must be made
to your beneficiary or beneficiaries at least as rapidly as under the
method being used to determine minimum distributions as of the date
of your death.
(b) before your required beginning date, the entire amount remaining in
your account will, at the election of your beneficiary or
beneficiaries, either
(i) be distributed by December 31 of the year containing the fifth
anniversary of your death, or
(ii)be distributed in equal or substantially equal payments over the
life or life expectancy of your designated beneficiary or
beneficiaries.
Your beneficiary or beneficiaries must elect either option (i) or (ii) by
December 31 of the year following the year of your death. If no election
is made, distribution will be made in accordance with (ii) if the
beneficiary is your surviving spouse, and in accordance with (i) if your
beneficiary is not your surviving spouse. In the case of distributions
under (ii), distributions must commence by December 31 of the year
following the year of your death. If your spouse is the beneficiary,
distributions need not commence until December 31 of the year you would
have attained age 70 1/2, if later.
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INCOME TAX CONSEQUENCES OF
ESTABLISHING AN IRA
A. IRA DEDUCTIBILITY - If you have not yet reached the year in which you attain
age 70 1/2 and have earned income from services rendered, you may make an
IRA contribution of the lesser of 100 percent of compensation or $2,000.
However, the amount of the contribution for which you may take a tax
deduction will depend upon whether you (or your spouse) are an active
participant in an employer-maintained retirement plan. If you (and your
spouse) are not an active participant, your IRA contribution will be totally
deductible. If you (or your spouse) are an active participant, the
deductibility of your contribution will depend on your adjusted gross income
(AGI) for the tax year for which the contribution was made. AGI is
determined on your tax return (disregarding any deductible IRA
contribution).
DEFINITION OF ACTIVE PARTICIPANT - Generally, you will be an active
participant if you are covered by one or more of the following
employer-maintained retirement plans:
1. a qualified pension, profit sharing, 401(k), or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation
plans under IRC Section 457);
5. a tax sheltered annuity for employees of certain tax-exempt organizations
or public schools;
6. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan);
and
7. a SIMPLE IRA plan or a SIMPLE 401(k) plan.
If you do not know whether your employer maintains one of these plans or
whether you are an active participant in it, check with your employer and
your tax advisor. Also, the Form W-2 (Wage and Tax Statement) that you
receive at the end of the year from your employer will indicate whether you
are an active participant.
If you are single, your threshold AGI level is $25,000. The threshold level
if you are married and file a joint tax return is $40,000, and if you are
married but file a separate tax return, the threshold level is $0. If your
AGI is less than $10,000 above your threshold level, you will still be able
to make a deductible contribution but it may be limited in amount (but never
less than $200).
The deductible amount of your contribution is determined by taking your
threshold AGI level plus $10,000 (e.g., $50,000 if you are married and
filing jointly, $35,000 if you are single) and subtracting from it your AGI
(determined prior to taking your itemized deductions). Multiply the
resulting number by .2 to give you your personal deduction limit. You must
round up the resulting number to the next highest $10 if the number is not a
multiple of 10.
B. TAX-DEFERRED EARNINGS - The investment earnings of your IRA are not subject
to federal income tax until distributions are made (or, in certain
instances, when distributions are deemed to be made).
C. NONDEDUCTIBLE CONTRIBUTIONS - You may make nondeductible contributions to
your IRA to the extent that deductible contributions are not allowed. The
sum of your deductible and nondeductible IRA contributions cannot exceed
your contribution limit (the lesser of $2,000 or 100 percent of
compensation). You may elect to
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treat deductible IRA contributions as nondeductible contributions.
If you make nondeductible contributions for a particular tax year, you must
report the amount of the nondeductible contribution on your federal income
tax return (using IRS Form 8606).
If you overstate the amount of designated nondeductible contributions for
any taxable year, you are subject to a $100 penalty unless reasonable cause
for the overstatement can be shown. Failure to file any form required by the
IRS to report nondeductible contributions (eg., IRS Form 8606) will result
in a $50 per failure penalty.
D. TAXATION OF DISTRIBUTIONS - The taxation of IRA distributions depends on
whether or not you have ever made nondeductible IRA contributions. If you
have only made deductible contributions, any IRA distribution will be fully
included in income. If you have ever made nondeductible contributions to any
IRA, the following formula must be used to determine the amount of any IRA
distribution excluded from income:
(Aggregate Nondeductible Contributions)
x (Amount Withdrawn) = Amount Excluded
--------------------
Aggregate IRA Balance From Income
NOTE: Aggregate nondeductible contributions include all nondeductible
contributions made by you through the end of the year of the distribution
(which have not previously been withdrawn and excluded from income). Also
note that aggregate IRA balance includes the total balance of all of your
IRAs as of the end of the year of distribution and any distributions
occurring during the year.
E. ROLLOVERS - Your IRA may be rolled over to an IRA of yours, or may receive
rollover contributions, provided that all of the applicable rollover rules
are followed. Rollover is a term used to describe a tax-free movement of
cash or other property to your IRA from any of your IRAs, or from your
employer's Qualified Retirement Plan or Tax Sheltered Annuity. SIMPLE IRA
funds may not be rolled to your IRA during the first two years you
participate in your employer's SIMPLE IRA plan. The rollover rules are
generally summarized below. These transactions are often complex. If you
have any questions regarding a rollover, please see a competent tax advisor.
1. IRA to IRA Rollovers - Funds distributed from your IRA may be rolled
over to an IRA of yours if the requirements of IRC Section 408(d)(3) are
met. A proper IRA to IRA rollover is completed if all or part of the
distribution is rolled over not later than 60 days after the
distribution is received. You may not have completed another IRA to IRA
rollover from the distributing IRA during the 12 months preceding the
date you receive the distribution. Further, you may roll the same
dollars or assets only once every 12 months.
2. Qualified Plan (or Tax-Sheltered Annuity) to IRA Rollovers - Effective
for qualified plan distributions received after January 1, 1993, you may
roll over, directly or indirectly, any eligible rollover distribution.
An eligible rollover distribution is defined generally as any
distribution from a qualified plan (other than distributions to
nonspouse beneficiaries) unless it is part of certain series of
substantially equal periodic payments, after-tax dollars or a required
minimum distribution.
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If you elect to receive your rollover distribution prior to placing it
in an IRA, thereby conducting an indirect rollover, your plan
administrator will generally be required to withhold 20 percent of your
distribution as a prepayment of income taxes. When completing the
rollover, you may make up the amount withheld, out of pocket, and roll
over the full amount distributed from your qualified plan balance, if
you so choose. To qualify as a rollover, your eligible rollover
distribution must be rolled over to your IRA not later than 60 days
after you receive it.
Alternatively, you may claim the withheld amount as income and pay the
applicable income tax and, if you are under age 59 1/2, the 10 percent
early distribution penalty (unless an exception to the penalty applies).
As an alternative to the indirect rollover, your employer generally must
give you the option of directly rolling your qualified plan balance over
to an IRA. If you elect the direct rollover option, your eligible
rollover distribution will be paid directly to the IRA (or other
qualified plan) that you designate. The 20 percent withholding
requirements do not apply to direct rollovers.
If you place your rollover contribution in a separate (i.e., conduit)
IRA plan which holds just those dollars, you preserve the right to later
roll the money originating from the qualified plan into another
qualified plan.
3. Written Election - At the time you make a proper rollover to an IRA, you
must designate to the Custodian, in writing, your election to treat that
contribution as a rollover. Once made, the rollover election is
irrevocable.
F. CARRYBACK CONTRIBUTIONS - A contribution is deemed to have been made on
the last day of the preceding taxable year if you make a contribution by
the deadline for filing your income tax return (not including
extensions), and you designate that contribution as a contribution for
the preceding taxable year. For example, if you are a calendar year
taxpayer and you make your IRA contribution on or before April 15, your
contribution is considered to have been made for the previous tax year
if you designated it as such.
LIMITATIONS AND RESTRICTIONS
A. SEP PLANS - Under a Simplified Employee Pension (SEP) Plan that meets the
requirements of IRC Section 408(k), your employer may make contributions to
your IRA. Your employer is required to provide you with information which
describes the terms of your employer's SEP Plan.
B. SPOUSAL IRA - If you are married, you may make payments to an IRA
established for the benefit of your spouse. Your spouse must not have
attained age 70 1/2 in that year, or any prior year, even if you are age 70
1/2 or older. You must file a joint tax return for the year for which the
contribution is made.
The amount you may contribute to your IRA and your spouse's IRA is the
lesser of $4,000 or 100 percent of your combined compensation. However, you
may not contribute more than $2,000 to any one IRA.
C. DEDUCTION OF ROLLOVERS AND TRANSFERS - A deduction is not allowed for
rollover or transfer contributions.
D. ESTATE TAX EXCLUSION - The $100,000 federal estate tax exclusion previously
available has been repealed for individuals dying after 12/31/84. No
exclusion will be allowed for individuals dying after that date. Transfers
of
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your IRA assets to a named beneficiary made during your life and at your
request or because of your failure to instruct otherwise, may be subject to
federal gift tax under IRC Section 2501 if made after October 22, 1986.
E. SPECIAL TAX TREATMENT - Capital gains treatment and the favorable five or
ten year forward averaging tax authorized by IRC Section 402 do not apply to
IRA distributions.
F. INCOME TAX TREATMENT - Any withdrawal from your IRA, except a direct
transfer, is subject to federal income tax withholding. You may, however,
elect not to have withholding apply to your IRA withdrawal. If withholding
is applied to your withdrawal, not less than 10 percent of the amount
withdrawn must be withheld.
G. PROHIBITED TRANSACTIONS - If you or your beneficiary engage in a prohibited
transaction with your IRA, as described in IRC Section 4975, your IRA will
lose its tax-exempt status and you must include the value of your account in
your gross income for that taxable year.
H. PLEDGING - If you pledge any portion of your IRA as collateral for a loan,
the amount so pledged will be treated as a distribution and will be included
in your gross income for that year.
FEDERAL TAX PENALTIES
A. EARLY DISTRIBUTION PENALTY - If you are under age 59 1/2and receive an IRA
distribution, an additional tax of 10 percent will apply, unless made on
account of death, disability, a qualifying rollover, a direct transfer, the
timely withdrawal of an excess contribution; or if the distribution is part
of a series of substantially equal periodic payments (at least annual
payments) made over your life expectancy or the joint life expectancy of you
and your beneficiary. Beginning January 1, 1997, payments made to pay
medical expenses which exceed 7.5 percent of your adjusted gross income and
distributions to pay for insurance by an individual who has separated from
employment and who has received unemployment compensation under a federal or
state program for at least 12 weeks are also exempt from the 10 percent tax.
This additional tax will apply only to the portion of a distribution which
is includible in your income.
B. EXCESS CONTRIBUTION PENALTY - An excise tax of 6 percent is imposed upon any
excess contribution you make to your IRA. This tax will apply each year in
which an excess remains in your IRA. An excess contribution is any
contribution amount which exceeds your contribution limit, excluding
rollover and direct transfer amounts. Your contribution limit is the lesser
of $2,000 or 100 percent of your compensation for the taxable year.
C. EXCESS ACCUMULATION PENALTY - One of the requirements listed above is that
you are required to take a minimum distribution by April 1 of the year
following the year you attain age 70 1/2and by the end of each year
thereafter and that your designated beneficiary(ies) is required to take
certain minimum distributions after your death. An additional tax of 50
percent is imposed on the amount of the required minimum distribution which
should have been taken but was not. This tax is referred to as an excess
accumulation penalty tax.
D. EXCESS DISTRIBUTION PENALTY - You will be taxed an additional 15 percent on
any amount received and included in income during a calendar year from
qualified retirement plans, tax-sheltered annuities and IRAs which exceeds
$112,500 (indexed each year for the cost of
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living). Certain exceptions may apply. If you receive an excess distribution
as described above, you should see your tax advisor to determine if these
exceptions apply to you. This tax is referred to as an excess distribution
penalty. However, this penalty is suspended for payments received during
1997, 1998 and 1999 as a result of the Small Business Job Protection Act of
1996.
E. EXCESS RETIREMENT ACCUMULATION PENALTY - Your estate will have to pay
additional federal estate tax if you die with an excess retirement
accumulation. The increased estate tax will be equal to 15 percent of the
excess retirement accumulation. An excess retirement accumulation exists if,
at the time of your death, the value of all of your interests in qualified
plans, tax-sheltered annuities and IRAs exceeds the present value of an
annuity with annual payments of $112,500 (indexed each year for the cost of
living), payable over your life expectancy immediately before your death.
This tax is referred to as an excess retirement accumulation tax penalty.
F. PENALTY REPORTING - You must file Form 5329 with the Internal Revenue
Service to report and remit any penalties or excise taxes.
CUSTODIAN/PLAN ADMINISTRATOR The Custodian of your IRA is identified in the
Individual Retirement Account Application. If FPS Services, Inc. is not the
Custodian, FPS Services, Inc. serves as the Plan Administrator, and in such
capacity is responsible for all record keeping, applicable tax reporting and fee
collection in connection with IRA accounts. FPS Services, Inc. is also the
transfer agent for the Funds.
FEES
The custodial fee currently in effect is an annual maintenance fee of $12 per
Fund account.
Your first annual maintenance fee may be paid at the same time that you mail
your IRA Application to FPS Services, Inc. Forward a separate check for $12,
made payable to FPS Services, Inc.
In subsequent years, you may pay the annual maintenance fee by forwarding a
check to FPS Services, Inc. If you do not forward payment for the annual
maintenance fee by August 31 of each year, FPS Services, Inc. will obtain
payment directly from your IRA by redeeming a sufficient number of the Fund
shares held in your IRA.
The Custodial Fees may be modified upon 30 days' written notice from the
Custodian of your IRA.
One or more of the mutual funds available for investment through your IRA may be
subject to sales charges. Such charges, if any, are listed in the prospectus of
that fund.
OTHER
A. IRS PLAN APPROVAL - The Agreement used to establish this IRA has been
approved by the Internal Revenue Service. The Internal Revenue Service
approval is a determination only as to form. It is not an endorsement of the
plan in operation or of the investments offered.
B. ADDITIONAL INFORMATION - You may obtain further information on IRAs from
your District Office of the Internal Revenue Service. In particular, you may
wish to obtain IRS Publication 590, Individual Retirement Arrangements.
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INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
Form 5305-S Under Section 408(a) of the Internal Revenue Code
The depositor whose name appears on the attached is establishing an Individual
Retirement Account under section 408(a) to provide for his or her retirement and
for the support of his or her beneficiaries after death.
The Custodian named on the attached Application has given the Depositor the
disclosure statement required under Regulations section 1.408-6. The Depositor
has assigned the custodial account the sum indicated on the Application.
The Depositor and the Custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a Simplified
Employee Pension Plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a Simplified Employee Pension Plan described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial account is
nonforfeitable.
ARTICLE III
1. No part of the Custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of Section 408(a)(5)).
2. No part of the Custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the Custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are herein incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
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3. The Depositor's entire interest in the Custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 701/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the Custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the year
of the Depositor's death. If, however, the beneficiary is the
Depositor's surviving spouse, then this distribution is not required
to begin before December 31 of the year in which the Depositor would
have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained
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ages of the Depositor and designated beneficiary as of their birthdays in the
year the Depositor reaches age 70 1/2. In the case of a distribution in
accordance with paragraph 4(b)(ii), determine life expectancy using the attained
age of the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) and
Regulations Sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and related
regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Application.
ARTICLE VIII
1. CONTRIBUTIONS. The Custodian is under no duty to compel the Depositor to
make any contributions to the Custodial account (the "Account"). The
Depositor must certify to the Custodian (in form satisfactory to it) that
any contribution other than a regular contribution is:
(a) A rollover contribution under Section 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8) or 408(d)(3) of the Code, or
(b) A direct transfer from another individual retirement account (as defined
in Section 7701(a)(37) of the Code permitted under Article I of this
agreement.
2. INVESTMENTS. The Depositor shall direct the Custodian with respect to the
investment of all contributions. However, such direction shall be limited to
the purchase of shares of the Fund or Funds. Investments received without
direction may be returned or held uninvested without liability for loss of
income, interest or appreciation while directions are obtained. All
dividends and capital gain distributions received on shares held in the
Account shall be reinvested in additional shares of the issuing Fund(s).
3. CASH CONTRIBUTIONS. The Custodian shall not accept any contribution or
direct transfer from another individual retirement account qualified under
Section 408 of the Code unless it is made in cash (or its equivalent).
4. NOTICES AND VOTING. The Custodian shall deliver to the Depositor (or, in the
event of the Depositor's death, the Depositor's designated beneficiary) all
shareholder notices and reports, prospectuses, financial statements, proxy
material and other materials as they are received
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from the Fund(s). The Custodian shall vote at all shareholder meetings of the
Fund in accordance with written instructions of the Depositor which will be
secured by the Custodian.
5. FEES AND TAXES. The Custodian shall receive, and the Depositor hereby agrees
to pay, such reasonable compensation for its services ("fees ") as set forth
in the currently effective Disclosure Statement for the Account. The
Custodian may substitute a different fee schedule at any time upon 30 days'
notice in writing to the Depositor. Such fees may be paid by the Depositor;
however, they shall constitute a charge upon the assets of the Account until
paid. Unless otherwise paid, the Custodian shall have the right to redeem
sufficient Fund shares in the Account and to apply the proceeds to the
payment of its annual fees. Any income taxes or other taxes of any kind that
may be levied or assessed against the Account may be similarly paid from the
assets of the Account and shall not be an obligation of the Custodian.
6. CUSTODIAN'S DUTIES AND OBLIGATIONS. If FPS Services, Inc. is not the
Custodian, FPS Services, Inc. serves as the Plan Administrator for the
Custodian and in such capacity is responsible for all record keeping,
applicable tax reporting and fee collection in connection with IRA accounts.
FPS Services, Inc. also serves as transfer agent for the Fund(s). The
Custodian shall be under no duty whatsoever except such duties as are
specifically set forth in this Agreement, and, notwithstanding Article IV of
this Agreement, shall be under no duty to make any distribution from the
Account in the absence of specific directions from the Depositor or, upon
the death of the Depositor, the Depositor's designated beneficiary, whether
or not the Depositor has attained age 70 1/2or is deceased. Neither the
Custodian, the Plan Administrator, the Sponsor, the Fund(s) nor any of their
respective affiliates shall have any duty:
(a) To ascertain whether a rollover contribution described in Article I of
this Agreement or a direct transfer from another IRA is properly made in
accordance with applicable provisions of the Code or any other plan, IRA
or other retirement arrangement;
(b) To ascertain whether any distribution is sufficient for purposes of the
rules described in Article IV of this Agreement;
(c) To make distributions in the form of an annuity contract under Article
IV of this Agreement;
(d) To confirm the existence of a disability;
(e) To review or make suggestions regarding the investment of the assets of
the Account; or
(f) To invest, reinvest or dispose of any assets held in the Account except
in accordance with Section 2 or 3 of this Article VIII. Whenever the
Depositor is responsible for any direction, notice, warranty,
representation, or instruction under this Agreement, the Custodian shall
be entitled to assume the truth of any statement made, or believed to
have been made, by the Depositor, and the Custodian shall be under no
duty of further inquiry and shall have no liability with respect to any
action taken in reliance upon the truth of such statement.
7. DEPOSITOR'S WARRANTIES. The Depositor hereby agrees that it is not
intended that any fiduciary duties be conferred (by implication or
otherwise) upon the Custodian under this Agreement, and he or she shall
look solely to the assets of his or her Account for the payment of any
benefits to which he or she may become entitled under this Agreement.
The Depositor hereby acknowledges his or her understanding
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that taxes and penalties may be imposed under the Code for:
(a) Excess contributions;
(b) Premature distributions made before the Depositor dies, becomes disabled
(as defined in Section 72(m) of the Code) or reaches age 59 1/2, except
in the case of:
(i) Rollovers or transfers to other IRAs or rollovers to eligible
retirement plans in accordance with applicable provisions of the
Code and related regulations; or
(ii) A series of substantially equal periodic payments (as defined in
Section 72(t) of the Code);
(c) Distributions which are less than the minimum amounts required under
Sections 401(a)(9), 408(a)(6) and 4974 of the Code; and
(d) Prohibited transactions under Section 4975 of the Code.
Any and all such taxes and penalties shall be paid by the Depositor.
8. AMENDMENT. The Depositor hereby delegates to the Custodian the power to
amend this Agreement, and the Depositor shall be deemed to have consented to
any such amendment. The Custodian shall adopt amendments only in accordance
with directions made by the Sponsor. The Depositor shall be furnished a copy
of any such amendment. Notwithstanding the foregoing, the Custodian may not
amend this Agreement in such manner as to permit or cause assets of the
Account to be diverted to purposes other than for the exclusive benefit of
the Depositor and his or her beneficiaries, except to the extent that any
such amendment is necessary to conform this Agreement to any applicable law,
governmental regulation or ruling or to satisfy the requirements of the
Code.
9. TERMINATION. This Agreement shall terminate upon the complete distribution
of the Account to the Depositor or his or her beneficiaries or to another
IRA. The Custodian shall have the right to terminate this Account upon 30
days' notice in writing to the Depositor or (in the event of his or her
death) to the Depositor's beneficiaries. In such event and upon expiration
of such period, the Custodian shall distribute the Account:
(a) To such other IRA as the Depositor (or his or her beneficiaries)
shall designate;
(b) In the absence of such direction, to the Depositor; or
(c) In the event of the Depositor's death, to the beneficiaries, as
their interests shall appear.
10. RESIGNATION. The Custodian may resign at any time, upon 30 days' notice in
writing to the Depositor, and may be removed by the Depositor or the Sponsor
at any time, upon 30 days' notice in writing to the Custodian. Upon such
resignation or removal, the Depositor or the Sponsor (as appropriate) shall
appoint a qualified successor custodian which shall be a bank, within the
meaning of Section 408(n) of the Code, or another person who has satisfied
the requirements of Section 408(a)(2) of the Code and related regulations.
11. SUCCESSOR CUSTODIAN. Upon receipt by the Custodian of written acceptance of
such appointment by the successor custodian, the Custodian shall transfer
and pay over to the successor custodian the assets of the Account and all
records pertaining thereto. The Custodian is authorized, however, to reserve
such sum of money or assets as it may deem advisable for payment of all of
its fees, compensation, costs and expenses, or for payment of any other
liabilities constituting a
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charge on or against the assets of the Account or on or against the
Custodian with respect to the Account; and any balance of such reserve
remaining after the payment of all such items shall be paid over to the
successor custodian. If assets are retained in accordance with this Section
11, they may be disposed of in accordance with the provisions of Section 5
of this Article VIII. The successor custodian shall hold the assets paid
over to it under terms which are consistent with Section 408 of the Code and
related regulations.
12. FAILURE OF APPOINTMENT. It shall be a condition of the removal of the
Custodian that the Depositor or the Sponsor shall have appointed a qualified
successor custodian. In the event of the resignation of the Custodian and
the failure to appoint a qualified successor custodian, the Custodian may
itself appoint such successor, unless it elects to terminate this Agreement
pursuant to Section 9 of this Article VIII, and the costs of such
appointment shall be treated in the same manner as fees under Section 5 of
this Article VIII.
13. REQUIRED APPOINTMENT OF SUCCESSOR CUSTODIAN. The Depositor may remove the
Custodian and appoint a successor custodian upon notification by the
Commissioner of Internal Revenue Service that the Custodian has failed to
comply with the applicable requirements of Section 1.401-12(n) or applicable
successor provisions of the Income Tax Regulations or is not keeping such
records, making such returns or rendering such statements as are required by
applicable Treasury Regulations or by forms prescribed by the Internal
Revenue Service.
14. BENEFICIARIES. By separate written document attached as the Beneficiary
Designation to this Agreement, the Depositor may designate a method for
payment of benefits in accordance with Article IV of this Agreement and
designate a beneficiary for the receipt of such benefits in the event of the
Depositor's death. Should the Depositor die without an effective designation
of method of distribution or beneficiary, the assets of the Account shall be
distributed to the surviving spouse in such manner as the Depositor's spouse
shall designate under Article IV of this Agreement. In the absence of a
surviving spouse or surviving designated beneficiary, the assets of the
Account shall be distributed to the Depositor's estate in a lump sum.
15. INDEMNIFICATION. The Depositor agrees to indemnify and hold harmless the
Custodian, the Plan Administrator (if applicable), the Sponsor, the Fund(s)
and their respective affiliates, agents, employees, successors and assigns,
from and against any claim or liability arising in connection with the
Depositor's Account, except in the case of gross negligence or willful
misconduct.
16. GOVERNING LAWS. Except to the extent preempted by the Code or other
applicable federal law, this Agreement shall be governed by and construed
and administered under the laws of the Commonwealth of Pennsylvania.
17. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed and
enforced as if such provision had not been included.
18. CAPTIONS. The captions contained in this Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge
or describe the scope or intent of this Agreement nor in any way shall
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affect the construction of any provision of this Agreement.
19. DEFINITIONS. For purposes of this Article VIII, "Sponsor" means the
institution identified as such in the IRA Application; and "Fund" or "Funds"
means the regulated investment company or companies, the investment advisor
to which, or the principal underwriter of which, is the Sponsor.
INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-A is a model Custodial account agreement that meets the requirements
of Section 408(a) and has been automatically approved by the IRS. An individual
retirement account (IRA) is established after the form is fully executed by both
the individual (Depositor) and the Custodian and must be completed no later than
the due date of the individual's income tax return for the tax year (without
regard to extensions). This account must be created in the United States for the
exclusive benefit of the Depositor or his or her beneficiaries.
Individuals may rely on regulations for Tax Reform Act of 1986 to the extent
specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get from
your Custodian, get Pub. 590, Individual Retirement Accounts (IRAs).
DEFINITIONS
Custodian: The Custodian must be a bank or savings and loan association, as
defined in Section 408(n), or other person who has the approval of the IRS to
act as Custodian.
Depositor: The Depositor is the person who establishes the Custodial account.
IDENTIFYING NUMBER
The Depositor's social security number will serve as the identification number
of his or her IRA. An employer identification number is required only for an IRA
for which a return is filed to report unrelated business taxable income. An
employer identification number is required for a common fund created for IRAs.
IRA FOR NON-WORKING SPOUSE
Form 5305-A may be used to establish the IRA Custodial account for a nonworking
spouse.
Contributions to an IRA Custodial account for a nonworking spouse must be made
to a separate IRA Custodial account established by the nonworking spouse.
SPECIFIC INSTRUCTIONS
ARTICLE IV: Distributions made under this Article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of Section 408(a)(6) have been met.
ARTICLE VIII: Article VIII and any that follow it may incorporate additional
provisions that are agreed upon by the Depositor and Custodian to complete the
Agreement. They may include, for example,
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definitions, investment powers, voting rights, exculpatory provisions, amendment
and termination, removal of Custodian, Custodian's fees, State law requirements,
beginning date of distributions, accepting only cash, treatment of excess
contributions, prohibited transactions with the Depositor, etc. Use additional
pages if necessary and attach them to this form.
REQUESTING DISTRIBUTION
A request for a distribution from the IRA must be submitted in writing to:
FPS Services, Inc.
Retirement Plans -- Liquidation Desk
3200 Horizon Drive
King of Prussia, PA 19406-0903
If a request does not contain all necessary information, FPS Services, Inc. will
notify the Depositor in writing as to its incompleteness, requesting the
additional information, including signature guarantee if required by the Fund.
When the distribution instructions are in proper order, only then will the
shares be redeemed and the monies distributed.
NOTE: FORM 5305-A MAY BE REPRODUCED AND
REDUCED IN SIZE FOR ADOPTION TO PASSBOOK PURPOSES.
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