THIRD AVENUE TRUST, 485APOS, 1998-12-18

THIRD AVENUE TRUST
485APOS, 1998-12-18

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON DECEMBER 18, 1998
REGISTRATION NOS.: 333-20891
811-8039

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20546

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ 7 ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
------
Amendment No. [ 8 ]
-----

THIRD AVENUE TRUST
(Exact name of Registrant as Specified in Charter)

767 THIRD AVENUE, NEW YORK, NEW YORK 10017-2023
(Address of Principal Executive Offices including Zip Code)

(TOLL-FREE) (800)443-1021, (212)888-5222
(Registrant's Telephone Number, including Area Code)

Please send copies of communications to:

David M. Barse Richard T. Prins, Esq.
767 Third Avenue Skadden, Arps, Slate, Meagher & Flom LLP
New York, New York 10017-2023 919 Third Avenue, New York, NY 10022
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

[ X ] 60 DAYS AFTER FILING (OR A LATER DATE DETERMINED BY REGISTRANT),
pursuant to paragragh (A)(1) of Rule 485.

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[LOGO]

THIRD AVENUE VALUE FUND

THIRD AVENUE SMALL-CAP VALUE FUND

THIRD AVENUE HIGH YIELD FUND

THIRD AVENUE REAL ESTATE VALUE FUND

PROSPECTUS
===================
FEBRUARY 28, 1999

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

<PAGE>

TABLE OF CONTENTS

ABOUT THE FUNDS 1

THIRD AVENUE VALUE FUND
Objective and Approach 2
Past Performance
Main Risks
Your Expenses

THIRD AVENUE SMALL-CAP VALUE FUND 4
Objective and Approach
Past Performance
Main Risks
Your Expenses

THIRD AVENUE HIGH YIELD FUND 6
Objective and Approach
Past Performance
Main Risks
Your Expenses

THIRD AVENUE REAL ESTATE VALUE FUND 8
Objective and Approach
Past Performance
Main Risks
Your Expenses

MANAGEMENT OF THE FUNDS 10

HOW TO PURCHASE SHARES 12

HOW TO REDEEM SHARES 16

HOW TO EXCHANGE SHARES 18

DIVIDENDS, CAPITAL GAIN DISTRIBUTION & TAXES 19

SHAREHOLDER SERVICES 20

FINANCIAL HIGHLIGHTS 21

<PAGE>

ABOUT THE FUNDS
================================================================================
INVESTMENT PHILOSOPHY OF THIRD AVENUE FUNDS

The Funds adhere to a strict value discipline in selecting securities. This
means seeking securities whose prices are low in relation to what the Funds'
Adviser believes is the true value of the securities. The Funds' Adviser
believes this both lowers risk and increases appreciation potential. The Funds
identify investment opportunities through intensive research of individual
companies and ignore general stock market conditions and other macro factors.
For these reasons, the Funds may seek investments in the securities of companies
in industries that are temporarily depressed. The Funds follow a strategy of
"buy and hold." The Funds will generally sell an investment only when there has
been a fundamental change in the business or capital structure of the company
which significantly affects the investment's inherent value.

The Funds are all non-diversified. This generally means that the Funds can have
fewer investments than diversified mutual funds of comparable size.
Non-diversified funds can be more volatile than diversified funds. When the
Funds' Adviser believes that 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. This does not constitute a change in such
Fund's investment objective, but could prevent it from achieving its objective.

WHO MAY WANT TO INVEST?

Third Avenue Funds may be appropriate for investors seeking long-term capital
appreciation.

Third Avenue High Yield Fund may also be appropriate for investors seeking
current income.

<PAGE>

THIRD AVENUE VALUE FUND
- --------------------------------------------------------------------------------

Objective and Approach

Third Avenue Value Fund seeks long-term capital appreciation. The Fund seeks to
achieve its objective mainly by acquiring common stocks of well-financed
companies (meaning companies without significant debt in comparison to their
cash resources) at a substantial discount to what the Adviser believes is their
true value. The Fund also seeks to acquire senior securities, such as preferred
stocks and debt instruments, that it believes are undervalued. Acquisitions of
these senior securities will generally be limited to those providing (1)
protection against the issuer taking certain actions which could reduce the
value of the security and (2) above-average current yields, yields to events, or
yields to maturity. The mix of the Fund's investments at any time will depend on
the areas the Adviser believes hold the most value.

FUND CODES

Ticker TAVFX
CUSIP 884116104
- --------------------------------------------------------------------------------

PAST PERFORMANCE

The tables below show the annual returns of Third Avenue Value Fund and compare
those returns to a relevant broad measure of market performance. This
information gives an indication of the risks involved in investing in Third
Avenue Value Fund by showing how performance has changed from year to year. All
figures assume reinvestment of dividends and distributions. As with all mutual
funds, past performance does not indicate future results.

[The following table represents a bar chart in the printed report.]

1991 34.41%
1992 21.29%
1993 23.66%
1994 -1.46%
1995 31.73%
1996 21.92%
1997 23.87%

During the 7-year period shown in the bar chart, the highest return for a
quarter was 26.9% (quarter ending March 31, 1991) and the lowest return for a
quarter was -5.03% (quarter ending December 31, 1997).

================================================================================
Average Annual Total Returns Past One Year Past 5 Years Since Inception
for the periods ending
12/31/97

Third Avenue Value Fund 23.87% 19.36% 22.53%

S & P 500
================================================================================

2
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Main Risks

Prices of securities (and stocks in particular) have historically fluctuated.
The value of the Fund will similarly fluctuate and you could lose money. The
Fund frequently finds value in industries that are temporarily depressed. The
prices of securities in these industries may tend to go down more than those of
companies in other industries. The Fund also invests in companies with smaller
capitalizations, whose securities tend to be more volatile than those of larger
companies. Since the Fund is not limited to investing in stocks, the Fund may
own significant non-equity instruments in a rising stock market, thereby
producing smaller gains than a Fund invested solely in stocks.
- --------------------------------------------------------------------------------

YOUR EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

Annual Operating Expenses (expenses that are deducted from Fund assets):
Management Fees 0.90%
Other Expenses 0.18%
- ----------------------------------------------------------
Total Fund Operating Expenses 1.08%

The following example is intended to help you compare the cost of investing in
Third Avenue Value Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:

Year 1 Year 3 Year 5 Year 10
$111 $345 $598 $1,323

<PAGE>

THIRD AVENUE SMALL-CAP VALUE FUND
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Objective and Approach

Third Avenue Small-Cap Value Fund seeks long-term capital appreciation. The Fund
seeks to achieve its objective by acquiring common stocks of well-financed small
companies at a substantial discount to what the Adviser believes is their true
value. A small company is one whose outstanding shares have a market value of
less than $1 billion at the time of the Fund's investment. The Fund intends to
invest at least 65% of its total assets in the equity securities of small
companies.
- --------------------------------------------------------------------------------

FUND CODES

Ticker TASCX
CUSIP 884116203

PAST PERFORMANCE

The tables below show the annual return of Third Avenue Small-Cap Value Fund for
its only full calendar year of performance and compares the return to a relevant
broad measure of market performance. You should be aware that the performance of
Third Avenue Small-Cap Value Fund will fluctuate from year to year and may or
may not perform as well as a comparable broad market index. All figures assume
dividend reinvestment. Past performance does not indicate future results.

<PAGE>

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MAIN RISKS

Prices of stocks have historically fluctuated. The value of the Fund will
similarly fluctuate and you could lose money. The Fund invests in smaller
companies, whose securities tend to be more volatile than those of larger
companies. The markets for these securities are also less liquid than those for
larger companies. This can adversely affect the prices at which the Fund can
purchase and sell these securities. The Fund frequently finds value in
industries that are temporarily depressed. The prices of securities in these
industries may tend to go down more than those of companies in other industries.
- --------------------------------------------------------------------------------

YOUR EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

Annual Operating Expenses (expenses that are deducted from Fund assets)
Management Fees 0.90%
Other Expenses 0.39%
- -------------------------------------------------
Total Fund Operating Expenses 1.29%

The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time periods indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the Fund's actual expenses and returns,
either past or future.

Year 1 Year 3 Year 5 Year 10
$132 $411 $712 $1,564

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THIRD AVENUE HIGH YIELD FUND
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Objective and Approach

Third Avenue High Yield Fund seeks to maximize total return through a
combination of income and capital appreciation. The Fund seeks to achieve its
objective by investing at least 65% of its total assets in bonds and preferred
stocks of companies whose securities are rated below investment grade
(and comparable unrated securities) at the time of the Fund's investment.
Securities are rated below investment grade if they are rated below Baa3 by
Moody's Investors Service, Inc. and below BBB- by Standard & Poor's Ratings
Group. Such securities are commonly referred to as "junk bonds". The Fund will
acquire securities of companies whose capital structures, in the opinion of the
Adviser, have a market value priced below their private market values. The Fund
will also invest in bonds and preferred stocks that are convertible into the
equity of the issuer. Convertible securities have general characteristics
similar to both fixed income and equity securities and provide the possibility
of capital appreciation should the underlying common stock increase in value.
- --------------------------------------------------------------------------------

FUND CODES

Ticker TAHYX
CUSIP 884116302

PAST PERFORMANCE

Past performance information is not provided for Third Avenue High Yield Fund
because it began operations on February 12, 1998 and thus does not have
performance information available for a full calendar year. You should be aware
that fund performance will fluctuate and may or may not perform as well as a
comparable broad market index. As with all mutual funds, past performance does
not indicate future results.

<PAGE>

- --------------------------------------------------------------------------------
MAIN RISKS

The market value of debt securities tends to go up when interest rates go down
and to go down when interest rates go up. These changes tend to be larger for
securities with longer maturities. For the period from inception to October 31,
1998, the average maturity of the Fund's securities ranged from ___ years to ___
years. The prices and yields of junk bonds are more volatile than those of
higher-rated bonds of the same maturities. Investors are more concerned about
the ability of junk bond issuers to pay their obligations. Under deteriorating
economic conditions or rising interest rates, the ability of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken significantly than that of issuers of higher-rated securities. Thus, the
market values of junk bonds tend to be more sensitive to economic conditions and
individual corporate developments than those of higher-rated securities. In
addition, there is less liquidity in the secondary market for these bonds than
that for higher-rated bonds. Convertible securities will also fluctuate with the
value of the security into which it is convertible. Thus, a downturn in equity
markets can cause the price of these securities to drop even when the prices of
junk bonds otherwise would not go down. Although the Fund will receive income
from its investments, the value of its investments can go down and you can lose
money.
- --------------------------------------------------------------------------------

YOUR EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

Shareholder Fees (fees paid directly from your investment):
Redemption Fee (as a percentage of amount redeemed) 1.00%*
Exchange Fee 1.00%*

Annual Operating Expenses (expenses that are deducted from Fund assets):
Management Fees 0.90%
Other Expenses 3.13%**
- --------------------------------------------------------------------------------
Total Fund Operating Expenses 4.03%**

* This fee is charged only on redemptions or exchanges of shares held less
than one year.

** These expenses do not reflect reimbursements by the Adviser. The Adviser
reimbursed the Fund for all expenses incurred by the Fund in excess of 1.9%
of Fund assets. The Adviser expects to continue to reimburse the Fund for
these expenses for the forseeable future. Either the Fund or the Adviser can
terminate this arrangement at any time.

The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time periods indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.

Year 1 Year 3 Year 5 Year 10
$413 $1,250 $2,102 $4,296

You would pay the following expenses for Third Avenue High Yield Fund if you did
not redeem your shares:

Year 1 Year 3 Year 5 Year 10
$413 $1,250 $2,102 $4,296

<PAGE>

THIRD AVENUE REAL ESTATE VALUE FUND
- --------------------------------------------------------------------------------

OBJECTIVE AND APPROACH

Third Avenue Real Estate Value Fund seeks long-term capital appreciation. The
Fund seeks to achieve its objective by investing at least 65% of its total
assets in equity and debt securities of well-financed companies in the real
estate industry or related industries or in companies which own significant real
estate assets at the time of investment. The Fund seeks to acquire these stocks
at a substantial discount to the Adviser's estimate of the issuing company's
private market value or liquidation value.

o A company is considered to be in the real estate industry if at least 50% of
its gross revenues or net profits at the time of investment come from (a)
construction, ownership, management, operation, financing, refinancing, sales,
leasing, development or rehabilitation of real estate; or (b) extraction of
timber or minerals from real estate.

o A company is considered to be in a related industry if at least 50% of its
gross revenues or net profits at the time of investment are derived from
providing goods (e.g., building materials and/or supplies) or services (e.g.,
consulting, legal or insurance) to real estate companies.

o A company is considered to own significant real estate assets if at least
50% of the fair market value of its assets at the time of investment is
attributable to one or more of the following: (a) real estate owned or leased by
the company as lessor or as lessee; (b) timber or minerals on such real estate;
or (c) the discounted value of the stream of fees or revenues to be derived from
the management or operation of real estate or the rights to extract timber or
minerals from real estate.

Examples of companies that might qualify under one of these categories include:

o Real estate development companies (including commercial/industrial developers
and homebuilders);
o Real estate investment trusts (REITs) and master limited partnerships;
o Hotel and hotel management companies;
o Real estate brokerage companies and/or management companies;
o Financial institutions that make or service mortgage loans;
o Title insurance companies;
o Lumber, paper, forest product, timber, mining and oil companies;
o Companies with significant real estate
holdings such as supermarkets, restaurant chains and retail chains; and
o Manufacturers or distributors of construction materials and/or building
supplies.
- --------------------------------------------------------------------------------

FUND CODES

Ticker TAREZ
CUSIP 884116401

PAST PERFORMANCE

Past performance information is not provided for Third Avenue Real Estate Value
Fund because it began operations on September 17, 1998 and thus does not have
performance information available for a full calendar year. You should be aware
that fund performance will fluctuate and may or may not perform as well as a
comparable broad market index. As with all mutual funds, past performance does
not indicate future results.

8
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MAIN RISKS

Prices of stocks have historically fluctuated. The value of the Fund will
similarly fluctuate and you could lose money. In addition to general market
conditions, the value of the Fund will be affected by the strength of the real
estate market. Factors that could affect the value of real estate include the
following:

o overbuilding and increased competition;
o increases in property taxes and operating expenses;
o changes in zoning laws;
o casualty or condemnation losses; variations in rental income;
o changes in neighborhood values; and
o the appeal of properties to tenants and increases in interest rates.

Prices of commodities such as timber have historically been very volatile.
Reductions in commodity prices will likely cause the prices of companies in
those industries to drop.
- --------------------------------------------------------------------------------

YOUR EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.

Shareholder Fees (fees paid directly from your investment):
Redemption Fee (as a percentage of amount redeemed) 1.00%*
Exchange Fee 1.00%*

Annual Operating Expenses (expenses that are deducted from Fund assets):
Management Fees 0.90%
Other Expenses 2.37%**
- --------------------------------------------------------------
Total Fund Operating Expenses 3.27%**

* This fee is charged only on redemptions or exchanges of shares held less
than one year.

Year 1 Year 3
$335 $1,022

You would pay the following expenses for Third Avenue Real Estate Value Fund if
you did not redeem your shares:
Year 1 Year 3
$335 $1,022

9
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MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER

EQSF Advisers, Inc. (the "Adviser"), 767 Third Avenue, New York, NY 10017-2023,
is the investment adviser for each of the Funds. The Adviser manages each Fund's
investments, provides various administrative services and supervises the Funds'
daily business affairs, subject to the authority of Third Avenue Trust's (the
"Trust") Board of Trustees. The Adviser has been an investment adviser for
mutual funds since its organization in 1986 and is controlled by Martin J.
Whitman.

MARTIN J. WHITMAN

Mr. Whitman, the Chairman and Chief Executive Officer of the Trust and its
Adviser, is the portfolio manager of Third Avenue Value Fund and the co-manager
of Third Avenue Small-Cap Value Fund and Third Avenue Real Estate Value Fund
since each Fund's inception. 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, currently including Danielson Holding Corporation,
an insurance holding company, Nabors Industries, Inc., an international oil
drilling contractor, and Tejon Ranch Company, an agricultural and land
management company.

CURTIS JENSEN

Curtis Jensen has served as co-manager of Third Avenue Small-Cap Value Fund
since its 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, and was an investment banker with Manufacturers Trust Company and
Enright & Co.

MARGARET PATEL

Margaret Patel has served as the portfolio manager of Third Avenue High Yield
Fund since its inception. From 1995 to 1997, Ms. Patel was a portfolio manager
of several mutual funds which invested in high yield, convertible and government
securities at Northstar Investment Management Corp. Ms. Patel was a portfolio
manager of several mutual funds with investments in high yield, convertibles,
governments, and municipals at Boston Security Counsellors, Inc., the investment
advisor for the Advantage Funds, from 1988 until their acquisition by Northstar
in 1995. Ms. Patel also managed mutual funds for American Capital Asset
Management and Dreyfus Management.

<PAGE>

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MICHAEL WINER
Michael Winer has served as the co-manager of Third Avenue Real Estate Value
Fund since its inception. Since 1994, Mr. Winer has been a managing director of
M.J. Whitman Senior Debt Corp. and a senior real estate analyst for M.J.
Whitman, Inc. From 1991 to 1994, Mr. Winer held senior-level positions with two
financial institutions where he directed the workout, collection and liquidation
of distressed real estate loan and asset portfolios. From 1986 to 1991, Mr.
Winer was the chief financial officer, director and co-owner of a southern
California real estate development firm specializing in the development,
construction and management of commercial properties. From 1980 to 1986, Mr.
Winer served as controller and financial officer for two large Southern
California real estate development firms. From 1978 to 1980, Mr. Winer was a CPA
and senior auditor with Touche Ross & Co.

ADVISORY FEES

Each of Third Avenue Value Fund and Third Avenue Small-Cap Value Fund paid the
Adviser a fee equal to .90% of its average daily net assets for the fiscal year
ended October 31, 1998. Each of Third Avenue High Yield Fund and Third Avenue
Real Estate Value Fund has agreed to pay the Adviser an annual rate of .90% of
its average daily net assets.

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HOW TO PURCHASE SHARES
================================================================================

PRICE OF SHARES

The price you will pay for a share of a Fund is the Fund's net asset value per
share. Net asset value per share is calculated as of the close of regular
trading on the New York Stock Exchange, normally 4:00 p.m., Eastern time. 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 outstanding shares of the Fund. Your order will be
priced at the next net asset value calculated following receipt of your order. A
Fund's investments are generally valued at market value. Certain short-term
securities are valued based on amortized cost. 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. Foreign securities
held by a Fund generally trade on foreign markets which may be open on days when
the New York Stock Exchange is closed. This means that the Fund's net asset
value can change on a day that you cannot purchase or redeem your shares.

BUSINESS HOURS

The Funds are open for business each day the New York Stock Exchange is open.
The New York Stock Exchange and the Funds will be closed on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.

PURCHASING SHARES

Shares of a Fund can be purchased either directly from the Fund or through your
broker-dealer or investment adviser.

To purchase shares directly from a Fund, you need to complete and sign an
account application and send it to the Funds' transfer agent:

First Data Investor Services Group
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903

To purchase shares from a broker-dealer, it must be a member in good standing
with the NASD and have entered into a selling agreement with the Funds'
distributor, M.J. Whitman, Inc. Investment advisers must be registered under
federal securities laws. You may or may not need to complete and sign an account
application when purchasing through a broker-dealer or investment adviser,
depending on its arrangements with the Funds. The Funds reserve the right to
reject any purchase order.

<PAGE>

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MINIMUM INVESTMENTS

The minimum initial investment for each Fund is $1,000 for a regular account and
$500 for an Individual Retirement Account (IRA). Additional investments must be
at least $1,000 for a regular account and $200 for an IRA, unless you use the
Funds' Automatic Investment Plan. Under this plan, 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.
Transactions in Fund shares made through your 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. 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, M.J. Whitman, Inc., the Adviser or any
affiliate of the Adviser (including their spouses and children under age 21).

PAYING FOR SHARES

When purchasing shares directly from a Fund, you may pay by check or money order
payable to "Third Avenue Funds." The Funds will accept checks 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, First Data Investor Services Group. The Funds will not
accept a check endorsed over by a third-party. You will be charged (minimum of
$20) for any check used for the purchase of Fund shares that is returned unpaid.
If you purchase Fund shares by check or money order, you may not receive
redemption proceeds until there is a reasonable belief that the check has
cleared, which may take up to fifteen calendar days after payment has been
received.

If you purchase shares through a broker-dealer or investment adviser, the
broker-dealer or investment adviser is responsible for forwarding payment or
arranging for payment promptly. The Funds reserve the right to cancel any
purchase order for which payment has not been received by the third business day
following receipt of the purchase order. Telephone purchase orders will only be
accepted from financial institutions which have been approved previously by the
Funds or the Adviser.

13
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PAYING FOR SHARES BY MAIL:

INITIAL PAYMENTS

Initial payments, together with your account application, should be sent to:

Third Avenue Funds
c/o First Data Investor
Services Group, Inc.
3200 Horizon Dr.
P.O. Box 61503
King of Prussia, PA 19406-0903

ADDITIONAL PAYMENTS

Additional payments, together with the payment stub from your account statement,
should be sent to:

Third Avenue Funds
c/o First Data Investor
Services Group, Inc.
P.O. Box 412797
Kansas City, MO 64141-2797

PAYING FOR SHARES BY WIRE:

Prior to sending wire instructions, notify First Data Investor Services Group at
(800) 443-1021, Option 2 to insure proper credit to your account.

Direct your bank to wire funds as follows:
UMB Bank KC NA
Kansas City, MO
ABA #: 10-10-00695
For Investor Services Group
#: 98-7037-071-9

For further credit to: Third Avenue Value Fund, Third Avenue Small-Cap Value
Fund, Third Avenue High Yield Fund or Third Avenue Real Estate 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.
- --------------------------------------------------------------------------------
14
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INDIVIDUAL RETIREMENT ACCOUNTS

The Funds' IRA application and additional forms required may be obtained by
contacting Investor Services Group at (800) 443-1021, Option 1. 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

If you are self-employed, you may purchase shares of the Funds through
tax-deductible contributions to retirement plans for self-employed persons,
known as Keogh 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.

<PAGE>

HOW TO REDEEM SHARES
================================================================================
GENERAL

You may redeem your shares on any day during which the New York Stock Exchange
is open, either directly from the Fund or through your broker-dealer or
investment adviser. Fund shares will be redeemed at the net asset value next
calculated after your order is accepted by the Fund's transfer agent. 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. You can redeem less than
all of your shares as long as you retain shares with a value of $500 ($200 for
IRAs).

BY MAIL

Send a written request, together with any share certificates that have been
issued, to:

First Data Investor Services Group
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

You may redeem shares by telephone by electing this service on the application.
You may thereafter redeem shares valued at not less than $1,000 on any business
day by calling First Data Investor Services Group at (800) 443-1021, Option 2,
prior to 4:00 p.m. Eastern time.

The Funds and First Data Investor Services Group will not be liable for
following telephone instructions reasonably believed to be genuine. In this
regard, First Data Investor Services Group will require personal identification
information before accepting a telephone redemption order.

Please contact your broker-dealer or investment adviser for information on how
to redeem your shares through them.

FEES

You will not be charged for redeeming your shares directly from the Funds,
except as described below under "Early Redemption Fee." The transfer agent
currently charges a wire fee of $9 for payment of redemption proceeds by federal
funds. The transfer agent will automatically deduct the wire fee from the
redemption proceeds. Broker-dealers handling redemption transactions generally
will charge a service fee.

REDEMPTION BY THE FUNDS

The Funds have the right to redeem your shares at current net asset value at any
time and without prior notice if and to the extent that such redemption is
necessary to reimburse the Funds for any loss sustained by reason of your
failure to make full payment for shares of the Funds you previously purchased or
subscribed for. The Funds may also redeem your shares in any account (other than
those in an IRA account), upon 30 days prior written notice, if they have 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 a
redemption request. You should note that 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 for the purchase.

WIRED PROCEEDS

If you request payment of redemption proceeds by wire transfer, payment will be
transmitted only on days that commercial banks

<PAGE>

- --------------------------------------------------------------------------------
are open for business and only to the bank and account previously authorized
by you on your application or separate signature guaranteed letter of
instruction. Neither the Funds nor the transfer agent 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 must be guaranteed by an "eligible guarantor institution", which
includes certain banks, brokers, dealers, credit unions, securities exchanges
and associations, clearing agencies and savings associations 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.

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 First Data Investor Services Group
toll free at (800) 443-1021, Option 2.

CHANGING INFORMATION

If you did not previously elect the Telephone Redemption Service on your
application, or wish to change any information previously provided to the Funds,
including the address of record or the bank to which redemption proceeds are to
be wired, you must submit a signature guaranteed letter of instruction.

SYSTEMATIC WITHDRAWAL PLAN

If you own or are purchasing shares of the Funds having a current value of at
least $10,000, you may participate in a Systematic Withdrawal Plan. This Plan
provides for automatic redemption of at least $100 monthly, quarterly,
semi-annually, or annually. You may establish a Systematic Withdrawal Plan by
sending a letter to First Data Investor Services Group. Notice of all changes
concerning the Systematic Withdrawal Plan must be received by First Data
Investor Services Group 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 First Data Investor Services Group at
(800) 443-1021, Option 2.

EARLY REDEMPTION FEE

If you redeem or exchange shares of Third Avenue High Yield Fund or Third Avenue
Real Estate Value Fund which you have held less than one year, a fee of 1% of
the current net asset value of the shares will be assessed and retained by the
Fund for the benefit of the remaining shareholders. This fee is intended to
encourage long-term investment in these Funds, to avoid transaction and other
expenses caused by early redemptions, and to facilitate portfolio management.
The fee is not a deferred sales charge, is not a commission paid to the Adviser,
and does not benefit the Adviser in any way. The Funds reserve the right to
modify the terms of or terminate this fee at any time. The fee applies to
redemptions from the Funds and exchanges to other Third Avenue Funds, but not to
dividend or capital gains distributions which have been automatically reinvested
in the Fund. The fee is applied to the shares being redeemed or exchanged in the
order in which they were purchased. For these purposes and without regard to the
shares actually redeemed, shares will be treated as redeemed as follows: first,
reinvestment shares; second, purchased shares held one year or more; and third,
purchased shares held for less than one year. No fee will be payable by
shareholders who are omnibus or similar account customers of certain
Fund-approved broker-dealers and other institutions.

17
<PAGE>

HOW TO EXCHANGE SHARES
================================================================================
INTER-FUND EXCHANGE PRIVILEGE

You may exchange shares of one Fund of the Trust for shares of another Fund, in
writing or by telephone, at net asset value without the payment of any fee or
charge, except that a fee will be applicable upon the exchange of shares of
Third Avenue High Yield Fund or Third Avenue Real Estate Value Fund that you
held for less than one year. See "How to Redeem Shares - Early Redemption Fee"
for details. An exchange is considered a sale of shares and may result in
capital gain or loss for federal and state income tax purposes. If you want to
use this exchange privilege, you should elect the service on your account
application.

If the transfer agent 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 your 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.

MONEY MARKET EXCHANGE PRIVILEGE

You 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.

If you want to use this exchange privilege, you should elect the service on your
account application. You should not order shares of the Money Market Fund
without first receiving the current prospectus for the Money Market Fund. By
giving exchange instructions, you will be deemed to have represented that you
have received the current prospectus for the Money Market Fund. Exchanges of
Fund shares are subject to the other requirements of the Money Market Fund into
which the exchange is made.

The Funds reserve the right to reject any exchange request or otherwise modify,
restrict or terminate the exchange privilege at any time upon at least 60 days
prior written notice.

<PAGE>

DIVIDENDS, CAPITAL GAIN DISTRIBUTION & TAXES
================================================================================

The Funds expect to pay dividends from their net investment income and to
distribute any realized net capital gains. Each Fund will make these
distributions annually, with Third Avenue High Yield Fund also making them
quarterly.

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 are taxable to shareholders as a
long-term capital gain. Short-term gains apply to assets held for up to one year
and long-term gains apply to assets held for more than one year. Those gains are
currently taxed at different rates.

The Funds will notify you of the tax status of dividends and capital gain
distributions after the end of each calendar year. The tax status of
distributions will be the same no matter how long you have held your shares.

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.

You will generally recognize taxable gain or loss on a redemption of shares in
an amount equal to the difference between the redemption proceeds and your basis
in the shares redeemed. This gain or loss will generally be capital 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. You
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
and be subject to federal income tax.

You should consult your tax advisers as to the federal, state and local tax
consequences to you of ownership of shares of the Funds.

DISTRIBUTION OPTIONS

You should specify on your account application how you 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.
19

<PAGE>

SHAREHOLDER SERVICES
================================================================================

Each Fund provides you with helpful services and information about your account.
o A statement after every transaction.
o An annual account statement reflecting all transactions for the year.
o Tax information mailed by January 31 of each year, a copy of which will also
be filed with the Internal Revenue Service.
o The financial statements of the Fund with a summary of portfolio composition
and performance, mailed at least twice a year.
o The Funds intend to continue to mail to shareholders quarterly reports
containing the Portfolio Managers' letters and a summary of portfolio
changes, composition and performance.
o 24 hour automatic voice response service.

The Funds pay for shareholder services but not for special services such as
requests for historical transcripts of accounts. The Funds' transfer agent,
First Data Investor Services Group, 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 First Data Investor Services Group Monday through Friday, 9:00 AM to
7:00 PM (Eastern time). Call toll free (800) 443-1021, Option 2 or (610)
239-4600.

THE FUNDS:

Questions about the Funds and literature requests 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, option 1 or (212) 888-5222.

TO REDEEM SHARES:

To redeem shares by telephone, call First Data Investor Services Group prior to
4:00 PM on the day you wish to redeem, toll free (800) 443-1021, Option 2, or
(610) 239-4600.

TRANSFER OF OWNERSHIP

You may transfer Fund shares or change the name or form in which the shares are
registered by writing to First Data Investor Services Group. 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>

FINANCIAL HIGHLIGHTS
================================================================================
The following sets forth information for each Fund regarding per share income
and capital changes for the last five fiscal years, for Third Avenue Value Fund,
and from each of the other Fund's commencement of operations to October 31,
1998, the end of each Funds' most recent fiscal year. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of dividends and distributions).
The Financial Highlights for the fiscal years included herein have been audited
by Pricewaterhouse Coopers LLP, independent accountants, whose unqualified
report on the October 31, 1998 financial statements appear in the Funds' Annual
Report to Shareholders. This information should be read in conjunction with the
financial statements and accompanying notes appearing in the 1998 Annual Report
to Shareholders which is incorporated by reference into the Funds' Statement of
Additional Information, which is available upon request.

THIRD AVENUE VALUE FUND: Selected Data and Ratios

<TABLE>
<CAPTION>
(Years Ended October 31,)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning Of Period $31.94 $24.26 $21.53 $18.01 $17.92
------ ------ ------ ------ ------
Income From Investment Operations:
Net investment income .48 .48 .53 .38 .29
Net gain (loss) on securities
(both realized and unrealized) (1.69) 7.92 2.76 3.53 .16
------ ------ ------ ------ ------
Total from Investment Operations (1.21) 8.40 3.29 3.91 .45
------ ------ ------ ------ ------

Less Distributions:
Dividends (from net investment income) (.41) (.57) (.41) (.25) (.22)
Distributions (from capital gains) (.16) (.15) (.15) (.14) (.14)
------ ------ ------ ------ ------
Total Distributions (.57) (.72) (.56) (.39) (.36)
------ ------ ------ ------ ------
Net Asset Value, End Of Period $30.16 $31.94 $24.26 $21.53 $18.01
====== ====== ====== ====== ======
Total Return (3.86%) 35.31% 15.55% 22.31% 2.56%

Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $1,540,711 $1,646,240 $566,847 $312,722 $187,192
Ratio of Expenses to Average
Net Assets 1.08% 1.13% 1.21% 1.25% 1.16%
Ratio of Net Income to Average
Net Assets 1.44% 2.10% 2.67% 2.24% 1.85%
Portfolio Turnover Rate 24% 10% 14% 15% 5%

</TABLE>
21

<PAGE>

FINANCIAL HIGHLIGHTS
================================================================================
THIRD AVENUE SMALL-CAP VALUE FUND: Selected Data And Ratios

<TABLE>
<CAPTION>
Period from
Year Ended April 1, 1997*
October 31, 1998 to October 31,1997

<S> <C> <C>
Net Asset Value, Beginning Of Period $12.37 $ 10.00
Income From Investment Operations:
Net investment income .08 .05
Net gain (loss) on securities
(both realized and unrealized) (1.73) 2.32
------ ----
Total from Investment Operations (1.65) 2.37
------ ----

Less Distributions:

Dividends from net investment income (.06) --
----- ------
Total Distributions (.06) --
------ ------
Net Asset Value, End Of Period $10.66 12.37
------ -----

Total Return (13.36)% 23.70%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $139,557 $107,256
Ratio of Expenses to Average Net Assets 1.28% 1.65%(2)
Ratio of Net Income to Average Net Assets 0.72% 1.44%(2)
Portfolio Turnover Rate 6% 7%(1)

(1) Not Annualized
(2) Annualized
* Commencement of investment operations

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THIRD AVENUE HIGH YIELD FUND: Selected Data And Ratios

Period from February 12, 1998*
to October 31, 1998

<S> <C>
Net Asset Value, Beginning Of Period $ 10.00
Income From Investment Operations:
Net investment income .34
Net gain on securities (both realized and unrealized) (1.56)
------
Total from Investment Operations (1.22)
------

Less Distributions:
Dividends from net investment income (.28)
Total Distributions (.28)
Net Asset Value, End Of Period $8.50
------

Total Return (12.39%)(1)

Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $7,691
Ratio of Expenses to Average Net Assets

Before expense reimbursement 3.99%(2)
After expense reimbursement 1.90%(2)
Ratio of Net Income to Average Net Assets
Before expense reimbursement 4.13%(2)
After expense reimbursement 6.22%(2)

Portfolio Turnover Rate 38%(1)

(1) Not Annualized
(2) Annualized
* Commencement of investment operations

23
</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS
================================================================================
THIRD AVENUE REAL ESTATE VALUE FUND: SELECTED DATA AND RATIOS

Period from September 17, 1998*
to October 31,1998

<S> <C>
Net Asset Value, Beginning Of Period $ 10.00

Income From Investment Operations:
Net investment income .02
Net gain on securities (both realized and unrealized) .26
---
Total from Investment Operations .28
---

Net Asset Value, End Of Period $10.28
------

Total Return 2.80%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $713
Ratio of Expenses to Average Net Assets

Before expense reimbursement 81.89%(2)
After expense reimbursement 1.90%(2)

Ratio of Net Income to Average Net Assets

Before expense reimbursement (77.33%)(2)
After expense reimbursement 2.66%(2)

Portfolio Turnover Rate 0%(1)

(1) Not Annualized
(2) Annualized (Note that annualized expense and income (loss) before
expense reimbursement are not necessarily indicative of expected
expenses due to the annualization of certain fixed expenses.)
* Commencement of investment operations

</TABLE>
24
<PAGE>

BOARD OF TRUSTEES

Phyllis W. Beck
Lucinda Franks
Gerald Hellerman
Marvin Moser
Myron M. Sheinfeld
Martin Shubik
Charles C. Walden
Barbara Whitman
Martin J. Whitman

OFFICERS
Martin J. Whitman
Chairman, Chief Executive Officer
David M. Barse
President, Chief Operating Officer
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
First Data Investor Services Group, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(610) 239-4600
(800) 443-1021 (toll-free)

CUSTODIANS

THIRD AVENUE VALUE FUND THIRD AVENUE SMALL-CAP VALUE FUND
North American Trust Company THIRD AVENUE HIGH YIELD FUND
225 Broadway THIRD AVENUE REAL ESTATE VALUE FUND
San Diego, CA 92101-4492 Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231

Third Avenue Funds
767 Third Avenue
New York, NY 10017-2023
Phone (212) 888-5222
Toll Free (800) 443-1021
www.thirdavenuefunds.com

<PAGE>

More information about the Funds is available in the Funds' reports to
shareholders and Statement of Additional Information (SAI). The Funds' annual
report contains a discussion of the market conditions and investment strategies
that significantly affected the Funds' performance during the last fiscal year.
The SAI is on file with the SEC and is incorporated by reference (is legally
considered part of this Prospectus).

You can obtain the SAI and the Funds' reports to shareholders without charge and
otherwise make inquiries to the Funds by writing or calling the Funds at 767
Third Avenue, New York, NY 10017-2023, (800) 443-1021 or (212) 888-5222.

Information about the Funds, including the SAI can be reviewed and copied at the
SEC's Public Reference Room in Washington D.C. (phone 1-800-SEC-0330 for
information). Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the SEC's Public Reference Section, Washington, D.C.
20549-6009. Reports and other information about the Funds are available on the
SEC's Internet Web sight (http://www.sec.gov)

SEC file number 811-8039

<PAGE>
(LOGO)

STATEMENT OF ADDITIONAL INFORMATION

DATED FEBRUARY 28, 1999

THIRD AVENUE TRUST

THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE FUND
THIRD AVENUE HIGH YIELD FUND
THIRD AVENUE REAL ESTATE VALUE FUND

This Statement of Additional Information (SAI) is not a Prospectus and should be
read together with the Funds' Prospectus dated February 28, 1999. The Funds'
Annual Report to Shareholders is incorporated by reference in this SAI (is
legally considered part of this SAI). A copy of the Prospectus and the Funds'
reports to shareholders may be obtained without charge by writing to the Funds
at 767 Third Avenue, New York, NY 10017-2023, or by calling the Funds at (800)
443-1021 (toll free) or (212) 888-5222.
<PAGE>

TABLE OF CONTENTS

GENERAL INFORMATION ........................................... 3
INVESTMENT POLICIES ........................................... 3
INVESTMENT RESTRICTIONS ....................................... 10
MANAGEMENT OF THE TRUST ....................................... 12
COMPENSATION TABLE ............................................ 16
PRINCIPAL STOCKHOLDERS ........................................ 16
INVESTMENT ADVISER ............................................ 18
INVESTMENT ADVISORY AGREEMENT ................................. 18
DISTRIBUTOR ................................................... 19
ADMINISTRATOR ................................................. 20
CUSTODIAN ..................................................... 20
TRANSFER AGENT ................................................ 20
INDEPENDENT ACCOUNTANTS ....................................... 20
PORTFOLIO TRADING PRACTICES ................................... 21
PURCHASE ORDERS ............................................... 23
REDEMPTION OF SHARES .......................................... 23
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES ............... 23
PERFORMANCE INFORMATION ....................................... 25
FINANCIAL STATEMENTS .......................................... 25
APPENDIX ...................................................... 26

- 2 -
<PAGE>

GENERAL INFORMATION

This Statement of Additional Information is in addition to and serves to expand
and supplement the current Prospectus of Third Avenue Trust (the "Trust"). The
Trust is an open-end, nondiversified management investment company which
currently consists of four separate investment series: THIRD AVENUE VALUE FUND,
THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE
REAL ESTATE VALUE FUND (each a "Fund" and collectively, the "Funds").

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

The Funds, and particularly THIRD AVENUE VALUE FUND, expect to invest in a broad
range of securities (subject to each Fund's fundamental investment objective).
The particular types of securities and the percentage of a Fund's assets
invested in each type, will vary depending on where the Adviser sees the most
value at the time of investment. The following is a description of the different
types of securities that the Adviser may invest in and certain of the risks
relating to those securities.

INVESTMENT IN EQUITY SECURITIES

In selecting common stocks, 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), where debt
servicel consumes a small part of such companies' cash flow.

(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.

1 "Debt Service" means the current annual required payment of interest and
principal to creditors.

In selecting preferred stocks, the Adviser will use its selection criteria for
either common stocks or debt securities, depending on the Adviser's
determination as to how the particular issue should be viewed, based, among
other things, upon the terms of the preferred stock and where it fits in the
issuer's capital structure.

- 3 -

<PAGE>

Although the Adviser does not pay attention to market factors in making
investment decisions, the Funds are, of course, subject to the vagaries of the
markets. In particular, small-cap stocks have less market liquidity and tend to
have more price volatility than larger capitalization stocks.

INVESTMENT IN DEBT SECURITIES

Each of THIRD AVENUE VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE
REAL ESTATE 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 for THIRD AVENUE VALUE FUND, the Adviser requires the following
characteristics:

1) Strong covenant protection, and

2) Yield to maturity at least 500 basis points above that of a comparable
credit.

In acquiring debt securities for THIRD AVENUE VALUE FUND, the Adviser generally
will look for covenants which protect holders of the debt issue from possible
adverse future events such as, for example, the addition of new debt senior to
the issue under consideration. Also, the Adviser will seek to analyze the
potential impacts of possible extraordinary events such as corporate
restructurings, refinancings, or acquisitions. The Adviser will also use its
best judgment as to the most favorable range of maturities. In general, THIRD
AVENUE VALUE FUND will acquire debt issues which have a senior position in an
issuer's capitalization and will avoid "mezzanine" issues such as
non-convertible subordinated debentures. THIRD AVENUE HIGH YIELD FUND and THIRD
AVENUE REAL ESTATE VALUE FUND may invest in such "mezzanine" issues.

The market value of debt securities is affected by changes in prevailing
interest rates and the perceived credit quality of the issuer. When prevailing
interest rates fall or perceived credit quality is increased, the market values
of debt securities generally rise. Conversely, when interest rates rise or
perceived credit quality is lowered, the market values of debt securities
generally decline. The magnitude of these fluctuations will be greater when the
average maturity of the portfolio securities is longer.

CONVERTIBLE SECURITIES

THIRD AVENUE HIGH YIELD FUND, THIRD AVENUE VALUE FUND and THIRD AVENUE REAL
ESTATE VALUE FUND may invest in convertible securities, which are bonds,
debentures, notes, preferred stocks or other securities that may be converted
into or exchanged for a prescribed amount of equity securities (generally common
stock) of the same or a different issuer within a particular period of time at a
specified price or formula. Convertible securities have general characteristics
similar to both fixed income and equity securities. Yields for convertible
securities tend to be lower than for non-convertible debt securities but higher
than for common stocks. Although to a lesser extent than with fixed income
securities generally, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying security and therefore also will react to
variations in the general market for equity securities and the operations of the
issuer. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.

MORTGAGE-BACKED SECURITIES

THIRD AVENUE VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE REAL
ESTATE VALUE FUND may invest in mortgage-backed securities and derivative
mortgage-backed securities, including, with respect to THIRD AVENUE HIGH YIELD
FUND, "principal only" and "interest only" components. Mortgage-backed
securities are securities that directly or indirectly represent a participation
in, or are secured by and payable from, mortgage loans on real property. Those
Funds intend to invest in these securities only when they believe, after
analysis, that there is unlikely to ever be permanent impairment of capital as
measured by whether there will be a money default by either the issuer or the
guarantor of these securities. These securities do,

- 4 -

<PAGE>

nonetheless, entail considerable market risk (meaning fluctuations in quoted
prices for the instruments), interest rate risk, prepayment risk and inflation
risk.

THIRD AVENUE VALUE FUND will not invest in non-investment grade subordinated
classes of residential mortgage-backed securities and does not intend to invest
in commercial mortgage-backed securities. THIRD AVENUE HIGH YIELD FUND and THIRD
AVENUE REAL ESTATE VALUE FUND may invest in commercial mortgage-backed
securities if these securities are available at a sufficient yield spread over
risk-free investments. Prepayments of principal generally may be made at any
time without penalty on residential mortgages and these prepayments are passed
through to holders of one or more of the classes of mortgage-backed securities.
Prepayment rates may change rapidly and greatly, thereby also affecting yield to
maturity, reinvestment risk and market value of the mortgage-backed securities.
As a result, the high credit quality of many of these securities may provide
little or no protection against loss in market value, and there have been
periods during which many mortgage-backed securities have experienced
substantial losses in market value. The Adviser believes that, under certain
circumstances, many of these securities may trade at prices below their inherent
value on a risk-adjusted basis and believes that selective purchases by a Fund
may provide high yield and total return in relation to risk levels.

ASSET-BACKED SECURITIES

Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may also invest in
asset-backed securities that, through the use of trusts and special purpose
vehicles, are securitized with various types of assets, such as automobile
receivables, credit card receivables and home-equity loans in pass-through
structures similar to the mortgage-related securities described above. In
general, the collateral supporting asset-backed securities is of shorter
maturity than the collateral supporting mortgage loans and is less likely to
experience substantial prepayments. However, asset-backed securities are not
backed by any governmental agency.

FLOATING RATE, INVERSE FLOATING RATE AND INDEX OBLIGATIONS

Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in debt
securities with interest payments or maturity values that are not fixed, but
float in conjunction with (or inversely to) an underlying index or price. These
securities may be backed by U.S. Government or corporate issuers, or by
collateral such as mortgages. The indices and prices upon which such securities
can be based include interest rates, currency rates and commodities prices.
However, neither Fund will invest in any instrument whose value is computed
based on a multiple of the change in price or value of an asset or an index of
or relating to assets in which that Fund cannot or will not invest.

Floating rate securities pay interest according to a coupon which is reset
periodically. The reset mechanism may be formula based, or reflect the passing
through of floating interest payments on an underlying collateral pool. Inverse
floating rate securities are similar to floating rate securities except that
their coupon payments vary inversely with an underlying index by use of a
formula. Inverse floating rate securities tend to exhibit greater price
volatility than other floating rate securities.

Neither Fund intends to invest more than 5% of its total assets in inverse
floating rate securities. Floating rate obligations generally exhibit a low
price volatility for a given stated maturity or average life because their
coupons adjust with changes in interest rates. Interest rate risk and price
volatility on inverse floating rate obligations can be high, especially if
leverage is used in the formula. Index securities pay a fixed rate of interest,
but have a maturity value that varies by formula, so that when the obligation
matures a gain or loss may be realized. The risk of index obligations depends on
the volatility of the underlying index, the coupon payment and the maturity of
the obligation.

INVESTMENT IN HIGH YIELD DEBT SECURITIES

THIRD AVENUE VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE REAL
ESTATE VALUE FUND may invest in high yield debt securities, including those
rated below Baa by Moody's Investors Service, Inc. ("Moody's") and below BBB by
Standard & Poor's Ratings Group

- 5 -

<PAGE>

("Standard & Poor's") and unrated debt securities, commonly referred to as "junk
bonds". THIRD AVENUE HIGH YIELD FUND intends to invest at least 65% of its total
assets, under normal market conditions, in non-investment grade high yield fixed
income and other debt securities, including straight debt instruments,
convertible debt, preferred securities and unrated securities. See also
"Investment in Debt Securities" and "Restricted and Illiquid Securities." Such
securities are predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligation, and may in fact be in default. THIRD AVENUE VALUE FUND and THIRD
AVENUE REAL ESTATE VALUE FUND do not intend to invest more than 35% of their
total assets in such securities. 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 (see Appendix A for a description of those ratings). It should
be emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market price risk of these securities. In
seeking to achieve its investment objective, each such Fund depends on the
Adviser's credit analysis to identify investment opportunities. For the Funds,
credit analysis is not a process of merely measuring the probability of whether
a money default will occur, but also measuring how the creditor would fare in a
reorganization or liquidation in the event of a money default.

Before investing in any high yield debt instruments, the Adviser will evaluate
the issuer's ability to pay interest and principal, as well as the seniority
position of such debt in the issuer's capital structure vis-a-vis any other
outstanding debt or potential debts. There appears to be a direct cause and
effect relationship between the weak financial conditions of issuers of high
yield bonds and the market valuation and prices of their credit instruments, as
well as a direct relationship between the weak financial conditions of such
issuers and the prospects that principal or interest may not be paid.

The market price and yield of bonds rated below Baa by Moody's and below BBB by
Standard & Poor's are more volatile than those of higher rated bonds due to such
factors as interest rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity and the risk of an issuer's inability
to meet principal and interest payments. In addition, the secondary market for
these bonds is generally less liquid than that for higher rated bonds.

Lower rated or unrated debt obligations also present reinvestment risks based on
payment expectations. If an issuer calls the obligation for redemption, the Fund
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors.

The market values of these higher yielding debt securities tend to be more
sensitive to economic conditions and individual corporate developments than
those of higher rated securities. Companies that issue such bonds often are
highly leveraged and may not have available to them more traditional methods of
financing. Under adverse economic conditions, there is a risk that highly
leveraged issuers may be unable to service their debt obligations or to repay
their obligations upon maturity. Under deteriorating economic conditions or
rising interest rates, the capacity of issuers of lower-rated securities to pay
interest and repay principal is more likely to weaken significantly than that of
issuers of higher-rated securities. Investors should carefully consider the
relative risks of investing in high yield securities and understand that such
securities are generally not meant for short-term investing.

THIRD AVENUE VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE REAL
ESTATE VALUE FUND may also purchase or retain debt obligations of issuers not
currently paying interest or in default (i.e. with a rating from Moody's of C or
lower or Standard & Poor's of C1 or lower). In addition, those Funds may
purchase securities of companies that have filed for protection under Chapter 11
of the United States Bankruptcy Code. Defaulted securities will be purchased or
retained if, in the opinion of the Adviser, they may present an opportunity for
subsequent price recovery, the issuer may resume payments, or other advantageous
developments appear likely.

ZERO-COUPON AND PAY-IN-KIND SECURITIES

THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in zero
coupon and pay-in-kind ("PIK") securities. Zero coupon securities are debt
securities that pay no cash income but

- 6 -

<PAGE>

are sold at substantial discounts from their value at maturity. PIK securities
pay all or a portion of their interest in the form of additional debt or equity
securities. Because such securities do not pay current cash income, the price of
these securities can be volatile when interest rates fluctuate. While these
securities do not pay current cash income, federal income tax law requires the
holders of zero coupon and PIK securities to include in income each year the
portion of the original issue discount (or deemed discount) and other non-cash
income on such securities accrued during that year. In order to continue to
qualify for treatment as a "regulated investment company" under the Internal
Revenue Code and avoid a certain excise tax, each Fund may be required to
distribute a portion of such discount and income and may be required to dispose
of other portfolio securities, which may occur in periods of adverse market
prices, in order to generate cash to meet these distribution requirements.

LOANS AND OTHER DIRECT DEBT INSTRUMENTS

THIRD AVENUE VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE REAL
ESTATE VALUE FUND may invest in loans and other direct debt instruments owed by
a borrower to another party. Each of THIRD AVENUE HIGH YIELD FUND and THIRD
AVENUE REAL ESTATE VALUE FUND may also from time to time make loans. These
instruments represent amounts owed to lenders or lending syndicates (loans and
loan participations) or to other parties. Direct debt instruments may involve a
risk of loss in case of default or insolvency of the borrower and may offer less
legal protection to a Fund in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending bank
or other financial intermediary. The markets in loans are not regulated by
federal securities laws or the SEC. THIRD AVENUE 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.

TRADE CLAIMS

Both THIRD AVENUE VALUE FUND and THIRD AVENUE HIGH YIELD FUND may invest in
trade claims. Trade claims are interests in amounts owed to suppliers of goods
or services and are purchased from creditors of companies in financial
difficulty. For purchasers such as a Fund, trade claims offer the potential for
profits since they are often purchased at a significant discount from face value
and, consequently, may generate capital appreciation in the event that the
market value of the claim increases as the debtor's financial position improves
or the claim is paid.

An investment in trade claims is speculative and carries a high degree of risk.
Trade claims are illiquid instruments 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.

FOREIGN SECURITIES

Each 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 which, in the judgment of the Adviser, otherwise provide financial
information which provides the Adviser with substantively similar financial
information as 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

- 7 -

<PAGE>

to the United States. Because foreign securities often are purchased with and
payable in foreign currencies, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.

FOREIGN CURRENCY TRANSACTIONS

Each Fund may, from time to time, engage in foreign currency transactions in
order to hedge the value of its portfolio holdings denominated in foreign
currencies against fluctuations in foreign currency prices versus the U.S.
dollar. These transactions include forward currency contracts, exchange listed
and OTC options on currencies, currency swaps and other swaps incorporating
currency hedges.

The notional amount of a currency hedged by a Fund will be closely related to
the aggregate market value (at the time of making such sale) of the securities
held and reasonably expected to be held in its portfolio denominated or quoted
in or currently convertible into that particular currency or a closely related
currency. If a Fund enters into a hedging transaction in which such Fund is
obligated to make further payments, its custodian will segregate cash or readily
marketable securities having a value at all times at least equal to such Fund's
total commitments.

The cost to a Fund of engaging in currency hedging transactions varies with
factors such as (depending upon the nature of the hedging transaction) the
currency involved, the length of the contract period, interest rates in foreign
countries for prime credits relative to U.S. interest rates for U.S. Treasury
obligations, the market conditions then prevailing and fluctuations in the value
of such currency in relation to the U.S. dollar. Transactions in currency
hedging contracts usually are conducted on a principal basis, in which case no
fees or commissions are involved. The use of currency hedging contracts does not
eliminate fluctuations in the prices in local currency of the securities being
hedged. The ability of a Fund to realize its objective in entering into currency
hedging transactions is dependent on the performance of its counterparties on
such contracts, which may in turn depend on the absence of currency exchange
interruptions or blockage by the governments involved, and any failure on their
part could result in losses to a Fund. The requirements for qualification as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), may cause a Fund to restrict the degree to which it engages in
currency hedging transactions.

RESTRICTED AND ILLIQUID SECURITIES

None of the Funds will purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets (taken at current market value) would be
invested in securities that are illiquid. Generally speaking, an illiquid
security is any asset or investment which a Fund cannot sell in the ordinary
course of business within seven days at approximately the value at which the
Fund has valued the asset or investment, including securities that cannot be
sold publicly due to legal or contractual restrictions.

Over the past several years, strong institutional markets have developed for
various types of restricted securities, including repurchase agreements,
commercial paper, and some corporate bonds and notes. Securities freely salable
among qualified institutional investors under special rules adopted by the SEC
or otherwise determined to be liquid, including "principal only" and "interest
only" components of mortgage-backed securities, 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

THIRD AVENUE VALUE FUND, THIRD AVENUE SMALL-CAP VALUE FUND and THIRD AVENUE REAL
ESTATE VALUE FUND intend to invest occasionally in the common stock of selected
new issuers; THIRD

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<PAGE>

AVENUE HIGH YIELD FUND intends to invest occasionally in the debt securities of
selected new issuers. Investments in relatively new issuers, i.e., those having
continuous operating histories of less than three years, may carry special risks
and may be more speculative because such companies are relatively unseasoned.
Such companies may also lack sufficient resources, may be unable to generate
internally the funds 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

Each Fund may also make use of bank borrowing as a temporary measure for
extraordinary or emergency purposes, such as for liquidity necessitated by
shareholder redemptions, and may use securities as collateral for such
borrowing. Such temporary borrowing may not exceed 5% of the value of the
applicable Fund's total assets at the time of borrowing.

INVESTMENT IN OTHER INVESTMENT COMPANIES

THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE
REAL ESTATE 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
accounts advised by the Adviser and its affiliates. If, however, such other
accounts wish to invest in, or dispose of, the same securities as one of the
Funds, available investments will be allocated equitably to each Fund and other
account. This procedure may adversely affect the size of the position obtained
for or disposed of by a Fund or the price paid or received by a Fund.

SECURITIES LENDING

THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE
REAL ESTATE VALUE FUND may lend their portfolio securities to qualified
institutions. By lending its portfolio securities, a Fund attempts to increase
its income through the receipt of interest on the loan. Any gain or loss in the
market price of the securities loaned that may occur during the term of the loan
will be for the account of the Fund. A Fund may lend its portfolio securities so
long as the terms and the structure of such loans are not inconsistent with the
requirements of the Investment Company Act of 1940, which currently provide that
(a) the borrower pledge and maintain with the Fund collateral consisting of
cash, a letter of credit issued by a domestic U.S. bank, or securities issued or
guaranteed by the U.S. government having a value at all times not less than 100%
of the value of the securities loaned, (b) the borrower add to such collateral
whenever the price of the securities loaned rises (i.e., the value of the loan
is "marked to the market" on a daily basis), (c) the loan be made subject to
termination by the Fund at any time and the loaned securities be subject to
recall within the normal and customary settlement time for securities
transactions and (d) the Fund receive reasonable interest on the loan (which may
include the

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<PAGE>

Fund's investing any cash collateral in interest bearing short-term
investments), any distributions on the loaned securities and any increase in
their market value.

A Fund will not lend portfolio securities if, as a result, the aggregate of such
loans exceeds 33 1/3% of the value of its total assets (including such loans).
Loan arrangements made by a Fund will comply with all other applicable
regulatory requirements. All relevant facts and circumstances, including the
creditworthiness of the qualified institution, will be monitored by the Adviser,
and will be considered in making decisions with respect to lending of
securities, subject to review by the Fund's Board of Trustees.

A Fund may pay reasonable negotiated fees in connection with loaned securities,
so long as such fees are set forth in a written contract and approved by its
Board of Trustees. In addition, the Fund shall, through the ability to recall
securities prior to any required vote, retain voting rights over the loaned
securities.

On behalf of THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and
THIRD AVENUE REAL ESTATE VALUE FUND, the Trust has entered into a master lending
arrangement with Bear, Stearns Securities Corp. in compliance with the foregoing
requirements.

PORTFOLIO TURNOVER

The Funds' investment policies and objectives, which emphasize long-term
holdings, would tend to keep the number of portfolio transactions relatively
low. THIRD AVENUE VALUE FUND portfolio turnover rate for the years ended
October 31, 1997 and 1998 was 10% and 24%, respectively. THIRD AVENUE SMALL-CAP
VALUE FUND portfolio turnover rate for the period ended October 31, 1997 was 7%
and for the year ended October 31, 1998 was 6%. The portfolio turnover rate for
THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE REAL ESTATE VALUE FUND for the
period ended October 31, 1998 was 38% and 0%, respectively.

SHORT SALES

THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE
REAL ESTATE VALUE FUND may, but currently do not intend to, engage in short
sales. In a short sale transaction, the Fund sells a security it does not own in
anticipation of a decline in the market value of the security.

COMMODITIES

THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and
THIRD AVENUE REAL ESTATE VALUE FUND may, but currently do not intend to, invest
in commodities or commodity contracts and futures contracts.

INVESTMENT RESTRICTIONS

For the benefit of shareholders, each Fund has adopted the following
restrictions, which are fundamental policies and cannot be changed without the
approval of a majority of such Fund's outstanding voting securities. 1

The following investment restrictions apply to each Fund. No Fund may:

1. Borrow money or pledge, mortgage or hypothecate any of its assets
except that each Fund may borrow on a secured or unsecured basis as a
temporary measure for extraordinary or emergency purposes. Such
temporary borrowing may not exceed 5% of the value of such Fund's
total assets when the borrowing is made.

2. Act as underwriter of securities issued by other persons, except to
the extent that, in connection with the disposition of portfolio
securities, it may technically be deemed to be an underwriter under
certain securities laws.

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<PAGE>

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, except that THIRD AVENUE REAL ESTATE VALUE FUND WILL invest
more than 25% of its total assets in the real estate industry or
related industries or that own significant real estate assets at the
time of investment.

- ------------
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.

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

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<PAGE>

the Fund's net or total assets causes it not to comply with the restriction at a
future date. A Fund will not purchase any portfolio securities while any
borrowing exceeds 5% of its total assets.

MANAGEMENT OF THE TRUST

The Board of Trustees of the Funds oversee the management of the Funds. The
Trustees are responsible for such matters as reviewing and approving fundamental
operating, financial, and corporate governance policies; evaluating the
Adviser's performance; determining management fees; and reviewing and approving
procedures for providing financial and operational information to the Board.

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* 72 Trustee An Associate Judge (1981 to Present) of the Superior
GSB Bldg. Suite 800 Court of Pennsylvania; Trustee or Director of the
City Line & Belmont Ave. Trust or its predecessor since November, 1992.
Bala Cynwyd, PA
19004-1611

LUCINDA FRANKS 52 Trustee Journalist (1969 to Present); Author "Wild Apples"
64 East 86th Street (1990), "Waiting Out a War; The Exile of Private
New York, NY 10028 John Picciano (1974); Winner of the 1971 Pulitzer
Prize for Journalism; Trustee of the Trust since
February, 1998.

GERALD HELLERMAN 61 Trustee Managing Director (8/93 to Present) of Hellerman
10965 Eight Bells Lane Associates, a financial and corporate consulting
Columbia, MD 21044 firm; Chief Financial Analyst (1976 to 7/93) of the
Antitrust Division of U.S. Department of Justice;
Trustee or Director of the Trust or its predecessor
since September, 1993.

MARVIN MOSER, M.D. 75 Trustee Trustee (1992 to Present) of the Trudeau Institute,
13 Murray Hill Road a medical research institute; Clinical Professor of
Scarsdale, NY 10583 Medicine (1984 to Present) at Yale University School
of Medicine; Senior Medical Consultant (1972 to
Present) for the National High Blood Pressure
Education Program of the National Heart, Lung and
Blood Institute; Chairman (1977) and a member in
1980, 1984, 1988, 1992 and 1996 of the Joint
National Committee on Detection, Evaluation and
Treatment of High Blood Pressure for the National
Heart, Lung and Blood Institute; Director of AMBI
Corp. (1997 to Present); Trustee or Director of the
Trust or its predecessor since November, 1994.

</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MYRON M. SHEINFELD Counsel to (12/96 to present) and Attorney and
1001 Fannin St., Suite 3700 68 Trustee Shareholder (1986 to 12/96) of Sheinfeld, Maley &
Houston, TX 77002 Kay P.C., a law firm; Adjunct Professor (1975 to
1991) of the University of Texas Law School;
Director (1984 to 1992) of Equity Strategies Fund,
Inc.; Director (1988 to Present) of Nabors
Industries, Inc., an international oil drilling
contractor; former Consultant (11/90 to 4/95) to
Meyer Hendricks Victor Osborn & Maledon, a law firm
in Phoenix, Arizona; Co-Editor and Co-Author
"Collier on Bankruptcy 15th Edition Revised" and
"Collier on Bankruptcy Taxation"; Trustee or
Director of the Trust or its predecessor since its
inception.

MARTIN SHUBIK 72 Trustee Seymour H. Knox Professor (1975 to Present) of
Yale University Dept. of Mathematical and Institutional Economics, Yale
Economics University; Director (1984 to 4/94) of Equity
Box 2125, Yale Station Strategies Fund, Inc.; Trustee or Director of the
New Haven, CT 06520 Trust or its predecessor since its inception.

CHARLES C. WALDEN 54 Trustee Executive Vice-President--Investments (1973 to Present)
11 Williamsburg Circle (Chief Investment Officer) of Knights of Columbus, a
Madison, CT 06443 fraternal benefit society selling life insurance and
annuities; Chartered Financial Analyst; Trustee or
Director of the Trust or its predecessor since May, 1996.

BARBARA WHITMAN* 40 Trustee Registered Securities Representative (11/96 to
767 Third Avenue Present) of M.J. Whitman, Inc., a broker-dealer and
New York, NY 10017-2023 the Funds' underwriter; Director (4/95 to Present)
of EQSF Advisers, Inc., the Funds' investment
adviser; Director (8/97 to 6/98) of Riverside Stage
Company, a theater; House Manager (1/94 to 8/94) of
Whiting Auditorium, a theater; Substitute Teacher
(1/92 to 6/93) of National-Louis University Movement
Center, a university. Trustee of the Trust since
September, 1997.
</TABLE>

- 13 -

<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARTIN J. WHITMAN* 74 Chairman, Chairman and CEO (3/90 to Present), President (1/91 to 5/98),
767 Third Avenue Chief of the Trust; Chairman and CEO (3/90 to Present),
New York, NY 10017-2023 Executive President (1/91 to 2/98), of EQSF Advisers, Inc.;
Officer, and Chairman, CEO (1/1/95 to Present), President
Trustee (1/1/95 to 6/29/95) and Chief Investment Officer (10/92
to Present) of M.J. Whitman Advisers, Inc., a
subsidiary of M.J. Whitman Holding Corp., (MJWHC), a
holding company managing investment subsidiaries and
an investment adviser to private and institutional
clients; Chairman, CEO (1/1/95 to Present) and
President (1/1/95 to 6/29/95) of MJWHC and of M.J.
Whitman, Inc., a subsidiary of MJWHC and the
successor broker-dealer of M.J. Whitman, L.P.
(MJWLP), a Delaware limited partnership which has
been dissolved; Distinguished Management Fellow
(1972 to Present) and Member of the Advisory Board
(10/94 to 6/95) of the Yale School of Management at
Yale University; Director and Chairman (8/90 to
Present), President (8/90 to 12/90), CEO (8/96 to
Present) and Chief Investment Officer (12/90 to
8/96) of Danielson Holding Corporation, and a
Director of its subsidiaries; Director (3/91 to
Present) of Nabors Industries, Inc., an international
oil drilling contractor; Director (8/97 to Present) of
Tejon Ranch Co.; President and CEO (10/74 to Present)
of Martin J. Whitman & Co., Inc., (formerly M.J. Whitman
& Co., Inc.), a private investment company; Trustee or
Director of the Trust or its predecessor since its
inception; Chartered Financial Analyst.

DAVID M. BARSE 36 President President (5/98 to Present), and Executive Vice
767 Third Avenue and Chief President (4/95 to 5/98) of the Trust; President,
New York, NY 10017-2023 Operating Chief Operating Officer and Director (7/96 to
Officer Present) of Danielson Holding Corporation; Director
(COO) (8/96 to Present) of National American Insurance
Company of California; President (2/98 to Present),
Executive Vice President (4/95 to 2/98), and
Director (4/95 to Present) of EQSF Advisers, Inc.;
President (6/95 to Present), Director, Chief
Operating Officer (1/95 to Present), Secretary (1/95
to 1/96) and Executive Vice President (1/95 to 6/95)
of MJWHC; 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
(6/97 to Present) of CGA Group, Ltd.; Director (7/94
to 12/94), Executive Vice President and Secretary
(1/92 to 12/94) of Whitman Securities Corp.
</TABLE>

- 14 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MICHAEL CARNEY 45 Treasurer, Director, (1/1/95 to Present) Executive Vice
767 Third Avenue Chief President, Chief Financial Officer (6/29/95 to
New York, NY 10017-2023 Financial Present) of MJWHC and of M.J. Whitman, Inc.;
Officer Treasurer, Director (1/1/95 to Present), Executive
(CFO) Vice President (6/29/95 to Present) and CFO (10/92
to Present) of M.J. Whitman Advisers, Inc.; Treasurer
(12/93 to 4/96) of Longstreet Investment Corp.; CFO
(3/26/93 to 6/95) of Danielson Trust Company;
Limited Partner (1/92 to 12/31/94) of M.J. Whitman,
L.P.; CFO of WHR Management Corporation (8/91 to
Present), Danielson Holding Corporation (8/90 to
Present) and Carl Marks Strategic Investments, L.P.,
an investment partnership (1/90 to 4/94); CFO (1/90
to 4/94) of Carl Marks & Co., Inc., a broker-dealer;
CFO (8/89 to 12/90) of Whitman Advisors, Ltd.; CFO
and Treasurer (5/89 to 4/94) of Equity Strategies
Fund, Inc.; CFO and Treasurer (5/89 to Present) of
EQSF Advisers, Inc.; CFO (5/89 to Present) of
Whitman Heffernan Rhein & Co., Inc., Martin J.
Whitman & Co., Inc., (formerly M.J. Whitman & Co.,
Inc.) and WHR Management Company, L.P., a firm
managing investment partnerships.

KERRI WELTZ 31 Assistant Assistant Treasurer (5/96 to Present), Controller
767 Third Avenue Treasurer (1/96 to Present), Assistant Controller (1/93 to
New York, NY 10017-2023 12/95) and Staff Accountant (1/92 to 12/92) for the
Trust; Controller (1/96 to Present), Assistant
Controller (1/93 to 12/95), and Staff Accountant
(1/92 to 12/92) of EQSF Advisers, Inc.; Controller
(8/96 to Present), of Danielson Holding Corp.;
Controller (5/96 to Present) and Assistant
Controller (1/95 to 5/96) of Whitman Heifernan &
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 manger (5/91 to 12/93) of M.J.
Whitman, L.P.

IAN M. KIRSCHNER 43 General General Counsel and Secretary (8/96 to Present) of
767 Third Avenue Counsel and Danielson Holding Corporation; General Counsel and
New York, NY 10017-2023 Secretary Secretary (1/96 to Present) of MJWHC, M.J. Whitman,
Inc., and M. J. Whitman Advisers, Inc.; General
Counsel and Secretary (1/97 to Present) of the
Trust; General Counsel and Secretary (1/97 to
Present) of EQSF Advisers, Inc.; Vice-President,
General Counsel and Secretary (2/93 to 6/95) of 2 I
Inc.; Of Counsel (10/90 to 10/92) to Morgan, Lewis &
Bockius.
</TABLE>

The Trust does not pay any fees to its officers for their services as such, but
does pay Trustees who are not affiliated with the Investment Adviser a fee of
$1,500 per Fund for each meeting of the Board of Trustees that they attend, in
addition to reimbursing all Trustees for travel and incidental expenses incurred
by them in connection with their attendance at Board meetings. The

- 15 -

<PAGE>
Trust also pays the non-interested Trustees an annual stipend of $2,000 per Fund
in January of each year for the previous year's service. The Trust paid Trustees
in the aggregate, $165,479 in such fees and expenses for the year ended October
31, 1998. Trustees do not receive any pension or retirement benefits.

For the fiscal year ended October 31, 1998, the aggregate amount of compensation
paid to each Trustee by the Trust is listed below.

COMPENSATION TABLE

AGGREGATE COMPENSATION TOTAL COMPENSATION
NAME AND FROM REGISTRANT FOR FISCAL FROM REGISTRANT AND FUND
POSITION HELD YEAR ENDED OCTOBER 31, 1998* COMPLEX PAID TO TRUSTEES
- ------------- --------------------------- ------------------------
Phyllis W. Beck, Trustee $ 0 $ 0
Tibor Fabian ** $ 3,000 $ 3,000
Lucinda Franks, Trustee $19,666 $19,666
Gerald Hellerman, Trustee $ 28,166 $ 28,166
Marvin Moser, M.D., Trustee $ 28,166 $ 28,166
Myron M. Sheinfeld, Trustee $28,166 $28,166
Martin Shubik, Trustee $ 25,166 $ 25,166
Charles C. Walden, Trustee $28,166 $28,166
Barbara Whitman, Trustee $ 0 $ 0
Martin J. Whitman, Chairman and $ 0 $ 0
Chief Executive Officer

* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $4,983 for all Trustees as a group.
Amounts for THIRD AVENUE HIGH YIELD FUND ARE for the period from
February 12, 1998 (inception) through October 31, 1998. Amounts for
THIRD AVENUE REAL ESTATE VALUE FUND ARE for the period from September
17, 1998 (inception) through October 31, 1998. For the fiscal year
ended October 31, 1999, it is anticipated that in addition to the
compensation specified above, the Trustees will receive additional
compensation from THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE REAL
ESTATE VALUE FUND in an estimated amount equal to $1,500 and $4,500
per Trustee, respectively, and THIRD AVENUE HIGH YIELD FUND and THIRD
AVENUE REAL ESTATE VALUE FUND will reimburse the Trustees for
approximately $5,000 in expenses in the aggregate (such estimated
amounts are based upon the aggregate compensation received and
expenses incurred by the Trustees for the fiscal year ended October
31, 1998).

** Mr. Fabian passed away on December 6, 1997.

PRINCIPAL STOCKHOLDERS

The following persons beneficially own of record or are known to beneficially
own of record 5 percent or more of the outstanding common stock of THIRD AVENUE
VALUE FUND, THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and
THIRD AVENUE REAL ESTATE VALUE FUND as of December 4, 1998:

THIRD AVENUE VALUE FUND

PERCENTAGE OF
THIRD AVENUE
NAME AND ADDRESS VALUE FUND NUMBER OF SHARES
- ---------------- ------------- ----------------

Charles Schwab & Co., Inc. 2 42.52% 21,542,933
101 Montgomery Street
San Francisco, CA 94104

- 16 -

<PAGE>

Donaldson Lufkin &
Jenrette Securities 11.49% 5,821,766
Corporation 3
Mutual Funds Dept. 5th Floor
P.O. Box 2052
Jersey City, NJ 07303

National Financial
Securities Corp. 3 10.01% 5,074,051
P.O. Box 3908
Church Street Station
New York, NY 10008-3908

THIRD AVENUE SMALL-CAP VALUE FUND

PERCENTAGE OF
THIRD AVENUE
NAME AND ADDRESS SMALL-CAP VALUE FUND NUMBER OF SHARES
- ---------------- -------------------- ----------------

Charles Schwab & Co., Inc. 2 33.52% 4,486,637
101 Montgomery Street
San Francisco, CA 94104

National Financial Securities Corp. 3 20.98% 2,808,145
P.O. Box 3908
Church Street Station
New York, NY 10008-3908

Bear Stearns Securities Corp. 4 7.54% 1,008,438
One Metrotech Center North
Brooklyn, NY 11201-3859

Donaldson Lufkin & Jenrette Securities 6.90% 923,095
Corporation 3
Mutual Funds Dept. 5th Floor
P.O. Box 2052
Jersey City, NJ 07303

THIRD AVENUE HIGH YIELD FUND

PERCENTAGE OF
THIRD AVENUE
NAME AND ADDRESS HIGH-YIELD VALUE FUND NUMBER OF SHARES
- ---------------- --------------------- ----------------

Bear Stearns Securities Corp. 4 32.38% 286,059
One Metrotech Center North
Brooklyn, NY 11201-3859

Charles Schwab & Co., Inc. 2 22.57% 199,471
1O1 Montgomery Street
San Francisco, CA 94104

National Financial Securities Corp. 3 10.79% 95,321
P.O. Box 3908
Church Street Station
New York, NY 10008-3908

- 17 -
<PAGE>

THIRD AVENUE REAL ESTATE VALUE FUND

PERCENTAGE OF
THIRD AVENUE
NAME AND ADDRESS REAL ESTATE VALUE FUND NUMBER OF SHARES
- ---------------- ---------------------- ----------------

Bear Stearns Securities Corp. 4 58.45% 122,758
One Metrotech Center North
Brooklyn, NY 11201-3859

National Financial Securities Corp. 3 20.80% 43,685
P.O. Box 3908
Church Street Station
New York, NY 10008-3908

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 it's clients, including, at such time, clients of MJW, the
Funds' affiliated broker-dealer, principal underwriter and distributor.

The officers and Trustees of the Funds own in the aggregate __% of THIRD AVENUE
VALUE FUND, __% of THIRD AVENUE SMALL-CAP VALUE FUND; __% of THIRD AVENUE HIGH
YIELD FUND, and __% of THIRD AVENUE REAL ESTATE VALUE FUND.

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 and Chief
Executive Officer of the Adviser.

The following individuals are affiliated persons of the Trust and Adviser:

CAPACITY WITH FUNDS CAPACITY WITH ADVISER
------------------- ---------------------

Martin J. Whitman Chairman and Chief Chairman and Chief
Executive Officer Executive Officer

David M. Barse President, Chief President, Chief
Operating Officer Operating Officer

Michael Carney Treasurer, Chief Treasurer, Chief
Financial Officer Financial Officer

Ian M. Kirschner General Counsel General Counsel
and Secretary and Secretary

Kerri Weltz Assistant Treasurer Assistant Treasurer

Barbara Whitman Trustee Director

INVESTMENT ADVISORY AGREEMENT

The investment advisory services of the Adviser are furnished to each of the
Funds pursuant to an Investment Advisory Agreement approved by the Board of
Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" as defined in the 1940 Act, and by the sole shareholder of
each Fund on the same date. The Adviser has provided investment advisory
services to the Funds since their inception.

- 18 -

<PAGE>
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.

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, 1998, 1997 and 1996, THIRD AVENUE VALUE FUND paid investment
advisory fees to the Adviser of $15,893,039, $9,303,435, and $3,976,741,
respectively. During the fiscal year ended October 31, 1998 and the period from
inception to October 31, 1997, THIRD AVENUE SMALL-CAP VALUE FUND paid investment
advisory fees to the Adviser of $1,248,794 and $252,298, respectively. During
the period from inception to October 31, 1998, THIRD AVENUE HIGH YIELD FUND paid
investment advisory fees to the Adviser of $50,472. During the period from
inception to October 31, 1998, THIRD AVENUE REAL ESTATE VALUE FUND paid
investment advisory fees to the Adviser of $568.

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. Any expense which
cannot be allocated to a specific Fund will be allocated to each of the Funds
based on their relative net asset values on the date the expense is incurred.
From time to time, the Adviser may waive receipt of its fees and/or assume
certain expenses of a Fund, which would have the effect of lowering the expense
ratio of the Fund and increasing yield to investors. Under current arrangements,
whenever in any fiscal year, a Fund's normal operating expenses, including the
investment advisory fee, but excluding brokerage commissions and interest and
taxes, exceeds 1.9% of the first $100 million of average daily net assets of the
Fund, and 1.5% of assets in excess of $100 million, the Adviser is obligated to
reimburse the Fund in an amount equal to that excess. If a Fund's operating
expenses fall below the expense limitation, that Fund will begin repaying the
Adviser for the amount contributed on behalf of the Fund. This repayment will
continue for up to three years after the end of the fiscal year in which an
expense is reimbursed by the Adviser, subject to the expense limitation, until
the Adviser has been paid for the entire amount contributed or such three year
period expires.

DISTRIBUTOR

The distribution services of M.J. Whitman, Inc., 767 Third Avenue, New York, NY
10017 ("MJW" or the "Distributor") are furnished to each Fund pursuant to a
Distribution Agreement (the "Distribution Agreement"). 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.

- 19 -

<PAGE>
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.

ADMINISTRATOR

The Funds have entered into an Administration Services Agreement (the
"Administration Agreement") with First Data Investor Services Group, Inc., a
wholly owned subsidiary of First Data Corporation ("Investor Services Group").
The Administration Agreement provides that Investor Services Group 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. The
Trust has agreed to pay Investor Services Group an amount equal to $186,000 per
annum plus .01% of aggregate assets of the funds in excess of $1 billion. During
the fiscal years ended October 31, 1998 and 1997, THIRD AVENUE VALUE FUND paid
fees to Investor Services Group of $236,033 and $143,175, respectively for these
services. During the fiscal year ended October 31, 1998 and the period from
inception to October 31, 1997, THIRD AVENUE SMALL-CAP VALUE FUND paid fees to
Investor Services Group of $18,586 and $8,116 , respectively for these services.
During the period from inception to October 31, 1998, THIRD AVENUE HIGH YIELD
FUND paid fees to Investor Services Group of $9,207 for these services. During
the period from inception to October 31, 1998, THIRD AVENUE REAL ESTATE VALUE
FUND paid fees to Investor Services Group of $1,434 for these services.

CUSTODIAN

North American Trust Company ("North American"), 525 B Street, San Diego, CA
92101-4492 serves as custodian for THIRD AVENUE VALUE FUND and Custodial Trust
Company, 101 Carnegie Center, Princeton, NJ 08540-6231, serves as custodian for
THIRD AVENUE SMALL-CAP VALUE FUND, THIRD AVENUE HIGH YIELD FUND and THIRD AVENUE
REAL ESTATE VALUE FUND pursuant to custodian agreements. Under such agreements,
each Custodian (1) maintains a separate account or accounts in the name of the
Fund for which it is Custodian; (2) holds and transfers portfolio securities on
account of such Fund; (3) accepts receipts and makes disbursements of money on
behalf of such Fund; (4) collects and receives all income and other payments and
distributions on account of such Fund's securities; and (5) makes periodic
reports to the Board of Trustees concerning such Fund's operations.

TRANSFER AGENT

First Data Investor Services Group, Inc., 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903, is the transfer agent for each of the Funds.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, NY 10036, is
the independent public accountants for the Funds. The independent public
accountants audit the financial statements of the Funds following the end of
each fiscal year and provide a report to the Board of Trustees of the results of
the audit.

- 20 -

<PAGE>

PORTFOLIO TRADING PRACTICES

Under the Investment Advisory Agreement between the Trust and the Adviser, the
Adviser has the responsibility of selecting brokers and dealers. The Adviser
must place portfolio transactions with brokers and dealers who render
satisfactory service in the execution of orders at the most favorable prices and
at reasonable commission rates, but has discretion to pay a greater amount if
it, in good faith, determines that such commission was reasonable in relation to
the value of the brokerage and research services provided by such broker or
dealer, either in terms of that particular transaction or in fulfilling the
overall responsibilities of the Adviser to the Funds. Where transactions are
executed in the over-the-counter market, or in the "third market" (the
over-the-counter market in listed securities), the Fund will normally first seek
to deal with the primary market makers. However, when the Funds consider it
advantageous to do so, they will utilize the services of brokers, but will, in
all cases, attempt to negotiate the best price and execution. The determination
of what may constitute the most favorable price and execution in a securities
transaction by a broker involves a number of considerations, including, without
limitation, the overall direct net economic result to the Funds (involving both
price paid or received and any commissions or other costs paid), the efficiency
with which the transaction is effected, the ability to effect the transaction at
all if selling large blocks is involved, the availability

of the broker to stand ready to execute possibly difficult transactions in the
future and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by management in determining the
overall reasonableness of brokerage commissions paid. In allocating any such
portfolio brokerage on a national securities exchange, the Funds may consider
the research, statistical and other factual information and services provided by
brokers from time to time to the Adviser. Such services and information are
available to the Adviser for the benefit of 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

- 21 -

<PAGE>

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.

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, 1998, THIRD AVENUE VALUE FUND incurred
total brokerage commissions of $1,261,197, of which approximately $1,026,034 (or
81%) was paid to MJW and $38,637 (or 3%) was paid to Senior Debt Corp. For the
fiscal year ended October 31, 1997, THIRD AVENUE VALUE FUND incurred total
brokerage commissions of $620,345 of which approximately $460,641 (or 74.20%)
was paid to MJW and $18,047 (or 3%) was paid to Senior Debt Corp. For the fiscal
year ended October 31, 1996, THIRD AVENUE VALUE FUND incurred total brokerage
commissions of $447,855 of which approximately $329,168 (or 73%) was paid to MJW
and $70,250 (or 16%) was paid to Senior Debt Corp.

For the fiscal year ended October 31, 1998, THIRD AVENUE SMALL-CAP VALUE FUND
incurred total brokerage commissions of $205,990 of which approximately $113,016
(or 55%) was paid to MJW. For the period from inception through October 31,
1997, THIRD AVENUE SMALL-CAP VALUE FUND incurred total brokerage commissions of
$78,938 of which approximately $50,977 (or 65%) was paid to MJW.

For the period from inception through October 31, 1998, THIRD AVENUE HIGH YIELD
FUND incurred total brokerage commissions of $600, none of which was paid to
MJW.

For the period from inception through October 31, 1998, THIRD AVENUE REAL ESTATE
VALUE FUND incurred total brokerage commissions of $1,670 of which approximately
$1,470 (or 88%) was paid to MJW.

These amounts include fees paid by MJW to its clearing agents. Commissions paid
by the Funds to MJW are paid at an average discount of at least 20% to the
normal fees charged by MJW.

For the fiscal year ended October 31, 1998, THIRD AVENUE VALUE FUND effected
40.48% and 0.57% of its total transactions for which commissions were paid
through MJW and Senior Debt Corp., respectively. For the fiscal year ended
October 31, 1998, THIRD AVENUE SMALL-CAP VALUE FUND effected 39.09% of its total
transactions for which commissions were paid through MJW. For the fiscal year
ended October 31, 1998, THIRD AVENUE HIGH YIELD FUND effected none of its total
transactions for which commissions were paid through MJW. For the fiscal year
ended October 31, 1998, THIRD AVENUE REAL ESTATE VALUE FUND effected 83.33% of
its total transactions for which commissions were paid through MJW.

- 22 -

<PAGE>

At October 31, 1998, THIRD AVENUE VALUE FUND held securities of the following of
the Fund's regular broker-dealers: Raymond James Financial, Inc. (the market
value of which was $27,094,922 at October 31, 1998).

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.

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

Each Fund intends to qualify and to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If they so qualify, the Funds will not be subject to
Federal income tax on their net investment income and net short-term capital
gain, if any, realized during any fiscal year to the extent that they distribute
such income and gain to their shareholders.

Each Fund will either distribute or retain for reinvestment all or part of any
net long-term capital gain. If any such net capital gain is retained, the Fund
will be subject to a tax of 35% of such amount. In that event, the Fund expects
to designate the retained amount as undistributed capital gains in a notice to
its shareholders, each of whom (1) will be required to include in income for tax
purposes, as long-term capital gains, its share of such undistributed amount,
(2) will be entitled to credit its proportionate share of the tax paid by the
Fund against its Federal income tax liability and to claim refunds to the extent
the credit exceeds such liability, and (3) will increase its basis in its shares
of such Fund by an amount equal to 65% of the amount of the undistributed
capital gains included in such shareholder's gross income. A distribution by a
Fund

- 23 -

<PAGE>

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.

The Federal income tax treatment of the various high yield debt securities and
other debt instruments (collectively, "Instruments" and individually, an
"Instrument") to be acquired by the Funds will depend, in part, on the nature of
those Instruments and the application of various tax rules. The Funds may derive
interest income through the accrual of stated interest payments or through the
application of the original issue discount rules, the market discount rules or
other similar provisions. The Funds may be required to accrue original issue
discount income, and in certain circumstances the Funds may be required to
accrue stated interest even though no concurrent cash payments will be received.
Moreover, it is the position of the IRS that a holder of a debt instrument
subject to the original issue discount rules is required to recognize interest
income regardless of the financial condition of the obligor, even where there is
no reasonable expectancy that the Instrument will be redeemed according to its
terms. If a Fund acquires an Instrument at a discount and the terms of that
Instrument are subsequently modified, the Fund could be required to recognize
gain at the time of the modification even though no cash payments will have been
received at that time. The market discount rules, as well as certain other
provisions, may require that a portion of any gain recognized on the sale,
redemption or other disposition of an Instrument be treated as ordinary income
as opposed to capital gain. Also, under the market discount rules, if a Fund
were to receive a partial payment on an Instrument, the Fund could be required
to recognize ordinary income at the time of the partial payment, even though the
Instrument may ultimately be settled at an overall loss. As a result of these
and other rules, the Funds may be required to recognize taxable income which
they would be required to distribute, even though the underlying Instruments
have not made concurrent cash distributions to the Funds.

The body of law governing these Instruments is complex and not well developed.
Thus the Funds and their advisors may be required to interpret various
provisions of the Internal Revenue Code and Regulations and take certain
positions on the Funds' tax returns, in situations where the law is somewhat
uncertain.

At October 31, 1998, the following Funds had available capital loss
carryforwards to offset future net capital gains, to the extent provided by
regulations, through October 31, 2006:

Third Avenue Value Fund $15,833,338
Third Avenue Small-Cap Value Fund $ 592,923
Third Avenue High Yield Fund $ 50,625
Third Avenue Real Estate Value Fund $ 1,531

To the extent that capital loss carryforwards are used to offset any future
capital gains realized during the carryover period as provided by U.S. Federal
income tax regulations, no capital gains tax liability will be incurred by a
Fund for gains realized and not distributed. To the extent that capital gains
are offset, such gains will not be distributed to the shareholders.

- 24 -

<PAGE>

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.

FINANCIAL STATEMENTS

The Funds' financial statements and notes thereto appearing in their Annual
Report to Shareholders and report thereon of PricewaterhouseCoopers 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.

- 25 -

<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 obligor 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 rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "BBB" rating.

B - Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The "B"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BB" or "BB-" rating.

CCC - Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
"CCC" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "B" or "B-" rating.

CC - The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.

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.

-26 -
<PAGE>

MOODY'S INVESTORS SERVICE, INC.

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risk appear
somewhat greater than the Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment some
time in the future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present,
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements:
their future cannot be considered as well-assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing. Moody's applies numerical
modifiers: 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category,
the modifier 2 indicates a mid-range ranking, and the modifier 3
indicates that the issue ranks in the lower end of its generic rating
category.

- 27 -
<PAGE>

BOARD OF TRUSTEES

Phyllis W. Beck
Lucinda Franks
Gerald Hellerman
Marvin Moser
Myron M. Sheinfeld
Martin Shubik
Charles C. Walden
Barbara Whitman
Martin J. Whitman

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
First Data Investor Services Group, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(610) 239-4600
(800) 443-1021 (toll-free)

CUSTODIANS

Third Avenue Funds
767 Third Avenue
New York, NY 10017-2023
Phone (212) 888-5222
Toll Free (800) 443-1021
www.thirdavenuefunds.com

<PAGE>

PART C - OTHER INFORMATION

Item 23. EXHIBITS

Exhibits filed pursuant to Form N-1A:

(a) 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.

(b) By-Laws are incorporated by reference to Exhibit No.
(2) of Registration Statement No. 333-20891 filed on
January 31, 1997.

(d) Investment Advisory Contracts for THIRD AVENUE VALUE
FUND and THIRD AVENUE SMALL-CAP VALUE FUND are
incorporated by reference to Exhibit No. (5) of
Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-20891 filed March 25, 1997.
Investment Advisory Contract for the THIRD AVENUE
HIGH YIELD FUND is incorporated by reference to
Exhibit No. (5) of Post-Effective Amendment No. 3 to
the Registration Statement No. 333-20891 filed
February 9, 1998. Investment Advisory Contract for
the Third Avenue Real Estate Value Fund is
incorporated by reference to Exhibit No. (5) of Post-
Effective Amendment No. 5 to Registration Statement
No. 333-20891 filed September 11, 1998.

(e) Distribution Agreements for THIRD AVENUE VALUE FUND
and THIRD AVENUE SMALL-CAP VALUE FUND are
incorporated by reference to Exhibit No. (6) of
Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-20891 filed March 25, 1997.
Distribution Agreement for THIRD AVENUE HIGH YIELD
FUND is incorporated by reference to Exhibit No. (6)
of Post-Effective Amendment No. 3 to the Registration
Statement No. 333-20891 filed February 9, 1998.
Distribution Agreement for the THIRD AVENUE REAL
ESTATE VALUE FUND is incorporated by reference to
Exhibit No. (6) of Post-Effective Amendment No. 5 to
the Registration Statement No. 333-20891 filed
September 11, 1998.

(g) Custodian Agreements

(1) Custody Agreement between Third Avenue Trust
on behalf of THIRD AVENUE VALUE FUND and
North American Trust Company is incorporated
by reference to Exhibit No. (8)(a) of
Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-20891 filed
March 25, 1997.

(2) Custody Agreement between Third Avenue Trust
on behalf of THIRD AVENUE SMALL-CAP VALUE
Fund and Custodial Trust Company is
incorporated by reference to Exhibit No.
(8)(b) of Pre-Effective Amendment No. 1 to
the Registration Statement No. 333-20891
filed March 25, 1997.

Amendment to Custody Agreement to include
THIRD AVENUE HIGH YIELD FUND is incorporated
by reference to Exhibit No. (8)(b) of
Post-Effective Amendment No. 3 to the
Registration Statement No. 333-20891 filed
February 9, 1998.

Amendment to Custody Agreement to include
THIRD AVENUE REAL ESTATE VALUE FUND is
incorporated by reference to Exhibit No.
(8)(b) of Post-Effective Amendment No. 5 to
the Registration Statement No. 333-20891
filed September 11, 1998.

(h) (1) Transfer Agent Services Agreement for
THIRD AVENUE VALUE FUND and THIRD AVENUE
SMALL-CAP VALUE FUND is incorporated by
reference to Exhibit No. (9)(a) of
Pre-Effective Amendment No. 1 to the
Registration Statement No. 333-20891 filed
March 25, 1997.

Amendment to Transfer Agent Services
Agreement to include THIRD AVENUE HIGH YIELD
FUND is incorporated by reference to Exhibit
No. (9)(a) of Post-Effective Amendment No. 3
to the Registration Statement No. 333-20891
filed February 9, 1998.

Amendment to Transfer Agent Services
Agreement to include THIRD AVENUE REAL
ESTATE VALUE FUND is incorporated by
reference to Exhibit No. (9)(a) of
Post-

<PAGE>

Effective Amendment No. 5 to the
Registration Statement No. 333-20891 filed
September 11, 1998.

(2) Administration Agreement for THIRD
AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP
VALUE FUND is incorporated by reference to
Exhibit No. (9)(b) of Pre-Effective
Amendment No. 1 to the Registration
Statement No. 333-20891 filed March 25,
1997.

Amendment to Administration Agreement to
include Third Avenue High Yield Fund is
incorporated by reference to Exhibit No.
(9)(b) of Post-Effective Amendment No. 3 to
the Registration Statement No. 333-20891
filed February 9, 1998.

Amendment to Administration Agreement to
include Third Avenue Real Estate Value Fund
is incorporated by reference to Exhibit No.
(9)(b) of Post-Effective Amendment No. 5 to
the Registration Statement No. 333-20891
filed September 11, 1998.

(3) Accounting Services Agreement for THIRD
AVENUE VALUE FUND and THIRD AVENUE SMALL-CAP
VALUE FUND is incorporated by reference to
Exhibit No. (9)(c) of Pre-Effective
Amendment No. 1 to the Registration
Statement No. 333-20891 filed March 25,
1997.

Amendment to Accounting Services Agreement
to include THIRD AVENUE HIGH YIELD FUND is
incorporated by reference to Exhibit No.
(9)(c) of Post-Effective Amendment No. 3 to
the Registration Statement No. 333-20891
filed February 9, 1998.

Amendment to Accounting Services Agreement
to include THIRD AVENUE REAL ESTATE VALUE
Fund is incorporated by reference to Exhibit
No. (9)(c) of Post-Effective Amendment No. 5
to the Registration Statement No. 333-20891
filed September 11, 1998.

(i) (a) Opinion and Consent of Counsel regarding
the legality of the securities being issued
is incorporated by reference to Exhibit No.
(10) of Post-Effective Amendment No. 7 to
the Registration Statement No. 333-20891
filed September 17, 1998.

(j) Consent of Independent Auditors is to be filed with
Post-Effective Amendment No. 8.

(n) Financial Data Schedule is to be filed with
Post-Effective Amendment No. 8.

Item 24. Persons Controlled By or Under Common Control
with Registrant.
Not Applicable.

Item 25. Indemnification.

Reference is made to Article X of the Registrant's Trust
Instrument.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Trust's Trust Instrument, its By-Laws or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or
controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.

<PAGE>

Item 26. Business and other connections of investment adviser.

EQSF Advisers, Inc., 767 Third Avenue, New York, New York
10017-2023 provides investment advisory services to investment
companies and as of December 16, 1998 had approximately $1,702
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 27. Principal underwriters.

(a) Not Applicable.

(b) Not Applicable.

Item 28. 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, First
Data Corporation, 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.

Item 29. Management services.
None.

Item 30. Undertakings.
Not applicable

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 7 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 17th day of December, 1998.

THIRD AVENUE TRUST

Registrant

/s/ Martin J. Whitman
Martin J. Whitman, Chairman

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 7 to the Registration Statement of Third Avenue Trust has been
signed below by the following persons in the capacities and on the date
indicated.

Signature Capacity Date

/s/ MARTIN J. WHITMAN
- ---------------------
Martin J. Whitman Trustee 12/17/98

/s/ PHYLLIS W. BECK
- -------------------
Phyllis W. Beck Trustee 12/17/98

/s/ MARTIN SHUBIK
- -----------------
Martin Shubik Trustee 12/17/98

/s/ MYRON M. SHEINFELD
- ----------------------
Myron M. Sheinfeld Trustee 12/17/98

/s/ GERALD HELLERMAN
- --------------------
Gerald Hellerman Trustee 12/17/98

/s/ CHARLES C. WALDEN
- ---------------------
Charles C. Walden Trustee 12/17/98

/s/ MARVIN MOSER
- ----------------
Marvin Moser Trustee 12/17/98

/s/ BARBARA WHITMAN
- -------------------
Barbara Whitman Trustee 12/17/98

/s/ LUCINDA FRANKS
- ------------------
Lucinda Franks Trustee 12/17/98