As filed with the Securities and Exchange Commission
on December 30, 1999 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. [9]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. [10]
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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[GRAPHIC]
THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE FUND
THIRD AVENUE REAL ESTATE VALUE FUND
PROSPECTUS
==========
FEBRUARY 28, 2000
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.
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TABLE OF CONTENTS
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ABOUT THE FUNDS 1
General
Investment Philosophy
Who May Want to Invest
THIRD AVENUE VALUE FUND 2
Objective and Approach
Past Performance
Main Risks
Expenses
THIRD AVENUE SMALL-CAP VALUE FUND 4
Objective and Approach
Past Performance
Main Risks
Expenses
THIRD AVENUE REAL ESTATE VALUE FUND 6
Objective and Approach
Past Performance
Main Risks
Expenses
MANAGEMENT OF THE FUNDS 8
HOW TO PURCHASE SHARES 9
HOW TO REDEEM SHARES 12
HOW TO EXCHANGE SHARES 14
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS & TAXES 15
SHAREHOLDER SERVICES 16
FINANCIAL HIGHLIGHTS 17
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ABOUT THE FUNDS
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General
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
will 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.
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THIRD AVENUE VALUE FUND
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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
(e.g., acquisitions and recapitalizations), or yields to maturity. The Fund
invests in companies regardless of market capitalization. It also invests in
both domestic and foreign securities. The mix of the Fund's investments at any
time will depend on the industries and types of securities the Adviser believes
hold the most value.
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Fund Codes
Ticker TAVFX
CUSIP 884116104
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Past Performance
The tables below show the annual returns of Third Avenue Value Fund and compare
those returns to relevant broad measures 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 WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATTER]
1991 34.41%
1992 21.29%
1993 23.66%
1994 -1.46%
1995 31.73%
1996 21.92%
1997 23.87%
1998 3.92%
During the 9-year period in the bar chart, the highest return for a quarter was
26.98% (quarter ending March 31, 1991) and the lowest return for a quarter was
- -14.29% (quarter ending September 30, 1998).
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Average Annual Total Returns Past Past Since
for the periods ending 12/31/99 One Year 5 Years Inception
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Third Avenue Value Fund --% --% --%
S & P 500 --% --% --%
Russell 2000 --% --% --%
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. In addition to general market risks, foreign securities are subject
to risks such as currency fluctuations and controls, adverse political
developments and potentially greater illiquidity. 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.
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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 0.20%
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Total Fund Operating Expenses 1.10%
Example
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
$112 $350 $606 $1,340
3
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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 common stocks of small companies.
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Fund Codes
Ticker TASCX
CUSIP 884116203
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Past Performance
The tables below show the annual returns of Third Avenue Small-Cap Value Fund
and compares those returns to a broad measure of market performance. This
information gives some indication of the risks involved in investing in Third
Avenue Small-Cap Value Fund by showing how performance has changed from year to
year. All figures assume dividend reinvestment. As with all mutual funds, past
performance does not indicate future results.
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATTER]
1998 -2.77%
During the 2-year period shown in the bar chart, the
highest return for the quarter was --% (quarter ending ---) and the lowest
return for a quarter was -18.31% (quarter ending September 30, 1998).
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Average Annual Total Returns Past Since
for the periods ending 12/31/99 One Year Inception
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Third Avenue Small-Cap Value Fund --% --%
Russell 2000 --% --%
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4
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Main Risks
Prices of securities 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, and thus the value of the Fund's shares. 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.
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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 0.38%
- --------------------------------------------------
Total Fund Operating Expenses 1.28%
Example
The following example is intended to help you compare the cost of investing in
Third Avenue Small-Cap 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
$130 $406 $702 $1,545
5
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THIRD AVENUE REAL ESTATE VALUE FUND
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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
securities at a substantial discount to the Adviser's estimate of the issuing
company's takeover value or liquidation value.
oA 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.
oA 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.
oA 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:
oReal estate development companies (including commercial/industrial
developers and homebuilders);
oReal estate investment trusts (REITs) and master limited partnerships;
oHotel and hotel management companies;
oReal estate brokerage companies and/or management companies;
oFinancial institutions that make or service mortgage loans;
oTitle insurance companies;
oLumber, paper, forest product, timber, mining and oil companies;
oCompanies with significant real estate holdings such as supermarkets,
restaurant chains and retail chains; and
oManufacturers or distributors of construction materials and/or building
supplies.
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Fund Codes
Ticker TAREZ
CUSIP 884116401
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Past Performance
The tables below show the annual return of Third Avenue Real Estate Value Fund
for its only full calendar year of performance. This information gives some
indication of the risks involved in investing in the Fund by comparing the
return to a broad measure of market performance. You should be aware that the
performance of Third Avenue Real Estate 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. As with all mutual funds, past performance
does not indicate future results.
6
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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:
ooverbuilding and increased competition;
oincreases in property taxes and operating expenses;
ochanges in zoning laws;
ocasualty or condemnation losses;
ovariations in rental income;
ochanges in neighborhood values; and
othe 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.
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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 4.48%**
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Total Fund Operating Expenses 5.38%**
* 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 1.87% of
Fund assets and has agreed, effective October 15, 1999 to reimburse the Fund for
all expenses incurred by the Fund in excess of 1.5% of Fund assets. The Fund
will repay the Adviser the amount of its reimbursement for up to three years
following the reimbursement to the extent Fund expenses drop below 1.5%. 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. Other expenses are based on estimated amounts for the current
fiscal year.
Example
The following example is intended to help you compare the cost of investing in
Third Avenue Real Estate 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
$637 $1,605 $2,665 $5,279
You would pay the following expenses if you did not redeem your shares:
Year 1 Year 3 Year 5 Year 10
$537 $1,605 $2,665 $5,279
7
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MANAGEMENT OF THE FUNDS
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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.
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 the Funds paid the Adviser a fee equal to .90% of its average daily net
assets for the fiscal year ended October 31, 1999.
8
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HOW TO PURCHASE SHARES
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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, together with your payment for the shares, to
the Funds' transfer agent:
PFPC, Inc.
211 South Gulph Rd.
P.O. Box 61767
King of Prussia, PA 19406
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.
9
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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 Accout (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 you, will be deducted from your 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 broker-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 only accept checks drawn in U.S.
currency on a domestic bank. 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 the purchase date.
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.
10
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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 PFPC, Inc.
211 South Gulph Rd.
P.O. Box 61767
King of Prussia, PA 19406
Additional Payments
Additional payments, together with the payment stub from your account statement,
should be sent to:
Third Avenue Funds
c/o PFPC, Inc.
P.O. Box 412797
Kansas City, MO 64141-2797
Paying for Shares by Wire
Prior to sending wire instructions, notify PFPC, Inc. at (800) 443-1021, Option
2 to insure proper credit to your account.
Direct your bank to wire funds as follows:
Boston Safe Deposit & Trust
ABA #: 011001234
Acct#: 003514
For further credit to: Third Avenue Value Fund, Third Avenue Small-Cap Value
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.
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Individual Retirement Accounts
The Funds' IRA application and additional forms required may be obtained by
contacting PFPC, Inc. 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.
11
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HOW TO REDEEM SHARES
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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 received in proper form 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, but if you retain shares with a value
of less than $500 ($200 for IRAs) your account will be closed.
By Mail
Send a written request, together with any share certificates that have been
issued, to:
PFPC, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
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 on any business day by calling PFPC, Inc. at
(800) 443-1021, Option 2, prior to 4:00 PM Eastern time.
The Funds and PFPC, Inc. will not be liable for following telephone instructions
reasonably believed to be genuine. In this regard, PFPC, Inc. 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 payment for 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 the purchase date.
Wired Proceeds
If you request payment of redemption proceeds by wire transfer, payment will be
transmitted only on days that commercial banks 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.
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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 share holder, 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 PFPC, Inc. 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 PFPC, Inc. Notice of all changes concerning the Systematic
Withdrawal Plan must be received by PFPC, Inc. 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 PFPC, Inc. at (800)
443-1021, Option 2.
Early Redemption Fee
If you redeem or exchange shares of 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 this Fund, to avoid transaction and other expenses caused by early
redemptions, and to facilitate portfolio management. The fee is not a deferred
sales charge, is not a commission paid to the Adviser, and does not benefit the
Adviser in any way. The Fund reserves the right to modify the terms of or
terminate this fee at any time. The fee applies to redemptions from the Fund
and exchanges to other Third Avenue Funds, but not to dividend or capital gains
distributions which have been automatically reinvested in the Fund. The fee is
applied to the shares 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.
13
<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 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.
14
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS & 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.
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.
15
<PAGE>
SHAREHOLDER SERVICES
================================================================================
Each Fund provides you with helpful services and information about your account.
oA statement after every transaction.
oAn annual account statement reflecting all transactions for the year.
oTax information mailed by January 31 of each year, a copy of which will
also be filed with the Internal Revenue Service.
oThe financial statements of the Fund with a summary of portfolio
composition and performance, mailed at least twice a year.
oThe Funds intend to continue to mail to shareholders quarterly reports
containing the Portfolio Managers' letters and a summary of portfolio changes,
composition and performance.
o24 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,
PFPC, Inc., 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 PFPC, Inc. 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 PFPC, Inc. 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 PFPC, Inc. 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."
16
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The following Financial Highlights tables are intended to help you understand
each Fund's financial performance, 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, 1999, the end of each Funds' most recent fiscal year. Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate that an investor would have earned or
lost on an investment in a Fund (assuming reinvestment of all 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, 1999 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 1999 Annual Report to Shareholders, which is available upon request.
THIRD AVENUE VALUE FUND: Selected Data and Ratios
<TABLE>
<CAPTION>
(Years Ended October 31,)
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning Of Period $30.16 $31.94 $24.26 $21.53 $18.01
------ ------ ------ ------ ------
Income From Investment Operations:
Net investment income .47 .48 .48 .53 .38
Net gain (loss) on securities
(both realized and unrealized) 4.59 (1.69) 7.92 2.76 3.53
------ ------ ------ ------ ------
Total from Investment Operations 5.06 (1.21) 8.40 3.29 3.91
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income) (.40) (.41) (.57) (.41) (.25)
Distributions (from capital gains) -- (.16) (.15) (.15) (.14)
------ ------ ------ ------ ------
Total Distributions (.40) (.57) (.72) (.56) (.39)
------ ------ ------ ------ ------
Net Asset Value, End Of Period $34.82 $30.16 $31.94 $24.26 $21.53
====== ====== ====== ====== ======
Total Return 16.89% (3.86%) 35.31% 15.55% 22.31%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $1,340,272 $1,540,711 $1,646,240 $566,847 $312,722
Ratio of Expenses to Average
Net Assets 1.10% 1.08% 1.13% 1.21% 1.25%
Ratio of Net Income to Average
Net Assets 1.27% 1.44% 2.10% 2.67% 2.24%
Portfolio Turnover Rate 5% 24% 10% 14% 15%
</TABLE>
17
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
THIRD AVENUE SMALL-CAP VALUE FUND: Selected Data And Ratios
<TABLE>
<CAPTION>
(Years Ended Period from
October 31, April 1, 1997*
1999 1998 to October 31, 1997
<S> <C> <C> <C>
Net Asset Value, Beginning Of Period $10.66 $12.37 $10.00
Income From Investment Operations:
Net investment income .09 .08 .05
Net gain (loss) on securities
(both realized and unrealized) .67 (1.73) 2.32
------ ------ ------
Total from Investment Operations .76 (1.65) 2.37
------ ------ ------
Less Distributions:
Dividends from net investment income (.09) (.06)
------ ------ ------
Total Distributions (.09) (.06)
------ ------ ------
Net Asset Value, End Of Period $11.33 $10.66 $12.37
====== ====== ======
Total Return 7.12% (13.36)% 23.70%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $121,895 $139,557 $107,256
Ratio of Expenses to Average Net Assets 1.28% 1.28% 1.65%(2)
Ratio of Net Income to Average Net Assets 0.72% 0.72% 1.44%(2)
Portfolio Turnover Rate 10% 6% 7%(1)
</TABLE>
* Commencement of investment operations
(1) Not Annualized
(2) Annualized
18
<PAGE>
================================================================================
THIRD AVENUE REAL ESTATE VALUE FUND: Selected Data And Ratios
<TABLE>
<CAPTION>
Year Ended Period from September 17, 1998*
October 31, 1999 to October 31, 1998
<S> <C> <C>
Net Asset Value, Beginning Of Period $10.28 $10.00
------ ------
Income From Investment Operations:
Net investment income .20 .02
Net gain on securities (both realized and unrealized) .71 .26
------ ------
Total from Investment Operations .91 .28
------ ------
Less Distributions:
Dividends from net investment income (.10) --
------ ------
Total Distributions (.10) --
------ ------
Net Asset Value, End Of Period $11.09 $10.28
====== ======
Total Return 8.86% 2.80%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $8,312 $713
Ratio of Expenses to Average Net Assets
Before expense reimbursement 5.38% 81.89%(2)
After expense reimbursement 1.87% 1.90%(2)
Ratio of Net Income to Average Net Assets
Before expense reimbursement (0.31%) (77.33%)(2)
After expense reimbursement 3.20% 2.66%(2)
Portfolio Turnover Rate 5% 0%(1)
</TABLE>
* Commencement of investment operations
(1) Not Annualized
(2) Annualized (Note that annualized expense and income (loss) before expense
reimbursement are not neccessarily indicative of expected expenses due to
the annualization of certain fund expenses.)
19
<PAGE>
Board of Trustees
Phyllis W. Beck
Lucinda Franks
Gerald Hellerman
Marvin Moser
Donald Rappaport
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
PFPC, Inc.
211 Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
(610) 239-4600
(800) 443-1021 (toll-free)
Custodian
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231Third Avenue Funds
[GRAPHIC]
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' performances 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 site (http://www.sec.gov).
SEC file number 811-8039
<PAGE>
[GRAPHIC OMITTED]
STATEMENT OF ADDITIONAL INFORMATION
Dated February 28, 2000
THIRD AVENUE TRUST
THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE 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, 2000. 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
ADMINISTRATORS 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
SHARE INFORMATION 25
PERFORMANCE INFORMATION 25
FINANCIAL STATEMENTS 26
APPENDIX 27
- 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, non-diversified management investment company which
currently consists of three separate investment series: Third Avenue Value Fund,
Third Avenue Small-Cap Value 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 Prospectus discusses the investment objectives of the Funds and the
principal strategies to be employed to achieve those objectives. This section
contains supplemental information concerning certain types of securities and
other instruments in which the Funds may invest, additional strategies that the
Funds may utilize and certain risks associated with such investments and
strategies.
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 generally 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
service1 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.
- 3 -
<PAGE>
Investing in common stock has certain risks, including the risk that the
financial condition of the issuers of the Funds' securities may become impaired
or that the general condition of the stock market may worsen (both of which may
contribute directly to a decrease in the value of the securities and thus in the
value of the Funds' shares). Common stocks are especially susceptible to general
stock market movements and to increases and decreases in value as market
confidence in and perceptions of the issuers change. These perceptions are based
on unpredictable factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, and global or regional political, economic or banking crises.
The value of the common stocks owned by the Funds thus may be expected to
fluctuate.
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. Preferred stocks are usually entitled to rights on
liquidation which are senior to those of common stocks. For these reasons,
preferred stocks generally entail less risk than common stocks of the same
issuer. Such securities may pay cumulative dividends. Because the dividend rate
is pre-established, and as they are senior to common stocks, such securities
tend to have less possibility of capital appreciation.
Although the Adviser does not pay attention to market factors in making
investment decisions, the Funds are, of course, subject to the vagaries of the
markets. In particular, small-cap stocks have less market liquidity and tend to
have more price volatility than larger capitalization stocks.
Investment In Debt Securities
Each of Third Avenue Value Fund and Third Avenue 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 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 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
- 4 -
<PAGE>
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. Convertible securities generally are subordinated to
other similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in right of
payment to all equity securities, and convertible preferred stock is senior to
common stock of the same issuer. However, because of the subordination feature,
convertible bonds and convertible preferred stock typically have lower ratings
than similar non-convertible securities.
Mortgage-Backed Securities
Third Avenue Value Fund and Third Avenue Real Estate Value Fund may invest in
mortgage-backed securities and derivative mortgage-backed securities, but do not
intend to invest in "principal only" and "interest only" components.
Mortgage-backed securities are securities that directly or indirectly represent
a participation in, or are secured by and payable from, mortgage loans on real
property. Those Funds intend to invest in these securities only when they
believe, after analysis, that there is unlikely to ever be permanent impairment
of capital as measured by whether there will be a money default by either the
issuer or the guarantor of these securities. These securities do, nonetheless,
entail considerable market risk (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 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
Third Avenue Value 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
Third Avenue Value Fund may invest in debt securities with interest payments or
maturity values that are not fixed, but float in conjunction with (or inversely
to) an underlying index or price. These securities may be backed by U.S.
Government or corporate issuers, or by collateral such as mortgages. The indices
and prices upon which such securities can be based include interest rates,
currency rates and commodities prices. However, the Fund will not invest in any
instrument whose value is computed based on a multiple of the change in price or
value of an asset or an index of or relating to assets in which the Fund cannot
or will not invest.
- 5 -
<PAGE>
Floating rate securities pay interest according to a coupon which is reset
periodically. The reset mechanism may be formula based, or reflect the passing
through of floating interest payments on an underlying collateral pool. Inverse
floating rate securities are similar to floating rate securities except that
their coupon payments vary inversely with an underlying index by use of a
formula. Inverse floating rate securities tend to exhibit greater price
volatility than other floating rate securities.
The Fund does not intend to invest more than 5% of its total assets in inverse
floating rate securities. Floating rate obligations generally exhibit a low
price volatility for a given stated maturity or average life because their
coupons adjust with changes in interest rates. Interest rate risk and price
volatility on inverse floating rate obligations can be high, especially if
leverage is used in the formula. Index securities pay a fixed rate of interest,
but have a maturity value that varies by formula, so that when the obligation
matures a gain or loss may be realized. The risk of index obligations depends on
the volatility of the underlying index, the coupon payment and the maturity of
the obligation.
Investment In High Yield Debt Securities
Third Avenue Value Fund 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
("Standard & Poor's") and unrated debt securities, commonly referred to as "junk
bonds". 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
- 6 -
<PAGE>
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 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 may invest in zero coupon and pay-in-kind ("PIK")
securities. Zero coupon securities are debt securities that pay no cash income
but are sold at substantial discounts from their value at maturity. PIK
securities pay all or a portion of their interest in the form of additional debt
or equity securities. Because such securities do not pay current cash income,
the price of these securities can be volatile when interest rates fluctuate.
While these securities do not pay current cash income, federal income tax law
requires the holders of zero coupon and PIK securities to include in income each
year the portion of the original issue discount (or deemed discount) and other
non-cash income on such securities accrued during that year. In order to
continue to qualify for treatment as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "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 and Third Avenue Real Estate Value Fund may invest in
loans and other direct debt instruments owed by a borrower to another party.
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
Third Avenue Value Fund may invest in trade claims. Trade claims are interests
in amounts owed to suppliers of goods or services and are purchased from
creditors of companies in financial difficulty. For purchasers such as 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.
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<PAGE>
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 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 hedge) 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 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. The sale of illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of
- 8 -
<PAGE>
securities eligible for trading on national securities exchanges or in the
over-the-counter markets. Restricted securities may sell at a price lower than
similar securities that are not subject to restrictions on resale.
Over the past several years, strong institutional markets have developed for
various types of restricted securities, including repurchase agreements,
commercial paper, and some corporate bonds and notes. Securities freely salable
among qualified institutional investors under special rules adopted by the SEC
or otherwise determined to be liquid, may be treated as liquid if they satisfy
liquidity standards established by the Board of Trustees. The continued
liquidity of such securities is not as well assured as that of publicly traded
securities, and accordingly the Board of Trustees will monitor their liquidity.
The Board will review pertinent factors such as trading activity, reliability of
price information and trading patterns of comparable securities in determining
whether to treat any such security as liquid for purposes of the foregoing 15%
test. To the extent the Board treats such securities as liquid, temporary
impairments to trading patterns of such securities may adversely affect the
Fund's liquidity.
Investment In Relatively New Issues
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. 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. The securities of
such issuers may have a limited trading market which may adversely affect their
disposition and can result in their being priced lower than might otherwise be
the case. If other investors who invest in such issuers trade the same
securities when a Fund attempts to dispose of its holdings, the Fund may receive
lower prices than might otherwise be the case.
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 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.
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<PAGE>
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 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 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.
If the borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates and the Portfolio could use the collateral to replace
the securities while holding the borrower liable for any excess of replacement
cost over the value of the collateral. As with any extension of credit, there
are risks of delay in recovery and in some cases even loss of rights in
collateral should the borrower of the securities fail financially.
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 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's portfolio turnover rate for the years ended
October 31, 1998 and 1999 was 24% and 5%, respectively. Third Avenue Small-Cap
Value Fund's portfolio turnover rate for the years ended October 31, 1998 and
1999 was 6% and 10%. The portfolio turnover rate for Third Avenue Real Estate
Value Fund for the period ended October 31, 1998 was 0% and for the year ended
October 31, 1999 was 5%.
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<PAGE>
Short Sales
Third Avenue Small-Cap Value 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 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.
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:
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<PAGE>
1. Make short sales of securities or maintain a short position.
2. Buy or sell commodities or commodity contracts, futures contracts or
real estate or interests in real estate, although it may purchase and
sell securities which are secured by real estate and securities of
companies which invest or deal in real estate.
3. Invest in securities of other investment companies if the Fund, after
such purchase or acquisition owns, in the aggregate, (i) more than 3%
of the total outstanding voting stock of the acquired company; (ii)
securities issued by the acquired company having an aggregate value in
excess of 5% of the value of the total assets of the Fund, or (iii)
securities issued by the acquired company and all other investment
companies (other than treasury stock of the Fund) having an aggregate
value in excess of 10% of the value of the total assets of the Fund.
4. Participate on a joint or joint and several basis in any trading
account in securities.
5. Make loans, except through (i) the purchase of bonds, debentures,
commercial paper, corporate notes, and similar evidences of
indebtedness of a type commonly sold to financial institutions, and
(ii) repurchase agreements . The purchase of a portion of an issue of
securities described under (i) above distributed publicly, whether or
not the purchase is made on the original issuance, is not considered
the making of a loan.
Each Fund is required to comply with the above fundamental investment
restrictions applicable to it only at the time the relevant action is taken. A
Fund is not required to liquidate an existing position solely because a change
in the market value of an investment or a change in the value of the Fund's net
or total assets causes it not to comply with the restriction at a future date. A
Fund will not purchase any portfolio securities while any borrowing exceeds 5%
of its total assets.
Management of the Trust
The Board of Trustees of the Funds oversees 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; detemining 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*(1) 73 Trustee An Associate Judge (1981 to Present) of the
GSB Bldg. Suite 800 Superior Court of Pennsylvania; Trustee of Third
City Line & Belmont Ave. Avenue Variable Series Trust (1999 to Present);
Bala Cynwyd, PA 19004-1611 Trustee or Director of the Trust or its
predecessor since November, 1992.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LUCINDA FRANKS 53 Trustee Journalist (1969 to Present); Author "Wild
64 East 86th Street Apples" (1990), "Waiting Out a War; The Exile of
New York, NY 10028 Private John Picciano (1974); Winner of the 1971
Pulitzer Prize for Journalism; Trustee of Third
Avenue Variable Series Trust (1999 to Present);
Trustee of the Trust since February, 1998.
GERALD HELLERMAN 62 Trustee
10965 Eight Bells Lane Managing Director (8/93 to Present) of Hellerman
Columbia, MD 21044 Associates, a financial and corporate consulting
firm; Chief Financial Analyst (1976 to 7/93) of the
Antitrust Division of U.S. Department of Justice;
Director of Clemente Global Strategic Value Fund (9/98
to Present); Trustee of Third Avenue Variable
Series Trust (1999 to Present); Trustee or Director
of the Trust or its predecessor since September,
1993.
MARVIN MOSER, M.D. 76 Trustee Trustee (1992 to Present) of the Trudeau
13 Murray Hill Road Institute, a medical research institute; Clinical
Scarsdale, NY 10583 Professor of 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
of Third Avenue Variable Series Trust (1999 to
Present); Trustee or Director of the Trust or its
predecessor since November, 1994.
DONALD RAPPAPORT 73 Trustee Private investor and consultant (1987 to May, 1997
1619 31st Street, N.W. and May, 1999 to Present); Chief Financial and
Washington, D.C. 20007 Chief Information Officer for the U.S. Department
of Education (May, 1997 to May, 1999); President
and Chief Operating Officer (3/90 to 12/90) of
Third Avenue Value Fund, Inc. and Equity
Strategies Fund, Inc. (1984 to 12/90); Director
(1987 to 4/94) of Equity Strategies Fund, Inc.;
President (1989 to 12/90) of Whitman Advisors,
Ltd., an investment adviser; Registered Securities
Representative (1989 to 1991) of M.J. Whitman &
Co., Inc. a former broker-dealer; Trustee of Third
Avenue Variable Series Trust (1999 to Present);
Trustee or Director of the Trust or its
predecessor from November, 1991 to May, 1997 and
since June, 1999.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MYRON M. SHEINFELD 69 Trustee Counsel to (12/96 to present) and Attorney and
1001 Fannin St., Suite 3700 Shareholder (1968 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; Director (11/98 to present) of Anchor
Glass Container Corp.; 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 of Third Avenue Variable Series Trust (1999
to Present); Trustee or Director of the Trust or
its predecessor since its inception.
MARTIN SHUBIK 73 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 of Third Avenue
New Haven, CT 06520 Variable Series Trust (1999 to Present); Trustee or
Director of the Trust or its predecessor since its
inception.
CHARLES C. WALDEN 55 Trustee Executive Vice-President--Investments (1973 to
11 Williamsburg Circle Present) (Chief Investment Officer) of Knights of
Madison, CT 06443 Columbus, a fraternal benefit society selling life
insurance and annuities; Chartered Financial
Analyst; Trustee of Third Avenue Variable Series
Trust (1999 to Present); Trustee or Director of the
Trust or its predecessor since May, 1996.
BARBARA WHITMAN*(1) 41 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 Third
Avenue Variable Series Trust (1999 to Present);
Trustee of the Trust since September, 1997.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARTIN J. WHITMAN*(1) 75 Chairman, Chairman and CEO (3/90 to Present), President (1/91
767 Third Avenue Chief to 5/98), of the Trust; Chairman and CEO (3/90 to
New York, NY 10017-2023 Executive Present), President (1/91 to 2/98), of EQSF
Officer, and Advisers, Inc.; Chairman, CEO (1/1/95 to Present),
Trustee President (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; Chairman of
the Board and Trustee of Third Avenue Variable
Series Trust (1999 to Present); Trustee or Director
of the Trust or its predecessor since its
inception; Chartered Financial Analyst.
DAVID M. BARSE 37 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 (COO) Present) of Danielson Holding Corporation;
Director (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.;
President (6/99 to Present) of Third Avenue
Variable Series Trust; 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>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MICHAEL CARNEY 46 Treasurer, Treasurer and CFO of the Trust (3/90 to Present);
767 Third Avenue Chief Treasurer and CFO (6/99 to Present) of Third Avenue
New York, NY 10017-2023 Financial Variable Series Trust; Director (1/1/95 to
Officer Present), Executive Vice President, Chief Financial
(CFO) Officer (6/29/95 to Present) of MJWHC and of M.J.
Whitman, Inc.; Treasurer, Director (1/1/95 to
Present), Executive 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 32 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.; Assistant
Treasurer (6/99 to Present) of Third Avenue
Variable Series Trust; Controller (8/96 to
Present), of Danielson Holding Corp.; Controller
(5/96 to Present) and Assistant Controller (1/95 to
5/96) of Whitman Heffernan & Rhein Workout Fund II,
L.P. and Whitman Heffernan & Rhein Workout Fund
II-A, L.P.; Controller (5/96 to Present) of WHR
Management Corp.; Controller (5/96 to present),
Assistant Controller (1/93 to 5/96) and Staff
Accountant (5/91 to 12/92), of Whitman Heffernan
Rhein & Co., Inc.; Controller (5/96 to Present) of
Martin J. Whitman & Co., Inc.; Assistant Controller
(10/94 to 4/96) of Longstreet Investment Corp and
Emerald Investment Partners, L.P.; Assistant
Controller (1/93 to 4/94) and Staff Accountant
(1/92 to 12/92) of Equity Strategies Fund, Inc.;
Payroll manager (5/91 to 12/93) of M.J. Whitman,
L.P.
</TABLE>
- 16 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
IAN M. KIRSCHNER 44 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.; General Counsel
and Seceretary (6/99 to Present) of Third Avenue
Variable Series Trust; 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>
(1) Phyllis W. Beck is the sister of Martin J. Whitman, Chairman, Chief
Exectuive Officer and a Trustee of the Trust and the Aunt of Barbara Whitman, a
Trustee of the Trust; Barbara Whitman is the daughter of Martin J. Whitman.
The Trust does not pay any fees to its officers for their services as such, but
does pay Trustees who are not affiliated with the Investment Adviser a fee of
$1,500 per Fund for each meeting of the Board of Trustees that they attend, in
addition to reimbursing all Trustees for travel and incidental expenses incurred
by them in connection with their attendance at Board meetings. The Trust also
pays the non-interested Trustees an annual stipend of $2,000 per Fund in January
of each year for the previous year's service. The Trust paid Trustees in the
aggregate, $229,735 in such fees and expenses for the year ended October 31,
1999. Trustees do not receive any pension or retirement benefits.
For the fiscal year ended October 31, 1999, the aggregate amount of compensation
paid to each Trustee by the Trust is listed below.
Compensation Table
<TABLE>
<CAPTION>
Aggregate Compensation From Total Compensation From
Registrant for Fiscal Year Ended Registrant and Fund Complex Paid
Name and Position Held October 31, 1999* to Trustees*
---------------------- ----------------- ------------
<S> <C> <C>
Phyllis W. Beck, Trustee $ 0 $ 0
Lucinda Franks, Trustee $34,278 $34,278
Gerald Hellerman, Trustee $34,278 $35,778
Marvin Moser, M.D., Trustee $34,278 $35,778
Donald Rappaport, Trustee $15,333 $16,833
Myron M. Sheinfeld, Trustee $32,778 $34,278
Martin Shubik, Trustee $34,278 $35,778
Charles C. Walden, Trustee $34,278 $35,778
Barbara Whitman, Trustee $ 0 $ 0
Martin J. Whitman, Chairman $ 0 $ 0
and Chief Executive Officer
</TABLE>
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $10,234 for all Trustees as a group.
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 and Third Avenue Real Estate Value
Fund as of December 13, 1999:
- 17 -
<PAGE>
Third Avenue Value Fund
<TABLE>
<CAPTION>
Percentage of
Name and Address Third Avenue Value Fund Number of Shares
- ---------------- ----------------------- ----------------
<S> <C> <C>
Charles Schwab & Co., Inc.(2) 41.14% 15,794,908
101 Montgomery Street
San Francisco, CA 94104
National Financial Securities Corp.(3) 10.19%
P.O. Box 3908 3,913,502
Church Street Station
New York, NY 10008-3908
Donaldson Lufkin & Jenrette Securities 9.25% 3,543,142
Corporation3
Mutual Funds Dept. 5th Floor
P.O. Box 2052
Jersey City, NJ 07303
5.93% 2,272,663
Bear Stearns Securities Corp.(4)
One Metrotech Center North
Brooklyn, NY 11201-3859
<CAPTION>
Third Avenue Small-Cap Value Fund
Percentage of
Third Avenue
Name and Address Small-Cap Value Fund Number of Shares
- ---------------- -------------------- ----------------
<S> <C> <C>
Charles Schwab & Co., Inc.(2) 31.37% 3,225,412
101 Montgomery Street
San Francisco, CA 94104
National Financial Securities Corp.(3) 18.18% 1,868,829
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Bear Stearns Securities Corp.(4) 8.66% 890,846
One Metrotech Center North
Brooklyn, NY 11201-3859
<CAPTION>
Third Avenue Real Estate Value Fund
Percentage of
Third Avenue
Name and Address Real Estate Value Fund Number of Shares
- ---------------- ---------------------- ----------------
<S> <C> <C>
Bear Stearns Securities Corp.(4) 27.49% 221,186
One Metrotech Center North
Brooklyn, NY 11201-3859
</TABLE>
- 18 -
<PAGE>
<TABLE>
<S> <C> <C>
First Union Natinal Bank 16.11% 129,558
FBO Bernard Rotko
1525 W. WT Harris Blvd # 1151
Charlotte, NC 28262-8522
12.55% 100,896
Charles Schwab & Co., Inc.(2)
101 Montgomery Street
San Francisco, CA 94104
5.74% 46,126
National Financial Securities Corp.(3)
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
</TABLE>
2 Charles Schwab & Co., Inc. is a discount broker-dealer acting as a nominee
for registered investment advisers whose clients have purchased shares of
the Fund, and also holds shares for the benefit of its clients.
3 Donaldson Lufkin & Jenrette Securities Corporation and National Financial
Services Corp. are broker-dealers holding shares for the benefit of their
respective clients.
4 Bear Stearns Securities Corp. is a broker-dealer holding shares for the
benefit of its clients, including, at such time, clients of MJW, the Funds'
affiliated broker-dealer, principal underwriter and distributor.
The officers and Trustees of the Funds own in the aggregate ____% of Third
Avenue Value Fund, ____% of Third Avenue Small-Cap Value 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 74%
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:
<TABLE>
<CAPTION>
Capacity With Funds Capacity With Adviser
------------------- ---------------------
<S> <C> <C>
Martin J. Whitman Chairman and Chief Executive Chairman and Chief Executive
Officer Officer
David M. Barse President, Chief Operating Officer President, Chief Operating Officer, Director
Michael Carney Treasurer, Chief Financial Officer Treasurer, Chief Financial Officer
Ian M. Kirschner General Counsel and Secretary General Counsel and Secretary
Kerri Weltz Assistant Treasurer Assistant Treasurer
Barbara Whitman Trustee Director
</TABLE>
Investment Advisory Agreement
The investment advisory services of the Adviser are furnished to each of 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.
- 19 -
<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, 1999, 1998 and 1997, Third Avenue Value Fund paid investment
advisory fees to the Adviser of $12,805,667, $15,893,039, and $9,303,435,
respectively. During the fiscal years ended October 31, 1999 and 1998 and the
period from inception to October 31, 1997, Third Avenue Small-Cap Value Fund
paid investment advisory fees to the Adviser of $1,247,500, $1,248,794, and
$252,298, respectively. During the fiscal year ended October 31, 1999 and the
period from inception to October 31, 1998, Third Avenue Real Estate Value Fund
paid investment advisory fees to the Adviser of $47,874 and $568, respectively.
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 and
fees of outside Trustees 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, the normal operating expenses, including the investment
advisory fee, but excluding brokerage commissions and interest and taxes, of
Third Avenue Value Fund or Third Avenue Small-Cap Value Fund 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. Under current arrangements, whenever in any fiscal
year, the normal operating expenses, including the investment advisory fee, but
excluding brokerage commissions and interest and taxes, of Third Avenue Real
Estate Value Fund exceeds 1.5% of average daily net assets of the Fund, 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.
- 20 -
<PAGE>
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.
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 a Services Agreement (the "Services Agreement") with
PFPC Inc. ("PFPC"). The Services Agreement provides that PFPC shall provide
certain accounting, transfer agency and shareholder 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 Services
Agreement has an initial three 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 PFPC an amount equal to
$[186,000] per annum plus .01% of aggregate assets of the Funds in excess of $1
billion. The Funds have entered into an Administration Agreement (the
"Administration Agreement") with the Adviser, which provides that the Adviser
shall provide all other adminsitrative services to the Funds other than those
relating to the investment portfolio of the Funds, the distribution of the Funds
and the maintenance of the Funds' financial records and those performed by PFPC
under the Services Agreement. The Adviser has entered into a Sub-Administration
Agreement with PFPC pursuant to which PFPC performs certain of those services on
behalf of the Adviser. The Administration Agreement has an initial three 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 the Adviser an amount equal to ___________. During the fiscal year
ended October 31, 1999 (the first year in which the Administration Agreement was
in effect) the Funds paid fees to the Adviser for these services in the
following amounts: Third Avenue Value Fund $2,164, Third Avenue Small-Cap Value
Fund $201, and Third Avenue Real Estate Value Fund $13. During the fiscal years
ended October 31, 1999 and 1998, Third Avenue Value Fund paid fees to PFPC of
$201,570 and $236,033, respectively, for its services. During the fiscal years
ended October 31, 1999 and 1998, Third Avenue Small-Cap Value Fund paid fees to
PFPC of $16,926 and $18,586, respectively, for its services. During the fiscal
year ended October 31, 1999 and the period from inception to October 31, 1998,
Third Avenue Real Estate Value Fund paid fees to PFPC of $12,195 and $1,434,
respectively for its services.
Custodian
Custodial Trust Company, 101 Carnegie Center, Princeton, NJ 08540-6231, serves
as custodian for the Funds pursuant to a custodian agreement. Under such
agreement, the Custodian (1) maintains a separate account or accounts in the
name of each Fund; (2) holds and transfers portfolio securities on account of
each Fund; (3) accepts receipts and makes disbursements of money on behalf of
each Fund; (4) collects and receives all income and other payments and
distributions on account of each Fund's securities; and (5) makes periodic
reports to the Board of Trustees concerning each Fund's operations.
- 21 -
<PAGE>
Transfer Agent
PFPC, Inc., 211 South Gulph Road, P.O. Box 61767, King of Prussia, PA 19406, 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
accoutants 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.
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
- 22 -
<PAGE>
each transaction. However, consideration is regularly given to information
concerning the prevailing level of commissions charged on comparable
transactions by other qualified brokers.
The Trustees from time to time, at least on a quarterly basis, will review,
among other things, all the Funds' portfolio transactions including information
relating to the commissions charged by MJW and Senior Debt Corp. to the Funds
and to their other customers, and information concerning the prevailing level of
commissions charged by other qualified brokers. In addition, the procedures
pursuant to which MJW and Senior Debt Corp. effects brokerage transactions for
the Funds must be reviewed and approved no less often than annually by a
majority of the disinterested Trustees.
The Adviser expects that it will execute a portion of the Funds' transactions
through qualified brokers other than MJW and Senior Debt Corp. In selecting such
brokers, the Adviser will consider the quality and reliability of the brokerage
services, including execution capability and performance, financial
responsibility, and investment information and other research provided by such
brokers. Accordingly, the commissions charged by any such broker may be greater
than the amount another firm might charge if management of the Trust determines
in good faith that the amount of such commissions is reasonable in relation to
the value of the brokerage services and research information provided by such
broker to the Funds. Management of the Trust believes that the research
information received in this manner provides the Funds with benefits by
supplementing the research otherwise available to the Funds. Over-the-counter
purchases and sales will be transacted directly with principal market makers,
except in those circumstances where the Funds can, in the judgment of their
management, otherwise obtain better prices and execution of orders.
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, 1999, Third Avenue Value Fund incurred
total brokerage commissions of $1,071,112, of which approximately $672,971 (or
63%) was paid to MJW. 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%) was paid to MJW and $18,047 (or 3%) was paid to
Senior Debt Corp.
For the fiscal year ended October 31, 1999, Third Avenue Small-Cap Value Fund
incurred total brokerage commissions of $78,630 of which approximately $61,498
(or 78%) was paid to MJW. 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 fiscal year ended October 31, 1999, Third Avenue Real Estate Value Fund
incurred total brokerage commissions of $28,707 of which approximately $25,568
(or 89%) 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.
- 23 -
<PAGE>
These amounts include fees paid by MJW to its clearing agents. Commissions paid
by the Funds to MJW are paid at an average discount of at least 20% to the
normal fees charged by MJW.
For the fiscal year ended October 31, 1999, Third Avenue Value Fund effected 38%
of its total transactions for which commissions were paid through MJW. For the
fiscal year ended October 31, 1999, Third Avenue Small-Cap Value Fund effected
45% of its total transactions for which commissions were paid through MJW. For
the fiscal year ended October 31, 1999, Third Avenue Real Estate Value Fund
effected 80% of its total transactions for which commissions were paid through
MJW.
At October 31, 1999, 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 $21,996,562 at October 31, 1999).
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.
For purposes of determining a Fund's net asset value per share, readily
marketable portfolio securities listed on the NYSE are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the NYSE on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the mean of the closing bid and asked prices on such day. If no bid or asked
prices are quoted on such day, then the security is valued by such method as the
Board of Trustees shall determine in good faith to reflect its fair market
value. Readily marketable securities not listed on the NYSE but listed on
- 24 -
<PAGE>
other national securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. ("NASDAQ") National
List are valued in a like manner. Portfolio securities traded on more than one
national securities exchange are valued at the last sale price on the business
day as of which such value is being determined as reflected on the tape at the
close of the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Trustees deems appropriate to reflect their fair value.
United States Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Trustees. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Funds' Board of
Trustees designed to reflect in good faith the fair value of such securities.
As indicated in the Prospectus, the net asset value per share of the Funds'
shares will be determined on each day that the NYSE is open for trading. The
NYSE annually announces the days on which it will not be open for trading; the
most recent announcement indicates that it will not be open on the following
days: New Year's Day, President's Day, Martin Luther King, Jr. Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, the NYSE may close on days not included in that announcement.
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. If for any taxable year a Fund does
not qualify for the special tax treatment afforded regulated investment
companies, all of its taxable income, including any net capital gains, would be
subject to tax at regular corporate rates (without any deduction for
distributions to 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 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.
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<PAGE>
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, 1999, Third Avenue Small-Cap Value Fund had $69,341 of available
capital loss carryforwards to offset future net capital gains, to the extent
provided by regulations, through October 31, 2006. 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.
Share Information
All shares of the Funds have one vote and when duly issued will be fully paid
and non-assessable. Shares have no preemptive, subscription or conversion rights
and are freely transferable. The Trustees are authorized to re-classify and
issue any unissued shares to any number of additional series without shareholder
approval. Accordingly, the Trustees in the future, for reasons such as the
desire to establish one or more additional funds with different objectives,
policies, risk considerations or restrictions, may create additional series or
classes of shares. Any issuance of
- 26 -
<PAGE>
shares of such additional series would be governed by the Investment Company Act
of 1940, as amended, and the laws of the State of Delaware.
Shares of the Funds have equal noncumulative voting rights which means that the
holders of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so, and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees. The Shares of each Fund also have equal rights with respect to
dividends, assets and liquidation of that Fund and are subject to any
preferences, rights or privileges of any classes of shares of that Fund. The
Trust is not required to and has no current intention of holding annual
shareholder meetings, although special meetings may be called for purposes
requiring shareholder approval, such as changing fundamental investment policies
or upon the written request of 10% of the shares of the Funds to replace its
Trustees.
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 1
is then subtracted from 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.
Third Avenue Value Fund's average annual total return for the one year, five
year and since inception periods ending October 31, 1999 are 16.89%, 16.52% and
19.06%, respectively. Third Avenue Small-Cap Value Fund's average annual total
return for the one year and since inception periods ending October 31, 1999 are
7.12% and 5.49%, respectively. Third Avenue Real Estate Value Fund's average
annual total return for the one year and since inception periods ending October
31, 1999 are 8.86% and 10.56%, respectively.
Calculation of a Fund's total return is 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.
A Fund's yield is computed in accordance with a standardized method prescribed
by rules of the SEC. The Fund's yield is computed by dividing the net investment
income per share earned during the specified one month or 30-day period by the
net asset value per share on the last day of the period, according to the
following formula:
YIELD = 2[a-b + 1] 6 - 1
[ cd ]
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<PAGE>
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
Financial Statements
The Funds' financial statements and notes thereto appearing in their Annual
Report to Shareholders and the 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.
- 28 -
<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.
- 29 -
<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.
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<PAGE>
Board of Trustees
Phyllis W. Beck
Lucinda Franks
Gerald Hellerman
Marvin Moser
Donald Rappaport
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
PFPC, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
(610) 239-4600
(800) 443-1021 (toll-free)
Custodian
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231
767 Third Avenue
New York, NY 10017
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.
(c) Reference is made to Article II of the Trust's Trust
Instrument and Articles IV and V of the Trust's By-Laws.
(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
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.
(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 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) 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 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.
Amendment to Custody Agreement to include Third Avenue Value
Fund is incorporated by reference to Exhibit (g) of
Post-Effective Amendment No. 8 to the Registration Statement
No. 333-20891 filed February 26, 1999.
(h) (1) Services Agreement between Third Avenue Trust and First
Data Investor Services Group, Inc. is filed herewith.
(2) Administration Agreement between Third Avenue Trust and
EQSF Advisers, Inc. is filed herewith.
(3) Sub-Administration Agreement between EQSF Advisers,
Inc. and First Data Investor Services Group, Inc. is
filed herewith.
(i) (a) Opinion and Consent of Counsel regarding the legality
of the securities being issued is filed herewith.
(j) Consent of Independent Auditors is to be filed with
Amendment No 10.
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.
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant
to the Trust's Trust Instrument, its By-Laws or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by trustees, officers or controlling persons of
the Registrant in connection with the successful defense of any
act, suit or proceeding) is asserted by such trustees, officers
or controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.
Item 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 20, 1999 had approximately $1,494
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.
(c) 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. 9 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 28th day of December, 1999.
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 12/28/99
/s/ MICHAEL CARNEY
- ----------------------
Michael Carney Chief Financial Officer 12/28/99
/s/ PHYLLIS W. BECK
- ----------------------
Phyllis W. Beck Trustee 12/28/99
/s/ MARTIN SHUBIK
- ----------------------
Martin Shubik Trustee 12/28/99
/s/ MYRON M. SHEINFELD
- ----------------------
Myron M. Sheinfeld Trustee 12/28/99
/s/ GERALD HELLERMAN
- ----------------------
Gerald Hellerman Trustee 12/28/99
/s/ CHARLES C. WALDEN
- ----------------------
Charles C. Walden Trustee 12/28/99
/s/ MARVIN MOSER
- ----------------------
Marvin Moser Trustee 12/28/99
/s/ BARBARA WHITMAN
- ----------------------
Barbara Whitman Trustee 12/28/99
/s/ LUCINDA FRANKS
- ----------------------
Lucinda Franks Trustee 12/28/99
/s/ DONALD RAPPAPORT
- ----------------------
Donald Rappaport Trustee 12/28/99
<PAGE>
EXHIBIT INDEX
99.1 Exhibit 99.1 - Services Agreement
99.2 Exhibit 99.2 - Administration Agreement
99.3 Exhibit 99.3 - Sub-Administration Agreement
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 1st day of October, 1999 (the "Effective Date")
between THIRD AVENUE TRUST (the "Fund"), a Delaware business trust having its
principal place of business at 767 Third Avenue, New York, New York 10017 and
FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor Services Group"), a
Massachusetts corporation with principal offices at 4400 Computer Drive,
Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series, with
each such series representing interests in a separate portfolio of securities or
other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint Investor
Services Group as its fund accounting agent, transfer agent, dividend disbursing
agent and agent in connection with certain other activities and Investor
Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any authorized
officer of the Fund; or (ii) any person, whether or not such person is an
officer or employee of the Fund, duly authorized to give Oral Instructions
or Written Instructions on behalf of the Fund as indicated in writing to
Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or Board of
Trustees of the Fund, as the case may be.
-1-
<PAGE>
(e) "Commencement Date" shall mean the date on which Investor Services
Group commences providing services to the Fund pursuant to this Agreement.
(f) "Commission" shall mean the Securities and Exchange Commission.
(g) "Custodian" refers to any custodian or subcustodian of securities
and other property which the Fund may from time to time deposit, or cause
to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(i) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(j) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by Investor Services Group from a person
reasonably believed by Investor Services Group to be an Authorized Person;
(k) "Portfolio" shall mean each separate series of shares offered by
the Fund representing interests in a separate portfolio of securities and
other assets;
(l) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements thereto
if any, which has become effective under the Securities Act of 1933 and the
1940 Act.
(m) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication signed
by a person reasonably believed by Investor Services Group to be an
Authorized Person and actually received by Investor Services Group. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
Article 2 Appointment of Investor Services Group.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its transfer agent and dividend disbursing agent for
Shares of each respective Portfolio of the Fund and as fund accounting agent,
and shareholder servicing agent for the Fund, and
-2-
<PAGE>
Investor Services Group hereby accepts such appointments and agrees to perform
the duties hereinafter set forth. This Agreement shall be effective as of the
Effective Date.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares of each Portfolio, as more fully described in the written schedule
of Duties of Investor Services Group annexed hereto as Schedule B and
incorporated herein, and in accordance with the terms of the Prospectus of
the Fund on behalf of the applicable Portfolio, applicable law and the
procedures established from time to time between Investor Services Group
and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant to Rule
17Ad-10(e) of the 1934 Act a record of the total number of Shares of each
Portfolio which are authorized, based upon data provided to it by the Fund,
and issued and outstanding. Investor Services Group shall provide the Fund
on a regular basis with the total number of Shares of each Portfolio which
are authorized and issued and outstanding and, except as provided herein,
shall have no obligation, when recording the issuance of Shares, to monitor
the issuance of such Shares.
(c) Investor Services Group shall be responsible for the following:
performing the customary services of a fund accounting agent for the Fund,
as more fully described in the written schedule of Duties of Investor
Services Group annexed hereto as Schedule B and incorporated herein, and
subject to the supervision and direction of the Board of Directors of the
Fund.
(d) Notwithstanding any of the foregoing provisions of this Agreement,
Investor Services Group shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or sale
of any Shares; (ii) the legality of the redemption of any Shares; (iii) the
legality of the declaration of any dividend by the Board of Directors, or
the legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. Except to the extent that Investor Services Group shall
provide Blue Sky administration services to the Fund, the responsibility of
Investor Services Group for the Fund's blue sky State registration status is
solely limited to the initial establishment of transactions subject to blue sky
compliance by the Fund.
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3.3 In performing its duties under this Agreement, Investor Services Group:
(a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records required
of it pursuant to its duties hereunder and as set forth in Schedule B in
accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor Services
Group agrees that all such records prepared or maintained by Investor Services
Group relating to the services to be performed by Investor Services Group
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section, and will be surrendered promptly
to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of Shareholder
records of the Fund, Investor Services Group will notify the Fund of such
request and secure Written Instructions as to the handling of such request.
Investor Services Group reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to comply with such request.
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon Written
or Oral Instructions reasonably believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
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5.2 At any time, Investor Services Group may request Written Instructions
from the Fund and may seek advice from legal counsel for the Fund, or its own
legal counsel, with respect to any matter arising in connection with this
Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate Investor
Services Group for the performance of its obligations hereunder in accordance
with the fees and other charges set forth in the written Fee Schedule annexed
hereto as Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund on
behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses actually incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios hereby authorizes Investor
Services Group to collect its fees, other charges and related out-of-pocket
expenses by debiting the Fund's or Portfolio's custody account for invoices
which are rendered for the services performed for the applicable function.
Invoices for the services performed will be sent to the Fund after such debiting
with an indication that payment has been made. The Fund shall have the right in
good faith to dispute any invoice amount in which case the Fund shall do the
following within thirty (30) days of the postmark date: (a) identify for
Investor Services Group the undisputed amount of the invoice; and (b) provide
Investor Services Group with a detailed written description of the disputed
amount and the basis for the Fund's dispute with such amount. The Fund and
Investor Services Group shall cooperate in resolving disputed invoice amounts.
Upon resolution of such dispute, Investor Services Group agrees to promptly
refund such amounts determined to be due.
6.4 Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedule C, a revised Fee Schedule executed and dated by the
parties hereto.
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6.5 Investor Services Group will from time to time employ or associate with
itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.6 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.7
which may be properly payable by the Fund.
Article 7 [RESERVED]
Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of any and
all data bases, computer programs, screen formats, report formats, interactive
design techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by Investor Services Group in connection
with the services provided by Investor Services Group to the Fund herein (the
"Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license to
the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
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Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to authorize
it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency as a
transfer agent and such registration will remain in effect for the duration
of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Declaration of Trust,
By-Laws and applicable laws have been taken to authorize it to enter into
this Agreement; and
(d) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its Prospectus with
respect to each Portfolio, such Shares shall be validly issued, fully paid
and non-assessable.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the Fund on
behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
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(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent act
or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or reasonable
use of information, data, records and documents (including but not limited
to magnetic tapes, computer printouts, hard copies and microfilm copies)
received by Investor Services Group from the Fund, or any authorized third
party acting on behalf of the Fund, including but not limited to the prior
transfer agent for the Fund, except FPS Services, Inc., in the performance
of Investor Services Group's duties and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund on behalf of
the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement under
the securities laws or regulations of any state that such shares be
registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale of
such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund made
herein.
10.2 Investor Services Group shall indemnify and hold the Fund harmless
from and against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind which may be asserted against the Fund or for which the Fund may be held
to be liable in connection with this Agreement (a "Claim"), provided that such
Claim resulted from a negligent act or omission to act, bad faith, willful
misfeasance or reckless disregard by Investor Services Group in the performance
of its duties hereunder.
10.3 In any case in which one party (the "Indemnifying Party") may be asked
to indemnify or hold the other party (the "Indemnified Party") harmless, the
Indemnified Party will notify the Indemnifying Party promptly after identifying
any situation which it believes presents or appears likely to present a claim
for indemnification against the Indemnified Party although the failure to do so
shall not prevent recovery by the Indemnified Party and shall keep the
Indemnifying Party advised with respect to all developments concerning such
situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide
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indemnification, except with the Indemnifying Party's prior written consent. The
obligations of the parties hereto under this Article 10 shall survive the
termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made prior
to the earlier of:
(a) one year after the Indemnified Party becomes aware of the event
for which indemnification is claimed; or
(b) one year after the earlier of the termination of this Agreement or
the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than three (3) years prior to the filing
of the suit (or commencement of arbitration proceedings) alleging such cause of
action.
11.3 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.
As used in the preceding paragraph "incidental, indirect or consequential
damages" means damages which do not flow directly from the act of the party or
which arise from the intervention of special circumstances not ordinarily
predictable, and does not include direct damages which arise naturally or
ordinarily from a breach of contract.
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Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above and
shall continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each,
unless the Fund or Investor Services Group provides written notice to the other
of its intent not to renew. Such notice must be received not less than ninety
(90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term. The Fund shall
have the right to terminate this Agreement prior to the expiration of the
Initial Term or then current Renewal Term upon sixty (60) days written notice to
Investor Services Group if the Fund's Board of Trustees finds in the exercise of
its fiduciary duty that Investor Services Group is materially unable to perform
its duties and obligations under this Agreement.
13.3 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion thereof to a
successor service provider will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If the material failure is one for which the
Non-Defaulting Party has previously given the Defaulting Party notice as
provided in the previous sentence, the Agreement may be terminated by the
Non-Defaulting Party upon thirty (30) days written notice without giving the
Defaulting Party a second opportunity to cure such material failure. If Investor
Services Group is the Non-Defaulting Party, its termination of this Agreement
shall not constitute a waiver of any other rights or remedies of Investor
Services Group with respect to services performed prior to such termination of
rights of Investor Services Group to be reimbursed for out-of-pocket expenses.
In all cases, termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might have under this
Agreement or otherwise against the Defaulting Party.
13.5 Notwithstanding anything contained in this Agreement to the contrary
and except as provided in Section 13.4, should the Fund desire to move any of
the services provided by Investor Services Group hereunder to a successor
service provider prior to the expiration of the then current Initial or Renewal
Term, or should the Fund or any of its affiliates take any action which would
result in Investor Services Group ceasing to provide transfer agency or fund
accounting services to the Fund prior to the expiration of the Initial or any
Renewal Term, Investor Services Group shall make a good faith effort and use all
commercially reasonable efforts to facilitate the conversion on such prior date,
however, there can be no guarantee that Investor Services Group will be able to
facilitate a conversion of services on such prior date. In connection with the
foregoing, should services be converted to a successor service provider or
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should the Fund or any of its affiliates take any action which would result in
Investor Services Group ceasing to provide transfer agency or fund accounting
services to the Fund prior to the expiration of the Initial or any Renewal Term,
the payment of fees to Investor Services Group as set forth herein shall be
accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained with Investor Services Group until
the expiration of the then current Initial or Renewal Term and calculated at the
asset and/or Shareholder account levels, as the case may be, on the date notice
of termination was given to Investor Services Group.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as service provider
under the terms hereof, the Fund shall so notify Investor Services Group in
writing, and if Investor Services Group agrees in writing to provide such
services, Schedule A shall be amended to include such additional Portfolios. If
after good faith negotiations, the parties are unable to agree upon the
conditions upon which Investor Services Group will service the new Portfolio,
either party shall have the right to terminate this Agreement upon sixty (60)
days written notice to the other party.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
(collectively "Confidential Information") are confidential information of the
parties and their respective licensors. The Fund and Investor Services Group
shall exercise at least the same degree of care, but not less than reasonable
care, to safeguard the confidentiality of the Confidential Information of the
other as it would exercise to protect its own confidential information of a
similar nature. The Fund and Investor Services Group shall not duplicate, sell
or disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Fund and
Investor Services Group may, however, disclose Confidential Information to their
respective parent corporation, their respective affiliates, their subsidiaries
and affiliated companies and employees, provided that each shall use reasonable
efforts to ensure that the Confidential Information is not duplicated or
disclosed in breach of this Agreement. The Fund and Investor Services Group may
also disclose the Confidential Information to independent contractors, auditors,
and professional advisors, provided they first agree in writing to be bound by
the confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive material,
and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates, business plans,
portfolio holdings, and internal performance results
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relating to the past, present or future business activities of the Fund or
Investor Services Group, their respective subsidiaries and affiliated
companies and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and secret
in the sense that its confidentiality affords the Fund or Investor Services
Group a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and models,
and any other tangible manifestation of the foregoing of either party which now
exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party; or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 Force Majeure; Excused Non-Performance.
No party shall be liable for any default or delay in the performance of its
obligations under this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by
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(i) fire, flood, elements of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders in any country, (iii)
any act or omission of the other party or any governmental authority; (iv) any
labor disputes (provided that the employees' demands are not reasonable and
within the party's power to satisfy); or (v) nonperformance by a third party or
any similar cause beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other equipment.
In addition, no party shall be liable for any default or delay in the
performance of its obligations under this Agreement if and to the extent that
such default or delay is caused, directly or indirectly, by the actions or
inactions of the other party. In any such event, the non-performing party shall
be excused from any further performance and observance of the obligations so
affected only for as long as such circumstances prevail and such party continues
to use commercially reasonable efforts to recommence performance or observance
as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary. Investor
Services Group may, in its sole discretion, engage subcontractors to perform any
of the obligations contained in this Agreement to be performed by Investor
Services Group but shall no be relieved of its obligations and responsibilities
hereunder by reason of any such engagement.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this Agreement,
or breach hereof, shall be settled by arbitration administered by the American
Arbitration Association in New York, New York in accordance with its applicable
rules, except that the Federal Rules of Evidence and the Federal Rules of Civil
Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
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Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Third Avenue Trust
767 Third Avenue
New York, New York 10017
Attention: Ian M. Kirschner, General Counsel
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the State of New York, excluding the laws on conflicts of laws,
shall govern the interpretation, validity, and enforcement of this agreement.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
Article 23 Publicity.
Neither Investor Services Group nor the Fund shall release or publish news
releases, public announcements, advertising or other publicity relating to this
Agreement or to the transactions contemplated by it without the prior review and
written approval of the other party; provided, however, that either party may
make such disclosures as are required by legal, accounting or regulatory
requirements after making reasonable efforts in the circumstances to consult in
advance with the other party.
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Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
neither Party shall recruit, solicit, employ or engage, for itself or others,
the other Party's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not affect
the validity of the remainder of this Agreement. In such case, the parties shall
in good faith modify or substitute such provision consistent with the original
intent of the parties. Without limiting the generality of this paragraph, if a
court determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement, including the
limitations on liability and exclusion of damages, shall remain fully effective.
Article 26 Miscellaneous.
The Fund and Investor Services Group agree that the obligations of the Fund
under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation and all
persons dealing with any Portfolio of the Fund must look solely to the trust
property belonging to such Portfolio for the enforcement of any claims against
the Fund.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
THIRD AVENUE TRUST
By: _________________________________
Title: ______________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: _________________________________
Title: ______________________________
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SCHEDULE A
LIST OF PORTFOLIOS
Third Avenue Value Fund
Third Avenue Small-Cap Value Fund
Third Avenue High Yield Fund
Third Avenue Real Estate Value Fund
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SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
1. SERVICES RELATED TO PORTFOLIO VALUATION AND MUTUAL FUND ACCOUNTING
All financial data provided to, processed and reported by Investor Services
Group under this Agreement shall be in United States dollars. Investor Services
Group's obligation to convert, equate or deal in foreign currencies or values
extends only to the accurate transposition of information received from the
various pricing and information services.
A. Daily Accounting Services
1. Calculate Net Asset Value ("NAV") and Public Offering Price Per Share
("POP"):
o Update the daily market value of securities held by the Fund
using Investor Services Group's standard agents for pricing U.S.
equity and bond securities as approved by the Board of Trustees.
The U.S. equity pricing services are currently Reuters, Inc.,
Muller Data Corporation, J.J. Kenny Co., Inc. and Interactive
Data Corporation ("IDC"). Muller Data Corporation, Dow Jones
Markets (formerly Telerate Systems, Inc.), J.J. Kenny Co., Inc.,
Municipal Market Data and IDC are also used for bond and money
market prices/yields. Bloomberg is available and used for price
research.
o Enter limited number (less than 15) of manual prices supplied by
the Fund and/or broker.
o Prepare NAV proof sheets. Review components of change in NAV for
reasonableness.
o Review variance reporting on-line and in hard copy for price
changes in individual securities using variance levels
established by the Fund. Verify U.S. dollar security prices
exceeding variance levels by notifying the Fund and pricing
sources of noted variances.
o Review for ex-dividend items indicated by pricing sources; trace
to Fund's general ledger for agreement.
o Communicate pricing information (NAV) to the Fund, Investor
Services Group and electronically to NASDAQ.
2. Determine and Report Cash Availability to the Fund by approximately
9:30 a.m. Eastern Time:
o Receive daily cash and transaction statements from the Custodian
by 8:30 a.m. Eastern time.
o Receive previous day shareholder activity reports from the
Transfer Agent by 8:30 a.m. Eastern time.
o Fax hard copy cash availability calculations with all details to
the Fund.
o Supply the Fund with 3-day cash projection report.
o Prepare daily bank cash reconciliations. Notify the Custodians
and the Fund of any reconciling items.
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3. Reconcile and Record All Expense Accruals:
o Accrue expenses based on budget supplied by the Fund either as
percentage of net assets or specific dollar amounts.
o If applicable, monitor expense limitations established by the
Fund.
o If applicable, accrue daily amortization of organizational
expense.
o If applicable, complete daily accrual of 12b-1 expenses.
4. Verify and Record All Daily Income Accruals for Debt Issues:
o Review and verify all system generated Interest and Amortization
reports.
5. Monitor Securities Held for Cash Dividends, Corporate Actions and
Capital Changes such as splits, mergers, spin-offs, etc. and process
appropriately.
o Monitor electronically received information from pricing vendors
for all domestic securities.
o Review current daily security trades for dividend activity.
o Monitor collection and postings of corporate actions, dividends
and interest.
6. Enter All Security Trades on Accounting System based on written
instructions from the Fund's Advisor.
o Review system verification of trade and interest calculations.
o Verify settlement through statements supplied by the Custodian.
o Maintain security ledger transaction reporting.
o Maintain tax lot holdings.
o Determine realized gains or losses on security trades.
o Provide broker commission reporting.
7. Enter All Fund Share Transactions on Accounting System:
o Process activity identified on reports supplied by Investor
Services Group.
o Verify settlement through statements supplied by the Custodians.
o Reconcile to Investor Services Group's report balances.
8. Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance
(listing all asset, liability, equity, income and expense accounts).
o Post manual entries to the general ledger.
o Post Custodian activity.
o Post security transactions.
o Post and verify system generated activity, i.e. income and
expense accruals.
9. Review and Reconcile with Custodians' Statements:
o Verify all posted interest, dividends, expenses and shareholder
and security payments/receipts, etc. (Discrepancies will be
reported to the Custodians).
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o Post all cash settlement activity to the trial balance.
o Reconcile to ending cash balance accounts.
o Clear subsidiary reports with settled amounts.
o Track status of past due items and failed trades as reported by
the Custodians.
10. Submission of Daily Accounting Reports to the Fund: (Additional
reports readily available)
o Fund Trial Balance.
o Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security).
o NAV Calculation Report
o Cash Availability
o 3-Day Cash Projection Report.
B. Monthly Accounting Services
1. Submission of Monthly Automated Accounting Reports to the Fund (by
10th business day):
o Security Purchase/Sales Journal.
o Interest and Maturity Report.
o Brokers Ledger (Commission Report).
o Security Ledger Transaction Report with Realized Gains/Losses.
o Security Ledger Tax Lot Holdings Report.
o Additional reports available upon request.
2. Submit Reconciliation of Accounting Asset Listing to Custodian Asset
Listing:
o Report any security balance discrepancies to the Custodian/the
Fund.
3. Provide Monthly Analysis and Reconciliation of Additional Trial
Balance Accounts, such as:
o Security cost and realized gains/losses.
o Interest/dividend receivable and income.
o Payable/receivable for securities purchased and sold.
o Payable/receivable for fund shares; issued and redeemed.
o Expense payments and accruals analysis.
4. If appropriate, Prepare and Submit to the Fund (additional fees may
apply):
o Standard Industry Code Valuation Report.
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o SEC yield reporting (non-money market funds with domestic and ADR
securities only).
C. Annual (and Semi-Annual) Accounting Services
1. Annually assist and supply Fund's auditors with schedules supporting
securities and shareholder transactions, income and expense accruals,
etc. for each Portfolio during the year in accordance with standard
audit assistance requirements.
2. Provide N-SAR Reporting (Accounting Questions) on a Semi-Annual Basis:
If applicable, answer the following items: 2, 12B, 20, 21, 22, 23, 28,
30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63, 64B, 71, 72, 73, 74, 75
and 76
D. Accounts and Records
On each day the New York Stock Exchange is open for regular trading and
subject to the proper receipt (via Oral or Written Instructions) by
Investor Services Group of all information required to fulfill its duties
under this Agreement, Investor Services Group will maintain and keep
current the following Accounts and Records and any other records required
to be kept pursuant to Rule 31a-1 of the 1940 Act relating to the business
of the Portfolios in such form as may be mutually agreed upon between the
Fund and Investor Services Group:
(1) Net Asset Value Calculation Reports;
(2) Cash Receipts Report;
(3) Cash Disbursements Report;
(4) Dividends Paid and Payable Schedule;
(5) Purchase and Sales Journals - Portfolio Securities;
(6) Subscription and Redemption Reports;
(7) Security Ledgers - Transaction Report and Tax Lot Holdings
Report;
(8) Broker Ledger - Commission Report;
(9) Daily Expense Accruals;
(10) Daily Interest Accruals;
(11) Daily Trial Balance;
(12) Portfolio Interest Receivable and Income Reports;
(13) Portfolio Dividend Receivable and Income Reports;
(14) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security; and
(15) Average Daily Net assets provided on monthly basis.
2. SERVICES RELATED TO SHAREHOLDERS AND SHARE TRANSACTIONS
A. Shareholder File
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1. Establish new accounts and enter demographic data into shareholder
base. Includes in-house processing and National Securities Clearing
Corporation ("NSCC") - Fund/SERV and/or Networking transmissions.
2. Create Customer Information File ("CIF") to link accounts within the
Fund and across Portfolios within the Fund. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.
3. 100% quality control of new account information including verification
of initial investment.
4. Maintain account and customer file records based on shareholder
request and routine quality review.
5. Maintain tax ID certification and Non Resident Alien ("NRA") records
for each account, including backup withholding.
6. Provide written confirmation of address changes.
7. Produce shareholder statements for daily activity, dividends,
on-request, interested party and periodic mailings.
8. Establish and maintain dealer file by Fund, including dealer, branch,
representative number and name, and provide this information to the
Fund.
9. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.
10. Image all applications, account documents, data changes,
correspondence, monetary transactions and other pertinent shareholder
documents.
A. Shareholder Services
1. Provide quality service through a dedicated group of highly trained
NASD licensed customer service personnel, including phone, research
and correspondence representatives.
2. Answer shareholder calls in timely fashion: provide routine account
information, transactions details including direct and wire purchases,
redemptions, exchanges, systematic withdrawals, pre-authorized drafts,
Fund/SERV and wire order trades, problem solving and process telephone
transactions.
3. Silent monitoring of telephone representative calls by the phone
supervisor during live conversations to ensure exceptional customer
service.
4. Record and maintain tape recordings of all shareholder calls for a six
month period.
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5. Phone supervisor produces daily management reports of shareholder
calls which include tracking volume, call length, average wait time
and abandoned call rates to ensure quality service, and provided to
the Fund weekly.
6. Phone representatives will be trained through in-house training
programs on the techniques of providing exceptional customer service.
7. Customer inquiries received by letter or telephone will be researched
by a correspondence team. These inquiries include such items as
account / customer file information, complete historical account
information, stop payments on checks, transaction details and lost
certificates.
8. Provide written correspondence in response to shareholder inquiries
and requests. Whenever possible, unclear shareholder instructional
letters are handled by a phone call to the shareholder from Investor
Services Group's phone representatives to avoid delay in processing of
the request.
C. Investment Processing
1. Initial investment.
2. Subsequent investments processed through lock box.
3. Pre-authorized investments ("PAD") through ACH system.
4. Government allotments through ACH system.
5. Wire order and NSCC - Fund/SERV trades.
6. Prepare and process daily bank deposit of shareholder investments.
D. Redemption Processing
1. Process mail redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal file and process automated
transactions on monthly basis.
4. Provide wire order and NSCC - Fund/SERV trade processing.
5. Distribute redemption proceeds to shareholder by check, wire or ACH
processing.
E. Exchange and Transfer Processing
1. Process legal transfers.
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<PAGE>
2. Process ACATS transfers.
3. Issue and cancel certificates.
4. Replace certificates through surety bonds (separate charge to
shareholder).
5. Process exchange transactions (letter and/or telephone requests).
F. Cash Management Services. (a) Investor Services Group shall establish
demand deposit accounts (DDA's) with a cash management provider to facilitate
the receipt of purchase payments and the processing of other Shareholder-related
transactions. Investor Services Group shall retain any excess balance credits
earned with respect to the amounts in such DDA's ("Balance Credits") after such
Balance Credits are first used to offset any banking service fees charged in
connection with banking services provided on behalf of the Fund. Balance Credits
will be calculated and applied toward the Fund's banking service charges
regardless of the withdrawal of DDA balances described in Section (b) below.
(b) DDA balances which cannot be forwarded on the day of receipt may be
withdrawn on a daily basis and invested in U.S. Treasury and Federal Agency
obligations, money market mutual funds, repurchase agreements, money market
preferred securities (rated A or better), commercial paper (rated A1 or P1),
corporate notes/bonds (rated A or better) and/or Eurodollar time deposits
(issued by banks rated A or better). Investor Services Group bears the risk of
loss on any such investment and shall retain any earnings generated thereby.
Other similarly rated investment vehicles may be used, provided however,
Investor Services Group shall first notify the Fund of any such change.
(c) Investor Services Group may facilitate the payment of distributions
from the Fund which are made by check ("Distributions") through the "IPS
Official Check" program. "IPS Official Check" is a product and service provided
by Investor Services Group's affiliate, Integrated Payment Systems ("IPS"). IPS
is licensed and regulated as an "issuer of payment instruments". In the event
the IPS Official Check program is utilized, funds used to cover such
Distributions shall be forwarded to and held by IPS. IPS may invest such funds
while awaiting presentment of items for payment. In return the services provided
by IPS, IPS imposes a per item charge which is identified in the Schedule of
Out-of-Pocket Expenses attached hereto and shall retain, and share with Investor
Services Group, the benefit of the revenue generated from its investment
practices.
G. Lost Shareholders. Investor Services Group shall perform such services
as are required in order to comply with Rules 17a-24 and 17Ad-17 of the 34 Act
(the Lost Shareholder Rules"), including, but not limited to those set forth
below. Investor Services Group may, in its sole discretion, use the services of
a third party to perform the some or all such services.
o documentation of electronic search policies and procedures;
o execution of required searches;
o creation and mailing of confirmation letters;
o taking receipt of returned verification forms;
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<PAGE>
o providing confirmed address corrections in batch via electronic
media;
o tracking results and maintaining data sufficient to comply with
the Lost Shareholder Rules; and
o preparation and submission of data required under the Lost
Shareholder Rules.
H. Retirement Plan Services
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 requirements
g. Calculate required minimum distributions ("RMD")
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRAs and identification
of employer contributions.
I. Settlement and Control
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to
Investor Services Group.
2. Preparation of daily cash movement sheets to be passed to Investor
Services Group and the Custodian Bank for use in determining the
Fund's daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments to also include the proper
notification of any booking entries needed, as well as any necessary
cash movement.
6. Settlement and review of the Fund's declared dividends and capital
gains will include the following:
a. Review of record date report for accuracy of shares.
b. Prepare dividend settlement report after dividend is posted.
c. Verify the posting date shares, the rate used and the NAV price of
reinvest date to ensure dividend was posted properly.
d. Distribute copies to Investor Services Group.
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e. Prepare the checks prior to being mailed.
f. Send any dividends via wire, if requested.
g. Prepare cash movement sheets for the cash portion of the dividend
payout on payable date.
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9. Aggregate tax filings for all Investor Services Group clients. Monthly
deposits are made to the IRS for all taxes withheld from shareholder
disbursements, distributions and foreign account distributions.
Correspond with the IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC - Fund/SERV activity.
J. Year-End Processing
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid tax IDs. This includes initiating 31%
backup withholding and notifying shareholders of their tax status and
the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertificated accounts. Update
account tax status to reflect backup withholding or certificated
status depending on responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year-end activity with client. Activities include producing
year-end statements, scheduling record dates for year-end dividends
and capital gains, production of combined statements and printing of
inserts to be mailed with tax forms.
6. Distribute dividend letter to Portfolios to sign off on all
distributions paid year-to-date. Dates and rates must be authorized so
that they can be used for reporting to the IRS.
7. Coordinate the ordering of forms and envelopes from vendors in
preparation of tax reporting. Compare forms with IRS requirements to
ensure accuracy. Upon receipt of forms and envelopes, allocate space
for storage.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year-end statements and tax forms.
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<PAGE>
9. Match and settle tax reporting totals to Fund records and on-line data
from Transfer Agency System.
10. Produce Forms 1099R, 1099B, 1099Div, 5498, 1042S and year-end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as crossover dividends
and prior year IRA contributions.
12. Prepare magnetic tapes and appropriate forms for the filing of all
reportable activity to the IRS.
K. Client Services
1. An Account Manager is assigned to each relationship and is the liaison
between the Fund and Investor Service Group. Responsibilities include
scheduling of events, system enhancement implementation, special
promotion / event implementation and follow-up and constant Fund
interaction on daily operational issues. Specifically:
a. Scheduling of dividends, proxies, report mailings and special
mailings.
b. Coordinating with the Fund the shipment of materials for scheduled
mailings.
c. Acting as liaison between the Fund and support services for
preparation of proofs and eventual printing of statement forms,
certificates, proxy cards, envelopes etc.
d. Handling all notification to the Fund regarding proxy tabulation
through the meeting - coordinate scheduling of materials, including
votes cards, tabulation letters and shareholder list to be available
for the meeting.
e. Ordering special reports, tapes and/or discs for special systems
requests received.
f. Implementing new operational procedures, i.e., check writing feature,
load discounts, minimum waivers, sweeps, telephone options, PAD
promotions etc.
g. Coordinating with systems, services and operations, special events,
i.e., mergers, new fund start-ups, small account liquidations,
combined statements, household mailings, additional mail files.
h. Preparing standard operating procedures and review prospectuses -
coordinate implementation of suggested changes with the Fund.
i. Acting as liaison between the Fund and Investor Services Group
regarding all service and operational issues.
2. Blue Sky Processing: maintain file with additions, deletions, changes
and updates at the Fund's direction.
4. SERVICES RELATED TO DISTRIBUTION/FULFILLMENT
1. Partition Fund 800 line for prospective shareholders, and track the
number of inbound calls.
2. Answer all calls thereon with the name "Third Avenue Funds".
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3. Utilize pre-approved scripts developed in cooperation with Fund
management.
4. Respond to inquiries concerning the Fund including:
a. Requests for literature / prospectuses.
b. Yields, Distribution Rates.
c. Performance.
d. Advisor / Management experience.
e. Dividends.
f. Portfolio holdings.
g. Account attributes.
5. Input marketing inquiries on confidential database and generate a
weekly and monthly report to the Fund.
6. Prepare written call reports once monthly which include the following
information:
a. Total number of requests for prospectus.
b. Fulfillment analysis report, typically sorted by source of
referral.
c. List of requests from states in which the Fund is not registered.
7. Provide literature fulfillment services as follows:
a. Receive requests from potential shareholders for Fund information
and literature fulfillment
b. Prepare, package and forward customized reports.
c. Assist with special direct mail programs. (Additional fees will
be quoted for this service.)
8. Provide sales reporting using ACS or equivalent reporting system.
These reports are to be available on-line and include daily and
monthly reports.
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SCHEDULE C
FEE SCHEDULE
Fund Accounting
Third Avenue Value Fund
$24,000 Minimum on the first $10 Million of Average Net Assets
0.0004 On the Next $40 Million of Average Net Assets
0.0003 On the Next $50 Million of Average Net Assets
0.0001 On the Next $100 Million of Average Net Assets
0.00005 On the Next $800 Million of Average Net Assets
0.000025 Over $1 Billion of Average Net Assets
Third Avenue Small-Cap Value Fund, Third Avenue High Yield Fund and Third Avenue
Real Estate Value Fund
$24,000 Minimum to $20 Million of Average Net Assets
0.0003 On the Next $30 Million of Average Net Assets
0.0002 On the Next $50 Million of Average Net Assets
0.0001 On the Next $100 Million of Average Net Assets
0.00005 On the Next $800 Million of Average Net Assets
0.000025 Over $1 Billion of Average Net Assets
Notes:
1. If any Portfolio holds 10 or less non-U.S. dollar denominated securities, the
fee schedule will remain unchanged.
2. If any Portfolio purchases more than 10 non-U.S. dollar denominated
securities, the annual minimum will increase from $24,000 to $34,000.
3. If any Portfolio holds more than 50% of its securities in non-U.S. dollar
denominated securities, the annual minimum will increase from $24,000 to
$40,000.
4. Assumes that Investor Services Group can use the automated return of capital
calculation for REITs which uses the prior year actual return of capital to
estimate current year return of capital. Should this not be the case, the annual
minimum will increase from $24,000 to $34,000.
Transfer Agency
$15.00 per account, per year subject to a monthly minimum fee of $2,250
for each class of each Portfolio. This fee will be reduced to
$2,000 per month for the first two years of the signing of a
three year contract.
$2.00 per closed account
$0.00 Provide history files at no charge to allow for cost basis
calculations
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Lost Shareholder Search/Reporting: $2.75 per account search*
* The per account search fee shall be waived until June 2000 so long as the
Fund retains Keane Tracers, Inc. ("KTI") to provide the Fund with KTI's
"In-Depth Research Program" services.
Fulfillment
$2.00 per call, includes Fulfillment (not including postage.)
$24,000 annual minimum (not necessarily on a monthly basis)
Miscellaneous Charges
The Fund shall be charged for the following products and services as applicable:
o Ad hoc reports
o Ad hoc SQL time
o COLD Storage
o Digital Recording
o Banking Services, including incoming and outgoing wire charges
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Manual Pricing o Materials for Rule 15c-3 Presentations
o Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
Fee Adjustments
After the one year anniversary of the effective date of this Agreement, Investor
Services Group may adjust the fees described in the above sections once per
calendar year, upon thirty (30) days prior written notice in an amount not to
exceed the cumulative percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted) -
(1982-84=100), published by the U.S. Department of Labor since the last such
adjustment in the Client's monthly fees (or the Effective Date absent a prior
such adjustment).
Programming Costs
The following programming rates are subject to an annual 5% increase after the
one year anniversary of the effective date of this Agreement.
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $ 150.00 per/hr per programmer
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SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
o Postage - direct pass through to the Fund
o Telephone and telecommunication costs as requested by the Fund,
including all lease, maintenance and line costs
o Proxy solicitations, mailings and tabulations
o Shipping, Certified and Overnight mail and insurance
o Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines, as
requested by the Fund.
o Duplicating services
o Distribution and Redemption Check Issuance
o Courier services
o Federal Reserve charges for check clearance
o Overtime, as approved by the Fund
o Temporary staff, as approved by the Fund
o Travel and entertainment, as approved by the Fund
o Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
o Third party audit reviews
o Pricing services (or services used to determine Fund NAV)
o Vendor set-up charges for Blue Sky and other services
o Blue Sky filing or registration fees
o EDGAR filing fees
o Vendor pricing comparison
o Such other expenses as are agreed to by Investor Services Group and
the Fund
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with Investor Services Group. In addition, the
Fund will promptly reimburse Investor Services Group for any other unscheduled
expenses incurred by Investor Services Group whenever the Fund and Investor
Services Group mutually agree that such expenses are not otherwise properly
borne by Investor Services Group as part of its duties and obligations under the
Agreement.
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ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT, dated as of this 1st day of October,
1999, the "Agreement"), between EQSF ADVISERS, INC., a New York corporation
("EQSF") and THIRD AVENUE TRUST (the "Fund"), an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
WHEREAS, the Fund desires to retain EQSF to render certain administrative
services with respect to each investment portfolio listed in Schedule A hereto,
as the same may be amended from time to time by the parties hereto
(collectively, the "Portfolios"), and EQSF is willing to render such services;
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any officer of
the Fund; or (ii) any person, whether or not such person is an officer or
employee of the Fund, duly authorized to give Oral Instructions or Written
Instructions on behalf of the Fund as indicated in writing to EQSF from
time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or Board of
Trustees of the Fund, as the case may be.
(e) "Commission" shall mean the Securities and Exchange Commission.
(f) "Custodian" refers to any custodian or subcustodian of securities
and other property which the Fund may from time to time deposit, or cause
to be deposited or held under the name or account of such a custodian
pursuant to a Custody Agreement.
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(g) "1933 Act" shall mean the Securities Act of 1933 and the rules and
regulations promulgated thereunder, all as amended from time to time.
(h) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(i) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by EQSF from a person reasonably believed
by EQSF to be an Authorized Person.
(j) "Portfolio" shall mean each separate series of shares offered by
the Fund representing interests in a separate portfolio of securities and
other assets.
(k) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements thereto
if any, which has become effective under the 1933 Act and the 1940 Act.
(l) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(m) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(n) "Written Instructions" shall mean a written communication signed
by a person reasonably believed by EQSF to be an Authorized Person and
actually received by EQSF. Written Instructions shall include manually
executed originals and authorized electronic transmissions, including
telefacsimile of a manually executed original or other process.
Article 2 Appointment of EQSF.
The Fund hereby appoints EQSF to act as Administrator of the Fund on
the terms set forth in this Agreement. EQSF accepts such appointment and agrees
to render the services herein set forth for the compensation herein provided.
Article 3 Duties of EQSF.
3.1 EQSF shall be responsible for the following: performing the customary
services of an Administrator, including treasury and blue sky for the Fund, as
more fully described in the written schedule of Duties of EQSF annexed hereto as
Schedule B and incorporated herein, and subject to the supervision and direction
of the Fund.
3.2 In performing its duties under this Agreement, EQSF: (a) will act in
accordance with the Articles of Incorporation, By-Laws, Prospectuses and with
the Oral Instructions and
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Written Instructions of the Fund and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal or state laws and
regulations; and (b) will consult with legal counsel to the Fund, as necessary
and appropriate. Furthermore, EQSF shall not, pursuant to this Agreement, have
or be required to have any authority to supervise the investment or reinvestment
of the securities or other properties which comprise the assets of the Fund or
any of its Portfolios and shall not provide any investment advisory services to
the Fund or any of its Portfolios.
3.3 In addition to the duties set forth herein, EQSF shall perform such
other duties and functions, and shall be paid such amounts therefor, as may from
time to time be agreed upon in writing between the Fund and EQSF.
Article 4 Recordkeeping and Other Information.
4.1 EQSF shall create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule B in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be maintained by
EQSF for the periods and in the places required by Rule 31a-2 under the 1940
Act.
4.2 To the extent required by Section 31 of the 1940 Act, EQSF agrees that
all such records prepared or maintained by EQSF relating to the services to be
performed by EQSF hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such section, and will be
surrendered promptly to the Fund on and in accordance with the Fund's request.
Article 5 Fund Instructions.
5.1 EQSF will have no liability when properly acting upon Written or Oral
Instructions reasonably believed to have been executed or orally communicated by
an Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from the
Fund.
5.2 At any time, EQSF may request Written Instructions from the Fund and
may seek advice from legal counsel for the Fund, or its own legal counsel, with
respect to any matter arising in connection with this Agreement, and it shall
not be liable for any action properly taken or not taken or suffered by it in
good faith in accordance with such Written Instructions or in accordance with
the opinion of counsel for the Fund or for EQSF. Written Instructions requested
by EQSF will be provided by the Fund within a reasonable period of time.
5.3 EQSF, its officers, agents or employees, shall accept Oral Instructions
or Written Instructions given to them by any person representing or acting on
behalf of the Fund only if said representative is an Authorized Person. The Fund
agrees that all Oral Instructions shall be followed within one business day by
confirming Written Instructions, and that the Fund's failure to so confirm shall
not impair in any respect EQSF's right to rely on Oral Instructions.
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Article 6 Compensation.
6.1 EQSF will from time to time employ or associate with itself such person
or persons as EQSF may believe to be particularly suited to assist it in
performing services under this Agreement. Such person or persons may be officers
and employees who are employed by both EQSF and the Fund. The compensation of
such person or persons shall be paid by EQSF and no obligation shall be incurred
on behalf of the Fund in such respect.
6.2 EQSF shall not be required to pay any of the following expenses
incurred by the Fund: membership dues in the Investment Company Institute or any
similar organization; investment advisory expenses; costs of printing and
mailing stock certificates, prospectuses, reports and notices; interest on
borrowed money; brokerage commissions; stock exchange listing fees; taxes and
fees payable to Federal, state and other governmental agencies; fees of Board
Members of the Fund who are not affiliated with EQSF; outside auditing expenses;
outside legal expenses; Blue Sky registration or filing fees; or other expenses
not specified in this Section 6.2 which are properly payable by the Fund. EQSF
shall not be required to pay any Blue Sky registration or filing fees unless and
until it has received the amount of such fees from the Fund.
6.3 The Fund will compensate EQSF for the performance of its obligations
hereunder in accordance with the fees and other charges set forth in the written
Fee Schedule annexed hereto as Schedule C and incorporated herein.
6.4 In addition to those fees set forth in Section 6.3 above, the Fund
agrees to pay, and will be billed separately for, out-of-pocket expenses
actually incurred by EQSF in the performance of its duties hereunder.
Out-of-pocket expenses shall include, but shall not be limited to, the items
specified in the written schedule of out-of-pocket charges annexed hereto as
Schedule D and incorporated herein. Schedule D may be modified by written
agreement between the parties. Unspecified out-of-pocket expenses shall be
limited to those out-of-pocket expenses reasonably incurred by EQSF in the
performance of its obligations hereunder.
6.5 The Fund agrees to pay all fees, charges and out-of-pocket expenses to
EQSF by Federal Funds Wire within fifteen (15) business days following the
receipt of the respective invoice. In addition, with respect to all fees under
this Agreement, EQSF may charge a service fee equal to the lesser of (i) one and
one half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts, provided however, the foregoing
service fee shall not apply if the Fund in good faith legitimately disputes any
invoice amount in which case the Fund shall do the following within thirty (30)
days of the postmark date: (a) pay EQSF the undisputed amount of the invoice;
and (b) provide EQSF a detailed written description of the disputed amount and
the basis for the Administrator's dispute with such amount. In addition, the
Fund shall cooperate with EQSF in resolving disputed invoice amounts and then
promptly paying such amounts determined to be due.
6.6 Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedule C a revised Fee Schedule executed and dated by the
parties hereto.
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Article 7 [RESERVED]
Article 8 Fund Accounting System.
8.1 EQSF shall retain title to and ownership of any and all data bases,
computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by EQSF in connection with the services
provided by EQSF to the Fund herein (the "EQSF System").
8.2 EQSF hereby grants to the Fund a limited license to the EQSF System for
the sole and limited purpose of having EQSF provide the services contemplated
hereunder and nothing contained in this Agreement shall be construed or
interpreted otherwise and such license shall immediately terminate with the
termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the EQSF System, such direct access capability shall be limited to
direct entry to the EQSF System by means of on-line mainframe terminal entry or
PC emulation of such mainframe terminal entry and any other non-conforming
method of transmission of information to the EQSF System is strictly prohibited
without the prior written consent of EQSF.
Article 9 Representations and Warranties.
9.1 EQSF represents and warrants to the Fund that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to authorize
it to enter into this Agreement; and
(d) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.2 The Fund represents and warrants to EQSF that:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized;
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(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement; and
(c) all corporate proceedings required have been taken to authorize it
to enter into this Agreement.
Article 10 Indemnification.
10.1 The Fund shall indemnify and hold EQSF harmless from and against any
and all claims, costs, expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or kind which may be
asserted against EQSF or for which EQSF may be held to be liable in connection
with this Agreement or EQSF's performance hereunder (a "Claim"), unless such
Claim resulted from a negligent act or omission to act or bad faith by EQSF in
the performance of its duties hereunder.
10.2 EQSF shall indemnify and hold the Fund harmless from and against any
and all claims, costs, expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or kind which may be
asserted against the Fund or for which the Fund may be held to be liable in
connection with this Agreement (a "Claim"), provided that such Claim resulted
from a negligent act or omission to act, bad faith, willful misfeasance or
reckless disregard by EQSF in the performance of its duties hereunder.
10.3 In any case in which one party (the "Indemnifying Party") may be asked
to indemnify or hold the other party (the "Indemnified Party") harmless, the
Indemnified Party will notify the Indemnifying Party promptly after identifying
any situation which it believes presents or appears likely to present a claim
for indemnification against the Indemnified Party although the failure to do so
shall not prevent recovery by the Indemnified Party and shall keep the
Indemnifying Party advised with respect to all developments concerning such
situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Article 10 shall survive the termination of this
Agreement.
10.4 Any claim for indemnification under this Agreement must be made prior
to the earlier of:
(a) one year after the Indemnified Party becomes aware of the event
for which indemnification is claimed; or
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(b) one year after the earlier of the termination of this Agreement or
the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
EQSF's sole and exclusive remedy for claims or other actions or proceedings to
which the Fund's indemnification obligations pursuant to this Article 10 may
apply.
Article 11 Standard of Care.
11.1 EQSF shall at all times act in good faith and agrees to use its best
efforts within commercially reasonable limits to ensure the accuracy of all
services performed under this Agreement, but assumes no responsibility for loss
or damage to the Fund unless said errors are caused by EQSF's own negligence,
bad faith or willful misconduct or that of its employees.
11.2 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than three (3) years prior to the filing
of the suit (or commencement of arbitration proceedings) alleging such cause of
action.
11.3 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
11.5 Without in any way limiting the foregoing, in the event EQSF shall
provide Blue Sky services to the Fund, EQSF shall have no liability for failing
to file on a timely basis any material to be provided by the Fund or its
designee that it has not received on a timely basis from the Fund or its
designee, nor shall EQSF have any responsibility to review the accuracy or
adequacy of materials it receives from the Fund or its designee for filing or
bear any liability arising out of the timely filing of such materials; nor shall
EQSF have any liability for monetary damages for the sale of securities in
jurisdictions where Shares are not properly registered, or in jurisdictions
where Shares are sold in excess of the lawfully registered amount unless such
failure of proper registration or excess sales is due to the willful
misfeasance, bad faith or negligence of EQSF and provided EQSF has requested
such information from the Fund in a timely fashion.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.
As used in the preceding paragraph "incidental, indirect or consequential
damages" means damages which do not flow directly from the act of the party or
which arise from the
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intervention of special circumstances not ordinarily predictable, and does not
include direct damages which arise naturally or ordinarily from a breach of
contract.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above and
shall continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each,
unless the Fund or EQSF provides written notice to the other of its intent not
to renew. Such notice must be received not less than ninety (90) days and not
more than one-hundred eighty (180) days prior to the expiration of the Initial
Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion thereof to a
successor Fund will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If the material failure is one for which the
Non-Defaulting Party has previously given the Defaulting Party notice as
provided in the previous sentence, the Agreement may be terminated by the
Non-Defaulting Party upon thirty (30) days written notice without giving the
Defaulting Party a second opportunity to cure such material failure. If EQSF is
the Non-Defaulting Party, its termination of this Agreement shall not constitute
a waiver of any other rights or remedies of EQSF with respect to services
performed prior to such termination of rights of EQSF to be reimbursed for
out-of-pocket expenses. In all cases, termination by the Non-Defaulting Party
shall not constitute a waiver by the Non-Defaulting Party of any other rights it
might have under this Agreement or otherwise against the Defaulting Party.
13.5 Notwithstanding anything contained in this Agreement to the contrary
and except as provided in Section 13.4, should the Fund desire to move any of
the services provided by EQSF hereunder to a successor service provider prior to
the expiration of the then current Initial or Renewal Term, or should the Fund
or any of its affiliates take any action which would result in EQSF ceasing to
provide administration services to the Fund or the Fund prior
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to the expiration of the Initial or any Renewal Term, EQSF shall make a good
faith effort and use all commercially reasonable efforts to facilitate the
conversion on such prior date, however, there can be no guarantee that EQSF will
be able to facilitate a conversion of services on such prior date. In connection
with the foregoing, should services be converted to a successor service provider
or should the Fund or any of its affiliates take any action which would result
in EQSF ceasing to provide administration services to the Fund or the Fund prior
to the expiration of the Initial or any Renewal Term, the payment of fees to
EQSF as set forth herein shall be accelerated to a date prior to the conversion
or termination of services and calculated as if the services had remained with
EQSF until the expiration of the then current Initial or Renewal Term and
calculated at the asset and/or Shareholder account levels, as the case may be,
on the date notice of termination was given to EQSF.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have EQSF render services as sub-Fund under the terms hereof, the
Fund shall so notify EQSF in writing, and if EQSF agrees in writing to provide
such services, Schedule A shall be amended to include such additional
Portfolios. If after good faith negotiations, the parties are unable to agree
upon the conditions upon which EQSF will service the new Portfolio, either party
shall have the right to terminate this Agreement upon sixty (60) days written
notice to the other party.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and EQSF shall exercise at least the same degree of care, but not less than
reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect its own confidential
information of a similar nature. The Fund and EQSF shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Fund and EQSF
may, however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and EQSF may also disclose the Confidential
Information to independent contractors, auditors, and professional advisors,
provided they first agree in writing to be bound by the confidentiality
obligations substantially similar to this Section 15.1. Notwithstanding the
previous sentence, in no event shall either the Fund or EQSF disclose the
Confidential Information to any competitor of the other without specific, prior
written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive material,
and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates, business plans,
portfolio holdings and internal performance results relating to the past,
present or future business activities of the Fund or EQSF, their respective
subsidiaries and affiliated companies and the customers, clients and
suppliers of any of them;
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(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and secret
in the sense that its confidentiality affords the Fund or EQSF a
competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and models,
and any other tangible manifestation of the foregoing of either party which now
exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party; or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt thereof,
directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative proceeding
after all reasonable legal remedies for maintaining such information in
confidence have been exhausted including, but not limited to, giving the other
party as much advance notice of the possibility of such disclosure as practical
so the other party may attempt to stop such disclosure or obtain a protective
order concerning such disclosure; or
(e) Is subsequently and independently developed by employees, consultants
or agents of the party without reference to the Confidential Information
disclosed under this Agreement.
Article 16 Force Majeure; Excused Non-Performance.
No party shall be liable for any default or delay in the performance of its
obligations under this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by (i) fire, flood, elements of nature or other
acts of God; (ii) any outbreak or escalation of hostilities, war, riots or civil
disorders in any country, (iii) any act or omission of the other party or any
governmental authority; (iv) any labor disputes (provided that the employees'
demands are not reasonable and within the party's power to satisfy); or (v)
nonperformance by a third party or
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any similar cause beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other equipment.
In addition, no party shall be liable for any default or delay in the
performance of its obligations under this Agreement if and to the extent that
such default or delay is caused, directly or indirectly, by the actions or
inactions of the other party. In any such event, the non-performing party shall
be excused from any further performance and observance of the obligations so
affected only for as long as such circumstances prevail and such party continues
to use commercially reasonable efforts to recommence performance or observance
as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that EQSF
may, in its sole discretion, assign all its right, title and interest in this
Agreement to an affiliate, parent or subsidiary, or to the purchaser of
substantially all of its business. EQSF may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement to
be performed by EQSF but shall not be relieved of its obligations and
responsibilities hereunder by reason of such engagement.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this Agreement,
or breach hereof, shall be settled by arbitration administered by the American
Arbitration Association in New York, New York in accordance with its applicable
rules, except that the Federal Rules of Evidence and the Federal Rules of Civil
Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Fund or EQSF, shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
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To the Fund:
767 Third Avenue
New York, New York 10017
Attention: Ian M. Kirschner, General Counsel
To EQSF:
767 Third Avenue
New York, New York 10017
Attention: David Barse
Article 20 Governing Law/Venue.
The laws of the State of New York, excluding the laws on conflicts of laws,
shall govern the interpretation, validity, and enforcement of this agreement.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
Article 23 Publicity.
Neither EQSF nor the Fund shall release or publish news releases, public
announcements, advertising or other publicity relating to this Agreement or to
the transactions contemplated by it without the prior review and written
approval of the other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements
after making reasonable efforts in the circumstances to consult in advance with
the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and
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understandings, whether written or oral, between the parties with respect to the
subject matter hereof. No change, termination, modification, or waiver of any
term or condition of the Agreement shall be valid unless in writing signed by
each party. No such writing shall be effective as against EQSF unless said
writing is executed by an officer of EQSF. A party's waiver of a breach of any
term or condition in the Agreement shall not be deemed a waiver of any
subsequent breach of the same or another term or condition.
25.2 The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not affect
the validity of the remainder of this Agreement. In such case, the parties shall
in good faith modify or substitute such provision consistent with the original
intent of the parties. Without limiting the generality of this paragraph, if a
court determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement, including the
limitations on liability and exclusion of damages, shall remain fully effective.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
EQSF ADVISERS, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
THIRD AVENUE TRUST
By: ______________________________
Name: ____________________________
Title: ___________________________
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SCHEDULE A
LIST OF PORTFOLIOS
Third Avenue Value Fund
Third Avenue Small-Cap Value Fund
Third Avenue High Yield Fund
Third Avenue Real Estate Value Fund
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SCHEDULE B
DUTIES OF EQSF
SERVICES RELATED TO ADMINISTRATION
Blue Sky Administration
o Receiving daily sales figures.
o Receiving daily sales figures broken down by state from Charles Schwab
or other mutual fund marketplaces (if applicable).
o Produce daily warning report for sales in excess of pre-determined
percentage.
o Analyze all sales data to determine trends within any state. o Produce
and mail the following required filings:
o initial filings - produce all required forms including
notification of SEC effectiveness.
o renewals - produce all renewal documents and mail to states,
including follow-up to ensure all is in order to continue selling
in states.
o sales reports - produce all relevant sales reports for the states
and complete necessary documents to properly file sales reports
with states.
o prospectus filings - file all copies of definitive SAI and
prospectuses with the states which require notification.
o post-effective amendment filing - file all post-effective
amendments with the states which require notification, as well as
any other required documents.
o On demand additional states - complete filing for any states that the
Fund would like to add.
o Amendments to current permits - file in a timely manner any amendment
to registered share amounts.
o Update and file hard copy of all data pertaining to individual
permits.
Processing and Payment of Bills
o Centralized contact to receive all invoices for Fund operating
expenses.
o Voucher invoices for authorization / money movement instructions
o Distribution of approved vouchers for payment / recording
o Monitoring bank statement for appropriate money movement and timing
o Ensure proper wire instructions for expenses paid by wire transfer
o Coordinate mailing of checks to various vendors
Completion of Industry Questionnaires
o Preparation of monthly and quarterly questionnaires directly
associated with the operations of the Portfolios,
o Ensuring timely receipt by rating agencies of information for which
the Administrator is responsible.
o The Administrator will provide Prudential monthly download and file
transfer.
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Preparation of Quarterly Reports
o Preparation of Schedule of Investments for the Portfolios' fiscal
quarter ends.
o Coordination to receive market/Fund commentary from Funds' adviser.
o Centralized area to receive and implement comments and changes.
o Coordination and timing with printer.
o Review content of draft copies prior to printing.
Preparation of Semi-Annual Reports and Annual Reports
o Preparation of Schedule of Investments, Statements of Assets and
Liabilities, Operations and Changes, Financial Highlights and
Footnotes to Financial Statements.
o Contact for auditors regarding questions / comments relating to the
Financial Statements / process.
o Timely delivery of properly formatted tape of registered shareholders
to ADP for quarterly report mailing.
o Centralized contact for receipt of president's letter, audit opinion
letter and letter of internal controls.
o Centralized area to receive and implement comments and changes.
o Coordination and timing with printer.
o Review content of draft copies prior to printing.
o Average Net Assets / Ratio Analysis.
Management Reporting
o Daily, Schedule of Investment Report delivered electronically
o Daily, Market Capitalization Report for the Small-Cap Value Fund,
delivered electronically.
Completion and Filing of N-SARs
o Preparation of N-SARs semi-annually.
o Preparation of Financial Data Sheet to facilitate EDGAR filing.
o Filing of N-SARs.
State and Local Tax Information
o Distribution notice to brokers.
o Calcuation of US Treasury / Agency percent of ordinary distribution.
o Massachusetts holding period / realized gains.
o South Carolina holding period / realized gains.
o Florida intangible tax.
o Preparation of 1099-DIV insert cards.
o Coordination with printer, mailroom for 1099-DIV insert cards.
o Review of 1099-DIV insert prior to printing.
o Calculation of Corporate Dividends Received Deduction percentage to
submit to audit firm for review.
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Regulatory Compliance
Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. administration contracts
e. accounting contracts
f. custody administration contracts
g. transfer agent and stockholder services
2. Filings
a. N-1A (prospectus), post-effective amendment and supplements
("stickers")
b. 24f-2 indefinite registration of shares
c. filing fidelity bond under 17g-1
d. filing stockholder reports under 30b2-1
3. Annual updates of biographical information and questionnaires for
Trustees and Officers
Corporate Business and Stockholder/Public Information
A. Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
D. Release Corporate Information
1. To stockholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
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c. changes to prospectus
d. letters from management
e. funds' performance
E. Communications to Stockholders
1. Coordinate printing and distribution of annual, semi-annual,
quarterly reports and prospectus
Financial and Management Reporting
A. Income and Expenses
1. Monitoring of expenses and expense accruals (monthly)
2. Checking Account Reconciliation (monthly)
3. Calculation of advisory fee and reimbursements to Fund (if
applicable)
4. Calculation of average net assets.
B. Distributions to Stockholders
1. Projections of distribution amounts
2. Calculations of dividends and capital gain distributions (in
conjunction with the Funds and their auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940
C. Financial Reporting
1. Liaison between fund management, independent auditors and
printers for stockholder reports
2. Preparation of financial statements for required SEC
post-effective filings (if applicable)
3. Portfolio turnover calculations
4. Calculation of Fund performance
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
E. Other Financial Analyses
1. Upon request from fund management, other budgeting and analyses
can be constructed to meet specific needs (additional fees may
apply)
2. Sales information, portfolio turnover (monthly)
3. Assist independent auditors on return of capital presentation,
excise tax calculation
4. Performance (total return) calculation (monthly)
5. IRS Form 1099 Miscellaneous preparation, mailing & IRS filing
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6. Analysis of interest derived from various Government obligations
(annual) (if interest income was distributed in a calendar year)
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure proper
update
2. Perform various reviews to ensure accuracy of
subscription/liquidation schedules, Accounting (the monthly
expense analysis) and Custody (review of daily bank statements to
ensure accurate money movement).
3. Review accruals and expenditures where applicable
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SCHEDULE C
FEE SCHEDULE
For the services to be rendered, the facilities to be furnished and the
payments to be made by EQSF, as provided for in this Agreement, the Fund will
pay EQSF on the first business day of each month a fee for the previous month at
the rates listed below.
Fund Administration
$170,000 per annum plus an amount equal to 50% of the difference
between (i)(x) $186,000 plus (y) an amount equal to .01% of
the Fund's average net assets in excess of $1 billion minus
(ii) $170,000,
plus $65 per permit for Blue Sky services
Miscellaneous Charges
The Fund shall be charged for the following products and services as applicable:
o Ad hoc reports
o Ad hoc SQL time
o Materials for Rule 15c-3 Presentations
o COLD Storage
o Digital Recording o Microfiche/microfilm production
o Magnetic media tapes and freight
o Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
Fee Adjustments
After the one year anniversary of the effective date of this Agreement, EQSF may
adjust the fees described in the above sections once per calendar year, upon
thirty (30) days prior written notice in an amount not to exceed the cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S.
Department of Labor since the last such adjustment in the Company's monthly fees
(or the Effective Date absent a prior such adjustment).
Programming Costs (to the extent requested by the Fund)
The following programming rates are subject to an annual 5% increase after the
one year anniversary of the effective date of this Agreement.
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(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $150.00 per/hr per programmer
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SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse EQSF monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
o Postage - direct pass through to the Fund
o Telephone and telecommunication costs, requested by the Fund,
including all lease, maintenance and line costs
o Shipping, Certified and Overnight mail and insurance
o Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
requested by the Fund
o Duplicating services
o Courier services
o Overtime, as approved by the Fund
o Temporary staff, as approved by the Fund
o Travel and entertainment, as approved by the Fund
o Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
o Third party audit reviews
o Vendor set-up charges for services
o EDGAR filing fees
o Vendor pricing comparison
o Such other expenses as are agreed to by EQSF and the Fund
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with EQSF. In addition, the Fund will promptly
reimburse EQSF for any other unscheduled expenses incurred by EQSF whenever the
Fund and EQSF mutually agree that such expenses are not otherwise properly borne
by EQSF as part of its duties and obligations under the Agreement.
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SUB-ADMINISTRATION AGREEMENT
THIS SUB-ADMINISTRATION AGREEMENT, dated as of this 1st day of October,
1999, the "Agreement"), between FIRST DATA INVESTOR SERVICES GROUP, INC., a
Massachusetts corporation ("Investor Services Group"), and EQSF ADVISERS, INC.,
a New York corporation (the "Administrator").
WHEREAS, the Administrator provides administration services to Third Avenue
Trust (the "Fund"), an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator desires to retain Investor Services Group to
render certain sub-administrative services with respect to each investment
portfolio listed in Schedule A hereto, as the same may be amended from time to
time by the parties hereto (collectively, the "Portfolios"), and Investor
Services Group is willing to render such services;
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any officer of
the Administrator; or (ii) any person, whether or not such person is an
officer or employee of the Administrator, duly authorized to give Oral
Instructions or Written Instructions on behalf of the Administrator as
indicated in writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or Board of
Trustees of the Fund, as the case may be.
(e) "Commission" shall mean the Securities and Exchange Commission.
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(f) "Custodian" refers to any custodian or subcustodian of securities
and other property which the Fund may from time to time deposit, or cause
to be deposited or held under the name or account of such a custodian
pursuant to a Custody Agreement.
(g) "1933 Act" shall mean the Securities Act of 1933 and the rules and
regulations promulgated thereunder, all as amended from time to time.
(h) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, all as amended from time to
time.
(i) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by Investor Services Group from a person
reasonably believed by Investor Services Group to be an Authorized Person.
(j) "Portfolio" shall mean each separate series of shares offered by
the Fund representing interests in a separate portfolio of securities and
other assets.
(k) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements thereto
if any, which has become effective under the 1933 Act and the 1940 Act.
(l) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(m) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(n) "Written Instructions" shall mean a written communication signed
by a person reasonably believed by Investor Services Group to be an
Authorized Person and actually received by Investor Services Group. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
Article 2 Appointment of Investor Services Group.
The Administrator hereby appoints Investor Services Group to act as
Sub-Administrator of the Fund on the terms set forth in this Agreement. Investor
Services Group accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for the following:
performing the customary services of a sub-administrator, including treasury and
blue sky for the Fund, as more
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<PAGE>
fully described in the written schedule of Duties of Investor Services Group
annexed hereto as Schedule B and incorporated herein, and subject to the
supervision and direction of the Administrator.
3.2 In performing its duties under this Agreement, Investor Services Group:
(a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the
Administrator and will conform to and comply with the requirements of the 1940
Act and all other applicable federal or state laws and regulations; and (b) will
consult with legal counsel to the Fund, as necessary and appropriate.
Furthermore, Investor Services Group shall not have or be required to have any
authority to supervise the investment or reinvestment of the securities or other
properties which comprise the assets of the Fund or any of its Portfolios and
shall not provide any investment advisory services to the Fund or any of its
Portfolios.
3.3 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the
Administrator and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records required
of it pursuant to its duties hereunder and as set forth in Schedule B in
accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor Services
Group agrees that all such records prepared or maintained by Investor Services
Group relating to the services to be performed by Investor Services Group
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section, and will be surrendered promptly
to the Fund on and in accordance with the Administrator's request.
Article 5 Administrator Instructions.
5.1 Investor Services Group will have no liability when properly acting
upon Written or Oral Instructions reasonably believed to have been executed or
orally communicated by an Authorized Person and will not be held to have any
notice of any change of authority of any person until receipt of a Written
Instruction thereof from the Administrator.
5.2 At any time, Investor Services Group may request Written Instructions
from the Administrator and may seek advice from legal counsel for the Fund, or
its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action properly taken or not
taken or suffered by it in good faith in accordance with such Written
Instructions or in accordance with the opinion of counsel for the Fund or for
Investor
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<PAGE>
Services Group. Written Instructions requested by Investor Services Group will
be provided by the Administrator within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Administrator only if said
representative is an Authorized Person. The Administrator agrees that all Oral
Instructions shall be followed within one business day by confirming Written
Instructions, and that the Administrator's failure to so confirm shall not
impair in any respect Investor Services Group's right to rely on Oral
Instructions.
Article 6 Compensation.
6.1 Investor Services Group will from time to time employ or associate with
itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Administrator. The compensation of such person
or persons shall be paid by Investor Services Group and no obligation shall be
incurred on behalf of the Administrator in such respect.
6.2 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Administrator or the Fund: membership dues in
the Investment Company Institute or any similar organization; investment
advisory expenses; costs of printing and mailing stock certificates,
prospectuses, reports and notices; interest on borrowed money; brokerage
commissions; stock exchange listing fees; taxes and fees payable to Federal,
state and other governmental agencies; fees of Board Members of the Fund who are
not affiliated with Investor Services Group; outside auditing expenses; outside
legal expenses; Blue Sky registration or filing fees; or other expenses not
specified in this Section 6.2 which are properly payable by the Administrator or
the Fund. Investor Services Group shall not be required to pay any Blue Sky
registration or filing fees unless and until it has received the amount of such
fees from the Administrator.
6.3 The Administrator will compensate Investor Services Group for the
performance of its obligations hereunder in accordance with the fees and other
charges set forth in the written Fee Schedule annexed hereto as Schedule C and
incorporated herein.
6.4 In addition to those fees set forth in Section 6.3 above, the
Administrator agrees to pay, and will be billed separately for, out-of-pocket
expenses actually incurred by Investor Services Group in the performance of its
duties hereunder. Out-of-pocket expenses shall include, but shall not be limited
to, the items specified in the written schedule of out-of-pocket charges annexed
hereto as Schedule D and incorporated herein. Schedule D may be modified by
written agreement between the parties. Unspecified out-of-pocket expenses shall
be limited to those out-of-pocket expenses reasonably incurred by Investor
Services Group in the performance of its obligations hereunder.
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<PAGE>
6.5 The Administrator agrees to pay all fees, charges and out-of-pocket
expenses to Investor Services Group by Federal Funds Wire within fifteen (15)
business days following the receipt of the respective invoice. In addition, with
respect to all fees under this Agreement, Investor Services Group may charge a
service fee equal to the lesser of (i) one and one half percent (1 1/2%) per
month or (ii) the highest interest rate legally permitted on any past due
invoiced amounts, provided however, the foregoing service fee shall not apply if
the Administrator in good faith legitimately disputes any invoice amount in
which case the Administrator shall do the following within thirty (30) days of
the postmark date: (a) pay Investor Services Group the undisputed amount of the
invoice; and (b) provide Investor Services Group a detailed written description
of the disputed amount and the basis for the Administator's dispute with such
amount. In addition, the Administrator shall cooperate with Investor Services
Group in resolving disputed invoice amounts and then promptly paying such
amounts determined to be due.
6.6 Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedule C a revised Fee Schedule executed and dated by the
parties hereto.
Article 7 [RESERVED]
Article 8 Fund Accounting System.
8.1 Investor Services Group shall retain title to and ownership of any and
all data bases, computer programs, screen formats, report formats, interactive
design techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by Investor Services Group in connection
with the services provided by Investor Services Group to the Administrator
herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Administrator a limited
license to the Investor Services Group System for the sole and limited purpose
of having Investor Services Group provide the services contemplated hereunder
and nothing contained in this Agreement shall be construed or interpreted
otherwise and such license shall immediately terminate with the termination of
this Agreement.
8.3 In the event that the Administrator, including any affiliate or agent
of the Administrator or any third party acting on behalf of the Administrator is
provided with direct access to the Investor Services Group System, such direct
access capability shall be limited to direct entry to the Investor Services
Group System by means of on-line mainframe terminal entry or PC emulation of
such mainframe terminal entry and any other non-conforming method of
transmission of information to the Investor Services Group System is strictly
prohibited without the prior written consent of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Administrator
that:
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(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to authorize
it to enter into this Agreement; and
(d) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.2 The Administrator represents and warrants to Investor Services
Group that:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement; and
(c) all corporate proceedings required have been taken to authorize it
to enter into this Agreement.
Article 10 Indemnification.
10.1 The Administrator shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable in connection with this
Agreement or Investor Services Group's performance hereunder (a "Claim"), unless
such Claim resulted from a negligent act or omission to act or bad faith by
Investor Services Group in the performance of its duties hereunder.
10.2 Investor Services Group shall indemnify and hold the Administrator
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against the Administrator or for which
the Administrator may be held to be liable in connection with this Agreement (a
"Claim"), provided that such Claim resulted from a negligent act or omission to
act, bad faith, willful misfeasance or reckless disregard by Investor Services
Group in the performance of its duties hereunder.
10.3 In any case in which one party (the "Indemnifying Party") may be asked
to indemnify or hold the other party (the "Indemnified Party") harmless, the
Indemnified Party will notify the Indemnifying Party promptly after identifying
any situation which it believes
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<PAGE>
presents or appears likely to present a claim for indemnification against the
Indemnified Party although the failure to do so shall not prevent recovery by
the Indemnified Party and shall keep the Indemnifying Party advised with respect
to all developments concerning such situation. The Indemnifying Party shall have
the option to defend the Indemnified Party against any Claim which may be the
subject of this indemnification, and, in the event that the Indemnifying Party
so elects, such defense shall be conducted by counsel chosen by the Indemnifying
Party and reasonably satisfactory to the Indemnified Party, and thereupon the
Indemnifying Party shall take over complete defense of the Claim and the
Indemnified Party shall sustain no further legal or other expenses in respect of
such Claim. The Indemnified Party will not confess any Claim or make any
compromise in any case in which the Indemnifying Party will be asked to provide
indemnification, except with the Indemnifying Party's prior written consent. The
obligations of the parties hereto under this Article 10 shall survive the
termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made prior
to the earlier of:
(a) one year after the Indemnified Party becomes aware of the event
for which indemnification is claimed; or
(b) one year after the earlier of the termination of this Agreement or
the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Administrator's indemnification obligations pursuant
to this Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Administrator unless said errors are
caused by Investor Services Group's own negligence, bad faith or willful
misconduct or that of its employees.
11.2 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than three (3) years prior to the filing
of the suit (or commencement of arbitration proceedings) alleging such cause of
action.
11.3 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
11.5 Without in any way limiting the foregoing, in the event Investor
Services Group shall provide Blue Sky services to the Administrator, Investor
Services Group shall have no
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liability for failing to file on a timely basis any material to be provided by
the Administrator or its designee that it has not received on a timely basis
from the Administrator or its designee, nor shall Investor Services Group have
any responsibility to review the accuracy or adequacy of materials it receives
from the Administrator or its designee for filing or bear any liability arising
out of the timely filing of such materials; nor shall Investor Services Group
have any liability for monetary damages for the sale of securities in
jurisdictions where Shares are not properly registered, or in jurisdictions
where Shares are sold in excess of the lawfully registered amount unless such
failure of proper registration or excess sales is due to the willful
misfeasance, bad faith or negligence of Investor Services Group and provided
Investor Services Group has requested such information from the Administrator in
a timely fashion.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.
As used in the preceding paragraph "incidental, indirect or consequential
damages" means damages which do not flow directly from the act of the party or
which arise from the intervention of special circumstances not ordinarily
predictable, and does not include direct damages which arise naturally or
ordinarily from a breach of contract.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above and
shall continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each,
unless the Administrator or Investor Services Group provides written notice to
the other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Administrator, all
expenses associated with movement of records and materials and conversion
thereof to a successor administrator will be borne by the Administrator.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If the material failure is one for which the
Non-Defaulting Party has previously given the Defaulting Party notice as
provided in the previous sentence, the
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Agreement may be terminated by the Non-Defaulting Party upon thirty (30) days
written notice without giving the Defaulting Party a second opportunity to cure
such material failure. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the contrary
and esxcept as provided in Section 13.4, should the Fund or the Administrator
desire to move any of the services provided by Investor Services Group hereunder
to a successor service provider prior to the expiration of the then current
Initial or Renewal Term, or should the Administrator or any of its affiliates
take any action which would result in Investor Services Group ceasing to provide
administration services to the Administrator or the Fund prior to the expiration
of the Initial or any Renewal Term, Investor Services Group shall make a good
faith effort and use all commercially reasonable efforts to facilitate the
conversion on such prior date, however, there can be no guarantee that Investor
Services Group will be able to facilitate a conversion of services on such prior
date. In connection with the foregoing, should services be converted to a
successor service provider or should the Administrator or any of its affiliates
take any action which would result in Investor Services Group ceasing to provide
administration services to the Administrator or the Fund prior to the expiration
of the Initial or any Renewal Term, the payment of fees to Investor Services
Group as set forth herein shall be accelerated to a date prior to the conversion
or termination of services and calculated as if the services had remained with
Investor Services Group until the expiration of the then current Initial or
Renewal Term and calculated at the asset and/or Shareholder account levels, as
the case may be, on the date notice of termination was given to Investor
Services Group.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the
Administrator desires to have Investor Services Group render services as
sub-administrator under the terms hereof, the Administrator shall so notify
Investor Services Group in writing, and if Investor Services Group agrees in
writing to provide such services, Schedule A shall be amended to include such
additional Portfolios. If after good faith negotiations, the parties are unable
to agree upon the conditions upon which Investor Services Group will service the
new Portfolio, either party shall have the right to terminate this Agreement
upon sixty (60) days written notice to the other party.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The
Administrator and Investor Services Group shall
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exercise at least the same degree of care, but not less than reasonable care, to
safeguard the confidentiality of the Confidential Information of the other as it
would exercise to protect its own confidential information of a similar nature.
The Administrator and Investor Services Group shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Administrator
and Investor Services Group may, however, disclose Confidential Information to
their respective parent corporation, their respective affiliates, their
subsidiaries and affiliated companies and employees, provided that each shall
use reasonable efforts to ensure that the Confidential Information is not
duplicated or disclosed in breach of this Agreement. The Administrator and
Investor Services Group may also disclose the Confidential Information to
independent contractors, auditors, and professional advisors, provided they
first agree in writing to be bound by the confidentiality obligations
substantially similar to this Section 15.1. Notwithstanding the previous
sentence, in no event shall either the Administrator or Investor Services Group
disclose the Confidential Information to any competitor of the other without
specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive material,
and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates, business plans,
portfolio holdings and internal performance results relating to the past,
present or future business activities of the Administrator or Investor
Services Group, their respective subsidiaries and affiliated companies and
the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and secret
in the sense that its confidentiality affords the Administrator or Investor
Services Group a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and models,
and any other tangible manifestation of the foregoing of either party which now
exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party; or
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(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 Force Majeure; Excused Non-Performance.
No party shall be liable for any default or delay in the performance of its
obligations under this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by (i) fire, flood, elements of nature or other
acts of God; (ii) any outbreak or escalation of hostilities, war, riots or civil
disorders in any country, (iii) any act or omission of the other party or any
governmental authority; (iv) any labor disputes (provided that the employees'
demands are not reasonable and within the party's power to satisfy); or (v)
nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In addition, no party shall be liable for
any default or delay in the performance of its obligations under this Agreement
if and to the extent that such default or delay is caused, directly or
indirectly, by the actions or inactions of the other party. In any such event,
the non-performing party shall be excused from any further performance and
observance of the obligations so affected only for as long as such circumstances
prevail and such party continues to use commercially reasonable efforts to
recommence performance or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services
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Group but shall not be relieved of its obligations and responsibilities
hereunder by reason of such engagement.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this Agreement,
or breach hereof, shall be settled by arbitration administered by the American
Arbitration Association in New York, New York in accordance with its applicable
rules, except that the Federal Rules of Evidence and the Federal Rules of Civil
Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Administrator or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Administrator:
EQSF Advisers, Inc.
767 Third Avenue
New York, New York 10017
Attention: Ian M. Kirschner, General Counsel
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
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Article 20 Governing Law/Venue.
The laws of the State of New York, excluding the laws on conflicts of laws,
shall govern the interpretation, validity, and enforcement of this agreement.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
Article 23 Publicity.
Neither Investor Services Group nor the Administrator shall release or
publish news releases, public announcements, advertising or other publicity
relating to this Agreement or to the transactions contemplated by it without the
prior review and written approval of the other party; provided, however, that
either party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
neither Party shall recruit, solicit, employ or engage, for itself or others,
the other Party's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
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25.2 The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not affect
the validity of the remainder of this Agreement. In such case, the parties shall
in good faith modify or substitute such provision consistent with the original
intent of the parties. Without limiting the generality of this paragraph, if a
court determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement, including the
limitations on liability and exclusion of damages, shall remain fully effective.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
EQSF ADVISERS, INC.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
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SCHEDULE A
LIST OF PORTFOLIOS
Third Avenue Value Fund
Third Avenue Small-Cap Value Fund
Third Avenue High Yield Fund
Third Avenue Real Estate Value Fund
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SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
SERVICES RELATED TO ADMINISTRATION
Blue Sky Administration
o Receiving daily sales figures.
o Receiving daily sales figures broken down by state from Charles Schwab or
other mutual fund marketplaces (if applicable).
o Produce daily warning report for sales in excess of pre-determined
percentage.
o Analyze all sales data to determine trends within any state.
o Produce and mail the following required filings:
o initial filings - produce all required forms including notification of
SEC effectiveness.
o renewals - produce all renewal documents and mail to states, including
follow-up to ensure all is in order to continue selling in states.
o sales reports - produce all relevant sales reports for the states and
complete necessary documents to properly file sales reports with
states.
o prospectus filings - file all copies of definitive SAI and
prospectuses with the states which require notification.
o post-effective amendment filing - file all post-effective amendments
with the states which require notification, as well as any other
required documents.
o On demand additional states - complete filing for any states that the Fund
would like to add.
o Amendments to current permits - file in a timely manner any amendment to
registered share amounts.
o Update and file hard copy of all data pertaining to individual permits.
Processing and Payment of Bills
o Centralized contact to receive all invoices for Fund operating expenses.
o Voucher invoices for authorization / money movement instructions
o Distribution of approved vouchers for payment / recording
o Monitoring bank statement for appropriate money movement and timing
o Ensure proper wire instructions for expenses paid by wire transfer
o Coordinate mailing of checks to various vendors
Completion of Industry Questionnaires
o Preparation of monthly and quarterly questionnaires directly associated
with the operations of the Portfolios,
o Ensuring timely receipt by rating agencies of information for which
Investor Services Group is responsible.
o Investor Services Group will provide Prudential monthly download and file
transfer.
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Preparation of Quarterly Reports
o Preparation of Schedule of Investments for the Portfolios' fiscal quarter
ends.
o Coordination to receive market / Fund commentary from Funds' adviser.
o Centralized area to receive and implement comments and changes.
o Coordination and timing with printer.
o Review content of draft copies prior to printing.
Preparation of Semi-Annual Reports and Annual Reports
o Preparation of Schedule of Investments, Statements of Assets and
Liabilities, Operations and Changes, Financial Highlights and Footnotes to
Financial Statements.
o Contact for auditors regarding questions / comments relating to the
Financial Statements / process.
o Timely delivery of properly formatted tape of registered shareholders to
ADP for quarterly report mailing.
o Centralized contact for receipt of president's letter, audit opinion letter
and letter of internal controls.
o Centralized area to receive and implement comments and changes.
o Coordination and timing with printer.
o Review content of draft copies prior to printing.
o Average Net Assets / Ratio Analysis.
Management Reporting
o Daily, Schedule of Investment Report for all 4 portfolios, delivered
electronically
o Daily, Market Capitalization Report for the Small-Cap Value Fund, delivered
electronically
Completion and Filing of N-SARs
o Preparation of N-SARs semi-annually.
o Preparation of Financial Data Sheet to facilitate EDGAR filing.
o Filing of N-SARs.
State and Local Tax Information
o Distribution notice to brokers.
o Calculation of US Treasury / Agency percent of ordinary distribution.
o Massachusetts holding period / realized gains.
o South Carolina holding period / realized gains.
o Florida intangibles tax.
o Preparation of 1099-DIV insert cards.
o Coordination with printer, mailroom for 1099-DIV insert cards.
o Review of 1099-DIV insert prior to printing.
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o Calculation of Corporate Dividends Received Deduction percentage to submit
to audit firm for review.
SCHEDULE C
FEE SCHEDULE
For the services to be rendered, the facilities to be furnished and the
payments to be made by Investor Services Group, as provided for in this
Agreement, the Administrator will pay Investor Services Group on the first
business day of each month a fee for the previous month at the rates listed
below.
Fund Administration
$170,000 per year for the Third Avenue Value Fund, Third Avenue Small
Cap Value Fund, Third Avenue High Yield Fund and Third Avenue
Real Estate Value Fund.
$20,00 per year per new domestic Portfolio
$25,000 per year per new international Portfolio
plus $65 per permit for Blue Sky services
Miscellaneous Charges
The Company shall be charged for the following products and services as
applicable:
o Ad hoc reports
o Ad hoc SQL time o Materials for Rule 15c-3 Presentations
o COLD Storage
o Digital Recording
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
Fee Adjustments
After the one year anniversary of the effective date of this Agreement, Investor
Services Group may adjust the fees described in the above sections once per
calendar year, upon thirty (30) days prior written notice in an amount not to
exceed the cumulative percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U) U.S. City Average, All items
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(unadjusted) - (1982-84=100), published by the U.S. Department of Labor since
the last such adjustment in the Company's monthly fees (or the Effective Date
absent a prior such adjustment).
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Programming Costs
The following programming rates are subject to an annual 5% increase after the
one year anniversary of the effective date of this Agreement.
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $ 150.00 per/hr per programmer
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SCHEDULE D
OUT-OF-POCKET EXPENSES
The Company shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
o Postage - direct pass through to the Company
o Telephone and telecommunication costs requested by the Company, including
all lease, maintenance and line costs
o Shipping, Certified and Overnight mail and insurance
o Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines as requested
by the Company
o Duplicating services
o Courier services
o Overtime, as approved by the Company
o Temporary staff, as approved by the Company
o Travel and entertainment, as approved by the Company
o Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
o Third party audit reviews
o Vendor set-up charges for Blue Sky and other services
o Blue Sky filing or registration fees
o EDGAR filing fees
o Vendor pricing comparison
o Such other expenses as are agreed to by Investor Services Group and the
Company
The Company agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Company will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Company
and Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
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SCHEDULE E
FUND DOCUMENTS
o Certified copy of the Articles of Incorporation of the Fund, as amended
o Certified copy of the By-laws of the Fund, as amended,
o Copies of all agreements between the Fund and its service providers.
o All notices issued by the Fund with respect to the Shares in accordance
with and pursuant to the Articles of Incorporation or By-laws of the Fund
or as required by law and shall perform such other specific duties as are
set forth in the Articles of Incorporation including the giving of notice
of any special or annual meetings of shareholders and any other notices
required thereby.
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