SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
Third Avenue Trust
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(Name of Registrant as Specified In Its Charter)
(name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
THIRD AVENUE FUNDS
767 THIRD AVENUE
NEW YORK, NEW YORK 10017-2023
Dear Fellow Shareholder,
I would like to notify you of a special meeting of shareholders of Third
Avenue Funds, which is described in the enclosed materials. A number of
important proposals will be voted on, and I urge you to vote your enclosed
proxy.
One proposal relates to changing various investment restrictions of the
Third Avenue Value Fund so they are identical to those of the Third Avenue
Small-Cap Value Fund and the Third Avenue Real Estate Value Fund. A second
proposal requests the election of the Board of Trustees, since some of the
Trustees have been elected by the Board to fill existing vacancies and have not
been previously elected by shareholders. We are also seeking to ratify the
selection of auditors for the Funds. The last proposal seeks approval of a new
Investment Advisory Agreement with the Funds' adviser, which contains terms that
are substantially the same as the existing contract, with a few additions. The
approval is being sought in connection with a technical change of control of the
adviser that would be caused by a proposed transfer of voting control of the
adviser back to my adult children who own a majority of the shares. No change in
the management or operations of the adviser or the Funds would occur as a result
of this transfer. I will continue to act as portfolio manager or co-portfolio
manager of the Funds and in fact will be entering into a five-year employment
contract with the Funds' adviser. Since this transfer requires shareholder
approval, we are taking this opportunity to simultaneously update the Investment
Advisory Agreement, by adding the new provisions as more fully described in the
Proxy Statement.
The proxy documents explain each proposal in detail, and I encourage you to
review them. As always, we are available to answer your questions at
1-800-443-1021. By mailing in your vote today, you can help Third Avenue Funds
avoid the cost of follow-up mailings and phone calls.
We appreciate your prompt attention to this matter. Thank you for being a
shareholder of Third Avenue Funds.
Sincerely,
/s/ Martin J. Whitman
- ---------------------
Martin J. Whitman
Chairman of the Board and Chief Executive Officer
<PAGE>
THIRD AVENUE FUNDS
767 THIRD AVENUE
NEW YORK, NEW YORK 10017-2023
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
A Special Meeting (the "Meeting") of shareholders of funds (each a "Fund"
and, collectively, the "Funds") comprising Third Avenue Trust (the "Trust"), a
Delaware business trust, will be held at Four Times Square, 38th Floor, New
York, New York 10036 on May 24, 2000 at 11:00 a.m. New York time for the
following purposes:
1. To elect ten (10) Trustees to serve until the next meeting of shareholders,
if any, and until the election and qualification of their successors.
2. To approve changing various fundamental investment restrictions of the Third
Avenue Value Fund in order to make them consistent with the fundamental
investment restrictions of the other Funds of the Trust.
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for the Funds for the fiscal year ending October 31, 2000.
4. To approve a new Investment Advisory Agreement between Third Avenue Value
Fund and its current adviser, EQSF Advisers, Inc,. in connection with a
proposed change of control of EQSF Advisers, Inc.
5. To approve a new Investment Advisory Agreement between Third Avenue Small-Cap
Value Fund and its current adviser, EQSF Advisers, Inc. in connection with a
proposed change of control of EQSF Advisers, Inc.
6. To approve a new Investment Advisory Agreement between Third Avenue Real
Estate Value Fund and its current adviser, EQSF Advisers, Inc. in connection
with a proposed change of control of EQSF Advisers, Inc.
7. To transact such other business as may properly come before the meeting
and/or any adjournments thereof.
Shareholders of record at the close of business on April 10, 2000 are
entitled to notice of, and to vote at the meeting and/or any adjournments
thereof.
By Order of the Board of Trustees,
David M. Barse
PRESIDENT
APRIL 15, 2000
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YOUR VOTE IS IMPORTANT
SHAREHOLDERS ARE URGED TO DESIGNATE THEIR CHOICES ON EACH OF THE MATTERS TO BE
ACTED UPON AND TO DATE, SIGN, AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR PROMPT
RETURN OF THE PROXY WILL HELP ASSURE A QUORUM AT THE MEETING AND AVOID THE
ADDITIONAL FUND EXPENSE OF FURTHER SOLICITATION.
<PAGE>
QUESTIONS AND ANSWERS
Q: Why is this material being sent to shareholders and what are they supposed to
do with it?
A: This material is being sent to shareholders of the Funds to ask them to vote
on some important proposals. These proposals include the approval of changes
in the investment restrictions of the Third Avenue Value Fund, the election
of the Board of Trustees, the ratification of the auditors of the financial
statements of the Funds comprising the Trust and the approval of a new
Investment Advisory Agreement with the adviser of each Fund comprising the
Trust. The Trustees recommend that you vote FOR all the proposals.
Q: Why is it necessary to vote on a new Investment Advisory Agreement with the
Funds' investment adviser if there are no material changes between that
contract and the existing one?
A: The primary reason is that Martin J. Whitman, the Chairman and Chief
Executive Officer of the Funds and the Adviser, wishes to give back to his
children the voting rights to the shares they own. If Mr. Whitman gives back
his voting rights, the present Investment Advisory Agreements will terminate
automatically under the law. Consequently, it is necessary for shareholders
to approve a new Agreement so that the Adviser can continue, without
interruption, to provide its services to the Funds comprising the Trust. Mr.
Whitman plans to remain with the Funds and the Adviser in his current
capacities for the indefinite future and will be entering into a five-year
employment agreement with the Adviser. Since the Adviser is required to
present the Agreement to shareholders for their approval, it makes sense to
simultaneously update the Investment Advisory Agreements to include language
it uses in other Investment Advisory Agreements that it is a party to.
Q: Do shareholders of all of the Funds have to vote on changing the fundamental
investment restrictions of the Third Avenue Value Fund, or just the
shareholders of that Fund?
A: Just the shareholders of the Third Avenue Value Fund. The reason for this
proposal is to make the fundamental investment restrictions of all of the
Funds comprising the Trust identical to one another.
Q: Why are shareholders electing Trustees to the Board when the Trustees already
serve in that capacity?
A: Some of the Trustees were elected by the Board, rather than the shareholders,
to fill vacancies that have occurred over the years. Management desires that
shareholders elect all present members of the Board of Trustees. This will
minimize the likelihood that the Board would have to spend additional
shareholder funds to hold a special meeting to elect trustees, which would be
required at any time less than 2/3 of the Trustees have been elected by the
shareholders.
Q: Why is the selection of the independent accountants being ratified?
A: The Trust is required to present ratification of the independent accountants
at least once each year in which it holds any shareholder meeting.
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IMPORTANT ADDITIONAL INFORMATION ABOUT THE PROPOSALS IS SET FORTH IN THE
ACCOMPANYING PROXY STATEMENT. PLEASE READ IT CAREFULLY.
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2
<PAGE>
THIRD AVENUE FUNDS
767 THIRD AVENUE
NEW YORK, NEW YORK 10017-2023
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
MAY 24, 2000
This Proxy Statement is furnished to the shareholders of Third Avenue Value
Fund, Third Avenue Small-Cap Value Fund and Third Avenue Real Estate Value Fund
(each a "Fund" and collectively the "Funds"), each a series of the Third Avenue
Trust (the "Trust"), in connection with the solicitation by the management of
the Trust of proxies to be used at the Special Meeting of Shareholders of the
Funds (the "Meeting"), to be held at Four Times Square, 38th Floor, New York,
New York 10036, on May 24, 2000 at11:00 a.m. New York time, and/or at any
adjournments thereof. The purpose of the Meeting and the matters to be acted
upon are set forth in the accompanying Notice of Special Meeting of
Shareholders.
The cost of the solicitation of proxies will be borne directly by the Trust
and therefore, indirectly by its shareholders. The Trust has retained
Shareholder Communications Corporation as its solicitation agent. The cost of
solicitation is estimated to be approximately $10,000 plus out of pocket
expenses. Proxies may also be solicited personally or by mail, telephone or
electronic means by Trustees, officers and regular employees of the Trust, its
Investment Adviser, EQSF Advisers, Inc. (the "Adviser") and PFPC Inc., the
Fund's transfer agent.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the Meeting, the shares of beneficial interest of each Fund
represented thereby will be voted in accordance with the instructions marked on
the proxy.
The following table sets forth each of the proposals to be voted on at the
Meeting, and the shareholders of the Fund that are to vote on that proposal:
PROPOSAL FUND(S) VOTING ON PROPOSAL
1. To elect ten (10) Trustees to serve until All Funds
the next meeting of shareholders, if any, and
until the election and qualification of their
successors.
2. To approve changing various fundamental Third Avenue Value Fund
investment restrictions of the Third Avenue
Value Fund in order to make them consistent
with the fundamental investment restrictions
of the other Funds of the Trust.
3. To ratify the selection of All Funds
PricewaterhouseCoopers LLP as independent
accountants for the Funds for the fiscal year
ending October 31, 2000.
4. To approve a new Investment Advisory Third Avenue Value Fund
Agreement between Third Avenue Value Fund and
the Adviser, in connection with a proposed
change of control of the Adviser.
5. To approve a new Investment Advisory Third Avenue Small-Cap
Agreement between Third Avenue Small-Cap Value Value Fun
Fund and the Adviser, in connection with a
proposed change of control of the Adviser.
6. To approve a new Investment Advisory Third Avenue Real Estate
Agreement between Third Avenue Real Estate Value Fund
Value Fund and the Adviser, in connection with
a proposed change of control of the Adviser.
3
<PAGE>
To the extent instructions are not marked, executed proxies will be voted
FOR proposal 1, all of proposal 2, and proposals 3, 4, 5 and 6 and in the
discretion of the proxies on any other matter. Any proxy may be revoked at any
time prior to its exercise, either by filing with the Fund a written notice of
revocation, by delivering a duly executed proxy bearing a later date, or by
attending the Meeting and voting in person.
At the close of business on April 10, 2000, the record date for determining
shareholders entitled to notice of, and to vote at, the Meeting, there were
outstanding 39,923,024 shares of Third Avenue Value Fund, 9,889,118 shares of
Third Avenue Small-Cap Value Fund and 1,248,698 shares of Third Avenue Real
Estate Value Fund entitled to vote. Each share represents a transferable unit of
beneficial interest in the applicable Fund and entitles the holder thereof to
one vote on all matters which come before the Meeting with respect to that Fund.
With respect to the election of Trustees and ratification of the accountants,
shares of all Funds will be voted together and entitle the holder to one vote on
those matters.
In the event that a quorum is not present or a quorum is present but
sufficient votes in favor of any of the proposals described in this proxy
statement are not received by the time scheduled for the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of the shares present in person or by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote in favor of such adjournment, all executed proxies that make no provision
to the contrary (such as by instructing the proxies to vote against the
proposal).
Some proposals require more votes than others to be approved. An
affirmative vote of a majority of each Fund's outstanding shares (defined as
either 67% of the shares present at the Meeting, if holders of more than 50% of
the outstanding shares are present in person or by proxy, or more than 50% of
the outstanding shares, whichever is less) is necessary to approve its new
Investment Advisory Agreement and, in the case of Third Avenue Value Fund, the
change in each fundamental investment restriction being voted on. Election of
Trustees requires a plurality of the votes cast at the Meeting. Ratification of
the appointment of auditors requires the affirmative vote of a majority of the
votes of the applicable Fund cast at the Meeting. Broker non-votes are shares
held in street name for which the broker indicates that instructions have not
been received from the beneficial owners or other persons entitled to vote and
for which the broker does not have discretionary authority. Abstentions and
broker non-votes will be counted as shares present for purposes of determining
whether a quorum is present but will not be voted for or against any adjournment
or proposal. Accordingly, abstentions and broker non-votes effectively will be a
vote against adjournment or against any proposal where the required vote is a
percentage of the shares present or outstanding.
This Proxy Statement and the accompanying Form of Proxy will initially be
mailed to shareholders on or about April 15, 2000.
Shareholders may request copies of the Annual Report of the Funds for the
fiscal year ended October 31, 1999, without charge, by writing to Third Avenue
Funds, 767 Third Avenue, New York, NY 10017, Attention: Marketing Department, or
by calling toll-free (800) 443-1021.
PROPOSAL NO. 1
ELECTION OF TRUSTEES
Pursuant to the By-Laws of the Trust, the Board of Trustees has fixed the
number of trustees comprising the entire Board at not more than fifteen (15) and
has designated the ten (10) incumbent Trustees listed below as nominees for
election as Trustees of the Trust to hold office until the next Meeting of
Shareholders and until their successors are elected and qualified.
A shareholder using the enclosed proxy card can vote for all or any of the
nominees of the Board of Trustees or withhold his or her vote from all or any of
such nominees. Unless otherwise specified in the accompanying proxy, the shares
voted pursuant thereto will be voted FOR the election as Trustees of the Trust
of each of the persons named below. If for any reason any of the nominees named
below should be unable to stand for election or serve if elected, it is intended
that such proxy will be voted for the election of such other person(s) as
management may recommend. Each of the nominees is a member of the current Board
of Trustees and has consented to his or her nomination and has agreed to serve
if elected. Management has no reason to believe that any nominee will be unable
to serve as a Trustee.
4
<PAGE>
The following table sets forth the names of management's nominees for
election as Trustees, their principal occupation or employment during the past
five years including the periods during which each of them has served as a
Trustee, their age and the approximate number of shares of the Trust
beneficially owned, directly or indirectly, by each of them as of March 31,
2000.
<TABLE>
<CAPTION>
POSITION(S) SHARES
HELD WITH PRINCIPAL OCCUPATION OWNED
NAME & ADDRESS AGE REGISTRANT DURING PAST 5 YEARS BENEFICIALLY
---------------------- ----- --------------- ----------------------------------- --------------
<S> <C> <C> <C> <C>
Phyllis W. Beck* 73 Trustee An Associate Judge of the 19,893
GSB Bldg. Suite 800 Superior Court of Pennsylvania;
City Line & Trustee of Third Avenue Variable
Belmont Ave. Series Trust (1999-Present);
Bala Cynwald, PA Trustee or Director of the Trust
19004-1611 or its predecessor since Nov. 1992.
Lucinda Franks 53 Trustee Journalist (1969-Present); 0
64 East 86th Street Author; Winner of the 1971
New York, Ny 10028 Pulitzer Prize for Journalism;
Trustee of Third Avenue Variable
Series Trust (1999-Present);
Trustee of the Trust since Feb. 1998.
Gerald Hellerman 62 Trustee Managing Director of Hellerman 4,607
10965 Eight Bells Lane Associates, a financial and
Columbia, MD 21044 corporate consulting firm.
Trustee of Third Avenue Variable
Series Trust (1999-Present);
Trustee or Director of the Trust or
its predecessor since Sept. 1993.
Marvin Moser, M.D. 76 Trustee Trustee of Trudeau Institute, a 28,732
13 Murray Hill Road medical research institute;
Scarsdale, NY 10583 Clinical Professor of Medicine
at Yale University School of Medicine
and Senior Medical Advisor, National
High Blood Pressure Education
Program, National Heart Lung and
Blood Institute. Director of AMBI
Corp; Trustee of Third Avenue
Variable Series Trust (1999-Present);
Trustee or Director of the Trust or its
predecessor since Nov. 1994.
Donald Rappaport 73 Trustee Private investor and consultant 5,086
1619 31st Street, N.W., (1987-May 1997 and May
Washington, D.C. 20007 1999-Present); Chief Financial and
Chief Information Officer for
the U.S. Department of Education
(May 1997 to May 1999); Trustee of
Third Avenue Variable Series Trust
(1999-Present); Trustee or Director of
the Trust or its predecessor from November,
1991-May 1997 and since June 1999.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) SHARES
HELD WITH PRINCIPAL OCCUPATION OWNED
NAME & ADDRESS AGE REGISTRANT DURING PAST 5 YEARS BENEFICIALLY
---------------------- ----- --------------- ----------------------------------- --------------
<S> <C> <C> <C> <C>
Myron M. Sheinfeld 70 Trustee Counsel (12/96-Present) to and 40,357
1001 Fannin St., Attorney and Shareholder
Suite 3700 (1968-12/96) of Sheinfeld, Maley
Houston, TX 77002 & Kay P.C., a law firm; Director
(1988-Present) of Nabors
Industries, Inc., an international
oil drilling contractor; Director
(11/98-Present) Anchor Glass
Container Corporation; Director
(7/99-Present) of Repap
Enterprises, Inc.; Author of texts
on Bankruptcy and Bankruptcy
Taxation; Former adjunct professor
of law University of Texas School
of Law (1974-1991); Trustee of
Third Avenue Variable Series Trust
(1999- Present); Trustee or
Director of the Trust or its
predecessor since its inception.
Martin Shubik 73 Trustee Seymour H. Knox Professor 12,990
Yale University (1975-Present) of Mathematical and
Dept. of Economics Institutional Economics, Yale University;
Box 2125, Yale Station Trustee of Third Avenue Variable
New Haven, CT 06520 Series Trust (1999-Present);
Trustee or Director of the Trust or
its predecessor since its inception.
Charles C. Walden 55 Trustee Executive Vice President-Investments 6,953
11 Williamsburg Circle (1973-Present)(Chief Investment Officer)
Madison, CT 06443 of Knights of Columbus, a fraternal
benefit society selling life
insurance and annuities; Chartered
Financial Analyst; Trustee of Third
Avenue Variable Series Trust
(1999-Present); Trustee or Director
of the Trust or its predecessor
since May 1996.
Barbara Whitman* 41 Trustee Registered Securities Representative 40,271
767 Third Avenue (11/96-Present) of M.J. Whitman, Inc.,
New York, NY 10017-2023 a broker-dealer and the Funds'
underwriter; Director (4/95-Present)
of EQSF Advisers, Inc., the Funds'
investment adviser; Director (4/99-
Present) of M.J. Whitman Holding
Corp. (MJWHC), a holding company
managing investment subsidiaries
and an investment adviser to
private and institutional clients;
Director (12/99-Present) of The
Beck Institute; Director
(8/97-6/98) of Riverside Stage
Company; Trustee of Third Avenue
Variable Series Trust
(1999-Present; Trustee of the Trust
since September 1997.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) SHARES
HELD WITH PRINCIPAL OCCUPATION OWNED
NAME & ADDRESS AGE REGISTRANT DURING PAST 5 YEARS BENEFICIALLY
---------------------- ----- --------------- ----------------------------------- --------------
<S> <C> <C> <C> <C>
Martin J. Whitman* 75 Trustee Chairman and CEO (3/90-Present), 1,015,132
767 Third Avenue President (1/91-5/98), of the
New York, NY 10017-2023 Trust; Chairman and CEO (3/90-Present),
President (1/91-2/98), of EQSF
Advisers, Inc.; Chairman, CEO
(1/1/95-Present), President
(1/1/95-6/29/95) and Chief
Investment Officer (10/92-Present)
of M.J. Whitman Advisers. Inc., a
subsidiary of MJWHC; Chairman, CEO
(1/1/95-Present) and President
(1/1/95) 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 -Present) and Member
of the Advisory Board (10/94-6/95)
of the Yale School of Management at
Yale University; Director
(8/90-Present), Chairman
(8/90-7/99), President
(8/90-12/90), CEO (8/96-Present)
and Chief Investment Officer
(12/90-8/96) of Danielson Holding
Corporation, and a Director of its
subsidiaries; Director
(3/91-Present) of Nabors
Industries, Inc., an international
oil drilling contractor; Director
(8/97-Present) of Tejon Ranch Co.;
Director (3/93-2/96) of Herman's
Sporting Goods, Inc., which filed a
voluntary petition under Chapter 11
of the United States Bankruptcy
Code on April 26, 1996; President
and CEO (10/74-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-Present); Chairman and
CEO of the Trust or its predecessor
since its inception; Chartered
Financial Analyst.
</TABLE>
* An asterisk denotes those trustees who are deemed "interested persons" of the
Funds. Mrs. Beck is the sister of Mr. Whitman and the aunt of Ms. Whitman.
Barbara Whitman is Mr. Whitman's daughter.
7
<PAGE>
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 Trustees for travel and incidental expenses incurred
by them in connection with their attendance at Board meetings. The Trust also
pays the non-affiliated 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, $211,398 in such fees and expenses for the year ended October 31,
1999. Trustees do not receive any pension or retirement benefits from the Trust.
The Board of Trustees held four meetings during the fiscal year ended October
31, 1999. Each Trustee attended at least 75% of the total number of meetings of
the Board of Trustee held during the last fiscal year.
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 TOTAL COMPENSATION
FROM REGISTRANT FOR FROM REGISTRANT AND
FISCAL YEAR ENDED FUND COMPLEX PAID
NAME AND POSITION HELD OCTOBER 31, 1999* TO TRUSTEES*
----------------------- ------------------------ --------------------
<S> <C> <C>
Phyllis W. Beck, Trustee $ 0 $ 0
Lucinda Franks, Trustee $ 31,499 $ 31,499
Gerald Hellerman, Trustee $ 31,833 $ 33,333
Marvin Moser, M.D., Trustee $ 31,833 $ 33,333
Donald Rappaport, Trustee $ 12,000 $ 13,500
Myron M. Sheinfeld, Trustee $ 30,333 $ 31,833
Martin Shubik, Trustee $ 31,833 $ 33,333
Charles C. Walden, Trustee $ 31,833 $ 33,333
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 from Registrant and $11,166 from Fund Complex for all
Trustees as a group. Amount includes fees with respect to the Third Avenue High
Yield Fund, which was subsequently terminated in connection with the transfer of
all of its assets to Pioneer High Yield Fund on February 25, 2000.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE ABOVE NOMINEES TO THE BOARD OF TRUSTEES.
ADMINISTRATOR, TRANSFER AGENT, AND DISTRIBUTOR OF THE FUNDS
The Funds have also entered into a Services Agreement with PFPC Inc.,
located at 211 South Gulph Road, P.O. Box 61503, King of Prussia, PA 19406. PFPC
Inc. provides 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. In addition to EQSF Advisers, Inc. acting as the Funds' Investment
Adviser, it also acts as the Funds' Administrator and provides all other
administrative 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 Inc. under the Services
Agreement. The Adviser has entered into a Sub-Administration Agreement with PFPC
Inc. pursuant to which PFPC Inc. performs certain of those services on behalf of
the Adviser. During the fiscal year ended October 31, 1999 (the first year
during which the administration agreement
8
<PAGE>
with the Adviser 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. M. J.
Whitman, Inc. ("MJW"), 767 Third Avenue, New York, NY 10017, an affiliate of the
Adviser, acts as the principal underwriter and distributor of the Funds' shares.
MJW also acts as a broker-dealer for the Funds. In the fiscal year ended October
31, 1999, Third Avenue Value Fund paid approximately $672,971 in brokerage
commissions to MJW (constituting 63% of all commissions paid by the Fund), Third
Avenue Small-Cap Value Fund paid approximately $61,498 in brokerage commissions
to MJW (constituting 78% of all commissions paid by the Fund), and Third Avenue
Real Estate Value Fund paid $25,568 in brokerage commissions to MJW
(constituting 89% of all commissions paid by the Fund).
EXECUTIVE OFFICERS
In addition to Mr. Whitman, the other officers of the Trust are listed
below, along with their age, position(s) held with the Trust and affiliates, and
their principal occupation during the past five years.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
David M. Barse 37 President President (5/98 to Present),
767 Third Avenue and Chief and Executive Vice President
New York, NY 10017-2023 Operating (4/95 to 5/98) of the Trust;
Officer President, Chief Operating Officer
(COO) and Director (7/96 to 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), Chief
Executive Officer (7/99 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), Chief Executive
Officer (7/99 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), Chief
Executive Officer (7/99 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.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Michael Carney 46 Treasurer, Treasurer and CFO of the Trust
767 Third Avenue Chief (3/90 to Present); Treasurer and
New York, NY 10017-2023 Financial CFO (6/99 to Present) of Third Avenue
Officer Variable Series Trust; Director (1/1/95
(CFO) to Present), Executive Vice President,
Chief Financial 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; CFO of WHR
Management Corporation (8/91 to
Present), and Danielson Holding
Corporation (8/90 to Present); 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),
767 Third Avenue Treasurer Controller (1/96 to Present) and Assistant
New York, NY 10017-2023 Controller (1/93 to 12/95) for the Trust;
Controller (1/96 to Present) and
Assistant Controller (1/93 to 12/95) of
EQSF Advisers, Inc.; Assistant Treasurer
and Controller (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) and
Assistant Controller (1/93 to 5/96) 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.
</TABLE>
10
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO CERTAIN FUNDAMENTAL POLICIES
AND INVESTMENT RESTRICTIONS OF THIRD AVENUE VALUE FUND
Each Fund in the Trust has adopted fundamental investment policies that
govern generally the investment operations of the Fund and which may not be
changed without shareholder approval. Some of the Third Avenue Value Fund's
fundamental restrictions reflect past regulatory, business or industry
conditions, practices or requirements that are no longer in effect or prevalent
in the mutual fund industry. The Trust's Board, including a majority of
Independent Trustees, has approved and directed that the following changes to
the fundamental policies of the Third Avenue Value Fund be submitted to
shareholders for approval, in order to make them consistent with the investment
restrictions applying to the other Funds in the Trust.
Presently, in addition to the investment restrictions applicable to all of
the Funds, the Third Avenue Value Fund may not:
1. Make short sales of securities or maintain a short position.
2. Buy or sell commodities or commodity contracts, futures contracts or
real estate or interest 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.
It is proposed that these investment restrictions be eliminated. If
shareholders of the Third Avenue Value Fund approve the change in investment
restrictions, the investment restrictions of that Fund will read as follows: The
Fund may not:
1. Borrow money or pledge, mortgage or hypothecate any of its assets except
that the 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.
11
<PAGE>
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.
The Fund's fundamental policies do not restrict its ability to make loans
or to invest in commodities, real estate or interests in real estate.
WHY MAKE THE CHANGES?
In general, the Board believes that eliminating the disparities between the
Third Avenue Value Fund and the other Funds of the Trust will enhance
management's ability to manage Third Avenue Value Fund's assets efficiently and
effectively and permit Trustees to review and monitor investment policies more
easily. Although the proposed changes in fundamental restrictions will allow the
Third Avenue Value Fund greater investment flexibility to respond to future
investment opportunities, the Board does not anticipate that the changes,
individually or in the aggregate, will result at this time in a material change
in the level of investment risk associated with an investment in Third Avenue
Value Fund.
Shareholders will have the right to vote separately on each of the proposed
changes to the fundamental restrictions. It is not a condition to making any of
the changes that any other changes be approved by the shareholders. The
following sets forth each of the proposed changes to the Third Avenue Value
Fund's fundamental restrictions that shareholders are being requested to vote
on.
A. Eliminate the restriction on making short sales of securities or maintaining
a short position.
The Third Avenue Value Fund is currently prohibited from making short sales
of securities or maintaining a short position. Third Avenue Value Fund would
like to have the ability to engage in short sales to the extent permitted by the
1940 Act, even though it does not intend to engage in short sales at the present
time. In a short sale transaction, the Fund would sell a security it may or may
not own in anticipation of a decline in the market value of the security.
Short selling allows the Fund to profit from declines in market prices to
the extent such decline exceeds the transaction costs and the costs of borrowing
the securities. A short sale creates the risk of a theoretically unlimited loss,
in that the price of the underlying security could theoretically increase
without limit, thus increasing the cost to the Fund of buying those securities
to cover the short position.
B. Eliminate the restriction on buying or selling commodities or commodity
contracts and futures contracts or real estate or interests in real estate.
The Third Avenue Value Fund is currently prohibited from buying or selling
commodities or commodity contracts and futures contracts and real estate or
interests in real estate. This change would permit the Fund to invest without
restriction in commodities or commodity contracts and futures contracts or real
estate or interests in real estate should it desire to do so. The Fund has no
current intention of investing in physical commodities or in real estate or
interests in real estate other than indirectly through securities which are
secured by real estate and securities of companies which invest or deal in real
estate or commodities. However, given the rapid and continuing development of
derivative products and the possibility of changes in the definition of
"commodities", it is important for the Fund's policies to be flexible enough to
allow it to enter into hedging and other transactions using these products when
doing so is deemed appropriate by the Fund and is within its investment
parameters. In addition, the Fund would like the flexibility to purchase or sell
real estate acquired as a result of ownership of securities or other instruments
(e.g. through foreclosure on a mortgage in which the Fund directly or indirectly
holds an interest), which the Board believes will make it easier for decisions
to be made concerning the Fund's investments in real estate-related securities.
Although the Fund also has no current intention of using financial
contracts, such as futures contracts and options on futures contracts, the Fund
may at some future date authorize the Adviser to enter into these kinds of
financial contracts that are classified as commodities. These investments will
be made by the Fund solely for the purpose of hedging
12
<PAGE>
against changes in the value of its portfolio securities and securities it
intends to purchase and managing other risks in the Fund's portfolio. Such
investments will only be made if they are economically appropriate to the
reduction of risks involved in the management of the Fund. In this regard, the
Fund may enter into futures contracts or options on futures for the purchase or
sale of securities indices or other financial instruments including but not
limited to U.S. Government securities. Futures exchanges and trading in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission.
A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contractual obligation to deliver the securities underlying the
contract at a specified price at a specified future time. A "purchase" of a
futures contract (or a "long" futures position) means the assumption of a
contractual obligation to acquire the securities underlying the contract at a
specified price at a specified future time. Certain futures contracts, including
stock and bond index futures, are settled on a net cash payment basis rather
than by the sale and delivery of the securities underlying the futures
contracts.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract at a specified
exercise price at any time prior to the expiration of the option. Upon exercise
of an option, the delivery of the futures position by the writer of the option
to the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account attributable to that contract,
which represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential loss related
to the purchase of an option on futures contracts is limited to the premium paid
for the option (plus transaction costs). Because the value of the option
purchased is fixed at the point of sale, there are no daily cash payments by the
purchaser to reflect changes in the value of the underlying contract; however,
the value of the option does change daily and that change would be reflected in
the net asset value of the portfolio.
The success of hedging depends on the Adviser's ability to predict
movements in the prices of the hedged securities and market fluctuations. The
Adviser may not be able to perfectly correlate changes in the market value of
securities and the prices of the corresponding options or futures. The Adviser
may have difficulty selling or buying futures contracts and options when it
chooses and there may be certain restrictions on trading futures contracts and
options. The Fund is not obligated to pursue any hedging strategy. While hedging
can reduce or eliminate losses, it can also reduce or eliminate gains. In
addition, hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
C. Eliminate the restriction on investing in securities of other investment
companies if the Third Avenue Value 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.
Eliminating this restriction would bring the Fund's policy in line with
present regulatory rules. If this proposal is approved, the Fund's policy would
allow the purchase of securities of other investment companies, to the extent
permitted by the 1940 Act, provided that after any purchase the Fund does not
own more than 3% of such investment company's outstanding stock.
D. Eliminate the restriction on participating on a joint or joint and several
basis in any trading account in securities.
Third Avenue Value Fund is currently prohibited from participating on a
joint or joint and several basis in any trading account in securities. The
purpose of eliminating the restriction dealing with joint or joint and several
trading transactions is to differentiate simultaneous investments by any Fund(s)
or with another party with the way the term "joint and several transactions" is
sometimes interpreted. Investment decisions for a Fund are made independently
from those of 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(s). 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.
13
<PAGE>
E. Eliminate the restriction on making 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.
Third Avenue Value Fund is currently prohibited from making 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. If this proposal is
approved, the Fund would have the right to make such loans, both directly and
through the lending of its portfolio securities. Third Avenue Value Fund would
like to have the ability, like the other Funds in the Trust, to make loans and
to lend its portfolio securities to qualified institutions. While the Fund is
permitted to purchase notes and debentures and other securities that are the
equivalent of loans, it is prohibited from making direct loans to a proposed
borrower. The Fund is occasionally presented with opportunities to make such
loans and the Board believes that the Fund should have the flexibility to do so
when appropriate. Loans represent amounts owed to lenders or lending syndicates
(loans and loan participations) or to other parties. Direct debt instruments may
involve a risk of loss in case of default or insolvency of the borrower and may
offer less legal protection to the Fund in the event of fraud or
misrepresentation. The market in loans and other direct debt instruments are not
regulated by federal securities laws or the SEC.
By lending its portfolio securities, a fund atttempts to increase its
income through the receipt of interest on the loan. Any gain or loss in the
market price of the securities loan 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 structure of such loans are not inconsistent with the
requirements of the 1940 Act, 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 adds to such collateral whenever the
price of the securities loan 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 fund 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.
The Fund will not lend portfolio securities if, as a result, the aggregate
of such loans exceeds 331/3% of the value of its total assets (including such
loans). Loan arrangements made by the 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.
The Trust, on behalf of Third Avenue Small-Cap Value Fund and Third Avenue
Real Estate Value Fund, has entered into a master lending arrangement with Bear,
Stearns Securities Corp. in compliance with the foregoing requirements. If
Shareholders of the Fund approve the proposed change in investment restrictions,
it is contemplated that the Trust will enter into a similar agreement with Bear,
Stearns Securities Corp. on behalf of Third Avenue Value Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS OF THE THIRD AVENUE
VALUE FUND VOTE "FOR" APPROVAL OF EACH OF THE AMENDMENTS TO THE FUND'S
FUNDAMENTAL POLICIES SET FORTH AS PROPOSALS 2A, 2B, 2C, 2D AND 2E.
14
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Trustees, including a majority of the Independent Trustees of
the Fund, selected, at a meeting of the Board of Trustees held on November 17,
1999, PricewaterhouseCoopers, LLP, 1177 Avenue of the Americas, New York, NY
10036 as independent accountants to examine the financial statements of the
Funds. PricewaterhouseCoopers has served as the Funds' independent accountants
since the Funds' inception. The Funds have been informed that neither
PricewaterhouseCoopers nor any of its partners has any direct financial interest
or any material indirect financial interest in the Funds, nor has had any
connection with the Funds during the past three years in the capacity of
promoter, underwriter, voting trustee, director, officer or employee. Although
the Trust does not have an audit committee which meets with the independent
accountants for the Funds, all of the Trustees are provided with updated
financial and portfolio information statements each quarter, as well as audited
year-end financial statements. The Board of Trustees meets with
PricewaterhouseCoopers at a regular meeting of the Board of Trustees on an
annual basis. It is not expected that a representative of PricewaterhouseCoopers
will be present at the Special Meeting of the Shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF PRICEWATERHOUSECOOPERS, LLP AS THE FUNDS' INDEPENDENT
ACCOUNTANTS.
PROPOSAL NO. 4
TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT WITH THIRD AVENUE VALUE FUND
IN CONNECTION WITH A CHANGE OF CONTROL OF ADVISER
PROPOSAL NO. 5
TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT WITH THIRD AVENUE SMALL-CAP
VALUE FUND IN CONNECTION WITH A CHANGE OF CONTROL OF ADVISER
PROPOSAL NO. 6
TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT WITH THIRD AVENUE REAL
ESTATE VALUE FUND IN CONNECTION WITH A CHANGE OF CONTROL OF ADVISER
EQSF Advisers, Inc., 767 Third Avenue, New York, NY 10017-2023 (the
"Adviser"), serves as the investment adviser of each Fund pursuant to Investment
Advisory Agreements dated February 28, 1997 for the Third Avenue Value Fund and
Third Avenue Small-Cap Value Fund, and September 16, 1998 for the Third Avenue
Real Estate Value Fund (the "Present Advisory Agreements"). The Present Advisory
Agreements were initially approved on the dates listed above by the sole
shareholders of the Funds. They had previously been approved by the Board of
Trustees of the Trust (the "Board"), including a majority of the Trustees who
are not "interested persons" as defined in the 1940 Act (the "Independent
Trustees"). After an initial two-year term, the Present Advisory Agreements
continue from year to year if approved annually by the Board of Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for the purpose of voting on such approval or a majority of the
outstanding voting securities of the Fund. The Board of Trustees, including a
majority of the Independent Trustees, have each year approved the terms of the
Present Advisory Agreements and their continuance (with the most recent approval
for the Third Avenue Value Fund and Third Avenue Small-Cap Value Fund coming at
the Board's meeting on February 9, 2000). These contracts may be terminated at
any time without penalty, upon 60 days' written notice by either party to the
other, and will automatically be terminated upon any assignment thereof.
Under each of the Present Advisory Agreements, the Adviser supervises and
assists in the management of the Fund, 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 pays the compensation of officers of the Trust for their services
as such.
15
<PAGE>
All other non-advisory expenses incurred in the operation of the Trust and
the continuous offering of its shares, including taxes, fees and commissions,
bookkeeping expenses, salaries of non-officer fund employees and officers of the
Trust providing administrative services, the cost of leased office space
incurred in operation of the Trust, expenses of redemption of shares, charges of
custodians and transfer agents, auditing and legal expenses and fees of outside
Trustees, are borne by the Trust. Any expense which cannot be allocated to a
specific Fund of the Trust will be allocated to each of the Funds based on their
relative net asset values on the date the expense is incurred.
Under the Present Advisory Agreements, each Fund pays the Adviser a monthly
fee of 1/12 of .90% (an annual fee of .90%) on the average daily net assets in
each portfolio during the prior month. During the fiscal year ended on October
31, 1999, Third Avenue Value Fund paid investment advisory fees to the Adviser
of $12,805,667, Third Avenue Small-Cap Value Fund paid investment advisory fees
to the Adviser of $1,247,500, and Third Avenue Real Estate Value Fund paid
investment advisory fees to the Adviser of $47,874.
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 these Funds, and 1.5% of assets in excess of $100 million,
the Adviser is obligated to reimburse the Fund(s) 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 the 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. This arrangement may be terminated by either the
Fund or the Adviser at any time without the consent of the other.
For the fiscal year ended October 31, 1999, no fees were reimbursed to the
Adviser by the Funds. The Adviser waived fees of $47,874, and reimbursed
$138,938 for Third Avenue Real Estate Value Fund, for the fiscal year ended
October 31, 1999.
The following are the executive officers and directors of the Adviser, all
of whom are affiliated persons of the Trust and Adviser:
CAPACITY WITH FUNDS CAPACITY WITH ADVISER
-------------------- ---------------------
Martin J. Whitman Chairman and Chief Chairman and Chief
Executive Officer Executive Officer
David M. Barse President, Chief President, Chief
Operating Officer Operating Officer,
Director
Michael Carney Treasurer, Chief Treasurer, Chief
Financial Officer Financial Officer
Kerri Weltz Assistant Treasurer Assistant Treasurer
Barbara Whitman Trustee Director
The Investment Company Act of 1940, ("the Act") provides that in the event
of a transfer of a controlling block of stock of the adviser of a registered
investment company or series thereof, the Investment Advisory Contract with that
fund is automatically terminated. A 25% block of the outstanding shares of the
Adviser would normally be considered a controlling block as that term is used in
the Act.
16
<PAGE>
Martin J. Whitman is a controlling person of the Adviser. His control is
based upon his position as Chairman of the Board and Chief Executive Officer and
an irrevocable proxy signed by his children, who own in the aggregate
approximately 74% of the outstanding common stock of the Adviser (the balance of
the shares being owned by Mr. Whitman and other employees of the Adviser and its
affiliates). Mr. Whitman's children are Barbara Whitman whose address is the
same as the Fund; James Q. Whitman, Yale Law School, 127 Wall Street, New Haven,
CT 16520-8215, and Thomas I. Whitman, Swarthmore College, 500 College Avenue,
Swarthmore, PA 19081. When Mr. Whitman formed the Adviser, his children
purchased 75% of the outstanding shares. Each of Mr. Whitman's children
currently own 24.33% of the common stock of the Adviser. As part of the initial
formation of the Adviser, Mr. Whitman's children gave the right to vote their
shares to him by signing an irrevocable proxy.
Mr. Whitman now desires to revoke the proxy (which is permissible under the
terms of the proxy) and return the voting rights of the shares to his children,
as they are mature adults. While no change in ownership of the shares would be
involved in any such revocation, management believes that transfer of the right
to vote these shares constitutes an assignment under the Act. Thus, shareholders
of each Fund in the Trust are being asked to approve new Investment Advisory
Agreements with the Adviser to take effect upon such revocation. Mr. Whitman
intends to revoke the proxy promptly after the shareholders approve the
proposals and all other necessary approvals are obtained from other parties with
whom the Adviser has contractual relationships, but in any event not later than
March 31, 2001.
Mr. Whitman has assured the Board that his revocation of the proxy will in
no way affect his performance as Chairman and Chief Executive Officer and a
Trustee of the Trust and Chairman and Chief Executive Officer and a director of
the Adviser and its affiliates. He has every intention of continuing to serve
the Trust and the other entities in his present capacities, and has agreed to
enter into a five-year employment contract with the Adviser. Since the deemed
assignment of the Present Advisory Agreements requires the approval of
shareholders, the Adviser and the Trust determined to take this opportunity to
revise and update the agreements to reflect current practices in the industry.
No changes are proposed in the economic terms of the Investment Advisory
Agreements.
On March 27, 2000 the Board of Trustees, including the Independent
Trustees, unanimously approved proposed Investment Advisory Agreements (the
"Proposed Advisory Agreements"), the form of which is attached hereto as
Appendix A and directed that they be submitted to the shareholders for approval
at a Special Meeting of Shareholders called for that purpose. The following
discussion is not complete and is subject in its entirety to the terms of the
Proposed Advisory Agreements. The Proposed Advisory Agreements are identical in
substance to the Present Advisory Agreements except for the date of the
Agreement, and the inclusion of liability, indemnification and notice
provisions. The following paragraphs summarize these provisions.
Paragraph 2 (d) of each Proposed Advisory Agreement states that the Adviser
will give the benefit of its best judgement and effort in rendering the services
described in the contract and shall not be liable for acts, omissions, or
losses, except losses resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties.
Paragraph 5 requires the Fund to indemnify the Adviser, its directors,
officers, employees, and agents against liability arising out of the Adviser
performing duties described in the Proposed Advisory Agreements, except where
willful misfeasance, bad faith, gross negligence, or reckless disregard of
duties is involved in the conduct of those duties. This provision is consistent
with the Securities and Exchange Commission policy of indemnification provisions
of mutual funds.
Paragraph 6 makes clear that the name "Third Avenue" and any associated
logo and mask are the property of the Adviser, but may continue to be used by
the Fund as long as it is managed by the Adviser or receives the Adviser's
consent to such use if it is no longer managed by the Adviser.
Finally, the notice provision in Paragraph 7 simply states that the parties
to the agreement must notify one another in writing at the addresses that each
of them designates in writing and any such notice will be deemed to have been
17
<PAGE>
received on the earlier of the date it actually was received or on the fourth
day after the postmark if it was mailed by first class mail.
In evaluating the Proposed Advisory Agreements, the Board relied in part
upon its experience in overseeing, on an ongoing basis, the nature, quality and
extent of the Adviser's services to each Fund. The Board noted that the deemed
assignment of the Present Advisory Agreements was occurring by reason of
applicable definitions in the Act and that no actual changes in the management
or operations of the Adviser would occur. The Board also noted Mr. Whitman's
assurances as to his continued performance for the Funds, including his entrance
into a five-year employment agreement with the Adviser, described above.
With respect to the approval of the Proposed Advisory Agreements, the Board
was provided with additional information prepared specially to assist it in its
consideration of this issue. The Adviser had previously prepared a report
evaluating the Adviser's fee and the Funds' expenses based on publicly available
industry data as an aid to the Board in its deliberations. The Adviser presented
its proposal to the Board of Trustees, which included the report and updated
data on the funds described in it. The report compared the Funds' current
expenses, advisory fee, performance and other indicators to comparable funds
having similar investment approaches and objectives to the Funds.
The Board reviewed the information and documentation provided and
considered such factors as they deemed reasonably necessary. These factors
included, among others, (1) the nature and quality of the advisory and
non-advisory services rendered and the results achieved by the Adviser in the
management of each Fund's portfolio, both on a stand-alone basis and in
comparison to comparable funds; (2) the relationship of the advisory fee
schedule to the fee schedules of comparable mutual funds, the impact of the
advisory fees on the Fund's expense ratio and the relationship of the Funds' pro
forma expense ratios to the expense ratios of comparable mutual funds; (3) the
costs borne by the Adviser in providing investment advisory and management
services to the Funds; (4) the historical and anticipated profits of the Adviser
in providing services to the Funds; and (5) the benefits the Adviser may have
indirectly received from its relationship with the Funds, including execution of
portfolio transactions for the Funds.
In reaching its decision to approve the Proposed Advisory Agreements, the
Independent Trustees noted that the Funds' historical performance under the
Adviser's direction has been highly satisfactory and that the Third Avenue Value
Fund's and Third Avenue Small-Cap Value Fund's historical total expense ratios
had been below average. With respect to Third Avenue Real Estate Value Fund, the
Independent Trustees noted that the Fund was relatively new and had not yet
raised large assets, but that the Adviser's fee waivers and expense
reimbursements had kept the Fund's expense ratio in line with other similar
funds.
In the event that shareholders do not approve the change of control and the
Proposed Advisory Agreements, Mr. Whitman will not revoke his proxy and the
Present Advisory Agreements will remain in effect.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS OF EACH FUND VOTE "FOR"
APPROVAL OF THE PROPOSED ADVISORY AGREEMENTS AND THE CHANGE OF CONTROL OF THE
ADVISER.
18
<PAGE>
PRINCIPAL SHAREHOLDERS
On March 27, 2000, to the knowledge of the management of the Funds, only
the following persons beneficially owned more than 5% of the outstanding shares
of the Funds designated below:
THIRD AVENUE VALUE FUND
PERCENTAGE OF NUMBER
NAME AND ADDRESS THIRD AVENUE VALUE FUND OF SHARES
---------------- ----------------------- -----------
Charles Schwab & Co. Inc.(2)
101 Montgomery Street
San Francisco, CA 94104 41.52% 16,065,500
National Financial
Securities Corp.(3)
P.O. Box 3908
Church Street Station
New York, NY 10008-3908 10.67% 4,129,064
Donaldson Lufkin & Jenrette
Securitites Corporation(3)
Mutual Fund Dept. 5th Floor
P.O. Box 2052 Jersey City, NJ 07303 8.99% 3,482,042
Bear Stearns Securities Corp(4)
One Metrotech Center North
Brooklyn, NY 11201-3859 6.29% 2,436,138
THIRD AVENUE SMALL-CAP VALUE FUND
PERCENTAGE OF NUMBER
NAME AND ADDRESS THIRD AVENUE VALUE FUND OF SHARES
---------------- ----------------------- -----------
Charles Schwab & Co. Inc.(2)
101 Montgomery Street
San Francisco, CA 94104 33.60% 3,316,153
National Financial Securities Corp.(3)
P.O. Box 3908
Church Street Station
New York, NY 10008-3908 18.20% 1,795,509
Bear Stearns Securities Corp(4)
One Metrotech Center North
Brooklyn, NY 11201-3859 8.25% 812,718
Donaldson Lufkin & Jenrette
Securitites Corporation(3)
Mutual Fund Dept. 5th Floor
P.O. Box 2052 Jersey City, NJ 07303 5.34% 526,184
19
<PAGE>
THIRD AVENUE REAL ESTATE VALUE FUND
PERCENTAGE OF NUMBER
NAME AND ADDRESS THIRD AVENUE VALUE FUND OF SHARES
---------------- ----------------------- -----------
Bear Stearns Securities Corp(4)
One Metrotech Center North
Brooklyn, NY 11201-3859 26.24% 304,997
Charles Schwab & Co. Inc.(2)
101 Montgomery Street
San Francisco, CA 94104 19.69% 227,642
First Union National Bank
FBO Bernard Rotko
1525 W. WT Harris Blvd # 1151
Charlotte, NC 28262-8522 11.52% 133,258
National Financial Securities Corp.(3)
P.O. Box 3908
Church Street Station
New York, NY 10008-3908 10.93% 126,356
(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 2.50% of Third
Avenue Value Fund, 1.10% of Third Avenue Small-Cap Value Fund, and 9.09% of
Third Avenue Real Estate Value Fund.
Management knows of no other matters which may be brought before the
Meeting. However, if any other matters come before the meeting, it is intended
that the persons named in the enclosed proxy, or their substitutes, will vote
the proxy in accordance with their judgement on such matters.
SHAREHOLDERS PROPOSALS FOR FUTURE MEETINGS OF SHAREHOLDERS
Since there are no annual or further special meetings of shareholders of
the Trust unless required by applicable law or called by the Trustees in their
discretion, shareholders wishing to submit proposals that are intended to be
presented at any such future shareholder meeting, should submit the proposal(s)
in writing to the President of the Trust, Third Avenue Funds, 767 Third Avenue,
New York, NY 10017-2023. Shareholder proposals should be received in a
reasonable time before the solicitation is made.
Submission of proposals by shareholders does not guarantee its inclusion in
a proxy statement since applicable state or federal rules apply. The Trust is
not obligated to call a shareholder meeting to consider any proposal which is
substantially the same as a matter voted upon by the shareholders during the
preceding twelve months, unless requested by holders of a majority of all shares
entitled to be voted at such meeting.
By Order of the Board of Trustees,
David M. Barse
President
Dated: April 15, 2000
20
<PAGE>
PROXY
THIRD AVENUE VALUE FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 24, 2000
The undersigned, revoking all proxies heretofore given, hereby appoints
Martin J. Whitman and David M. Barse and each of them, with power of
substitution, to represent the undersigned and to vote all of the Fund shares of
the undersigned at the Special Meeting of Shareholders to be held on May 24,
2000 at 11:00 a. m., at Four Times Square, 38th Floor, New York, NY 10036.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE FUND.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSALS 1, 2A, 2B, 2C, 2D,
2E, 3, 4, AND 5, INCLUDING A VOTE FOR THE ELECTION OF ALL NOMINEES FOR
TRUSTEES. IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED FOR ITEMS
1, 2A, 2B, 2C, 2D, 2E, 3, 4, AND 5. THE PROXIES ARE AUTHORIZED IN THEIR
DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF.
1. To elect ten (10) Trustees to serve until the next meeting of shareholders,
if any, and until the election and qualification of their successors.
[] FOR all nominees listed below [] WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for all nominees
listed below)
(INSTRUCTION: To withhold authority to vote for any nominee strike a line
through the nominee's name in the list below)
Phyllis W. Beck Marvin Moser Martin Shubik
Lucinda Franks Donald Rappaport Charles C. Walden
Gerald Hellerman Myron M. Sheinfeld Barbara. Whitman
Martin J. Whitman
2. To approve changing various fundamental investment restrictions of the
Third Avenue Value Fund in order to make them consistent with the
fundamental investment restrictions of the other Funds of the Trust.
2A. To eliminate the restriction on making short sales of securities or
maintaining a short position.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2B. To eliminate the restriction on buying or selling commodities or commodity
contracts and futures contracts or real estate or interests in real estate.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2C. To eliminate the restriction on investing in securities of other investment
companies if the Third Avenue Value 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.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2D. To eliminate the restriction on participating on a joint or joint and
several basis in any trading account in securities.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2E. To eliminate the restriction on making 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.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for the Fund for the fiscal year ending October 31, 2000.
<PAGE>
[] FOR [] AGAINST [] ABSTAIN
4. To approve a new Investment Advisory Agreement between the Fund and its
current adviser, EQSF Advisers, Inc.
[] FOR [] AGAINST [] ABSTAIN
5. To transact such other business as may properly come before the meeting
and/or any adjournments thereof.
[] FOR [] AGAINST [] ABSTAIN
NOTE: When shares are held by joint tenants, both must sign. Persons signing as
Executor, Administrator, Trustee, etc. should so indicate. Please sign exactly
as the name appears on this card. If signing on behalf of a corporation, please
sign the full corporate name and your name and indicate your title. If you are a
partner signing for a partnership, please sign the partnership name and your
name.
DATE:_____________________, 2000
------------------------------
Signature
------------------------------
Signature (if held jointly)
PLEASE VOTE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
PROXY
THIRD AVENUE SMALL-CAP VALUE FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 24, 2000
The undersigned, revoking all proxies heretofore given, hereby appoints
Martin J. Whitman and David M. Barse and each of them, with power of
substitution, to represent the undersigned and to vote all of the Fund shares of
the undersigned at the Special Meeting of Shareholders to be held on May 24,
2000 at 11:00 a. m., at Four Times Square, 38th Floor, New York, NY 10036.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE FUND.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, AND 4,
INCLUDING A VOTE FOR THE ELECTION OF ALL NOMINEES FOR TRUSTEES. IF NO
SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED FOR ITEMS 1, 2, 3, AND 4.
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
1. To elect ten (10) Trustees to serve until the next meeting of shareholders,
if any, and until the election and qualification of their successors.
[] FOR all nominees listed below [] WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for all nominees
listed below)
(INSTRUCTION: To withhold authority to vote for any nominee strike a line
through the nominee's name in the list below)
Phyllis W. Beck Marvin Moser Martin Shubik
Lucinda Franks Donald Rappaport Charles C. Walden
Gerald Hellerman Myron M. Sheinfeld Barbara. Whitman
Martin J. Whitman
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for the Fund for the fiscal year ending October 31, 2000.
[] FOR [] AGAINST [] ABSTAIN
3. To approve a new Investment Advisory Agreement between the Fund and its
current adviser, EQSF Advisers, Inc.
[] FOR [] AGAINST [] ABSTAIN
4. To transact such other business as may properly come before the meeting
and/or any adjournments thereof.
[] FOR [] AGAINST [] ABSTAIN
NOTE: When shares are held by joint tenants, both must sign. Persons signing as
Executor, Administrator, Trustee, etc. should so indicate. Please sign exactly
as the name appears on this card. If signing on behalf of a corporation, please
sign the full corporate name and your name and indicate your title. If you are a
partner signing for a partnership, please sign the partnership name and your
name.
DATE:_____________________, 2000
------------------------------
Signature
------------------------------
Signature (if held jointly)
PLEASE VOTE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
PROXY
THIRD AVENUE REAL ESTATE VALUE FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 24, 2000
The undersigned, revoking all proxies heretofore given, hereby appoints
Martin J. Whitman and David M. Barse and each of them, with power of
substitution, to represent the undersigned and to vote all of the Fund shares of
the undersigned at the Special Meeting of Shareholders to be held on May 24,
2000 at 11:00 a. m., at Four Times Square, 38th Floor, New York, NY 10036.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE FUND.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, AND 4,
INCLUDING A VOTE FOR THE ELECTION OF ALL NOMINEES FOR TRUSTEES. IF NO
SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED FOR ITEMS 1, 2, 3, AND 4.
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
1. To elect ten (10) Trustees to serve until the next meeting of shareholders,
if any, and until the election and qualification of their successors.
[] FOR all nominees listed below [] WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for all nominees
listed below)
(INSTRUCTION: To withhold authority to vote for any nominee strike a line
through the nominee's name in the list below)
Phyllis W. Beck Marvin Moser Martin Shubik
Lucinda Franks Donald Rappaport Charles C. Walden
Gerald Hellerman Myron M. Sheinfeld Barbara. Whitman
Martin J. Whitman
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for the Fund for the fiscal year ending October 31, 2000.
[] FOR [] AGAINST [] ABSTAIN
3. To approve a new Investment Advisory Agreement between the Fund and its
current adviser, EQSF Advisers, Inc.
[] FOR [] AGAINST [] ABSTAIN
4. To transact such other business as may properly come before the meeting
and/or any adjournments thereof.
[] FOR [] AGAINST [] ABSTAIN
NOTE: When shares are held by joint tenants, both must sign. Persons signing as
Executor, Administrator, Trustee, etc. should so indicate. Please sign exactly
as the name appears on this card. If signing on behalf of a corporation, please
sign the full corporate name and your name and indicate your title. If you are a
partner signing for a partnership, please sign the partnership name and your
name.
DATE:_____________________, 2000
------------------------------
Signature
------------------------------
Signature (if held jointly)
PLEASE VOTE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
