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THIRD AVENUE VALUE FUND
THIRD AVENUE SMALL-CAP VALUE FUND
THIRD AVENUE REAL ESTATE VALUE FUND
PROSPECTUS
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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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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.
-------------- [Figures below represent bar chart in printed piece]
FUND CODES
1991 34.41%
Ticker 1992 21.29%
TAVFX 1993 23.66%
1994 -1.46%
CUSIP 1995 31.73%
884116104 1996 21.92%
-------------- 1997 23.87%
1998 3.92%
1999 12.82%
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 12.82% 18.45% 19.26%
S&P500 Index 20.89% 28.24% 21.60%
Russell 2000 Index 21.11% 17.00% 17.90%
Russell 2000 Value Index -1.49% 13.14% 17.89%
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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. Under normal circumstances, the Fund expects to invest at least 65% of
its assets in equity securities of small companies. The Fund considers a "small
company" to be one whose market capitalization is no greater than nor less than
the range of capitalizations of companies in the Russell 2000 Index at the time
of the initial investment. The Fund may continue to hold or buy additional stock
in a company that exceeds this range if the stock remains attractive.
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PAST PERFORMANCE
The tables below show the annual returns of Third Avenue Small-Cap Value Fund
and compare 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.
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FUND CODES [Figures below represent bar chart in printed piece]
Ticker 1998 -2.77
TASCX 1999 11.29
CUSIP
884116203
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During the 2-year period shown in the bar chart, the highest return for a
quarter was 17.11% (quarter ending June 30, 1999) 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 11.29% 8.95%
Russell 2000 Index 21.11% 16.58%
Russell 2000 Value Index -1.49% 7.42%
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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%
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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
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THIRD AVENUE REALESTATEVALUE 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.
o A company is considered to be in the real estate industry if at least 50%
of its gross revenues or net profits at the time of investment come from (a)
construction, ownership, management, operation, financing, refinancing, sales,
leasing, development or rehabilitation of real estate; or (b) extraction of
timber or minerals from real estate.
o A company is considered to be in a related industry if at least 50% of its
gross revenues or net profits at the time of investment are derived from
providing goods (e.g., building materials and/or supplies) or services (e.g.,
consulting, legal or insurance) to real estate companies.
o A company is considered to own significant real estate assets if at least
50% of the fair market value of its assets at the time of investment is
attributable to one or more of the following: (a) real estate owned or leased by
the company as lessor or as lessee; (b) timber or minerals on such real estate;
or (c) the discounted value of the stream of fees or revenues to be derived from
the management or operation of real estate or the rights to extract timber or
minerals from real estate.
Examples of companies that might qualify under one of these categories include:
o Real estate development companies (including commercial/industrial
developers and homebuilders);
o Real estate investment trusts (REITs) and master limited partnerships;
o Hotel and hotel management companies; o Real estate brokerage companies
and/or management companies;
o Financial institutions that make or service mortgage loans;
o Title insurance companies;
o Lumber, paper, forest product, timber, mining and oil companies;
o Companies with significant real estate holdings such as supermarkets,
restaurant chains and retail chains; and
o Manufacturers or distributors of construction materials and/or building
supplies.
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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.
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FUND CODES [Figures below represent bar chart in printed piece]
Ticker 1999 5.17
TAREX
CUSIP
884116401
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During the 1-year period shown in the bar chart, the highest return for a
quarter was 10.71% (quarter ending June 30, 1999) and the lowest return for a
quarter was -6.73% (quarter ending September 30, 1999).
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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 Real Estate Value Fund 5.17% 9.98%
Bloomberg REITSmall Cap Index -4.35% -0.63%
Bloomberg Real Estate Operating Co. Index -3.63% 4.62%
Wilshire Real Estate Securities Index -3.17% 2.13%
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MAIN RISKS
Prices of stocks have historically fluctuated. The value of the Fund will
similarly fluctuate and you could lose money. In addition to general market
conditions, the value of the Fund will be affected by the strength of the real
estate market. Factors that could affect the value of real estate include the
following:
o overbuilding and increased competition;
o increases in property taxes and operating expenses;
o changes in zoning laws;
o casualty or condemnation losses;
o variations in rental income;
o changes in neighborhood values; and
o the appeal of properties to tenants and increases in interest rates.
Prices of commodities such as timber have historically been very volatile.
Reductions in commodity prices will likely cause the prices of companies in
those industries to drop.
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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
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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.
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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 61503
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.
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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.
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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 61503
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.
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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 61503
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 shareholder, or
3. requests to transfer shares.
A notary public is not an acceptable guarantor.
Additional documents may be required when shares are registered in the name of a
corporation, partnership, association, agent, fiduciary, trust, estate or other
organization.
Additional tax documents may also be required in the case of redemptions from
IRA accounts. For further information, call 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
Until March 31, 2000 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.
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.
Effective April 1, 2000, the Money Market Fund will be closed and all shares in
the Money Market Fund will, at your election, be exchanged for shares of another
Fund or redeemed for cash.
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.
o A statement after every transaction.
o An annual account statement reflecting all transactions for the year.
o Tax information mailed by January 31 of each year, a copy of which will
also be filed with the Internal Revenue Service.
o The financial statements of the Fund with a summary of portfolio
composition and performance, mailed at least twice a year.
o The Funds intend to continue to mail to shareholders quarterly reports
containing the Portfolio Managers' letters and a summary of portfolio changes,
composition and performance.
o 24 hour automatic voice response service.
o On-line account access though the Funds' web site:
www.thirdavenuefunds.com.
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
ime). 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, 1998, the end of each Funds' most recent fiscal year. Certain
information reflects financial results for a single Fund share. The total
returns in the 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 PricewaterhouseCoopers LLP, independent accountants, whose
unqualified report on the October 31, 1998 financial statements appears in the
Funds' Annual Report to Shareholders. This information should be read in
conjunction with the financial statements and accompanying notes appearing in
the 1998 Annual Report to Shareholders, which is 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>
Year 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) ----
------ ------ ------
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>
FINANCIAL HIGHLIGHTS
================================================================================
THIRD AVENUE REAL ESTATE VALUE FUND: SELECTED DATA AND RATIOS
<TABLE>
<CAPTION>
Period from
Year Ended September 17, 1998*
October 31, 1998 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) --
------- -------
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 necessarily 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 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406
(610) 239-4600
(800) 443-1021 (toll-free)
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231
[LOGO]
THIRD AVENUE FUNDS
767 THIRD AVENUE
NEW YORK, NY 10017-2023
PHONE (212) 888-5222
TOLL FREE (800) 443-1021
WWW.THIRDAVENUEFUNDS.COM
<PAGE>
More information about the Funds is available in the Funds' reports to
shareholders and Statement of Additional Information (SAI). The Funds' Annual
Report contains a discussion of the market conditions and investment strategies
that significantly affected the Funds' 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 202-942-8090 for
information). Copies of this information may be obtained, upon payment of a
duplicating fee, by electronic request at the E-mail address [email protected],
or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.
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
