As filed with the Securities and Exchange Commission
on June 18, 1999 Registration Nos.: 333-_____
811-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. [ ]
THIRD AVENUE VARIABLE SERIES TRUST
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(Exact name of Registrant as Specified in Charter)
767 Third Avenue, New York, New York 10017-2023
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(Address of Principal Executive Offices including Zip Code)
(toll-free) (800)443-1021, (212)888-5222
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(Registrant's Telephone Number, including Area Code)
Please send copies of communications to:
David M. Barse Richard T. Prins, Esq.
767 Third Avenue Skadden, Arps, Slate, Meagher & Flom LLP
New York, New York 10017-2023 919 Third Avenue, New York, NY 10022
(Name and Address of Agent
for Service)
Approximate Date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
elected to register an indefinite number of shares of beneficial interest.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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THIRD AVENUE VARIABLE SERIES TRUST
THIRD AVENUE VALUE PORTFOLIO
PROSPECTUS
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SEPTEMBER --, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
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ABOUT THE PORTFOLIO 1
Objective and Approach
Main Risks
Investment Philosophy
Who May Want to Invest
MANAGEMENT OF THE PORTFOLIO 3
HOW TO PURCHASE AND REDEEM SHARES 4
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS & TAXES 5
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THIRD AVENUE VALUE PORTFOLIO
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OBJECTIVE AND APPROACH
The Portfolio seeks long-term capital appreciation as its investment objective.
The Portfolio 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 Portfolio 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 Portfolio invests in companies regardless of market
capitalization, although it frequently finds value in companies with a smaller
capitalization. It also invests in both domestic and foreign securities. The mix
of the Portfolio's investments at any time will depend on the industries and
types of securities the Adviser believes hold the most value.
MAIN RISKS
Prices of securities (and stocks in particular) have historically fluctuated.
The value of the Portfolio will similarly fluctuate and you could lose money.
The Portfolio 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 Portfolio 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,
sometimes the value of a security owned by the Portfolio will decline if the
market believes that the value of the security is less than the Adviser believes
such security is worth. This may be particularly true of the Portfolio because
the Portfolio follows a buy and hold strategy and does not sell investments in
response to price changes in the markets. Sometimes the Adviser's analysis of a
company in which the Portfolio invests may be wrong or the company may fail to
realize its full value and the Portfolio could lose money on its investment in
the company. Foreign securities are subject to risks such as currency
fluctuations and controls, adverse political developments and potentially
greater illiquidity. Since the Portfolio is not limited to investing in stocks,
the Portfolio may own significant non-equity instruments in a rising stock
market, thereby producing smaller gains than a Portfolio invested solely in
stocks. The Portfolio is non-diversified. This generally means that the
Portfolio will have fewer investments than diversified mutual funds of
comparable size. Non-diversified funds can be more volatile than diversified
funds.
PAST PERFORMANCE AND FINANCIAL HIGHLIGHTS
Past performance information and financial highlights are not provided for the
Portfolio because it had not begun investment operations as of the date of this
Prospectus. You should be aware that Portfolio performance will fluctuate and
may or may not perform as well as a comparable broad market index. The
investment objective and philosophy of the Portfolio are simliar to those of the
Third Avenue Value Fund, a publicly offered "retail" fund managed by the
Adviser. Although the Adviser anticipates that the Portfolio and the
corresponding retail fund will hold simliar investments, differences in asset
size and cash flow needs resulting from purchases and redemptions of Portfolio
shares may result in different security selections, differences in the relative
weightings of investments or differences in the prices paid for particular
investments and, accordingly, are expected to cause differences in performance
results. Expenses of the Portfolio and the corresponding retail fund also are
expected to differ. As with all mutual funds, past performance does not indicate
future results.
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INVESTMENT PHILOSOPHY
The Portfolio adheres to a strict value discipline in selecting securities. This
means seeking securities whose prices are low in relation to what the
Portfolio's Adviser believes is the true value of the securities. The
Portfolio's Adviser believes this both lowers risk and increases appreciation
potential. The Portfolio identifies investment opportunities through intensive
research of individual companies and ignores general stock market conditions and
other macro factors. For these reasons, the Portfolio may seek investments in
the securities of companies in industries that are temporarily depressed. The
Portfolio follows a strategy of "buy and hold." The Portfolio 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 particular types of securities in which the Portfolio will invest and the
percentage of the Portfolio's assets invested in each type of security will vary
depending on where the Adviser sees the most value at the time of investment.
The Adviser anticipates, however, that a substantial portion of the Portfolio's
assets will be invested in common stocks. In selecting common stocks, the
Adviser generally seeks to invest in companies that exhibit the following
characteristics:
1) A strong financial position, as measured not only by balance sheet data but
also by off-balance sheet assets, liabilities and contingencies (as disclosed in
footnotes to financial statements and as determined through research of public
information), where debt service (that is, the current annual required payment
of interest and principal to creditors) consumes a small part of such companies'
cash flow.
2) Responsible management and control groups, as gauged by managerial
competence as operators and investors as well as by an apparent absence of
intent to profit at the expense of stockholders.
3) Availability of comprehensive and meaningful financial and related
information. A key disclosure is audited financial statements and information
which the Adviser believes are reliable benchmarks to aid in understanding the
business, its values and its dynamics.
4) Availability of the security at a market price which the Adviser believes
is at a substantial discount to the Adviser's estimate of what the issuer is
worth as a private company or as a takeover or merger and acquisition candidate.
As noted above, the Portfolio may from time to time invest its assets in
securities other than common stock, including preferred stocks and various types
of debt securities, when the Adviser believes that there is a greater potential
to realize value by investing in other types of securities. The Portfolio may
invest a small portion or a substantial portion of its assets in those other
types of securities from time to time without shareholder approval.
When the Portfolio's Adviser believes that a temporary defensive posture is
appropriate, the Portfolio 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 the Portfolio's investment objective, but could prevent it from
achieving its objective.
WHO MAY WANT TO INVEST
The Portfolios may be appropriate for investors seeking long-term capital
appreciation.
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MANAGEMENT OF THE PORTFOLIO
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THE INVESTMENT ADVISER
The Investment Adviser EQSF Advisers, Inc. (the "Adviser"), 767
Third Avenue, New York, NY 10017-2023, is the investment adviser for the
Portfolio. The Adviser manages the Portfolio's investments, provides various
administrative services and supervises the Portfolio's daily business affairs,
subject to the authority of the Board of Trustees of Third Avenue Variable
Series Trust (the "Trust"). The Adviser manages five other open-end mutual funds
with assets in excess of $1.5 billion. 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 the Portfolio. During the past five years,
he has also: served in various executive capacities with M.J. Whitman, Inc., the
Portfolio's distributor and regular broker-dealer, and several affiliated
companies engaged in various investment and financial businesses; served as a
Distinguished Management Fellow at the Yale School of Management; and 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.
ADVISORY FEES
Under an investment advisory agreement between the Portfolio and the Adviser,
the Portfolio has agreed to pay the Adviser a fee at an annual rate of .90% of
the Portfolio's average daily net assets.
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YEAR 2000
The Portfolio's securities trades, pricing and accounting services
and other operations could be adversely affected if the computer
systems of the Adviser or the Portfolio's distributor, custodian or
transfer agent were unable to recognize dates after 1999. The Adviser
and other service providers have told the Portfolio that they are
taking action to prevent, and do not expect the Portfolio to suffer
from, significant year 2000 problems. In addition, the companies in
which the Portfolio invests may have year 2000 problems. The value of
their securities could go down if they do not fix these problems in
time or if fixing them is very expensive.
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HOW TO PURCHASE SHARES
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GENERAL
The Portfolio is offering its shares only to separate accounts (the "Accounts")
of insurance companies to fund the benefits of variable annuity or variable life
insurance policies (the "Contracts"). The Accounts may invest in shares of the
Portfolio in accordance with allocation instructions received from the owners of
the Contracts. Such allocation rights and information on how to purchase or
surrender a Contract, as well as sales charges and other expenses imposed by the
Contracts or their owners, are further described in the separate prospectuses
issued by the participating insurance companies and accompanying this
prospectus. The Portfolio reserves the right to reject any order for the
purchase of shares.
PRICE OF SHARES
All investments in the Portfolio are credited to an account immediately upon
acceptance of the investment by the Portfolio's transfer agent. Net asset value
per share is calculated each day the Portfolio is open for business as of the
close of regular trading on the New York Stock Exchange, normally 4:00 p.m.,
Eastern time. Net asset value of the Portfolio is determined by dividing the
value of all portfolio securities, cash, and other assets, including accrued
interest and dividends, owned by the Portfolio, less all liabilities, including
accrued expenses of the Portfolio, by the total number of outstanding shares of
the Portfolio. Orders will be priced at the next net asset value calculated
following receipt of the order in proper form by the transfer agent. The
Portfolio'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 Portfolio. Foreign securities held by the Portfolio
generally trade on foreign markets which may be open on days when the New York
Stock Exchange is closed. This means that the Portfolio's net asset value can
change on a day that you cannot purchase or redeem your shares.
BUSINESS HOURS
The Portfolio is open for business each day the New York Stock Exchange is open.
The New York Stock Exchange and the Portfolio 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.
REDEMPTION OF SHARES
Shares of the Portfolio may be redeemed on any day during which the New York
Stock Exchange is open. Portfolio shares will be redeemed at the net asset value
next calculated after an order is received in proper form by the Portfolio'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. The Portfolio will usually make payment for redemptions of Portfolio
shares within one business day, but not later than seven calendar days after
receipt of a redemption request.
CERTAIN EXPENSES
Contract owners will bear various distribution-related and insurance-related
costs at the insurance company level and should refer to the accompanying
Account prospectus for a summary of such fees and expenses.
4
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DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS & TAXES
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The Portfolio expects to pay dividends from its net investment income and to
distribute any realized net capital gains. All dividends and capital gains
distributions of the Portfolio are automatically reinvested by the Account in
additional shares of such Portfolio.
Dividends from stocks and interest earned from other investments are the main
source of income for the Portfolio. Substantially all of this income, less
expenses, is distributed to Accounts on an annual basis. When the Portfolio
sells securities, it may realize capital gains or losses, depending upon whether
the prices of the securities sold are higher or lower than the prices the
Portfolio paid to purchase them. Net capital gains represent the excess of net
long-term capital gains over net short-term capital losses and any carried
forward from prior years. The Portfolio will distribute any net capital gains to
Accounts no less frequently than annually.
TAX STATUS OF THE PORTFOLIO
The Portfolio will elect to be taxed as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). So long as the
Portfolio qualifies as a "regulated investment company," the Portfolio will not
be subject to federal income taxes to the extent it distributes its net
investment income and net capital gains. If for any taxable year the Portfolio
does not qualify for the special tax treatment afforded regulated investment
companies, all of its taxable income, including any net capital gains, would be
subject to tax at regular corporate rates (without any deduction for
distributions to shareholders).
TAX TREATMENT TO INSURANCE COMPANY AS SHAREHOLDER
The investments of an Account are subject to the diversification requirements of
Section 817(h) of the Code (the "Requirements"), which must be met at the end of
each quarter of the year (or within 30 days thereafter). An Account may
generally satisfy the Requirements in either of two ways. First, an Account will
satisfy the Requirements if it invests no more than 55% of its total assets in
securities of any one issuer, no more than 70% in the securities of any two
issuers, no more than 80% in the securities of any three issuers, and no more
than 90% in the securities of any four issuers. For this purpose, the U.S.
Treasury and each U.S. Government agency and instumentality is considered to be
a separate issuer. Second, an Account will satisfy the Requirements if (i) it
meets the diversification requirements imposed upon regulated investment
companies and (ii) no more than 55% of the value of the total assets of the
Account are attributable to cash, cash items (including receivables), government
securities, and securities of regulated investment companies. In determining
whether an Account meets the Requirements, a "look-through" rule permits an
Account to treat assets of a regulated investment company as its own assets if
all of the beneficial interests in the regulated investment company are held by
one or more Accounts. Because the Portfolio is offering its shares only to
Accounts, an Account should be able to apply this "look-through" rule to the
Portfolio in determining if such Account meets the Requirements. [The Portfolio
intends to manage its investments so that the Portfolio itself will meet the
Requirements.] In the event that an Account is not properly diversified under
Code Section 817(h), then the policies funded by shares of the Portfolio will
not be treated as life insurance for federal income tax purposes and the owners
of the policies will be subject to taxation on their respective shares of the
dividends and distributions paid by the Portfolio.
Dividends paid by the Portfolio from its ordinary income and distributions of
the Portfolio's net short-term capital gains are includable in the insurance
company's gross income. The tax treatment of such dividends and distributions
depends upon the insurance company's tax status. To the extent that income of
the Portfolio represents dividends on equity securities rather than interest
income, its distributions are eligible for the dividends received deduction
applicable in the case of a life insurance company as provided in the Code. The
Portfolio will send to the Accounts a written notice required by the Code
designating the
5
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amount and character of any distributions made during such year.
Under the Code, any distributions designated as being made from the Portfolio's
net capital gains are taxable to the insurance company as long-term capital
gains. Such distributions of net capital gains will be designated as capital
gain dividends in a written notice to the Accounts which accompanies the
distribution payments. Capital gain dividends are not eligible for the dividends
received deduction. Ordinary income dividends and capital gain dividends to the
insurance company may also be subject to state and local taxes.
CERTAIN INVESTMENT PRACTICES
Certain investment practices of the Portfolio may be subject to special
provisions of the Code that, among other things, may defer the use of certain
losses of the Portfolio and affect the holding period of the securities held by
the Portfolio and the character of the gains or losses realized by the
Portfolio. These provisions may also require the Portfolio to recognize income
or gain without receiving cash with which to make distributions in the amounts
necessary to maintain the Portfolio's qualification as a regulated investment
company and avoid income and excise taxes. The Portfolio will monitor its
transactions and may make certain tax elections in order to mitigate the effect
of these rules and prevent disqualification of the Portfolio as a regulated
investment company.
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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
First Data Investor Services Group, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(610) 239-4600
(800) 443-1021 (toll-free)
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231
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THIRD AVENUE FUNDS
767 THIRD AVENUE
NEW YORK, NY 10017-2023
PHONE (212)888-5222
TOLL FREE (800)443-1021
www.thirdavenuefunds.com
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More information about the Portfolio is available in the Portfolio's reports to
shareholders and Statement of Additional Information (SAI). The Portfolio's
Annual Report contains a discussion of the market conditions and investment
strategies that significantly affect the Portfolio's performance during its
fiscal year. The SAI is on file with the SEC and is incorporated in this
Prospectus by reference (is legally considered part of this Prospectus).
You can obtain the SAI and the Portfolio's reports to shareholders without
charge and otherwise make inquiries to the Portfolio by writing or calling the
Portfolio at 767 Third Avenue, New York, NY 10017-2023, (800) 443-1021 or (212)
888-5222.
Information about the Portfolio, including the SAI, can be reviewed and copied
at the SEC's Public Reference Room in Washington D.C. (phone 1-800-SEC-0330 for
information). Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the SEC's Public Reference Section, Washington, D.C.
20549-6009. Reports and other information about the Portfolio are available on
the SEC's Internet Web site (http://www.sec.gov).
SEC file number 811-
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[GRAPHIC OMITTED]
STATEMENT OF ADDITIONAL INFORMATION
Dated September __, 1999
THIRD AVENUE VARIABLE SERIES TRUST
THIRD AVENUE VALUE PORTFOLIO
This Statement of Additional Information (SAI) is not a Prospectus and should be
read together with the Portfolio's Prospectus dated September __, 1999. This SAI
contains information in addition to that set forth in the Prospectus into which
this document is incorporated by reference. A copy of the Prospectus and the
Portfolio's reports to shareholders may be obtained without charge by writing to
the Portfolio at 767 Third Avenue, New York, NY 10017-2023, or by calling the
Portfolio at (800) 443-1021 (toll free) or (212) 888-5222.
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TABLE OF CONTENTS
GENERAL INFORMATION 3
INVESTMENT STRATEGIES AND RISKS 3
INVESTMENT RESTRICTIONS 10
MANAGEMENT OF THE TRUST 11
COMPENSATION TABLE 16
PRINCIPAL STOCKHOLDERS 16
INVESTMENT ADVISER 16
INVESTMENT ADVISORY AGREEMENT 17
DISTRIBUTOR 17
ADMINISTRATOR 18
CUSTODIAN 18
TRANSFER AGENT 18
INDEPENDENT ACCOUNTANTS 18
PORTFOLIO TRADING PRACTICES 18
SHARE INFORMATION 20
PURCHASE ORDERS 20
REDEMPTION OF SHARES 20
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES 22
PERFORMANCE INFORMATION 23
FINANCIAL STATEMENTS 24
APPENDIX 25
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GENERAL INFORMATION
This Statement of Additional Information is in addition to and serves to expand
and supplement the current Prospectus of Third Avenue Variable Series Trust (the
"Trust"). The Trust is an open-end, non-diversified management investment
company which currently consists of one investment series: THIRD AVENUE VALUE
PORTFOLIO (the "Portfolio"). The Trust was organized as a business trust under
the laws of the state of Delaware pursuant to a Agreement and Declaration of
Trust dated as of June 16, 1999.
The shares of the Portfolio may be purchased only by the separate accounts of
insurance companies for the purpose of funding variable life insurance policies
and variable annuity contracts.
INVESTMENT STRATEGIES AND RISKS
The Prospectus discusses the investment objective of the Portfolio and the
principal strategies to be employed to achieve that objective. This section
contains supplemental information concerning certain types of securities and
other instruments in which the Portfolio may invest, additional strategies that
the Portfolio may utilize and certain risks associated with such investments and
strategies.
The Portfolio expects to invest in a broad range of securities (subject to the
Portfolio's fundamental investment objective). The particular types of
securities and the percentage of the Portfolio's assets invested in each type,
will vary depending on where the Adviser (as hereinafter defined) sees the most
value at the time of investment. The following is a description of the different
types of securities that the Adviser may invest in and certain of the risks
relating to those securities.
INVESTMENT IN EQUITY SECURITIES
In selecting common stocks, the Adviser generally seeks issuers that exhibit the
following characteristics:
(1) A strong financial position, as measured not only by balance sheet
data but also by off-balance sheet assets, liabilities and
contingencies (as disclosed in footnotes to financial statements
and as determined through research of public information), where
debt service1 consumes a small part of such companies' cash flow.
(2) Responsible management and control groups, as gauged by managerial
competence as operators and investors as well as by an apparent
absence of intent to profit at the expense of stockholders.
(3) Availability of comprehensive and meaningful financial and related
information. A key disclosure is audited financial statements and
information which the Adviser believes are reliable benchmarks to
aid in understanding the business, its values and its dynamics.
(4) Availability of the security at a market price which the Adviser
believes is at a substantial discount to the Adviser's estimate of
what the issuer is worth as a private company or as a takeover or
merger and acquisition candidate.
1 "Debt Service" means the current annual required payment of interest and
principal to creditors.
Investing in common stock has certain risks, including the risk that the
financial condition of the issuers of the Portfolio's securities may become
impaired or that the general condition of the stock market may worsen (both of
which may contribute directly to a decrease in the value of the securities and
thus in the value of the Portfolio's shares). Common stocks are especially
susceptible to general stock market movements and to increases and decreases in
value as market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors including expectations regarding
government, economic, monetary and fiscal policies,
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inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
owned by the Portfolio thus may be expected to fluctuate.
In selecting preferred stocks, the Adviser will use its selection criteria for
either common stocks or debt securities, depending on the Adviser's
determination as to how the particular issue should be viewed, based, among
other things, upon the terms of the preferred stock and where it fits in the
issuer's capital structure. Preferred stocks are usually entitled to rights on
liquidation which are senior to those of common stocks. For these reasons,
preferred stocks generally entail less risk than common stocks of the same
issuer. Such securities may pay cumulative dividends. Because the dividend rate
is pre-established, and as they are senior to common stocks, such securities
tend to have less possibility of capital appreciation.
Although the Adviser does not pay attention to market factors in making
investment decisions, the Portfolio is, of course, subject to the vagaries of
the markets. In particular, small-cap stocks have less market liquidity and tend
to have more price volatility than larger capitalization stocks.
INVESTMENT IN DEBT SECURITIES
The Portfolio intends its investment in
debt securities to be, for the most part, in securities which the Adviser
believes will provide above-average current yields, yields to events, or yields
to maturity. In selecting debt instruments for the Portfolio, the Adviser
requires the following characteristics:
1) Strong covenant protection, and
2) Yield to maturity at least 500 basis points above that of a
comparable credit.
In acquiring debt securities for the Portfolio, the Adviser generally will look
for covenants which protect holders of the debt issue from possible adverse
future events such as, for example, the addition of new debt senior to the issue
under consideration. Also, the Adviser will seek to analyze the potential
impacts of possible extraordinary events such as corporate restructurings,
refinancings, or acquisitions. The Adviser will also use its best judgment as to
the most favorable range of maturities. In general, the Portfolio will acquire
debt issues which have a senior position in an issuer's capitalization and will
avoid "mezzanine" issues such as non-convertible subordinated debentures.
The market value of debt securities is affected by changes in prevailing
interest rates and the perceived credit quality of the issuer. When prevailing
interest rates fall or perceived credit quality is increased, the market values
of debt securities generally rise. Conversely, when interest rates rise or
perceived credit quality is lowered, the market values of debt securities
generally decline. The magnitude of these fluctuations will be greater when the
average maturity of the portfolio securities is longer.
CONVERTIBLE SECURITIES
The Portfolio may invest in convertible securities, which are bonds, debentures,
notes, preferred stocks or other securities that may be converted into or
exchanged for a prescribed amount of equity securities (generally common stock)
of the same or a different issuer within a particular period of time at a
specified price or formula. Convertible securities have general characteristics
similar to both fixed income and equity securities. Yields for convertible
securities tend to be lower than for non-convertible debt securities but higher
than for common stocks. Although to a lesser extent than with fixed income
securities generally, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying security and therefore also will react to
variations in the general market for equity securities and the operations of the
issuer. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer. Convertible securities generally are subordinated to
other similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in right of
payment to all equity
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securities, and convertible preferred stock is senior to common stock of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
convertible securities.
MORTGAGE-BACKED SECURITIES
The Portfolio may invest in mortgage-backed securities and derivative
mortgage-backed securities, but will not invest in "principal only" and
"interest only" components. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. The Portfolio intends to invest
in these securities only when it believes, after analysis, that there is
unlikely to ever be permanent impairment of capital as measured by whether there
will be a money default by either the issuer or the guarantor of these
securities. These securities do, nonetheless, entail considerable market risk
(meaning fluctuations in quoted prices for the instruments), interest rate risk,
prepayment risk and inflation risk.
The Portfolio will not invest in non-investment grade subordinated classes of
residential mortgage-backed securities and does not intend to invest in
commercial mortgage-backed securities. Prepayments of principal generally may be
made at any time without penalty on residential mortgages and these prepayments
are passed through to holders of one or more of the classes of mortgage-backed
securities. Prepayment rates may change rapidly and greatly, thereby also
affect yield to maturity, reinvestment risk and market value of the
mortgage-backed securities. As a result, the high credit quality of many of
these securities may provide little or no protection against loss in market
value, and there have been periods during which many mortgage-backed securities
have experienced substantial losses in market value. The Adviser believes that,
under certain circumstances, many of these securities may trade at prices below
their inherent value on a risk-adjusted basis and believes that selective
purchases by the Portfolio may provide high yield and total return in relation
to risk levels.
ASSET-BACKED SECURITIES
The Portfolio may also invest in asset-backed securities that, through the use
of trusts and special purpose vehicles, are securitized with various types of
assets, such as automobile receivables, credit card receivables and home-equity
loans in pass-through structures similar to the mortgage-related securities
described above. In general, the collateral supporting asset-backed securities
is of shorter maturity than the collateral supporting mortgage loans and is less
likely to experience substantial prepayments. However, asset-backed securities
are not backed by any governmental agency.
FLOATING RATE, INVERSE FLOATING RATE AND INDEX OBLIGATIONS
The Portfolio may invest in debt securities with interest payments or maturity
values that are not fixed, but float in conjunction with (or inversely to) an
underlying index or price. These securities may be backed by U.S. Government or
corporate issuers, or by collateral such as mortgages. The indices and prices
upon which such securities can be based include interest rates, currency rates
and commodities prices. However, the Portfolio will not invest in any instrument
whose value is computed based on a multiple of the change in price or value of
an asset or an index of or relating to assets in which the Portfolio cannot or
will not invest.
Floating rate securities pay interest according to a coupon which is reset
periodically. The reset mechanism may be formula based, or reflect the passing
through of floating interest payments on an underlying collateral pool. Inverse
floating rate securities are similar to floating rate securities except that
their coupon payments vary inversely with an underlying index by use of a
formula. Inverse floating rate securities tend to exhibit greater price
volatility than other floating rate securities.
The Portfolio does not intend to invest more than 5% of its total assets in
inverse floating rate securities. Floating rate obligations generally exhibit a
low price volatility for a given stated maturity or average life because their
coupons adjust with changes in interest rates. Interest rate risk and price
volatility on inverse floating rate obligations can be high, especially if
leverage is used in the formula. Index securities pay a fixed rate of interest,
but have a maturity value that
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<PAGE>
varies by formula, so that when the obligation matures a gain or loss may be
realized. The risk of index obligations depends on the volatility of the
underlying index, the coupon payment and the maturity of the obligation.
INVESTMENT IN HIGH YIELD DEBT SECURITIES
The Portfolio may invest in high yield debt securities, including those rated
below Baa by Moody's Investors Service, Inc. ("Moody's") and below BBB by
Standard & Poor's Ratings Group ("Standard & Poor's") and unrated debt
securities, commonly referred to as "junk bonds". See also "Investment in Debt
Securities" and "Restricted and Illiquid Securities." Such securities are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation, and may in
fact be in default. The Portfolio does not intend to invest more than 35% of its
total assets in such securities. The ratings of Moody's and Standard & Poor's
represent their opinions as to the credit quality of the securities which they
undertake to rate (see Appendix A for a description of those ratings). It should
be emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market price risk of these securities. In
seeking to achieve its investment objective, the Portfolio depends on the
Adviser's credit analysis to identify investment opportunities. For the
Portfolio, credit analysis is not a process of merely measuring the probability
of whether a money default will occur, but also measuring how the creditor would
fare in a reorganization or liquidation in the event of a money default.
Before investing in any high yield debt instruments, the Adviser will evaluate
the issuer's ability to pay interest and principal, as well as the seniority
position of such debt in the issuer's capital structure vis-a-vis any other
outstanding debt or potential debts. There appears to be a direct cause and
effect relationship between the weak financial conditions of issuers of high
yield bonds and the market valuation and prices of their credit instruments, as
well as a direct relationship between the weak financial conditions of such
issuers and the prospects that principal or interest may not be paid.
The market price and yield of bonds rated below Baa by Moody's and below BBB by
Standard & Poor's are more volatile than those of higher rated bonds due to such
factors as interest rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity and the risk of an issuer's inability
to meet principal and interest payments. In addition, the secondary market for
these bonds is generally less liquid than that for higher rated bonds. Lower
rated or unrated debt obligations also present reinvestment risks based on
payment expectations. If an issuer calls the obligation for redemption, the
Portfolio may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. The market values of these higher
yielding debt securities tend to be more sensitive to economic conditions and
individual corporate developments than those of higher rated securities.
Companies that issue such bonds often are highly leveraged and may not have
available to them more traditional methods of financing. Under adverse economic
conditions, there is a risk that highly leveraged issuers may be unable to
service their debt obligations or to repay their obligations upon maturity.
Under deteriorating economic conditions or rising interest rates, the capacity
of issuers of lower-rated securities to pay interest and repay principal is more
likely to weaken significantly than that of issuers of higher-rated securities.
Investors should carefully consider the relative risks of investing in high
yield securities and understand that such securities are generally not meant for
short-term investing.
The Portfolio may also purchase or retain debt obligations of issuers not
currently paying interest or in default (i.e., with a rating from Moody's of C
or lower or Standard & Poor's of C1 or lower). In addition, the Portfolio may
purchase securities of companies that have filed for protection under Chapter 11
of the United States Bankruptcy Code. Defaulted securities will be purchased or
retained if, in the opinion of the Adviser, they may present an opportunity for
subsequent price recovery, the issuer may resume payments, or other advantageous
developments appear likely.
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<PAGE>
ZERO-COUPON AND PAY-IN-KIND SECURITIES
The Portfolio may invest in zero coupon and pay-in-kind ("PIK") securities. Zero
coupon securities are debt securities that pay no cash income but are sold at
substantial discounts from their value at maturity. PIK securities pay all or a
portion of their interest in the form of additional debt or equity securities.
Because such securities do not pay current cash income, the price of these
securities can be volatile when interest rates fluctuate. While these securities
do not pay current cash income, federal income tax law requires the holders of
zero coupon and PIK securities to include in income each year the portion of the
original issue discount (or deemed discount) and other non-cash income on such
securities accrued during that year. In order to continue to qualify for
treatment as a "regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code") and avoid a certain excise tax, the Portfolio may
be required to distribute a portion of such discount and income and may be
required to dispose of other portfolio securities, which may occur in periods of
adverse market prices, in order to generate cash to meet these distribution
requirements.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS
The Portfolio may invest in loans and other direct debt instruments owed by a
borrower to another party and may also from time to time make loans. These
instruments represent amounts owed to lenders or lending syndicates (loans and
loan participations) or to other parties. Direct debt instruments may involve a
risk of loss in case of default or insolvency of the borrower and may offer less
legal protection to the Portfolio in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending bank
or other financial intermediary. The markets in loans are not regulated by
federal securities laws or the Securities and Exchange Commission (the "SEC").
TRADE CLAIMS
The Portfolio may invest in trade claims. Trade claims are interests in amounts
owed to suppliers of goods or services and are purchased from creditors of
companies in financial difficulty. For purchasers such as the Portfolio, trade
claims offer the potential for profits since they are often purchased at a
significant discount from face value and, consequently, may generate capital
appreciation in the event that the market value of the claim increases as the
debtor's financial position improves or the claim is paid.
An investment in trade claims is speculative and carries a high degree of risk.
Trade claims are illiquid instruments which generally do not pay interest and
there can be no guarantee that the debtor will ever be able to satisfy the
obligation on the trade claim. The markets in trade claims are not regulated by
federal securities laws or the SEC. Because trade claims are unsecured, holders
of trade claims may have a lower priority in terms of payment than certain other
creditors in a bankruptcy proceeding.
FOREIGN SECURITIES
The Portfolio may invest in foreign securities. The Portfolio's foreign
securities investments will have characteristics similar to those of domestic
securities selected for the Portfolio. The Portfolio intends to limit its
investments in foreign securities to companies issuing U.S. dollar-denominated
American Depository Receipts or which, in the judgment of the Adviser, otherwise
provide financial information which provides the Adviser with substantively
similar financial information as SEC disclosure requirements. By limiting its
investments in this manner, the Portfolio seeks to avoid investing in securities
where there is no compliance with SEC requirements to provide public financial
information, or such information is unreliable as a basis for analysis.
Foreign securities markets generally are not as developed or efficient as those
in the United States. Securities of some foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. The Portfolio will be
subject to additional risks which include: possible adverse political and
economic developments, seizure or nationalization of foreign deposits and
adoption of governmental restrictions that may adversely affect the payment of
principal and interest on the foreign securities or currency blockage that would
restrict such payments from being brought back
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to the United States. Because foreign securities often are purchased with and
payable in foreign currencies, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS
The Portfolio may, from time to time, engage in foreign currency transactions in
order to hedge the value of its portfolio holdings denominated in foreign
currencies against fluctuations in foreign currency prices versus the U.S.
dollar. These transactions include forward currency contracts, exchange listed
and OTC options on currencies, currency swaps and other swaps incorporating
currency hedges.
The notional amount of a currency hedged by the Portfolio will be closely
related to the aggregate market value (at the time of making such hedge) of the
securities held and reasonably expected to be held in its portfolio denominated
or quoted in or currently convertible into that particular currency or a closely
related currency. If the Portfolio enters into a hedging transaction in which
the Portfolio is obligated to make further payments, its custodian will
segregate cash or readily marketable securities having a value at all times at
least equal to the Portfolio's total commitments.
The cost to the Portfolio of engaging in currency hedging transactions varies
with factors such as (depending upon the nature of the hedging transaction) the
currency involved, the length of the contract period, interest rates in foreign
countries for prime credits relative to U.S. interest rates for U.S. Treasury
obligations, the market conditions then prevailing and fluctuations in the value
of such currency in relation to the U.S. dollar. Transactions in currency
hedging contracts usually are conducted on a principal basis, in which case no
fees or commissions are involved. The use of currency hedging contracts does not
eliminate fluctuations in the prices in local currency of the securities being
hedged. The ability of the Portfolio to realize its objective in entering into
currency hedging transactions is dependent on the performance of its
counterparties on such contracts, which may in turn depend on the absence of
currency exchange interruptions or blockage by the governments involved, and any
failure on their part could result in losses to the Portfolio. The requirements
for qualification as a regulated investment company under the Code, may cause
the Portfolio to restrict the degree to which it engages in currency hedging
transactions.
RESTRICTED AND ILLIQUID SECURITIES
The Portfolio will not purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets (taken at current market value) would be
invested in securities that are illiquid. Generally speaking, an illiquid
security is any asset or investment which the Portfolio cannot sell in the
ordinary course of business within seven days at approximately the value at
which the Portfolio has valued the asset or investment, including securities
that cannot be sold publicly due to legal or contractual restrictions. The sale
of illiquid securities often requires more time and results in higher brokerage
charges or dealer discounts and other selling expenses than does the sale of
securities eligible for trading on national securities exchanges or in the
over-the-counter markets. Restricted securities may sell at a price lower than
similar securities that are not subject to restrictions on resale.
Over the past
several years, strong institutional markets have developed for various types of
restricted securities, including repurchase agreements, commercial paper, and
some corporate bonds and notes. Securities freely salable among qualified
institutional investors under special rules adopted by the SEC or otherwise
determined to be liquid, may be treated as liquid if they satisfy liquidity
standards established by the Board of Trustees. The continued liquidity of such
securities is not as well assured as that of publicly traded securities, and
accordingly the Board of Trustees will monitor their liquidity. The Board will
review pertinent factors such as trading activity, reliability of price
information and trading patterns of comparable securities in determining whether
to treat any such security as liquid for purposes of the foregoing 15% test. To
the extent the Board treats such securities as liquid, temporary impairments to
trading patterns of such securities may adversely affect the Portfolio's
liquidity.
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INVESTMENT IN RELATIVELY NEW ISSUES
The Portfolio intends to invest occasionally in the common stock of selected new
issuers. Investments in relatively new issuers, i.e., those having continuous
operating histories of less than three years, may carry special risks and may be
more speculative because such companies are relatively unseasoned. Such
companies may also lack sufficient resources, may be unable to generate
internally the funds necessary for growth and may find external financing to be
unavailable on favorable terms or even totally unavailable. Those companies will
often be involved in the development or marketing of a new product with no
established market, which could lead to significant losses. The securities of
such issuers may have a limited trading market which may adversely affect their
disposition and can result in their being priced lower than might otherwise be
the case. If other investors who invest in such issuers trade the same
securities when the Portfolio attempts to dispose of its holdings, the Portfolio
may receive lower prices than might otherwise be the case.
TEMPORARY DEFENSIVE INVESTMENTS
When, in the judgment of the Adviser, a temporary defensive posture is
appropriate, the Portfolio may hold all or a portion of its assets in short-term
U.S. Government obligations, cash or cash equivalents. The adoption of a
temporary defensive posture does not constitute a change in the Portfolio's
investment objective.
BORROWING
The Portfolio may also make use of bank borrowing as a temporary measure for
extraordinary or emergency purposes, such as for liquidity necessitated by
shareholder redemptions, and may use securities as collateral for such
borrowing. Such temporary borrowing may not exceed 5% of the value of the
Portfolio's total assets at the time of borrowing.
INVESTMENT IN OTHER INVESTMENT COMPANIES
The Portfolio may invest in securities of other investment companies, to the
extent permitted under the Investment Company Act of 1940, as amended (the "1940
Act"), provided that after any purchase the Portfolio does not own more than 3%
of such investment company's outstanding stock. The Adviser will charge an
advisory fee on the portion of the Portfolio's assets that are invested in
securities of other investment companies. Thus, shareholders will be responsible
for a "double fee" on such assets, since both investment companies will be
charging fees on such assets.
SIMULTANEOUS INVESTMENTS
Investment decisions for the Portfolio are made independently from those of the
other accounts advised by the Adviser and its affiliates. If, however, such
other accounts wish to invest in, or dispose of, the same securities as one of
the Portfolios, available investments will be allocated equitably between the
Portfolio and other account. This procedure may adversely affect the size of the
position obtained for or disposed of by the Portfolio or the price paid or
received by the Portfolio.
SECURITIES LENDING
The Portfolio may lend its portfolio securities to qualified institutions. By
lending its portfolio securities, the Portfolio attempts to increase its income
through the receipt of interest on the loan. Any gain or loss in the market
price of the securities loaned that may occur during the term of the loan will
be for the account of the Portfolio. The Portfolio may lend its portfolio
securities so long as the terms and the 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 Portfolio collateral consisting of
cash, a letter of credit issued by a domestic U.S. bank, or securities issued or
guaranteed by the U.S. government having a value at all times not less than 100%
of the value of the securities loaned, (b) the borrower add to such collateral
whenever the price of the securities loaned rises (i.e., the value of the loan
is "marked to the market" on a daily basis), (c) the loan be made subject to
termination by the Portfolio at any time and the loaned securities be subject to
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recall within the normal and customary settlement time for securities
transactions and (d) the Portfolio receive reasonable interest on the loan
(which may include the Portfolio's investing any cash collateral in interest
bearing short-term investments), any distributions on the loaned securities and
any increase in their market value. If the borrower fails to maintain the
requisite amount of collateral, the loan automatically terminates and the
Portfolio could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over the value of the
collateral. As with any extension of credit, there are risks of delay in
recovery and in some cases even loss of rights in collateral should the borrower
of the securities fail financially.
The Portfolio will not lend portfolio securities if, as a result, the aggregate
of such loans exceeds 33 1/3% of the value of its total assets (including such
loans). Loan arrangements made by the Portfolio 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 Portfolio's Board of Trustees.
The Portfolio 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 Portfolio shall, through the
ability to recall securities prior to any required vote, retain voting rights
over the loaned securities.
On behalf of the Portfolio, the Trust has entered into a master lending
arrangement with Bear, Stearns Securities Corp. in compliance with the foregoing
requirements.
SHORT SALES
The Portfolio may, but currently does not intend to, engage in short sales. In a
short sale transaction, the Portfolio sells a security it does not own in
anticipation of a decline in the market value of the security.
COMMODITIES
The Portfolio may, but currently does not intend to, invest in commodities or
commodity contracts and futures contracts.
INVESTMENT RESTRICTIONS
For the benefit of shareholders, the Portfolio has adopted the following
restrictions, which are fundamental policies and cannot be changed without the
approval of a majority of such Portfolio's outstanding voting securities. 1
The Portfolio may not:
1. Borrow money or pledge, mortgage or hypothecate any of its assets
except that the Portfolio 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 the Portfolio'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 1940 Act). Borrowings
permitted by Item 1 above are not senior securities.
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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 Portfolio controls and which are determined to be engaged in
the same industry or similar trades or businesses or related trades or
businesses.
6. Invest 25% or more of the value of its total assets in any one industry.
- ----------------
1 As used in this Statement of Additional Information as to any matter requiring
shareholder approval, the phrase "majority of the outstanding securities" means
the vote at a meeting of (i) 67% or more of the shares present or represented,
if the holders of more than 50% of the outstanding voting securities are present
in person or represented by proxy, or (ii) more than 50% of the outstanding
voting securities, whichever is less.
The Portfolio is required to comply with the above fundamental investment
restrictions applicable to it only at the time the relevant action is taken. The
Portfolio is not required to liquidate an existing position solely because a
change in the market value of an investment or a change in the value of the
Portfolio's net or total assets causes it not to comply with the restriction at
a future date. The Portfolio will not purchase any portfolio securities while
any borrowing exceeds 5% of its total assets.
MANAGEMENT OF THE TRUST
The Board of Trustees of the Portfolio oversees the management of the Portfolio.
The Trustees are responsible for such matters as reviewing and approving
fundamental operating, financial, and corporate governance policies; evaluating
the Adviser's performance; determining management fees; and reviewing and
approving procedures for providing financial and operational information to the
Board.
Trustees and officers of the Portfolio, together with information as to their
principal business occupations during at least the last five years, are shown
below. Each trustee who is deemed to be an "interested person" of the Portfolio,
as defined in the 1940 Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
IAN M. KIRSCHNER* 43 Sole Initial General Counsel and Secretary of the Trust since
767 Third Avenue Trustee; inception; General Counsel and Secretary (8/96 to
New York, NY 10017-2023 General Present) of Danielson Holding Corporation; General
Counsel and Counsel and Secretary (1/96 to Present) of MJWHC,
Secretary M.J. Whitman, Inc., and M. J. Whitman Advisers,
Inc.; General Counsel and Secretary (1/97 to Present)
of Third Avenue Trust; General Counsel and Secretary
(1/97 to Present) of EQSF Advisers, Inc.; Vice-President,
General Counsel and Secretary (2/93 to 6/95) of 2 I
Inc.; Of Counsel (10/90 to 10/92) to Morgan, Lewis &
Bockius.
</TABLE>
The Trust currently anticipates that the Sole Initial Trustee will resign from
such capacity prior to the commencement of investment operations and that the
following persons will be named to the Board of Trustees.
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<TABLE>
<CAPTION>
NAME & ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION DURING PAST 5 YEARS
HELD WITH
REGISTRANT
<S> <C> <C> <C>
PHYLLIS W. BECK*(1) 72 Trustee An Associate Judge (1981 to Present) of the
GSB Bldg. Suite 800 Superior Court of Pennsylvania; Trustee of the
City Line & Belmont Ave. Trust since its inception, June, 1999.
Bala Cynwyd, PA 19004-1611
LUCINDA FRANKS 52 Trustee Journalist (1969 to Present); Author "Wild
64 East 86th Street Apples" (1990), "Waiting Out a War; The Exile of
New York, NY 10028 Private John Picciano (1974); Winner of the 1971
Pulitzer Prize for Journalism; Trustee of the
Trust since its inception, June, 1999.
GERALD HELLERMAN 61 Trustee Managing Director (8/93 to Present) of Hellerman
10965 Eight Bells Lane Associates, a financial and corporate consulting
Columbia, MD 21044 firm; Chief Financial Analyst (1976 to 7/93) of
the Antitrust Division of U.S. Department of
Justice; Director of Clemente Global Growth
Portfolio, Inc. (9/98 to Present); Trustee of the
Trust since its inception, June, 1999.
MARVIN MOSER, M.D. 75 Trustee Trustee (1992 to Present) of the Trudeau
13 Murray Hill Road Institute, a medical research institute; Clinical
Scarsdale, NY 10583 Professor of Medicine (1984 to Present) at Yale
University School of Medicine; Senior Medical
Consultant (1972 to Present) for the National High
Blood Pressure Education Program of the National Heart,
Lung and Blood Institute; Chairman (1977) and a member
in 1980, 1984, 1988, 1992 and 1996 of the Joint National
Committee on Detection, Evaluation and Treatment of High
Blood Pressure for the National Heart, Lung and Blood
Institute; Director of AMBI Corp. (1997 to Present);
Trustee of the Trust since its inception, June, 1999.
DONALD RAPPAPORT 73 Trustee Private investor and consultant (1987 to ___1997
1619 31st Street, N.W. and May, 1999 to Present); Chief Financial and
Washington, D.C. 20007 Chief Information Officer for the U.S. Department
of Education (1997 to May, 1999); President and
Chief Operating Officer (3/90 to 12/90 of Third
Avenue Value Fund, Inc. and Equity Strategies
Fund, Inc. (1984 to 12/90); Director (1987 to 4/94
of Equity Strategies Fund, Inc.; President (1989
to 12/90) of Whitman Advisors, Ltd., an investment
adviser; Registered Securities Representative
(1989 to 1991) of M.J. Whitman & Co., Inc. a
former broker-dealer; Trustee of the Trust since
its inception, June, 1999.
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<PAGE>
MYRON M. SHEINFELD 68 Trustee Counsel to (12/96 to present) and Attorney and
1001 Fannin St., Suite 3700 Shareholder (1968 to 12/96) of Sheinfeld, Maley &
Houston, TX 77002 Kay P.C., a law firm; Adjunct Professor (1975 to
1991) of the University of Texas Law School;
Director (1984 to 1992) of Equity Strategies
Portfolio, Inc.; Director (1988 to Present) of
Nabors Industries, Inc., an international oil
drilling contractor; Director (11/98 to present)
of Anchor Glass Container Corp.; former
Consultant (11/90 to 4/95) to Meyer Hendricks
Victor Osborn & Maledon, a law firm in Phoenix,
Arizona; Co-Editor and Co-Author "Collier on
Bankruptcy 15th Edition Revised" and "Collier on
Bankruptcy Taxation"; Trustee of the Trust since
its inception, June, 1999.
MARTIN SHUBIK 72 Trustee Seymour H. Knox Professor (1975 to Present) of
Yale University Dept. Mathematical and Institutional Economics, Yale
of University; Director (1984 to 4/94) of Equity
Economics Strategies Portfolio, Inc.; Trustee of the Trust
Box 2125, Yale Station since its inception, June, 1999.
New Haven, CT 06520
CHARLES C. WALDEN 54 Trustee Executive Vice-President--Investments (1973 to
11 Williamsburg Circle Present) (Chief Investment Officer) of Knights of
Madison, CT 06443 Columbus, a fraternal benefit society selling life
insurance and annuities; Chartered Financial Analyst;
Trustee of the Trust since its inception, June, 1999.
BARBARA WHITMAN*(1) 40 Trustee Registered Securities Representative (11/96 to
767 Third Avenue Present) of M.J. Whitman, Inc., a broker-dealer
New York, NY 10017-2023 and the Portfolios' underwriter; Director (4/95 to
Present) of EQSF Advisers, Inc., the Portfolios'
investment adviser; Director (8/97 to 6/98) of
Riverside Stage Company, a theater; House Manager
(1/94 to 8/94) of Whiting Auditorium, a theater;
Substitute Teacher (1/92 to 6/93) of National-Louis
University Movement Center, a university. Trustee of
the Trust since its inception, June, 1999.
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<PAGE>
MARTIN J. WHITMAN*(1) 74 Chairman, Chairman and CEO of the Trust since inception;
767 Third Avenue Chief Chairman and CEO (3/90 to Present), President
New York, NY 10017-2023 Executive (1/91 to 5/98), of Third Avenue Trust; Chairman
Officer, and and CEO (3/90 to Present), President (1/91 to
Trustee 2/98), of EQSF Advisers, Inc.; Chairman, CEO
(1/1/95 to Present), President (1/1/95 to
6/29/95) and Chief Investment Officer (10/92 to
Present) of M.J. Whitman Advisers, Inc., a
subsidiary of M.J. Whitman Holding Corp.,
(MJWHC), a holding company managing investment
subsidiaries and an investment adviser to
private and institutional clients; Chairman, CEO
(1/1/95 to Present) and President (1/1/95 to
6/29/95) of MJWHC and of M.J. Whitman, Inc., a
subsidiary of MJWHC and the successor
broker-dealer of M.J. Whitman, L.P. (MJWLP), a
Delaware limited partnership which has been
dissolved; Distinguished Management Fellow (1972
to Present) and Member of the Advisory Board
(10/94 to 6/95) of the Yale School of Management
at Yale University; Director and Chairman (8/90
to Present), President (8/90 to 12/90), CEO
(8/96 to Present) and Chief Investment Officer
(12/90 to 8/96) of Danielson Holding
Corporation, and a Director of its subsidiaries;
Director (3/91 to Present) of Nabors Industries,
Inc., an international oil drilling contractor;
Director (8/97 to Present) of Tejon Ranch Co.;
President and CEO (10/74 to Present) of Martin
J. Whitman & Co., Inc., (formerly M.J. Whitman &
Co., Inc.), a private investment company;
Trustee of the Trust since its inception, June,
1999; Chartered Financial Analyst.
DAVID M. BARSE 37 President President of the Trust since inception; President
767 Third Avenue and Chief (5/98 to Present), and Executive Vice President
New York, NY 10017-2023 Operating (4/95 to 5/98)of Third Avenue Trust; President,
Officer Chief Operating Officer and Director (7/96 to
(COO) Present) of Danielson Holding Corporation;
Director (8/96 to Present) of National American
Insurance Company of California; President (2/98
to Present), Executive Vice President (4/95 to
2/98), and Director (4/95 to Present) of EQSF
Advisers, Inc.; President (6/95 to Present),
Director, Chief Operating Officer (1/95 to
Present), Secretary (1/95 to 1/96) and Executive
Vice President (1/95 to 6/95) of MJWHC; President
(6/95 to Present), Director and COO (1/95 to
Present), Secretary (1/95 to 1/96), Executive Vice
President (1/95 to 6/95) of M.J. Whitman, Inc.;
President (6/95 to Present), Director and COO
(1/95 to Present), Executive Vice President (1/95
to 6/95) and Corporate Counsel (10/92 to 12/95) of
M.J. Whitman Advisers, Inc.; Director (6/97 to
Present) of CGA Group, Ltd.; Director (7/94 to
12/94), Executive Vice President and Secretary
(1/92 to 12/94) of Whitman Securities Corp.
-14-
<PAGE>
MICHAEL CARNEY 45 Treasurer, Treasurer and CFO of the Trust since inception;
767 Third Avenue Chief Director, (1/1/95 to Present) Executive Vice
New York, NY 10017-2023 Financial President, Chief Financial Officer (6/29/95 to
Officer Present) of MJWHC and of M.J. Whitman, Inc.;
(CFO) Treasurer, Director (1/1/95 to Present), Executive
Vice President (6/29/95 to Present) and CFO
(10/92 to Present) of M.J. Whitman Advisers,
Inc.; Treasurer (12/93 to 4/96) of Longstreet
Investment Corp.; CFO (3/26/93 to 6/95) of
Danielson Trust Company; Limited Partner (1/92
to 12/31/94) of M.J. Whitman, L.P.; CFO of WHR
Management Corporation (8/91 to Present),
Danielson Holding Corporation (8/90 to Present)
and Carl Marks Strategic Investments, L.P., an
investment partnership (1/90 to 4/94); CFO (1/90
to 4/94) of Carl Marks & Co., Inc., a
broker-dealer; CFO (8/89 to 12/90) of Whitman
Advisors, Ltd.; CFO and Treasurer (5/89 to 4/94)
of Equity Strategies Portfolio, Inc.; CFO and
Treasurer (5/89 to Present) of EQSF Advisers,
Inc.; CFO (5/89 to Present) of Whitman Heffernan
Rhein & Co., Inc., Martin J. Whitman & Co.,
Inc., (formerly M.J. Whitman & Co., Inc.) and
WHR Management Company, L.P., a firm managing
investment partnerships.
KERRI WELTZ 31 Assistant Assistant Treasurer of the Trust since inception;
767 Third Avenue Treasurer Assistant Treasurer (5/96 to Present), Controller
New York, NY 10017-2023 (1/96 to Present), Assistant Controller (1/93 to
12/95) and Staff Accountant (1/92 to 12/92) for
Third Avenue Trust; Controller (1/96 to
Present), Assistant Controller (1/93 to 12/95),
and Staff Accountant (1/92 to 12/92) of EQSF
Advisers, Inc.; Controller (8/96 to Present), of
Danielson Holding Corp.; Controller (5/96 to
Present) and Assistant Controller (1/95 to 5/96)
of Whitman Heffernan & Rhein Workout Portfolio
II, L.P. and Whitman Heffernan & Rhein Workout
Portfolio II-A, L.P.; Controller (5/96 to
Present) of WHR Management Corp.; Controller
(5/96 to present), Assistant Controller (1/93 to
5/96) and Staff Accountant (5/91 to 12/92), of
Whitman Heffernan Rhein & Co., Inc.; Controller
(5/96 to Present) of Martin J. Whitman & Co.,
Inc.; Assistant Controller (10/94 to 4/96) of
Longstreet Investment Corp and Emerald
Investment Partners, L.P.; Assistant Controller
(1/93 to 4/94) and Staff Accountant (1/92 to
12/92) of Equity Strategies Portfolio, Inc.;
Payroll manager (5/91 to 12/93) of M.J. Whitman,
L.P.
</TABLE>
Phyllis W. Beck is the sister of Martin J. Whitman, Chairman, Chief Executive
Officer and a Trustee of the Trust and the aunt of Barbara Whitman, a Trustee of
the Trust; Barbara Whitman is the daughter of Martin J. Whitman.
The Trust does not pay any fees to its officers for their services as such, but
does pay Trustees who are not affiliated with the Adviser a fee of $1,500 for
each meeting of the Board of Trustees that they attend, in addition to
reimbursing all Trustees for travel and incidental expenses incurred by them in
connection with their attendance at Board meetings. The Trust also pays the
non-interested Trustees an annual stipend of $2,000 in January of each year for
the previous year's service. Since the Trust was organized in June, 1999, it has
not paid any compensation to its Trustees for the prior fiscal year. Trustees do
not receive any pension or retirement benefits.
-15-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION FROM REGISTRANT AND FUND COMPLEX PAID
NAME AND POSITION HELD REGISTRANT * TO TRUSTEES*
---------------------- ----------- ------------
<S> <C> <C>
Phyllis W. Beck, Trustee $ 0 $ 0
Lucinda Franks, Trustee $8,000 $27,666
Gerald Hellerman, Trustee $8,000 $36,166
Marvin Moser, M.D., Trustee $8,000 $36,166
Donald Rappaport, Trustee $8,000 $ 8,000
Myron M. Sheinfeld, Trustee $8,000 $36,166
Martin Shubik, Trustee $8,000 $33,166
Charles C. Walden, Trustee $8,000 $36,166
Barbara Whitman, Trustee $ 0 $ 0
Martin J. Whitman, Chairman and $ 0 $ 0
Chief Executive Officer
</TABLE>
* Estimated for the Portfolio's first full fiscal year.
** Includes estimated fees for the Portfolio's first full fiscal year and actual
fees paid to the Trustees by other funds in the Fund Complex for the fiscal year
ended October 31, 1998. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $4,983 for all Trustees as a group
for the fiscal year ended October 31, 1998. Amounts for THIRD AVENUE HIGH YIELD
FUND are for the period from February 12, 1998 (inception) through October 31,
1998. Amounts for THIRD AVENUE REAL ESTATE VALUE FUND are for the period from
September 17, 1998 (inception) through October 31, 1998. For the fiscal year
ended October 31, 1999, it is anticipated that in addition to the compensation
specified above, the Trustees will receive additional compensation from THIRD
AVENUE HIGH YIELD FUND and THIRD AVENUE REAL ESTATE VALUE FUND in an estimated
amount equal to $1,500 and $4,500 per Trustee, respectively, and THIRD AVENUE
HIGH YIELD FUND and THIRD AVENUE REAL ESTATE VALUE FUND will reimburse the
Trustees for approximately $2,500 in expenses in the aggregate (such estimated
amounts are based upon the aggregate compensation received and expenses incurred
by the Trustees for the fiscal year ended October 31, 1998).
PRINCIPAL STOCKHOLDERS
As of September __, 1999, the Portfolio had no stockholders.
INVESTMENT ADVISER
The investment adviser to the Trust is EQSF Advisers, Inc. (the "Adviser"), 767
Third Avenue, New York, NY 10017. Martin J. Whitman is a controlling person of
the Adviser. His control is based upon an irrevocable proxy signed by his
children, who own, in the aggregate, 75% of the outstanding common stock of the
Adviser, pursuant to a shareholders' agreement entered into by and among them.
Mr. Whitman is Chairman and Chief Executive Officer of the Adviser.
The following individuals are affiliated persons of the Trust and Adviser:
<TABLE>
<CAPTION>
Capacity With Portfolios Capacity With Adviser
------------------------ ---------------------
<S> <C> <C>
Martin J. Whitman Chairman and Chief Executive Chairman and Chief Executive
Officer Officer
David M. Barse President, Chief Operating Officer President, Chief Operating Officer
Michael Carney Treasurer, Chief Financial Officer Treasurer, Chief Financial Officer
Ian M. Kirschner General Counsel and Secretary General Counsel and Secretary
Kerri Weltz Assistant Treasurer Assistant Treasurer
Barbara Whitman Trustee Director
</TABLE>
-16-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
The investment advisory services of the Adviser are furnished to the Portfolio
pursuant to an Investment Advisory Agreement approved by the Board of Trustees
of the Trust, including a majority of the Trustees who are not "interested
persons" as defined in the 1940 Act, and by the sole shareholder of the
Portfolio on the same date. The Adviser has provided investment advisory
services to the Portfolio since its inception. The Investment Advisory Agreement
initially was approved by the Trustees, including a majority of the Trustees who
are not "interested persons" of the Adviser within the meaning of the 1940 Act.
After the initial two-year term, the Investment Advisory Agreement will continue
from year to year if approved annually by the Board of Trustees of the Trust or
a majority of the outstanding voting securities of the Trust, and by vote of a
majority of the Trustees who are not parties to the Investment Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of such parties,
cast in person at a meeting called for the purpose of voting on such approval.
The Investment Advisory Agreement may be terminated at any time without penalty,
upon 60 days written notice by either party to the other, and will automatically
be terminated upon any assignment thereof.
For the investment advisory services provided by the Adviser, the Portfolio has
agreed to pay the Adviser a monthly fee of 1/12 of .90% (an annual rate of .90%)
on the average daily net assets in the Portfolio during the prior month. Under
the Investment Advisory Agreement, the Adviser supervises and assists in the
management of the Trust, provides investment research and research evaluation
and makes and executes recommendations for the purchase and sale of securities.
The Adviser furnishes, at its expense, all necessary office equipment and
personnel necessary for the performance of the obligations of the Adviser and
pays the compensation of officers of the Trust. However, in the event that any
person serving as an officer of the Trust has both executive duties attendant to
such offices and administrative duties to the Trust apart from such office, the
Adviser does not pay any amount relating to the performance of such
administrative duties.
All other expenses incurred in the operation of the Portfolio and the continuous
offering of its shares, including taxes, fees and commissions, bookkeeping
expenses, Portfolio employees, expenses of redemption of shares, charges of
administrators, custodians and transfer agents, auditing and legal expenses and
fees of outside Trustees are borne by the Portfolio. From time to time, the
Adviser may waive receipt of its fees and/or assume certain expenses of the
Portfolio, which would have the effect of lowering the expense ratio of the
Portfolio and increasing yield to investors. [Under current arrangements,
whenever, in any fiscal year, the Portfolio's normal operating expenses,
including the investment advisory fee, but excluding brokerage commissions and
interest and taxes, exceeds 1.9% of the first $100 million of average daily net
assets of the Portfolio, and 1.5% of assets in excess of $100 million, the
Adviser is obligated to reimburse the Portfolio in an amount equal to that
excess.] If the Portfolio's operating expenses fall below the expense
limitation, the Portfolio will begin repaying the Adviser for the amount
contributed on behalf of the Portfolio. This repayment will continue for up to
three years after the end of the fiscal year in which an expense is reimbursed
by the Adviser, subject to the expense limitation, until the Adviser has been
paid for the entire amount contributed or such three year period expires.
DISTRIBUTOR
The distribution services of M.J. Whitman, Inc., 767 Third Avenue, New York, NY
10017 ("MJW" or the "Distributor") are furnished to the Portfolio pursuant to a
Distribution Agreement (the "Distribution Agreement"). Under such agreement, the
Distributor shall (1) assist in the sale and distribution of each Portfolio's
shares; and (2) qualify and maintain the qualification as a broker-dealer in
such states where shares of the Portfolios are registered for sale.
-17-
<PAGE>
Martin J. Whitman, David M. Barse, Michael Carney and Ian M. Kirschner, who are
executive officers of the Trust and the Adviser, are also executive officers of
the Distributor.
The Distribution Agreement will remain in effect provided that it is approved at
least annually by the Board of Trustees or by a majority of the Portfolio's
outstanding shares, and in either case, by a majority of the Trustees who are
not parties to the Distribution Agreement or interested persons of any such
party. The Distribution Agreement terminates automatically if it is assigned and
may be terminated without penalty by either party on not less than 60 days
written notice.
ADMINISTRATOR
The Portfolio has entered into an Administration Services Agreement (the
"Administration Agreement") with First Data Investor Services Group, Inc.
("Investor Services Group"), a wholly owned subsidiary of First Data
Corporation. The Administration Agreement provides that Investor Services Group
shall provide all administrative services to the Portfolio other than those
relating to the investment portfolio of the Portfolio, the distribution of the
Portfolio and the maintenance of the Portfolio's financial records. The
Administration Agreement has an initial two year term and may be terminated at
any time (effective after such initial term) without penalty, upon 180 days
written notice by either party to the other, and will automatically be
terminated upon any assignment thereof. [The Trust has agreed to pay Investor
Services Group an amount equal to $_______ per annum plus .01% of aggregate
assets of the Portfolio in excess of $1 billion.]
CUSTODIAN
Custodial Trust Company (the "Custodian"), 101 Carnegie Center, Princeton, NJ
08540-6231, serves as custodian for the Portfolio pursuant to a custodian
agreement. Under such agreement, the Custodian (1) maintains a separate account
or accounts in the name of the Portfolio; (2) holds and transfers portfolio
securities on account of the Portfolio; (3) accepts receipts and makes
disbursements of money on behalf of the Portfolio; (4) collects and receives all
income and other payments and distributions on account of the Portfolio's
securities; and (5) makes periodic reports to the Board of Trustees concerning
the Portfolio's operations.
TRANSFER AGENT
First Data Investor Services Group, Inc., 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903, is the transfer agent for the Portfolio.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, NY 10036, is
the independent public accountants for the Portfolio. The independent public
accountants audit the financial statements of the Portfolio following the end of
each fiscal year and provide a report to the Board of Trustees of the results of
the audit.
PORTFOLIO TRADING PRACTICES
Under the Investment Advisory Agreement between the Trust and the Adviser, the
Adviser has the responsibility of selecting brokers and dealers. The Adviser
must place portfolio transactions with brokers and dealers who render
satisfactory service in the execution of orders at the most favorable prices and
at reasonable commission rates, but has discretion to pay a greater amount if
it, in good faith, determines that such commission was reasonable in relation to
the value of the brokerage and research services provided by such broker or
dealer, either in terms of that particular transaction or in fulfilling the
overall responsibilities of the Adviser to the Portfolio.
-18-
<PAGE>
Where transactions are executed in the over-the-counter market, or in the "third
market" (the over-the-counter market in listed securities), the Portfolio will
normally first seek to deal with the primary market makers. However, when the
Portfolio considers it advantageous to do so, it will utilize the services of
brokers, but will, in all cases, attempt to negotiate the best price and
execution. The determination of what may constitute the most favorable price and
execution in a securities transaction by a broker involves a number of
considerations, including, without limitation, the overall direct net economic
result to the Portfolio (involving both price paid or received and any
commissions or other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all if selling large blocks
is involved, the availability of the broker to stand ready to execute possibly
difficult transactions in the future and the financial strength and stability of
the broker. Such considerations are judgmental and are weighed by management in
determining the overall reasonableness of brokerage commissions paid. In
allocating any such portfolio brokerage on a national securities exchange, the
Portfolio may consider the research, statistical and other factual information
and services provided by brokers from time to time to the Adviser. Such services
and information are available to the Adviser for the benefit of all clients of
the Adviser and its affiliates and it is not practical for the Adviser to assign
a particular value to any such service.
The Adviser intends to use brokers affiliated with the Adviser as brokers for
the Portfolio where, in its judgment, such firms will be able to obtain a price
and execution at least as favorable as other qualified brokers. Martin J.
Whitman, David M. Barse, Michael Carney and Ian M. Kirschner, who are executive
officers of the Trust and the Adviser, are also executive officers of MJW and
M.J. Whitman Senior Debt Corp. ("Senior Debt Corp."), a broker of private debt
instruments under common control with MJW.
In determining the commissions to be paid to MJW and Senior Debt Corp., it is
the policy of the Portfolio that such commissions will, in the judgment of the
Adviser, be (i) at least as favorable as those which would be charged by other
qualified brokers having comparable execution capability and (ii) at least as
favorable as commissions contemporaneously charged by MJW or Senior Debt Corp.,
as the case may be, on comparable transactions for its most favored unaffiliated
customers, except for any customers of MJW or Senior Debt Corp., as the case may
be, considered by a majority of the disinterested Trustees not to be comparable
to the Portfolio. The Portfolio does not deem it practicable and in its best
interests to solicit competitive bids for commission rates on each transaction.
However, consideration is regularly given to information concerning the
prevailing level of commissions charged on comparable transactions by other
qualified brokers.
The Trustees from time to time, at least on a quarterly basis, will review,
among other things, all the Portfolio's portfolio transactions including
information relating to the commissions charged by MJW and Senior Debt Corp. to
the Portfolio and to their other customers, and information concerning the
prevailing level of commissions charged by other qualified brokers. In addition,
the procedures pursuant to which MJW and Senior Debt Corp. effects brokerage
transactions for the Portfolio must be reviewed and approved no less often than
annually by a majority of the disinterested Trustees.
The Adviser expects that it will execute a portion of the Portfolio's
transactions through qualified brokers other than MJW and Senior Debt Corp. In
selecting such brokers, the Adviser will consider the quality and reliability of
the brokerage services, including execution capability and performance,
financial responsibility, and investment information and other research provided
by such brokers. Accordingly, the commissions charged by any such broker may be
greater than the amount another firm might charge if management of the Trust
determines in good faith that the amount of such commissions is reasonable in
relation to the value of the brokerage services and research information
provided by such broker to the Portfolio. Management of the Trust believes that
the research information received in this manner provides the Portfolios with
benefits by supplementing the research otherwise available to the Portfolio.
Over-the-counter purchases and sales will be transacted directly with principal
market makers, except in those circumstances where
-19
<PAGE>
the Portfolio can, in the judgment of its management, otherwise obtain better
prices and execution of orders.
To the knowledge of the Portfolio, no affiliated person of the Portfolio
receives give-ups or reciprocal business in connection with security
transactions of the Portfolio. The Portfolio does not effect securities
transactions through brokers in accordance with any formula, nor will it take
the sale of Portfolio shares into account in the selection of brokers to execute
security transactions. However, brokers who execute brokerage transactions for
the Portfolio, including MJW and Senior Debt Corp., from time to time may effect
purchases of Portfolio shares for their customers.
SHARE INFORMATION
All shares of the Portfolio have one vote and when duly issued will be fully
paid and non-assessable. Shares have no preemptive, subscription or conversion
rights and are freely transferable. The Trustees are authorized to re-classify
and issue any unissued shares to any number of additional series without
shareholder approval. Accordingly, the Trustees in the future, for reasons such
as the desire to establish one or more additional Portfolios with different
objectives, policies, risk considerations or restrictions, may create additional
series or classes of shares. Any issuance of shares of such additional series
would be governed by the Investment Company Act of 1940, as amended, and the
laws of the State of Delaware.
Shares of the Portfolio have equal noncumulative voting rights which means that
the holders of more than 50% of the shares voting for the election of Trustees
can elect 100% of the Trustees if they choose to do so, and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees. The Shares of the Portfolio also have equal rights with respect to
dividends, assets and liquidation of the Portfolio and are subject to any
preferences, rights or privileges of any classes of shares of the Portfolio. The
Trust is not required to and has no current intention of holding annual
shareholder meetings, although special meetings may be called for purposes
requiring shareholder approval, such as changing fundamental investment policies
or upon the written request of 10% of the Portfolio shares to replace its
Trustees.
PURCHASE ORDERS
The purchase of shares of the Portfolio is currently limited to separate
accounts (the "Accounts") of insurance companies to fund the benefits of
variable life insurance policies (the "Contracts") as explained in the
Prospectus. The Portfolio reserves the right, in its sole discretion, to refuse
purchase orders. Without limiting the foregoing, the Portfolio will consider
exercising such refusal right when it determines that it cannot effectively
invest the available funds on hand in accordance with the Portfolio's investment
policies.
REDEMPTION OF SHARES
The procedure for redemption of Portfolio shares under ordinary circumstances is
set forth in the Prospectus and in the separate prospectus relating to the
Contracts which accompanies the Prospectus. In unusual circumstances, such as in
the case of a suspension of the determination of net asset value, the right of
redemption is also suspended and, unless redeeming shareholders withdraw their
certificates from deposit, they will receive payment of the net asset value next
determined after termination of the suspension. The right of redemption may be
suspended or payment upon redemption deferred for more than seven days: (a) when
trading on the New York Stock Exchange (the "NYSE") is restricted; (b) when the
NYSE is closed for other than weekends and holidays; (c) when the SEC has by
order permitted such suspension; or (d) when an emergency exists making disposal
of portfolio securities or valuation of net assets of the Portfolio
-20-
<PAGE>
not reasonably practicable; provided that applicable rules and regulations of
the SEC shall govern as to whether the conditions prescribed in (a), (c) or (d)
exist.
REDEMPTION IN KIND
The Portfolio has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which the Portfolio is obligated during any 90 day period to redeem
shares for any one shareholder of record solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Portfolio at the beginning of such
period. Should a redemption exceed such limitation, the Portfolio may deliver,
in lieu of cash, readily marketable securities from its portfolio. The
securities delivered will be selected at the sole discretion of the Portfolio,
will not necessarily be representative of the entire portfolio and may be
securities which the Portfolio would otherwise sell. The redeeming shareholder
will usually incur brokerage costs in converting the securities to cash. The
method of valuing securities used to make the redemptions in kind will be the
same as the method of valuing portfolio securities and such valuation will be
made as of the same time the redemption price is determined.
For purposes of determining the Portfolio's net asset value per share, readily
marketable portfolio securities listed on the NYSE are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the NYSE on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the mean of the closing bid and asked prices on such day. If no bid or asked
prices are quoted on such day, then the security is valued by such method as the
Board of Trustees shall determine in good faith to reflect is fair market value.
Readily marketable securities not listed on the NYSE but listed on other
national securities exchanges or admitted to trading on the National Association
of Securities Dealers Automated Quotations, Inc. ("NASDAQ") National List are
value in a like manner. Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Trustees deems appropriate to reflect their fair value.
United States Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Trustees. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Portfolio's Board of
Trustees designed to reflect in good faith the fair value of such securities.
As indicated in the Prospectus, the net asset value per share of the Portfolio's
shares will be determined on each day that the NYSE is open for trading. The
NYSE annually announces the days on which it will not be open for trading; the
most recent announcement indicates that it will not be open on the following
days: New Year's Day, President's Day, Martin Luther King, Jr. Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, the NYSE may close on days not included in that announcement.
-21-
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Portfolio will elect to be taxed as a "regulated investment company" under
the Code. So long as the Portfolio qualifies as a "regulated investment
company", the Portfolio will not be subject to Federal income taxes to the
extent it distributes its net investment income and net capital gains. If for
any taxable year the Portfolio does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income, including
any net capital gains, would be subject to tax at regular corporate rates
(without any deduction for distributions to shareholders).
The Portfolio will either distribute or retain for reinvestment all or part of
any net long-term capital gain. If any such net capital gain is retained, the
Portfolio will be subject to a tax of 35% of such amount. In that event, the
Portfolio expects to designate the retained amount as undistributed capital
gains in a notice to its shareholders, each of whom (1) will be required to
include in income for tax purposes, as long-term capital gains, its share of
such undistributed amount, (2) will be entitled to credit its proportionate
share of the tax paid by the Portfolio against its Federal income tax liability
and to claim refunds to the extent the credit exceeds such liability, and (3)
will increase its basis in its shares of the Portfolio by an amount equal to 65%
of the amount of the undistributed capital gains included in such shareholder's
gross income. A distribution by a Portfolio will be treated as paid during any
calendar year if it is declared by the Portfolio in October, November or
December of that year, payable to shareholders of record on a date during such
month and paid by the Portfolio during January of the following year. Any such
distributions paid during January of the following year will be deemed to be
received on December 31 of the year the distribution is declared, rather than
when the distribution is received.
Under the Code, amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a 4% excise tax. To avoid
the tax, the Portfolio must distribute during each calendar year, an amount
equal to at least the sum of (1) 98% of its ordinary income (not taking into
account any capital gains or losses) for the calendar year, (2) 98% of its
capital gains in excess of its capital losses for the twelve-month period ending
on October 31 of the calendar year (unless an election is made by a Portfolio
with a November or December year end to use the Portfolio's fiscal year), and
(3) all ordinary income and net capital gains for previous years that were not
previously distributed.
The Federal income tax treatment of the various high yield debt securities and
other debt instruments (collectively, "Instruments" and individually, an
"Instrument") to be acquired by the Portfolio will depend, in part, on the
nature of those Instruments and the application of various tax rules. The
Portfolio may derive interest income through the accrual of stated interest
payments or through the application of the original issue discount rules, the
market discount rules or other similar provisions. The Portfolio may be required
to accrue original issue discount income, and in certain circumstances the
Portfolio may be required to accrue stated interest even though no concurrent
cash payments will be received. Moreover, it is the position of the IRS that a
holder of a debt instrument subject to the original issue discount rules is
required to recognize interest income regardless of the financial condition of
the obligor, even where there is no reasonable expectancy that the Instrument
will be redeemed according to its terms. If the Portfolio acquires an Instrument
at a discount and the terms of that Instrument are subsequently modified, the
Portfolio could be required to recognize gain at the time of the modification
even though no cash payments will have been received at that time. The market
discount rules, as well as certain other provisions, may require that a portion
of any gain recognized on the sale, redemption or other disposition of an
Instrument be treated as ordinary income as opposed to capital gain. Also, under
the market discount rules, if the Portfolio were to receive a partial payment on
an Instrument, the Portfolio could be required to recognize ordinary income at
the time of the partial payment, even though the Instrument may ultimately be
settled at an overall loss. As a result of these and other rules, the Portfolio
may be required to recognize taxable
-22-
<PAGE>
income which it would be required to distribute, even though the underlying
Instruments have not made concurrent cash distributions to the Portfolio.
The body of law governing these Instruments is complex and not well developed.
Thus the Portfolio and its advisors may be required to interpret various
provisions of the Internal Revenue Code and Regulations and take certain
positions on the Portfolio's tax returns, in situations where the law is
somewhat uncertain.
PERFORMANCE INFORMATION
Performance information for the Portfolio may appear in advertisements, sales
literature, or reports to shareholders or prospective shareholders. Performance
information in advertisements and sales literature may be expressed as "average
annual return" and "total return."
The Portfolio's average annual return quotation is computed in accordance with a
standardized method prescribed by rules of the SEC. The average annual return
for a specific period is found by first taking a hypothetical $1,000 investment
("initial investment") in the Portfolio's shares on the first day of the period
and computing the redeemable value of that investment at the end of the period.
The redeemable value is then divided by the initial investment, and this
quotient is taken to the Nth root (N representing the number of years in the
period) and 1 is then subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Portfolio have been reinvested at net asset value on the
reinvestment dates during the period.
Calculation of the Portfolio's total return is subject to a standardized
formula. Total return performance for a specific period is calculated by taking
an initial investment in the Portfolio's shares on the first day of the period
and computing the redeemable value of that investment at the end of the period.
The total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains dividends by the Portfolio have been
reinvested at net asset value on the reinvestment dates during the period. Total
return may also be shown as the increased dollar value of the hypothetical
investment over the period.
As of September __, 1999, the Portfolio had not commenced investment operations
and, accordingly, no performance information is included for the Portfolio.
PERFORMANCE OF ADVISER. The Adviser manages the Third Avenue Value Fund (the
"Value Fund"), which served as the model for the Portfolio. The Portfolio has
substantially the same investment objective, policies and strategies as the
Value Fund. In addition, the Adviser intends the Portfolio to be managed by the
same personnel and to continue to have closely similar investment strategies,
techniques and characteristics as the Value Fund. Past investment performance of
the Value Fund, as shown in the table below, may be relevant to your
consideration of investment in the Portfolio. The investment performance of the
Value Fund is not necessarily indicative of future performance of the Portfolio.
As of the date of this SAI, the Portfolio had not yet commenced investment
operations and therefore had no performance of its own. Also, the operating
expenses of the Portfolio will be different from the operating expenses of the
Value Fund. The investment performance of the Value Fund is provided merely to
indicate the experience of the Adviser in managing a similar investment
portfolio. The data does not reflect any fees that may be accessed at the
Contract level as explained in the Prospectus. Such fees would reduce the total
return figures shown below.
-23-
<PAGE>
The data set forth below are adjusted to reflect the Portfolio's projected
operating expenses.
Average Annual Total Return for Third Avenue Value Fund's Shares
(A Separate Mutual Fund from the Portfolio)
For the Periods Ended October 31, 1998
(adjusted to reflect projected operating expenses of the Portfolio)
1 Year 5 Years Since Inception (1991)
- ------ ------- ----------------------
The past performance of the Value Fund is no guarantee of the future performance
of the Value Fund or the Portfolio.
FINANCIAL STATEMENTS
The Portfolio will issue unaudited semi-annual and audited annual financial
statements.
-24-
<PAGE>
Appendix
Description of Corporate Bond Ratings
Standard & Poor's Ratings Group
The ratings are based on current information furnished by the issuer or obtained
by Standard & Poor's from other sources it considers reliable. Standard & Poor's
does not perform any audit in connection with any rating and may, on occasion,
rely on unaudited financial information. The ratings may be changed, suspended
or withdrawn as a result of changes in, or unavailability of, such information
or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation.
II. Nature and provisions of the obligation.
III. Protection afforded by, and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B, CCC, CC, C - Debt rated "BB", "B", "CCC", "CC", and "C" is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. "BB" indicates the lowest degree of speculation and "C" the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB - Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The "BB" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BBB" rating.
B - Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied "BB" or "BB-" rating.
CCC - Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
"CCC" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "B" or "B-" rating.
CC - The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C - The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
C1 - The rating "C1" is reserved for income bonds on which no interest is
being paid.
D - Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such grace period.
The "D" rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
-25-
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, fluctuation
of protective elements may be of greater amplitude, or there may be other
elements present which make the long-term risk appear somewhat greater than
the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative elements:
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing. Moody's applies numerical
modifiers: 1, 2 and 3 in each generic rating classification from Aa through
B in its corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category, the
modifier 2 indicates a mid-range ranking, and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
-26-
<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
First Data Investor Services Group, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(610) 239-4600
(800) 443-1021 (toll-free)
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231
767 THIRD AVENUE
NEW YORK, NY 10017
Phone (212) 888-5222
Toll Free (800) 443-1021
www.thirdavenuefunds.com
<PAGE>
PART C - OTHER INFORMATION
Item 23. EXHIBITS
Exhibits filed pursuant to Form N-1A:
(a)(1) Agreement and Declaration of Trust and Certificate of
Trust are filed herewith.
(2) Designation of Subtrust for Third Avenue Value Portfolio
is filed herewith
(b) By-Laws are filed herewith.
(c) Reference is made to Articles V and VI of the Trust's
Agreement and Declaration of Trust.
(d) Investment Advisory Contract is to be filed with
Amendment No. 1.
(e) Distribution Agreement is to be filed with Amendment
No. 1.
(g) Custody Agreement between Third Avenue Variable Series
Trust and Custodial Trust Company is to be filed with
Amendment No. 1.
(h) (1) Transfer Agent Services Agreement is
to be filed with Amendment No. 1.
(2) Administration Agreement is to be filed
with Amendment No. 1.
(3) Accounting Services Agreement is to be
filed with Amendment No. 1.
(i) (a) Opinion and Consent of Counsel regarding
the legality of the securities being
issued is to be filed with Amendment
No. 1.
(j) Not applicable*
(n) Not applicable.
* Pursuant to Rule 14a-2(b)
Item 24. Persons Controlled By or Under Common Control with
Registrant.
Not Applicable.
Item 25. Indemnification.
Reference is made to Article IV of the Registrant's Trust
Instrument.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Trust's Trust Instrument, its By-Laws or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or
controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.
Item 26. Business and other connections of investment adviser.
EQSF Advisers, Inc., 767 Third Avenue, New York, New York
10017-2023 provides investment advisory services to investment
companies and as of June 15, 1999 had approximately $1,534
million in assets under management.
For information as to any other business, vocation or
employment of a substantial nature in which each Director or
officer of the Registrant's investment adviser has been
engaged for his own account or in
<PAGE>
the capacity of Director, officer, employee, partner or trustee,
reference is made to Form ADV (File #801-27792) filed by it under
the Investment Advisers Act of 1940.
Item 27. Principal underwriters.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
Item 28. Location of accounts and records.
All records described in Section 31 (a) of the Investment Company Act of 1940,
as amended and Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Trust's Investment Adviser, EQSF Advisers, Inc. 767 Third
Avenue, NY, NY 10017-2023, except for those records maintained by the Trust's
Custodians, North American Trust Company, 525 B Street, San Diego, CA 92101-4492
and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ 08540-6231, and
the Trust's Shareholder Service and Fund Accounting and Pricing Agent, First
Data Corporation, 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.
Item 29. Management services.
None.
Item 30. Undertakings.
Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York on the 18th day
of June, 1999.
THIRD AVENUE VARIABLE SERIES TRUST
Registrant
/s/ Martin J. Whitman
-----------------------------------
Martin J. Whitman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Third Avenue Variable Series Trust has been signed below by the
following persons in the capacities and on the date indicated.
Signature Capacity Date
/s/ MARTIN J. WHITMAN Chief Executive Officer 6/18/99
- ------------------------------
Martin J. Whitman
/s/ MICHAEL CARNEY
- ------------------------------ Chief Financial Officer 6/18/99
Michael Carney
/s/ IAN M. KIRSCHNER
- ------------------------------ Trustee 6/18/99
Ian M. Kirschner
<PAGE>
EXHIBIT INDEX
Item 23. EXHIBITS
Exhibits filed pursuant to Form N-1A:
(a)(1) Agreement and Declaration of Trust and Certificate of
Trust are filed herewith.
(2) Designation of Subtrust for Third Avenue Value Portfolio
is filed herewith
(b) By-Laws are filed herewith.
(c) Reference is made to Articles V and VI of the Trust's
Agreement and Declaration of Trust.
(d) Investment Advisory Contract is to be filed with
Amendment No. 1.
(e) Distribution Agreement is to be filed with Amendment
No. 1.
(g) Custody Agreement between Third Avenue Variable Series
Trust and Custodial Trust Company is to be filed with
Amendment No. 1.
(h) (1) Transfer Agent Services Agreement is
to be filed with Amendment No. 1.
(2) Administration Agreement is to be filed
with Amendment No. 1.
(3) Accounting Services Agreement is to be
filed with Amendment No. 1.
(i) (a) Opinion and Consent of Counsel regarding
the legality of the securities being
issued is to be filed with Amendment
No. 1.
(j) Not applicable*
(n) Not applicable.
* Pursuant to Rule 14a-2(b)
Item 24. Persons Controlled By or Under Common Control with
Registrant.
Not Applicable.
Item 25. Indemnification.
Reference is made to Article IV of the Registrant's Trust
Instrument.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Trust's Trust Instrument, its By-Laws or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or
controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.
Item 26. Business and other connections of investment adviser.
EQSF Advisers, Inc., 767 Third Avenue, New York, New York
10017-2023 provides investment advisory services to investment
companies and as of June 15, 1999 had approximately $1,534
million in assets under management.
For information as to any other business, vocation or
employment of a substantial nature in which each Director or
officer of the Registrant's investment adviser has been
engaged for his own account or in
<PAGE>
the capacity of Director, officer, employee, partner or trustee,
reference is made to Form ADV (File #801-27792) filed by it under
the Investment Advisers Act of 1940.
Item 27. Principal underwriters.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
Item 28. Location of accounts and records.
All records described in Section 31 (a) of the Investment Company Act of 1940,
as amended and Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Trust's Investment Adviser, EQSF Advisers, Inc. 767 Third
Avenue, NY, NY 10017-2023, except for those records maintained by the Trust's
Custodians, North American Trust Company, 525 B Street, San Diego, CA 92101-4492
and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ 08540-6231, and
the Trust's Shareholder Service and Fund Accounting and Pricing Agent, First
Data Corporation, 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.
Item 29. Management services.
None.
Item 30. Undertakings.
Not applicable
Exhibit (a)(1)
THIRD AVENUE VARIABLE SERIES TRUST
---------------------------------------
AGREEMENT
AND DECLARATION OF TRUST
---------------------------------------
June 16, 1999
<PAGE>
iii
TABLE OF CONTENTS
ARTICLE I
The Trust
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.1 Name..............................................................................2
Section 1.2 Definitions.......................................................................2
Section 1.3 Purpose and Powers of Trust.......................................................4
ARTICLE II
Trustees
Section 2.1 Number and Qualification..........................................................4
Section 2.2 Term and Election.................................................................4
Section 2.3 Resignation and Removal...........................................................5
Section 2.4 Vacancies.........................................................................5
Section 2.5 Meetings..........................................................................6
Section 2.6 Officers..........................................................................7
ARTICLE III
Powers and Duties of Trustees
Section 3.1 General...........................................................................7
Section 3.2 Investments.......................................................................8
Section 3.3 Legal Title.......................................................................8
Section 3.4 Issuance and Repurchase of Shares.................................................8
Section 3.5 Borrow Money or Utilize Leverage..................................................9
Section 3.6 Delegation; Committees. .........................................................9
Section 3.7 Collection and Payment. .........................................................9
Section 3.8 Expenses.........................................................................10
Section 3.9 By-Laws..........................................................................10
Section 3.10 Miscellaneous Powers.............................................................10
Section 3.11 Further Powers...................................................................11
</TABLE>
i
<PAGE>
ARTICLE IV
Limitations of Liability and Indemnification
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.1 No Personal Liability of Shareholders, Trustees, etc.............................11
Section 4.2 Mandatory Indemnification........................................................12
Section 4.3 No Duty of Investigation; Notice in Trust Instruments, etc.......................14
Section 4.4 Reliance on Experts, etc.........................................................14
ARTICLE V
Shares of Beneficial Interest
Section 5.1 Beneficial Interest..............................................................14
Section 5.2 Series Designation. ............................................................15
Section 5.3 Class Designation. .............................................................15
Section 5.4 Description of Shares............................................................16
Section 5.5 Rights of Shareholders. ........................................................17
Section 5.6 Trust Only.......................................................................18
Section 5.7 Issuance of Shares...............................................................18
Section 5.8 Register of Shares. ............................................................18
Section 5.9 Transfer of Shares...............................................................19
Section 5.10 Notices..........................................................................19
Section 5.11 Net Asset Value..................................................................20
Section 5.12 Distributions to Shareholders....................................................20
ARTICLE VI
Shareholders
Section 6.1 Meetings of Shareholders.........................................................20
Section 6.2 Voting...........................................................................21
Section 6.3 Notice of Meeting, Shareholder Proposals and Record Date.........................21
Section 6.4 Quorum and Required Vote.........................................................22
Section 6.5 Proxies, etc.....................................................................22
Section 6.6 Reports..........................................................................23
Section 6.7 Inspection of Records............................................................23
Section 6.8 Shareholder Action by Written Consent............................................23
</TABLE>
ii
<PAGE>
ARTICLE VII
Redemption
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.1 Redemptions......................................................................24
Section 7.2 Disclosure of Holding............................................................24
Section 7.3 Redemptions of Small Accounts....................................................24
ARTICLE VIII
Duration: Termination of Trust; Amendment; Mergers, Etc.
Section 8.1 Duration.........................................................................25
Section 8.2 Termination......................................................................25
Section 8.3 Amendment Procedure..............................................................26
Section 8.4 Merger, Consolidation and Sale of Assets.........................................27
ARTICLE IX
Miscellaneous
Section 9.1 Filing...........................................................................28
Section 9.2 Resident Agent...................................................................28
Section 9.3 Governing Law....................................................................28
Section 9.4 Counterparts.....................................................................28
Section 9.5 Use of the Name "Third Avenue Variable Series Trust".............................29
Section 9.6 Reliance by Third Parties........................................................29
Section 9.7 Provisions in Conflict with Law or Regulation....................................29
</TABLE>
iii
<PAGE>
THIRD AVENUE VARIABLE SERIES TRUST
AGREEMENT
AND
DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made as of the 16th day of June,
1999, by the Trustees hereunder, and by the holders of shares of beneficial
interest issued hereunder as hereinafter provided.
WHEREAS, this Trust has been formed to carry on business as set forth
more particularly hereinafter;
WHEREAS, this Trust is authorized to issue an unlimited number of its
shares of beneficial interest in separate series and classes of each such
series, each separate series to be a sub-trust hereunder, all in accordance with
the provisions hereinafter set forth;
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as Trustees of a Delaware business trust in accordance with the
provisions hereinafter set forth; and
WHEREAS, the parties hereto intend that the Trust created by this
Declaration and the Certificate of Trust filed with the Secretary of State of
the State of Delaware on June 16, 1999 shall constitute a business trust under
the Delaware Business Trust Statute and that this Declaration shall constitute
the governing instrument of such business trust.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities, and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust or sub-trusts created
hereunder as hereinafter set forth.
<PAGE>
ARTICLE I
THE TRUST
Section 1.1 NAME. This Trust shall be known as "Third Avenue Variable
Series Trust" and the Trustees shall conduct the business of the Trust under
that name or any other name or names as they may from time to time determine.
Section 1.2 DEFINITIONS. As used in this Declaration, the following
terms shall have the following meanings:
"BY-LAWS" shall mean the By-Laws of the Trust as amended from time to
time by the Trustees.
"CLASS" shall mean a portion of Shares of a Series of the Trust
established in accordance with Section 5.3 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
"COMMISSION" shall mean the Securities and Exchange Commission.
"DECLARATION" shall mean this Agreement and Declaration of Trust, as
amended or amended and restated from time to time, including by way of any
classifying or reclassifying Shares of any Series or any Class of any such
Series or determining any designations, powers, preferences, voting, conversion
and other rights, limitations, qualifications and terms and conditions thereof.
"DELAWARE BUSINESS TRUST STATUTE" shall mean the provisions of the
Delaware Business Trust Act, 12 DEL. C. '3801, ET. SEQ., as such Act may be
amended from time to time.
"FUNDAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth from time to time in any Prospectus of the Trust or any
Series that are expressly designated therein as fundamental policies of such
Series.
"INTERESTED PERSON" shall have the meaning ascribed thereto in the
1940 Act.
2
<PAGE>
"MAJORITY SHAREHOLDER VOTE" shall mean a vote of a "majority of the
outstanding voting securities" (as such term is defined in the 1940 Act) of the
Trust, any Series of the Trust or any Class thereof, as applicable.
The "1940 ACT" refers to the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder and applicable exemptions
therefrom, as amended from time to time.
The "1933 ACT" refers to the Securities Act of 1933, and the
rules and regulations promulgated thereunder and applicable exemptions
therefrom, as amended from time to time.
"PERSON" shall mean and include natural persons, corporations,
partnerships, trusts, limited liability companies, associations, joint ventures
and other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
"PROSPECTUS" shall mean the current Prospectus of the Trust or of any
Series thereof or of any Class of any such Series, as applicable.
"SERIES" shall mean the separate sub-trusts that may be established
and designated as series pursuant to Section 5.2 hereof or any one of such
sub-trusts, as applicable.
"SHAREHOLDERS" shall mean as of any particular time the holders of
record of outstanding Shares of the Trust, any Series of the Trust or any Class
of any Series, as applicable, at such time.
"SHARES" shall mean the transferable units of beneficial interest into
which the beneficial interest in the Trust or in a Series of the Trust shall be
divided from time to time and includes fractions of Shares as well as whole
Shares, which Shares may be divided into Series and Classes. All references to
Shares shall be deemed to be Shares of any or all Series or Classes as the
context may require.
"TRUST" shall mean the trust established by this Declaration, as
amended from time to time, inclusive of each such amendment and every sub-trust
established as a Series hereunder.
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"TRUSTEES" shall mean the signatory to this Declaration, so long as
such signatory shall continue in office in accordance with the terms hereof, and
all other persons who at the time in question have been duly elected or
appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office.
"TRUST PROPERTY" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees in such capacity.
Section 1.3 PURPOSE AND POWERS OF TRUST. The Trust is established for
the purpose of engaging in any activity not prohibited by Delaware law and shall
have the power to engage in any such activity and in any activity incidental or
related to any such activity.
ARTICLE II
TRUSTEES
Section 2.1 NUMBER AND QUALIFICATION. Prior to any offering of Shares,
there may be a sole Trustee and thereafter the number of Trustees shall be such
number, not less than three or more than fifteen, as shall be set forth in a
written instrument signed or adopted by a majority of the Trustees then in
office. No reduction in the number of Trustees shall have the effect of removing
any Trustee from office prior to the expiration of his or her term. An
individual nominated as a Trustee shall be at least 21 years of age and not
older than such age as may be set forth in a written instrument signed or
adopted by not less than a majority of the Trustees then in office and shall not
be under legal disability. Trustees need not own Shares and may succeed
themselves in office.
Section 2.2 TERM AND ELECTION. Except for the Trustees appointed to
fill vacancies pursuant to Section 2.4 hereof, each Trustee shall be elected to
serve until death, resignation, removal, reelection by written ballot at the
annual meeting, if one is held, or at any special meeting. Subject to Section
2.4 hereof, each Trustee named herein or elected or appointed pursuant to the
terms hereof shall hold office until such Trustee's successor has been elected
at such meetings and has qualified to serve as Trustee. Election of Trustees at
a meeting shall be by the affirmative vote of the holders of a plurality of the
Shares present in person or by proxy. Each individ-
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ual elected or appointed as a Trustee of the Trust shall, unless otherwise
provided by such election or appointment, also thereby be elected or appointed,
as the case may be, as a Trustee of each Series of the Trust then in existence.
The election or appointment of any Trustee (other than an individual who was
serving as a Trustee immediately prior thereto) shall not become effective
unless and until such person shall have in writing accepted his election and
agreed to be bound by the terms of this Declaration.
Section 2.3 RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered or mailed to the Chairman, if any, the President or
the Secretary and such resignation shall be effective upon such delivery, or at
a later date according to the terms of the instrument. Any Trustee may be
removed (provided the aggregate number of Trustees after such removal shall not
be less than the number required by Section 2.1 hereof) for cause at any time by
written instrument, signed by two-thirds of the remaining Trustees, specifying
the date when such removal shall become effective. Any Trustee may be removed
(provided the aggregate number of Trustees after such removal shall not be less
than the minimum number required by Section 2.1 hereof) without cause at any
time by a written instrument, signed or adopted by two-thirds of the remaining
Trustees or by vote of Shares having not less than two-thirds of the aggregate
number of Shares entitled to vote in the election of such Trustee, specifying
the date when such removal shall become effective. Upon the resignation or
removal of a Trustee, or such persons otherwise ceasing to be a Trustee, such
persons shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, such Trustee's legal representative shall
execute and deliver on such Trustee's behalf such documents as the remaining
Trustees shall require as provided in the preceding sentence.
Section 2.4 VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, bankruptcy,
adjudicated incompetence or other incapacity to perform the duties of the
office, or removal, of a Trustee. Whenever a vacancy in the Board of Trustees
shall occur, the remaining Trustees may fill such vacancy by appointing an
individual having the qualifications described in this Article by a resolution
of a majority of the Trustees then in office or by election by the Shareholders,
or may leave such vacancy unfilled or may reduce the number of Trustees
(provided the aggregate number of Trustees after such reduction shall not be
less than the minimum number required by Section
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2.1 hereof). Any vacancy created by an increase in Trustees may be filled by the
appointment of an individual having the qualifications described in this Article
made by a resolution of a majority of the Trustees then in office or by election
by the Shareholders. No vacancy shall operate to annul this Declaration or to
revoke any existing agency created pursuant to the terms of this Declaration.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled as provided herein, the Trustees in office, regardless of their number,
shall have all the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by this Declaration.
Section 2.5 MEETINGS. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman, if any, the President, the Secretary or
any two Trustees. Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by the Trustees. Notice of
any other meeting shall be mailed not less than 48 hours before the meeting or
otherwise actually delivered orally or in writing not less than 24 hours before
the meeting, but may be waived in writing by any Trustee either before or after
such meeting. The attendance of a Trustee at a meeting shall constitute a waiver
of notice of such meeting except where a Trustee attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting has not been lawfully called or convened. The Trustees may act
with or without a meeting. A quorum for all meetings of the Trustees shall be
one-third of the Trustees. Unless provided otherwise in this Declaration of
Trust, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority of the Trustees or such other proportion as
shall be specified herein for action at a meeting at which all Trustees then in
office are present.
Any committee of the Trustees, including an executive committee, if
any, may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members or such other
proportion as shall be specified herein for action at a meeting at which all
committee members are present.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons in any action to be taken may be
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counted for quorum purposes under this Section and shall be entitled to vote to
the extent not prohibited by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone, internet
connection or similar communications equipment by means of which all persons
participating in the meeting can hear or otherwise communicate with each other;
participation in a meeting pursuant to any such communications system shall
constitute presence in person at such meeting except as otherwise provided by
the 1940 Act.
Section 2.6 OFFICERS. The Trustees shall elect a Chief Executive
Officer, a President, a Secretary, a Treasurer and an Assistant Treasurer and
may elect a Chairman who shall serve at the pleasure of the Trustees or until
their successors are elected. The Trustees may elect or appoint or may authorize
the Chairman, if any, or President to appoint such other officers or agents with
such other titles and powers as the Trustees may deem to be advisable. A
Chairman shall, and the President, Secretary, Treasurer and Assistant Treasurer
may, but need not, be a Trustee.
ARTICLE III
POWERS AND DUTIES OF TRUSTEES
Section 3.1 GENERAL. The Trustees shall owe to the Trust and its
Shareholders the same fiduciary duties as owed by directors of corporations to
such corporations and their stockholders under the general corporation law of
the State of Delaware. The Trustees shall have exclusive and absolute control
over the Trust Property and over the business of the Trust or any Series thereof
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to engage in any
activity not prohibited by Delaware law. The enumeration of any specific power
herein shall not be construed as limiting the aforesaid power. The Trustees may
perform such acts as in their sole discretion are proper for conducting the
business of the Trust. The powers of the Trustees may be exercised without order
of or resort to any court. No Trustee shall be obligated to give any bond or
other security for the performance of any of his duties or powers hereunder.
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Section 3.2 INVESTMENTS. The Trustees shall have power to:
(a) manage, conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of any and all sorts of property, tangible or
intangible, including but not limited to securities of any type whatsoever,
whether equity or non-equity, of any issuer, evidences of indebtedness of any
person and any other rights, interests, instruments or property of any sort and
to exercise any and all rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers and privileges in respect of any of said investments. The
Trustees shall not be limited by any law limiting the investments which may be
made by fiduciaries.
Section 3.3 LEGAL TITLE. Legal title to all the Trust Property shall
be vested in the Trust except that the Trustees shall have power to cause legal
title to any Trust Property to be held by or in the name of one or more of the
Trustees, or in the name of the Trust, or any Series thereof, or in the name of
any other Person as nominee, custodian or pledgee, on such terms as the Trustees
may determine, provided that the interest of the Trust or any Series thereof
therein is appropriately protected.
Section 3.4 ISSUANCE AND REPURCHASE OF SHARES. Subject to the
provisions of this Declaration and applicable law, the Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including Shares
in fractional denominations, shall have the power to establish from time to time
in accordance with the provisions of Section 5.2 and 5.3 hereof Series and
Classes representing interests in the Trust or a Series thereof and, subject to
the more detailed provisions set forth in Article VII, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the applicable Series of the Trust whether capital or
surplus or otherwise, to the full extent now or hereafter permitted by the laws
of the State of Delaware governing business corporations.
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Section 3.5 BORROW MONEY OR UTILIZE LEVERAGE. The Trustees shall have
the power to borrow money or otherwise obtain credit or utilize leverage in
connection with the activities of the Trust to the maximum extent permitted by
law, regulation or order and the Fundamental Policies of any Series and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
assets of the Trust or any Series thereof, including the lending of portfolio
securities, and to endorse, guarantee, or undertake the performance of any
obligation, contract or engagement of any other person, firm, association or
corporation; provided, however, that the assets of any particular Series shall
not be used as security for any credit extended solely to one or more other
Series.
Section 3.6 DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Trustees or otherwise as the Trustees may deem expedient, to at
least the same extent as such delegation is permitted to directors of a Delaware
business corporation and is permitted by the 1940 Act, as well as any further
delegations the Trustees may determine to be desirable, expedient or necessary
in order to effect the purpose hereof. The Trustees may designate one or more
committees which shall have all or such lesser portion of the authority of the
entire Board of Trustees as the Trustees shall determine from time to time
except to the extent action by the entire Board of Trustees or particular
Trustees is required by the 1940 Act.
Section 3.7 COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust or any Series of the Trust or any Class
thereof; to pay all claims, including taxes, against the Trust Property, the
Trust or any Series of the Trust or any Class thereof, the Trustees or any
officer, employee or agent of the Trust; to prosecute, defend, compromise or
abandon any claims relating to the Trust Property, the Trust or any Series of
the Trust or any Class thereof, or the Trustees or any officer, employee or
agent of the Trust; to foreclose any security interest securing any obligations,
by virtue of which any property is owed to the Trust or any Series of the Trust
or any Class thereof; and to enter into releases, agreements and other
instruments. Except to the extent required for a Delaware business corporation,
the Shareholders shall have no power to vote as to whether or not a court
action, legal proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders.
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Section 3.8 EXPENSES. The Trustees shall have power to incur and pay
out of the assets or income of the Trust or any Series of the Trust or any Class
thereof, any expenses which in the opinion of the Trustees are necessary or
appropriate to carry out any of the purposes of this Declaration, and the
business of the Trust or any Series of the Trust or any Class thereof, and to
pay reasonable compensation from the funds of the Trust to themselves as
Trustees. The Trustees shall fix the compensation of all officers, employees and
Trustees. The Trustees may pay themselves such compensation for special
services, including legal, underwriting, syndicating and brokerage services, as
they in good faith may deem reasonable and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series or Class thereof, to pay directly, in
advance or arrears, for charges of distribution, of the custodian or transfer,
shareholder servicing or similar agent of such Series or Class, a pro rata
amount as defined from time to time by the Trustees, by setting off such charges
due from such Shareholder from declared but unpaid dividends or distributions
owed such Shareholder and/or by reducing the number of shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 3.9 BY-LAWS. The Trustees may adopt and from time to time
amend or repeal By-Laws for the conduct of the business of the Trust. Such
By-Laws shall be binding on the Trust and the Shareholders unless inconsistent
with the provisions of this Declaration. The Shareholders shall not have
authority to adopt or amend By-Laws.
Section 3.10 MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust or any Series thereof,
including investment advisors, administrators, custodians, transfer agents,
shareholder services providers, accountants, counsel, brokers, dealers and
others; (b) enter into joint ventures, partnerships and any other combinations
or associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisors, distributors, selected dealers or independent contractors
of the Trust or any Series thereof against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such
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Person against such liability; (d) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific, civic
or similar purposes; (f) to the extent permitted by applicable law, indemnify
any Person with whom the Trust or any Series thereof has dealings, including
without limitation any investment advisor, administrator, manager, transfer
agent, custodian, distributor or selected dealer, or any other person as the
Trustees may see fit to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method in which its accounts shall
be kept; and (i) adopt a seal for the Trust but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.
Section 3.11 FURTHER POWERS. The Trustees shall have the power to
conduct the business of the Trust or any Series of the Trust or any Class
thereof and carry on its operations in any and all of its branches and maintain
offices both within and without the State of Delaware, in any and all states of
the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust or
any Series of the Trust or any Class thereof although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust or any Series of the Trust or any Class thereof made by the Trustees in
good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
ARTICLE IV
LIMITATIONS OF LIABILITY AND INDEMNIFICATION
Section 4.1 NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder of the Trust shall be subject in such capacity to any personal
liability whatsoever to any Person in connection with Trust Property or the
acts, obligations or affairs of the Trust. Shareholders shall have the same
limitation of personal liability as is extended to stockholders of a private
corporation for profit incorporated under the general corporation law of the
State of Delaware. No Trustee, officer,
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employee or agent of the Trust or any Series of the Trust shall be subject in
such capacity to any personal liability whatsoever to any Person, other than the
Trust or the respective Series or the Shareholders, in connection with Trust
Property or the affairs of the Trust or the respective Series, save only
liability to the Trust or its Shareholders arising from bad faith, willful
misfeasance, gross negligence or reckless disregard for his duty to such Person;
and, subject to the foregoing exception, all such Persons shall look solely to
the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee or
officer, as such, of the Trust, is made a party to any suit or proceeding to
enforce any such liability, subject to the foregoing exception, he shall not, on
account thereof, be held to any personal liability.
Section 4.2 MANDATORY INDEMNIFICATION. (a) The Trust shall indemnify
the Trustees and officers of the Trust to the full extent permitted by law (each
such person being an "indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and reasonable counsel fees reasonably incurred by such
indemnitee in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before any court or administrative
or investigative body in which he may be or may have been involved as a party or
otherwise (other than, except as authorized by the Trustees, as the plaintiff or
complainant) or with which he may be or may have been threatened, while acting
in any capacity set forth above in this Section 4.2 by reason of his having
acted in any such capacity, except with respect to any matter as to which he
shall not have acted in good faith in the reasonable belief that his action was
in the best interest of the Trust or the respective Series of the Trust or Class
thereof and furthermore, in the case of any criminal proceeding, as to which he
shall have had reasonable cause to believe that the conduct was unlawful,
provided, however, that no indemnitee shall be indemnified hereunder against any
liability to any person or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence (negligence in
the case of indemnitees that are affiliates of the Trust), or (iv) reckless
disregard of the duties involved in the conduct of his position. Notwithstanding
the foregoing, with respect to any action, suit or other proceeding voluntarily
prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory
only if the prosecution of such action, suit or other proceeding by such
indemnitee was authorized by a majority of the Trustees.
(b) Notwithstanding the foregoing, no indemnification shall be
made hereunder unless there has been a determination (1) by a final decision on
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the merits by a court or other body of competent jurisdiction before whom the
issue of entitlement to indemnification hereunder was brought that such
indemnitee is entitled to indemnification hereunder or, (2) in the absence of
such a decision, by (i) a majority vote of a quorum of those Trustees who are
neither Interested Persons of the Trust nor parties to the proceeding
("Disinterested Non-Party Trustees"), that the indemnitee is entitled to
indemnification hereunder, or (ii) if such quorum is not obtainable or even if
obtainable, if such majority so directs, independent legal counsel in a written
opinion conclude that the indemnitee should be entitled to indemnification
hereunder. All determinations to make advance payments in connection with the
expense of defending any proceeding shall be authorized and made in accordance
with the immediately succeeding paragraph (c) below.
(c) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation by the
indemnitee of the indemnitee's good faith belief that the standards of conduct
necessary for indemnification have been met and a written undertaking to
reimburse the Trust unless it is subsequently determined that he is entitled to
such indemnification and if a majority of the Trustees determine that the
applicable standards of conduct necessary for indemnification appear to have
been met. In addition, at least one of the following conditions must be met: (1)
the indemnitee shall provide adequate security for his undertaking, (2) the
Trust shall be insured against losses arising by reason of any lawful advances,
or (3) a majority of a quorum of the Disinterested Non-Party Trustees, or if a
majority vote of such quorum so direct, independent legal counsel in a written
opinion, shall conclude, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is substantial reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.
(d) The rights accruing to any indemnitee under these
provisions shall not exclude any other right to which he may be lawfully
entitled.
(e) Notwithstanding the foregoing, subject to any limitations
provided by the 1940 Act and this Declaration, the Trust shall have the power
and authority to indemnify Persons providing services to the Trust to the full
extent provided by law as if the Trust were a corporation organized under the
Delaware General Corporation Law provided that such indemnification has been
approved by a majority of the Trustees.
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Section 4.3 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other person dealing with the
Trustees or with any officer, employee or agent of the Trust or any Series of
the Trust or Class thereof shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, undertaking, instrument,
certificate, Share, other security of the Trust or any Series of the Trust or
any Class thereof, and every other act or thing whatsoever executed in
connection with the Trust or any Series of the Trust or Class thereof shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as Trustees under this Declaration or in their capacity as
officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable or is required by the 1940 Act.
Section 4.4 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust or any Series of the Trust shall, in the performance of
its duties, be fully and completely justified and protected with regard to any
act or any failure to act resulting from reliance in good faith upon the books
of account or other records of the Trust or any Series of the Trust or Class
thereof, upon an opinion of counsel, or upon reports made to the Trust or any
Series thereof by any of the Trust's officers or employees or by any advisor,
administrator, manager, distributor, selected dealer, accountant, appraiser or
other expert or consultant selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or other
person may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1 BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into an unlimited number of shares of beneficial
interest, par value $.001 per share. All Shares issued in accordance with the
terms hereof, including, without limitation, Shares issued in connection with a
dividend in Shares
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or a split of Shares, shall be fully paid and nonassessable when the
consideration determined by the Trustees (if any) therefor shall have been
received by the Trust.
Section 5.2 SERIES DESIGNATION. The Trustees, in their discretion
from time to time, may authorize the division of Shares into one or more Series,
each Series relating to a separate portfolio of investments and each of which
Series shall be a separate and distinct subtrust of the Trust. Each Series so
established hereunder shall be deemed to be a separate trust under the
provisions of Delaware law. The Trustees shall have exclusive power without the
requirement of Shareholder approval to establish and designate such separate and
distinct Series and to fix and determine the relative rights and preferences as
between the different Series. The establishment and designation of any Series
shall be effective upon the execution by a majority of the Trustees of an
instrument setting forth the establishment and designation of such Series (or
when authorized to do so, by any officer of the Trust pursuant to the vote of a
majority of the Trustees of the Trust). Such instrument shall also set forth any
rights and preferences of such Series which are in addition to the rights and
preferences of Shares set forth in this Declaration. At any time that there are
no Shares outstanding of any particular Series previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish or alter that Series and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the status of
an amendment to this Declaration.
Section 5.3 CLASS DESIGNATION. The Trustees, in their discretion from
time to time, may authorize the division of Shares of the Trust or any Series
into one or more Classes of Shares all the assets of which shall be commingled
with the other Classes of such Series. The Trustees shall have exclusive power
without the requirement of Shareholder approval to establish and designate such
separate and distinct Classes and to fix and determine the relative rights,
terms, conditions and expenses applicable to each Class of Shares to the maximum
extent permitted by the 1940 Act. The establishment and designation of any Class
of Shares shall be effective upon the affirmative vote of a majority of the
Trustees of the Trust, including the Trustees who are not interested persons of
the Trust. At any time that there are no Shares outstanding of any particular
Class previously established and designated, the Trustees may, by the
affirmative vote of a majority of the Trustees, including a majority of the
Trustees who are not interested persons of the Trust, abolish or alter that
Class and the establishment and designation thereof.
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Section 5.4 DESCRIPTION OF SHARES. If the Trustees shall create
sub-trusts and divide the Shares into one or more Series or create Classes of
Shares, the following provisions shall be applicable:
(a) NUMBER OF SHARES. The number of Shares of each Series or
Class that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series or Class into one or more Series or Classes that may be established
and designated from time to time. The Trustees may hold as treasury Shares (of
the same or some other Series or Class), reissue for such consideration and on
such terms as they may determine, or cancel any Shares of any Series or Class
reacquired by the Trust at their discretion from time to time.
(b) INVESTMENT OF PROPERTY. The power of the Trustees to invest
and reinvest the Trust Property of each Series that may be established shall be
governed by Section 3.2 of this Declaration.
(c) ALLOCATION OF ASSETS. All consideration received by the
Trust for the issue or sale of Shares of a particular Series or Class, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payment
derived from any reinvestment of such proceeds in whatever form the same may be,
together with such Series' or Class's share of any assets of the Trust not
otherwise allocated to any particular Series or Class, shall be held by the
Trustees and Trust for the benefit of the Shareholders of such Series and,
subject to the rights of creditors of such Series only, shall irrevocably belong
to that Series for all purposes, and shall be so recorded upon the books of
account of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series, the Trustees shall allocate
them among any one or more of the Series established and designated from time to
time in such manner and on such basis as they, in their sole discretion, deem
fair and equitable, and anything so allocated to a Series shall belong to such
Series. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes.
(d) ALLOCATION OF EXPENSES. The assets belonging to each
particular Series or attributable to each particular Class shall be charged with
the liabilities of the Trust in respect of that Series or Class and all
expenses, costs,
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charges and reserves attributable to that Series or Class, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or attributable to
any particular Class shall be allocated and charged by the Trustees to and among
any one or more of the Series or Classes established and designated from time to
time in such manner and on such basis as the Trustees in their sole discretion
deem fair and equitable; PROVIDED that any incremental expenses allocated to one
or more Classes of Shares on a basis other than the relative net asset values of
the respective Classes shall be allocated in a manner consistent with the 1940
Act. Each allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the Shareholders of all Series
and Classes for all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital, and each such determination and
allocation shall be conclusive and binding upon the Shareholders. Under no
circumstances shall the assets allocated or belonging to a particular Series or
attributable to a particular Class be charged with any liabilities attributable
to another Series or Class. Any creditor may look only to the assets of the
particular Series with respect to which such person is a creditor for
satisfaction of such creditor's debt.
(e) DIVIDENDS. The power of the Trustees to pay dividends and make
distributions with respect to any one or more Series shall be governed by
Section 5.12 of this Trust. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series, from such of the income and
capital gains, accrued or realized, from the assets belonging to that Series, as
the Trustees may determine, after providing for actual and accrued liabilities
belonging to that Series. All dividends and distributions on each Class of a
Series shall be distributed pro rata to the holders of Shares of that Class in
proportion to the number of Shares of that Class held by such holders at the
date and time of record established for the payment of such dividends or
distributions, and such dividends and distributions need not be pro rata with
respect to dividends and distributions paid to Shares of any other Class of such
Series. Dividends and distributions shall be paid with respect to Shares of a
given Class only out of lawfully available assets attributable to such Class.
Section 5.5 RIGHTS OF SHAREHOLDERS. The Shares shall be personal
property giving only the rights in this Declaration specifically set forth. The
ownership of the Trust Property of every description and the right to conduct
any business
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herein before described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, with respect to a particular Series or Class and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or assume any losses of the Trust or, subject to the right of the Trustees to
charge certain expenses directly to Shareholders, as provided in the last
sentence of Section 3.8, suffer an assessment of any kind by virtue of their
ownership of Shares. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights (except as specified in
Section 8.4 or as specified by the Trustees in the designation or redesignation
of any Series or Class thereof).
Section 5.6 TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 5.7 ISSUANCE OF SHARES. The Trustees, in their discretion,
may from time to time without the vote of the Shareholders issue Shares with
respect to any Series that may have been established pursuant to Section 5.2, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may determine, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. The Trustees may from time to time
divide or combine the Shares of any Series into a greater or lesser number
without thereby changing the proportionate beneficial interest in such Series of
the Trust. Issuances and redemptions of Shares may be made in whole Shares
and/or l/l,000ths of a Share or multiples thereof as the Trustees may determine.
Section 5.8 REGISTER OF SHARES. A register shall be kept at the Trust
or any transfer agent duly appointed by the Trustees under the direction of the
Trustees which shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Separate registers shall be established and maintained for each Series
of the Trust and each Class thereof. Each such register shall be conclusive as
to who are the
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holders of the Shares of the applicable Series and Classes thereof and who shall
be entitled to receive dividends or distributions or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him as
herein provided, until he or she has given his or her address to a transfer
agent or such other officer or agent of the Trustees as shall keep the register
for entry thereon. It is not contemplated that certificates will be issued for
the Shares; however, the Trustees, in their discretion, may authorize the
issuance of share certificates and promulgate appropriate fees therefore and
rules and regulations as to their use.
SECTION 5.9 TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by its agent thereto
duly authorized in writing, upon delivery to the Trustees or a transfer agent of
the Trust of a duly executed instrument of transfer, together with such evidence
of the genuineness of each such execution and authorization and of other matters
as may reasonably be required. Upon such delivery, the transfer shall be
recorded on the applicable register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereof and neither the Trustees nor any transfer agent or registrar nor
any officer, employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or a
transfer agent of the Trust, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such for all purposes hereof, and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
Section 5.10 NOTICES. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications to any Shareholder
shall be deemed duly served or given if mailed, postage prepaid, addressed to
any Shareholder of record at his or her last known address as recorded on the
applicable register of the Trust and may be sent together with any such notice
or other communication to another Shareholder at the same address.
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Section 5.11 NET ASSET VALUE. The value of the assets of the Trust or
any Series thereof, the amount of liabilities of the Trust or any Series thereof
and the net asset value of each outstanding Share of the Trust or any Series or
Class shall be determined at such time or times and on such days as the Trustees
may determine in accordance with the 1940 Act. The method of determination of
net asset value shall be determined by the Trustees. The power and duty to value
the assets and liabilities of the Trust and make net asset value determinations
and calculations may be delegated by the Trustees.
SECTION 5.12 DISTRIBUTIONS TO SHAREHOLDERS.
(a) The Trustees shall from time to time distribute among the
Shares such proportion of the net profits, surplus (including paid-in surplus),
capital, or assets held by the Trustees as they may deem proper or as may
otherwise be determined in the instrument setting forth the terms of such Shares
such Class or Series of Shares, which need not be ratable with respect to
distributions in respect of Shares of any other class or series thereof of the
Trust. Such distributions may be made in cash or property (including without
limitation any type of obligations of the Trust or any assets thereof) or any
combination thereof.
(b) Distributions may be made to the Shareholders of record
entitled to such distribution at the time such distribution is declared or at
such later date as shall be determined by the Trust prior to the date of
payment.
(c) The Trustees may always retain from any source such amount
as they may deem necessary to pay the debts or expenses of the Trust or to meet
obligations of the Trust, or as they otherwise may deem desirable to use in the
conduct of its affairs or to retain for future requirements or extensions of the
business of the Trust.
ARTICLE VI
SHAREHOLDERS
Section 6.1 MEETINGS OF SHAREHOLDERS. The Trust may, but shall not be
required to, hold annual meetings of the holders of any Class or Series of
Shares. An annual or special meeting of Shareholders may be called at any time
only by the Trustees; provided, however, that if May 31 of any year shall have
passed and the
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Trustees shall not have called an annual meeting of Shareholders for such year,
the Trustees shall call a meeting for the purpose of voting on the removal of
one or more Trustees or the termination of any investment advisory agreement,
upon written request of holders of Shares of the Trust or a Series having in the
aggregate not less than a majority of the votes of the outstanding Shares of the
Trust entitled to vote on the matter or matters in question, such request
specifying the purpose or purposes for which such meeting is to be called. Any
meeting of Shareholders shall be held within or without the State of Delaware on
such day and at such time as the Trustees shall designate.
Section 6.2 VOTING. Shareholders shall have no power to vote on any
matter except matters on which a vote of Shares is required by applicable law,
this Declaration or resolution of the Trustees. Any matter required to be
submitted for approval of any of the Shares and affecting one or more Series or
Classes shall require approval by the required vote of Shares of the affected
Series or Class voting together as a single Series or Class and, if such matter
affects one or more Series or Class thereof differently from one or more other
Series or Class, approval by the required vote of Shares of such other Series or
Class voting as a separate Series or Class shall be required in order to be
approved with respect to such other Series or Class; provided, however, that
except to the extent required by the 1940 Act, there shall be no separate class
votes on the election or removal of Trustees or the selection of auditors for
the Trust. Shareholders of a particular Series shall not be entitled to vote on
any matter that affects the rights or interests of only one or more other
Series. There shall be no cumulative voting in the election or removal of
Trustees.
Section 6.3 NOTICE OF MEETING, SHAREHOLDER PROPOSALS AND RECORD DATE.
Notice of all meetings of Shareholders, stating the time, place and purposes of
the meeting, shall be given by the Trustees by mail to each Shareholder of
record entitled to vote thereat at its registered address, mailed at least 10
days before the meeting or otherwise in compliance with applicable law. Except
with respect to an annual meeting, at which any business required by the 1940
Act may be conducted, only the business stated in the notice of the meeting
shall be considered at such meeting. Subject to the provisions of applicable
law, any Shareholder wishing to include a proposal to be considered at an annual
meeting must submit such proposal to the Trust at least 30 days in advance of
such meeting. Any adjourned meeting may be held as adjourned one or more times
without further notice not later than 130 days after the record date. For the
purposes of determining the Shareholders who are entitled to notice of and to
vote at any meeting the Trustees may, without closing the transfer books, fix a
date not more than 100 days prior to the date of such meeting of
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Shareholders as a record date for the determination of the Persons to be treated
as Shareholders of record for such purposes.
SECTION 6.4 QUORUM AND REQUIRED VOTE.
(a) The holders of one-third of the outstanding Shares of the
Trust on the record date present in person or by proxy shall constitute a quorum
at any meeting of the Shareholders for purposes of conducting business on which
a vote of all Shareholders of the Trust is being taken. The holders of one-third
of the outstanding Shares of one or more Series or one or more Classes on the
record date present in person or by proxy shall constitute a quorum at any
meeting of the Shareholders for purposes of conducting business on which a vote
of Shareholders of such Series or Series or Class or Classes is being taken.
Shares underlying a proxy as to which a broker or other intermediary states its
absence of authority to vote with respect to one or more matters shall be
treated as present for purposes of establishing a quorum for taking action on
any such matter only to the extent so determined by the Trustees at or prior to
the meeting of Shareholders at which such matter is to be considered.
(b) Subject to any provision of applicable law, this
Declaration or a resolution of the Trustees specifying or requiring a greater or
lesser vote requirement for the transaction of any matter of business at any
meeting of Shareholders, (i) the affirmative vote of a plurality of the Shares
entitled to vote for the election of any Trustee or Trustees shall be the act of
such Shareholders with respect to the election of such Trustee or Trustees, (ii)
the affirmative vote of a majority of the Shares present in person or
represented by proxy and entitled to vote on any other matter shall be the act
of the Shareholders with respect to such matter, and (iii) where a separate vote
of any Series is required on any matter, the affirmative vote of a majority of
the Shares of such Series present in person or represented by proxy and entitled
to vote on such matter shall be the act of the Shareholders of such Series with
respect to such matter.
Section 6.5 PROXIES, ETC. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more
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Trustees or one or more of the officers or employees of the Trust. Only
Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and each fractional Share shall be entitled to a vote equal
to its fraction of a full Share. When any Share is held jointly by several
persons, any one of them may vote at any meeting in person or by proxy in
respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Share. A proxy purporting to be given by or on behalf of a Shareholder
of record on the record date for a meeting shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of such Share, he or she
may vote by his or her guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy. The Trustees shall
have the authority to make and modify from time to time regulations regarding
the validity of proxies. In addition to signed proxies, such regulations may
authorize facsimile, telephonic, internet and other methods of appointing a
proxy that are subject to such supervision by or under the direction of the
Trustees as the Trustees shall determine.
Section 6.6 REPORTS. The Trustees shall cause to be prepared and sent
to Shareholders at least annually and more frequently to the extent and in the
form required by law, regulation or any exchange on which Shares are listed a
report of operations containing financial statements of the Trust prepared in
conformity with generally accepted accounting principles and applicable law. It
is contemplated that separate reports may be prepared for the various Series.
Copies of such reports shall be mailed to all Shareholders of record of the
applicable Series within the time required by the 1940 Act, and in any event
within a reasonable period preceding the meeting of Shareholders.
Section 6.7 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Persons who have been holders of record of at least
$25,000 in net asset value or liquidation preference of Shares for a continuous
period of not less than six months to the same extent and for the same purposes
as is permitted under the Delaware General Business Corporation Law to
shareholders of a Delaware business corporation.
Section 6.8 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action which
may be taken by Shareholders by vote may be taken without a meeting if the
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holders of all of the Shares entitled to vote thereon consent to the action in
writing and the written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of Shareholders.
ARTICLE VII
REDEMPTION
Section 7.1 REDEMPTIONS. All outstanding Shares of any Series of the
Trust may be redeemed at the option of the holders thereof, upon and subject to
the terms and conditions provided in this Article VII. The Trust shall, upon
application by any Shareholder or pursuant to authorization from any Shareholder
of a particular Series or Class, redeem or repurchase from such Shareholder
outstanding Shares of such Series or Class for an amount per share determined by
the application of a formula adopted for such purpose by the Trustees with
respect to such Series (which formula shall be consistent with the 1940 Act);
provided that (a) such amount per share shall not exceed any limitations imposed
under applicable law and (b) if so authorized by the Trustees, the Trust may, at
any time and from time to time, charge fees for effecting such redemption, at
such rates as the Trustees may establish, as and to the extent permitted under
the 1940 Act, and may, at any time and from time to time, pursuant to such Act,
suspend such right of redemption. The procedures for effecting redemption shall
be as set forth in the Prospectus with respect to the applicable Series or Class
from time to time. The proceeds of the redemption of Shares shall be paid in
cash or property (tangible or intangible) or any combination thereof in the sole
discretion of the Trust's investment advisor.
Section 7.2 DISCLOSURE OF HOLDING. The holders of Shares or other
securities of the Trust shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares or
other securities of the Trust as the Trustees deem necessary to comply with the
provisions of the Code or any other applicable laws.
Section 7.3 REDEMPTIONS OF SMALL ACCOUNTS. The Trustees shall have
the power to redeem shares of any Series at a redemption price determined in
accordance with Section 7.1 above, (a) if at any time the total investment in
such account does not have a value of at least such minimum amount as may be
specified in the Prospectus for such Series from time to time, (b) as provided
by Section 3.8, or
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(c) to the extent a Shareholder or other person beneficially owns Shares equal
to or in excess of a percentage of Shares of the Trust or any Series or Class
determined from time to time by the Trustees and specified in the applicable
Prospectus. In the event the Trustees determine to exercise their power to
redeem Shares provided in subsection (a) of this Section 7.3, the Shareholder
shall be notified that the value of his account is less than the applicable
minimum amount and shall be allowed 30 days to make an appropriate investment
before redemption is processed.
ARTICLE VIII
DURATION: TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 8.1 DURATION. Subject to termination in accordance with the
provisions of Section 8.2 hereof, the Trust created hereby shall have perpetual
existence.
Section 8.2 TERMINATION.
(a) The Trust or any Series may be dissolved by the affirmative
vote of a majority of the Trustees, and without any vote of the Shareholders
thereof, except as may be required by the 1940 Act. Upon the dissolution of the
Trust or any Series:
(1) The Trust or such Series shall carry on no business
except for the purpose of winding up its affairs.
(2) The Trustees shall proceed to wind up the affairs of
the Trust or such Series and all of the powers of the Trustees under
this Declaration shall continue until the affairs of the Trust or such
Series shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust or such Series, collect its
assets, sell, convey, assign, exchange, merge where the Trust is not
the survivor, transfer or otherwise dispose of all or any part of the
remaining Trust Property to one or more Persons at a public or private
sale for consideration which may consist in whole or in part in cash,
securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
merger in which the
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Trust is not the survivor, transfer or other disposition of all or substantially
all the Trust Property of the Trust or any Series shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration with the same vote as required for dissolution pursuant to
paragraph (a) above.
(3) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of the Trust or any Series, in cash or
in kind or partly in each, among the Shareholders of such Series according to
their respective rights.
(b) After the winding up and termination of the Trust or any
Series and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination and shall
execute and file a certificate of cancellation with the Secretary of State of
the State of Delaware. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders shall thereupon cease.
Upon termination of any Series, the Trustees shall thereunder be
discharged from all further liabilities and duties with respect to such Series,
and the rights and interests of all Shareholders of such Series shall thereupon
cease.
Section 8.3 AMENDMENT PROCEDURE.
(a) Subject to Section 8.3(b), this Declaration may be amended
in any respect by the affirmative vote of two-thirds of the Trustees and without
any vote of the Shareholders of the Trust or any Series or Class except as may
be required by the 1940 Act.
(b) Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders. Expenses of the Trust charged directly to
Shareholders pursuant to Section 3.8 hereof or fees or sales charges payable
upon or in
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connection with redemptions of Shares pursuant to Section 7.1 hereof shall not
constitute "assessments" for purposes of this Section 8.3(b).
(c) An amendment duly adopted by the requisite vote of the
Board of Trustees and, if required, Shareholders as aforesaid, shall become
effective at the time of such adoption or at such other time as may be
designated by the Board of Trustees or Shareholders, as the case may be. A
certification signed by a majority of the Trustees setting forth an amendment
and reciting that it was duly adopted by the Trustees and, if required,
Shareholders as aforesaid, or a copy of the Declaration, as amended, and
executed by a majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust or at such other time
designated by the Board.
Notwithstanding any other provision hereof, until such time as Shares
are issued and outstanding, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
Section 8.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or
any Series may merge or consolidate with any other corporation, association,
trust or other organization or any Series, sub-trust or other designated portion
thereof or may sell, lease or exchange all or substantially all of the Trust
Property or the property of any Series including its good will or may acquire
all or substantially all of the property of any other corporation, association,
trust or other organization or any series, sub-trust or other designated portion
thereof, upon such terms and conditions and for such consideration when and as
authorized by two-thirds of the Trustees and without any vote by the
Shareholders of the Trust or any Series or Class except as may be required by
the 1940 Act, and any such merger, consolidation, sale, lease, exchange or
purchase shall be determined for all purposes to have been accomplished under
and pursuant to the statutes of the State of Delaware.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 FILING. This Declaration and any amendment (including any
supplement) hereto shall be filed in such places as may be required or as the
Trustees deem appropriate. Each amendment shall be accompanied by a certificate
signed and acknowledged by a Trustee stating that such action was duly taken in
a manner provided herein, and shall, upon insertion in the Trust's minute book,
be conclusive evidence of all amendments contained therein. A restated
Declaration, containing the original Declaration and all amendments theretofore
made, may be executed from time to time by a majority of the Trustees and shall,
upon insertion in the Trust's minute book, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
Section 9.2 RESIDENT AGENT. The Trust shall maintain a resident agent
in the State of Delaware, which agent shall initially be The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801. The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of the State.
Section 9.3 GOVERNING LAW. This Declaration is executed by a majority
of the Trustees for the purpose of creating a "business trust" under the
Delaware Business Trust Statue and establishing this Declaration as the
"governing instrument" of the Trust within the meaning of the Delaware Business
Trust Statue. The rights of all persons hereunder and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said State of Delaware and reference shall be
specifically made to the business corporation law of the State of Delaware as to
the construction of matters not specifically covered herein or as to which an
ambiguity exists, although such law shall not be viewed as limiting the powers
otherwise granted to the Trustees hereunder and any ambiguity shall be viewed in
favor of such powers.
Section 9.4 COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
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Section 9.5 USE OF THE NAME "THIRD AVENUE VARIABLE SERIES TRUST". The
name "Third Avenue Variable Series Trust" and all rights to the use thereof
belong to EQSF Advisers, Inc., the investment adviser of the Trust. EQSF
Advisers, Inc. has consented to the use by the Trust of such name.
Section 9.6 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to the existence of any fact or facts which in any manner
relate to the affairs of the Trust shall be conclusive evidence as to the
matters so certified in favor of any person dealing with the Trust.
Section 9.7 PROVISIONS IN CONFLICT WITH LAW OR REGULATION.
(a) The provisions of this Declaration are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration to the extent of such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
By: /s/ IAN M. KIRSCHNER
---------------------------
Name: Ian M. Kirschner
Title: Trustee
<PAGE>
CERTIFICATE OF TRUST
OF
THIRD AVENUE VARIABLE SERIES TRUST
This certificate of Trust executed as of the 16th day of June, 1999
for the purpose of organizing a business trust pursuant to the Delaware Business
Trust Act, 12 Del. C. 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1. NAME. The name of the business trust is: Third Avenue Variable
Series Trust (the "Trust").
2. REGISTERED INVESTMENT COMPANY. The Trust is or will become a
registered investment company under the Investment Company Act of 1940, as
amended.
3. REGISTERED OFFICE AND REGISTERED AGENT. The registered office of
the Trust in the State of Delaware is located at Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801. The name of the registered agent of
the Trust for service of process at such location is The Corporation Trust
Company.
4. NOTICE OF LIMITATION OF LIABILITIES OF SERIES. Notice is hereby
given that the Trust is or may hereafter be constituted a series trust. The
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to any particular series shall be enforceable
against the assets of such series only, and not against the assets of the Trust
generally.
IN WITNESS WHEREOF, the undersigned, being the sole Trustee of the
Trust, has duly executed this Certificate of Trust as of the day and year first
above written.
/s/ Ian M. Kirschner
----------------------------------
Ian M. Kirschner, Trustee
THIRD AVENUE VARIABLE SERIES TRUST
Designation of Subtrust
of
Third Avenue Value Portfolio
The undersigned being the sole and initial Trustee of Third Avenue
Variable Series Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 5.2 of the Trust's
Agreement and Declaration of Trust (the "Declaration"), does hereby create a
separate Series of the Trust as of June 16, 1999, with the following
designations, rights, preferences, limitations and restrictions:
1. DESIGNATION. The Series shall be designated the "Third Avenue
Value Portfolio" (the "Portfolio").
2. SHARES. The beneficial interests in the Portfolio shall be
divided in shares having a par value of $.001 per share (the
"Shares"). An unlimited number of Shares of the Portfolio are
authorized for issuance. The Shares shall represent interests
only in the Portfolio. The Trustees of the Trust shall have the
authority to issue such other Series of the Trust with such
other designations, rights, preferences, limitations and
restrictions as they shall from time to time deem necessary or
desirable, and the Shares shall not represent any interest in
such other Series.
3. CLASSES. The Shares initially shall be issued in a single Class.
The Trustees of the Trust shall have the authority from time to
time to issue additional Classes of Shares of the Portfolio.
4. SALES CHARGES. The Shares shall be subject to such sales
charges, if any, as may be established from time to time by the
Trustees in accordance with the 1940 Act and applicable rules
and regulations of the National Associate of Securities Dealers,
Inc., all as set forth in the Portfolio's prospectus.
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5. Other Rights. All other rights, preferences, limitations and
restrictions with respect to any shares of beneficial interest
of the Trust or with respect to any Series of the Trust or any
Classes of shares of the Trust set forth in the Declaration
shall apply to the Shares unless otherwise specified in this
Certificate of Designations, in which case this Certificate of
Designations shall govern.
6. Amendments. Subject to the provisions and limitations of Section
8.3(b) of the Declaration and applicable law, this Certificate
of Designation may be amended by an instrument signed in writing
by two-thirds of the Trustees of the Trust (or when authorized
to do so, by any officer of the Trust pursuant to the vote of a
majority of the Trustees of the Trust) or the holders of a
majority of all the Shares of the Portfolio outstanding and
entitled to vote.
7. Defined Terms. All capitalized terms which are not defined
herein shall have the same meaning as ascribed to those terms in
the Declaration.
/s/ Ian M. Kirschner
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Ian M. Kirschner, Trustee
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Exhibit (b)
BY-LAWS
OF
THIRD AVENUE VARIABLE SERIES TRUST
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TABLE OF CONTENTS
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Page
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ARTICLE I
Shareholder Meetings
1.1 Chairman.......................................................................................1
1.2 Proxies; Voting................................................................................1
1.3 Fixing Record Dates............................................................................1
1.4 Inspectors of Election.........................................................................1
1.5 Records at Shareholder Meetings................................................................2
ARTICLE II
Trustees
2.1 Annual and Regular Meetings....................................................................2
2.2 Chairman; Records..............................................................................3
ARTICLE III
Officers
3.1 Officers of the Trust..........................................................................3
3.2 Election and Tenure............................................................................3
3.3 Removal of Officers............................................................................3
3.4 Bonds and Surety...............................................................................4
3.5 Chairman, President, and other Officers........................................................4
3.6 Secretary......................................................................................4
3.7 Treasurer......................................................................................5
3.8. Assistant Treasurer............................................................................5
3.9 Other Officers and Duties......................................................................5
ARTICLE IV
Miscellaneous
4.1 Signatures.....................................................................................6
4.2 Seal...........................................................................................6
ARTICLE V
Amendment of By-Laws
5.1 Amendment and Repeal of By-Laws................................................................6
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THIRD AVENUE VARIABLE SERIES TRUST
BY-LAWS
These By-Laws are made and adopted pursuant to Section 3.9 of the
Agreement and Declaration of Trust establishing Third Avenue Variable Series
Trust dated as of June 16, 1999, as from time to time amended (hereinafter
called the "Declaration"). All words and terms capitalized in these By-Laws
shall have the meaning or meanings set forth for such words or terms in the
Declaration.
ARTICLE I
SHAREHOLDER MEETINGS
1.1 CHAIRMAN. The Chairman, if any, shall act as chairman at all
meetings of the Shareholders; in the Chairman's absence, the Trustee or Trustees
present at each meeting may elect a temporary chairman for the meeting, who may
be one of themselves.
1.2 PROXIES; VOTING. Shareholders may vote either in person or by duly
executed proxy and each full share or fraction thereof represented at the
meeting shall have one vote (or such fraction, as the case may be), all as
provided in Article VI of the Declaration.
1.3 FIXING RECORD DATES. For the purpose of determining the
Shareholders who are entitled to notice of or to vote or act at any meeting,
including any adjournment thereof, or who are entitled to participate in any
dividends, or for any other proper purpose, the Trustees may from time to time,
without closing the transfer books, fix a record date in the manner provided in
Section 6.3 of the Declaration. If the Trustees do not prior to any meeting of
Shareholders so fix a record date or close the transfer books, then the date of
mailing notice of the meeting or the date upon which the dividend resolution is
adopted, as the case may be, shall be the record date.
1.4 INSPECTORS OF ELECTION. In advance of any meeting of Shareholders,
the Trustees may appoint Inspectors of Election to act at the meeting or any
adjournment thereof. If Inspectors of Election are not so appointed, the
Chairman, if any, of any meeting of Shareholders may, and on the request of any
Shareholder or Shareholder proxy shall, appoint Inspectors of Election of the
meeting. The number of Inspectors shall be either one or three. If appointed at
the meeting on the request of one or more Shareholders or proxies, a majority of
Shares present shall determine whether one or three Inspectors are to be
appointed, but failure to allow such
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determination by the Shareholders shall not affect the validity of the
appointment of Inspectors of Election. In case any person appointed as Inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment made by the Trustees in advance of the convening of the meeting or
at the meeting by the person acting as chairman. The Inspectors of Election
shall determine the number of Shares outstanding, the Shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results, and
do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. If there are three Inspectors of Election, the
decision, act or certificate of a majority is effective in all respects as the
decision, act or certificate of all. On request of the Chairman, if any, of the
meeting, or of any Shareholder or Shareholder proxy, the Inspectors of Election
shall make a report in writing of any challenge or question or matter determined
by them and shall execute a certificate of any facts found by them.
1.5 RECORDS AT SHAREHOLDER MEETINGS. At each meeting of the
Shareholders, there shall be made available for inspection at a convenient time
and place during normal business hours, if requested by Shareholders, the
minutes of the last previous Annual or Special Meeting of Shareholders of the
Trust and a list of the Shareholders of the Trust, as of the record date of the
meeting or the date of closing of transfer books, as the case may be. Such list
of Shareholders shall contain the name and the address of each Shareholder in
alphabetical order and the number of Shares owned by such Shareholder.
Shareholders shall have such other rights and procedures of inspection of the
books and records of the Trust as are granted to shareholders of a Delaware
business corporation.
ARTICLE II
TRUSTEES
2.1 ANNUAL AND REGULAR MEETINGS. Meetings of the Trustees shall be
held from time to time upon the call of the Chairman, if any, the President, the
Secretary or any two Trustees. Regular meetings of the Trustees may be held
without call or notice and shall generally be held quarterly on dates
established by the Trustees. Notice of any other meeting shall be mailed not
less than 48 hours before the meeting or otherwise actually delivered orally or
in writing not less than 24 hours before the meeting, but may be waived in
writing by any Trustee either before or after such meeting. The attendance of a
Trustee at a meeting shall constitute a waiver of notice of such meeting except
where a Trustee attends a meeting for the express purpose of
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objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the Board of Trustees need be stated in the
notice or waiver of notice of such meeting.
2.2 CHAIRMAN; RECORDS. The Chairman, if any, shall be elected by the
Trustees from one of their number to serve at the pleasure of the Trustees. Such
Chairman, if any, shall act as chairman at all meetings of the Trustees; in
absence of a chairman, the Trustees present shall elect one of their number to
act as temporary chairman. The results of all actions taken at a meeting of the
Trustees, or by unanimous written consent of the Trustees, shall be recorded by
the person appointed by the Board of Trustees as the meeting secretary.
ARTICLE III
Officers
3.1 OFFICERS OF THE TRUST. The officers of the Trust shall consist
of a Chief Executive Officer, a President, a Secretary, a Treasurer, an
Assistant Treasurer and such other officers or assistant officers as may be
elected or authorized by the Trustees. Any two or more of the offices may be
held by the same Person, except that the same person may not be both the Chief
Executive Officer and Secretary.
3.2 ELECTION AND TENURE. At the initial organizational meeting, the
Trustees shall elect the Chief Executive Officer, a President, Secretary,
Treasurer, Assistant Treasurer and such other officers as the Trustees shall
deem necessary or appropriate in order to carry out the business of the Trust.
Such officers shall serve at the pleasure of the Trustees or until their
successors have been duly elected and qualified. The Trustees may fill any
vacancy in office or add any additional officers at any time.
3.3 REMOVAL OF OFFICERS. Any officer may be removed at any time,
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the Chairman, if any, President, or Secretary, and
such resignation shall take effect immediately upon receipt by the Chairman, if
any, President, or Secretary, or at a later date according to the terms of such
notice in writing.
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3.4 BONDS AND SURETY. Any officer may be required by the Trustees to
be bonded for the faithful performance of such officer's duties in such amount
and with such sureties as the Trustees may determine.
3.5 CHAIRMAN, PRESIDENT, AND OTHER OFFICERS. The Chairman, if any,
shall, if present, preside at all meetings of the Shareholders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to such person by the Trustees. Subject to such
supervisory powers, if any, as may be given by the Trustees to the Chairman, if
any, the Chief Executive Officer shall be the chief executive officer of the
Trust and, subject to the control of the Trustees and any agreements entered
into by the Trust with others, shall have general supervision, direction and
control of the business of the Trust and of its employees and shall exercise
such general powers of management as are usually vested in the office of a Chief
Executive Officer of a corporation. Each officer shall have power in the name
and on behalf of the Trust for the benefit of the Trust or any of its Series to
execute any and all loans, documents, contracts, agreements, deeds, mortgages,
registration statements, applications, requests, filings and other instruments
in writing, and to employ and discharge employees and agents of the Trust.
Unless otherwise directed by the Trustees, each officer shall have full
authority and power, on behalf of all of the Trustees, to attend and to act and
to vote, on behalf of the Trust at any meetings of business organizations in
which the Trust holds an interest, or to confer such powers upon any other
persons, by executing any proxies duly authorizing such persons. The Chief
Executive Officer shall have such further authorities and duties as the Trustees
shall from time to time determine. Notwithstanding the foregoing, the President
of the Trust shall exercise such general powers of management as are usually
vested in the office of a President of a corporation. In the absence or
disability of the Chief Executive Officer, the President and after the
President, the Vice-Presidents, if any, in order of their rank as fixed by the
Trustees or, if more than one and not ranked, the Vice-President designated by
the Trustees or such other officer(s) designated by the Trustees, shall perform
all of the duties of the President, and when so acting shall have all the powers
of and be subject to all of the restrictions upon the President.
3.6 SECRETARY. The Secretary shall maintain the minutes of all
meetings of, and record all votes of, Shareholders, Trustees and the Executive
Committee, if any. The Secretary shall be custodian of the seal of the Trust, if
any, and the Secretary (and any other person so authorized by the Trustees)
shall affix the seal, or if permitted, facsimile thereof, to any instrument
executed by the Trust which would be sealed by a Delaware business corporation
executing the same or a similar instrument and shall attest the seal and the
signature or signatures of the officer or officers executing such instrument on
behalf of the Trust. The Secretary shall also perform any other duties commonly
incident to such office in a Delaware business
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corporation, and shall have such other authorities and duties as the Trustees
shall from time to time determine.
3.7 TREASURER. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and shall
have and exercise under the supervision of the Trustees and of the President all
powers and duties normally incident to the office. The Treasurer may endorse for
deposit or collection all notes, checks and other instruments payable to the
Trust or to its order. The Treasurer shall deposit all funds of the Trust in
such depositories as the Trustees shall designate, and deliver all funds and
securities of the Trust which may come into his hands to such company as the
Trustees shall employ as Custodian in accordance with the Declaration and
applicable provisions of law. The Treasurer shall be responsible for such
disbursement of the funds of the Trust as may be ordered by the Trustees or the
President. The Treasurer shall keep accurate account of the books of the Trust's
transactions which shall be the property of the Trust, and which together with
all other property of the Trust in the Treasurer's possession, shall be subject
at all times to the inspection and control of the Trustees. Unless the Trustees
shall otherwise determine, the Treasurer shall be the principal accounting
officer of the Trust and shall also be the principal financial officer of the
Trust. The Treasurer shall have such other duties and authorities as the
Trustees shall from time to time determine. Notwithstanding anything to the
contrary herein contained, the Trustees may authorize any adviser,
administrator, manager or transfer agent to maintain bank accounts and deposit
and disburse funds of any Series of the Trust on behalf of such Series.
3.8 ASSISTANT TREASURER. Any Assistant Treasurer of the Trust shall
perform such duties as the trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the most senior Assistant
Treasurer present and able to act may perform all the duties of the Treasurer.
3.9 OTHER OFFICERS AND DUTIES. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of the office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon such person by the Trustees or delegated to such person by the
President.
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ARTICLE IV
Miscellaneous
4.1 SIGNATURES. All contracts and other instruments shall be executed
on behalf of the Trust by its properly authorized officers, agent or agents, as
provided in the Declaration or By-laws or as the Trustees may from time to time
by resolution provide.
4.2 SEAL. The Trust is not required to have any seal, and the
adoption or use of a seal shall be purely ornamental and be of no legal effect.
The seal, if any, of the Trust, or any Series of the Trust, if any, may be
affixed to any instrument, and the seal and its attestation may be lithographed,
engraved or otherwise printed on any document with the same force and effect as
if it had been imprinted and affixed manually in the same manner and with the
same force and effect as if done by a Delaware business corporation. The
presence or absence of a seal shall have no effect on the validity,
enforceability or binding nature of any document or instrument that is otherwise
duly authorized, executed and delivered.
ARTICLE V
Amendment of By-Laws
5.1 AMENDMENT AND REPEAL OF BY-LAWS. In accordance with Section 3.9 of
the Declaration, only the Trustees shall have the power to amend or repeal the
By-Laws or adopt new By-Laws at any time. Action by the Trustees with respect to
the By-Laws shall be taken by an affirmative vote of a majority of the Trustees.
The Trustees shall in no event adopt By-Laws which are in conflict with the
Declaration, and any apparent inconsistency shall be construed in favor of the
related provisions in the Declaration.
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