As filed with the Securities and Exchange Commission on April 28, 2000
Securities Act File No. 333-81141
Investment Company Act File Act No. 811-9395
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2
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 Office) (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)
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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THIRD AVENUE VARIABLE SERIES TRUST
THIRD AVENUE VALUE PORTFOLIO
PROSPECTUS
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APRIL 28, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
[THIRD AVENUE FUNDS LOGO]
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TABLE OF CONTENTS
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ABOUT THE PORTFOLIO 1
Objective and Approach
Main Risks
Bar Chart and Performance Information
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
FINANCIAL HIGHLIGHTS 6
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ABOUT THE 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.
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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. The Portfolio does not have, however, a strategy requiring it
to limit its investments to any specified number of issuers. Non-diversified
funds can be more volatile than diversified funds.
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BAR CHART AND PERFORMANCE INFORMATION
Past performance information is not provided for the Portfolio at this time
because it began investment operations on September 21, 1999 and thus does not
have performance information available for a full calendar year. You should be
aware that Portfolio performance will fluctuate and may or may not perform as
well as a comparable broad market index. As with all mutual funds, past
performance does not indicate future results.
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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.
The investment objective and philosophy of the Portfolio are similar 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 similar 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.
WHO MAY WANT TO INVEST
The Portfolio 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
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
provides investment advisory services to six other open-end mutual funds with
assets in excess of $1.8 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 Trust 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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HOW TO PURCHASEAND REDEEM 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
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
In general, 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 a redemption 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 reserves the right
to make payment up to 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.
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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 to the Accounts, in each case at least
annually. All dividends and capital gains distributions of the Portfolio are
automatically reinvested by the Accounts in additional shares of such Portfolio.
Dividends from stocks and interest earned from other investments are the main
source of net investment income for the Portfolio. 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.
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 instrumentality 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
5
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a written notice required by the Code designating the 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.
FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you understand the
Portfolio's financial performance for the period ended December 31, 1999.
Certain information reflects financial results for a single Portfolio share. The
total return in the table represents the rate that you would have earned on an
investment in the Portfolio assuming reinvestment of all dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Portfolio's financial statements, are included in
the Annual Report, which is available upon request.
SELECTED DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) AND RATIOS ARE AS
FOLLOWS:
FOR THE
PERIOD ENDED
DECEMBER 31, 1999*
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Net Asset Value, Beginning of Period $10.00
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Income from Investment Operations:
Net investment income .03
Net unrealized gain on investments .81
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Total from Investment Operations .84
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Net Asset Value, End of Period $10.84
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Total Return 8.40%(1)
Ratios/Supplemental Data:
Net Assets, End of period (in thousands) $4,367
Ratio of Expenses to Average Net Assets
Before expense reimbursement 34.43%(2)
After expense reimbursement 1.30%(2)
Ratio of Net Income (Loss) to Average Net Assets
Before expense reimbursement (30.14%)(2)
After expense reimbursement 2.99%(2)
Portfolio Turnover Rate 0%(1)
(1) Not Annualized
(2) Annualized. Note that annualized expenses and net income (loss) before
expense reimbursement are not necessarily indicative of expected expenses
due to the annualization of certain fixed expenses.
* The Fund commenced investment operations on September 21, 1999
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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
INVESTMENT ADVISER
EQSF Advisers, Inc.
767 Third Avenue
New York, NY 10017-2023
DISTRIBUTOR
M.J. Whitman, Inc.
767 Third Avenue
New York, NY 10017-2023
TRANSFER AGENT
PFPC Inc.
211 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406-0903
(610) 239-4600
(800) 443-1021 (toll-free)
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540-6231
[THIRD AVENUE FUNDS LOGO]
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 will be available in the Portfolio's
reports to shareholders and is available in the Statement of Additional
Information (SAI). The Portfolio's Annual Report contains a discussion of the
market conditions and investment strategies that significantly affected 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 (202) 942-8090 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 811-9395
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[GRAPHIC OMITTED]
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 28, 2000
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 April 28, 2000. 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 11
MANAGEMENT OF THE TRUST 12
COMPENSATION TABLE 16
PRINCIPAL STOCKHOLDERS 16
INVESTMENT ADVISER 16
INVESTMENT ADVISORY AGREEMENT 17
DISTRIBUTOR 17
ADMINISTRATORS 18
CUSTODIAN 18
TRANSFER AGENT 18
INDEPENDENT ACCOUNTANTS 18
CODE OF ETHICS 19
PORTFOLIO TRADING PRACTICES 19
SHARE INFORMATION 20
PURCHASE ORDERS 21
REDEMPTION OF SHARES 21
REDEMPTION IN KIND 21
NET ASSET VALUE 21
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 an 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
service(1) 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, 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.
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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 looks for 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 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-
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<PAGE>
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
affecting yield to maturity, reinvestment risk and market value of the
mortgage-backed securities. As a result, the high credit quality of many of
these securities may provide little or no protection against loss in market
value, and there have been periods during which many mortgage-backed securities
have experienced substantial losses in market value. The Adviser believes that,
under certain circumstances, many of these securities may trade at prices below
their inherent value on a risk-adjusted basis and believes that selective
purchases by 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 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
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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.
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
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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 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
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<PAGE>
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.
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.
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<PAGE>
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
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.
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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.
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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, together with the Portfolio's
investment objective, 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.
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.
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(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.
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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.
POSITION(S)
HELD WITH PRINCIPAL OCCUPATION DURING
Name & Address AGE REGISTRANT PAST 5 YEARS
PHYLLIS W. BECK(1) 73 Trustee An Associate Judge of the
GSB Bldg. Suite 800 Superior Court of Pennsylvania;
City Line & Belmont Ave. Trustee or Director of the Third
Bala Cynwald, PA Avenue Trust or its predecessor
19004-1611 (Nov. 1992-Present); Trustee of
Trust since inception.
LUCINDA FRANKS 53 Trustee Journalist (1969-Present);
64 East 86th Street Author; Winner of the 1971
New York, NY 10028 Pulitzer Prize for Journalism;
Trustee of the Third Avenue
Trust (Feb. 1998--Present);
Trustee of Trust since
inception.
GERALD HELLERMAN 62 Trustee Managing Director of Hellerman
10965 Eight Bells Lane Associates, a financial and
Columbia, MD 21044 corporate consulting firm.
Trustee or Director of the Third
Avenue Trust or its predecessor
(Sept. 1993- Present); Trustee
of Trust since inception.
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MARVIN MOSER, M.D. 76 Trustee Trustee of Trudeau Institute, a
13 Murray Hill Road medical research institute;
Scarsdale, NY 10583 Clinical Professor of Medicine
at Yale University School of
Medicine and Senior Medical
Advisor, National High Blood
Pressure Education Program,
National Heart, Lung and Blood
Institute; Director of AMBI
Corp; Trustee or Director of the
Third Avenue Trust or its
predecessor (Nov. 1994-Present);
Trustee of Trust since
inception.
DONALD RAPPAPORT 73 Trustee Private investor and consultant
1619 31st Street, N.W., (1987-May 1997 and May 1999-
Washington, D.C. 20007 Present); Chief Financial and
Chief Information Officer for
the U.S. Department of Education
(May 1997 to May 1999); Trustee
or Director of the Third Avenue
Trust or its predecessor
(November 1991-May 1997 and June
1999-Present); Trustee of Trust
since inception.
MYRON M. SHEINFELD 70 Trustee Counsel (12/96-Present) to and
1001 Fannin St., Suite 3700 Attorney and Shareholder (1968-
Houston, TX 77002 12/96) of Sheinfeld, Maley & Kay
P.C., a law firm; Director
(1988-Present) of Nabors
Industries, Inc., an
international oil drilling
contractor; Director (11/98-
Present) Anchor Glass Container
Corporation; Director (7/99-
Present) of Repap Enterprises,
Inc.; Author of texts on
Bankruptcy and Bankruptcy
Taxation; Former adjunct
professor of law University of
Texas School of Law (1974-1991);
Trustee or Director of the Third
Avenue Trust or its predecessor
(Nov. 1990-Present); Trustee of
Trust since inception.
MARTIN SHUBIK 73 Trustee Seymour H. Knox Professor
Yale University Dept. (1975-Present) of Mathematical
of Economics and Institutional Economics,
Box 2125, Yale Station Yale University; Trustee or
New Haven, CT 06520 Director of the Third Avenue
Trust or its predecessor (Nov.
1990-Present); Trustee of Trust
since inception.
CHARLES C. WALDEN 55 Trustee Executive Vice President-
11 Williamsburg Circle Investments (1973-Present)
Madison, CT 06443 (Chief Investment Officer) of
Knights of Columbus, a fraternal
benefit society selling life
insurance and annuities;
Chartered Financial Analyst;
Trustee or Director of the Third
Avenue Trust or its predecessor
(May 1996-Present); Trustee of
Trust since inception.
BARBARA WHITMAN (1) 41 Trustee Registered Securities
767 Third Avenue Representative (11/96-Present)
New York, NY 10017-2023 of M.J. Whitman, Inc., a
broker-dealer and the Funds'
underwriter; Director (4/95-
Present) of EQSF Advisers, Inc.,
the Funds' investment adviser;
Director (4/99-Present) of M.J.
Whitman Holding Corp. (MJWHC), a
holding company managing
investment subsidiaries and an
investment adviser to private
and institutional clients;
Director (12/99-Present) of The
Beck Institute; Director
(8/97-6/98) of Riverside Stage
Company; Trustee of the Third
Avenue Trust (September 1997-
Present); Trustee of Trust since
inception.
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<PAGE>
MARTIN J. WHITMAN (1) 75 Trustee Chairman and CEO (3/90-Present),
767 Third Avenue President (1/91-5/98), of the
New York, NY 10017-2023 Trust; Chairman and CEO (3/90-
Present), President (1/91-2/98),
of EQSF Advisers, Inc.;
Chairman, CEO (1/1/95-Present),
President (1/1/95-6/29/95) and
Chief Investment Officer
(10/92-Present) of M.J. Whitman
Advisers, Inc., a subsidiary of
MJWHC; Chairman, CEO (1/1/95-
Present) and President (1/1/95)
of MJWHC and of M.J. Whitman,
Inc., a subsidiary of MJWHC and
the successor broker-dealer of
M.J. Whitman, L.P.. (MJWLP), a
Delaware limited partnership
which has been dissolved;
Distinguished Management Fellow
(1972-Present) and Member of the
Advisory Board (10/94-6/95) of
the Yale School of Management at
Yale University; Director (8/90-
Present), Chairman (8/90-7/99),
President (8/90-12/90), CEO
(8/96-Present) and Chief Invest-
ment Officer (12/90-8/96) of
Danielson Holding Corporation,
and a Director of its
subsidiaries; Director (3/91-
Present) of Nabors Industries,
Inc., an international oil
drilling contractor; Director
(8/97-Present) of Tejon Ranch
Co.; Director (3/93-2/96) of
Herman's Sporting Goods, Inc.,
which filed a voluntary petition
under Chapter 11 of the United
States Bankruptcy Code on April
26, 1996; President and CEO
(10/74- Present) of Martin J.
Whitman & Co., Inc., (formerly
M.J. Whitman & Co., Inc.) a
private investment company;
Chairman and CEO of the Third
Avenue Trust or its predecessor
(Nov. 1990-Present); Chairman of
the Board and Trustee of Trust
since inception; Chartered
Financial Analyst.
DAVID M. BARSE 37 President President of the Trust since
767 Third Avenue and Chief inception; President (5/98 to
New York, NY 10017-2023 Operating Present), and Executive Vice
Officer President (4/95 to 5/98) of
(COO) Third Avenue Trust; President,
Chief Operating Officer and
Director (7/96 to Present) of
Danielson Holding Corporation;
Director (8/96 to Present) of
National American Insurance
Company of California; President
(2/98 to Present), Executive
Vice President (4/95 to 2/98),
and Director (4/95 to Present)
of EQSF Advisers, Inc.;
President (6/95 to Present),
Chief Executive Officer (7/99 to
Present), Director, Chief
Operating Officer (1/95 to
Present), Secretary (1/95 to
1/96) and Executive Vice
President (1/95 to 6/95) of
MJWHC; President (6/95 to
Present), Chief Executive
Officer (7/99 to Present),
Director and COO (1/95 to
Present), Secretary (1/95 to
1/96), Executive Vice President
(1/95 to 6/95) of M.J. Whitman,
Inc.; President (6/95 to
Present), Chief Executive
Officer (7/99 to Present),
Director and COO (1/95 to
Present), Chief Executive
Officer (7/99 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.
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MICHAEL CARNEY 46 Treasurer, Treasurer and CFO of the Trust
767 Third Avenue Chief since inception; Treasurer and
New York, NY 10017-2023 Financial CFO of Third Avenue Trust
Officer (March, 1990 to Present);
(CFO) Director, (1/99 to Present)
Executive Vice President, Chief
Financial Officer (6/95 to
Present) of MJWHC and of M.J.
Whitman, Inc.; Treasurer,
Director (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
(3/93 to 6/95) of Danielson
Trust Company; CFO of WHR
Management Corporation (8/91 to
Present), and Danielson Holding
Corporation (8/90 to Present);
CFO and Treasurer (5/89 to
Present) of EQSF Advisers, Inc.;
CFO (5/89 to Present) of Whitman
Heffernan Rhein & Co., Inc.,
Martin J. Whitman & Co., Inc.,
(formerly M.J. Whitman & Co.,
Inc.) and WHR Management
Company, L.P., a firm managing
investment partnerships.
KERRI WELTZ 32 Assistant Assistant Treasurer of the Trust
767 Third Avenue Treasurer since inception; Assistant
New York, NY 10017-2023 Treasurer (5/96 to Present),
Controller (1/96 to Present) and
Assistant Controller (1/93 to
12/95) for Third Avenue Trust;
Controller (1/96 to Present) and
Assistant Controller (1/93 to
12/95) 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) and Assistant
Controller (1/93 to 5/96) of
Whitman Heffernan Rhein & Co.,
Inc.; Controller (5/96 to
Present) of Martin J. Whitman &
Co., Inc.; Assistant Controller
(10/94 to 4/96) of Longstreet
Investment Corp and Emerald
Investment Partners, L.P.
- ----------
(1) 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 compensation to its Trustees for a full fiscal year. Trustees do not
receive any pension or retirement benefits.
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COMPENSATION TABLE
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION THE TRUST AND
FROM THE FUND COMPLEX PAID
NAME AND POSITION HELD TRUST* TO TRUSTEES**
Phyllis W. Beck, Trustee $ 0 $ 0
Lucinda Franks, Trustee $ 8,000 $39,499
Gerald Hellerman, Trustee $ 8,000 $39,833
Marvin Moser, M.D., Trustee $ 8,000 $39,833
Donald Rappaport, Trustee $ 8,000 $20,000
Myron M. Sheinfeld, Trustee $ 8,000 $38,333
Martin Shubik, Trustee $ 8,000 $39,833
Charles C. Walden, Trustee $ 8,000 $39,833
Barbara Whitman, Trustee $ 0 $ 0
Martin J. Whitman, Chairman and
Chief Executive Officer $ 0 $ 0
* Estimated for the Portfolio's first full fiscal year. As of December 31,
1999, the Trust had not completed a 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, 1999.
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PRINCIPAL STOCKHOLDERS
On March 29, 2000, to the knowledge of the management of the Portfolio only
IDS Life Insurance Company 1SV, which beneficially owned 383,132 shares (53.98%
of the outstanding shares) and IDS Life Insurance Company 2SV, which
beneficially owned 314,366 shares (44.29% of the outstanding shares), in each
case on behalf of holders of variable annuity contracts, beneficially owned more
than 5% of the outstanding shares of the Fund.
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, 74% of the outstanding common stock of the
Adviser, pursuant to a shareholders' agreement entered into by and among them.
Mr. Whitman is Chairman and Chief Executive Officer of the Adviser.
The following individuals are affiliated persons of the Trust and Adviser:
CAPACITY WITH THE TRUST CAPACITY WITH ADVISER
----------------------- ---------------------
Martin J. Whitman Chairman and Chairman and
Chief Executive Officer Chief Executive Officer
David M. Barse President, President, Chief Operating
Chief Operating Officer Officer, Director
Michael Carney Treasurer, Treasurer,
Chief Financial Officer Chief Financial Officer
Kerri Weltz Assistant Treasurer Assistant Treasurer
Barbara Whitman Trustee Director
INVESTMENT ADVISORY AGREEMENT
The investment advisory services of the Adviser are furnished to the Portfolio
pursuant to an Investment Advisory Agreement approved by a majority of the
Trustees who are not "interested persons" as defined in the 1940 Act and the
Board of Trustees of the Trust, and by the sole shareholder of the Portfolio at
the time of its approval. The Adviser has provided investment advisory services
to the Portfolio since its inception.
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.
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.
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<PAGE>
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 1.3% of average daily net assets of the Portfolio,
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.
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. For the
period ended December 31, 1999, the Adviser waived fees of $4,011 and reimbursed
$142,305 to the Portfolio.
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 the Portfolio's
shares; and (2) qualify and maintain the qualification as a broker-dealer in
such states where shares of the Portfolio are registered for sale.
Martin J. Whitman, David M. Barse and Michael Carney, 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 reviewed
and approved at least annually by a majority of the Trustees who are not parties
to the Distribution Agreement or interested persons of any such party and by the
Board of Trustees or by a majority of the Portfolio's outstanding shares. 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.
ADMINISTRATORS
The Portfolio has entered into a Services Agreement (the "Services Agreement")
with PFPC Inc. ("PFPC"). The Services Agreement provides that PFPC shall provide
certain accounting, transfer agency and shareholder services to the Portfolio.
The Services Agreement has an initial three year term and may be terminated at
any time (effective after such initial term) without penalty, upon 180 days
written notice by either party to the other, and will automatically be
terminated upon any assignment thereof. The Portfolio has entered into an
Administration Agreement (the "Administration Agreement") with the Adviser,
which provides that the Adviser shall provide all other 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 and those performed by PFPC under the Services
Agreement. The
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<PAGE>
Adviser has entered into a Sub-Administration Agreement with PFPC pursuant to
which PFPC performs certain of those services on behalf of the Adviser. For the
period since inception to December 31, 1999, the Portfolio accrued $8,800 in
fees to the Advisor for these services.
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
PFPC Inc., 211 South Gulph Road, 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 accountants for the Portfolio. The independent 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.
CODE OF ETHICS
The Trust, the Adviser and the Distributor have each adopted Codes of Ethics
pursuant to Rule 17j-1 under the 1940 Act. Each Code contains provisions
reasonably necessary to prevent access persons (as defined in Rule 17j-1) from
engaging conduct prohibited by Rule 17j-1(b).
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. 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
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<PAGE>
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 and Michael Carney, 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 Portfolio 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 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.
For the period ended December 31, 1999, the Portfolio paid
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approximately $11,404 in brokerage commissions of which $9,062 (79.46%) were
paid to MJW. The percentage of the Portfolio's aggregate dollar amount of
transactions involving the payment of commissions that were effected through MJW
was 78.31%.
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 annuity or 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 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
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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.
NET ASSET VALUE
For purposes of determining the Portfolio's net asset value per share, readily
marketable portfolio securities traded on a market for which transaction prices
are contemporaneously available are valued, except as indicated below, at the
last sale price in their primary trading market as of 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 and for readily marketable
securities traded in markets for which transaction prices are not
contemporaneously available, the securities are valued at the mean of the
closing bid and asked prices on such day; if no bid or asked prices are quoted
on such day, then the security is valued by such method as the Board of Trustees
shall determine in good faith to reflect its fair market value. In valuing the
assets of the portfolio, the Trust may utilize pricing services deemed reliable
by the Trustees.
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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.
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 intends to distribute substantially all of any net long-term
capital gain. A distribution by the 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
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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. The Portfolio may also retain for reinvestment all or part of any
net long-term capital gain, although it does not intend to do so. 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
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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.
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 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
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<PAGE>
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.
For the period since inception to December 31, 1999, the total return for the
portfolio was 8.40%.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto for the Trust contained in
the Annual Report to Shareholders dated December 31, 1999, are incorporated by
reference into this Statement of Additional Information and have been audited by
PricewaterhouseCoopers LLP, whose report also appears in the Annual Report and
is also incorporated by reference herein. No other parts of the Annual Report
are incorporated by reference herein.
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<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.
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.
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<PAGE>
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, fluctuation
of protective elements may be of greater amplitude, or there may be other
elements present which make the long-term risk appear somewhat greater than
the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative elements:
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing. Moody's applies numerical
modifiers: 1, 2 and 3 in each generic rating classification from Aa through
B in its corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category, the
modifier 2 indicates a mid-range ranking, and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
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<PAGE>
BOARD OF TRUSTEES
Phyllis W. Beck
Lucinda Franks
Gerald Hellerman
Marvin Moser
Donald Rappaport
Myron M. Sheinfeld
Martin Shubik
Charles C. Walden
Barbara Whitman
Martin J. Whitman
OFFICERS
Martin J. Whitman
Chairman, Chief Executive Officer
David M. Barse
President, Chief Operating Officer
Michael Carney
Chief Financial Officer, Treasurer
Kerri Weltz
Assistant Treasurer
INVESTMENT ADVISER
EQSF Advisers, Inc.
767 Third Avenue
New York, NY 10017-2023
DISTRIBUTOR
M.J. Whitman, Inc.
767 Third Avenue
New York, NY 10017-2023
TRANSFER AGENT
PFPC, Inc.
211 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406-0903
(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 incorporated by reference to the
Registrant's Registration Statement on Form N-1A,
File No. 333-81141, filed on June 21, 1999.
(2) Designation of Subtrust for Third Avenue Value
Portfolio is incorporated by reference to the
Registrant's Registration Statement on Form N-1A,
File No. 333-81141, filed on June 21, 1999.
(b) By-Laws are incorporated by reference to the
Registrant's Registration Statement on Form N-1A, file
No. 333-81141, filed on June 21, 1999.
(c) Reference is made to Articles V and VI of the Trust's
Agreement and Declaration of Trust.
(d) Investment Advisory Contract is incorporated by
reference to the Registrant's Registration Statement on
Form N-1A File No. 333-81141, filed on September 10,
1999.
(e) Distribution Agreement is incorporated by reference to
the Registrant's Registration Statement on Form N-1A
File No. 333-81141, filed on September 10, 1999.
(g) Custody Agreement between Third Avenue Variable Series
Trust and Custodial Trust Company is incorporated by
reference to the Registrant's Registration Statement on
Form N-1A File No. 333-81141, filed on September 10,
1999.
(h) (1) Services Agreement between Third Avenue Variable
Series Trust and First Data Investor Services
Group, Inc. is incorporated by reference to the
Registrant's Registration Statement on Form N-1A
File No. 333-81141, filed on September 10, 1999.
(2) Administration Agreement between Third Avenue
Variable Series Trust and EQSF Advisers, Inc. is
incorporated by reference to the Registrant's
Registration Statement on Form N-1A file
No. 333-81141, filed on September 10, 1999.
(3) Sub-Administration Agreement between EQSF
Advisers, Inc. and First Data Investor Services
Group, Inc. is incorporated by reference to the
Registrant's Registration Statement on Form N-1A
File No. 333-81141, filed on September 10, 1999.
(i) (a) Opinion and Consent of Counsel regarding the
legality of the securities being issued is
incorporated by reference to the Registrant's
Registration Statement on Form N-1A File No.
333-81141, filed on September 10, 1999.
(j) Consent of Auditors is filed herewith.
(n) Not applicable.
(q) (i) Joint Code of Ethics of the Registrant and EQSF
Advisers, Inc. is filed herewith.
(2) Code of Ethics of M.J. Whitman, Inc. to be filed
by amendment.
Item 24. Persons Controlled By or Under Common Control with
Registrant.
Insofar as the following have substantially the same boards
of trustees or directors, they may be deemed to be under
common control with the Portfolio: Third Avenue Value Fund,
Third Avenue Small-Cap Value Fund, Third Avenue High Yield
Fund and Third Avenue Real Estate Value Fund.
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
<PAGE>
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 September 3, 1999 had
approximately $1,506 million in assets under management.
For information as to any other business, vocation or
employment of a substantial nature in which each Director or
officer of the Registrant's investment adviser has been
engaged for his own account or in the capacity of Director,
officer, employee, partner or trustee, reference is made to
Form ADV (File #801-27792) filed by it under the Investment
Advisers Act of 1940.
Item 27. Principal underwriters.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
Item 28. Location of accounts and records.
All records described in Section 31 (a) of the Investment Company Act of 1940,
as amended and Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are
maintained by the Trust's Investment Adviser, EQSF Advisers, Inc. 767 Third
Avenue, NY, NY 10017-2023, except for those records maintained by the Trust's
Custodian, Custodial Trust Company, 101 Carnegie Center, Princeton, NJ
08540-6231, and the Trust's Shareholder Service and Fund Accounting and Pricing
Agent, PFPC Inc., 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 certifies that it meets all the
requirements for effectiveness of this registration statement under Rule 485(b)
under the Securities Act and 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 27th day of April, 2000.
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
- ----------------------------
Martin J. Whitman Chief Executive Officer 4/27/00
/s/ MICHAEL CARNEY
- ----------------------------
Michael Carney Chief Financial Officer 4/27/00
/s/ PHYLLIS W. BECK
- ----------------------------
Phyllis W. Beck Trustee 4/27/00
/s/ MARTIN SHUBIK
- ----------------------------
Martin Shubik Trustee 4/27/00
/s/ MYRON M. SHEINFELD
- ----------------------------
Myron M. Sheinfeld Trustee 4/27/00
/s/ GERALD HELLERMAN
- ----------------------------
Gerald Hellerman Trustee 4/27/00
/s/ CHARLES C. WALDEN
- ----------------------------
Charles C. Walden Trustee 4/27/00
/s/ MARVIN MOSER
- ----------------------------
Marvin Moser Trustee 4/27/00
/s/ BARBARA WHITMAN
- ----------------------------
Barbara Whitman Trustee 4/27/00
/s/ LUCINDA FRANKS
- ----------------------------
Lucinda Franks Trustee 4/27/00
/s/ DONALD RAPPAPORT
- ----------------------------
Donald Rappaport Trustee 4/27/00
<PAGE>
SCHEDULE OF EXHIBITS TO FORM N-1A
EXHIBIT
NUMBER EXHIBITS
99.J Consent of Auditors
99.Q (1) Joint Code of Ethics of the Registrant and Adviser
EXHIBIT J
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form N-1A of our report dated February 14, 2000,
relating to the financial statements and financial highlights which appears in
the December 31, 1999 Annual Report to Shareholders of Third Avenue Variable
Series Trust--Third Avenue Value Portfolio, which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Financial Highlights", "Independent Accountants" and
"Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
April 24, 2000
AMENDED AND RESTATED
CODE OF ETHICS
OF
THIRD AVENUE TRUST
THIRD AVENUE VARIABLE SERIES TRUST
AND
EQSF ADVISERS, INC.
This Code of Ethics ("Code") establishes rules of conduct for persons who are
associated with Third Avenue Trust and Third Avenue Variable Series Trust, each
a registered investment company (each a "Trust" and, collectively, the "Trusts")
and each series of each Trust (each a "Fund" and, collectively, the "Funds") and
EQSF Advisers, Inc., a registered investment adviser (the "Adviser"), that
provides investment advisory services to the Funds (collectively, the
"Companies").
The basic rule is very simple, put the Funds shareholders' interests first. The
rest of the rules elaborate this principle. Some of the rules are imposed
specifically by law. For example, the laws that govern investment advisers
specifically prohibit fraudulent activity, making statements that are not true
or that are misleading or omit something that is significant in the context and
engaging in manipulative practices. These are general words, of course, and over
the years the courts, the regulators and investment advisers have interpreted
these words and established codes of conduct for their employees and others who
have access to their investment decisions and trading activities. Indeed, the
rules obligate investment advisers to adopt written rules that are reasonably
designed to prevent the illegal activities described above and to follow
procedures that will enable them to prevent such activities.
This Code is intended to assist the Companies in fulfilling their obligations
under the law. The first part lays out who the Code applies to, the second part
deals with personal investment activities, the third part deals with other
sensitive business practices, and subsequent parts deal with reporting and
administrative procedures.
The Code is very important to the Companies and their employees. Violations can
not only cause the Companies embarrassment, loss of business, legal
restrictions, fines and other punishments but for employees can lead to
demotion, suspension, firing, ejection from the securities business and very
large fines.
1
<PAGE>
I. APPLICABILITY
(A) The Code applies to each of the following:
1. Third Avenue Value Tust and Third Avenue Variable Series Trust
(each a "Trust" and, collectively, the "Trusts"), each series of
each Trust (each a "Fund" and, collectively, the "Funds"), and
EQSF Advisers, Inc. (the "Adviser") and all entities that are
under common management with the Companies ("Affiliates"). A
listing of the Affiliates is attached as Exhibit A.
2. Any officer, director, trustee or employee of the Companies or
Affiliates whose job regularly involves him in the investment
process of the Companies. This includes the formulation and
making of investment recommendations and decisions, the purchase
and sale of securities for clients and the utilization of
information about investment recommendations, decisions and
trades. Due to the manner in which the Companies and Affiliates
conduct their business, every employee should assume that he is
subject to the Code unless the Compliance Officer specifies
otherwise.
3. With respect to the Companies and Affiliates, any natural person
who controls any of the Companies or Affiliates and who obtains
information regarding the Companies' investment recommendations
or decisions. However, a person whose control arises only as a
result of his official position with such entity is excluded.
Disinterested trustees of a Fund, for example, are excluded from
coverage under this item.
4. With respect to the Companies, any trustee, director, officer, or
person performing a similar function even if he has no knowledge
of and is not involved in the investment process. Disinterested
trustees of a Fund are covered under this item.
5. As an exception, the Code does not apply to any director, officer
or employee of the Companies' affiliated broker-dealer, M.J.
Whitman, Inc., whose duties do not involve the formulation or
making of investment recommendations or decisions or the
execution of portfolio transactions. These individuals are
covered by the code of ethics or supervisory procedures adopted
by such entity.
2
<PAGE>
(B) DEFINITIONS
1. ACCESS PERSONS. The Companies, the Affiliates and the persons
described in items (A) 2 and (A) 3 above other than those
excluded by item (A) 5 above.
2. ACCESS PERSONS ACCOUNT. Includes all advisory, brokerage, trust
or other accounts or forms of direct beneficial ownership in
which one or more Access Persons and/or one or more members of an
Access Person's immediate family have a substantial proportionate
economic interest. Immediate family includes an Access Person's
spouse and minor children living with the Access Person. A
substantial proportionate economic interest will generally be 10%
of the equity in the account, in the case of an account in which
only one Access Person has an interest and 25% of the equity in
the account, in the case of an account in which more than one
Access Person has an interest, whichever is first applicable.
Investment partnerships and similar indirect means of ownership
other than registered open-end investment companies are also
treated as accounts.
As an exception, accounts in which one or more Access Persons
and/or their immediate family have a substantial proportionate
interest which are maintained with persons who have no
affiliation with the Companies and with respect to which no
Access Person has, in the judgment of the Compliance Officer
after reviewing the terms and circumstances, any direct or
indirect influence or control over the investment or portfolio
execution process are not Access Person Accounts.
3. ASSOCIATE PORTFOLIO MANAGERS. Access Persons who are engaged in
securities research and analysis for the Companies or are
responsible for investment recommendations for other clients but
who are not principally responsible for investment decisions with
respect to any client accounts.
4. PORTFOLIO MANAGERS. Access Persons who are principally
responsible for investment decisions with respect to any client
account.
5. COMPANIES. Third Avenue Trust, Third Avenue Variable Series
Trust, each series of each Trust, and EQSF Advisers, Inc.
(B) DEFINITIONS CONTINUED
6. COMPLIANCE OFFICER. The persons designated as the compliance
officer(s) of the Companies.
7. COVERED PERSONS. The Companies, the Access Persons and the
persons described in item (A) 4.
8. SECURITY. Any financial instrument treated as a security for
investment purposes and any related instrument such as a futures,
forward or swap contract entered into with respect to one or
3
<PAGE>
more securities, a basket of or an index of securities or
components of securities. However, the term security does not
include securities issued by the Government of the United States,
bankers' acceptances, bank certificates of deposit, or shares of
registered open-end investment companies.
II. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
(A) BASIC RESTRICTION ON INVESTING ACTIVITIES
If a purchase or sale order is pending or under active consideration
by the Adviser, neither the same Security nor any related Security
(such as an option, warrant or convertible security) may be bought or
sold for any Access Person Account.
(B) INITIAL PUBLIC OFFERINGS
No Security or related Security may be acquired in an initial public
offering for any Access Person Account.
(C) BLACKOUT PERIOD
No Security or related Security may be bought or sold for the account
of any Portfolio Manager or Associate Portfolio Manager during the
period commencing seven (7) days prior to and ending seven (7)
calendar days after the purchase or sale (or entry of any order for
the purchase or sale) of that Security or any related Security for the
account of any client with respect to which such person has been
designated a Portfolio Manager or Associate Portfolio Manager.
4
<PAGE>
II. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES CONTINUED
(D) EXEMPT TRANSACTIONS
Participation on an ongoing basis in an issuer's dividend reinvestment
or stock purchase plan, participation in any transaction over which no
Access Person had any direct or indirect influence or control and
involuntary transactions (such as mergers, inheritances, gifts, etc.)
are exempt from the restrictions set forth in paragraphs (A) and (C)
above without case by case preclearance under paragraph (G) below.
(E) PERMITTED EXCEPTIONS
Purchases and sales of the following Securities for Access Person
Accounts are exempt from the restrictions set forth in paragraphs A, C
and D above if such purchases and sales comply with the pre clearance
requirements of paragraph (F) below:
1. Non-convertible fixed income Securities rated at least "A";
2. Equity Securities of a class having a market capitalization in
excess of $1 billion;
3. Equity Securities of a class having a market capitalization in
excess of $500 million if the transaction in question and the
aggregate amount of such Securities and any related Securities
purchased and sold for the Access Person Account in question during
the preceding 60 days does not exceed 100 shares;
4. Municipal Securities; and
5. Securities transactions effected for federal, state or local
income tax purposes that are identified to the Compliance Officer at
the time as being effected for such purpose.
In addition, the exercise of rights that were received pro rata with
other security holders is exempt if the pre clearance procedures are
satisfied.
(F) PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS
1. EXCEPT AS SET FORTH IN PARAGRAPH (F) 2. BELOW, no Security may be
bought or sold for an Access Person Account unless; (i) the Access
Person obtains prior approval from the Compliance Officer or, in the
absence of the Compliance Officer, from the general counsel of the
Fund; (ii) the approved transaction is completed on
5
<PAGE>
II. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES CONTINUED
the same day approval is received; and (iii) Mr. Whitman, the
Compliance Officer or the Fund's general counsel does not rescind such
approval prior to execution of the transaction (See paragraph H below
for details of the Pre-Clearance Process.)
2. Notwithstanding the foregoing, if the transaction is being
executed through M.J. Whitman, Inc., on the basis of the head trader's
assessment that the security is either not currently in the Fund's
portfolio or the Fund has no current interest in the acquisition of
the security and there is no current interest in the sale of the
security, prior approval will be deemed to have been obtained subject
to the authority of the Compliance Department to rescind such
transaction for any reason.
(G) PRIVATE PLACEMENTS
The Compliance Officer will not approve purchases or sales of
Securities that are not publicly traded, unless the Access Person
provides full details of the proposed transaction (including written
certification that the investment opportunity did not arise by virtue
of such person's activities on behalf of a Fund or Adviser) and the
Compliance Officer concludes, after consultation with one or more of
the relevant Portfolio Managers, that the Fund would have no
foreseeable interest in investing in such Security or any related
Security.
(H) PRE-CLEARANCE PROCESS
1. Except as set forth in paragraph (F) above, no Securities may be
purchased or sold for any Access Person Account unless the particular
transaction has been approved in writing by the Compliance Officer.
The Compliance Department shall review weekly to the extent
practicable and in any event not less often than monthly, reports from
the trading desk (or, if applicable, confirmations from brokers) to
assure that all transactions effected for Access Person Accounts are
effected in compliance with this Code.
2. No Securities may be purchased or sold for any Access Person
Account other than through the trading desk of the Adviser's
affiliated broker-dealer, M.J. Whitman, Inc., (MJW) unless express
permission is granted by the Compliance Officer of MJW
II. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES CONTINUED
and filed with the Companies. Access Persons granted permission to
maintain trading accounts with outside broker-dealers must arrange for
the mailing of duplicate copies of confirmations of all personal
Securities transactions and copies of periodic statements for all such
accounts.
3. A Trading Approval Form, attached as Exhibit B, must be completed
and submitted to the Compliance Officer for approval prior to entry of
an order.
4. After reviewing the proposed trade, the level of potential
investment interest on behalf of a Fund in the Security in question
and any trading restrictions currently in effect on the Security by a
Fund and/or MJW, the Fund's Portfolio Manager and the Compliance
Officer shall approve (or disapprove) a trading order on behalf of an
Access Person as expeditiously as possible. They will generally
approve transactions described in paragraph (E) above unless the
Security in question or a related security is on the Restricted List
or they believe for any other reason that the Access Person Account
should not trade in such Security at such time.
6
<PAGE>
5. Once an Access Person's Trading Approval Form is approved, the
form must be forwarded to the trading desk (or, if a third party
broker is permitted, to the Compliance Officer) for execution on the
same day. If the Access Person's trading order request is not
approved, or is not executed on the same day it is approved, the
clearance lapses although such trading order request may be
resubmitted at a later date.
6. In the absence of the Portfolio Manager and Compliance Officer,
an Access Person may submit his Trading Approval Form to the
Companies' general counsel. Trading approval for the Compliance
Officer must be obtained from the Companies' general counsel. In no
case will the Trading Desk accept an order for an Access Person
Account unless it is accompanied by a signed Trading Approval Form.
7. The Compliance Officer shall review all Trading Approval Forms,
all initial, quarterly and annual disclosure certifications and all
trading activities of the Fund and with a view to ensure that all
Covered Persons are complying with the spirit as well as the detailed
requirements of this Code.
III. OTHER INVESTMENT-RELATED RESTRICTIONS
(A) GIFTS
No Access Person shall accept any gift or other item of more than $100
in value from any person or entity that does business with or on
behalf of a Fund or Adviser.
(B) SERVICE AS A DIRECTOR
No Access Person shall commence service on the Board of Directors of a
publicly traded company or any company in which the Fund has an
interest without prior authorization from the Compliance Committee
based upon a determination that the Board service would not be
inconsistent with the interest of the Funds. The Compliance Committee
shall include the Compliance Officer, general counsel of the Companies
and at least two of the senior executives of the Trust and/or Adviser.
IV. REPORT AND ADDITIONAL COMPLIANCE PROCEDURES
(A) Every Covered Person, including disinterested trustees of the Funds,
must submit a report (a form of which is attached as Exhibit C)
containing the information set forth in paragraph (B) below with
respect to transactions in any Security in which such Covered Person
has or by reason of such transaction acquires, any direct or indirect
beneficial ownership (as defined in Exhibit D) in the Security;
provided, however, that:
1. a Covered Person who is required to make reports only because he
is a trustee of a Fund and who is a "disinterested" director
thereof need not make a report with respect to any transactions
other than those where he knew or should have known in the
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<PAGE>
course of his duties as a trustee that a Fund has made or is
considering making a purchase or sale of the same or a related
Security within 15 days before or after the purchase or sale of
such Security or related Security by such trustee.
2. a Covered Person need not make a report with respect to any
transaction effected for any account over which such person does
not have any direct or indirect influence or control; and
IV. REPORT AND ADDITIONAL COMPLIANCE PROCEDURES CONTINUED
3. a Covered Person will be deemed to have complied with this
Article IV insofar as the Compliance Officer receives in a timely
fashion duplicate monthly or quarterly brokerage statements or
transaction confirmation on which all transactions required to be
reported thereunder are described.
(B) A Covered Person must submit the report required by this Article IV to
the Compliance Officer no later than 10 days after the end of the
calendar quarter in with the transaction to which the report relates
was effected. A report must contain the following information:
1. The date of the transaction, the title and number of shares and
the principal amount of each Security involved:
2. The nature of the transactions (i.e., purchase, sale or any other
type of acquisition or disposition);
3. The price at which the transaction was effected; and
4. The name of the broker, dealer or bank with or through whom the
transaction was effected.
(C) Any report submitted to comply with the requirements of this Article
IV may contain a statement that the report shall not be construed as
an admission by the person making such report that he has any direct
or indirect beneficial ownership in the Security to which the report
relates.
(D) Upon commencement of employment with the Companies or Affiliates, each
Access Person shall be required to disclose all current personal
Securities holdings contained in any Access Person Account in which
such Access Person has an interest.
(E) Annually each Covered Person must certify that he has read and
understood the Code and recognizes that he is subject to such Code. In
addition, annually each Covered Person must certify that he has
disclosed or reported all personal Securities transactions required to
be disclosed or reported under the Code and that he is not subject to
any regulatory disability. The form of Such certification is attached
as Exhibit E.
8
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IV. REPORT AND ADDITIONAL COMPLIANCE PROCEDURES CONTINUED
(F) At least annually (or quarterly in the case of Items 3 and 4 below),
the Adviser shall report to the Board of Trustees:
1. All existing procedures concerning Covered Persons' personal
trading activities and reporting requirements and any procedural
changes made during the past year;
2. Any recommended changes to this Code or procedures;
3. A summary of any violations of this Code which occurred during
the past quarter and the nature of any remedial action taken; and
4. Any exceptions to any provision of this Code of Ethics as
determined under Article VI below.
V. SANCTIONS
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the Compliance Committee may impose on such
person whatever sanctions the Board deems appropriate, including, among
other things, disgorgement of profit, censure, suspension or termination of
employment. Material violations of the requirements of this Code by Access
Persons and any sanctions imposed in connection therewith shall be reported
not less frequently than quarterly to the Board of Trustees of the Fund.
VI. EXCEPTIONS
The Compliance Committee of the Funds reserves the right to decide, on a
case-by case basis, exceptions to any provision under this Code. Any
exceptions made hereunder will be maintained in writing by the Compliance
Committee and presented to the applicable Fund's Board of Trustees at their
next scheduled meeting of the Board.
VII. PRESERVATION OF DOCUMENTS
This Code, a copy of each report by a Covered Person, any written report
made hereunder by a Fund, Adviser or Compliance Officer, and lists of all
persons require to make reports, shall be preserved with the records of the
Fund for the period required by Rule 17j-1.
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<PAGE>
VIII. OTHER LAWS, RULES AND STATEMENTS OF POLICY
Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provision of any
applicable law, rule or regulation or any other statement of policy or
procedure governing the conduct of such person adopted by a Trust, a Fund,
Adviser or Affiliates.
IX. FURTHER INFORMATION
If any person has any question with regard to the applicability of the
provisions of this Code or with regard to any Securities transaction or
transactions, they should consult the Compliance Officer.
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<PAGE>
EXHIBIT A
AFFILIATES
----------
o Danielson Holding Corporation, a holding company
o M.J. Whitman Holding Corp., (a holding company) and subsidiaries,
o M.J. Whitman, Inc.
o M.J. Whitman Advisers, Inc.
o M.J. Whitman Senior Debt Corp.
o M.J. Whitman Pilot Fish Opportunity Fund, Inc.
o M.J. Whitman Pilot Fish Opportunity Fund, L.P.
o M.J. Whitman Structured Finance Fund, L.P.
o M.J. Whitman Structured Finance Manager, LLC
o Aggressive Conservative Investment Fund, L.P.
o M.J. Whitman Management, LLC
o Martin J. Whitman & Co., Inc., a private investment company
11
<PAGE>
EXHIBIT B
PRE-CLEARANCE TRADING APPROVAL FORM
-----------------------------------
I, ______________________________________________________________________,
am an Access Person and seek pre-clearance to engage in the transaction
described below for the benefit of myself or another Access Person:
[_] Acquisition or [_] Disposition (check one)
Name of Account:
--------------------------------------------------------
Account Number:
--------------------------------------------------------
Date of Request:
--------------------------------------------------------
Security:
--------------------------------------------------------
Amount (or # of) Shares:
--------------------------------------------------------
Broker:
--------------------------------------------------------
If the transaction involves a Security that is not publicly traded, provide
(on the reverse side of this form) a description of the proposed transaction,
source of investment opportunity and any potential conflicts of interest:
I hereby certify that, to the best of my knowledge, the transaction
described herein is not prohibited by the Code of Ethics and that the
opportunity to engage in the transaction did not arise by virtue of my
activities of behalf of a Fund or Adviser.
Signature:
Print Name: --------------------------------------------------------
[_] APPROVED OR [_] DISAPPROVED
(check one)
DATE OF APPROVAL:
----------------
SIGNATURE:
PRINT NAME: --------------------------------------------------------
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<PAGE>
EXHIBIT C
TRANSACTION REPORT
PAGE 1 OF 2
Report Submitted by:
------------------------------------------------------------
Print your name
This transaction report ( the "Report") is submitted pursuant to
Section IV (B) of the Code of Ethics of the Companies and supplies information
with respect to transactions in any Security in which you may be deemed to have,
or by reason of such transaction acquire, any direct or indirect beneficial
ownership interest for the period specified below.
Unless the context otherwise requires, all terms used in the Report
shall have the same meaning as set forth in the Code of Ethics.
If you have no reportable transactions, sign and return this page
only. If you have reportable transaction, completed, sign and return page 2 and
any attachments.
...............................................................................
I HAD NO REPORTABLE SECURITIES TRANSACTIONS DURING THE PERIOD
___________, 199 THROUGH ___________, 199 . I CERTIFY THAT I AM FULLY
FAMILIAR WITH THE CODE OF ETHICS AND THAT TO THE BEST OF MY KNOWLEDGE THE
INFORMATION FURNISHED IN THIS REPORT IS TRUE AND CORRECT.
Signature:
------------------------------------------------------------
Position:
------------------------------------------------------------
Date:
------------------------------------------------------------
13
<PAGE>
EXHIBIT C
TRANSACTION REPORT
PAGE 2 OF 2
Report Submitted by:
------------------------------------------------------------
Print your name
The following table supplies the information required by Section IV
(B) of the Code of Ethics for the period specified below. Transactions reported
on brokerage statements or duplicate confirmations actually received by the
Compliance Officer do not have to be listed although it is your responsibility
to make sure that such statements or confirmations are completed and have been
received in a timely fashion.
To the extent specified above, I hereby disclaim beneficial ownership
of any security listed in this Report or in brokerage statements or transaction
confirmations provided by you.
...............................................................................
I CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND THAT TO
THE BEST OF MY KNOWLEDGE THE INFORMATION FURNISHED IN THIS REPORT IS TRUE
AND CORRECT FOR THE PERIOD OF _________________, 199 THROUGH
_________________, 199 .
Signature:
------------------------------------------------------------
Position:
------------------------------------------------------------
Date:
------------------------------------------------------------
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<PAGE>
EXHIBIT D
BENEFICIAL OWNERSHIP
For purposes of the attached Code of Ethics, "beneficial ownership" shall
be interpreted in the same manner as it would be in determine whether a person
is subject to the provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except the determination of
direct or indirect beneficial ownership shall apply to all securities that a
Covered Person has or acquires. The term "beneficial ownership" of securities
would include not only ownership of securities held by a Covered Person for his
own benefit, whether in bearer form or registered in his name or otherwise, but
also ownership of securities held for his benefit by other (regardless of
whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees (including trusts in which he has only a remainder
interest), and securities held for his account by pledges, securities owned by a
partnership in which he is a member if he may exercise a controlling influence
over the purchase, sale of voting of such securities, and securities owned by
any corporation or similar entry in which he owns securities if the shareholder
is a controlling shareholder of the entity and has or shares investment control
over the entity's portfolio.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which a Covered Person is a legatee or beneficiary
unless there is a specified legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by a Covered Person where such person enjoys "financial
benefits substantially equivalent to ownership." The Securities and Exchange
Commission has said that although the final determination of beneficial
ownership is a question to be determined in the light of the facts of the
particular case, generally a person is regarded as the beneficial owner of
securities held in the name of his or her spouse and their minor children.
Absent of special circumstances such relationship ordinarily results in such
person obtaining financial benefits substantially equivalent to ownership, e.g.,
application of the income derived from such securities to maintain a common
home, or to meet expenses that such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
A Covered Person also may be regarded as the beneficial owner of securities
held in the name of another person, if by reason of any contract, understanding,
relationship, agreement, or other agreement, he obtains therefrom financial
benefits substantially equivalent to those of ownership.
A Covered Person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he can
vest or revest title in himself at once or at some future time.
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<PAGE>
EXHIBIT E
ANNUAL CERTIFICATION OF CODE OF ETHICS
A. I (a Covered Person) hereby certify that I have read and understood
the Code of Ethics and recognize that I am subject to its provisions. In
addition, I hereby certify that I have disclosed or reported all personal
Securities transactions required to be disclosed or reported under the Code
of Ethics;
B. Within the last ten years there have been no complaints or
disciplinary actions filed against me by any regulated securities or
commodities exchange, any self-regulatory securities or commodities
organization, any attorney general, or any governmental office or agency
regulating insurance, securities, commodities or financial transactions in
the United States, in any state of the United States, or in any other
country.
C. I have not within the last ten years been convicted of or acknowledged
commission of any felony or misdemeanor arising out of my conduct as an
employee, salesperson, officer, director, insurance agent, broker, dealer,
underwriter, investment manager or investment advisor.
D. I have not been denied permission or otherwise enjoined by order,
judgment or decree of any court of competent jurisdiction, regulated
securities or commodities exchange, self-regulatory securities or
commodities organization or other federal or state regulatory authority
from acting as an investment advisor, securities or commodities broker or
dealer, commodity pool operator or trading advisor or as an affiliated
person or employee of any investment company, bank, insurance company or
commodity broker, dealer, pool operator or trading advisor, or from
engaging in or continuing any conduct or practice in connection with any
such activity or the purchase or sale of any security.
Print Name:
------------------------------------------------------------
Signature:
------------------------------------------------------------
Date:
------------------------------------------------------------
16
