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Third Avenue Funds Portfolio Commentary and Third Quarter Report

JULY 31, 2015

Third Avenue Value Fund

Third Avenue Small-Cap Value Fund

Third Avenue Real Estate Value Fund

Third Avenue International Value Fund

Third Avenue Focused Credit Fund

THE POWER OF ORIGINAL THINKING

Chairman’s Letter Page 1

Third Avenue Value Fund (TAVFX, TVFVX) Page 4

Third Avenue Small-Cap Value Fund (TASCX, TVSVX) Page 9

Third Avenue Real Estate Value Fund (TAREX, TVRVX) Page 16

Third Avenue International Value Fund (TAVIX, TVIVX) 2

Third Avenue Focused Credit Fund (TFCIX, TFCVX) Page 29

Portfolio Manager Commentary July 31, 2014

This booklet consists of two separate documents.

THIRD AVENUE FUNDS

Third Avenue Value Fund Page 1

Third Avenue Small-Cap Value Fund Page 3

Third Avenue Real Estate Value Fund Page 5

Third Avenue International Value Fund Page 7

Third Avenue Focused Credit Fund Page 9

Notes to Portfolios of Investments Page 14

Third Quarter Report THIRD AVENUE FUNDS

3 Q 2 0 1 5 T h i r d A v e n u e F u n d s P o r t f o l i o M a n a g e r C o m m e n t a r y 1

THIRD AVENUE FUNDS Portfolio Manager Commentary

July 31, 2015

Letter from the Chairman Dear Fellow Shareholders,

There are those who believe that markets are efficient—finance academics, traders, owners of Index Funds and ETFs, and market participants who study market price and security price movements while ignoring the study of companies and the securities they issue. They are wrong. There are those who believe that markets are inefficient—value investors, active investors, distress investors, control investors, many credit analysts and those who are first and second stage venture capital investors. They are also wrong.

The fact is that some markets are highly efficient, or tend to be, and some markets are grossly inefficient, or tend to be. It is a matter of individual differences among and between disparate markets. In one very important sense academic finance and economics seem to be immature social sciences compared with say, law, psychology or sociology. In academic finance and economics the emphasis is on discovering general laws while in law, psychology and sociology, the focus is not on general laws, but rather on individual differences on a case by case basis.

It is helpful to define efficiency. At Third Avenue Management (TAM) we believe efficiency breaks down into three parts:

1. Value Efficiency: At TAM value efficiency is defined as that price, and other terms, which would be arrived at in a transaction between a willing control buyer and a willing control seller, both with knowledge of the relevant facts, and neither under any compulsion to act.

2. Process Efficiency: Prices that would be arrived at outside of control markets. Such prices usually will be much below value efficiency prices where there are little or no prospects for resource conversions, especially changes of control, going private, or massive distributions to equity holders; where particular securities issues may lack marketability; where there is a lack of disclosures to passive investors, either through regulatory filings or management communications; or where there is an absence of regulatory protections for passive investors. Such prices also may be far higher than value efficiency prices. This especially seems to be the case where companies have access to capital markets at super attractive prices such as is the case of equity offerings of high tech companies during the IPO boom. Prices in excess of value efficiency prices are tricky because in the hands of competent management, overpriced common stocks can be a business’s most important and most valuable asset.

Martin J. Whitman Chairman of the Board



Letter from the Chairman

3. Transaction Efficiency: Prices to be realized in sudden death situations where there are likely to be readily determinable work-outs in readily determinable periods of time; and where the securities are analyzable by reference to only a limited number of computer programmable variables. Such securities include options and warrants; pending merger transactions; tender offers; voluntary exchanges; balance sheet arbitrage, especially convertible arbitrage; and certain liquidations and spin-offs. Day traders too, deal in markets which for them are characterized by transactional efficiency, in that the trading horizon is ultra-short term. Transaction efficiency markets are almost always highly efficient. Finance academics seem to concentrate on the study of transaction efficiency markets because their concentration is on immediate changes in securities prices. They use such markets to postulate general laws, not realizing that transaction efficiency markets seem to be a special case; for example such markets seem to have little or no relationship to, say, control markets.

At the various TAM Funds, the concentration is on acquiring common stocks that sell at meaningful discounts from fund management’s estimate of value efficiency prices. However, such investments tend to be restricted to the common stocks of companies which are strongly financed. In less well financed companies underlying values can dissipate quite rapidly, and often do.

Most passive markets, excluding sudden death securities, seem to be very inefficient in measuring long-term value efficiency. This seems quite understandable in light of the things considered most important to most non-control market participants. Most non-control equity investors seem to believe the following:

1. There is a primacy of the income account—especially current and near term forecasts from operations as measured either by cash flows or accounting earnings. Instead, TAM’s focus is on a company’s ability to grow NAV 10% per year, compounded.

2. There is an emphasis on short termism—how might the price performance of the common stocks be in the immediate future. In contrast long term shareholders such as TAM tend to concentrate on prospects over a three to five year time frame allowing for either resource conversion or market dynamics to realize value.

3. There is an emphasis on top down considerations when making buy, hold, and sell decisions such as the general market outlook, interest rates, the Dow-Jones Industrial Average, Gross Domestic Product, etc., with a consequent downgrading of bottom-up factors such a refinancing, new capital expenditures, management changes, mergers and acquisitions, etc.

4. There is a belief in equilibrium pricing, i.e., the current stock market price reflects a universal value and will only change as the market digests new information. In contrast, at TAM we believe we can acquire common stocks at prices that represent meaningful discounts from value efficiency prices.

Most market participants and finance academics focus on changes in security prices rather than corporate fundamentals in their analyses. It seems impossible, to me at least, to have a focus on security prices without being short term concentrated.

The promoters of ETFs and Index Funds believe securities markets are efficient because no one outperforms benchmarks consistently. Consistently is a dirty word. It means all the time. Many in the investment process do outperform benchmarks on average, most of the time, and over the long term, but not consistently. Such performance, however, is not enough to satisfy passive investors who seem


Letter from the Chairman

to boast about their ignorance of companies and the securities they issue; they need the impossible – outperformance all the time. Those who seem to outperform over the long run, on average and most of the time include many, many, value investors, active investors, distress investors and certain venture capitalists. Insofar as these persons or institutions achieve superior results, it seems to center around their having intimate knowledge about companies and the securities they issue. Public disclosures have gotten better and more comprehensive over the years. The public record is now so good that outsiders can know much, much more about most companies than was dreamed possible in the Graham and Dodd days which stretched from the 1930’s to the 1970’s. Unless one seeks to have intimate knowledge of the companies and the securities that they issue, one seems restricted to being conscious of transaction efficiency even denying the existence of value efficiency and process efficiency. This seems to be the case for most day traders and most financial academics.

At TAM, the emphasis in common stock investing is to acquire common stocks of well financed companies at meaningful discounts from our estimate of value efficiency prices. We also examine the probabilities for resource conversion activities which would eliminate process efficiency pricing or in any event, bring the pricing closer to value efficiency pricing. As passive investors it is hard to be accurate about forecasting resource conversions. In contrast, it is pretty easy for TAM analysts to have a good degree of confidence about the long-term growth of NAV’s and underlying efficiency values. The essential underlying fact is that historically, in over 80% of the cases, NAV seems to have been larger in the latest reporting period than it had been in the prior period; if TAM has bought in at a discount from NAV, then all that has to happen to get satisfactory market performance, is to have the discounts from NAV not widen and stay widened. This highly probable growth in NAV by no means guarantees satisfactory market performance but ought to put the odds in favor of good performance for various TAM portfolios.

Several of the securities in TAM portfolios lack relative marketability. As a consequence, their prices as measured by process efficiency are far, far below what the prices would be measured by value efficiency. The appreciation potential in these common stocks seem to revolve around either resource conversions or massive increases in NAV. In this regard it seems useful to look at the three things (other than being a nuisance) that can create value for a common stockholder.

1. Owning common stocks can give the holder elements of control, or control, of a company. It seems as if most non-trading activities on Wall Street are involved in this type of security ownership even though it probably accounts for only of a small fraction of trading volume.

2. Owning a security can give the holder access to cash payments by the company for interest, principal or premium for a credit instrument, or dividends or share buy-backs for an equity instrument.

3. Owning a security can give the holder access to a market in which the security might be sold for cash or marketable securities. Put otherwise, the investor owns something with little or no value if he owns a common stock which has no nuisance value, pays no dividend, and does not provide the holder with a market out by sale to either a market or to the issuer itself. TAM does not want to own such securities regardless of what its value efficiency might be.

I shall write you again when the TAM Annual Report for fiscal 2015 is published.

Sincerely yours,

Martin J. Whitman Chairman of the Board


Dear Fellow Shareholders,

As our Chairman, Martin Whitman, mentioned in his letter, many non-control investors are focused on the primacy of the income account. Investors’ obsessing over near-term reported earnings could lose focus on what drives long-term performance. It is the redeployment of cash flows (both internally and externally generated) that are a larger determinant of long-term investment success. Current cash flows invested poorly aren’t worth very much over time. Thus, while the historical compounding of Book Value is one area we look at when researching potential new investments, our work centers around the ability of a company to continue to compound book value at double digit rates in the future. This includes an exhaustive balance sheet analysis to determine what we call creditworthiness, as well as company specific and industry specific factors. In addition, our balance sheet focused analysis conservatively values non-income producing assets, which can easily be overlooked by analysts focused on earnings per share (EPS) valuation metrics.

The broader market has generally rewarded securities that produced the fastest growth in the income account, i.e., earnings momentum, while also broadly and indiscriminately selling companies where EPS have come under pressure. Companies that are rapidly growing EPS are clearly the “prom queens” of today’s markets, while others are being left behind. As seen in the figure below, year-to-date, the market has generally ignored valuation parameters and instead seems to be rewarding richly valued sectors with high earnings growth.

Earnings Growth, Price to Book and 2015 Year-to-Date Performance by Sector, MSCI World Index

Value Fund Portfo l i o Manager Commentary

T H I R D AV E N U E

J U L Y 3 1 , 2 0 1 5

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Value Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of July 31, 2015:

Bank Of New York Mellon Corp., 5.47%; Weyerhaeuser Co., 5.22%; Cavco Industries Inc., 5.21%; Comerica Inc., 5.21%; Covanta Holding Corp., 3.93%; AGCO Corp., 3.58%; Total S.A., 3.55%; Vodafone Group PLC, 3.41%; CK Hutchinson Holdings Ltd., 3.27%; Canfor Corp., 2.96%

Data: Bloomberg. As of July 31, 2015.

5.4%

21.0%

15.2%

9.2%

2.9%

9.8%

7.1%

4.1% 0.5%

5.9%

8.5x 8.5x

6.2x 5.3x 5.2x 5.2x

4.3x 2.1x 2.0x 1.9x

10.4%

3.8%

11.7%

6.2%

2.7%

-1.9% -3.4%

3.6%

-12.4%

-4.9%

ConsumerDiscretionary

TelecomServices

Health Care InformationTechnology

ConsumerStaples

Industrials Materials Financials Energy Utilities

Earnings Growth (trailing 12 months) P/B YTD Performance


Value Fund

This infatuation with earnings acceleration proved to be a headwind for the Value Fund in July specifically, as earnings aren’t our primary focus. We do not believe the intrinsic value of the companies in the Fund changes based on the quarterly EPS growth rate. Instead, we believe the intrinsic value of the companies in the Fund will improve with their longer-term ability to compound book value growth.

The key pillars of our investment philosophy are creditworthiness, ability to compound NAV, and healthy discounts to NAV. Our investment process is geared to identify good businesses that are led by strong management teams who are good capital allocators, along with a significant discount to a fair value in the market. Creditworthiness is the starting point for us when assessing any investment. Investing in well capitalized companies allows us to wait out earnings swings because we are confident our management teams will not be forced to do things that would hurt shareholder value to meet short-term financial considerations. In many cases, our management teams use their strong financial positions to invest when others are forced to sell. In contrast, investors focused on EPS growth use short-term earnings headwinds as reasons to sell as opposed to buy. Compounding NAV is critical as well and it’s best measured through book value per share growth over time rather than earnings growth. We seek to invest in companies that can compound at double-digit rates over our three-to-five year initial investment horizon.

Growing book value and NAV per share is achieved through various means beyond earnings growth. Companies can profitably buy and sell assets, reduce net debt per share or buy-back shares or debt at attractive prices. This form of wealth creation does not lend itself to short-hand valuation metrics such as quarterly price to earnings ratios, given that it is often lumpy and requires a more thorough analysis of the company. We agree with Marty Whitman that a long-term record of increasing NAV per share is far more important than consistent quarterly EPS growth to measure a firm’s value. EPS valuation metrics are easier to understand but only tell a small part of the story. The quality of the balance sheet, the company’s ability to access capital markets and management’s ability to invest capital are our focus and are the true determinants of long-term shareholder returns.

Most of the largest holdings in our Fund have been active year to date, with management teams engaging in strategic actions to boost book value per share. Several of the holdings that came under price pressure in the quarter continued to improve their ability to compound book value growth. These good companies got cheaper.

Comerica Buying back stock at attractive prices while maintaining robust capital levels

Cavco Strategic asset purchases to drive growth while maintaining net cash per share

Weyerhaeuser Restructuring cost actions and buying back shares, post its housing unit spin-off

Bank of New York Mellon

Cutting costs and returning capital through share buybacks and dividends while maintaining high capital levels


Notably, we substantially increased our holdings of both Weyerhaeuser and Canfor on weakness in the quarter, bringing our positions to roughly 5% and 3% of fund assets, respectively. We would refer back to last quarter’s letter where we extensively discussed our positive view on both companies and more generally our positive views on the recovery of the US housing market. Share prices of both companies did come under pressure in the quarter due to EPS reductions, mainly due to lower lumber prices. We feel the price declines in both of these companies are a very good example of our longer-term focus vs. shorter-term EPS gyrations. A major contributor to lower lumber prices this spring was the dual effect of ideal harvesting conditions in the Pacific Northwest, while a cold winter and a very wet spring, negatively impacted construction activity. While we have no way of forecasting shorter-term movements in commodity prices, nor would we try, we do note that both companies have taken strategic actions to bolster their longer-term ability to grow book value, Weyerhaeuser through restructuring actions and Canfor through acquisitions, and both have bought back shares at depressed levels. In addition, the general industry dynamics of housing starts, and new housing permits continue to trend higher, off cyclical lows. Thus, we feel the short-term hiccup in Weyerhaeuser’s and Canfor’s EPS cadence provided us a nice opportunity to patiently increase our holdings at almost 50% discounts to our appraised NAV’s for both companies.

Balance sheet improvement is a leading indicator of financial success. With high yield markets being less forgiving lately, the importance of maintaining financial strength could increase in importance to investors. While EPS fluctuations have impacted the price performance of many of our names, because we see strongly financed balance sheets and the ability to compound book value growth over time, we are confident in the ability of our portfolio names to outperform over time.

Anixter In the quarter, we initiated a new position in Anixter International. We became very interested in the company as its stock price sold off from a peak of $106 in March of 2014 to about $65 in July of this year, as investors became concerned about the economy slowing down and the negative effects of the strong US dollar. Anixter is a global distributor and solutions provider for a multitude of cables, electrical wires and electrical and security equipment for offices and industrial plants.

Value Fund

AGCO

Cost cutting and working capital reductions have freed up cash flow and funded share-backs to reduce share count by 12% over the past 15 months

Apache

Completed over $4.5 billion of asset sales, cut corporate overhead costs and redeployed cash flow into core North American operations

Canfor Completed Southern U.S. sawmill acquisitions and repurchased shares


Although distribution is a competitive business, Anixter offers a unique value-added business model for its customers. Anixter serves as a crucial link between some 1,600 wire and cable manufacturers and over 100,000 customers who buy some 450,000 types of wires, cables and related products. The company positions its role as the manager of procurement, inventory management, quality testing, engineering advisory, and just in time delivery for the Fortune 1000 companies. As evidenced by its stable gross margin of between 22% and 23%, even during recession years, Anixter’s business is not a commodity competing purely on price. Thus, Anixter has been able to avoid the channel compression at other distribution industries where manufacturers have tried to eliminate the “middlemen”; its value added model has enabled it to stay above internet resellers focused solely on lower prices.

In the last 15 months, management made three major moves to reposition the company, which in our opinion secures its ability to grow its book value for the long term. In April of 2014, Anixter acquired Tri-Ed, a leading distributor for state of the art electronic security products, for $420 million. In February 2015 it sold its sub-scale and European focused OEM Fasteners business for $380 million, exiting a non-core segment which freed up management’s focus and provided balance sheet liquidity. Most recently, it agreed to purchase HD Power Solutions in July 2015 for $825 million. We believe these three strategic actions substantially strengthen Anixter, by building scale in its core North American electronic distribution platform, while exiting an underscale unit which would have proven costly to grow. We believe the addition of Anixter’s new businesses should sustain its long-term organic growth rate at one-and-a-half to two-times US GDP. While the net effect of these transactions increased the financial leverage of the company—debt to EBITDA rose from 2.5 times to 3.6 times—management has made debt reduction a near-term priority for its strong cash flow. We think management’s goals to reduce leverage back to historical ranges of 2.5 times in roughly eighteen months are realistic and achievable. Management has historically proven to be a good allocator of capital and has demonstrated an ability to create value. The company’s equity value grew 10% a year, over the last decade, when adding back all of the stock buy backs and special dividends.

The recent sell-off in Industrials provided us with the opportunity to initiate a position at very attractive valuation levels. On a pro-forma basis, accounting for the recent announced HD acquisition, Anixter is trading at about six times our projection of 2016 EBITDA, at the bottom of its historical range of six to nine times. A conservative mid-point valuation of 7.5 times suggests over 30% upside to $80 per share. Our separate discounted cash flow (DCF) based analysis suggests an $85 per share value, as it incorporates Anixter’s stable free cash flow generation attributes. We believe these targets are both realistic and conservative.

Portfolio sale activity included the disposition of our stakes in Michelin, Hang Lung Group and Valmont. As described in more detail in our Small-Cap Value Fund letter this quarter, we believe having a robust sell discipline is a key tool for strong performance. We will sell when our price target is achieved, when we see a more attractive risk vs. return scenario, or when the original basis for our investment thesis has changed for the worse and we no longer have a compelling reason to own the stock.

Value Fund


Michelin and Hang Lung Group proved to be very successful investments for the Fund, and both were sold as share prices for these companies reached our conservative estimates of NAV. Conversely, we decided to reverse our decision on our Valmont initiation and sell the shares for a small loss. In our opinion, two risk factors that we identified in our initial analysis developed more negatively than we anticipated, i) the severity of the California drought which is impacting farm income and sprinkler sales in the region and ii) moreover, the continued drought of orders for long-haul transmission lines and the subsequent price competition for transmission tower structures that some of Valmont’s peers are pursuing. While we continue to have high regard for the management of Valmont, the earnings and balance sheet pressure on the company now appear to be more sustained than when we initiated the position, so we decided to redeploy the capital into other names, specifically our Anixter purchase which we described above. Essentially, the risk/ reward tradeoff of Anixter vs. Valmont presented a superior investment opportunity.

In closing, we remain confident in the longer-term positioning of the Fund. We continue to see new investment opportunities, as well as the potential to increase the position sizes of certain Fund names.

We thank you for your trust and support and look forward to writing to you again at the end of our fiscal year in October.

Sincerely,

The Third Avenue Value Team

Value Fund

Chip Rewey, Lead Portfolio Manager

Michael Lehmann, Portfolio Manager

Yang Lie, Portfolio Manager

Victor Cunningham, Portfolio Manager


Small-Cap Value Fund Portfo l i o Manager Commentary


J U L Y 3 1 , 2 0 1 5


As long term, patient investors, we believe that the key driver of outperformance lies in the ability of a company to compound its book value growth at double digits growth rates over time. Ideally, we would like to own a stock forever, if the long-term compounding could continue unabated and the shares remained significantly undervalued. Unfortunately, a forever holding that continually adds value is indeed a rarity.

Our investment philosophy is geared to identify companies that we can potentially hold for long periods of time given the three pillars of our investment philosophy: creditworthiness, the ability to compound Net Asset Value (NAV) over time and a discount to our NAV estimate (price target). Said differently, we look for good, well financed businesses that are led by strong management teams who are good capital allocators, along with a significant discount to a fair value in the market. Our unique approach, especially in contrast to the short term focus on quarterly earnings or even monthly sales comparisons that dominate the investment universe today, provides for a concentrated portfolio of fundamentally attractive companies. We think the measure of 95.92% active share1 for our portfolio is a good quantitative measure that supports our approach of not “following the herd”.

However, forever is a long time and over time valuation parameters and risk profiles of stocks can and do change. So outperformance hinges not only on what we buy but also—and sometimes more importantly—on what we sell. We view our robust sell discipline as an important aspect to portfolio construction and devote most of this quarter’s letter to the topic.

There are three reasons why we sell stocks that are held in the Fund. The first one is complete success. When a stock appreciates to our full NAV driven price target, we will exit the position. Essentially, in this scenario, the stock no longer meets the third pillar of our investment philosophy—the stock is no longer trading at a discount to our conservatively estimated NAV. As we have discussed in past letters, we value a company as if we were buying the whole entity, and we invest in companies that are priced at a significant discount (30% to 40%) relative to our valuation. Our price target, being long-term in nature, does take into account the future benefit of NAV compounding at double digit rates. Indeed, assessing the ability of a company to continue to grow book value at double digit rates is one of the main endeavors of our due diligence process. Thus, when a stock appreciates to, or even exceeds, our price target we move to trim back and even exit the position. This discipline is especially important for stocks that operate in cyclical industries, in order to avoid a round trip in value through the cycle, but also important for more steady compounders where price levels and market expectations have moved too high.

1 Active Share is the percentage of a Fund’s portfolio that differs from the benchmark index, the Russell 2000 Value Index. Source: FactSet Portfolio Analytics.

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Small-Cap Value Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of July 31, 2015:

HCC Insurance Holdings, Inc., 3.78%; JZ Capital Partners Ltd., 2.52%; Barnes Group, Inc., 2.24%; WCI Communities, Inc., 2.23%; VCA, Inc., 2.17%; Genpact, Ltd., 2.17%; CSG Systems International, Inc., 2.16%; Commerce Bancshares, Inc., 2.15%; Prosperity Bancshares, Inc., 2.13%; Anixter International, Inc., 2.13%

3 Q 2 0 1 5 T h i r d A v e n u e F u n d s P o r t f o l i o M a n a g e r C o m m e n t a r y 1 0

Small-Cap Value Fund

One recent example of this aspect of our sell discipline is Arch Capital Group. Arch was a very successful investment for the Fund, dating back to our purchase in November 2000 that produced an IRR of 19.8%. We sold out of our position as the stock moved toward $70, roughly a 1.5 times multiple of tangible book value, the high end of its 10-year trading range vs. our purchase cost of $18, which approximated tangible book value at the time. Thus, we felt the multiple expansion of 50% to 1.5 times fully discounted a strong path to forward NAV compounding, but did not reflect in any potential risks such as the potential of higher interest rates, which could hurt the value of its investment portfolio, nor the possibility of future price competition and/or catastrophe losses, both of which have been very benign over the last few years.

In past letters we have talked about working on many more names than we will ever own and having a robust “bullpen” list of ideas that are essentially competing with existing names to get into the portfolio. This list, and our continued ability to identify new investment ideas, leads to a second reason we will sell a stock: another investment opportunity presents a significantly more attractive upside vs. downside tradeoff, both in potential return and risks associated with the position. The capital of an existing position can and should be re-deployed into another investment idea if it is, using one of our favorite statistical terms, “stochastically dominant” when compared to an existing position. This scenario usually comes about in evaluating a peer company, usually through our continuing due diligence process, where we see a better upside vs. downside valuation tradeoff with similar compounding attributes and similar potential investment risks. We have discussed in the past how we break down our stocks into their component pieces, or risk buckets, for portfolio construction purposes. If we have made the decision not to increase the portfolio exposure to any of these end market attributes—e.g., automotive exposure, credit underwriting risk, oil and gas risk—we can and will sell an existing name from one of these areas to accommodate a newer name offering better risk vs. reward trade-off.

A good example of this type of sale was the recent sale of our Encore Wire position, to fund the increase in our Anixter International holdings to roughly 2% of the Fund. While Encore and Anixter are not exactly in the same businesses, they are subject to the same industry dynamics regarding commercial and utility construction and the volatility of copper pricing. Given the FY3Q sell-off in Anixter, combined with the value-added restructuring moves and accretive Home Depot Supply acquisition, we believe Anixter is well positioned to advance towards our NAV, roughly 50% higher than current prices. Conversely, in the low $40’s, we felt Encore Wire’s near term business trends were facing stiffer headwinds and earnings estimates appeared too high. Given today’s trading level of $33 to $34 on Encore Wire, the avoidance of a loss has proved so far to be better use of capital, despite Anixter still hovering near the price where we increased our position.

The third reason we will sell is perhaps the most important. We are not perfect and neither are our stocks. We should and do sell when our investment thesis becomes impaired due to changing circumstances. Perhaps counter-intuitively, this sort of sale is the easiest one to make. Our investment philosophy is simple and robust, but in a sense ruthless too. In contrast from a price-driven sale, if we no longer see creditworthiness, and/or the ability to compound NAV at double digit rates we have no basis for owning the stock.


There are innumerable reasons our thesis can become impaired, perhaps it’s because one of the initial risks we identified in our work has continued to develop to the negative. Perhaps management has made a poor capital allocation decision, maybe through M&A. Perhaps new competition or new products are emerging (the stage coach was replaced by passenger rail which was replaced by affordable air travel - what’s next?). Or something unexpected has emerged – by definition, something that we could not have foreseen in the original risk discussion of our investment case.

Regardless of why, it is imperative to act and not to compound a poor investment by holding when our thesis is broken. The discipline of writing and documenting our investment thesis, saved in our internal database, is a strong tool to refer back to when negative developments occur. Again, in this scenario, having a robust “bullpen” list leaves us with plenty of answers when we ask ourselves “what else can we do with this capital?” This is another instance in which our team-based approach proves to be crucial. The team can help process and cross-check the new information expeditiously and remove the emotion from the sale decision, so we can act quickly and protect capital as the negative developments are fully digested by the market.

As we said, we are not perfect, and there are a few recent examples of Fund sales where we deemed our original investment thesis to be impaired. In May and June of 2014, and finishing in October 2014, we sold our Kennametal shares in the range from $46 down to $41. We felt that the increasing mining industry slowdown, widely discussed by firms such as Caterpillar and Eaton, would impact sales and earnings for Kennametal. Moreover, we were uncomfortable with the leverage the October 2013 acquisition of Allegheny Technologies’ Tungsten metals business added to Kennametal. With Kennametal’s stock now under $30, this has proved to have been a good sale for the Fund.

One other example was our sale of Ascena Brands which we discussed in our fiscal Q2 2015 shareholder letter. We entered into the position in fiscal Q2 2015, believing that management was on a long-term path to fix its Justice division and concentrate on its women’s fashion brands. When Ascena unexpectedly bought Ann Taylor, we did not like the increased leverage on the business model, nor did we like that management was now tasked with fixing two large retail divisions. Luckily, the market liked the deal, and pushed the stock to $15.50 plus, over our $15.25 NAV and we sold. Despite the stock in the interim running to north of $17—our timing was not perfect—at today’s price below $12 this sale too proved to be prescient.

As we discussed in our letter last quarter, we continue to find several interesting new companies to work on, and were able to add three new names to the portfolio this quarter.

EP Energy Corp.

As the energy markets churned weaker over the quarter, we continued to look for attractive investment opportunities, as it was our sense that many investors were shooting first and asking questions later on their sales. We continue to believe that the current price weakness is a supply driven shock, and not what we believe would be a more worrisome lack of demand driven sell off.



The one-two punch of higher Saudi Arabian production and potential future Iranian production have pushed oil down to the low $40 per barrel range, well below what we believe is a realistic industry wide break-even level in the mid-$60’s or higher, even with the benefit of recent service cost reductions that are likely not sustainable over time. In the near term we have seen a strong demand response in higher oil use and over the medium term we would expect a drop in production of higher cost barrels, which would reduce supply and lead to higher oil prices.

As we sifted through the sell-off looking for good companies, we identified EP Energy Corp. (EPE) as it has similar characteristics to our investment in Rosetta Resources with high quality acreage in two of the most attractive shale regions in North America in the Eagle Ford and the Permian.

EPE is an independent oil and gas exploration and production company that was previously owned by El Paso Energy. The company was sold in May 2012 to private equity investors Apollo Global Management, Riverstone Holdings, Access Industries and Korea National Oil Corporation (KNOC) for $7.2 billion. EP Energy began trading publicly in January 2014 and the private equity sponsors continue to own 85% of the shares outstanding. EPE operates in four areas: the Eagle Ford Shale in Southern Texas, the Wolfcamp Shale in the Permian Basin in West Texas, the Altamont field in the Uinta Basin in Northeastern Utah and the Haynesville Shale in North Louisiana.

EPE’s management has an excellent track record of growing oil and gas production at a 27% compound annual growth rate over the past five years and proven reserves increased by 14% last year. The company’s Eagle Ford acreage is its most economic area in the current oil and gas price environment with break-even (a company-defined 10% return on capital) at an oil price of $40 per barrel. EPE’s Permian Midland Basin acreage holds significant growth potential. The Wolfcamp wells have a 10% return at $44 per barrel oil which is almost as economic as the Eagle Ford acreage as a result of lower costs and improved drilling results. The Permian acreage provides EPE with long term growth opportunities with more than twice the acreage as the Eagle Ford and over 3,000 potential drilling locations. In addition the Wolfcamp is six-times thicker than the Eagle Ford with at least 6 potential producing zones versus one in the Eagle Ford.

Although EPE has $4.9 billion of debt and a Net Debt to EBITDA ratio of 1.9 times, which is at the high end of our comfort zone, we are very comfortable with the financial strength of the company since none of the debt is due prior to 2018. In addition EP has an enviable hedge position with 95% of 2015 expected oil production hedged at a floor of $88 per barrel and 75% of estimated 2016 oil production hedged at a floor of $80 per barrel which will allow the company to live within cash flow without having to add additional debt. EP’s hedges have a current market value of around $875 million which if monetized could be used to repay debt and bring the Net Debt to EBITDA ratio down to 1.6 times.

We are confident that management’s history of improving drilling results across all of their acreage positions as well as continued cost reductions will support continued earnings improvement despite weak oil and gas prices. We also think that EPE could be an attractive acquisition target for a mid-sized E&P that wants to enter or add to its position in the very attractive Eagle Ford and Permian plays. In addition EPE may consider divesting its Altamont or Haynesville acreage at the right price.



1-800-Flowers.com

Another company we purchased during the quarter is 1-800-Flowers.com (800-Flowers). We can’t think of many better examples of a management team’s patience around investing than their recent acquisition of the iconic company Harry & David. Management studied the business for more than a decade and had multiple opportunities to purchase the asset at much higher prices. We see a fortunate parallel with our own approach to the company, having first met with the management when it was trading at significantly higher prices but patiently waiting for the right opportunity to invest. The opportunity came during the quarter when shares declined by nearly thirty percent, allowing us to invest at an undemanding valuation less than eight times EBITDA, with between 35%-50% up to our valuation estimates.

The company’s name tells a lot about its operations but we think there’s even more it doesn’t tell, and as a result of that, the company is both misunderstood and off the radar of most investors. Founded nearly forty years ago by CEO Jim McCann, 800-Flowers is the leading floral company in the world, connecting buyers of flower arrangements with local florists, primarily through its customer-facing website 1800flowers.com, familiar to the millions of consumers that regularly order flowers for delivery through it. Behind the scenes, 800-Flowers also owns a very profitable ‘wire service’ named BloomNet that electronically connects florists around the country to one another and provides a comprehensive suite of small business services to them, and we believe could have other applications in time. What is even less known by consumers and investors though is that 800-Flowers has become the world’s leading food gifting company—in part due to the extremely shrewd and transformative purchase last fall of Harry & David.

We believe the acquisition of Harry & David will accelerate 800-Flowers’ ability to compound value over the coming years for multiple reasons. To begin with, Harry & David has long been the leader in the food gifting industry and provides 800-Flowers a very valuable customer base, millions deep, to which it can cross-sell its other offerings. This includes 800-Flowers’ floral offerings but perhaps more importantly its other food gifting offerings—800-Flowers owns a host of strong brands such as Cheryl’s cookies, Fannie May chocolates, Popcorn Factory, and Fruit Bouquets which are all very well known within regions of the country but have tremendous opportunity to grow nationally. Among other things, a multi-branded web site will drive a lot of the cross-selling and is still being rolled out currently, in conjunction with a new customer loyalty platform named Celebrations. In our minds, there’s a strong likelihood that in time this platform becomes the first de facto gifting destination in consumers’ minds—bulwarked by trust and millions of loyal customers. Separately, both the floral and food businesses should continue to benefit strongly from consumers’ ongoing move to the Web and mobile devices, driven by what we believe is a powerful secular trend within society towards convenience—a trend in which we continue to invest. In addition, we would note that the online floral industry experienced an important event in December when the two other main companies in the industry (FTD and ProFlowers) combined, effectively creating what is likely to be a more profitable and less promotional duopoly between 800-Flowers and FTD over the coming years.

.



800-Flowers also benefits from a very strong management team led by Jim McCann and his brother, Chris McCann. With company insiders owning large stakes in the company we see solid alignment of interests with outside long-term investors like Third Avenue. We first met with the company at a conference in March and have spent significant time with management since. Among other things, we would highlight their long-held dedication to a pristine balance sheet, strong corporate culture, and patient investing. We believe that the market is likely to appreciate the attractiveness of 800-Flowers’ valuation over the coming year as more investors become aware of the Harry & David acquisition and take the time to analyze its impacts. We expect financial results will shine a light as well, as our analysis points to a high likelihood for strong organic growth and cash flows over the coming years, particularly during the holidays, which are typically a boon for gifting companies.

Visteon

Many people may remember Visteon as the automotive parts company spun off from Ford that fell on hard times during the financial crisis. Today it is a much different company than the Visteon of yore. Given its “special situation” status, having over $60 per share in net cash and a stock price of roughly $100, the stock screened poorly on a statistical basis, enabling the Fund to acquire shares during the quarter at an attractive valuation of around 6.4 times pro forma adjusted EBITDA as the company continued on its transformational path. With its large net cash position, Visteon certainly meets our hurdle of a solid balance sheet. More excitingly, we think the transformation of the company has set it up to accelerate its book value compounding.

Visteon has transformed itself into a singularly focused automotive electronics company, having sold or in the process of selling its interiors businesses and now upon the recent sale of its climate control business. In December 2014, Visteon announced the sale of its 70% stake in Halla-Visteon Climate Control Corp (HVCC) for approximately $3.6 billion to an affiliate of Hahn & Co and Hankook Tire; the transaction closed in June 2015. The company expects to return $2.50 billion to $2.75 billion of cash to shareholders over the next 12 months via a series of buybacks and special dividends, in a very tax efficient manner, with the remainder of the proceeds to be used for growth and some debt reduction. Post the HVCC transaction, Visteon is very well-capitalized, with around 56% of its current market cap in cash, with solid growth prospects longer term given its market position in cockpit electronics, its focus on connected car solutions and given the outlook for the automotive electronics market overall. The company recently lured its new CEO, Sachin Lawande, away from Harman, a company which is known for infotainment and where Lawande had most recently been president of the infotainment division. Further, the company has opportunities to improve margins. Visteon acquired Johnson Controls’ automotive electronics business last year, and is already benefiting from an increase in business wins and re-wins. In addition to increased sales opportunities, there are cost synergies from this acquisition along with other opportunities to reduce operational overhead.



We’d like to close this letter with the simple thought that it is our job to find undervalued securities that meet our investment philosophy hurdles, construct them into a fairly concentrated 60 to 65 name portfolio, harvest when necessary and redeploy those assets into better risk-return situations. By adhering to our investment philosophy and maintaining strict practices, like our sell discipline and our bullpen list, we can produce solid results over time. On the anniversary of Chip’s first year at Third Avenue in June, it is worth reflecting that these and many other process and portfolio construction tools that he has brought to the team have been integrated into our work flow and are working to keep our team focused on delivering successful investment results along the lines of our well-tenured investment philosophy. We are pleased with our investment results year-to-date, with our returns up 2.96% vs. -2.02% for the Russell 2000 Value.2

We look forward to writing to you at the end of our fiscal year in October.

Sincerely,

Third Avenue Small-Cap Value Team

Chip Rewey, Lead Portfolio Manager

Tim Bui, Portfolio Manager

________________________________

2 The Fund’s Institutional share class one year, five year and ten year (April 1, 1997) average annual returns for the period ended July 31, 2015 were 7.29%, 12.80% and 5.57%, respectively. The Fund’s Institutional share class one year, five year and ten year (April 1, 1997) average annual returns for the period ended June 30, 2015 were 4.09%, 14.86 and 6.23%, respectively. Past performance is no guarantee of future results; returns include reinvestment of all distributions. The above represents past performance and current performance may be lower or higher than performance quoted above. Investment return and principal value fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. The Fund’s total operating expense ratio, gross of any fee waivers or expense reimbursements, was 1.15%, as of April 30, 2015. Risks that could negatively impact returns include: fluctuations in currencies versus the US dollar, political/social/economic instability in foreign countries where Fund invests, lack of diversification, volatility associated with investing in small-cap securities, and adverse general market conditions. Prospectuses contain more complete information on management fees, distribution charges, and other expenses. Please read the Prospectus carefully before investing or sending money. For current Fund performance or a copy of the Prospectus please visit our website: www.thirdave.com or call 800-443-1021. M.J. Whitman LLC, Distributor. Member FINRA/ SIPC.



Real Estate Value Fund Portfo l i o Manager Commentary


J U L Y 3 1 , 2 0 1 5


We are pleased to provide you with the Third Avenue Real Estate Value Fund’s (Fund) report for the quarter ended July 31, 2015.

Quarterly Activity Macroeconomic events such as the Greek debt crisis, a continued rout in commodity prices, and significant declines in China’s stock markets led to global volatility during the quarter. As a result, we were able to further reduce the Fund’s cash position (approximately 14% at quarter end) by investing capital into bargain priced securities in all three of its primary regions including: North America, Europe, and Asia ex-Japan. The bulk of the activity consisted of adding to existing holdings as the Fund’s core positions continue to offer the most attractive risk-adjusted return prospects in real estate and real estate related securities for long-term investors.

Key additions during the quarter included increasing exposure to a select group of real estate businesses globally that seem capable of compounding capital by 10% or more per year over the next three to five years by undertaking development and redevelopment projects or by making opportunistic acquisitions. Additions included the common stocks of Westfield Corporation, Global Logistics, Forest City Enterprises, City Developments and Vornado Realty Trust. The Fund also increased its exposure to real estate related businesses that have strong ties to the US and UK residential markets, where fundamentals continue to recover from multi-decade low levels but remain below where they need to be on a long-term basis (e.g., 1.5-1.6 million home starts annually in the US). Residential related investments increased during the quarter included the common stocks of Weyerhaeuser and Rayonier, both of which are large timberland owners that trade at steep discounts to our estimates of Net Asset Value (NAV) despite robust growth prospects. The Fund also increased its exposure to certain special situation investments by purchasing additional shares of Macerich, First Industrial, and Wereldhave. As is the case for the Fund’s other special situation investments, the common stocks for these companies trade at significant discounts to our estimates of their private market values.

The Fund also reduced a few positions during the quarter, reallocating the capital to other securities where the risk-adjusted return prospects seemed superior. Capital recycling activity during the quarter included selling the common stock of Starwood Waypoint and initiating a position in Kennedy Wilson Holdings; reducing CK Hutchison Holdings in order to increase the Fund’s position in Cheung Kong Property Holdings; and eliminating Hang Lung Properties and in turn buying Hang Lung Group. The Fund also sold Quintain Estates & Development.

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Real Estate Value Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of July 31, 2015:

Weyerhaeuser Co., 4.82%; Forest City Enterprises, Inc., Class A, 4.30%; First Industrial Realty Trust, Inc., 3.65%; Macerich Co., 3.60%; Rayonier, Inc., 3.40%; Westfield Corp., 3.38%; Newhall Holding Co. LLC, Class A, 3.08%; Vornado Realty Trust, 2.96%; Hammerson PLC, 2.85%; Inmobiliaria Colonial SA, 2.83%


Real Estate Value Fund

Starwood Waypoint is a US REIT that owns a portfolio of single family homes for rent. At the time the position was initiated in 2013, the company was incredibly well-financed (i.e., net cash) and run by a management team with a proven track record in both operations and capital allocation. Since that time there has been turnover in the executive ranks, large scale acquisition opportunities seem to have passed, and the balance sheet has become significantly encumbered. With the original thesis no longer being intact (limited downside with upside optionality on improving profitability and potential acquisitions), the Fund exited its position at prices that were in-line with the original cost basis after factoring in dividends.

Kennedy Wilson Holdings (Kennedy Wilson) is a US-based real estate operating company that has been on Fund Management’s radar for a number of years. The company has evolved over time and, today, is an integrated global real estate investment and services company with a $2 billion portfolio of investments in a diversified mix of commercial and residential assets. In addition, Kennedy Wilson has rapidly expanded its funds management business with more than $18 billion of assets under management. The management team owns 19% of the company’s stock and has historically been savvy capital allocators, having made substantial investments in Japan during the 1990’s, the United States following the financial crisis, and in Europe in recent years as a first mover in Ireland and Spain. The template has been the same in all markets: invest capital in out-of-favor regions or property types at substantial discounts to underlying value, actively manage the properties and add value during the holding period, and then ultimately realize profits over the long-term in order to recycle the capital elsewhere. During the quarter the Fund finally had an opportunity to purchase Kennedy Wilson’s shares at a discount to our estimate of NAV. It seems likely that the company will continue to prove capable of increasing its NAV by 10% or more per year over the next two to three years as it further expands its asset management business and realizes profits (including promotes) from some of the well-timed investments it made over the past few years.

With volatility in Chinese stock markets spilling over to the Hong Kong market, certain companies in Hong Kong have traded to historically low valuations. For instance, during the quarter the common stock of Hang Lung Group, a Hong Kong based holding company with a 53% ownership stake in Hang Lung Properties and other real estate investments, traded at prices that implied a value below the market value of its stake in Hang Lung Properties (without factoring any uplift for the Group’s additional ownership position in a 2.2 million square foot class-A office and residential space at the Grand Gateway complex in Shanghai). Consequently, the Fund sold its stock in Hang Lung Properties and purchased Hang Lung Group, essentially trading one discounted security for an even more discounted security.

Hang Lung Properties had been held in the Fund off and on for nearly 10 years. The Hong Kong based real estate operating company historically concentrated on commercial properties and residential projects in Hong Kong. Hang Lung Chairman Ronnie Chan was a pioneer in China, developing retail led class-A mixed-use projects more than a decade ago. After enormous success in Shanghai, Hang Lung branched out to other cities in China, where it now has seven large scale projects open with three more under development.


Once completed, the company’s properties in China will comprise more than 54 million square feet of space (approximately one-third of the size of Simon Property Group’s portfolio) and form one of the most productive and valuable portfolios in the region. The process of undertaking these large scale developments is a challenging one but the long-term value creation taking place as these projects open and stabilize should lead to outsized NAV growth and reward both Hang Lung Properties and Hang Lung Group shareholders. At this point in time, however, Group shareholders may benefit disproportionately given the larger discount and the outside chance that the company collapses the holding company structure.

With the additions to Hang Lung Group and Cheung Kong Property during the quarter, the Fund’s exposure to Hong Kong based companies increased to 13% of net assets. Fund Management has been increasingly mindful of the impact global currency movements could have on the underlying value of the Fund’s Hong Kong holdings. At the present time the Fund doesn’t have currency exposure relating to these investments, per se, as the Hong Kong Dollar ($HKD) is pegged to the United States Dollar ($USD). It is no longer inconceivable, though, that at some point over the next few years Hong Kong could elect to re-peg the $HKD to a basket of currencies or even the Chinese Renminbi. Should such a scenario play out, there would no doubt be short-term market dislocations (potentially great buying opportunities for the Fund’s well-capitalized property companies) but the Fund’s investments could end up in a currency that is re-pegged at a rate that is lower than what exists today. While the chances of this occurring still seem remote, the Fund purchased two-year Put Options on the $HKD for its entire notional exposure at a price that is approximately 3% below the current exchange rate. After purchasing the $HKD Put Option, the Fund has hedging instruments in place for its entire notional exposure in Europe, Australia, and Hong Kong.

The common stock of Quintain Estates & Development (Quintain), a UK based real estate operating company, was also eliminated during the quarter. Quintain Common had been owned in the Fund since 2004. Quintain controlled two valuable residential led mixed-use projects in London with sites in East London (Greenwich) and North London (Wembley). While the company had great development sites, those projects didn’t generate enough income to cover its interest costs during the downturn, which ultimately led Quintain to undertake a dilutive rights offering (which the Fund participated in) and bring in a new management team in 2009. Since that time, the company sold the Greenwich project for cash, significantly reduced debt levels, and refocused the company on Wembley with entitlements to build more than 7 million square feet of residential and commercial space in one of the most supply constrained markets globally. However, the public markets didn’t seem to be willing to give the company credit for its underlying holdings, leaving the stock at a large discount years after being repaired. In order to close this gap and realize value for shareholders, Quintain’s Board announced that it had agreed to sell the company to funds affiliated with Lone Star (a US based real estate and private equity group) for 131p per share or a 22.4% premium to the undisturbed price (107p per share) and a 7.4% premium to the company’s most recently published NAV (122p per share). Subsequent to the announcement, the Fund sold its shares. Having held Quintain Common for more than 10 years, realizing only a nominal gain on the investment was not the ideal outcome, but Fund Management supports the Board’s decision to crystalize value for shareholders by agreeing to sell for cash and at a premium to NAV.



Unlocking Value We estimate that the Fund’s common stock investments are trading at more than a 20% discount to their private market values when viewed in the aggregate. This discrepancy has continued to widen over the past year, not necessarily due to declines in the price of securities, but as a result of lower initial yields (i.e., higher prices) paid for portfolios in private market transactions. Given the trend, market participants are increasingly focused on the disconnect between the value of real estate on “Main Street” vs. “Wall Street,” and the topic has dominated recent meetings with management teams and conference calls with industry executives. While certain companies have made great strides in addressing the discount, very few companies seem to be taking the steps necessary to close the gap including: (i) simplification, (ii) returning excess capital, and (iii) eliminating barriers to a transaction. Should companies execute on these three initiatives, value will be recognized by either the public or private markets and stakeholders will be rewarded.

Simplifying the business is an obvious first step that a company can take in order to eliminate some of the discount that its shares trade at relative to the underlying NAV or private market value. As we have discussed in previous letters, companies that focus on a single property type, or property owners that dominate a certain market, tend to be rewarded with premium valuations and rarely trade at material discounts provided the capital structures are sound. Most of the property companies in the United States, United Kingdom, and Australia, including a number of those held in the Fund, have done a remarkable job of streamlining their businesses and have eliminated a great deal of the discount in the process (e.g., Forest City Enterprises, Vornado Realty Trust, Hammerson plc, Dexus Property Group, etc.). However, there remains a great opportunity to benefit from improved valuations as companies in Europe (e.g., Gecina, IVG, Globe Trade) and Asia ex-Japan (e.g., Henderson Land, Wheelock, Hang Lung Group, etc.) simplify their respective structures or refocus their businesses around core assets. The real low hanging fruit seems to be in Asia where companies trade at the deepest discounts to private market values, but now have a template to follow after Li Ka-Shing’s moves earlier this year. As evidence of the value that can be created by simplifying a business along these lines, Cheung Kong Holdings’ stock price increased by more than 50% between the time the restructuring was announced and completed.

Should simplification efforts not close the gap between implied prices and intrinsic value for a sustainable period of time, well-capitalized companies can take a further step and return excess capital to shareholders via share repurchases or special dividends. Third Avenue has been a long time advocate of stock repurchases at prices below NAV as a tool to enhance shareholder value. In fact, there are currently a number of holdings in the Fund that have large share repurchase programs in place (i.e., Weyerhaeuser, Westfield, Rayonier, Countrywide plc and PNC Financial Services). Fund Management supports the buyback programs since the earnings power for these businesses is likely to be significantly greater in two to three years time (which doesn’t seem to be factored into current prices), so the impact for the remaining shareholders will be much more meaningful with a reduced share count.

While Fund Management is generally supportive of share repurchases, one trap management teams should avoid is selling assets or returning excess cash flow to shareholders via stock buybacks at prices that are only slightly below private markets or at valuations that may not be sustainable over the course of an entire cycle.



Given our focus on investing in securities that trade at discounts to conservative estimates of value (i.e., durable values), the Third Avenue Real Estate Value Fund is invested in few securities where this could be the case. There are certain situations where Fund Management would prefer excess capital to be returned to shareholders via a special dividend instead of stock buybacks. For instance, one of the Fund’s top holdings is the common stock of Macerich, a US Mall REIT that owns a highly productive portfolio of irreplaceable malls with a focus on the West Coast. Late last year, Macerich received an unsolicited takeover offer from Simon Property Group at $96 per share to be paid in a mix of cash and stock, implying almost a 4% cap rate for the company’s portfolio (a historically low initial yield or historically high cash flow multiple). The offer was ultimately rejected by the Macerich board based on the company’s internal estimate of private market value being higher than the offer price. Instead of selling to Simon, Macerich has now announced intentions to monetize stakes in certain mall assets where it may generate $1.5-2.0 billion of net proceeds at prices that were above the price implied by Simon’s bid. The proceeds are intended to be used to repurchase shares. Selling properties at a sub-4% cap rate and buying back stock at cap rates in excess of 5% can certainly be accretive in the short-term, but in this case it could make more sense to return that capital to shareholders via a special dividend. Should Macerich sell assets at a sub 4% cap rate and return that cash to shareholders, the end result might ultimately be the superior alternative should a higher bid for the company not surface.

Simplifying and returning excess capital to shareholders via well-timed share repurchases or special dividends typically act as large enough catalysts to close the discount to private market values over a reasonable period of time. In cases where these moves don’t close the gap, there are typically other factors in play, such as a management team or control group being entrenched, thus limiting the prospects for a change of control. Depending on the jurisdiction, this can take various forms including staggered boards and ownership limitations (United States), shareholders with blocking rights (United Kingdom), or companies with majority owners and board representation (Asia ex-Japan). Provided companies with these structures have management teams and control groups with a strong track record and ones that are meaningfully invested alongside the Fund as shareholders, Third Avenue supports these owner-operator models.

There are a number of instances though where the Fund is invested in well-run property companies where the incentives seem to be much more skewed towards management teams continuing to run the company as a going concern instead of selling the business to crystalize value. This is certainly the case in a number of the Fund’s US based investments, where inside ownership isn’t as significant and there has been a big push in recent years for change of control clauses or “golden parachutes” to be removed from compensation packages as a best practice, thus preventing management teams from being paid when selling the business. Third Avenue is not necessarily in agreement with this practice as we believe that management teams should be equally as incentivized to sell a business at a premium valuation as they are to continue to operate it as a going concern. Therefore, Fund Management is supportive of change of control clauses that are in reasonable ranges (i.e., 2-3 times total compensation payment for key executives with a full vesting of options and restricted shares).



Aligning stakeholders’ interests (e.g., shareholders, directors, executives, etc.) seems to be of the essence at this point in time as record amounts of private capital have recently been raised to invest in real estate. In fact, according to industry sources, pledges to commercial real estate vehicles are on track to approach $50 billion in 2015, exceeding the amount raised last year by more than 20%, leaving private equity funds with buying power in excess of $200 billion. In order to put these large sums of capital to work, sponsors will undoubtedly have to look to the public markets for larger scale transactions. Management teams and boards should be aligned with shareholders in entertaining bids from these pools of capital as they may very well have a lower cost of capital and therefore be willing to pay prices for portfolios that may be hard to achieve in the public markets (e.g., Gables multifamily portfolio selling for $3.2 billion or a 4.9% cap rate, Industrial Income Trust’s selling for $4.6 billion or a 5.5% cap rate). Therefore, it seems like the opportune time for control groups to make sure they have done everything they can to enhance value, including simplifying, returning excess capital, and eliminating barriers to transactions. Should they follow this path, publicly traded real estate companies (including a number owned in the Fund) can greatly increase the odds of having their portfolios more appropriately priced by either the public markets or else in private market transactions, thus unlocking substantial value for key stakeholders in the process.

We thank you for your continued support and look forward to writing to you again next quarter.

Sincerely,

The Third Avenue Real Estate Team

Michael Winer, Co-Lead Portfolio Manager Jason Wolf, Co-Lead Portfolio Manager Ryan Dobratz, Co-Lead Portfolio Manager



International Value Fund Portfo l i o Manager Commentary


J U L Y 3 1 , 2 0 1 5


Investing is sometimes analogized to long distance running. People say things like, this is not a sprint it’s a marathon. While I do not care much for clichés I do enjoy running. I ran the New York City Marathon in 2010 and I do believe there are a number of parallels to be drawn between investing and this type of endurance sport. As I reflect upon the performance and positioning of the Fund, I frequently remind myself of the concept of “pace”, meaning the pace at which a marathoner can consistently run the length of a grueling race, ideally finishing the latter half of the race with faster per mile times than the first half (referred to as split times). Concentration and discipline throughout the race are critical. Running through New York City with 50,000 people under the watchful eyes of enormous crowds, helicopters and news crews is heady stuff and similar in several regards to Fund management. It is extremely easy to get excited, lose concentration and succumb to the urge to adopt the pace of the runners around you or accelerate to pass runners in front of you, which of course result in a break from one’s pace and strategy.

Through July of this year, the Third Avenue International Value Fund (Fund) returned negative 3.86%. In the most recent fiscal quarter, the Fund returned negative 8.62%.1 The Fund’s benchmark, the MSCI ACWI ex USA Index, returned 4.08% year to date as of July and negative 4.43% for most recent fiscal quarter. It feels far worse than that as a result of the maelstrom surrounding select parts of the portfolio. Structural flows into equity ETFs continue to pose challenges for managers with high active share and, throughout this year, the capital exodus from emerging market and commodity ETFs, and funds otherwise dedicated to those categories, have created a gale force headwind for those classes of assets. We continue to steer the Fund in the direction of value, in the extreme in some cases. We find neither safety nor prospect of attractive return in the vast majority of widely held securities. We have certainly not been paid for our effort at this point but continue to unapologetically believe that buying dirt cheap securities while protecting one’s capital from risk of permanent impairment is the path to success in this endurance race. It is critical that we tune out the pace of other runners in the field and continue to run our style of race. Personally, I have used the recent period of weakness to add to my holdings in the Fund.

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue International Value Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of July 31, 2015:

Tenon, Ltd., 5.97%; Rubicon, Ltd., 5.20%; Telefónica Deutschland Holding AG 4.23%; White Mountains Insurance Group Ltd., 4.02%; Vivendi SA, 3.95%; Atrium European Real Estate Ltd., 3.56%; GP Investments, Ltd., 3.48%; Antofagasta PLC, 3.46%; Petroleum Geo-Services ASA, 3.44%; Capstone Mining Corp., 3.31%

1 The Fund’s Institutional share class one year, five year and ten year (December 31, 2001) average annual returns for the period ended July 31, 2015 were -15.05%, 4.05% and 2.48%, respectively. The Fund’s Institutional share class one-year, five- year and ten-year (December 31, 2001) average annual returns for the period ended June 30, 2015 were -15.22%, 5.95% and 3.21%, respectively. Past performance is no guarantee of future results; returns include reinvestment of all distributions. The above represents past performance and current performance may be lower or higher than performance quoted above. Investment return and principal value fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. The Fund’s total operating expense ratio, gross of any fee waivers or expense reimbursements, was 1.64%, as of April 30, 2015. Risks that could negatively impact returns include: fluctuations in currencies versus the U.S. dollar, political/social/economic instability in foreign countries where Fund invests, lack of diversification, volatility associated with investing in small-cap securities, and adverse general market conditions. Prospectuses contain more complete information on management fees, distribution charges, and other expenses. Please read the Prospectus carefully before investing or sending money. For current Fund performance or a copy of the Prospectus please visit our website: www.thirdave.com or call 800-443-1021. M.J. Whitman LLC, Distributor. Member FINRA/ SIPC.


International Value Fund

In the pages that follow, we will discuss the drivers of the Fund’s performance and delve into several of the philosophical underpinnings that dictate the Fund’s approach and activity. Our letter concludes with a discussion of the Fund’s investment activity during the quarter.

Performance The strongest positive contributions to Fund performance year to date have come from Hutchison Whampoa, which has executed on several important resource conversion activities, and a number of our European holdings including Telefonica Deutschland, Nexans, BinckBank, Daimler and Vivendi. Negative impacts to the Fund’s performance during the quarter, and for the year for that matter, have resulted, in large part, from three categories of investments held within the Fund. Firstly, our exposure to base metals and oil services. Our copper mining companies continued to negatively impact performance as global sentiment towards the metal and this class of company continued to deteriorate in this fifth year of cyclical downturn. With similar sentiment surrounding them, our oil and gas related investments were also poor performers during the quarter. We will return to where the concept of sentiment fits into the team’s activities shortly noting though that several of our investments in other commodity-related industries, such as timber and agriculture, have performed reasonably well of late. Secondly, our investments in Brazil have suffered from an increasingly challenging macroeconomic and political environment which has affected each of our three investments in ways specific to each business. In no case has the long-term value of any of our businesses been diminished, i.e., suffered a permanent impairment, and in each case the impact from the depreciating Brazilian Real has been the primary source of negative investment returns. We will return to the matter of forecasting currencies shortly as well. Finally, our two investments in less liquid New Zealand small-cap companies—Rubicon Ltd. and Tenon Ltd.—have been a drag on performance during the quarter and year to date. The depreciation of the New Zealand dollar is the primary source of negative returns more so than the stock prices. Meanwhile the two businesses derive their value almost exclusively in US dollars, which makes the decline in the New Zealand dollar nearly irrelevant to the value of the business as denominated in US dollars. This value dynamic has failed to “flow through” to be reflected in the equity prices. We have written extensively on this topic in past letters and thus will speak to our investment philosophy more broadly with regard to our assessment of how efficiently the market prices securities in subsequent paragraphs.

Sentiment and its Importance It might seem odd for fundamental corporate finance-fixated, value investing people like ourselves to exert energy in considering squishy psychological matters like sentiment. Many Wall Street banks “measure” sentiment using fund manager positioning relative to indices as a proxy or some other similar method. In recent weeks the world has been awash with articles describing historic net short positioning in the futures of various metals. It is not remotely surprising that measurements of poor sentiment are nearly off the charts for a variety of commodities today.


Commodity ETF (out)flows are another glaring indication of sentiment. Which brings us to one critical element of the Third Avenue investment approach: the refusal to accept today’s received wisdom as gospel. Fundamental analysis and valuation inform long-term value investors, not prevailing sentiment. Though I suspect short-term traders are justified in caring more about current sentiment and shifts thereof. Our firm’s Founder and Chairman, Marty Whitman, sometimes speaks to the issue of sentiment with the mantra “we buy when the near-term outlook sucks”. The philosophy compels us to deliberately seek out and analyze areas of potential opportunity where sentiment is at its worst, or is at least quite poor, knowing full well that sentiment and valuations may get worse before they get better. Our presence in areas of controversy is deliberate. These are the hunting grounds in which one finds exceptional long-term value. I offer the Argentine Crisis of early 2000s, the Tech, Media and Telecom bubble implosion of 2000, the Greater China SARS outbreak, the global financial crisis and the European Sovereign Crisis as historical examples of areas where the Fund found opportunities with sentiment at its worst and the near-term outlook quite dire. David Swensen, legendary manager of Yale’s endowment, has offered some jewels on the topic of building idiosyncratic portfolios “which frequently appear downright imprudent in the eyes of conventional wisdom.” Idiosyncratic portfolios will, almost by definition, produce periods of underperformance. Indeed, virtually all of the investment industry’s great track records bear scars from periods of material underperformance. Still, this approach is so uncommon because an unconventional approach to any task tends to invite skeptics and flying in the face of conventional wisdom requires considerable fortitude.

To Forecast or Not to Forecast Let me skip directly to the punchline: we do not make economic forecasts let alone identify or value businesses based upon them. In our last quarterly conference call we exhumed the often quoted John Kenneth Galbraith quip that “there are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” I think it’s an honest assessment to say that we know we don’t know, meaning we are guilty of one sin rather than two. Let’s take the matter of forecasting exchange rates as a topical example. Having spent the last year managing an international fund in an environment of unmitigated US dollar strengthening, with the resultant performance headwind, the topic of currency forecasting and currency hedging has been a near constant and continues on today. The discussion regarding the future of exchange rates tends to be wide-ranging, including (but not limited to) the interrelationship of central bank policy, economic growth rates, inflation rates, interest rates, trade balances, indebtedness, foreign exchange reserves and all manner of national idiosyncrasies such as political will. Bear in mind that we are talking about an exchange rate determined by the future balance of all of these variables not for one country but two, to say nothing of the unknown unknowns and inherent dynamism of the environment in which the relevant actors make critical decisions. I remain extremely skeptical that these varied factors can be accurately predicted over time across many currency pairs. Further, for currency forecasters an equally important and complex question is whether the future as they forecast it is accurately reflected in the exchange rate today, which is what would inform one as to future changes in exchange rate (in other words, are those future developments currently priced into the exchange rate?).




Today it seems hard to believe but in January of 2014 Goldman Sachs’ currency strategy group put forth its twelve month Euro forecast for a rate of 1.40 US dollar per Euro. The Euro was then at 1.36 US dollar per Euro, meaning they were looking for a modest strengthening of the Euro relative to the US dollar throughout 2014. That is of course not what happened. Fourteen months later in March 2015 with the Euro now costing only $1.05 US dollars, the same team forecast that six months forward the Euro would be at $1.00 US dollar and twelve months forward would be at $0.95. Declines have a way of eliciting forecasts for further declines. The 2015 low for the Euro was within days of that report and the Euro has since strengthened roughly 7%, ECB bond buying onslaught and Greek Crisis notwithstanding. For your records, they forecast the Euro to be at $0.85 by the end of 2016. My purpose is certainly not to call out Goldman’s currency team but rather to draw attention to the near impossibility of the forecasting job, even for sophisticated and experienced people who make it their life’s endeavor.

In my experience as an investor and, more generally, as a human, forecasts are frequently extrapolations in drag. What I am describing can be seen in countless corners of the financial world. As in the currency example above, it is easy to find forecasts that are heavily derived from the current price and recent price movements. The futures curve for oil gave no indication of the late 2014 oil price crash even as the crash had already begun. Earlier high prices had led to predictions for more high prices. Likewise, current low oil prices tend to be extrapolated in forecasts that look a lot like current prices. To be clear, I don’t personally have a strong view about the future price of oil. Nobel Prize Laureate and Yale professor Robert Schiller recently produced a long time series showing a similarly poor ability of the market to accurately predict future inflation rates, as seen through TIPS pricing. The conclusion was conceptually identical to the oil futures example—expectations of future inflation tend to be extremely similar to the recent inflation experience. It is no wonder that as an investment community we are prone to economic surprises on a grand scale.

In practice, the implications for our team are several-fold. First, the companies in which we invest must be able to maintain, and hopefully increase, value across a range of economic conditions. Second, we tend to spend the preponderance of our time attempting to understand what an informed cash buyer would pay for the business or assets in question across a range of scenarios and further develop a sense of the probabilities that this underlying value will grow over time. Third, we must make sure that the company’s business model and financial position will enable it to endure the unexpected. We are certain that we will be surprised (we know we don’t know). Our goal is to be as prepared as possible by paying cheap prices for companies with high degrees of financial and operational durability, for which underlying values are highly likely to endure, if not grow.

The Deficient Market Hypothesis I will spare readers another lengthy invocation of Black Monday and instead refer readers to our Chairman’s brilliant writings on the invalidity of the efficient market hypothesis. Additionally, I will attempt to make a contribution from my own personal investment experiences which preclude me from having any faith in the efficiency of securities markets pricing.


Factors exist pervasively in financial markets that are the enemy of efficiency. Markets for illiquid or less liquid securities immediately come to mind. As discussed above, sentiment (in its extreme form known as hysteria) also has a habit of creating nasty divorces between price and intrinsic value. Earlier in this letter I referred to Rubicon Ltd., and the New Zealand dollar in which it is listed, as a drag on Fund performance. Over the last twelve months, the US dollar denominated intrinsic value of the security has grown meaningfully as a result of the improved operating performance of one if its two subsidiaries and through gradual nearing of a known resource conversion event for the other, all of which is publicly available information. In each case the values are almost entirely derived in US dollars. Meanwhile the price of Rubicon stock has declined 32% in US dollars (13% from the stock price and 19% from the New Zealand dollar decline) over that last twelve months. There is no efficient market for the equity of Rubicon. Investment returns will come the old fashioned way, from actual corporate events, rather than market efficiency.

More broadly, securities with high degrees of price volatility, due to low liquidity or any number of reasons, tend to produce inefficient securities pricing and on occasion extraordinary opportunities to buy or sell. Poor sentiment, extrapolated forecasts for a continuation of poor operating conditions, and heightened price volatility are today conspiring to provide exceptional long-term opportunities in many of the areas described above. This type of investing rarely provides immediate gratification but has historically been very rewarding.

Investment Activity During the quarter the Fund established one new position and eliminated four positions—Sanofi, Munich Re, Daiwa Securities and Titan Cement. Additionally the Fund added to its positions in PGS, Antofagasta, Capstone Mining, Arcos Dorados and CNH Industrial. We will begin with two of our dispositions.

Titan Cement

During the quarter we sold our remaining position in Titan Cement. We initially purchased shares in this family-controlled Greek cement company in the height of the European Sovereign crisis, meaning early 2011, prior to the world coming to be at peace with ballooning European sovereign debt loads and highly questionable credit worthiness. One of our primary attractions to Titan at that time was a South Florida-focused US operation that had not yet recovered from the US housing crisis. In the years of our ownership, Titan’s US division did indeed show a considerable resurgence. Its Greek business, while macro-challenged, performed better than one might have guessed given the dire operating environment. The company’s operations in Egypt however were diminished as a result of large scale gas shortages in that country. After having realized a respectable IRR of 7.8%, our sense of the company’s cheapness has faded and simultaneously the path to further improvement in operating performance is more questionable. The growing prospect of Greek capital controls and potential disruption in the Greek equity market had some influence on our disposition which we completed prior to the Athens Stock Exchange closure in July.



Munich Re

During the quarter, the Fund also disposed of long-held Munich Re, which the Fund initially purchased prior to the Global Financial Crisis. As a well-capitalized historically prudent underwriter and manager of its enormous investment portfolio, the company survived the Global Financial Crisis as well as the subsequent European Sovereign Crisis relatively unscathed. With those experiences behind us, a long stretch of low levels of catastrophe-related losses in the industry has led to an oversupply of capital in the industry. Meanwhile capital continues to flood into the industry from financial investors and reinsurance pricing remains under pressure. Low pricing means low returns for the assumption of certain risks. In total we realized an IRR of 5.5% beginning in early 2008. We would like to return to quality companies in the insurance industry when some of the excess capital has been cleared out, premiums reflect a “harder” market and prices of equities are available at cheaper prices.

Amec Foster Wheeler Plc

During the quarter we established a single new position in the Fund, Amec Foster Wheeler Plc, which provides consulting, engineering and project management services to energy, power and process industries largely through reimbursable contracts. Engineering services typically represent only a small portion of the customer’s total project cost, but are critical to the success of the project. Slightly over 60% of Amec Foster Wheeler’s revenue is driven by the more cyclical end-markets, such as oil and gas and mining, but the remaining 40% should prove more stable in the current market environment. Amec and its management have a demonstrated history of compounding business value, maintaining strong returns, generating free cash flow and returning excess cash to shareholders. The company is in the process of integrating the recent transformational acquisition of Foster Wheeler, which added new capabilities in downstream oil and gas and further diversified the company’s geographic exposure.

Our ability to purchase shares of Amec Foster Wheeler at a significant discount to our estimate of its business value results from a share price that tends to respond to movements in oil prices to a degree that overstates its business sensitivity to the price of oil. While it is not surprising that the stock has declined, we believe the less cyclical parts of the business will enable it to weather this storm better than most of its peers, who rely heavily upon upstream oil and gas spending. Meanwhile, no credit appears to be bestowed upon the newly combined company for the considerable strategic benefits of combining Amec with Foster Wheeler. The two companies had a high degree of complementarity in terms of their respective upstream and downstream exposures, geographic exposures and customer exposures. Lastly, the company is progressing rapidly on its merger integration which will yield considerable cost synergies and improved operating performance. Amec was a 1.5% position in the Fund as of July 31, 2015.



In closing, today we see a number of excellent opportunities available to long-term patient investors. Increasingly so, the portfolio is being populated with investments that we believe offer very attractive long-term propositions. Unusually attractive opportunities have surfaced as a result of deteriorating sentiment that is divorced from fundamental attractiveness and long-term value in emerging markets, specific natural resources and the companies that produce them, as well as company-specific opportunities. An idiosyncratic portfolio results from our approach and we do not intend to respond to the “pace” of the broader market. We will continue to invest where deep value is present and remain very confident that the approach will yield the desired results.

Thank you for your continued interest in our quarterly reviews and we look forward to writing to you next quarter.

Sincerely,

Matthew Fine, Lead Portfolio Manager




Focused Credit Fund Portfo l i o Manager Commentary


J U L Y 3 1 , 2 0 1 5


Summer has been anything but quiet in the high yield and distressed debt markets. In fact, we are approaching a full year of turbulence.

As investors in the high yield and distressed markets, we are no strangers to short-term turmoil. What is particularly distinct about this past year is that several events of significant magnitude have developed in conjunction with one another. In fact, macro events in Puerto Rico, Greece and China, Oil & Gas, and Metals & Mining are clearly affecting the Third Avenue Focused Credit Fund (Fund), even though the Fund has no direct exposure to sovereign debt and only modest exposure to energy and commodity markets.1

Turbulence in the high yield and distressed debt market is pressuring investments with otherwise sound fundamentals. While this may be unpleasant in the short-term, we strongly believe that fundamentals dictate prices over the long term and that dislocations such as the ones taking place as we write this letter tend to generate the most attractive long-term investment opportunities. We believe that patience and focus on new opportunities, while other investors panic, is the best way to navigate times like this.

What is going on in High Yield and Distressed Debt? Several high profile events unfolded over the summer: a second but equally dramatic drop in oil and commodity prices leading to the worst slump in commodities since the 2008 recession; Puerto Rico’s anticipated municipal default; a frail situation in some Latin American oil companies (PDVSA, the Venezuelan state owned oil company which is currently facing a coupon payment on its debt with the country’s rapidly shrinking reserves, and Petrobras, where the political situation has piled onto weak oil prices causing significant price declines); a couple of unfavorable rulings on Nortel and Washington Mutual, long viewed as “cash substitutes” by the distressed community; material losses in TXU bank debt (which is not the Oncor side of TXU which is in the Fund); and tumultuous negotiations for the third bailout of Greece by the European Central Bank. In addition, investors’ expectation of a liftoff in US interest rates this coming Fall and increased preoccupation regarding growth in China and its tumbling stock market have added even more uncertainty and volatility to global financial markets in general, and the high yield market in particular.

The most high profile factor, Energy, represents about 15% of the high yield market, that is, approximately $200 billion of debt. Nine months ago, high yield Energy bonds were market darlings with significant new issuance and trading at a lower yield than the overall high yield market. Now, about $50 to $70 billion of debt in Energy companies is trading at distressed levels, i.e., with spreads greater than or equal to 1,000 basis points.

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Focused Credit Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of July 31, 2015:

Altegrity Inc., 5.34%; Liberty Tire Recycling LLC, 5.03%; iHeart Communications Inc., 4.81%; Energy Future Intermediate Holding Co. LLC, 3.76%; The Sun Products Corp., 3.61%; Affinion Group Inc., 3.10%; Ideal Standard International S.A., 2.80%; MPM Holdings Inc., 2.79%; Codere Finance Luxembourg S.A., 2.56%.; Longview Power LLC, 2.43%

1 The Fund had only 5.83% exposure to the Energy sector as of July 31, 2014, before oil prices dropped. This represented a significant underweight in Energy relative to its benchmark, the Barclay’s High Yield Index, which had a 14.55% allocation to Energy at the time. As of July 31, 2015 the Fund has 8.33% of its capital allocated to Energy and continues to be underweight, as 13.45% of the Barclay’s High Yield Index is allocated to Energy.


Losses have spread far and wide. We have estimated the top 20 mark-to-market losses associated with investments in Energy debt as well as in some other large distressed names affecting the market over the last twelve months to give our readers a sense of the magnitude that these events represent. We estimate that mark-to-market losses account for almost a quarter of the value of the debt outstanding in high yield Oil & Gas and over a third of the value of the debt outstanding in other companies, excluding Oil & Gas. These are significant amounts.

Estimated losses for selected companies in high yield Oil & Gas and other distressed debt, in USD billions, year over year as of June 30 2015

It is not surprising that the high yield and distressed markets took a nosedive in the last few months. The figure on the next page shows historical performance of the Bank of America/ Merrill Lynch High Yield Index and the lower quality segments within the index: distressed, and CCC.3 Over the last six months, the decline has been pronounced, but significantly larger in the distressed segment of the market. While the high yield index declined by 1%, CCC prices dropped close to 6% and distressed debt declined by more than 22% over the period, as shown in the figure on the next page. In addition, the composition of the Bank of America/ Merrill Lynch Distressed Debt Index has shifted quite dramatically to reflect events over the last year.

DDistressedDebt

OutstandingApprox. Value

Lost% Loss vs. Par OOil & Gas

Debt Outstanding

Approx. Value Lost

% Loss vs. Par

MolyCorp $1.4 $1.3 93% Hercules Offshore $1.2 $0.9 75%Alpha Natural $4.0 $3.0 75% Quicksilver $2.0 $1.5 75%Walter $3.0 $2.0 67% Samson Investment Co. $4.3 $2.8 65%Peabody $6.0 $3.5 58% Energy XXI Gulf Coast $4.6 $3.0 64%PDVSA $70.0 $40.0 57% Sabine / Forest $2.5 $1.5 60%Verso Paper $2.7 $1.5 56% Sandridge Energy $4.4 $2.6 59%Cliffs Natural $3.0 $1.5 50% Midstates $1.9 $1.0 53%Murray $1.5 $0.8 50% Vantage Drilling $2.5 $1.3 52%Arch Coal $3.5 $1.5 43% Paragon Offshore $2.0 $1.0 50%Getty Images $2.4 $0.9 38% Halcon Resources $3.7 $1.6 44%First Quantum Min $3.4 $1.2 35% CHC Helicopter $1.3 $0.6 42%Advanced Micro Devices $2.0 $0.7 35% Jupiter Resources $1.1 $0.4 36%TXU $24.0 $8.0 33% Chaparral Energy $1.7 $0.6 35%Weight Watchers $2.1 $0.7 33% Linn Energy $10.3 $3.5 34%Bombardier $10.0 $3.0 30% Transocean Inc $10.0 $2.5 25%Freddie / Fannie Pref $35.0 $9.0 26% Ultra Petroleum $3.4 $0.7 21%FMG Resources $9.0 $2.0 22% Chesapeake Energy $11.6 $2.3 20%Windstream $5.0 $1.0 20% Denbury Resources $3.5 $0.7 20%Nortel $5.0 $0.7 14% California Resource Corp. $6.5 $1.3 19%Petrobras $130.0 $15.0 12% MEG Energy $4.7 $0.5 10%Intelsat $14.0 $1.5 11% TOTAL $83.1 $30.1iHeart Communications $20.0 $2.0 10%WAMU $6.0 $0.5 8%Sprint $30.0 $2.5 8%Puerto Rico $73.0 $5.0 7%TOTAL $466.0 $108.8

Focused Credit Fund

2 Based on a sample of 45 companies selected by size of the issue and or losses as well as prominence in the media. While securities of some of these companies are holdings in the Fund, most of them are not. Debt outstanding includes all debt issued by the company. Approximate value lost is the difference between the value of debt outstanding multiplied by price as of June 30, 2014 and June 30, 2015. While PDVSA and Petrobras are oil companies we have included them in this table as they are not considered high yield companies, nor included in high yield indices. In reality the percentage losses are much larger because many of these securities were already trading at discounts to par. For example, WAMU was trading at $0.33 and fell to $0.20, a 40% loss in value. Likewise, in Puerto Rico, the $5 billion in estimated loss is only in the non-insured bonds that represent significantly less than the full $73 billion outstanding. 3 The BofA Merrill Lynch US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $100 million. In addition, qualifying securities must have risk exposure to countries that are members of the FX-G10, Western Europe or territories of the US and Western Europe. Index constituents are capitalization-weighted based on their current amount outstanding times the market price plus accrued interest. The BofA Merrill Lynch US CCC and below Index is a subset of The BofA Merrill Lynch US High Yield Index including all securities with credit rating CCC or lower. The BofA Merrill Lynch US Distressed High Yield Index is a subset of The BofA Merrill Lynch US High Yield Index including all securities with an option-adjusted spread greater than or equal to 1,000 basis points.

Source: TAM Estimates2 based on Bloomberg data.


Focused Credit Fund

Commodity-related companies are now more than half of the Distressed Debt Index, and between 30% and 40% of the credits in the index are still rated BB or B as prices always move faster than the rating agencies. This is very different from a year ago, when the composition of the index was more balanced across sectors.

We believe that there are several dynamics at play in the high yield and distressed debt markets. First, the sheer magnitude of recent events unfolding has significantly increased the supply of distressed investments, perhaps by $150 billion, clearly flooding the market. Investors bullish on oil today can pick from an almost unlimited supply of bonds trading in the $50s to $70s that will surely generate handsome returns if/when oil and gas prices recover. Likewise, investors bullish on Puerto Rico and an ultimate solution that leaves these bonds unimpaired can pick from multiple issuers that trade from $50 to $70. Together, these two opportunities offer over $100 billion of alternative, investable, distressed securities. It is logical to assume that many bullish investors on either of these two potential bargains are selling other distressed investments and reallocating or diversifying their capital pools.

Second, as shown in the tables above the losses either realized or marked to market are having a significant impact on distressed investment performance. Investors own these securities and these losses are not being offset by gains by other market participants. They are truly losses in market value that may not return and have for the most part dampened investor sentiment.

The effects of these events have spilled over onto other parts of the credit market, generating and enhancing the disconnect between price and fundamentals of credits. On the flip side, the market is offering a very interesting array of investment opportunities—significantly more than a year ago when credit spreads were unusually tight—which we are taking advantage of, as well as more upside potential. Credits issued by fundamentally healthy businesses priced at $75 or lower have ample room to appreciate on their way to par.

Source: Bloomberg.

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

12/31/2014 1/29/2015 2/25/2015 3/24/2015 4/22/2015 5/20/2015 6/17/2015 7/15/2015 8/12/2015

ML HY index ML CCC index ML HY Distressed Index FCF

-1.1%

-5.4%

-8.3%

-22.6%

Cumulative performance of High Yield, CCC, Distressed Debt and the Fund, year to date as of August 24, 2015


Focused Credit Fund

The Opportunity we see in iHeart Communications We believe that iHeartCommunications debt, for example, has been one of the many high yield investments suffering as a result of the events in Energy and Puerto Rico, while seemingly unrelated. iHeartCommunications is a media and entertainment advertising company, with the largest collection of radio stations and associated streaming services in the US, and major presences in the US and international outdoor display advertising markets. While iHeart’s revenue and EBITDA have increased since last year, per the company’s last four financial statements, its bond price has been cut almost by half. About a year ago, its bonds were trading at $105; as of publication date they traded at $61. The bond we hold in the Fund pays a 14% coupon, which is much more than 1% of income per month based on the market discount in the price. While the capital structure is highly levered, the underlying fundamentals are sound and the company maintains flexibility in dealing with its upcoming maturities. Additionally, given the compelling valuations for the competitors of the domestic and outdoor advertising businesses as well as the streaming service, it seems that it is trading below the value of the sum of its parts, and real options exist to extract this discounted value. The figure below contrasts the evolution of the price of iHeart’s debt to news about the business and reporting on fundamentals. Despite these positive trends, the bonds continue to underperform the overall market.

iHeart Communications, Price in USD, 14% Notes due 2/21/2021

Source: Bloomberg and iHeart Communications. iHeart earnings calls report OIBDAN, this refers to the metric more commonly known as EBITDA. OIBDAN is reported first excluding the currency effect and secondly with the currency effect (depreciation of the Euro).

50

60

70

80

90

100

110

Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

12/11 Announced sale leaseback for radio towers; first

close of approx. $370MM in April

3Q14 +8.7%/+8.9%

OIBDAN

11/10 Reuters reports on possible sale of European

outdoor unit

12/8/14 Reuters reports JC Decaux

considering purchase of Euro business

4Q14 +7.5%/+6.0% OIBDAN

1Q15 +7.5%/+5.9% OIBDAN

2Q15 +2.6%/+0.4%

OIBDAN

8/22/14 Issued add'l 14% notes

9/10/14 Issued PGNs

9/29/14 Issued PGNs

Oct to Dec 2014Repurchased CCO shares

1Q15 Sale leaseback of two office

buildings for $34.3MM

1/15 Repurchased CCO shares ($20.4MM)

4/2/15 Repurchased CCO shares ($22.2MM)


Focused Credit Fund

Closed-End High Yield Funds Discounts Reflect Stress in the Market Closed-end high yield debt funds are trading at a significant discount to their net asset value (NAV). Current discounts are as large as they have been since the financial crisis. The figure below shows our largest closed-end fund holding, the Blackrock Corporate HY fund (HYT). This fund has a current yield of 8%5 and is run by a solid team with extensive high yield experience. It has a portfolio of bellwether high yield bonds and some other interesting companies and is very similar to their open ended fund (BHYAX). HYT is now trading at almost a 16% discount to where the underlying bonds are marked. We believe that this investment could generate a 25% to 30% return over the course of the year, including the income it provides, if it closes its discount. This is not impossible, as you can see in the chart below, HYT has actually traded at a premium as recently as 2012.

Blackrock Corporate HY Fund Premium/ Discount

Source: Bloomberg.

The Third Avenue Focused Credit Fund The Fund is a value-oriented, opportunistic portfolio with investments across the capital structure and risk spectrum. The portfolio is concentrated in our highest conviction ideas, spans both the high yield and distressed debt universe, and is typically less correlated with the broader market. However, the current environment has negatively impacted our Fund performance over the last 12 months. Over the past year the performance of the Fund has been -18.83% and -4.25% year to date.6

• We attribute approximately a quarter of the performance over the last year to some specific mistakes we made, and these are primarily companies in the commodities space—materials and oil—where the dramatic drop in commodity prices has impaired our investment thesis. We have exited (or mostly exited) these positions including Allied Nevada and Walter Energy.

5 The average annual total returns (standardized) for BlackRock Corporate High Yield Fund for the 1 year, 5 year and since inception (June 2005) periods were 0.84%, 11.61% and 9.73%, respectively. The average annual total returns (market price) for BlackRock Corporate High Yield Fund for the 1 year, 5 year and since inception (June 2005) periods were -4.39%, 9.46% and 7.98%, respectively. Total operating expense ratio for BlackRock Corporate High Yield Fund was 1.35%. Since ETFs may be purchased at a premium or discount to NAV, standardized performance data may be different than market price performance data. All of the above data is as of June 30, 2015. 6 The Fund’s Institutional share class one year, five year and since inception (August 31, 2009) average annual returns for the period ended July 31, 2015 were -18.83%, 4.93% and 6.42%, respectively. The Fund’s Institutional share class one year, five year and since inception (August 31, 2009) average annual returns for the period ended June 30, 2015 were -18.13%, 5.92% and 6.78%, respectively. Past performance is no guarantee of future results; returns include reinvestment of all distributions. The above represents past performance and current performance may be lower or higher than performance quoted above. Investment return and principal value fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Risks that could negatively impact returns include: increase in interest rates, lack of diversification, lack of liquidity in the market, insolvency and bankruptcy of debt issuers, and adverse general market conditions. The Fund’s total operating expense ratio, gross of any fee waivers or expense reimbursements, was 0.92%, as of April 30, 2015. Prospectuses contain more complete information on management fees, distribution charges, and other expenses. Please read the Prospectus carefully before investing or sending money. For current Fund performance or a copy of the Prospectus please visit our website: www.thirdave.com or call 800-443-1021. M.J. Whitman LLC, Distributor. Member FINRA/ SIPC.


Focused Credit Fund

• We believe that another qquarter of the negative performance can be explained by credits that are undergoing some temporary headwinds or completing their restructuring process, which we believe is a temporary yet normal dislocation related to how we process risk and rewards. For example, Altegrity, which was a detractor last summer, defaulted in January and is now close to exiting bankruptcy. This is an investment that has cost the Fund some performance in the short term but one which we believe will ultimately benefit the Fund if the restructuring process is successful and the company can execute its new business plan. We have a representative on the Board of Directors of the company, and the Fund will receive equity in the reorganized business—composed of HireRight and Kroll, two healthy businesses. We typically expect investor wariness in companies going through reorganization (such as Altegrity) to subside as such companies emerge as credit-worthy entities, and we anticipate that the equities can have asymmetric upside.

• Finally, our analysis shows that half of the underperformance of the Fund over the last year is a result of the market environment or technical factors. These are credits where—as highlighted above in the case of iHeart and closed-end high yield Funds—there is a significant disconnect between strong fundamentals and price.

A review of the top five positions in the Fund as of July 31, 2015 examines the current disconnect between fundamentals and prices.

1. Altegrity Inc. This investment cost us 150-200 basis points of performance in 2014; we see significant upside potential, as we discussed above.

2. Liberty Tire Recycling Llc. Liberty is the largest tire recycling company in the US, and recently underwent a restructuring in which holders of the 11% notes (including the Fund) obtained new bonds at approximately 80% of the previous bond face amount, and all of the equity of the company. This is an example of a name in the portfolio where our equity upside is potentially significant, as it typically takes some time for the market to revalue the equity from a restructured company.7 We own nearly 40% of the equity in the company. The restructuring work on this investment is already done and now management needs to focus on creating value for shareholders. At this point, there is little downside in the equity.

3. iHeart Communications Inc. as discussed above, had positive operating results but the price of the bonds has been cut in half. This investment is paying a 14% coupon on a $60 price and we believe that it is likely that the price of these bonds will improve over the long term given the fundamental factors already discussed.

4. Energy Future Intermediate Holding Co. Bonds are trading over par. We bought them at $70 with an eye towards owning the Oncor part of business as part of a consortium’s bid. After a year of litigation, our group’s proposal was superseded by a plan incorporating a different group of junior securities that seeks to pay us “in full”, which could be as much as 135% if we receive our full post-petition interest. We still have the opportunity to negotiate a role in the current plan to receive some of the equity upside.

7 In many of these reorganizations, the bonds and equity that we receive reflect the market value of the bonds that were converted at the time of the reorganization. The difference between the value of the new bonds that we receive compared to the total value of the conversion becomes the initial market value of the equity shares that we receive. The equity is likely to appreciate as sell-side analysts start covering the company and the market recognizes the new, delivered structure.


Focused Credit Fund

5. The Sun Products Corp. The bonds are trading at $90, and paying an 8% coupon. Relatively unscathed in the downturn, the company has generated good numbers.

New Opportunities The same disconnect between price and upside potential offers opportunistic investors like us abundant possibilities. We have added to some of the positions in the Fund and also initiated a number of new positions across several industries. As mentioned earlier, the pain has not been limited to oil and commodities, so we are seeking to benefit from indiscriminate selling and we have deployed some cash in opportunistic purchases. We expect that most of our new investments will remain performing credits. An example of such an investment is Western Express, a position that we owned previously in the Fund until March 2015. Western Express is an asset based truckload carrier providing transportation and distribution solutions for companies in North America. We started our initial investment over two years ago at $55. We believed we would be the fulcrum security in the event the company restructured, but thought it had plenty of time to improve its operations. As it turned out, the company was able to refinance our bonds at par and we generated an 11% coupon plus the capital appreciation from our average cost to the takeout price of $100 in March 2015. Our IRR on this investment was 48.2%.

Below are two examples of new positions in the Fund:

Intelsat operates the world’s largest satellite services business, providing a critical layer in the global communications infrastructure. Intelsat provides diversified communication services to the world’s leading media companies, telecommunications operators, and data service provides, among others. It is also the leading provider of commercial satellite capacity to the US government and other select military organizations and their contractors. We initiated a position in the Senior Unsecured Notes due in 2023 that pay a 8.125% coupon at an average price in the high $80s. This is a company the Fund has owned in the past, when it was private. The company owns what we believe is the best real estate in the galaxy and charges high margins for it. It has a four year backlog which reduces uncertainty over its future revenue; as revenue is booked when the order is received, before satellites are sent to orbit. It is a large, liquid issuance and we expect it will be a performing credit but we are positioned in the fulcrum security in case it defaults. Our two main risks in this investment come from a potential change in satellite technology and increase in competition.

Advanced Micro Devices, Inc. (AMD) is a global semiconductor company with manufacturing facilities worldwide. They offer a wide variety of products, including microprocessors, chipsets and discrete graphic processing units. The company’s bonds declined on recent company performance. We purchased the unsecured bonds in the $70s. AMD is a well-established manufacturer with nearly $1 billion in cash. While AMD’s results have not turned the corner yet, we have owned this company in the past and believe their liquidity and new products coming online will return the company to profitability and positive cash flow.

Looking Forward We believe the Fund is attractively positioned in today’s pricing environment. This environment reminds us of 2011 and ultimately sets us up for a very strong performance recovery in the following two to three years.


Focused Credit Fund

1. Attractive valuation: The average dollar price for the credits in the Fund is $74.20, as of July 31, 2015.

2. Attractive income: The average coupon for the holdings in the Fund is 10% vs. higher quality high yield offering only 4-5% income, and investment grade only 2-3%.

3. Likely low sensitivity to rise in interest rates: The average duration of the Fund’s fixed income investments is 1.6 years compared to approximately 4 to 6 years for most high quality high yield and investment grade funds. Thus, the mathematical effect of rising interest rates on the price of our portfolio should be much lower than those types of funds.

4. Recent market volatility has not impaired the investment thesis underlying most of the credits in the portfolio. We have added to several of our existing positions during the recent market weakness.

5. We have completed or nearly completed the restructuring process for several of the holdings in the portfolio removing much of the uncertainty generated by this process. We expect some of these restructurings (such as Altegrity, Cesaers, TXU, Codere, among others) and other “beaten up” investments to start to play out, adding upside potential to the portfolio.

6. Market dislocations generate opportunities: we have added several names across different industries to the Fund over the last couple of months.

While the market environment over the last year has not been conducive to short-term success, we believe that the fundamentals of the credits in the portfolio are healthy and positioned to capture significant upside as market conditions normalize. In our view this hinges on several factors, including a recovery in oil prices to levels above $55 as well as a return to the belief that the US economy is strong—and not headed into a recession, that China is on stable footing and that Europe is entering a growth trajectory. Finally, and most importantly, we believe that the Fund is poised to benefit as investors shift back their focus towards company fundamentals as opposed to market technicals. We cannot predict when this will happen. In the meantime, as market sentiment improves, some names in the Fund may even benefit from stabilized commodity prices. While others panic, we find that this is the time to stick to our investment philosophy, patiently wait for the fundamentals in our credits to be recognized and focus on identifying the new opportunities likely to arise in this sentiment driven environment. This is, indeed, as good a time as ever to invest in the Third Avenue Focused Credit Fund.

As usual, we thank you for your continued support of the Fund and look forward to writing to you next quarter. Until then, we look forward to sharing our views on current events, the Fund and the ample investment opportunities we see today in the credit markets.

Sincerely,

Third Avenue Focused Credit Fund Team

Thomas Lapointe, Lead Portfolio Manager Joseph Zalewski, Portfolio Manager Nathaniel Kirk, Portfolio Manager

Third Avenue Value Fund

Third Avenue Small-Cap Value Fund

Third Avenue Real Estate Value Fund



T QUARTER REPORT

JULY 31, 2015

THIRD AVENUE MANAGEMENT


THIRD AVENUE FUNDS

Privacy Policy

Third Avenue Funds (the “Funds”) respect your right to privacy. We also know that you expect us to conduct and process your business in an accurateand efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you onapplications or other forms and from the transactions you make with us, our affiliates, or third parties. We do not disclose any information about youor any of our former customers to anyone, except to our affiliates (which may include the Funds’ affiliated money management entities) and serviceproviders, or as otherwise permitted by law. To protect your personal information, we permit access only by authorized employees. Be assured that wemaintain physical, electronic and procedural safeguards that comply with federal standards to guard your personal information.

Proxy Voting Policies and Procedures

The Funds have delegated the voting of proxies relating to their voting securities to the Funds’ investment adviser pursuant to the adviser’s proxy votingguidelines. A description of these proxy voting guidelines and procedures, as well as information relating to how a Fund voted proxies relating toportfolio securities during the most recent 12-month period ended June 30, is available by August 31 each year (i) without charge, upon request, bycalling (800) 443-1021, (ii) at the website of the Securities and Exchange Commission (“SEC”) at http://www.sec.gov, and (iii) on the Funds’ websitewww.thirdave.com.

Schedule of Portfolio Holdings—Form N-Q

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’Form N-Q is available on the SEC’s website at http://www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room inWashington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

PrincipalAmount ($) Security†

Value(Note 1)

Corporate Bonds & Notes - 1.49%Consumer Products - 0.81%

22,150,228 Home Products International, Inc., 2nd Lien,Convertible, 6.000% Payment-in-kindInterest, due 3/20/17 (a)(b)(c)(d). . . . . . . . . $ 14,621,366

Oil & Gas Production & Services - 0.68%17,665,000 BreitBurn Energy Partners L.P./ BreitBurn

Finance Corp., 7.875%, due 4/15/22 . . . . . 12,277,175

Total Corporate Bonds & Notes(Cost $34,779,167) . . . . . . . . . . . . . . . . . . . 26,898,541

Claims - 0.47%Securities Brokerage - 0.47%

63,101,500 Lehman Brothers Holdings, Inc., SIPAClaims (e) . . . . . . . . . . . . . . . . . . . . . . . . . . 8,558,141

Total Claims(Cost $9,465,225) . . . . . . . . . . . . . . . . . . . . 8,558,141

Shares

Common Stocks & Warrants - 93.34%Agricultural Equipment - 3.58%

1,178,413 AGCO Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,824,499

Asset Management - 7.57%2,279,413 Bank of New York Mellon Corp. (The) . . . . . . . . 98,926,5241,091,856 Brookfield Asset Management, Inc., Class A

(Canada) . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,029,345

136,955,869

Automotive - 4.82%1,596,400 General Motors Co. . . . . . . . . . . . . . . . . . . . . . . 50,302,564

667,793 Toyota Industries Corp. (Japan). . . . . . . . . . . . . 37,017,291

87,319,855

Banks - 9.52%1,988,349 Comerica, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 94,307,3932,086,998 KeyCorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,971,050

479,200 PNC Financial Services Group, Inc. (The) . . . . . 47,047,856

172,326,299

Consumer Products - 3.66%526,368 Home Products International, Inc. (a)(b)(d)(e) . —

4,823,425 Kingfisher PLC (United Kingdom) . . . . . . . . . . . 27,169,6631,479,930 Masco Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,055,353

66,225,016

Diversified Holding Companies - 9.27%3,990,000 CK Hutchison Holdings, Ltd. (Hong Kong) . . . . . 59,240,354

961,970 Investor AB, Class B (Sweden) . . . . . . . . . . . . . 37,121,72282,242,880 Lai Sun Garment International, Ltd.

(Hong Kong) . . . . . . . . . . . . . . . . . . . . . . . . . 10,821,013421,832 Pargesa Holding S.A. (Switzerland). . . . . . . . . . 28,397,156

6,203,000 Wheelock & Co., Ltd. (Hong Kong). . . . . . . . . . . 32,126,008

167,706,253

Electronic Components - 1.62%441,900 Anixter International, Inc. (e) . . . . . . . . . . . . . . 29,258,199

Shares Security†Value

(Note 1)

Financial Insurance - 0.02%37 Manifold Capital LLC (a)(b)(d)(e) . . . . . . . . . . . $ 285,000

Forest Products & Paper - 5.22%3,080,090 Weyerhaeuser Co., REIT . . . . . . . . . . . . . . . . . . 94,527,962

Insurance & Reinsurance - 7.29%81,573 Alleghany Corp. (e) . . . . . . . . . . . . . . . . . . . . . . 39,655,082

1,051,888 Loews Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,087,45273,999 White Mountains Insurance Group, Ltd.

(Bermuda) . . . . . . . . . . . . . . . . . . . . . . . . . . 52,243,294

131,985,828

Manufactured Housing - 5.21%1,291,281 Cavco Industries, Inc. (b)(e) . . . . . . . . . . . . . . . 94,366,815

Materials - 2.96%2,941,600 Canfor Corp. (Canada) (e) . . . . . . . . . . . . . . . . 53,508,173

Media & Entertainment - 2.87%972,000 CBS Corp., Class B, Non-Voting Shares . . . . . . 51,972,840

Non-U.S. Real Estate Operating Companies - 1.84%3,990,000 Cheung Kong Property Holdings, Ltd.

(Hong Kong) (e) . . . . . . . . . . . . . . . . . . . . . . 33,248,713

Oil & Gas Production & Services - 8.82%1,061,000 Apache Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 48,657,460

943,606 Devon Energy Corp. . . . . . . . . . . . . . . . . . . . . . 46,633,0081,299,649 Total S.A. (France). . . . . . . . . . . . . . . . . . . . . . . 64,337,293

159,627,761

Semiconductor & Related - 2.30%2,082,168 NVIDIA Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 41,539,252

Senior Housing - 2.12%1,159,500 Brookdale Senior Living, Inc. (e) . . . . . . . . . . . . 38,414,235

Software - 2.92%2,322,155 Symantec Corp. . . . . . . . . . . . . . . . . . . . . . . . . 52,805,805

Steel & Specialty Steel - 2.71%1,180,432 POSCO, ADR (South Korea) . . . . . . . . . . . . . . . . 49,011,537

Telecommunications - 3.41%16,353,677 Vodafone Group PLC (United Kingdom) . . . . . . . 61,765,234

U.S. Real Estate Operating Companies - 1.68%1,221,894 Tejon Ranch Co. (b)(e) . . . . . . . . . . . . . . . . . . . 30,327,409

200,255 Tejon Ranch Co., Warrants, expire 8/31/16(b)(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,163

30,423,572

Utilities - 3.93%3,606,707 Covanta Holding Corp. . . . . . . . . . . . . . . . . . . . 71,196,396

Total Common Stocks & Warrants(Cost $1,521,599,244) . . . . . . . . . . . . . . . . . 1,689,295,113

Third Avenue TrustThird Avenue Value FundPortfolio of Investmentsat July 31, 2015 (Unaudited)

See accompanying notes to the Portfolios of Investments.

1

InvestmentAmount ($) Security†

Value(Note 1)

Limited Partnership – 0.00%(f)Insurance & Reinsurance - 0.00%(f)

1,805,000 Insurance Partners II Equity Fund, L.P. (a)(e) . . $ 49,841

Total Limited Partnership(Cost $0) . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,841

PrincipalAmount ($)

Short-Term Investment – 2.21%U.S. Government Obligations - 2.21%

40,000,000 U.S. Treasury Bills, 0.040%, due 8/20/15(g). . . 39,999,261

Total Short-Term Investment(Cost $39,999,261) . . . . . . . . . . . . . . . . . . . 39,999,261

Total Investment Portfolio - 97.51%(Cost $1,605,842,897) . . . . . . . . . . . . . . . . . 1,764,800,897

Other Assets less Liabilities - 2.49% . . . . . . . 45,148,112

NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $1,809,949,009

Investor Class:Net assets applicable to 580,082 shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,432,997

Net asset value, offering and redemption priceper share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55.91

Institutional Class:Net assets applicable to 31,736,057 shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $1,777,516,012


Notes:(a) Fair-valued security.(b) Affiliated issuers - as defined under the Investment Company Act of 1940 (ownership of 5%

or more of the outstanding voting securities of these issuers).(c) Payment-in-kind (“PIK”) security. Income may be paid in additional securities.(d) Security subject to restrictions on resale.

Shares/Principal Amount ($) Issuer

AquisitionDate Cost

MarketValue

Per Unit

526,368 Home Products International, Inc. 5/30/07 $54,667,471 $ 0.00$22,150,228 Home Products International, Inc.,

2nd Lien, Convertible, 6.000%Payment-in-kind Interest,due 3/20/17 3/16/07 - 4/1/15 22,150,228 66.01

37 Manifold Capital LLC 9/24/97-11/10/06 37,712,514 7,702.70At July 31, 2015, these restricted securities had a total market value of $14,906,366 or 0.83% of net assets of the Fund.

(e) Non-income producing security.(f) Amount represents less than 0.01% of net assets.(g) Annualized yield at date of purchase.† U.S. issuer unless otherwise noted.ADR: American Depositary Receipt.REIT: Real Estate Investment Trust.SIPA: Securities Investor Protection Act of 1970.

Country Concentration% of

Net Assets

United States* 65.24%Hong Kong 7.48Canada 5.06United Kingdom 4.91France 3.55Bermuda 2.89South Korea 2.71Sweden 2.05Japan 2.05Switzerland 1.57

Total 97.51%

* Includes cash equivalents.

Third Avenue TrustThird Avenue Value FundPortfolio of Investments (continued)at July 31, 2015 (Unaudited)


2


(Note 1)

Common Stocks - 96.77%Asset Management - 1.87%

165,132 Legg Mason, Inc. . . . . . . . . . . . . . . . . . . . . . . . $ 8,147,613

Auto Parts and Services - 5.35%155,700 Dorman Products, Inc. (a). . . . . . . . . . . . . . . . . 8,217,846225,604 Standard Motor Products, Inc. . . . . . . . . . . . . . 8,250,33868,164 Visteon Corp. (a). . . . . . . . . . . . . . . . . . . . . . . . 6,784,363

23,252,547

Bank & Thrifts - 11.24%72,471 City National Corp. . . . . . . . . . . . . . . . . . . . . . . 6,515,868

198,650 Commerce Bancshares, Inc. . . . . . . . . . . . . . . 9,354,428115,200 Cullen/Frost Bankers, Inc. . . . . . . . . . . . . . . . . 8,346,240169,563 Prosperity Bancshares, Inc. . . . . . . . . . . . . . . . 9,256,444159,391 UMB Financial Corp. . . . . . . . . . . . . . . . . . . . . 8,737,815670,975 Valley National Bancorp . . . . . . . . . . . . . . . . . . 6,656,072

48,866,867

Business Services - 1.88%285,433 Viad Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,183,364

Chemicals & Industrial Materials - 1.19%420,036 SunCoke Energy, Inc. . . . . . . . . . . . . . . . . . . . . 5,162,242

Consulting and Information Technology Services - 7.47%210,192 FTI Consulting, Inc. (a) . . . . . . . . . . . . . . . . . . . 8,601,057424,566 Genpact, Ltd. (Bermuda) (a). . . . . . . . . . . . . . . 9,429,611170,381 ICF International, Inc. (a) . . . . . . . . . . . . . . . . . 6,246,167187,830 Syntel, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . 8,206,293

32,483,128

Consumer Products & Services - 4.97%559,982 1-800-Flowers.com, Inc., Class A (a) . . . . . . . . 5,571,821174,315 CST Brands, Inc. . . . . . . . . . . . . . . . . . . . . . . . 6,603,052153,458 VCA, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,442,271

21,617,144

Diversified Holding Companies - 3.64%579,165 Dundee Corp., Class A (Canada) (a) . . . . . . . . . 4,866,784

1,557,923 JZ Capital Partners, Ltd. (Guernsey) . . . . . . . . . 10,948,159

15,814,943

Electronic Components - 5.40%139,556 Anixter International, Inc. (a) . . . . . . . . . . . . . . 9,240,003241,911 Ingram Micro, Inc., Class A (a) . . . . . . . . . . . . . 6,587,237282,750 Insight Enterprises, Inc. (a) . . . . . . . . . . . . . . . 7,631,422

23,458,662

Energy Exploration and Production - 1.88%327,338 EP Energy Corp., Class A (a) . . . . . . . . . . . . . . . 2,739,819154,551 Noble Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . 5,444,832

8,184,651

Energy Services - 1.92%23,426 SEACOR Holdings, Inc. (a) . . . . . . . . . . . . . . . . 1,479,82096,552 SemGroup Corp., Class A . . . . . . . . . . . . . . . . . 6,863,882

8,343,702

Forest Products & Paper - 2.36%473,005 Interfor Corp. (Canada) (a) . . . . . . . . . . . . . . . . 5,844,524


(Note 1)

Forest Products & Paper (continued)216,711 PH Glatfelter Co. . . . . . . . . . . . . . . . . . . . . . . . $ 4,423,072

10,267,596

Healthcare - 3.39%144,700 Patterson Cos., Inc. . . . . . . . . . . . . . . . . . . . . . 7,258,152

55,907 Teleflex, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,490,979

14,749,131

Home Building - 2.23%383,534 WCI Communities, Inc. (a) . . . . . . . . . . . . . . . . 9,680,398

Industrial Capital Equipment Manufacturers - 3.20%250,500 Barnes Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 9,751,965166,879 Rofin-Sinar Technologies, Inc. (a). . . . . . . . . . . 4,161,962

13,913,927

Industrial Equipment - 6.61%257,200 Actuant Corp., Class A . . . . . . . . . . . . . . . . . . . 5,931,032162,006 Alamo Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 8,511,795

86,767 CIRCOR International, Inc. . . . . . . . . . . . . . . . . 4,150,06664,171 EnerSys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,007,479

166,321 LSB Industries, Inc. (a) . . . . . . . . . . . . . . . . . . . 6,138,908

28,739,280

Industrial Services - 11.27%239,857 ABM Industries, Inc. . . . . . . . . . . . . . . . . . . . . . 7,905,687146,518 Cubic Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,501,004166,383 EMCOR Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 7,958,09955,546 Multi-Color Corp. . . . . . . . . . . . . . . . . . . . . . . . 3,547,167

345,644 Tetra Tech, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 9,207,95650,310 UniFirst Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,575,354

204,619 World Fuel Services Corp. . . . . . . . . . . . . . . . . . 8,317,762

49,013,029

Insurance & Reinsurance - 5.27%13,343 Alleghany Corp. (a) . . . . . . . . . . . . . . . . . . . . . . 6,486,432

212,785 HCC Insurance Holdings, Inc. . . . . . . . . . . . . . 16,418,491

22,904,923

Metals Manufacturing - 2.08%107,276 Kaiser Aluminum Corp. . . . . . . . . . . . . . . . . . . 9,059,458

Securities Trading/Processing Services - 1.39%111,048 Broadridge Financial Solutions, Inc. . . . . . . . . 6,026,575

Software and Services - 5.39%443,587 Allscripts Healthcare Solutions, Inc. (a) . . . . . . 6,414,268301,398 CSG Systems International, Inc. . . . . . . . . . . . . 9,373,478257,355 Progress Software Corp. (a) . . . . . . . . . . . . . . . 7,638,296

23,426,042

Specialty Pharmaceuticals - 0.91%55,456 ANI Pharmaceuticals, Inc. (a) . . . . . . . . . . . . . . 3,939,040

U.S. Real Estate Investment Trusts - 0.91%122,119 Tanger Factory Outlet Centers, Inc. . . . . . . . . . 3,966,425

U.S. Real Estate Operating Companies - 4.95%143,227 Alico, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,419,434203,867 Brookdale Senior Living, Inc. (a) . . . . . . . . . . . . 6,754,114103,065 Forestar Group, Inc. (a). . . . . . . . . . . . . . . . . . . 1,319,232

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio of Investmentsat July 31, 2015 (Unaudited)


3


(Note 1)

Common Stocks (continued)U.S. Real Estate Operating Companies (continued)

64,039 Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . $ 7,024,438

21,517,218

Total Common Stocks(Cost $329,099,224) . . . . . . . . . . . . . . . . . . 420,717,905

Total Investment Portfolio - 96.77%(Cost $329,099,224) . . . . . . . . . . . . . . . . . . 420,717,905


NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $ 434,761,737

Investor Class:Net assets applicable to 436,491 shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,260,828



outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $424,500,909


Notes:(a) Non-income producing security.† U.S. issuer unless otherwise noted.


Net Assets

United States 89.62%Guernsey 2.52Canada 2.46Bermuda 2.17

Total 96.77%

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio of Investments (continued)at July 31, 2015 (Unaudited)


4

PrincipalAmount Security†

Value(Note 1)

Term Loans - 0.09%Non-U.S. Real Estate Operating Companies - 0.09%Concrete Investment I, Term Loan

(Netherlands):50,450 EUR Tranche A2, 1.911% Cash or

Payment-in-kind Interest,due 3/31/16 (a)(b)(c) . . . . . . . . . . . . . . . . . . $ 55,406

19,273 EUR Tranche A3, 2.000% Cash orPayment-in-kind Interest,due 3/31/16 (a)(b)(c) . . . . . . . . . . . . . . . . . . 21,167

Concrete Investment II, Term Loan(Netherlands):



IVG Immobilien AG, Term Loan (Netherlands):1,081,276 EUR Tranche A1, 9.432% Cash or

Payment-in-kind Interest,due 9/30/17 (a)(b)(c) . . . . . . . . . . . . . . . . . . 1,187,511

1,596,094 EUR Tranche A2, 9.432% Cash orPayment-in-kind Interest,due 9/30/18 (a)(b)(c) . . . . . . . . . . . . . . . . . . 1,752,909

Total Term Loans(Cost $3,770,909) . . . . . . . . . . . . . . . . . . . . 3,060,284

Shares

Common Stocks & Warrants - 81.11%Banks - 4.89%

1,939,049 PNC Financial Services Group, Inc., Warrants,expire 12/31/18 (d) . . . . . . . . . . . . . . . . . . . 60,478,938

1,156,551 Wells Fargo & Co., Warrants, expire 10/28/18(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,699,397

2,773,300 Zions Bancorporation . . . . . . . . . . . . . . . . . . . . 86,499,227

174,677,562

Forest Products & Paper - 8.21%4,931,300 Rayonier, Inc., REIT . . . . . . . . . . . . . . . . . . . . . 121,309,9805,603,058 Weyerhaeuser Co., REIT . . . . . . . . . . . . . . . . . . 171,957,850

293,267,830

Lodging & Hotels - 2.38%450,000 Hyatt Hotels Corp., Class A (d) . . . . . . . . . . . . . 25,123,500

6,848,517 Millennium & Copthorne Hotels PLC(United Kingdom) . . . . . . . . . . . . . . . . . . . . . 59,677,871

84,801,371

Non-U.S. Diversified Holding Companies - 2.12%5,109,000 CK Hutchison Holdings, Ltd. (Hong Kong) . . . . . 75,854,379

Non-U.S. Real Estate Consulting/Management - 2.55%6,002,254 Countrywide PLC (United Kingdom) . . . . . . . . . 48,835,3922,752,003 Savills PLC (United Kingdom) . . . . . . . . . . . . . . 42,095,525

90,930,917


(Note 1)

Non-U.S. Real Estate Investment Trusts - 9.89%12,070,176 Dexus Property Group (Australia) . . . . . . . . . . . $ 68,640,701

366,031 Gecina S.A. (France) . . . . . . . . . . . . . . . . . . . . . 46,892,5219,910,908 Hammerson PLC (United Kingdom). . . . . . . . . . 101,840,8298,839,052 Segro PLC (United Kingdom). . . . . . . . . . . . . . . 61,949,9731,249,353 Wereldhave N.V. (Netherlands) . . . . . . . . . . . . . 73,887,648

353,211,672

Non-U.S. Real Estate Operating Companies - 22.24%2,319,189 Brookfield Asset Management, Inc., Class A

(Canada) . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,777,3537,601,500 Cheung Kong Property Holdings, Ltd.

(Hong Kong) (d) . . . . . . . . . . . . . . . . . . . . . . 63,343,38214,625,450 City Developments, Ltd. (Singapore). . . . . . . . . 99,468,19932,115,300 Global Logistic Properties, Ltd. (Singapore) . . . 53,843,48914,967,134 Globe Trade Centre S.A. (Poland) (d). . . . . . . . . 23,410,32610,406,000 Hang Lung Group, Ltd. (Hong Kong) . . . . . . . . . 46,913,78014,173,122 Henderson Land Development Co., Ltd.

(Hong Kong) . . . . . . . . . . . . . . . . . . . . . . . . . 93,606,26511,373,967 Hysan Development Co., Ltd. (Hong Kong) . . . . 48,710,151

135,653,174 Inmobiliaria Colonial S.A. (Spain) (d) . . . . . . . . 100,860,14816,480,805 Westfield Corp., REIT (Australia). . . . . . . . . . . . 120,828,07611,975,500 Wheelock & Co., Ltd. (Hong Kong). . . . . . . . . . . 62,022,409

793,783,578

Real Estate Consulting/Management - 2.02%1,584,200 Realogy Holdings Corp. (d) . . . . . . . . . . . . . . . . 72,112,784

Retail-Building Products - 2.35%1,206,930 Lowe’s Cos., Inc. . . . . . . . . . . . . . . . . . . . . . . . 83,712,665

Senior Housing - 1.74%1,873,595 Brookdale Senior Living, Inc. (d) . . . . . . . . . . . . 62,072,202

U.S. Real Estate Investment Trusts - 16.60%3,460,150 Equity Commonwealth (d). . . . . . . . . . . . . . . . . 90,655,9306,223,431 First Industrial Realty Trust, Inc. (e) . . . . . . . . . 130,318,6451,624,562 Macerich Co. (The) . . . . . . . . . . . . . . . . . . . . . . 128,600,3281,253,782 Post Properties, Inc. . . . . . . . . . . . . . . . . . . . . . 71,390,3472,031,678 Tanger Factory Outlet Centers, Inc. . . . . . . . . . 65,988,9011,084,694 Vornado Realty Trust . . . . . . . . . . . . . . . . . . . . 105,811,900

592,766,051

U.S. Real Estate Operating Companies - 6.12%6,579,688 Forest City Enterprises, Inc., Class A (d). . . . . . 153,635,715

703,900 Kennedy-Wilson Holdings, Inc. . . . . . . . . . . . . . 17,822,748941,627 Tejon Ranch Co. (d). . . . . . . . . . . . . . . . . . . . . . 23,371,182139,089 Tejon Ranch Co., Warrants, expire 8/31/16 (d) . 66,790

3,369,445 Trinity Place Holdings, Inc. (a)(d)(f) . . . . . . . . . 23,444,345

218,340,780

Total Common Stocks & Warrants(Cost $2,245,549,992) . . . . . . . . . . . . . . . . . 2,895,531,791

Preferred Stocks - 0.73%Non-U.S. Real Estate Operating Companies - 0.73%

189,696 Concrete Investment II SCA (Luxembourg) (d). . 26,250,023

Total Preferred Stocks(Cost $27,535,807) . . . . . . . . . . . . . . . . . . . 26,250,023

Third Avenue TrustThird Avenue Real Estate Value FundPortfolio of Investmentsat July 31, 2015 (Unaudited)


5

Units Security†Value

(Note 1)

Private Equities - 3.08%U.S. Real Estate Operating Companies - 3.08%

28,847,217 Newhall Holding Co. LLC, Class A Units (d)(e) . $ 109,980,014

Total Private Equities(Cost $75,516,192) . . . . . . . . . . . . . . . . . . . 109,980,014

NotionalAmount‡

Purchased Options - 0.04%Foreign Currency Put Options - 0.01%

40,000,000 AUD Australian Currency, strike 0.7301 AUD, expire8/11/15 (d). . . . . . . . . . . . . . . . . . . . . . . . . . 207,252

47,000,000 AUD Australian Currency, strike 0.6825 AUD, expire9/10/15 (d). . . . . . . . . . . . . . . . . . . . . . . . . . 85,140

292,392

Foreign Currency Call Options - 0.03%

380,000,000 U.S. Currency, strike 8.1400 HKD, expire8/1/17 (d). . . . . . . . . . . . . . . . . . . . . . . . . . . 1,026,190

Total Purchased Options(Cost $1,575,500) . . . . . . . . . . . . . . . . . . . . 1,318,582

PrincipalAmount($)

Short-Term Investments - 13.02%U.S. Government Obligations - 13.02%

465,000,000 U.S. Treasury Bills, 0.010%-0.040%,due 8/20/15-10/22/15 (g) . . . . . . . . . . . . . . 464,987,078

Total Short-Term Investments(Cost $464,991,552) . . . . . . . . . . . . . . . . . . 464,987,078


Other Assets less Liabilities - 1.93% (h) . . . . . 68,870,477

NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $3,569,998,249

Investor Class:Net assets applicable to 14,101,561 shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $ 454,247,643



outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $3,115,750,606


Notes:(a) Fair-valued security.(b) Payment-in-kind (“PIK”) security. Income may be paid in additional securities or cash at

the discretion of the issuer.(c) Variable rate security. The rate disclosed is in effect as of July 31, 2015.(d) Non-income producing security.

(e) Affiliated issuers - as defined under the Investment Company Act of 1940 (ownership of 5%or more of the outstanding voting securities of these issuers).

(f) Security subject to restrictions on resale.

Shares IssuerAquisition

Date Cost

MarketValue

Per Unit

3,369,445 Trinity Place Holdings, Inc. 10/2/13 - 11/6/13 $13,477,776 $6.96At July 31, 2015, the restricted security had a total market value of $23,444,345 or 0.66% of net assets of the Fund.

(g) Annualized yield at date of purchase.(h) Includes restricted cash received from counterparties as collateral management for forward

foreign currency contracts and options.† U.S. issuer unless otherwise noted.‡ Denominated in U.S. Dollars unless otherwise noted.AUD: Australian Dollar.EUR: Euro.REIT: Real Estate Investment Trust.


Net Assets

United States* 58.74%Hong Kong 10.97United Kingdom 8.81Australia 5.32Singapore 4.29Spain 2.82Canada 2.26Netherlands 2.16France 1.31Luxembourg 0.73Poland 0.66

Total 98.07%


Schedule of Written Options

NotionalAmount Security

ExpirationDate Strike Price Value

40,000,000 AUD Australian Currency, Call 8/11/15 0.7950 AUD $ (4)47,000,000 AUD Australian Currency, Call 9/10/15 0.7850 AUD (11,177)

(Premiums received $293,000) $(11,181)

AUD: Australian Dollar.

Schedule of Forward Foreign Currency Contracts

Contracts to Sell CounterpartySettlement

DateSettlement

ValueValue at7/31/15

UnrealizedAppreciation

113,000,000 EUR Goldman Sachs & Co. 8/27/2015 $124,830,603$124,143,743 $ 686,860113,000,000 EUR Morgan Stanley & Co. LLC 8/27/2015 124,827,710 124,143,743 683,967

$1,370,827

EUR: Euro.

Third Avenue TrustThird Avenue Real Estate Value FundPortfolio of Investments (continued)at July 31, 2015 (Unaudited)


6

PrincipalAmount‡ Security†

Value(Note 1)

Corporate Bonds & Notes - 2.16%Oil & Gas Production & Services - 2.16%

5,200,000 Petroleum Geo-Services ASA, 7.375%,due 12/15/18 (Norway) (a) . . . . . . . . . . . . . . $ 4,836,000

Total Corporate Bonds & Notes(Cost $4,708,383) . . . . . . . . . . . . . . . . . . . . 4,836,000

Foreign Government Bonds - 3.52%

11,000,000 SGD Singapore Government Bond, 0.500%,due 4/1/18 (Singapore) . . . . . . . . . . . . . . . . 7,878,048

Total Foreign Government Bonds(Cost $7,916,040) . . . . . . . . . . . . . . . . . . . . 7,878,048

Shares

Common Stocks - 87.33%Agricultural Equipment - 1.98%

494,600 CNH Industrial N.V. (Netherlands). . . . . . . . . . . 4,436,562

Automotive - 4.86%50,880 Daimler AG (Germany) . . . . . . . . . . . . . . . . . . . 4,547,98699,943 Leoni AG (Germany) . . . . . . . . . . . . . . . . . . . . . 6,329,994

10,877,980

Building & Construction Products/Services - 5.97%9,907,153 Tenon, Ltd. (New Zealand) (b)(c). . . . . . . . . . . . 13,341,029

Capital Goods - 1.97%108,306 Nexans S.A. (France) (b) . . . . . . . . . . . . . . . . . . 4,405,797

Diversified Holding Companies - 11.74%442,684 CK Hutchison Holdings, Ltd. (Hong Kong) . . . . . 6,572,621

4,075,126 GP Investments, Ltd., BDR (Brazil) (b) . . . . . . . 7,771,893236,633 Leucadia National Corp. . . . . . . . . . . . . . . . . . 5,565,60894,170 Pargesa Holding S.A. (Switzerland). . . . . . . . . . 6,339,396

26,249,518

Engineering/Construction - 1.59%277,400 Amec Foster Wheeler PLC (United Kingdom) . . . 3,552,245

Financials - 3.13%736,924 BinckBank N.V. (Netherlands). . . . . . . . . . . . . . 6,993,389

Food & Beverage - 2.46%1,410,092 C&C Group PLC (Ireland) . . . . . . . . . . . . . . . . . 5,494,549

Forest Products & Paper - 8.10%56,796,558 Rubicon, Ltd. (New Zealand) (b)(c). . . . . . . . . . 11,622,351

211,543 Weyerhaeuser Co., REIT . . . . . . . . . . . . . . . . . . 6,492,255

18,114,606

Insurance - 4.02%12,719 White Mountains Insurance Group, Ltd.

(Bermuda) . . . . . . . . . . . . . . . . . . . . . . . . . . 8,979,614

Investment Technology Services - 2.06%87,818 Otsuka Corp. (Japan) . . . . . . . . . . . . . . . . . . . . 4,612,863

Media - 3.95%335,699 Vivendi S.A. (France). . . . . . . . . . . . . . . . . . . . . 8,824,385


(Note 1)

Metals & Mining - 6.77%873,604 Antofagasta PLC (Chile) . . . . . . . . . . . . . . . . . . $ 7,735,355

10,528,312 Capstone Mining Corp. (Canada) (b) . . . . . . . . 7,406,084

15,141,439

Non-U.S. Real Estate Operating Companies - 1.65%442,684 Cheung Kong Property Holdings, Ltd.

(Hong Kong) (b) . . . . . . . . . . . . . . . . . . . . . . 3,688,891

Oil & Gas Production & Services - 5.50%1,685,119 Petroleum Geo-Services ASA (Norway) . . . . . . . 7,690,717

13,899,800 Vard Holdings, Ltd. (Singapore) (b) . . . . . . . . . 4,610,131

12,300,848

Real Estate - 9.70%1,713,642 Atrium European Real Estate, Ltd. (Austria) . . . 7,970,2973,048,500 Global Logistic Properties, Ltd. (Singapore) . . . 5,111,0181,367,034 Oberoi Realty, Ltd. (India) . . . . . . . . . . . . . . . . . 5,610,497

429,138 Segro PLC, REIT (United Kingdom) . . . . . . . . . . 3,007,685

21,699,497

Retail & Restaurants - 2.78%1,461,400 Arcos Dorados Holdings, Inc., Class A

(Argentina). . . . . . . . . . . . . . . . . . . . . . . . . . 6,210,950

Telecommunications - 6.83%1,522,855 Telefonica Deutschland Holding AG (Germany) . 9,457,8441,537,292 Vodafone Group PLC (United Kingdom) . . . . . . . 5,806,107

15,263,951

Transportation Infrastructure - 2.27%1,339,889 Santos Brasil Participacoes S.A. (Brazil) . . . . . 5,087,270

Total Common Stocks(Cost $227,289,578) . . . . . . . . . . . . . . . . . . 195,275,383

PrincipalAmount ($)

Short-Term Investment - 3.58%U.S. Government Obligations - 3.58%

8,000,000 U.S. Treasury Bills, 0.040%, due 8/20/15 (d) . . 7,999,852

Total Short-Term Investment(Cost $7,999,852) . . . . . . . . . . . . . . . . . . . . 7,999,852

Total Investment Portfolio - 96.59%(Cost $247,913,853) . . . . . . . . . . . . . . . . . . 215,989,283


NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $223,614,934Investor Class:Net assets applicable to 411,368 shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,506,995



outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $217,107,939


Third Avenue TrustThird Avenue International Value FundPortfolio of Investmentsat July 31, 2015 (Unaudited)


7

Notes:(a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This

security may be resold in transactions that are exempt from registration, normally to qualifiedinstitutional buyers.

(b) Non-income producing security.(c) Affiliated issuers - as defined under the Investment Company Act of 1940 (ownership of 5%

or more of the outstanding voting securities of these issuers).(d) Annualized yield at date of purchase.† U.S. issuer unless otherwise noted.‡ Denominated in U.S. Dollars unless otherwise noted.BDR: Brazilian Depositary Receipt.REIT: Real Estate Investment Trust.SGD: Singapore Dollar.


Net Assets

New Zealand 11.16%Germany 9.09United States* 8.97Singapore 7.87France 5.92Brazil 5.75Norway 5.60United Kingdom 5.53Netherlands 5.11Hong Kong 4.59Bermuda 4.02Austria 3.56Chile 3.46Canada 3.31Switzerland 2.84Argentina 2.78India 2.51Ireland 2.46Japan 2.06

Total 96.59%


Third Avenue TrustThird Avenue International Value FundPortfolio of Investments (continued)at July 31, 2015 (Unaudited)


8

PrincipalAmount‡/Units Security†

Value(Note 1)

Corporate Bonds & Notes - 57.60%Chemicals - 0.00%

17,809,061 Reichhold Industries, Inc.,due 5/8/17 (a)(b)(c) . . . . . . . . . . . . . . . . . . . $ —

Consumer Products - 6.23%Ideal Standard International S.A.

(Luxembourg):27,905,497 EUR Series B, 11.750% Cash or 15.750%

Payment-in-kind Interest, due 5/1/18 (d). . . 28,961,59933,180,416 EUR Series C, 11.750% Cash or 17.750%

Payment-in-kind Interest,due 5/1/18 (d)(e) . . . . . . . . . . . . . . . . . . . . . 25,872,664

83,000,000 Sun Products Corp. (The), 7.750%,due 3/15/21 (a) . . . . . . . . . . . . . . . . . . . . . . 75,737,500

130,571,763

Energy - 5.70%8,500,000 American Eagle Energy Corp.,

due 9/1/19 (a)(b) . . . . . . . . . . . . . . . . . . . . . 2,698,75030,285,000 CHC Helicopter S.A., 9.250%, due 10/15/20

(Luxembourg) . . . . . . . . . . . . . . . . . . . . . . . 19,685,25035,000,000 Energy XXI Gulf Coast, Inc., 11.000%,

due 3/15/20 (a) . . . . . . . . . . . . . . . . . . . . . . 26,512,500Global Geophysical Services, Inc., Escrow:

15,599,000 due 5/1/14 (b)(c)(f) . . . . . . . . . . . . . . . . . . . —45,925,000 due 5/1/17 (b)(c)(f) . . . . . . . . . . . . . . . . . . . —

Hercules Offshore, Inc.:10,000,000 10.250%, due 4/1/19 (a) . . . . . . . . . . . . . . . 3,050,00032,380,000 8.750%, due 7/15/21 (a) . . . . . . . . . . . . . . . 9,875,9003,000,000 7.500%, due 10/1/21 (a) . . . . . . . . . . . . . . . 885,0005,000,000 6.750%, due 4/1/22 (a) . . . . . . . . . . . . . . . . 1,487,500

20,150,000 IronGate Energy Services LLC, 11.000%,due 7/1/18 (a) . . . . . . . . . . . . . . . . . . . . . . . 14,105,000

20,000,000 Linn Energy LLC / Linn Energy Finance Corp.,8.625%, due 4/15/20 . . . . . . . . . . . . . . . . . 12,400,000

3,000,000 Lone Pine Resources, Inc., Escrow,due 2/15/17 (b)(c) . . . . . . . . . . . . . . . . . . . . —

5,000,000 Magnum Hunter Resources Corp., 9.750%,due 5/15/20 . . . . . . . . . . . . . . . . . . . . . . . . 3,850,000

16,075,000 McDermott International, Inc., 8.000%,due 5/1/21 (Panama) (a) . . . . . . . . . . . . . . . 13,945,062

22,847,000 Quicksilver Resources, Inc., due 7/1/21 (b) . . . 2,227,58310,106,000 CAD Southern Pacific Resource Corp., due 1/25/18

(Canada) (a)(b) . . . . . . . . . . . . . . . . . . . . . . 270,45217,500 ^ US Shale Solutions, Inc., 12.500%,

due 9/1/17 (a) . . . . . . . . . . . . . . . . . . . . . . . 8,575,000

119,567,997

Financials - 1.78%30,000,000 DFC Finance Corp., 10.500%, due 6/15/20 (a) . 21,225,000

Lehman Brothers Holdings, Inc.:31,000,000 due 9/26/08 (b) . . . . . . . . . . . . . . . . . . . . . . 3,332,50017,185,861 due 10/14/08 (b) . . . . . . . . . . . . . . . . . . . . . 1,847,48010,000,000 due 10/22/08 (b) . . . . . . . . . . . . . . . . . . . . . 1,075,00025,000,000 due 11/24/08 (b) . . . . . . . . . . . . . . . . . . . . . 2,687,50012,205,000 due 12/23/08 (b) . . . . . . . . . . . . . . . . . . . . . 1,312,0386,771,301 due 4/3/09 (b) . . . . . . . . . . . . . . . . . . . . . . . 727,915

30,000,000 due 1/14/11 (b) . . . . . . . . . . . . . . . . . . . . . . 3,262,500


Value(Note 1)

Financials (continued)Lehman Brothers Holdings, Inc.:

10,000,000 due 1/24/13 (b) . . . . . . . . . . . . . . . . . . . . . . $ 1,112,5007,113,000 due 2/9/17 (b) . . . . . . . . . . . . . . . . . . . . . . . 755,756

37,338,189

Food & Beverage - 1.85%39,007,000 American Seafoods Group LLC / American

Seafoods Finance, Inc., 10.750%,due 5/15/16 (a) . . . . . . . . . . . . . . . . . . . . . . 38,714,448

Gaming & Entertainment - 4.14%105,000,000 Caesars Entertainment Operating Co., Inc.,

due 12/15/18 (b) . . . . . . . . . . . . . . . . . . . . . 33,075,000Codere Finance Luxembourg S.A.

(Luxembourg):42,378,000 EUR due 6/15/15 (b) . . . . . . . . . . . . . . . . . . . . . . 34,440,79326,910,000 due 2/15/19 (a)(b) . . . . . . . . . . . . . . . . . . . . 19,240,650

86,756,443

Healthcare - 1.98%InVentiv Health, Inc.:

32,000,000 10.000% Cash or 12.000%Payment-in-kind Interest,due 8/15/18 (a)(d) . . . . . . . . . . . . . . . . . . . . 33,760,000

8,000,000 11.000%, due 8/15/18 (a) . . . . . . . . . . . . . . 7,720,000

41,480,000

Home Construction - 1.99%46,312,000 New Enterprise Stone & Lime Co., Inc.,

11.000%, due 9/1/18 . . . . . . . . . . . . . . . . . 41,680,800

Manufacturing - 5.61%20,000,000 Associated Materials LLC / AMH New Finance,

Inc., 9.125%, due 11/1/17 . . . . . . . . . . . . . 17,100,000Euramax International, Inc.:

31,000,000 9.500%, due 4/1/16 . . . . . . . . . . . . . . . . . . 31,038,75010,000,000 12.000%, due 8/15/20 (a) . . . . . . . . . . . . . . 10,012,50059,535,000 Liberty Tire Recycling LLC, 2nd Lien, 11.000%

Payment-in-kind Interest,due 3/31/21 (a)(c)(d)(f) . . . . . . . . . . . . . . . . 59,535,000

117,686,250

Media/Cable - 4.81%43,000,000 Cengage Learning Acquisitions, Inc., Escrow,

due 4/15/20 (b)(c) . . . . . . . . . . . . . . . . . . . . —151,500,000 iHeartCommunications, Inc., 12.000% Cash

plus 2.000% Payment-in-kind Interest,due 2/1/21 (d) . . . . . . . . . . . . . . . . . . . . . . . 100,747,500

100,747,500

Metals & Mining - 4.15%10,000,000 AK Steel Corp., 7.625%, due 10/1/21 . . . . . . . 7,100,000

116,582,098 EUR Boats Investments Netherlands B.V., 11.000%Payment-in-kind Interest, due 3/31/17(Netherlands) (d) . . . . . . . . . . . . . . . . . . . . . 39,691,227

2,500,000 FMG Resources (August 2006) Pty, Ltd.,9.750%, due 3/1/22 (Australia) (a) . . . . . . . 2,306,250

Third Avenue TrustThird Avenue Focused Credit FundPortfolio of Investmentsat July 31, 2015 (Unaudited)


9


Value(Note 1)

Corporate Bonds & Notes (continued)Metals & Mining (continued)New World Resources N.V. (Netherlands):

34,966,026 EUR 8.000% Cash or 11.000% Payment-in-kindInterest, due 4/7/20 (a)(d) . . . . . . . . . . . . . . $ 22,848,843

13,403,643 EUR 4.000% Cash or 8.000% Payment-in-kindInterest, due 10/7/20 (a)(d) . . . . . . . . . . . . . 1,214,445

37,000,000 Noranda Aluminum Acquisition Corp.,11.000%, due 6/1/19 . . . . . . . . . . . . . . . . . 13,782,500

86,943,265

Paper & Related Products - 0.19%10,000,000 Verso Paper Holdings LLC / Verso Paper, Inc.,

11.750%, due 1/15/19 . . . . . . . . . . . . . . . . 4,100,000

Retailers - 2.00%Claire’s Stores, Inc.:

2,500,000 8.875%, due 3/15/19 . . . . . . . . . . . . . . . . . 1,106,250115,250,000 7.750%, due 6/1/20 (a) . . . . . . . . . . . . . . . . 40,913,750

42,020,000

Services - 7.22%129,771,112 Affinion Group Holdings, Inc., 13.750% Cash

or 14.500% Payment-in-kind Interest,due 9/15/18 (d) . . . . . . . . . . . . . . . . . . . . . . 45,419,889

41,552,020 Affinion Investments LLC, 13.500%,due 8/15/18 . . . . . . . . . . . . . . . . . . . . . . . . 19,217,809

Altegrity, Inc.:118,871,840 due 7/1/20 (a)(b) . . . . . . . . . . . . . . . . . . . . . 61,813,35735,740,000 due 7/1/20 (a)(b) . . . . . . . . . . . . . . . . . . . . . 18,584,8006,500,000 Constellis Holdings LLC / Constellis Finance

Corp., 9.750%, due 5/15/20 (a) . . . . . . . . . . 6,223,750

151,259,605

Technology - 1.08%Advanced Micro Devices, Inc.:

15,000,000 6.750%, due 3/1/19 . . . . . . . . . . . . . . . . . . 10,987,50012,500,000 7.000%, due 7/1/24 . . . . . . . . . . . . . . . . . . 8,375,00028,118,000 THQ, Inc., due 8/15/14 (b) . . . . . . . . . . . . . . . . 3,233,570

22,596,070

Telecommunications - 2.68%55,555,000 Intelsat Luxembourg S.A., 7.750%, due 6/1/21

(Luxembourg) . . . . . . . . . . . . . . . . . . . . . . . 44,374,55614,000,000 Sprint Capital Corp., 6.875%, due 11/15/28 . . 11,900,000

56,274,556

Transportation Services - 1.49%32,500,000 CEVA Group PLC, 9.000%, due 9/1/21

(United Kingdom) (a) . . . . . . . . . . . . . . . . . . 31,159,375

Utilities - 4.70%4,000,000 Energy Future Holdings Corp.,

due 11/15/34 (b) . . . . . . . . . . . . . . . . . . . . . 4,220,00070,000,000 Energy Future Intermediate Holding Co. LLC /

EFIH Finance, Inc., due 12/1/18 (a)(b) . . . . . 78,750,000Texas Competitive Electric Holdings Co. LLC /

TCEH Finance, Inc.:60,000,000 due 11/1/15 (b) . . . . . . . . . . . . . . . . . . . . . . 9,300,000


Value(Note 1)

Utilities (continued)Texas Competitive Electric Holdings Co. LLC /

TCEH Finance, Inc.:40,000,000 due 11/1/16 (b) . . . . . . . . . . . . . . . . . . . . . . $ 6,200,000

98,470,000

Total Corporate Bonds & Notes(Cost $1,643,403,802) . . . . . . . . . . . . . . . . . 1,207,366,261

Term Loans - 11.35%Chemicals - 1.93%

4,292,000 Reichhold Holdings International B.V., DIPLoan, 12.000% Cash or 14.000%Payment-in-kind Interest,due 3/31/17 (Netherlands)(c)(d) . . . . . . . . . 4,292,000

Reichhold Holdings, Inc.:1,900,212 DIP Loan, 12.000% Cash or 14.000%,

Payment-in-kind Interest,due 3/17/17 (c)(d) . . . . . . . . . . . . . . . . . . . . 1,900,212

2,577,000 Term Loan, 15.000% Cash orPayment-in-kind Interest,due 3/31/17 (c)(d) . . . . . . . . . . . . . . . . . . . . 2,577,000

34,278,662 Vertellus Specialties, Inc., Term Loan,10.500%, due 10/10/19 (g) . . . . . . . . . . . . . 31,622,066

40,391,278

Energy - 1.37%14,424,934 Global Geophysical Services, Inc., Term Loan

B, 15.500% Cash or Payment-in-kindInterest, due 8/9/17 (c)(d)(f) . . . . . . . . . . . . 14,424,934

15,000,000 Templar Energy LLC, Term Loan B, 2nd Lien,8.500%, due 11/25/20 (g) . . . . . . . . . . . . . . 9,424,995

5,000,000 W & T Offshore, Inc., Term Loan, 2nd Lien,9.000%, due 5/5/20 . . . . . . . . . . . . . . . . . . 4,800,000

28,649,929

Financials - 0.09%Concrete Investment I, Term Loan

(Netherlands):32,255 EUR Tranche A2, 1.911% Cash or

Payment-in-kind Interest,due 3/31/16 (c)(d)(g) . . . . . . . . . . . . . . . . . . 35,424

12,322 EUR Tranche A3, 2.000% Cash orPayment-in-kind Interest,due 3/31/16 (c)(d)(g) . . . . . . . . . . . . . . . . . . 13,533

Concrete Investment II, Term Loan(Netherlands):



IVG Immobilien AG, Term Loan (Netherlands):702,628 EUR Tranche A1, 9.432% Cash or

Payment-in-kind Interest,due 9/30/17 (c)(d)(g) . . . . . . . . . . . . . . . . . . 771,661

Third Avenue TrustThird Avenue Focused Credit FundPortfolio of Investments (continued)at July 31, 2015 (Unaudited)


10


Value(Note 1)

Term Loans (continued)Financials (continued)IVG Immobilien AG, Term Loan (Netherlands):

1,048,717 EUR Tranche A2, 9.432% Cash orPayment-in-kind Interest,due 9/30/18 (c)(d)(g) . . . . . . . . . . . . . . . . . . $ 1,151,752

2,000,130

Gaming & Entertainment - 2.38%12,468,354 AP Gaming I LLC, Term Loan,

9.250%, due 12/20/20 (g) . . . . . . . . . . . . . . 12,406,01220,000,000 Land Holdings LLC, Term Loan,

12.000%, due 6/27/20 . . . . . . . . . . . . . . . . 20,000,00018,258,582 Majestic Star Casino LLC, Term Loan, 1st Lien,

12.500% Cash or 14.500%Payment-in-kind Interest, due 6/1/20 (d). . . 17,528,239

49,934,251

Healthcare - 0.87%19,412,400 Rural/Metro Corp., Term Loan, 8.000% Cash

plus 1.000% Payment-in-kind Interest,due 6/30/18 (d)(g) . . . . . . . . . . . . . . . . . . . . 18,247,656

Manufacturing - 1.15%25,000,000 Liberty Tire Recycling LLC, Term Loan,

9.000%, due 3/31/21 (f)(g) . . . . . . . . . . . . . 24,125,000

Media/Cable - 0.17%5,000,000 Getty Images, Inc., Term Loan, 1st Lien,

4.750%, due 10/18/19 (g) . . . . . . . . . . . . . . 3,553,125

Metals & Mining - 0.50%9,840,618 Allied Nevada Gold Corp., DIP Loan, 12.000%

Cash or Payment-in-kind Interest,due 3/12/16 (c)(d) . . . . . . . . . . . . . . . . . . . . 10,529,462

Retailers - 0.67%26,614,423 Weight Watchers International, Inc., Term

Loan, 4.000%, due 4/2/20 (g) . . . . . . . . . . . 13,959,265

Services - 2.22%31,545,293 Altegrity, Inc., DIP Loan A, 12.000% Cash or

Payment-in-kind Interest,due 8/7/15 (c)(d) . . . . . . . . . . . . . . . . . . . . . 31,545,293

Education Management LLC:8,875,618 Term Loan A, 5.500%, due 7/2/20 (g) . . . . . 6,109,381

15,285,509 Term Loan B, 8.500%, due 7/2/20 (g) . . . . . 8,884,702

46,539,376

Total Term Loans(Cost $253,103,693) . . . . . . . . . . . . . . . . . . 237,929,472

Claims - 1.29%Financials - 1.29%

200,000,000 Lehman Brothers Holdings, Inc., SIPAClaims (h) . . . . . . . . . . . . . . . . . . . . . . . . . . 27,125,000

Total Claims(Cost $35,218,345) . . . . . . . . . . . . . . . . . . . 27,125,000


Value(Note 1)

Municipal Bonds - 0.07%Gaming & Entertainment - 0.07%

5,200,000 New York City, NY, Industrial DevelopmentAgency Civic Facility Revenue, BronxParking Development Co. LLC OID,due 10/1/37 (b) . . . . . . . . . . . . . . . . . . . . . . $ 1,521,000

Total Municipal Bonds(Cost $3,058,314) . . . . . . . . . . . . . . . . . . . . 1,521,000

Shares

Convertible Preferred Stocks - 0.60%Transportation Services - 0.60%

4,435 CEVA Holdings LLC, Series A-1 (e)(h) . . . . . . . . 4,656,98110,196 CEVA Holdings LLC, Series A-2 (e)(h) . . . . . . . . 7,850,666

12,507,647

Total Convertible Preferred Stocks(Cost $17,733,657) . . . . . . . . . . . . . . . . . . . 12,507,647

Preferred Stocks - 3.31%Energy - 0.15%

1,122,431 Lone Pine Resources, Inc. (Canada) (c)(h) . . . . 3,120,358

Financials - 2.78%120,774 Concrete Investment II SCA (Luxembourg) (h). . 16,712,637100,000 Federal Home Loan Mortgage Corp.

5.300% (h). . . . . . . . . . . . . . . . . . . . . . . . . . 636,25060,000 Federal Home Loan Mortgage Corp.,

Series G (g)(h) . . . . . . . . . . . . . . . . . . . . . . . 372,00089,283 Federal Home Loan Mortgage Corp.,

Series H, 5.100% (h) . . . . . . . . . . . . . . . . . . 647,30263,188 Federal Home Loan Mortgage Corp.,

Series K, 5.790% (h) . . . . . . . . . . . . . . . . . . 445,47552,500 Federal Home Loan Mortgage Corp.,

Series L (g)(h) . . . . . . . . . . . . . . . . . . . . . . . 325,500207,640 Federal Home Loan Mortgage Corp.,

Series M (g)(h) . . . . . . . . . . . . . . . . . . . . . . . 1,214,69423,500 Federal Home Loan Mortgage Corp.,

Series N (g)(h) . . . . . . . . . . . . . . . . . . . . . . . 142,175336,223 Federal Home Loan Mortgage Corp.,

Series P, 6.000% (h). . . . . . . . . . . . . . . . . . . 2,518,310224,580 Federal Home Loan Mortgage Corp.,

Series R, 5.700% (h) . . . . . . . . . . . . . . . . . . 1,605,747165,000 Federal Home Loan Mortgage Corp.,

Series S (g)(h) . . . . . . . . . . . . . . . . . . . . . . . 1,112,100100,000 Federal Home Loan Mortgage Corp.,

Series U, 5.900% (h) . . . . . . . . . . . . . . . . . . 400,000637,722 Federal Home Loan Mortgage Corp.,

Series V, 5.570% (h) . . . . . . . . . . . . . . . . . . 2,582,774392,089 Federal Home Loan Mortgage Corp.,

Series W, 5.660% (h) . . . . . . . . . . . . . . . . . . 1,842,818203,813 Federal Home Loan Mortgage Corp.,

Series X, 6.020% (h) . . . . . . . . . . . . . . . . . . 849,900100,000 Federal Home Loan Mortgage Corp.,

Series Y, 6.550% (h) . . . . . . . . . . . . . . . . . . 430,000500,000 Federal Home Loan Mortgage Corp.,

Series Z, 8.375% (g)(h) . . . . . . . . . . . . . . . . 2,500,000



11


(Note 1)

Preferred Stocks (continued)Financials (continued)

96,750 Federal National Mortgage Association,Series H, 5.810% (h) . . . . . . . . . . . . . . . . . . $ 736,268

478,000 Federal National Mortgage Association,Series M, 4.750% (h) . . . . . . . . . . . . . . . . . . 3,752,300

1,293,000 Federal National Mortgage Association,Series O (g)(h) . . . . . . . . . . . . . . . . . . . . . . . 11,119,800

100,000 Federal National Mortgage Association,Series P (g)(h) . . . . . . . . . . . . . . . . . . . . . . . 409,000

564,650 Federal National Mortgage Association,Series S, 8.250% (g)(h) . . . . . . . . . . . . . . . . 2,766,785

750,000 Federal National Mortgage Association,Series T, 8.250% (h). . . . . . . . . . . . . . . . . . . 5,220,000

58,341,835

Services - 0.38%118,341 Education Management LLC, Class A-1 (h) . . . 3,254,377335,501 Education Management LLC, Class A-2 (h) . . . 4,613,139

7,867,516

Total Preferred Stocks(Cost $93,595,647) . . . . . . . . . . . . . . . . . . . 69,329,709

Private Equities - 1.30%Automotive - 0.39%

10,000,000 International Automotive ComponentsGroup LLC (h) . . . . . . . . . . . . . . . . . . . . . . . . 8,125,000

Chemicals - 0.70%29,055 Reichhold Cayman L.P. (c)(h) . . . . . . . . . . . . . . 14,643,593

Consumer Products - 0.18%1,451,633,736,280 Ideal Standard International Equity S.A.

Alpecs (Luxembourg) (e)(h) . . . . . . . . . . . . . 3,866,070

Energy - 0.03%19,700 Thunderbird Resources L.P. (c)(h)(i) . . . . . . . . . 553,567

Total Private Equities(Cost $30,651,290) . . . . . . . . . . . . . . . . . . . 27,188,230

Common Stocks & Warrants - 10.66%Chemicals - 2.80%

867,448 MPM Holdings, Inc. (h) . . . . . . . . . . . . . . . . . . . 23,312,6651,310,842 MPM Holdings, Inc., Restricted Shares (e)(h) . . 35,228,879

478,500 Phosphate Holdings, Inc. (f)(h). . . . . . . . . . . . . 31,485

58,573,029

Energy - 1.18%124,461 Geokinetics Holdings USA, Inc. (c)(e)(h) . . . . . . 10,274,256

3,786,564 Global Geophysical Services, Inc. (c)(f)(h) . . . . 8,709,097262,913 Global Geophysical Services, Inc.,

Warrants (c)(f)(h). . . . . . . . . . . . . . . . . . . . . —374,199 Lone Pine Resources Canada, Ltd.

(Canada) (c)(h) . . . . . . . . . . . . . . . . . . . . . . 972,917374,199 Lone Pine Resources, Inc. (c)(h) . . . . . . . . . . . . —

1,122,431 Lone Pine Resources, Inc., Multiple VotingShares (c)(h) . . . . . . . . . . . . . . . . . . . . . . . . —

5,000 New Gulf Resources LLC, Warrants (h) . . . . . . . 125,00050,000 Platinum Energy Solutions, Inc. (c)(e)(h) . . . . . 947,500


(Note 1)

Energy (continued)10,874 Platinum Energy Solutions, Inc.,

Warrants (c)(e)(h) . . . . . . . . . . . . . . . . . . . . $ —53 Thunderbird Resources Equity, Inc. (c)(h) . . . . . 3,647,500

17,500 US Shale Solutions, Inc., Warrants (a)(c)(h) . . . —

24,676,270

Financials - 1.18%3,725,000 Federal Home Loan Mortgage Corp. (h). . . . . . . 8,381,2501,700,000 Rescap Liquidating Trust . . . . . . . . . . . . . . . . . 16,252,000

24,633,250

Manufacturing - 1.04%3,430,293 Liberty Tire Recycling LLC (c)(f)(h) . . . . . . . . . . 21,782,360

42,750 Liberty Tire Recycling LLC, Warrants, expire12/12/19 (c)(f)(h). . . . . . . . . . . . . . . . . . . . . —

21,782,360

Media/Cable - 1.73%971,678 Cengage Learning Holdings II, Inc. . . . . . . . . . 25,870,927

2,311,360 Radio One, Inc. Class D (f)(h) . . . . . . . . . . . . . . 5,639,718681,637 Spanish Broadcasting System, Inc.

Class A (f)(h) . . . . . . . . . . . . . . . . . . . . . . . . 4,703,295

36,213,940

Metals & Mining - 0.07%2,334,038 Noranda Aluminum Holding Corp. . . . . . . . . . . 1,517,125

Services - 0.02%499,061 Affinion Group, Inc., Warrants, Series A (h). . . . 274,484

6,422,764 Affinion Group, Inc., Warrants, Series B (h) . . . 128,455

402,939

Technology - 0.02%250,000 Advanced Micro Devices, Inc. (h) . . . . . . . . . . . 482,500

Transportation Services - 0.17%4,710 CEVA Holdings LLC (e)(h) . . . . . . . . . . . . . . . . . 3,626,631

Utilities - 2.45%32,549,441 EME Reorganization Trust . . . . . . . . . . . . . . . . 423,1434,509,571 Longview Power LLC (f)(h) . . . . . . . . . . . . . . . . 51,014,522

51,437,665

Total Common Stocks & Warrants(Cost $267,012,911) . . . . . . . . . . . . . . . . . . 223,345,709

Closed-End Funds - 3.44%Financials - 3.44%

309,983 Ares Dynamic Credit Allocation Fund, Inc. . . . . 4,690,0432,009,188 BlackRock Corporate High Yield Fund, Inc. . . . 21,257,209

842,356 BlackRock Credit Allocation Income Trust . . . . 10,478,908835,639 First Trust High Income Long/Short Fund . . . . . 12,618,149425,826 Neuberger Berman High Yield Strategies Fund,

Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,811,834586,170 New America High Income Fund, Inc. (The) . . . 4,988,307554,048 Western Asset High Yield Defined Opportunity

Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,310,166



12


(Note 1)

Closed-End Funds (continued)Financials (continued)

1,025,669 Western Asset Managed High Income Fund,Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,953,981

72,108,597

Total Closed-End Funds(Cost $81,727,331) . . . . . . . . . . . . . . . . . . . 72,108,597

PrincipalAmount($)

Short-Term Investments - 3.58%U.S. Government Obligations - 3.58%

75,000,000 U.S. Treasury Bills, 0.020% - 0.030%,due 8/6/15-8/20/15(j) . . . . . . . . . . . . . . . . . 74,999,056

Total Short-Term Investments(Cost $74,999,056) . . . . . . . . . . . . . . . . . . . 74,999,056


Other Assets less Liabilities - 6.80% (k)(l) . . . 142,585,075

NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $2,096,005,756

Investor Class:Net assets applicable to 66,613,767 shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $ 594,784,326



outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $1,501,221,430


Notes:(a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This

security may be resold in transactions that are exempt from registration, normally to qualifiedinstitutional buyers.

(b) Issue in default.(c) Fair-valued security.(d) Payment-in-kind (“PIK”) security. Income may be paid in additional securities or cash at the

discretion of the issuer.(e) Security subject to restrictions on resale.

Shares/Principal Amount1 Issuer

AquisitionDate Cost

MarketValue

Per Unit

4,710 CEVA Holdings LLC 5/29/13 $ 5,355,643 $ 769.994,435 CEVA Holdings LLC, Series A-1,

Convertible Preferred 5/29/13 4,435,224 1,050.0510,196 CEVA Holdings LLC, Series A-2,

Convertible Preferred 5/29/13 13,298,434 769.98124,461 Geokinetics Holdings USA, Inc. 5/22/13-5/14/14 13,060,780 82.55

1,451,633,736,280 Ideal Standard International EquityS.A. Alpecs 10/31/14 9,915,530 0.002

33,180,416 EUR Ideal Standard International S.A.,Series C, 11.750% Cash or17.750% Payment-in-kind Interest,due 5/1/18 10/31/14-5/1/15 39,995,128 77.98

1,310,842 MPM Holdings, Inc., Restricted Shares 10/24/14 21,367,809 26.8850,000 Platinum Energy Solutions, Inc. 10/4/13 1,225,746 18.9510,874 Platinum Energy Solutions, Inc.,

Warrants 10/4/13 9,743 0.00EUR: Euro.1) Denominated in U.S. Dollars unless otherwise noted.2) Amount less than $0.01.At July 31, 2015, these restricted securities had a total market value of $92,323,647 or 4.40% of net assets of the Fund.

(f) Affiliated issuers - as defined under the Investment Company Act of 1940 (ownership of 5%or more of the outstanding voting securities of these issuers).

(g) Variable rate security. The rate disclosed is in effect as of July 31, 2015.(h) Non-income producing security.(i) Security is held in the blocker, created to hold the investment for the Fund.(j) Annualized yield at date of purchase.(k) A portion is segregated for future fund commitment.(l) Includes restricted cash pledged to counterparty as collateral management for forward

foreign currency contracts.† U.S. issuer unless otherwise noted.^ Expressed in units.‡ Denominated in U.S. Dollars unless otherwise noted.CAD: Canadian Dollar.DIP: Debtor-In-Possession.EUR: Euro.OID: Original Issue Discount.SIPA: Securities Investor Protection Act of 1970.


Net Assets

United States* 78.17%Luxembourg 9.22Netherlands 3.34United Kingdom 1.49Panama 0.66Canada 0.21Australia 0.11

Total 93.20%


Schedule of Forward Foreign Currency Contracts

Contracts to Buy CounterpartySettlement

DateSettlement


UnrealizedDepreciation

8,760,000 EUR Goldman Sachs & Co. 8/27/2015 $9,661,272 $9,623,887 $(37,385)

Contracts to Sell CounterpartySettlement

DateSettlement


UnrealizedAppreciation/

(Depreciation)

13,500,000 EUR Goldman Sachs & Co. 8/21/2015 $14,815,461 $14,830,229 $ (14,768)74,800,000 EUR Goldman Sachs & Co. 8/27/2015 82,736,751 82,176,566 560,18574,800,000 EUR JPMorgan Chase Bank, N.A. 8/27/2015 82,719,599 82,176,566 543,03320,000,000 EUR Macquaire Bank, Ltd. 8/27/2015 22,106,400 21,972,344 134,056

$1,222,506

EUR: Euro.



13

1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization:Third Avenue Trust (the “Trust”) is an open-end, management investment company organized as a Delaware business trust pursuant to a TrustInstrument dated October 31, 1996. The Trust currently consists of five non-diversified (within the meaning of Section 5(b)(2) of the InvestmentCompany Act), separate investment series: Third Avenue Value Fund, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund,Third Avenue International Value Fund and Third Avenue Focused Credit Fund (each a “Fund” and, collectively, the “Funds”). Third AvenueManagement LLC (the “Adviser”) provides investment advisory services to each of the Funds in the Trust. The Funds seek to achieve their investmentobjectives by adhering to a strict value discipline when selecting securities and other instruments. Each Fund has a distinct investment approach.

Accounting policies:The policies described below are followed consistently by the Funds and are in conformity with accounting principles generally accepted in theUnited States of America (“U.S. GAAP”). The Trust is an investment company and, accordingly, follows the investment company accounting andreporting guidance of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 946-InvestmentCompanies, which is part of U.S. GAAP.

Security valuation:Generally, the Funds’ investments are valued at market value. Securities traded on a principal stock exchange, including The NASDAQ Stock Market,Inc. (“NASDAQ”), are valued at the last quoted sales price, the NASDAQ official closing price, or in the absence of closing sales prices on that day,securities are valued at the mean between the closing bid and asked price. In accordance with procedures approved by the Trust’s Board of Trustees (the“Board”), the Funds have retained a third party provider that, under certain circumstances, applies a statistical model to provide fair value pricing forforeign equity securities with principal markets that are no longer open when a Fund calculates its net asset value (“NAV”), and certain events haveoccurred after the principal markets have closed but prior to the time as of which the Funds compute their NAVs. Debt instruments with maturitiesgreater than 60 days, including floating rate loan securities, are valued on the basis of prices obtained from a pricing service approved as reliable by theBoard or otherwise pursuant to policies and procedures approved by the Board. Investments in derivative instruments are valued independently byservice providers or by broker quotes based on pricing models. Short-term cash investments are valued at cost, plus accrued interest, whichapproximates market value. Short-term debt securities with 60 days or less to maturity may be valued at amortized cost.

The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securitiesheld in the Funds. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by theBoard, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies andprocedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’sresponsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value andliquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification orenhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believesappropriate.

Each Fund may invest up to 15% of its total net assets in securities which are not readily marketable, including those which are restricted as todisposition under applicable securities laws (“restricted securities”). Restricted securities and other securities and assets for which market quotations arenot readily available are valued at “fair value”, as determined in good faith by the Committee as authorized by the Board, under procedures establishedby the Board. At July 31, 2015, such securities had a total fair value of $14,956,207 or 0.83% of net assets of Third Avenue Value Fund, $26,504,629or 0.74% of net assets of Third Avenue Real Estate Value Fund, and $191,455,179 or 9.13% of net assets of Third Avenue Focused Credit Fund.There were no fair valued securities for Third Avenue Small-Cap Value Fund and Third Avenue International Value Fund at July 31, 2015. Among thefactors that may be considered by the Committee in determining fair value are: the type of security, trading in unrestricted securities of the same issuer,the financial condition of the issuer, the percentage of the Fund’s beneficial ownership of the issuer’s common stocks and debt securities, comparablemultiples of similar issuers, the operating results of the issuer and the discount from market value of any similar unrestricted securities of the issuer atthe time of purchase and liquidation values of the issuer. The fair values determined in accordance with these procedures may differ significantly fromthe amounts which would be realized upon disposition of the securities.

Fair value measurements:In accordance with FASB ASC 820-10, Fair Value Measurements and Disclosures, the Funds disclose the fair value of their investments in a hierarchythat prioritizes the inputs to valuation techniques used to measure the fair value. Fair value is defined as the price that a Fund would receive uponselling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under currentmarket conditions. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or

Third Avenue TrustNotes to Portfolios of InvestmentsJuly 31, 2015 (Unaudited)

14

liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3measurements). The three levels of the fair value hierarchy are as follows:Level 1 – Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access at the measurementdate;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not consideredto be active;

Level 3 – Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that issignificant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Funds.The Funds consider observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, notproprietary, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuinginvestments are not necessarily an indication of the risk associated with investing in those investments.

The Funds use valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on thetype of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactionsinvolving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

The following are certain inputs and techniques that the Funds generally use to evaluate how to classify each major category of assets and liabilities forLevel 2 and Level 3, in accordance with U.S. GAAP.

Equity Securities (Common Stocks, Preferred Stocks, and Warrants)—Equity securities traded in inactive markets and certain foreign equity securitiesare valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluatedprice quotes received from independent pricing services or brokers that take into account the integrity of the market sector and issuer, the individualcharacteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extentthat these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable, the values arecategorized as Level 3.

U.S. Government Obligations—U.S. Government obligations are valued by independent pricing services based on pricing models that evaluate themean between the most recently quoted bid and ask price. The models also take into consideration data received from active market makers andbroker-dealers, yield curves, and the spread over comparable U.S. Government issues. The spreads change daily in response to market conditions andare generally obtained from the new issue market and broker-dealer sources. To the extent that these inputs are observable, the values ofU.S. Government obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

Corporate Bonds & Notes—Corporate bonds and notes are generally comprised of two main categories: investment grade bonds and high yieldbonds. Investment grade bonds are valued by independent pricing services or brokers using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, and option adjusted spread modelsthat include base curve and spread curve inputs. Adjustments to individual bonds can be applied to recognize trading differences compared to otherbonds issued by the same issuer. High yield bonds are valued by independent pricing services or brokers based primarily on broker-dealer quotationsfrom relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations receivedare supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of theunderlying equities, listed bonds and sector specific trends. To the extent that these inputs are observable, the values of corporate bonds and notes arecategorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

Forward Foreign Currency Contracts—Forward foreign currency contracts are valued by independent pricing services using various inputs andtechniques, which include broker-dealer quotations, actual trading information and foreign currency exchange rates gathered from leading marketmakers and foreign currency exchange trading centers throughout the world. To the extent that these inputs are observable, the values of forwardforeign currency contracts are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

Claims—Claims are valued by brokers based on pricing models that take into account, among other factors, both cash and non-cash assets. Thevaluation is derived from expected cash flow of the claims and the non-cash assets, which include all real estate, private equity or other securities withinthe estate. To the extent that these inputs are observable, the values of the claims are categorized as Level 2. To the extent that these inputs areunobservable, the values are categorized as Level 3.

Term Loans—Term loans are valued by independent pricing services based on the average of evaluated quoted prices received from multiple dealers orvalued relative to other benchmark securities when broker-dealer quotes are unavailable. Inputs may include quoted prices for similar investments in

Third Avenue TrustNotes to Portfolios of Investments (continued)July 31, 2015 (Unaudited)

15

active markets, interest rates, coupon rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features inorder to estimate the relevant cash flows which is then discounted to calculate fair values. To the extent that these inputs are observable, the values ofterm loans are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

Municipal Bonds—Municipal bonds are valued by independent pricing services based on pricing models that take into account, among other factors,information received from market makers and broker-dealers, current trades, bid-ask lists, offerings, market movements, the callability of the bond,state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable, the values of municipal bonds arecategorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

Options (Written and Purchased)—Options are valued by independent pricing services or by brokers based on pricing models that take into account,among other factors, foreign exchange rate, time until expiration, and volatility of the underlying foreign currency security. To the extent that theseinputs are observable, the values of options are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized asLevel 3.

The following is a summary by level of inputs used to value the Funds’ investments as of July 31, 2015:

Third Avenue ValueFund

Third AvenueSmall-Cap Value

FundThird Avenue RealEstate Value Fund

Third AvenueInternational Value

FundThird Avenue

Focused Credit FundLevel 1: Quoted Prices†Investments in Securities:

Common Stocks & Warrants:Chemicals $ — $ — $ — $ — $ 31,485Consumer Products 66,225,016 — — — —Diversified Holding Companies 167,706,253 4,866,784 — 26,249,518 —U.S. Real Estate Operating Companies 30,423,572 21,517,218 194,896,435 — —Utilities 71,196,396 — — — 423,143Other** 1,353,458,876 383,385,744 2,677,191,011 144,062,485 62,846,815

Preferred Stocks:Financials — — — — 36,269,761

Closed-End Funds:Financials — — — — 72,108,597Total for Level 1 Securities $1,689,010,113 $409,769,746 $2,872,087,446 $170,312,003 $171,679,801

Level 2: Other Significant Observable Inputs†Investments in Securities:

Common StocksBuilding & Construction Products/Services $ — $ — $ — $13,341,029 $ —Chemicals — — — — 58,541,544Diversified Holding Companies — 10,948,159 — — —Forest Products & Paper — — — 11,622,351 —Services — — — — 402,939Utilities — — — — 51,014,522

Preferred Stocks:Financials — — — — 5,359,437Services — — — — 4,613,139

Debt Securities issued by the U.S.Treasury and other governmentcorporations and agencies:Municipal Bonds — — — — 1,521,000

Corporate Bonds & Notes 12,277,175 — — 4,836,000 1,089,763,428Term Loans — — — — 85,959,546Claims 8,558,141 — — — 27,125,000Purchased Options:

Foreign Currency Put Options — — 292,392 — —Foreign Currency Call Options — — 1,026,190 — —

Foreign Government Bonds — — — 7,878,048 —Short Term Investments:

U.S. Government Obligations 39,999,261 — 464,987,078 7,999,852 74,999,056Total for Level 2 Securities 60,834,577 10,948,159 466,305,660 45,677,280 1,399,299,611


16





FundThird Avenue

Focused Credit FundLevel 3: Significant Unobservable InputsInvestments in Securities:

Common Stocks & Warrants:Consumer Products $ —* $ — $ — $ — $ —Energy — — — — 24,676,270*Financial Insurance 285,000 — — — —Manufacturing — — — — 21,782,360*Transportation Services — — — — 3,626,631U.S. Real Estate Operating Companies — — 23,444,345 — —

Limited Partnerships:Insurance & Reinsurance 49,841 — — — —

Convertible Preferred Stocks:Transportation Services — — — — 12,507,647

Preferred Stocks:Energy — — — — 3,120,358Financials — — — — 16,712,637Non-U.S. Real Estate Operating Companies — — 26,250,023 — —Services — — — — 3,254,377

Corporate Bonds & Notes 14,621,366 — — — 117,602,833*Term Loans — — 3,060,284 — 151,969,926Private Equities:

Automotive — — — — 8,125,000Chemicals — — — — 14,643,593Consumer Products — — — — 3,866,070Energy — — — — 553,567U.S. Real Estate Operating Companies — — 109,980,014 — —Total for Level 3 Securities 14,956,207 — 162,734,666 — 382,441,269

Total Value of Investments $1,764,800,897 $420,717,905 $3,501,127,772 $215,989,283 $1,953,420,681

Investments in Other Financial Instruments:Level 2: Other Significan Observable Inputs

Written Foreign Currency Options $ — $ — $ (11,181) $ — $ —Forward Foreign Currency Contracts-Assets — — 1,370,827 — 1,237,274Forward Foreign Currency Contracts-Liabilities — — — — (52,153)

Total Appreciation/(Depreciation)or Value of Other Financial Instruments $ — $ — $ 1,359,646 $ — $ 1,185,121

† The value of securities that was transferred from Level 2 on October 31, 2014 to Level 1 on July 31, 2015 for Third Avenue Focused Credit Fund was $6,572,073. The transfer was due to theavailability of quoted prices in active market at period end. The value of securities that was transferred from Level 1 on October 31, 2014 to Level 2 on July 31, 2015 for Third Avenue Focused CreditFund was $4,137,254. The transfer was due to lack of quoted prices in active market at period end.

* Includes investments fair valued at zero.** Please refer to the Portfolios of Investments for industry specifics of the portfolio holdings.

Transfers from Level 1 to Level 2, or from Level 2 to Level 1 are recorded utilizing values of the beginning of the period.


17

Following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Third Avenue Value FundCommonStocks

CorporateBonds & Notes

LimitedPartnerships Total

Balance as of 10/31/14 (fair value)Consumer Products $ —* $ 4,507,464 $ — $ 4,507,464Financial Insurance 259,000 — — 259,000Insurance & Reinsurance 40,800 — 92,941 133,741

Payment-in-kindConsumer Products — 645,152 — 645,152

SalesInsurance & Reinsurance (49,673) — — (49,673)

Net change in unrealized gain/(loss)Consumer Products — 9,468,750 — 9,468,750Financial Insurance 26,000 — — 26,000Insurance & Reinsurance 11,870,336 — (43,100) 11,827,236

Net realized gain/(loss)Insurance & Reinsurance (11,861,463) — — (11,861,463)

Balance as of 7/31/15 (fair value)Consumer Products —* 14,621,366 — 14,621,366Financial Insurance 285,000 — — 285,000Insurance & Reinsurance — — 49,841 49,841

Total $ 285,000 $14,621,366 $ 49,841 $ 14,956,207

Net change in unrealized gain/(loss) related to securities still held as of July 31, 2015 $ 9,451,650

* Investments fair valued at zero.

Third Avenue Real Estate Value FundCommonStocks

PreferredStocks

PrivateEquities Term Loans Total

Balance as of 10/31/14 (fair value)Non-U.S. Real Estate Operating Companies $ — $33,993,569 $ — $3,337,522 $ 37,331,091U.S. Real Estate Operating Companies 19,295,656 — 100,965,259 — 120,260,915

Payment-in-kindNon-U.S. Real Estate Operating Companies — — — 139,901 139,901

Net change in unrealized gain/(loss)Non-U.S. Real Estate Operating Companies — (7,743,546) — (417,139) (8,160,685)U.S. Real Estate Operating Companies 4,148,689 — 9,014,755 — 13,163,444

Balance as of 7/31/15 (fair value)Non-U.S. Real Estate Operating Companies — 26,250,023 — 3,060,284 29,310,307U.S. Real Estate Operating Companies 23,444,345 — 109,980,014 — 133,424,359

Total $23,444,345 $26,250,023 $109,980,014 $3,060,284 $162,734,666

Net change in unrealized gain/(loss) related to securities still held as of July 31, 2015 $ 5,002,759


CorporateBonds & Notes Term Loans

CommonStocks

and Warrants

Preferred andConvertiblePreferred

Stocks

PrivateEquities

and Claims TotalBalance as of 10/31/14 (fair value)

Automotive $ — $ — $ — $ — $ 10,625,000(c) $ 10,625,000Chemicals — 57,938,000 71,883,570 — — 129,821,570Consumer Products 61,765,296 — — — 4,354,901(c) 66,120,197Energy 22,979,360* 40,703,101 21,193,777* 3,120,358(a) 1,043,306(c) 89,039,902Financials — 2,147,439 — 21,642,730(a) — 23,790,169Food & Beverage — — — — 9,431,221*(d) 9,431,221Gaming & Entertainment — 19,600,000 — — — 19,600,000Healthcare — 21,296,632 — — — 21,296,632Media/Cable —* — — — — —


18

Third Avenue Focused Credit Fund (continued)


CommonStocks

and Warrants


Stocks

PrivateEquities

and Claims TotalMetals & Mining $ 41,652,303 $ — $ — $ — $ — $ 41,652,303Services — — 1,005,503 — — 1,005,503Technology 4,358,290 — — — — 4,358,290Transportation Services — — 4,533,288 15,623,470(b) — 20,156,758Utilities — 70,353,585 — — — 70,353,585

Transfer in/(out) of Level 3^Chemicals 65,009,764 — (71,883,570) — — (6,873,806)Energy (16,012,500) — — — — (16,012,500)Metals & Mining (41,652,303) — — — — (41,652,303)Services — — (1,005,503) — — (1,005,503)

PurchasesChemicals — 7,960,860 — — 9,965,778(c) 17,926,638Energy —† 28,540,640 26,615,862† — — 55,156,502Gaming & Entertainment — 17,345,653 — — — 17,345,653Manufacturing 59,101,778 23,750,000 1,743,600† — — 84,595,378Metals & Mining — 12,058,342 — — — 12,058,342Services — 31,545,293 — 8,267,095(a) — 39,812,388Utilities — 5,066,895 — — — 5,066,895

SalesChemicals (49,798,789) (57,872,500) — — — (107,671,289)Consumer Products (5,236,445) — — — — (5,236,445)Energy (6,966,860) (47,575,176) — — — (54,542,036)Food & Beverage — — — — (14,819,694)(d) (14,819,694)Healthcare — (2,790,000) — — — (2,790,000)Metals & Mining — (2,306,491) — — — (2,306,491)Utilities — (77,308,654) — — — (77,308,654)

Bond discount/(premium)Chemicals (115,161) 459,404 — — — 344,243Consumer Products 1,269,311 — — — — 1,269,311Energy 228 441,379 — — — 441,607Gaming & Entertainment — 58,939 — — — 58,939Healthcare — 196,315 — — — 196,315

Payment-in-kindChemicals — 234,712 — — — 234,712Consumer Products 11,145,232 — — — — 11,145,232Energy — 485,519 — — — 485,519Financials — 123,113 — — — 123,113Healthcare — 112,261 — — — 112,261Manufacturing 10,452 9,388 — — — 19,840Metals & Mining — 88,767 — — — 88,767

Return of capitalEnergy — — (261,000) — — (261,000)Food & Beverage — — — — (497,284)(d) (497,284)

Net change in unrealized gain/(loss)Automotive — — — — (2,500,000)(c) (2,500,000)Chemicals 4,937,813 (3,074,510) — — 4,677,815(c) 6,541,118Consumer Products (14,001,850) — — — (488,831)(c) (14,490,681)Energy (39,404) (413,913) (22,872,369) — (489,739)(c) (23,815,425)Financials — (270,422) — (4,930,093)(a) — (5,200,515)Food & Beverage — — — — 21,364,846(d) 21,364,846Gaming & Entertainment — 523,647 — — — 523,647Healthcare — (495,424) — — — (495,424)Manufacturing 422,770 365,612 20,038,760 — — 20,827,142Metals & Mining — 688,844 — — — 688,844Services — — — (5,012,718)(a) — (5,012,718)Technology (1,124,720) — — — — (1,124,720)


19

Third Avenue Focused Credit Fund (continued)


CommonStocks

and Warrants


Stocks

PrivateEquities

and Claims TotalTransportation Services $ — $ — $ (906,657) $ (3,115,823)(b) $ — $ (4,022,480)Utilities — (4,868,956) — — — (4,868,956)

Net realized gain/(loss)Chemicals (20,033,627) 3,123,246 — — — (16,910,381)Consumer Products (107,281) — — — — (107,281)Energy 39,176 (2,956,616) — — — (2,917,440)Food & Beverage — — — — (15,479,089)(d) (15,479,089)Healthcare — (72,128) — — — (72,128)Utilities — 6,757,130 — — — 6,757,130

Balance as of 7/31/15 (fair value)Automotive — — — — 8,125,000(c) 8,125,000Chemicals —* 8,769,212 — — 14,643,593(c) 23,412,805Consumer Products 54,834,263 — — — 3,866,070(c) 58,700,333Energy —* 19,224,934 24,676,270* 3,120,358(a) 553,567(c) 47,575,129Financials — 2,000,130 — 16,712,637(a) — 18,712,767Food & Beverage — — — — — —Gaming & Entertainment — 37,528,239 — — — 37,528,239Healthcare — 18,247,656 — — — 18,247,656Manufacturing 59,535,000 24,125,000 21,782,360* — — 105,442,360Media/Cable —* — — — — —Metals & Mining — 10,529,462 — — — 10,529,462Services — 31,545,293 — 3,254,377(a) — 34,799,670Technology 3,233,570 — — — — 3,233,570Transportation Services — — 3,626,631 12,507,647(b) — 16,134,278Utilities — — — — — —

Total $117,602,833 $151,969,926 $ 50,085,261 $35,595,019 $ 27,188,230 $ 382,441,269

Net change in unrealized gain/(loss) related to securities still held as of July 31, 2015 $ (27,430,805)

^ Transfers in/out of level 3 are recorded utilizing values as of the beginning of the period. The transfers are due to increase/decrease in trading activities at period end.* Includes investments fair valued at zero.† Includes investments acquired through corporate actions with zero cost.(a) Preferred Stocks(b) Convertible Preferred Stocks(c) Private Equities(d) Claims


20

Quantitative Information about Level 3 Fair Value Measurements(amounts in thousands)

Third Avenue Value FundFair Value at

7/31/15 Valuation Technique(s) Unobservable Inputs(s)

Range(WeightedAverage)

Corporate Bonds $14,621 Book Value Restructuring value $66.01Other (b) 335

$14,956

Third Avenue Real Estate Value FundFair Value at



Private Equities $109,980 Broker Quote # $3.81Preferred Stocks 26,250 Broker Quote # $138.38Common Stocks 23,445 Option Pricing Model (a) Share volatility 0.60% (N/A)Term Loans 3,060 Book Value Restructuring value $109.82-$109.84

$162,735

Third Avenue Focused Credit FundFair Value at



Term Loans $84,701 Broker Quote # $94.00-$100.00Term Loans 67,269 Book Value Restructuring value 1.0x (1.0x)Corporate Bonds 59,535 Book Value Restructuring value 1.0x (1.0x)Corporate Bonds 58,068 Broker Quote # $11.50-$103.78Common Stocks 46,334 Book Value Restructuring value $2.30-$68,820.74Preferred Stocks 19,967 Broker Quote # $27.50-$138.38Private Equities 15,197 Book Value Restructuring value $28.10-$504.00Convertible Preferred Stocks 12,508 Broker Quote # $769.98-$1,050.05Private Equities 11,991 Broker Quote # $0.00*-$0.81Other (b) 6,871

$382,441

# Valuation techniques and significant unobservable inputs used by third-party pricing vendors or brokers, which are described in Note 1, were not provided to the Adviser. The appropriateness of fairvalues for these securities is based on results of back testing, broker due diligence, unchanged price review and consideration of macro or security specific events.

(a) Represents amounts used when the reporting entity has determined that market participants would take into account premiums and discounts, as applicable, when pricing the investments.(b) Includes securities less than 0.50% within each respective Fund.* Amount less than $0.01.

The significant unobservable inputs used in the fair value measurement of the Funds’ investments are listed above. Generally, a change in the assumptions used in any input in isolation may beaccompanied by a change in another input. Significant changes in any of the unobservable inputs may significantly impact the fair value measurement. The impact is based on the relationship betweeneach unobservable input and the fair value measurement. Significant increases (decreases) in enterprise multiples may increase (decrease) the fair value measurement. Significant increases (decreases)in the discount for marketability may decrease (increase) the fair value measurement.

Security transactions and investment income:Security transactions are accounted for on a trade date basis.

Foreign currency translation and foreign investments:The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:

• Investments and assets and liabilities denominated in foreign currencies: At the prevailing rates of exchange on the valuation date.

• Investment transactions: At the prevailing rates of exchange on the date of such transactions.

Payment-in-kind securities:The Funds may invest in payment-in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest paymentsin either cash or additional debt securities.Those additional debt securities usually have the same terms, including maturity dates and interest rates, andassociated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a �dirty� price)and require a pro-rata adjustment from the unrealized appreciation or depreciation on investments to interest receivable.

Term loans:The Funds typically invest in loans which are structured and administered by a third party entity (the “Agent”) that acts on behalf of a group of lendersthat make or hold interests in the loan. These securities generally pay interest at rates which are periodically pre-determined by reference to a baselending rate plus a premium. These base lending rates are generally either the lending rate offered by one or more major European banks, such as theLondon Interbank Offered Rate (“LIBOR”) or the prime rate offered by one or more major United States banks, or the certificate of deposit rate.


21

These securities are generally considered to be restricted, as the Funds are ordinarily contractually obligated to receive approval from the Agent bankand/or borrower prior to disposition. Remaining maturities of term loans may be less than the stated maturities shown as a result of contractual oroptional payments by the borrower. Such prepayments cannot be predicted with certainty. The interest rate disclosed reflects the rate in effect onJuly 31, 2015.

Forward foreign exchange contracts:The Funds may be exposed to foreign currency risks associated with portfolio investments and therefore may use forward foreign currency contracts tohedge or manage these exposures. The Funds also may buy forward foreign currency contracts to gain exposure to currencies. Forward foreign currencycontracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealizedappreciation/(depreciation) on investments and foreign currency translations. When the contract is closed, the Funds record a realized gain or loss equalto the difference between the value of the contract at the time it was opened and the value at the time it was closed.

The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of the Funds’ portfolio securities, but it doesestablish a rate of exchange that can be achieved in the future. Although forward foreign currency contracts limit the risk of loss due to a decline in thevalue of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Funds couldbe exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts.

During the period ended July 31, 2015, Third Avenue Real Estate Value Fund and Third Avenue Focused Credit Fund used forward foreign currencycontracts for hedging against foreign currency risks.

Option contracts:The Funds may purchase and sell (“write”) put and call options on various instruments including investments, indices, and foreign currency to manageand hedge exchange rate risks within their portfolios and also to gain long or short exposure to the underlying instruments.

An option contract gives the buyer the right, but not the obligation, to buy (call) or sell (put) an underlying item at a fixed exercise price on a certaindate or during a specified period. The cost of the underlying instruments acquired through the exercise of a call option is increased by the premiumspaid. The proceeds from the underlying instruments sold through the exercise of a purchased put option are decreased by the premiums paid.Investments in over-the-counter option contracts require the Funds to fair value or mark-to market the options on a daily basis, which reflects thechange in the market value of the contracts at the close of each day’s trading. The cost of purchased options that expire unexercised are treated by theFunds, on expiration date, as realized losses on investments or foreign currency transactions.

When the Funds write an option, an amount equal to the premium received by the Funds is recorded as a liability and is subsequently adjusted to thecurrent fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Funds, on the expiration date,as realized gains on written options or foreign currency. The difference between the premium and the amount paid on effecting a closing purchasetransaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchasetransaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency indetermining whether the Funds have a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the security or currencypurchased by the Funds. In purchasing and writing options, the Funds bear the market risk of an unfavorable change in the price of the underlyingsecurity or the risk that the Funds may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could resultin the Funds purchasing a security or currency at a price different from the current market value.The Funds may execute transactions in both listed andover-the-counter options. Listed options involve minimal counterparty risk since listed options are guaranteed against default by the exchange on whichthey trade. When purchasing over-the-counter options, the Funds bear the risk of economic loss from counterparty default, equal to the market valueof the option.

During the period ended July 31, 2015,Third Avenue Real Estate Value Fund used purchased options on foreign currency for hedging purposes and/orto protect against losses in foreign currencies.

During the period ended July 31, 2015, Third Avenue Value Fund used written put options on equities to gain long exposure to the underlyinginstruments and enhance the yield of the Fund. Third Avenue Real Estate Value Fund used written call options on foreign currency for hedgingpurposes and written put options on equities to gain long exposure to the underlying instruments. As of July 31, 2015, the Third Avenue Value Fundand Third Avenue Real Estate Value Fund no longer held any written put options on equities.


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2. INVESTMENTS

Unrealized appreciation/(depreciation):The following information is based upon the book basis of investment securities as of July 31, 2015:





Fund

Third AvenueFocused Credit

Fund

Gross unrealized appreciation $ 356,802,037 $112,515,521 $ 739,445,073 $ 36,014,417 $ 121,091,877Gross unrealized depreciation (197,844,037) (20,896,840) (57,257,253) (67,938,987) (668,175,242)

Net unrealized appreciation/(depreciation) $ 158,958,000 $ 91,618,681 $ 682,187,820 $ (31,924,570) $ (547,083,365)

Aggregrate book cost $1,605,842,897 $329,099,224 $2,818,939,952 $247,913,853 $2,500,504,046

3. COMMITMENTS AND CONTINGENCIES

At July 31, 2015, Third Avenue Focused Credit Fund had the following commitments and contingencies.

Issuer TypeAmount of

CommitmentFunded

CommitmentValue of

Segregated Cash

Allied Nevada Gold Corp. Debtor-In-Possession Loan $12,700,334 $9,840,618 $ 2,859,716Hercules Offshore, Inc. Debtor-In-Possession Loan 40,000,000 0 40,000,000

In the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide generalindemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made againstthe Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.

Third Avenue Focused Credit Fund is a plaintiff in two separate litigations each pertaining to counterparties not performing their contractualobligations. The Fund is seeking damages from both counterparties.

Third Avenue Focused Credit Fund is a defendant in an action initiated by the issuer of bonds currently held by the Fund pertaining to the validity ofa notice of default sent to the issuer. The Fund expects the risk of any loss from this action to be remote.

For additional information regarding the accounting policies of the Funds, refer to the most recent financial statements in the N-CSR filing atwww.sec.gov.


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This publication does not constitute an offer or solicitation of any transaction in any securities. Any recommendation contained herein may not be suitable for all investors. Information contained in this publication has been obtained from sources we believe to be reliable, but cannot be guaranteed.

The information in this portfolio manager letter represents the opinions of the portfolio manager(s) and is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed are those of the portfolio manager(s) and may differ from those of other portfolio manager(s) or of the firm as a whole. Also, please note that any discussion of the Fund’s holdings, the Fund’s performance, and the portfolio managers views are as of July 31, 2015 (except as otherwise stated), and are subject to change without notice. Certain information contained in this letter constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe,” or the negatives thereof (such as “may not,” “should not,” “are not expected to,” etc.) or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of any fund may differ materially from those reflected or contemplated in any such forward-looking statement.

Third Avenue Funds are offered by prospectus only. Prospectuses contain more complete information on advisory fees, distribution charges, and other expenses and should be read carefully before investing or sending money. Please read the prospectus and carefully consider investment objectives, risks, charges and expenses before you send money. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost.

If you should have any questions, please call 1-800-443-1021, or visit our web site at: www.thirdave.com, for the most recent month-end performance data or a copy of the Funds’ prospectus. Current performance results may be lower or higher than performance numbers quoted in certain letters to shareholders.

M.J. Whitman LLC, Distributor. Date of first use of portfolio manager commentary: August 31, 2015.

BOARD OF TRUSTEES

David M. BarseWilliam E. Chapman, II

Lucinda FranksEdward J. KaierEric Rakowski

Patrick ReinkemeyerMartin Shubik

Charles C. WaldenMartin J. Whitman

OFFICERS

Martin J. Whitman — Chairman of the BoardDavid M. Barse — President, Chief Executive OfficerVincent J. Dugan — Chief Financial Officer, Treasurer

Michael A. Buono — ControllerW. James Hall — General Counsel, Secretary

Joseph J. Reardon — Chief Compliance Officer

TRANSFER AGENT

BNY Mellon Investment Servicing (U.S.) Inc.P.O. Box 9802

Providence, RI 02940-8002610-239-4600

800-443-1021 (toll-free)

INVESTMENT ADVISER

Third Avenue Management LLC622 Third Avenue

New York, NY 10017

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP300 Madison AvenueNew York, NY 10017

CUSTODIAN

JPMorgan Chase Bank, N.A.14201 Dallas Parkway, 2nd Floor

Dallas, TX 75254

ABOUT THIRD AVENUE MANAGEMENT

Third Avenue Management LLC is a New York-based global asset manager thathas adhered to a proven value investment philosophy since its founding in 1986.Third Avenue’s disciplined approach seeks to maximize long-term, risk-adjusted

returns by focusing on corporate financial stability, and price conscious,opportunistic security selection throughout the capital structure.

If you would like further information about Third Avenue Funds, please contactyour relationship manager or email [email protected]


622 Third Avenue, 31st floor | New York, New York 10017www.thirdave.com

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