third avenue funds - valuewalk · the information in these portfolio manager letters represents the...

Third Avenue Value Fund

Third Avenue Small-Cap Value Fund

Third Avenue real Estate Value Fund

Third Avenue international Value Fund

Third Ave nue Focused Credit Fund

Portfolio Manager Commentary

April 30, 2014

Third Avenue Funds

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 these portfolio manager letters represents the opinions of the individual

portfolio manager 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 and may differ

from those of other portfolio managers or of the firm as a whole. Also, please note that any

discussion of the Funds’ holdings, the Funds’ performance, and the portfolio managers’ views are

as of April 30, 2014 (except as otherwise stated), and are subject to change without notice.

Certain information contained in the following letters constitute “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 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:

May 30, 2014.

Third Avenue Value fund

Third Avenue smal l -cap Value fund

Third Avenue Real estate Value fund

Third Avenue internat ional Value fund

Third Avenue focused credit fund

second QUARTeR poRTfolio mAnAgeR commenTARy

april 30, 2014

THiRd AVenUe fUndspoRTfolio mAnAgeR commenTARy_____________________________________________

cHAiRmAn’s leTTeR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1THiRd AVenUe VAlUe fUnd (TAVfX, TVfVX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4THiRd AVenUe smAll-cAp VAlUe fUnd (TAscX, TVsVX) . . . . . . . . . . . . . . . . . . . . . . . . 11THiRd AVenUe ReAl esTATe VAlUe fUnd (TAReX, TVRVX) . . . . . . . . . . . . . . . . . . . . . . . 16THiRd AVenUe inTeRnATionAl VAlUe fUnd (TAViX, TViVX) . . . . . . . . . . . . . . . . . . . . 21THiRd AVenUe focUsed cRediT fUnd (TfciX, TfcVX) . . . . . . . . . . . . . . . . . . . . . . . . . . 28

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Dear Fellow Shareholders:

High Frequency Trading (“HFT”) has been on the frontpages of the financial press ever since the publicationearlier this year of Michael lewis’ book, Flash Boys. Thebook demonstrates once again how difficult it is toprosper as an investor in markets where longer-termfundamental analysis of companies and securities areignored. The ways most market participants who lackspecific knowledge about individual companies and thesecurities they issue can prosper seems to encompass atleast one of the three factors:

1.) Front running, which is the principal topic of Flash

Boys. Have information about buy or sell order flowsbefore such orders are executed, and place yourorder before the other orders are executed.

2.) Obtaining and using inside information either aboutprospective market events or corporate events orannouncements.

3.) Getting large compensation off the top in the formof commissions, management fees incentive fees,interest income on credit balances, fees for orderflows, and /or trading spreads.

Understandably 100% of high frequency traders, as wellas the vast majority of other market participants (withthe exception of those engaged in risk arbitrage), havelittle or no interest in becoming knowledgeable aboutindividual companies and individual securities. after all,fundamental, underlying, factors seem to have no impacton immediate security prices.

Most market participants just are not in a position tomake determinations about intermediate to long-termfundamental values, which requires a detailed study ofcompanies and the securities they issue. rather, mostmarket participants have to be short-run oriented.Virtually all of academic finance involves only the studyof markets and market prices; for academics the study ofcompanies and the securities they issue tends to besomebody else’s business. For those involved with

“sudden death” securities short-run considerations tendto be the only factor that makes sense. This lack ofinterest, especially by traders and finance academics, isunderstandable. “Sudden death” exists where aninvestment situation will come to a definitive end in arelatively short period of time, say, call options are toexpire or a merger transaction is to conclude. “Suddendeath” securities and situations include options andwarrants, risk arbitrage, short maturity credits, manycredits likely to suffer a money default, heavily marginedportfolios, and situations where the investor and hisadvisers know little, or nothing, about the companies inwhich they invest. in contrast, emphasis on determiningintermediate to long-term values and dynamics is anecessary approach in value investing, control investing,most distress investing, credit analysis, and first andsecond stage venture capital investing.

it is extremely hard to use most conventional securityanalysis – see Graham & Dodd – and be focused ondetermining underlying fundamental values for commonstocks. This is because in most conventional analysis, fourfactors tend to be so overemphasized for non-controlinvestors that they lose sight of underlying, long-termvalues and the underlying dynamics of businesses. Thesefour areas of overemphasis in conventional investmentapproaches seem to be as follows:

1.) a belief in the primacy of periodic earnings indetermining value or prices whether those periodicearnings are cash flows from operations oraccounting earnings from operations. Thereprobably is no one factor in the accounting cycle thatdeserves primacy in the analysis of an individualcompany, but if there were, the one i’d pick wouldbe credit worthiness, rather than earnings, certainlysubsequent to the 2008 financial meltdown.

2.) a belief in short termism. if one is acutely consciousof securities price fluctuations – whether hourly,daily, weekly, monthly or annually one, per se, has tobe focused on the short-term. if the market

letter from the chairman(Unaudited)

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participant believes that the market knows moreabout a particular security than he or she does, thatparticipant ought to place great weight on securityprices and the short term. The guts of valueinvesting and control investing, however, revolvearound the conviction that the market participantknows more about the security than the marketdoes. The opposite is true for traders as well as mostother market participants.

3.) a belief that top-down considerations, such aspredicting the business cycle, the Dow-Jonesindustrial average, inflation, and interest rates, arefar more importantinvestment considerationsthan are bottom-up factors,such as the strength ofcorporate financial positions,access to capital markets,earnings, or the pricediscount for a common stockfrom net asset value (“NaV”).The actual times when topdown factors seem to havebeen actually moreimportant than bottom-upconsiderations for long-terminvestors seem to have beenfew and far between – say,1929, 1933, 1937, 1969, 1974, 1987, 2000 and2008.

4.) There is a belief that securities markets reflect aprice equilibrium. at any time, the prices forsecurities are right (i.e., efficient) and will changeonly as the market digests new information. Whatnonsense! For the value investor, as well as thecontrol investor, most prices are wrong most of thetime and most short-run price changes are merelyrandom walks. How can one gauge whether a priceis right from an intermediate to long-term point of

view unless the particular security and issuingcompany are examined in depth? admittedly, themarket for equities where “sudden death”conditions dominate tends to be highly efficient butthe problem faced by academics, traders andconventional analysts is that they apply validreasoning for “sudden death” situations to allinvestments. Traders are not equipped to conductsuch examinations in the secondary market; valueinvestors and active investors are. if you are a highfrequency trader who makes, say, ten trades a day,how can you possibly have fundamental knowledgeabout the securities you are trading? Someone like

Warren Buffett probablyundertakes no more than tennew investments a year – forgetabout 10 a day.

according to Flash Boys, investorsare being ripped off by HighFrequency Traders who, on anytrade, front run for a profit of, say1¢ to 5¢ a share. While this viewhas validity in regard to averagetraders, it is an utterly immaterialconsideration for buy-and-hold-investors, such as those managingThird avenue portfolios. For mostof the securities in those buy-and-

hold portfolios, the average holding period is anywherefrom two years to five years. incurring an extra 5¢ tradingcost every two to five years is just not relevant to aportfolio’s performance. Day traders, who are involvedwith five to ten trades a day, in contrast, are vitally affectedby trading costs.

Many equities in Third avenue portfolios are the commonstocks of well-financed companies which are selling atmeaningful discounts from readily ascertainable NaV.Such securities seem to deliver a great deal of long-termsafety to holders. i believe, based on several studies, that

letter from the chairman (continued)(Unaudited)

“many equities in ThirdAvenue portfolios are thecommon stocks of well-

financed companies which areselling at meaningful discounts

from readily ascertainablenAV. such securities seem todeliver a great deal of long-

term safety to holders.”

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at least 80% of the time for at least 80% of thecompanies, NaVs will be larger in the next reportingperiod than in the prior reporting period. While theseincreases in NaV don’t guaranty a profitable, long-terminvestment, they seem to put the odds in the investors’favor. performance will be satisfactory over the long termunless the price discounts from NaV widen and staywidened. These steady, long-term increases in NaVexplain much of the satisfactory performance of manyExchange Traded Funds (“ETFs”). Third avenue differsfrom ETFs because it strives, through intensiveexamination, to restrict such NaV investments tocompanies which have promise of increasing NaVs, overthe longer term, by not less than 10% compoundedannually, after adding back dividends.

Don’t overestimate the importance of HFT, and alltrading, in trying to understand Wall Street. While tradingmay involve a larger population of market participantsthan other activities, it is among the least importantactivities conducted in the financial community. Moreimportant activities probably are control investing,distress investing, credit analysis, as well as first andsecond stage venture capital investing combined withinitial public Offerings (“ipOs”). incidentally for ipOs, itseems as if most gross spreads for equities rangebetween 4% to7%, quite possibly resulting in far higherprofit margins for those actively involved with ipOs thanis the case for HFT. There are few, if any, activities on WallStreet which are not highly profitable for sponsors andpromoters. HFT, in my opinion, serves no useful social oreconomic purpose but the profits it delivers to promotersare hardly unique on Wall Street.

There is a common view that HFT serves an economicpurpose in creating liquidity in the market place. in myexperience, high levels of liquidity tend to result in grosslyinefficient market prices with no association to underlyingcorporate values. Stock market buying bubbles and panicmarket crashes almost always have as one componentlarge, large trading volumes. With electronic trading, HFThas taken over the role that used to belong to floorspecialists who maintained orderly markets in individualsecurities by standing ready to buy or sell as needed. HFTtraders, like specialists, see the order book and theiractivities seem to have been highly profitable for both.The essential differences between HFT and the specialistis that HFT assumes no responsibility and is not requiredto buy when there is a plethora of sellers, or to sell whenthere is a plethora of buyers. HFT can just walk away;specialists never could just walk away.

i shall write you again after the fiscal period to end July31, 2014.

Sincerely yours,

Martin J. WhitmanChairman of the Board

letter from the chairman (continued)(Unaudited)

Third Avenue Value fund(Unaudited)


The following summarizes Third avenue Value Fund’s(the “Fund” or “TaVF”) investment activity during thequarter:

number of shares new position

253,642 shares aGCO Corp. Common Stock(“aGCO Common”)

positions increased

27,215 shares alleghany Corp. Common Stock(“alleghany Common”)

130,000 shares apache Corp. Common Stock(“apache Common”)

255,000 shares Encana Corp. Common Stock(“Encana Common”)

15,000 shares pOSCO aDr Common Stock(“pOSCO Common”)

4,175,000 shares Vodafone Group plC CommonStock (“Vodafone Common”)

1,278 shares White Mountains insuranceGroup, ltd. Common Stock(“White Mountains Common”)

positions decreased

100,000 shares Bank of New York Mellon Corp.Common Stock (“Bank of NewYork Common”)

385,000 shares Brookfield asset Managementinc. Class a Common Stock(“Brookfield Common”)

25,692 shares Cavco industries inc. CommonStock (“Cavco Common”)

708,000 shares Cheung Kong Holdings ltd.Common Stock (“Cheung KongCommon”)

number of shares positions decreased (continued)

7,994,112 shares Chong Hing Bank ltd. CommonStock (“Chong Hing Common”)

1,325,000 shares Daiwa Securities Group, inc.Common Stock (“DaiwaCommon”)

280,000 shares Devon Energy Corp. CommonStock (“Devon Common”)

478,701 shares investor aB Class B CommonStock (“investor aB Class BCommon”)

683,056 shares rHJ international Common Stock(“rHJ Common”)

1,284,500 shares Sycamore Networks inc. CommonStock (“Sycamore Common”)

401,900 shares Toyota industries Corp. CommonStock (“Toyota industriesCommon”)

position eliminated

583,862 shares Verizon Communications inc.Common Stock (“VerizonCommon”)

discUssion of QUARTeRly AcTiViTy

Fund Management initiated a position in the commonstock of aGCO Corp. (“aGCO”) during the quarter. aGCOis a pure-play agricultural company dedicated to farmmachinery, grain storage solutions and proteinproduction equipment. it is a global company with salesgenerated across the following geographies: 23% U.S.,53% Europe, 23% latin america and 1% asia pacific. itmaintains an investment grade balance sheet, is highlycash generative, and has been consistently profitable.Despite these appealing characteristics, the currentvaluation is depressed due to short-term concerns.

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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 april 30, 2014: Cavco industries, inc., 5.56%; posco (aDr),5.40%; Henderson land Development Co., ltd., 5.29%; Wheelock & Co., ltd., 4.86%; Covanta Holding Corp., 4.45%; Bank ofNew York Mellon Corp., 4.36%; Hang lung Group ltd., 3.90%; Devon Energy Corp., 3.89%; apache Corp., 3.83%; and TotalS.a., 3.76%.

Third Avenue Value fund (continued)(Unaudited)

agricultural spending drives aGCO’s top-line and it isprimarily driven by farm income. Farm income has grownrapidly in the U.S. over the past five years and many areprojecting that spending growth will slow down or declinein the near term. This is putting pressure on agricultural-related companies like aGCO (See aGCO’s valuationhistory below).

Agco 10-year Valuation History

Source: Capital iQNote: Hi: 8.2X, low: 2.0X, average: 7.3X

although we agree that agricultural spending will likelybe challenged in the near term, there are mitigatingfactors to combat slowing end-market activity. First,aGCO’s exposure to North america is only 23%, whichtrails peers by wide margins. Over half of aGCO’s salesare in Europe. There seems to be less risk in Europe, asfarm incomes have been more stable when compared toU.S. farm incomes. Second, aGCO’s operating margins arelower (8%) than peers and management is focused onimproving them to double digit rates. Management’spotential to improve margins provides a cushion tosluggish sales. Finally, management has responded to theattractive valuation by implementing a $500 million stockbuyback program (roughly 10% of current marketcapitalization) and has been aggressively purchasingshares at current prices.

What we find most interesting is how the short-termconcerns seem to be overshadowing attractive long-termagricultural trends. as economies develop, per capitaprotein demand tends to grow. productivity in North

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america exceeds other geographies as well. Higherprotein demand and the potential for productivityimprovement outside the U.S. should provide tailwindsfor agricultural spending even if U.S. farm incomes arechallenged. aGCO is well positioned to take advantage.in addition, outside the U.S. and Europe, between 10%to 15% of annual grain harvest is wasted due toinsufficient storage capacity. aGCO’s grain storageproducts are a very important part of the solution for thisfundamental problem. With aGCO’s strong marketpositions in areas such as latin america, it should haveample ability to grow sales over the long haul.

although not a central part of our thesis, given aGCO’shealthy market position outside the lucrative U.S.markets, it could be an appealing target for largercompetitors who are interested in expanding its footprintoutside the U.S.

Fund Management also increased its positions in severalcommon stocks during the quarter:

• Oil and gas exploration and production (“E&p”)companies (Encana Common and apacheCommon). Shares of both companies werepurchased below our estimates of net asset value,despite generally improving business fundamentals,particularly for natural gas. The common stocks of oiland gas exploration and production companiesaccounted for 14.5% of the Fund’s net assets atquarter end.

• The position in posco common was increasedslightly at about a 50% discount to book value.Despite excess capacity and pricing pressure in theglobal steel industry, particularly in China, posco’ssteel business continues to perform relatively well asevidenced by its 7% operating margin in both 2013and the first quarter of 2014. The companycontinues to have a strong financial position, and itsrecent investments in non-steel businesses shouldstart to contribute more meaningfully over the nextcouple of years, particularly in energy (more on this

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later in this letter). posco common accounted for5.4% of the Fund’s net assets at quarter end.

• property and casualty insurance companies(alleghany Common and White MountainsCommon). Both companies have generated solid(high single digit) annual book value growth sincethe Fund invested in 2012 despite a challengingenvironment characterized by low interest rates andcompetitive underwriting. Shares of bothcompanies, which account for 3.1% of the Fund’sassets in total, were purchased at modest discountsto book value.

• additional shares of Vodafone Common werepurchased following the completion of thecompany’s sale of its 45% stake in Verizon Wirelessto Verizon. This transaction resulted in a significantdistribution to shareholders consisting mostly ofVerizon common stock and also of cash. FundManagement elected to sell the Verizon sharesowing to concerns about slowing growth andincreasing completion in the US along with thecompany’s leveraged balance sheet. Vodafone has avery strong financial position and is well positionedto benefit from consolidation in the Europeantelecommunication market and growth in emergingmarkets. Vodafone Common accounted for 2.5% ofthe Fund’s net assets at quarter end.

The majority, 77%, of the Fund’s Chong Hing Commonposition was accepted for tender by Yuexiu FinancialHoldings, part of the Yue Xiu Group, a Chinese company.as discussed in the 2013 year end letter, FundManagement was very pleased with the price of thistransaction (2.4 times book value, including a specialdividend), particularly considering that the shares hadbeen purchased below book value.

Fund Management also trimmed several positions thathad appreciated or were non-core holdings. at quarter

end, cash and equivalents accounted for about 14% ofthe Fund’s net assets.

lARgesT posiTion UpdATe – cAVco

The Fund’s largest position is the common stock of Cavcoindustries inc., which represented 5.6% of the Fund’s netassets as of quarter end. Since Cavco is not a householdname, we thought it would be helpful to discuss thehistory of the investment and why we are so excitedabout its future.

The Cavco investment originated during the 2008financial crisis. Fleetwood Enterprises, a leading producerof manufactured homes and recreational vehicles (“rVs”)had filed for bankruptcy, and its announcement of thesale of its rV business in a bankruptcy auction indicatedthat the manufactured housing business could beavailable on similar terms. Fund Management had longfollowed the manufactured housing industry and knewthat Fleetwood had a strong brand name and reputationas a quality manufacturer. Fund Management contactedJoe Stegmayer, the Chairman and CEO of Cavco, todiscuss the situation and learned that Cavco was alsointerested in the Fleetwood manufactured housingbusiness. Fund Management had known Joe Stegmayerfor many years, dating back to when he was president ofindustry leader Clayton Homes, and had tremendousrespect for his managerial capabilities. Cavco was a small(three plants) regional manufactured housing producerbased arizona. Under Joe Stegmayer’s prudentmanagement, the company had maintained generallyprofitable operations and a strong, debt free balancesheet during the long industry downturn (SeeManufactured Housing Shipments chart that follows onthe next page). Therefore, the company was in positionto consider acquisitions. However, given Fleetwood’sconsiderably larger size, Cavco wanted a financial partnerfor the acquisition, and, hence, we formed a 50-50 jointventure company (“Fleetwood Homes”) to purchase theFleetwood assets. The Fund and Cavco each contributed$35 million to fund the joint venture.

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Fleetwood’s manufactured housing assets, consistingmostly of seven manufacturing plants, were purchasedby our joint venture for $26 million in august 2009 at abankruptcy auction. The only other bidder for the assetswas Clayton Homes, which is now owned by BerkshireHathaway. Under the terms of our joint ventureagreement, Cavco operated the assets. impressively,despite continued industry weakness, Cavco was able tooperate Fleetwood profitably in 2010. Therefore, when alarger, vertically integrated competitor, palm Harbor,experienced financial distress in 2010, Fund Managementwas willing to make an additional contribution to the jointventure ($36 million) to pursue this attractive expansionopportunity. after much negotiation and diligence onpalm Harbor, the Fleetwood Homes joint venture agreedto provide debtor in possession (“Dip”) financing for palmHarbor’s November 2010 bankruptcy filing. in 2011,Fleetwood Homes rolled this Dip loan into a purchase ofsubstantially all of palm Harbor’s assets for $84 million atanother bankruptcy auction. These assets consistedmostly of five manufacturing facilities, 49 retail outletsand 100% of the common stock of profitable insuranceand finance subsidiaries that had not filed for bankruptcy.

in 2013, the Fund sold its stake in the Fleetwood Homesjoint venture to its partner, Cavco, in exchange forapproximately 21% of Cavco’s common stock. The saleprice equated to a 29% premium to our cost, but, moreimportantly, the Fund received Cavco stock at $49 pershare, compared to $78 as of quarter end. FundManagement wanted to take Cavco common stock asopposed to cash because we believe the company’s long-term prospects are very attractive.

Despite the strong recent appreciation of Cavco common,we believe that there is still considerable upside as thecompany benefits from the acquisitions of Fleetwood andpalm Harbor and a manufactured housing industryrecovery. as the chart below illustrates, the manufacturedhousing industry remains extremely depressed. 2013industry shipments of 60,000 are only slightly above the

trough of 50,000 in 2009-2010. The twenty year averageshipment level of 183,000 is more than triple the currentlevel. One factor that should drive a more significantindustry recovery is improved financing availability.Following the burst of the easy credit driven industry boomin the late 1990s, most manufactured housing lendersexited the industry. However, recent performance ofmanufactured home mortgages underwritten over the lastten years, including those by the finance subsidiary thatCavco purchased from palm Harbor, has been healthy(much better than sub-prime site built mortgages). FreddieMac’s recent announcement of a program to purchase thedebt of manufactured housing community developers is apositive sign, and we expect more financing options tobecome available for the industry. The paucity of financingin the manufactured housing industry is reflected in itsshare of the overall housing market. Between 1980 and2000, manufactured housing accounted for 29% of newhome sales. This percentage fell to about 10% from 2004-2006 during the sub-prime site built boom and has recentlyincreased to only about 12%. With the overall housingmarket still depressed, we believe the manufacturedhousing industry will benefit over the next several yearsfrom gaining share in an increasing overall market.

manufactured Housing shipments

Source: Manufactured Housing institute.

Cavco’s recent financial results demonstrate theoperating leverage inherent in its business model. Unlike

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site built homebuilders, manufactured home producersdo not need to invest in land. The productionenvironment is controlled and cost efficient ($42 persquare foot, compared to $86 per square foot for the sitebuilt industry). Cavco’s facilities are currently operating ata capacity utilization of only 43%, indicating that salescould expand significantly without additional capitalinvestment. in fiscal 2014 (March 31st year end), Cavco’srevenues, operating income and earnings per shareincreased 18%, 30% and 173%, respectively, as thecompany gained market share and benefited from themodest industry recovery. We believe that the Companywill continue to generate substantial earnings growthover the next several years, as the industry continues torecover. Finally, Cavco’s strong balance sheet with $73million of cash and no debt (excluding non-recoursefinance subsidiary debt) positions the company to makeadditional acquisitions or investments to drive furthergrowth. Cavco’s management team, led by Chairman andCEO, Joe Stegmayer, has proven to be very capable inboth making and integrating acquisitions.

Hong Kong compAnies UpdATe

Our Hong Kong companies recently reported strong fullyear 2013 financial results. The table below summarizesthese results and also includes balance sheet, valuationand insider ownership data for our four significantinvestments in Hong Kong real estate and investmentcompanies, which accounted for 17% of the Fund’s assetsat quarter end. Commercial leasing income (primarilygenerated from owning office buildings and shoppingcenters) increased between 6.8% and 14.4%, andresidential property development margins ranged from22.9% to 60.4%. The healthy results in these two corebusinesses drove net asset value growth (includingdividends) of 8.4% to 11.2% in 2013.

Despite this positive business performance, the stockperformance for these companies has been weak overthe last year. as a result, the discounts to net asset valuehave widened and are considerably larger than historicalaverages. These wider-than-historical discounts seem tomore than compensate for widely publicized headwindsfacing the Chinese economy and the residential propertymarkets in Hong Kong and China. additionally, eachcompany continues to have a very strong financialposition and a management team with an impressive

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Hong Kong ReAl esTATe And inVesTmenT compAnies

common 12 months 2013 net

stock price to nAV prop dev leasing nAV debt to insider

price nAV (1) current 10 yr. Avg margin growth growth (4) capital ownership_____ _______ _______ _________ ______ ______ _________ ______ _________

Cheung Kong Holdings $132.00 $155.72 85% 95% 36.9% 6.8% 10.3% 2.3% 43%Hang lung Group (2) $42.05 $52.28 80% 110% 60.4% 12.0% 9.8% 7.0% 37%Henderson land

Development $46.20 $82.77 56% 84% 22.9% 14.4% 8.4% 14.6% 66%Wheelock (3) $31.90 $81.98 39% 64% 24.9% 13.3% 11.2% 17.4% 59%

Note: prices and position sizes as of april 30, 2014. all figures in Hong Kong dollars.(1) reported Net asset Value as of 12/31/13.(2) leasing growth excludes disposal of non-core properties. Overall leasing growth was 8%.(3) Excludes Wharf's net debt (non-recourse to Wheelock) and Wheelock properties' net cash.(4) annualized; includes dividendsSource: Bloomberg, Company reports


long-term track record and significant insider ownership.as value investors, the wide gap between intrinsic valueand stock price is very attractive, particularly comparedto the U.S. where markets are at or near record highs.

poTenTiAl, bUT noT necessARy, cATAlysTs

You can hardly pick up a newspaper or turn on the newsthese days without seeing another mergers andacquisitions (“M&a”) transaction headline. Global M&avolume, per Bloomberg data, increased 51% year-to-datethrough april and 118% in april alone. activity was strongin all of the major regions, with year-to-date volume up45% in the U.S., 50% in Europe and 80% in asia. Headlinesof activities by various activistinvestors too are all the rage. atThird avenue, we avoid activismunless it is necessary. We wouldrather discuss opportunities tocreate shareholder value with acompany’s management teamfirst, rather than be paper tigers.However, we have and will engagein activism if the need arises. if weput on our investmentbanker/private equity-type hats,we see an array of shareholdervalue creating opportunities thatcould be generated amongst our portfolio companies.We have outlined a few examples below. Except in thecase of risk arbitrage, we do not invest expecting animminent catalyst, as typically such a catalyst wouldpreclude the kind of pricing, i.e., discount to net assetvalue, that we look for. Could any of these activities cometo bear? We do not know for certain, but fortunately wedo not need them to happen for the investments to besuccessful over the long term.

bank of new york mellon

BNY Mellon (“BK”) participates in two businesses – assetmanagement and investment servicing. The company

had $1.6 trillion in assets under management and $27.9trillion of asset under custody and/or administration, asof March 31, 2014. The businesses seem separable andmore valuable on a sum-of-the-parts basis. The assetmanagement business with its iconic Dreyfus Funds andstable of boutique managers could certainly be a stand-alone entity or would seem to attract interest fromstrategic or financial buyers. BK has been in the newsrecently given more shareholder scrutiny of its operatingefficiency. recently, there have been news reports thatBK could be looking to sell its Corporate Trust unit, whichhas been a detractor due to the run-off of high-marginsecuritizations.

symantec

Symantec operates in securitysoftware and iT storagemanagement businesses with itswell-known brands, such asNorton. recently, it hasexperienced managementturnover, with its second CEOterminated by the Board in asmany years. The surpriseannouncement was due to whatappears to be slower thanexpected execution of a

previously announced new strategy. The company hadalready started to embark on its new strategy to improvegrowth capabilities, including restructuring the sales forceand eliminating duplicative organizational and operatingstructures. While not central to our original investmentthesis, we have long thought that the company’sbusinesses seem separable and saleable. Strategic firmscould be potentially interested in its various businesses,though it could also be interesting to private equity firmsgiven the strong cash flow characteristics of the business.

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“except in the case of riskarbitrage, we do not invest

expecting an imminentcatalyst, as typically sucha catalyst would preclude

the kind of pricing, i.e.,discount to net asset

value, that we look for.”


Toyota industries

perhaps because it has “Toyota” in its name or perhapsbecause it spun out Toyota Motor years ago, many peopleview Toyota industries as largely an automotive parts typecompany. it is, but also derives around 50% of operatingincome from its material handling equipment business,where it is the global market share leader. The companyalso has a logistics segment and a textiles machinerybusiness. The company is profitable and growing and,furthermore, has an attractive investment securitiesportfolio, the value of which exceeds Toyota industries’current market value. The businesses are separable butnot likely saleable (perhaps if it were not a Japanesecompany). Changes in corporate governance are afoot inJapan. The government is working on new corporategovernance rules requiring independent directors, or inthe absence of that, an explanation of deviations. Further,Japan is working on a Stewardship Code to encourageinstitutional investors to disclose their proxy votes andengage in dialogue with companies on issues that couldimpact long-term share value. a new stock index, the JpX-Nikkei 400, highlights this new focus. To be included inthe index, companies must meet certain corporategovernance and profitability requirements.

posco

posco recently experienced a change in management.The new CEO, Oh-joon Kwon, started in March 2014. Hehad previously been the Chief Technical Officer. His statedmission is to reform the company and, to that end, fourout of five board members have been replaced and three

new outside directors added. His focus is on enhancingthe existing business via organic growth and reducingleverage, whereas the prior CEO’s focus was more aboutempire building. Despite the weakness in the steelbusiness due to macroeconomic challenges, posco has asubstantial non-steel business. For example, via its stakein Daewoo international, posco participates in the profitsof Daewoo’s Myanmar gas field which is just starting toramp up. The field began production in June 2013 andwas producing only 20% of potential production capacityin the fourth quarter of 2013. posco expects the projectto provide 150 billion KrW in pre-tax income in 2014,growing to KrW300 billion in 2015. posco also haspotential growth opportunities from its Engineering andConstruction business and opportunities to divest non-core assets. recent media reports suggest the companyseeks to raise 2 trillion won by selling assets and is seekingto make an initial public offering of some of its affiliatesincluding posco Energy, posco Engineering and poscoSpecialty Steel.

looking forward, we remain pleased with the currentportfolio and optimistic about prospects for futuregrowth. at a p/B of 0.88, as of april 30, 2014, the Fund isundervalued compared to the MSCi World index at 2.08.We look forward to writing you again after the third fiscalquarter of 2014. Thank you for your continued interestand support of the Fund.

Sincerely,

Third avenue Value Fund Team

ian lapey, lead portfolio ManagerMichael lehmannYang lieVictor Cunningham

10

11


During the quarter, Third avenue Small-Cap Value Fund(“Small-Cap Value” or the “Fund’) initiated seven newpositions and eliminated its holdings in 11 companies. atapril 30, 2014, Small-Cap Value held positions in 79common stocks, the top 10 positions of which accountedfor approximately 22% of the Fund’s net assets.

number of shares

or Units new positions

236,800 shares actuant Corp. Class a CommonStock (“actuant Common”)

159,500 shares Cooper Tire & rubber Co.Common Stock (“Cooper TireCommon”)

79,947 shares DigitalGlobe, inc. Common Stock(“DigitalGlobe Common”)

140,089 shares Exlservice Holdings, inc. CommonStock (“Exlservice Common”)

167,865 shares Forestar Group, inc. CommonStock (“Forestar Common”)

657,466 shares Genpact ltd. Common Stock(“Genpact Common”)

125,063 shares prosperity Bancshares, inc.Common Stock (“prosperityCommon”)

positions eliminated

126,959 shares american Eagle Outfitters, inc.Common Stock (“american EagleCommon”)

113,200 units ap alternative assets rDUs(“ap alternative Units”)

25,879 shares Bel Fuse inc. Class B CommonStock (“Bel Fuse Common”)

216,449 shares Cloud peak Energy, inc. CommonStock (“Cloud peak Common”)

67,864 shares Electro Scientific industries, inc.Common Stock (“ESi Common”)

25,940 shares J&J Snack Foods Corp. CommonStock (“J&J Snack Foods Common”)

201,793 shares Orbital Sciences Corp. CommonStock (“Orbital Common”)

199,289 shares pioneer Energy Services Corp.Common Stock (“pioneer Common”)

230,241 shares Segro plC Common Stock(“Segro Common”)

200,997 shares Wacker Neuson SE CommonStock (“Wacker Common”)

51,477 shares Weight Watchers international,inc. Common Stock (“WeightWatchers Common”)

The Small-Cap team’s efforts during the quartercontinued to bear fruit with the addition of seven newnames to the portfolio. Two of these new positions,Forestar Common and Cooper Tire Common, wereidentified by colleagues from our sister funds. The teamexited eleven positions during the period, reflecting ourview that the holdings no longer provided an adequatemargin of safety or had limited growth prospects over thecoming years. a discussion of selected activity, used toillustrate our investment approach, follows below.

AcTUAnT

We view Wisconsin-based actuant as an industrial “mini-conglomerate” distinguished by its operational strength,broadly respected brands and deep distributorrelationships. Historically acquisitive, the companymanufactures highly specialized industrial products,everything from hydraulic tools for the construction, railand power generation industries, to pipeline connectorsand concrete tensioners for the oil and gas industry, tosmaller motion control systems used by truck, auto and

Third Avenue small-cap Value fund(Unaudited)

portfolio holdings are subject to change without notice. The following is a list of Third avenue Small-Cap Value Fund’s 10 largestissuers, and the percentage of the total net assets each represented, as of april 30, 2014: HCC insurance Holdings, inc., 2.67%;axiall Corp., 2.63%; JZ Capital partners, ltd., 2.51%; Unifirst Corp., 2.15%; Emcor Group, inc., 2.05%; progress Software Corp.,2.04%; Tetra Tech, inc., 2.01%; World Fuel Services Corp., 1.94%; legg Mason, inc., 1.94% and Enersys, inc., 1.92%.

12

agricultural vehicle Original Equipment Manufacturers(“OEMs”). Management’s efforts to diversify the businesshave expanded the company’s presence into 30countries, dampened the cyclicality of many of itsindustrial end markets and provided an entre into therapidly evolving energy sectors where long-term growthprospects appear robust.

actuant’s shares appear to have fallen out of favor,however, owing to (i) sluggish top-line results in theindustrial segment and disappointing margins within theenergy group, as reported in the company’s most recentfiscal quarter; (ii) lingering doubts about the sustainabilityof acquisition-led growth (management recently had towrite-down some of the goodwill on the company’sbalance sheet); and (iii) uncertainty created by the startof a recent management transition.

While we acknowledge these challenges, we believe thevaluation has been overly-discounted in the publicmarkets, that recent results are not indicative of longer-term prospects and that markets ignore a number ofimportant elements relevant to an investment in thecompany’s stock, including:

• Management has generally been viewed as goodcapital allocators and has not been afraid to changecourse when the circumstances so required. Forexample, they recently divested the company’slower-margin, commoditized electrical business at areasonable valuation, while using the sale proceedsto both pay down debt and repurchase stock at whatwe consider attractive levels.

• The company’s financial strength, the best in years,ought to provide wide flexibility for growth initiativesas well as for returns of capital via share repurchasesand dividends.

• The company consistently generates high qualityearnings as reflected by the company’s prodigiouscash generation. Management’s internal incentives,anchored to cash generation and returns on capital,only serve to reinforce this characteristic.

• at current levels, which approximate the Fund’s costbasis, shares trade at a reasonably attractive 7.5%free cash flow yield (pre-acquisition spending), alevel which we feel provides adequate downsideprotection and translates to a roughly 15% to 25%discount to intrinsic value.

The company’s many strengths, which we feel vastlyoutweigh any of the noted setbacks, along with recentlysluggish share performance, could easily attract theattention of a strategic or financial buyer.

genpAcT And eXlseRVice

Fund Management added to its growing sub-portfolio ofBusiness process Outsourcing (“BpO”) companies withthe acquisition of Genpact Common and ExlServiceCommon. The investment cases, in a nutshell, are similar:both company’s stocks underperformed the broaderequity markets in 2013 as management’s forecastedgrowth, while solid, did not meet relatively highexpectations, thus, disappointing investors. Genpact,founded as the captive offshore outsourcing business forGeneral Electric, has the added challenge of finding newrevenue sources as it weans its way off of its formerparent. However, both BpO companies benefit fromhealthy longer term demand trends for outsourcing, withservices ranging from accounting functions, supply chainand procurement assistance as well as informationtechnology services. Each company enjoys long-termcustomer contracts that generate a high proportion ofrecurring revenues. Strong balance sheets and amplecash generation provide the financial flexibility we seekin our investments as well as a meaningful cushion shouldbusiness conditions deteriorate. in one sign of thatflexibility, soon after we initiated our position in GenpactCommon, the company announced a Dutch auctiontender offer for nearly 7.5% of its shares outstanding,ultimately completed at a 20% premium to the Fund’scost basis. The Fund acquired shares of Genpact andExlService at 7%+ free cash flow yields, equating to 20%discounts from our mid case estimates of Net asset Value.

Third Avenue small-cap Value fund (continued)(Unaudited)

13

pRospeRiTy bAncsHARes

The addition of prosperity Common expanded the Fund’sbank basket to six holdings. Houston-based prosperityBancshares is a bank holding company operating with atraditional community banking mindset, a far cry fromthe behemoth money center banks that have beenexposed as too big to manage, too big to regulate andjust plain too conflicted. it appears that managementruns a tight ship: the company has been profitable everyyear since its formation, even during the massiveeconomic downturn in Texas in the late 1980’s and duringthe 2008/2009 financial crisis. Historically the companyhas grown by making opportunistic acquisitions of banksand branches around Texas. During 2008, for example,the bank acquired $3.6 billion of deposits and certainassets of Franklin Bank from the Federal Depositinsurance Corporation, as receiver. Management’s well-managed, bolt-on acquisition strategy along with superbefficiency and conservative underwriting have producedan enviable track record, with adjusted book value1

compounding at mid-teens rates over the past five, tenand fifteen years. Our analysis suggests that managementhas an ample runway to continue doing more of thesame. prosperity’s operational record, based on assetquality, capital adequacy and profitability recently drewthe attention of Forbes Magazine2, which named it as“america’s Best Bank.”

at their present valuation, which approximates 15x 2014earnings, the shares may not appear obviouslyundervalued. We note, however, that prosperity’s currentearnings power is significantly depressed, we think moretemporarily than not, by the presence of a highproportion of low-rate assets, e.g., government securitiesnow on the books. Should interest rates and economicconditions gradually “normalize,” the company’s earningpower will undoubtedly grow and the true multiple ofearnings will be a much more favorable 12x-13x, per our

estimates. Should business conditions remain unchangedin the periods ahead, we believe prosperity Common haslimited downside. in spite of the currently depressedearnings, prosperity continues to earn a respectable 8%to 9% return on equity, a reasonable level given therelatively low-risk approach embraced by management.

disposiTions

as noted above, the Fund’s dispositions reflect the team’sview that valuations or fundamentals had changed to adegree that put capital at risk of permanent impairment,thus necessitating a sale. With few exceptions, the salescame on the heels of a disciplined process as well asprofitable outcomes. For example, we sold OrbitalCommon after a little more than a year’s time whilenearly doubling the Fund’s investment. Subsequent toour sales, Orbital became the subject of a takeover bidby a strategic acquirer whose offer price represented onlya modest premium above the Fund’s last sale prices,corroborating the team’s valuation work. The Fund alsobenefited mightily from its two year holding of J&J SnackFoods Common. Originally purchased at approximately11x operating income, the shares traded closer to 17xoperating income by the time the Fund exited. Combinedwith a 25% increase in pre-tax earnings during thatperiod, the impact on the share performance wasexplosive. We chose to take advantage of the hugeexpansion in the earnings multiple, which we felt wasunjustified by likely longer-term business economics orprivate market values for like businesses.

pRogRess RepoRT – yeAR-To-dATe peRfoRmAnce

For the year-to-date period ending in april 30th theFund’s institutional Class returned -1.09%. its benchmark,the russell 2000 Value index returned -0.84%. The tablebelow outlines the top contributors and detractors forthe period.


1 For computational purposes, our analysis adjusts book value by adding back dividends.2 prosperity had won the Forbes award in 2011 as well.

14

Top contributors Top detractors

Susser Holdings progress Software

Compass Minerals Blucora, inc.

iCF international rofin-Sinar Technologies

Big lots Dundee Co.

positive contributions to the Fund were led by theannounced takeover in late april of Susser Holdings at anearly 40% premium to market prices. The takeover isbittersweet: we are happy to have a knowledgeablebuyer confirm our investment thesis3 and to attain whatwe believe is full value for the stock, but sorry to see ahigh-quality compounder go away. in other cases, priorperiod laggards such as CompassCommon and Big lots Common,returned to investor favor basedon improving fundamentals at theunderlying company level.

perhaps the best part of ourperformance report this periodrelates to the Fund’s detractors, agroup of stocks that we continueto view favorably and that nowoffers very attractive risk/rewardcharacteristics. The team’sexpectation is that the Fund willbenefit as companyfundamentals, as opposed to investor sentiment, becomemore of a driver of equity markets. Consider the exampleof Dundee, a holding company based in Toronto, Canadawith wealth management, real estate and resourcesholdings. Dundee’s share performance has been weak inthe most recent period, though it is hard to pinpoint anysingle business line or set of data points that accounts forthat performance. While the company’s real estateexposure may weigh on the shares, its investments inresource-based and precious metals companies likely

appreciated, at least thus far in 2014. The share pricedecline ought to be viewed as a widening of an alreadyattractive discount: from an analytical standpointinvestors are getting many of Dundee’s underlyingbusinesses and investments for “free”. accordingly, weadded significantly to our position as the share pricedeclined.

looKing foRwARd

The Fund’s performance is illustrative of a broaderphenomenon pervasive across U.S. equity markets, andmore so in the small-cap space. as a result of the five yearbull market, share prices have advanced ahead of the

developments of the actualbusinesses. investors seem tohave started to realize this and asa result, broad based equityindices are flattish to negative.investors have also become highlysensitive to news, morespecifically over-reacting to(seemingly) negative news. Suchbehavior generates opportunitiesfor the Fund, as we continue tosee the prices of solid businessesfalling dramatically. We cannothelp but welcome this dynamic.as value investors focused on the

assets, balance sheet, management and actualbusinesses, as opposed to headline earnings numbers,we find these market environments generate interestinginvestment opportunities. Examples abound. in fact, asdiscussed above, some of the recent additions to theFund came about as a result of such dislocations.actuant’s share price dropped substantially asmanagement announced moderation in the pace of thecompany’s growth. Genpact’s shares also suffered as aresult of lower forecasts. in both cases, market reactions


“As value investors focused onthe assets, balance sheet,management and actual

businesses, as opposed toheadline earnings numbers,

we find these marketenvironments generateinteresting investment

opportunities.”

3 See the Fund’s letter dated July 31, 2013 for a discussion of our investment in Susser Common.

15

focused on short term earnings as opposed to longer-term business economics. activity during the quarterhelped position the Fund to benefit from theseopportunities. The Fund holds high quality companieswith attractive valuations, both from an absolute andrelative to benchmark perspective. in investing, you wantto be long (to own) what is in short supply. Today,investor/speculators seem to be short on patience. assuch, we counsel patience. Our experience suggests thatpatience pays, particularly when in short supply.

We look forward to writing you again when we publishour Third Quarter report dated July 31, 2014. Thank youfor your continued support.

Sincerely,

Third avenue Small-Cap Value Fund Team

Curtis r. Jensen, lead portfolio ManagerTim BuiCharlie page


Third Avenue Real estate Value fund (Unaudited)


We are pleased to provide you with the Third avenue realEstate Value Fund’s (the “Fund”) report for the quarterended april 30, 2014.

QUARTeRly AcTiViTy

The following summarizes the Fund’s investment activity1

during the quarter:

Amount new positions

270,000 shares Gecina S.a. Common Stock(“Gecina Common”)

4,928,748 inmobiliaria Colonial S.a. rights(“Colonial rights”)

950,000 shares pHH Corp. Common Stock (“pHHCommon”)

7,062,422 shares WM Morrison Supermarkets plCCommon Stock (“MorrisonCommon”)

4,261 Weyerhaeuser Co. $28 putOptions Expiring 5/17/14

positions increased

13,493,849 shares Dexus property Group CommonStock (“Dexus Common”)

€4,000,000 iVG Finance B.V. ConvertibleBonds due 2017 (“iVG Bonds”)

2,200,000 shares Millennium & Copthorne HotelsplC Common Stock (“MillenniumCommon”)

249,882 shares post properties inc. CommonStock (“post Common”)

832,386 shares Starwood Waypoint residentialTrust (“Starwood WaypointCommon”)

Amount positions eliminated

29,880,091 shares Commonwealth property OfficeFund Common Stock(“Commonwealth OfficeCommon”)

292,265 shares First potomac realty TrustCommon Stock (“First potomacCommon”)

16,127,367 shares Taylor Wimpey plC CommonStock (“Taylor WimpeyCommon”)

poRTfolio AcTiViTy

activity during the quarter included unique investments incommon stocks, distressed bonds, rights offerings, spin-offs and options – illustrating our persistent efforts toemploy our investment process to seek value in real estateand real estate-related securities. New positions during thequarter include three common stocks (Gecina Common,pHH Common, and Morrisons Common), Colonial rights,and put Options on Weyerhaeuser Common.

Gecina is a French real estate investment trust (“rEiT”)with a diversified portfolio of 11 million square feet ofoffice and retail space and 7,700 apartments, as well ashealthcare and student housing assets. Gecina’s high-quality asset portfolio is predominantly located in paris.The company is conservatively financed, with a loan-to-value ratio below 40%. Gecina Common has persistentlytraded at a discount to NaV largely due to the perceivedoverhang in the shareholder structure andmanagement’s lack of focus. Gecina hired a newmanagement team in 2013 and changed its strategy tofocus more on value creation as opposed to dividendyield. Management is in the process of repositioning the

16

portfolio holdings are subject to change without notice. The following is a list of Third avenue real Estate Value Fund’s 10largest issuers, and the percentage of the total net assets each represented, as of april 30, 2014: Newhall Holding Co. llC,Class a, 4.88%; Forest City Enterprises, inc., Class a, 4.15%; Songbird Estates plC, 3.93%; Cheung Kong Holdings, ltd., 3.66%;Weyerhaeuser Co., 3.47%; lowe’s Cos., inc., 2.90%; First industrial realty Trust, inc., 2.90%; Hammerson plC, 2.88%; West-field Group, 2.80%; and Wereldhave NV, 2.52%.1 investment activity excludes currency hedges.

Third Avenue Real estate Value fund (continued)(Unaudited)

company as a paris office specialist. a Blackstone jointventure recently gained control of 23% of the companyfrom purchasing a loan which was secured by the blockof Gecina’s shares (which was part of the perceived“overhang” on the stock) and elected threerepresentatives to the board. We expect Blackstone’spresence on the board to act as an additional catalyst torefocus the portfolio, divest non-core assets, andmonetize some of the embedded value in the portfolio.Of note, Gecina has €900mn of high street retail assetsin paris, much of which is on the Champs-Élysées. Thecompany also owns a €3.2bn apartment portfolio in paris,a €1bn healthcare portfolio, and a rapidly growingstudent accommodation portfolio, which could be soldor spun out as it achieves scale.

pHH Co. is a US-based specialty finance company thatoperates two distinct businesses as it provides mortgageorigination and servicing activities as well as fleetmanagement services in the US and Canada. Spun out ofCendant (now avis) in 2005, pHH is one of the largestproviders of outsourced, private-label mortgageorigination services. it is also the 8th largest mortgageservicer in the US in a space that we believe could be ripefor consolidation. The company’s fleet business providesfleet management services to a number of Fortune 500companies and is a dominant player in the space withsignificant market share. The Fund had previously ownedpHH Common originally purchasing the shares after itwas spun-out at a price that represented a discount to aconservative estimate of NaV and later sold (at a profit)when the share price more closely reflected theunderlying value of the businesses. Nearly 10 years later,the shares look interesting once again as pHH Commonhas languished recently in a lackluster mortgageorigination environment, and the company has beenunder pressure by activists to realize value forshareholders by selling or spinning off the fleetmanagement business as a result. initially, managementhad been resistant to the idea; however, in March thecompany announced that it had retained legal and

financial advisors to pursue a sale of the fleet business,mortgage business, or both. Shortly thereafter, weinitiated a position in pHH Common at a discount to NaVas we believe the value of the fleet business is notproperly reflected in the share price and that there is ahigh probability that the two businesses will be separatedto realize value.

WM Morrison Supermarkets plC (“Morrison”) is thefourth-largest grocer in the UK operating over 450 storesacross the country that generate over £17bn of salesannually. in addition to its core retail operations, Morrisonowns approximately 90% of its stores. The UK grocerysegment has been declining steadily over the past severalyears due to a perfect storm of rising market share ofdiscounters, perceived changing shopping habits and theimpact of the downturn. as a result and following theannouncement of new round of price wars among biggrocers, Morrison’s shares have declined significantly thisyear. During the quarter we took advantage of this marketdislocation and initiated a position in Morrison’s commonstock as we believe the company trades at a significantdiscount to its liquidation value. Morrison’s owned realestate has a book value of ~£9bn compared to its £7bnenterprise value. The company’s owned stores tend to besmaller than peers at an average size of approximately45k sf / store, making them more desirable for alternativeuse. in our view, Morrison is likely to unlock value throughthe monetization of its real estate assets. in March, thecompany announced the results of its strategic reviewand outlined a repositioning focused on free cash flowgeneration. it also announced it will be monetizing up to£1bn of owned real estate. Furthermore, the company isan attractive take-private candidate due to its lowleverage and real estate portfolio.

as outlined in detail in last quarter’s letter, The Fundacquired Colonial Common in anticipation of participatingin the company’s €1.3 billion rights offering, which wouldde-lever it balance sheet and set the company on a clearpath to growth. During the quarter, Colonial distributedthe rights to shareholders. Each right allowed the owner

17


to purchase 13 shares of Colonial stock for €0.43 pershare. The rights traded publicly for 10 days. The Fundtook advantage of market mispricing by purchasing 1.4million additional rights at a substantial discount tointrinsic value. after quarter-end, the Fund exercised its4.9 million rights and acquired nearly 65 millionadditional shares of Colonial Common.

During the quarter, Weyerhaeuser’s stock price declinedin value for what we believe to be non-fundamentalreasons, allowing the Fund to implement an optionsstrategy that it has frequently used in the past: writingput options on existing or prospective holdings. in thiscase, the Fund wrote put options on WeyerhaeuserCommon at $28 per share with a May 2014 expiry,collecting approximately $1 per share in premium. if thestock price falls below $28 prior to the put optionexpiring, we are willing to add to the Fund’s position (ata net price of $27 per share). if not, the premium receivedrepresents nearly a 20% annualized return on cash.

The Fund also added to a number of other existingpositions during the quarter including: iVG immobilienBonds, Starwood Waypoint Common, MillenniumCommon, post Common, and Dexus Common. Dexus, anaustralian rEiT that is the pre-eminent owner of officeassets in australia, acquired Commonwealth propertyOffice (which was also a Fund holding) during the quarterat a premium to net asset value and the Fund’s cost basis.Dexus offered Commonwealth shareholders an option of(i) cash or (ii) a combination of cash and stock. The Fundelected to receive a combination of cash and stock as thisallowed the Fund to crystalize the gains on a portion ofthe investment in Commonwealth while increasing theFund’s holdings in Dexus at a price that represented adiscount to a conservatively estimated net asset value forthe combined companies. The Fund also exited TaylorWimpey Common (due to valuation) and First potomacCommon (for portfolio management reasons) during thequarter.

poRTfolio posiTioning:

The Fund ended the quarter with the followingallocations: North america, 40%; United Kingdom, 16%;asia-ex Japan, 13%; australia, 6%; Europe, 6%; and Cashand equivalents, 20%. as outlined in last quarter’s letter,the Fund’s invested capital remains concentrated in four“pockets” of the real estate universe that still offertremendous value including:

(i) Companies that have entitlements for newdevelopments in highly desirable markets along withthe balance sheets and management teamsnecessary to provide new development as demandfor new product returns (e.g., Forest City Enterprises,Westfield Group, Brookfield asset Management, andSongbird Estates).

(ii) Companies that have strong ties to the U.S.residential markets which are in the middle stagesof a long-awaited recovery and have the balancesheets to withstand any sort of near-term volatility(e.g., Newhall land, Weyerhaeuser, lowe’s, andBrookdale).

(iii) Smaller and mid-sized property companies that areviewed as strategic platforms and could be acquiredby larger competitors or private equity funds as M&aactivity continues to accelerate back to more normallevels (e.g., First industrial, Hammerson, Segro, postproperties, and Tanger Outlets).

(iv) Special Situation investments, most notably inrecently recapitalized companies that now have thebalance sheets and management teams necessaryto increase corporate value (e.g., Colonial, iVGimmobilien, Commonwealth rEiT (US), and Trinityplace Holdings).

The Fund continues to have higher than average cashbalances which should (i) provide a cushion to the extentwe experience any market dislocations, (ii) provide ampledry powder and allow the Fund to increase its holdings

18


in existing positions and establish new positions at moreattractive prices during a period of market turbulence,and (iii) selectively increase existing positions and addnew names to the portfolio as prices allow.

spin-offs:

Four of the Fund’s portfolio companies recentlyannounced spin-offs of subsidiary companies to takeplace in 2014. We also expect several other real estatecompanies will be spinning-off portions of their portfoliosbefore year-end. Using history is a guide, spin-offstypically yield superior results.

The concept of a spin-off is simple: a company that isinvolved with two or more disparate business lines iseither (i) not getting credit for the value of its underlyingbusinesses or (ii) unable to dedicate the resourcesnecessary to allow for one of the businesses to beappropriately supported, so the company elects toseparate the various businesses by spinning-off thesubsidiary to existing shareholders as a standalonecompany. More often than not, this type of transactionis conducted via a tax-free distribution where ashareholder receives stock in the new entity (“spin-co”)and retains an investment in the predecessor company(“old-co”). after the spin-off is effectuated, each entitywill typically have its own management team, businessplan, capital allocation priorities, and capital structures inorder to support its operating and growth initiatives. Thistends to attract “dedicated” investors and results in morefocused companies that seem to be more disciplinedfrom an operational and capital allocation standpoint,which results in higher multiples for each standalonebusiness. as a result, the combined market value of “spin-co” and “old co” tends to be greater than the perceivedvalue of the original company prior to the separation.

an example of this playing out now is the Fund’sinvestment in Vornado realty Trust. The companyrecently began simplifying its business, which started withnon-core asset sales and now includes an even moretransformative change as the company will be spinning

off its shopping center portfolio before year-end. afterthe spin-off, Vornado shareholders will own a stake in (i)a standalone shopping center rEiT that will own a highlyleased portfolio, provide very predictable cash flowstreams and offer some redevelopment potential and (ii)a more focused rEiT that will own one of the highestquality real estate portfolios in the US with class-a officeand retail in New York City and class-a office space inWashington D.C., along with industry-leading growthpotential, given the below market leases in NY, vacanciesin DC, and development sites in Manhattan (e.g., 220Central park South). Since the streamlining began and thespin-off was announced, Vornado’s stock price hasresponded favorably, but we still believe the value of“spin-co” and “old-co” is worth more than what themarket is currently valuing Vornado at today.Consequently Vornado remains a meaningful position inthe Fund.

Other spin-offs by the Fund’s portfolio companies include(i) Westfield Group has announced that it will spin-off itsaustralian shopping center business as a standalone rEiTand concentrate the remaining businesses around its USand UK malls and development projects, (ii)Weyerhaeuser will be spinning-off its homebuildingsubsidiary to shareholders and become a more focusedforest products company that will own the highest qualitytimberland portfolio globally, and (iii) rayonierannounced it will be separating its cellulose fibersbusiness as a standalone company that will be namedrayonier advanced Materials, leaving rayonier inc. as acompany with a quality timberland portfolio withsignificant higher-and-better-use potential in theSoutheast portion of the United States.

Spin-offs have picked up across most industries andsectors, but disproportionately so in the real estate space,as the large and influential dedicated investor basecontinues to reward those companies that keep thingssimple by focusing on a single property type with a highermultiple, and thus lower cost of capital, than morediversified property companies. if the companies are

19


single-property type companies in single markets,sometimes the multiple is even higher. part of thispremium multiple is due to more focused companiesachieving better results over time. another reason is likelydue to portfolio managers preferring to make propertytype and geographic allocations on their own instead ofputting those decisions in the hands of the managementteams of their respective companies. They therefore arewilling to pay a higher price for those streamlinedcompanies.

That is not necessarily the caseat Third avenue. When investingin common stocks, we value thecompany’s assets, subtract all ofthe potential liabilities (both onand off the balance sheet) andbuy at meaningful discounts tothe net asset value remainingfor shareholders. We have notshied away from rolling up oursleeves and doing the worknecessary to understand someof the more diversified andcomplex real estate and realestate related companiesglobally. Often these companiestrade at a discount to the sumof the parts of the variousbusinesses and, therefore,comprise a large portion of theinvestments in the Fund today. as a result, this push toseparate business and portfolios that is currently takingplace in the real estate space could be a big windfall for theFund. it is our expectation that other companies in theFund will announce spin-offs or divest non-core businessesto surface value over the next 12-18 months. in fact, twoadditions to the portfolio this quarter are prime candidatesfor upcoming spin-offs. as outlined above, Gecina is aFrench rEiT that owns a high-quality office portfolio inFrance and also controls a very valuable collection ofresidential properties in paris. With Blackstone as a large

shareholder that now has board representation, it is notinconceivable that they look to separate the twobusinesses. also, recent underperformance might forcepHH to accelerate the divestiture or separation of themortgage and fleet businesses.

Other market forces may create opportunities for theFund to buy shares in recent spin-offs. For example, whenindex funds receive shares of “spin-co”, they are more

often than not forced to sell theshares since the company is notincluded in their compositeindex. Other actively managedfunds may be forced sellers asthey have restrictions in place onnumber of holdings, limitationson market cap, or otherstipulations as to what classifiesas a “real estate” company. Thisrequirement to sell typicallycreates downside pressure onthe shares of spun-off companiesand creates opportunities forknowledgeable investors toacquire spin-off shares atdiscounted prices. We expectthe Fund may have someopportunities to put some of itscash to work buying additionalshares of spin-offs from currentportfolio holdings as well

as others.

We thank you for your continued support and lookforward to writing to you next quarter.

Sincerely,

Third avenue real Estate Value Team

Michael Winer Co-lead portfolio ManagerJason Wolf Co-lead portfolio Managerryan Dobratz

20

“when investing in commonstocks, we value the company’s

assets, subtract all of thepotential liabilities (both on andoff the balance sheet) and buy atmeaningful discounts to the net

asset value remaining forshareholders. we have not shiedaway from rolling up our sleevesand doing the work necessary to

understand some of the morediversified and complex realestate and real estate related

companies globally.”

21

Dear Fellow Shareholders,

in the most recent quarter, Third avenue internationalValue Fund (the “Fund”) established two new positions,increased one existing position, reduced 30 existingpositions and eliminated four positions.

Over recent months, many of our fellow shareholdershave asked what types of changes they should expect tothe Fund following amit’s departure. First and foremost,please be assured that the process remains the same.The concentrated approach to long-term fundamentalvalue investing is embeddedvery deeply within the fiber ofThird avenue. in truth, it is theonly thing we know how to do.We also assure you that Thirdavenue’s unique approach tovalue investing, which results inhighly differentiated portfolios,will persist as the driving forcebehind the Third avenueinternational Value Fund. i,Matt Fine, have spent myentire professional career atThird avenue – i was raisedhere, in a manner of speaking –and have been a member ofthe Fund’s management team for more than a decade.Suffice it to say the approach will live on. That said, as weenter the final weeks of our manager transition, we havechosen to dedicate this shareholder letter exclusively tothe portfolio and the activity within. in the course of thisletter, we will cover in detail two new investments, fourexited positions and five existing positions. it is our hopethat readers will appreciate that the Fund is a collectionof idiosyncratic investments in which favorable outcomesfor our investments are dependent upon company

specific actions, evolving industry dynamics and a widevariety of resource conversion opportunities much moreso than a buoyant equity market or favorablemacroeconomic conditions.

new investments

in the first quarter of 2011, the price of copper peakedat roughly $4.62 per pound. During the first quarter of2014, the price of copper hit a low of approximately$2.92. a 37% drop over the three-year period issomething to note in itself but let us add some back of

the envelope math to illustratewhat this means to a miningcompany. in today’s world, theaverage copper mine producesa pound of copper for roughly$1.50 of cash costs (net ofcredits for byproducts). if onewere to include the costs tokeep the mine running overtime (sustaining capex), thefigure rises to roughly $2.00 perpound (again, net of credits forbyproducts), but let’s give thema break and use $1.50 for themoment. The implication is that,at $4.62 per pound of copper

the average mine, which has cash costs of $1.50 perpound would have had a cash margin per pound ofroughly $3.12 in early 2011 only to see that marginreduced to $1.42 with copper at $2.92, a theoretical 54%decline in cash profit. in reality, the story is materiallyworse, as costs have risen significantly over the three-year period making the profit decline even sharper. Stockprices of companies in the industry have reacted as badlyas you might expect.

Third Avenue international Value fund(Unaudited)

portfolio holdings are subject to change without notice. The following is a list of Third avenue international Value Fund’s 10largest issuers, and the percentage of the total net assets each represented, as of april 30, 2014: Straits Trading Co., ltd.,8.73%; Netia S.a., 6.79%; Weyerhaeuser Co., 3.97%; Sanofi, 3.79%; White Mountains insurance Group ltd., 3.46%; Munich re,3.44%; Hutchison Whampoa ltd., 3.28%; allianz SE, 3.12%; pargesa Holding S.a., 3.11%; and Titan Cement Co., S.a., 3.00%.

“it is our hope that readers willappreciate that the fund is a

collection of idiosyncraticinvestments in which favorableoutcomes for our investments are dependent upon company

specific actions, evolving industry dynamics and a widevariety of resource conversion

opportunities”

22

However, we have now arrived at a price for copper atwhich a small but material portion of the industry isunable to mine the metal for less than the price at whichthe metal sells. While the metal could certainly declinemore in the short term, we believe the probabilities ofmedium-term price increases materially outweigh theprobabilities of declines. Yet, as we sifted through thisindustry, one in which we have historical experience, ourhope was to identify select companies that are cheap,even assuming the price of copper stays right where it is,and ones that are capitalized in a way that will sustainthem through periods of volatility.

During the quarter, we initiated a second position in thecopper mining industry after having purchased shares ofantofagasta in the first quarter. Our new position isCapstone Mining Corp., a mid-cap copper miningcompany headquartered in Vancouver, British Columbia.The company’s assets are located exclusively in politicallystable, mining-friendly jurisdictions in the americas andthe company is committed to operating solely in low-riskgeographies going forward. Capstone is, in a sense, aproject to build a mid-cap copper mining company bystrategically acquiring assets either undermanaged or toosmall to be considered by larger mining companies. Thisdynamic of acquiring underappreciated assets gives thecompany a significant growth profile. its recentacquisition of pinto Valley Mine is set to more thandouble Capstone’s annual copper production in thecurrent fiscal year and has transformed the company.importantly, the pinto Valley acquisition appears to havebeen done at a very reasonable price and Capstone’sgrowth has neither stretched its balance sheet norresulted in an expensive stock price; the company’sbalance sheet remains pristine post-acquisition, andshares trade well below our estimate of net asset value(“NaV”). We credit a strong and like-mindedmanagement team with the company’s well-executedacquisitions and its ability to grow while maintaining itsconservative financial position. Furthermore, withproducing assets that sit in the second-lowest cost

quartile of the global cost curve, we believe Capstoneoffers substantial downside protection. it is also worthnoting that, with the global dearth of mid-tier copperprojects in low-risk jurisdictions, Capstone’s portfoliocarries substantial scarcity value and could be attractiveto a number of strategic buyers; investors should notoverlook the company’s prospects for resourceconversion. The combination of Capstone andantofagasta now comprises approximately 5% of theportfolio by weight.

Our second new position purchased during the quarter,arcos Dorados, is the world’s largest McDonald’sfranchisee, holding the exclusive rights to own, operateand grant franchises of McDonald’s restaurants in 20 latinamerican countries. as we observed in our previousquarterly letter, many emerging market economies andcurrencies have faced significant headwinds; latinamerica has been far from immune, and currenciesacross the region have depreciated substantially since2011. While all of arcos Dorados’ revenues aredenominated in a variety of local currencies, the companyreports its financial results in U.S. Dollars. Thus, localcurrency weakness has had a severe negative impact onarcos Dorados’ reported earnings and shares are downsome 60% over the past three years, as the depreciationof most latin american currencies versus the U.S. dollarhas been a virtual one way street. What depreciatingcurrencies obscure, however, is arcos Dorados’outstanding operating performance in local currencyterms, meaning before they are translated into U.S.dollars, its reporting currency. Since 2011, the company’sreported revenues have grown at a lackluster annual rateof 5%, while reported EBiTDa growth has been essentiallyflat. But in constant currency, arcos Dorados has grownrevenues and EBiTDa at very impressive annual rates of15% and 12%, respectively. arcos Dorados’ depressedvaluation suggests that investors are not giving thecompany credit for the high returns on capital itcontinues to generate and the considerable increases inbusiness value it continues to create in constant currency

Third Avenue international Value fund (continued)(Unaudited)

23

terms. investors are also overlooking an outstandingmanagement team, led by CEO Woods Staton; this teamhas over time done an excellent job of restructuring thecompany’s Mexican business, managing currencyexposure and coping with the challenges of doingbusiness in argentina and Venezuela in clever ways.Furthermore, the long-term fundamentals of the latinamerican market remain quite favorable; theseeconomies are home to rising incomes, a rapidlyexpanding middle class and lots of young people – allthings that should be very good for arcos Dorados’ futureoperating performance and, in turn, its shareholders.

dispositions

During the quarter, we exited four positions. We willdevote much of this section discussing the disposition ofasatsu DK, a Japanese advertising company. it isimportant to discuss investment mistakes as well assuccesses. We acquired our first shares of asatsu DK in2002, the Fund’s first year of operation. in a sentence,our original thesis revolved around several attractivedimensions: the company was grossly overcapitalizedwith cash and securities, as an operating going-concernin the highly competitive advertising industry it wasundermanaged and its portfolio of proprietary mediacontent could be turned into a profit center. Couldimprovement be made in these areas of operations andcapital management, we had concluded the opportunityto be quite attractive. in the ensuing years, severalmembers of our team visited with management, boardmembers, other large shareholders and peer investmentfirms to exchange ideas and opinions. The advertisingindustry went through cycles and the stock went up anddown. On several occasions the stock traded at a negativeenterprise value, meaning less than zero value wasimputed for all of asatsu’s operations, which compriseone of the largest advertising agencies in Japan, the thirdlargest economy in the world. in recent years, Thirdavenue and other shareholders redoubled efforts toencourage a different approach to operational and capital

management. Small-scale share buybacks and increaseddividends were the response. While disappointing in itsscale, it can be said that some progress was made.

as we write this letter, our initial asatsu investment thesis,hinged upon what could be, is just as valid today as it wasyears ago. The underwhelming approach to competingwithin the advertising industry has persisted and thecompany remains grossly overcapitalized. One mightrightly interpret our decision to sell as the team’sresignation that there is a low probability of a satisfactoryoutcome in the future. We may be proven wrong but thatis our sense of the probabilities today. Before turningaway from the discussion of asatsu, it is an opportunityto note that there are many types of investment mistakes.assuming we will continue to occasionally makeinvestment mistakes (a safe assumption), we prefer thetype in which we do not lose money and the primary costis the opportunity to have earned a satisfactory return onour capital that was lost over those years. asatsu was thistype of mistake.

During the quarter we also disposed of both of our long-held gold mining positions, Newmont Mining and KinrossGold Corp. The deterioration of the price of gold overrecent years has not been kind to gold mining stocks, oursincluded. a combination of a lack of confidence in ourown ability to predict an upward or downwardmovement in the future price of gold and rising politicalrisks in indonesia and russia for Newmont and Kinross,respectively, have contributed to our decision to sell.These company and industry-specific factors combinedwith the added attraction of realizing sizeable losses at atime when we are mindful of neutralizing the tax impactsof meeting Fund outflows associated with our portfoliomanager transition, made selling Newmont and Kinrossa fairly easy decision.

lastly, we exited our long-held position in Yuanta FinancialHolding Co. ltd. primarily based on the belief that wehave better uses for the capital in both new investment


24

ideas as well as other investments already within theFund.

Our firm belief is that the result of all of this activity, boththe new investments and the redeployment of capitalfrom our exited positions, has strengthened the Fund inimportant ways and improved its risk and return profile.

inside the portfolio

Turning to developments within our existing portfolioholdings, we would like to share material developmentsrelating to a number of positions. in some cases, we havemade little mention of these positions since sharing ourtheses at the time the investments were incepted. Theintention is to highlight a number of importantdevelopments and provide some insight as to how theseinvestments have evolved. We will also share someexpectations looking forward.

Telefonica Deutschland AG – We have owned TelefonicaDeutschland, the German wireless telecom servicesprovider, since the fall 2013. The investment outcome hasbeen positive over the roughly nine months of ourownership. around the time this letter goes to print, thecompany will pay its recurrent annual dividend, a yield ofnearly 8%. None of this is of much significance to ourinvestment thesis, which revolves in part aroundTelefonica Deutschland merging with its rival E-plus, KpN’sGerman subsidiary. What is important is that TelefonicaDeutschland and E-plus continue to iterate with EuropeanCommission officials with regard to various remediessought by the Commission in order to permit the merger.News flow would suggest that talks have beenconstructive. Historically, there has been Europeanregulatory resistance to allowing the number of wirelesscompetitors within a given country to shrink, which thistransaction would do. Yet, it continues to be our view thatthe regulatory environment must ease in order to spurmuch needed investment and, indeed, there is strongevidence to suggest that the regulatory tide is turning inthis direction. recent European Commission approval of

similar transactions in austria and iceland would certainlysupport this notion. While, the combination of TelefonicaDeutschland and E-plus would represent the largestEuropean wireless merger to date, and is thus receivingheightened attention, the competitive landscape of theGerman market should make the merger unusuallypalatable from a regulatory perspective. The EuropeanCommission is expected to rule on the merger in lateJune. if the merger is approved, Telefonica Deutschlandwill immediately conduct a large rights offering for thepurpose of funding the purchase of E-plus. We remainoptimistic that the merger will be approved. However, ona status quo basis, meaning failing the completion of themerger, Telefonica Deutschland remains an appealinginvestment.

With this backdrop, we have sized our position inTelefonica Deutschland such that, if the merger ispermitted and the rights offering conducted, ourparticipation in the rights offering will make theinvestment one of the largest in the portfolio. This is thedesired scenario and reflects our belief that thecombination of Telefonica Deutschland and E-plusrepresents an extremely exciting investment proposition.

Vodafone Group – Our investment in Vodafone Group,which like Telefonica Deutschland was originated in thefall of 2013, has developed as we had hoped. Shortlyafter our initial investment in Vodafone, the companyannounced that it had reached a deal to sell its 45% stakein Verizon Wireless to Verizon Group. This transactionclosed during this quarter, generating proceeds ofroughly USD 120 billion to Vodafone, in the form of cashand shares of Verizon Group. The majority of theproceeds were then in turn distributed to Vodafoneshareholders, including the Fund. post the distribution,we own a shrunken Vodafone which, with the portion ofthe sale proceeds it retained, has an improved balancesheet and enhanced ability to invest in its business, bothorganically as well as through M&a activity. Given theshrunken size of Vodafone and its improved position, it


25

is not surprising that rumors abound of various potentialacquirers having interest in Vodafone. The ultimate fatefor Vodafone may, indeed, be a merger or to be acquiredto form a larger company.

Nexans S.A. – Nexans has been a disappointinginvestment for us but one that has been evolving quicklyover the last twelve months. When we purchased sharesin this global wire and cable manufacturer in mid-2010,we were very conscious of the fact that it was materiallyless profitable than its most direct competitor and, inmany ways, a less well-run company. That said, it wasinexpensive, a number of its business lines were sufferingcyclical lows and some progress was being made withregard to its underwhelming management approach. astime passed, the lack of ambition in managementpersisted and operational difficulties appeared repeatedlyin the company’s most promising line of business, subseahigh voltage cables. Under increasing shareholderpressure to pursue a broader and more ambitiousrestructuring to improve profitability, management’swillingness to take the painful but necessary steps hasgrown. Yet, having borrowed to make an acquisition inthe U.S. in 2012 and suffering from reduced profitabilityfrom its operational woes in subsea high voltage, thecompany was strained to fund the considerable upfrontcosts of this much needed restructuring. rather than putthe overdue restructuring off even further into the future,the company’s board of directors preferred anaccelerated timeline and chose to ask shareholders tosubscribe to a rights offering in late 2013. Given the poorperformance which brought Nexans to that point of arights offering, you can imagine that the reaction fromshareholders was far from positive. While we wereunimpressed with the job done by management up tothat point, we were in favor of accelerating therestructuring and were further influenced by the price towhich the stock had fallen. Based upon thoseconsiderations, we chose to subscribe to the rightsoffering. in fact, we oversubscribed to the offering hoping

to acquire even more shares at the low subscription pricethan we were entitled. We got just a few. To date this hasproved to be a good decision. Since the rights offeringannouncement, the stock has appreciated by roughlyone-third and has been among the Fund’s bestperformers in 2014.

recent developments have been partly responsible fordriving Nexans stock upward. Shareholders have takenaim at the company’s embattled CEO and Chairman,challenging the merit of him holding both positions. inconjunction with the company’s mid-May annualmeeting, Nexans Chairman has decided to concede byturning over the CEO position to the company’s COO,who was widely understood to be the natural successor.We view this set of developments very positively. Equallyimportant though is the increasingly prevalent rumor thatNexans and its aforementioned closest competitor maybe in some form of merger discussion. This is an industrywhich remains extremely fragmented globally and amerger of two companies capable of rationalizing theirrespective European operations, where there is materialovercapacity in various product lines, does have someintuitive backing. To date these are mere rumors but, aswe mentioned earlier, this is a rapidly evolvinginvestment.

Vivendi S.A. – We originated our investment in Vivendislightly less than two years ago, in the summer of 2012.Vivendi was at the time a wide-ranging global media andtelecom conglomerate. at the outset this investment wasvery typical for us in the sense that it was a despisedcompany that had been undermanaged and was in needof a new direction. it was very much a special situationand, in our minds, would become a large-scaleliquidation. The investment was atypical in the sense thatits debt load was outside of our comfort level. Had webelieved it to be a going-concern with that level offinancial leverage we would not have made theinvestment. it was our firm belief that large pieces of the


26

company’s asset base would be sold, which would havethe dual-impact of deleveraging the company andgrowing its underlying net asset value.

in the two years that have passed, Vivendi has sold itscontrolling stake in activisionBlizzard, the world’s largestproducer of video games, in a management buyout. inrecent weeks, Vivendi closed on the previouslyannounced sale of its controlling stake in Maroc Telecomto Etisalat of abu Dhabi. Even more significantly, SFr,which is the second largest wireless telecom company inFrance, as well as one of the primary sources of Vivendi’swoes in recent years, became the subject of a biddingwar. a winner has been declared at a price quitesatisfactory to us. With the closing of this most recenttransaction, the deleveraging will be complete. The assetdispositions were each difficult in their own way butexceptional progress has been made and our stronginvestment result reflects this progress.

Vivendi is preparing itself for large returns of capital toshareholders in coming years which will shrink thecompany. Vivendi will also continue to pursue thedisposition of GVT, its Brazilian telecom business. ShouldGVT be disposed of, the shrunken business will bereduced to one of the largest French televisionbusinesses, Canal+, and the world’s largest musicbusiness, Universal Music Group. We believe theprospects for the winnowed down media business to bequite good, particularly under Vivendi’s Chairman-to-beVincent Bollore. a completely deleveraged balance sheetwill also provide lots of flexibility with which to buildfuture value. in contrast to companies with growingrecurrent earnings per share, Vivendi has been a story ofcreating shareholder value through resource conversion.

GP Investments – During the quarter, a small group ofThird avenue’s research and portfolio management team,myself included, conducted a research trip in Brazil.Where we travel does suggest something about wherewe see potential opportunities. prior to this quarter, Gp

investments had been our only Brazilian investment. Overthe last several years, Brazilian equity markets have beena global standout in terms of very poor performance. Gp,which is a private equity fund management company, hasbeen among the Fund’s worst performing investmentsover the last couple of years. The company’s woesprimarily relate to the Brazilian macro economy. in theheyday of easy capital in Brazil, Gp made its initial publicoffering and then proceeded to raise additionalpermanent capital on multiple occasions on extremelycheap terms. Much has changed since then and insteadof Gp being valued at multiples of its net asset value it isnow valued at roughly 40% discount to net asset value –i.e., a liquidation of the company would produce a returnof approximately 67% above the current price.admittedly, a macroeconomic and capital marketheadwind makes it difficult to have highly profitable exitsfrom many of its private equity investments in order toearn prodigious incentive fees as it did in the heyday, sothe world has legitimately changed from a private equitybusiness perspective. However, the company has beenable to execute a number of very nice dispositions and,in any event, our liquidation value gives no value to futureincome streams from the management and incentivefees. The undervaluation is severe, but statisticalcheapness alone is not a great reason to buy or own aninvestment. The lynchpin in the Gp investment is themanagement team’s opportunistic approach to capitalmarkets. Just as the company issued equity when priceswere extremely high, the company has undertaken to buya large chunk of equity when prices are extremely low. inthe last five quarters, Gp has repurchased approximately13% of its total outstanding shares. Buying sharesanywhere near 40% discount to net asset value is atremendous way to build shareholder value, independentof the macroeconomic environment. This type ofundervaluation is unusual, even in Brazil, but is indicativeof the gloom that exists in Brazil today. Not only will wehold our shares of Gp for the time being, we have beensearching for other similar values in Brazil of late.


27

We hope this provides some insight into not only theportfolio, but also the idiosyncratic bottom-up nature of thedrivers of performance within the portfolio. We willcontinue to strive to further improve the risk-return profileof the portfolio in quarters and years to come and lookforward to writing in detail about future investment activity.

Finally, i would like to thank amit for his partnership overthe last decade, and wish him the best of luck in thefuture.

i look forward to writing to you next quarter.

Sincerely,

Third avenue international Value Fund Team

Matthew Fine, Co-lead portfolio Manager


i would like to thank all of our shareholders who have entrusted us with their investments during the 12 1/2 years sincethe Fund’s inception and am grateful for the opportunity that you gave me to manage your money as a member of theThird avenue team. i intend to continue to invest alongside you as your fellow shareholder in the Fund under Matt’swatch following my departure. Given Matt’s experience working with me for more than a decade on the Fund, includingthe last two years as co-portfolio Manager, i have every confidence that our investment is in good hands going forward.

Sincerely,

amit Wadhwaney, Co-lead portfolio Manager

Third Avenue focused credit fund (Unaudited)

Dear Fellow Shareholders,

For the year-to-date period ending our second fiscalquarter, april 30, 2014, the Third avenue Focused CreditFund (“the Fund”) returned 8.30%1, versus 2.13% forMorningstar’s High Yield Bond Category2 average, 3.95%for the JpM HY US HY index and 0.96% for Morningstar’sBank loan Category3 average. The S&p returned 2.56%for the period. The strong rally in Treasuries resulted inhigher quality bonds outperforming lower quality bonds.investment grade bonds returned 4.14% (JpM iG), BB bondsreturned 4.23%, B returned 3.50% and CCC returned3.71%.

THe fUlcRUm secURiTy: wHAT iT is And wHy iT

mATTeRs

long-time readers of our letters (and hopefully investors)will be familiar with our usage of the term “fulcrumsecurity.” a quick primer or reminder can be helpful fromtime to time. The fulcrum security is a concept longentrenched in the investment philosophy of Third avenueand written about by Marty Whitman over the years. Hedefines the fulcrum security as “the most senior securitythat will participate in the reorganization, whereparticipation means that the security will likely convertinto equity ownership in the restructuring.”4 it is the partof the capital structure of a company that will control thecompany in the event of a restructuring, usually as equity.a see-saw provides the perfect analogy: the fulcrum isthe part of the device on which the board swings. The

more senior securities are on the side of the board thatis up in the air, or “in the money,” while the othersecurities are touching the ground, or “out of the money”.The fulcrum is the security around which it all pivots, thedeterminant of which securities have value (i.e., are upin the air) and which ones do not (i.e., are touching theground).

as we scour the investment universe for ideas in thedistressed or restructuring securities space, we gravitatetowards this concept for a variety of reasons which wediscuss next. as you examine our portfolio, you willusually find a number of holdings that we believe arefulcrum securities.

“win-win” or the opposiTe of Rock and a Hard place

When properly chosen, the fulcrum security shouldprovide an agreeable outcome whether a companyenters restructuring or not. We like to shy away fromclichés, but the phrase “Win-Win” sounds overly optimistic,so i would like to say the “Opposite of rock and a Hardplace.” Some of our readers may be familiar with Homer’sOdyssey in which our heroes encountered a terriblechoice: Scylla and Charybdis, a sea monster and awhirlpool. Neither option was really that good. Here, wehave the reverse scenario: the potential for an attractiveoutcome in both cases. imagine if Odysseus was facedwith not a sea monster and a whirlpool, but instead,seeing his wife or a nice lamb dinner.5 if a company avoidsa restructuring, then the investment in the fulcrum

28

1 The Fund's one-year and since inception (august 31, 2009) average annual returns for the period ended april 30, 2014 were14.93% and 12.58%, respectively. past performance is no guarantee of future results. investment return and principal valuewill fluctuate so that an investor's shares, when redeemed, may be worth more or less than original cost. The Fund's totaloperating expense ratio, gross of any fee waivers or expense reimbursements, was 0.91%, as of October 31, 2013. Currentperformance results may be lower or higher than performance quoted. please call 1-800-443-1021, or visit our website at:www.thirdave.com, for the most recent month-end performance data or a copy of the Fund's prospectus.

2 average year-to-date return of the 720 funds included in the Morningstar High Yield Bond Category, for the period ended april30, 2014.

3 average year-to-date return of the 240 funds included in the Morningstar Bank loan Category, for the period ended april 30,2014.

4 Whitman, Marty and Fernando Diz (2009) "Distress investing. principles and Techniques", Wiley Finance, page 234.5 Or, to use an example closer to our lead pM's heart than Greek literature, think about archie (of the eponymous comic book)

and his enduring choice of Betty or Veronica. Neither is suboptimal.

security will likely be refinanced at par, and shouldgenerate a very appealing combination of interest andprincipal gain. However, if the company does need torestructure, then the investment in the fulcrum would beexchanged for equity in the new entity. Certainly, owninga post-reorganization equity offers no guarantee of futuregains, but we view the fact that we can potentially accessthat equity-upside as an added tool to our kit. The caveatis that, ex ante, it is far from obvious which part of acompany’s capital structure will ultimately prove to bethe fulcrum security. and it is not possible to know withcertainty what the long-term economic value of anyentity is. Thus, the team spends a considerable amountof time and effort in analyzing the capital structure andvaluing the companies we invest in so that, when theFund invests any portion of its portfolio in securities thatare distressed or may restructure, the Fund can benefitin both scenarios (i.e., restructuring or not).

The Highest yield palatable with any Restructuring Risk

another way to look at the fulcrum security is that itprovides the highest yield that is reasonably attainable ina structure that could potentially go through arestructuring. as a company approaches the zone ofinsolvency, securities will trade at different yields due inpart to their seniority in the capital structure. There aremany options to choose from. The highest yieldingsecurities are attractive from a yield perspective, but thisyield is subject to the entity staying solvent, and theprincipal will be at greater risk. if the company goesbankrupt, a high yielding security at the bottom of thecapital structure could very likely pay zero. Conversely,lower yielding securities sitting higher up in the capitalstructure could be made whole, even in case ofbankruptcy, but would not generate as high a yield. Wechoose to resolve this trade-off by investing in what webelieve to be the fulcrum security. Where we think thefulcrum is will determine the level of yield with which weare comfortable within a company facing distress. Thiscombination of yield and downside protection guides our

risk management for distressed and restructuringsecurities.

Time can be on our side, Thanks to liquidity Runway

liquidity runway does provide an exception to the priorguideline, by the way. We view “liquidity runway” as theamount of time a company can sustain its cash expensesgiven its current operations, access to cash, and currentcash obligations. For our distressed investments, if acompany has a substantial amount of liquidity runway,and we believe that management is in the process offixing its operations, we may choose to invest in asegment of the capital structure that is not the fulcrumat that precise time but likely would be further down theroad. This extra time provides additional couponpayments plus optionality for the company to right itsship. We take these coupon payments in conjunction withfuture potential recoveries on a restructuring as keydeterminants of the investment decision. We can refer toour investment in Clear Channel to illustrate this concept.Back in 2009, the Fund owned guaranteed notes whichmay or may not have been the fulcrum at that point; wewere not sure. We were pretty sure, however, thatregardless of what happened, the company had severalyears of runway to get their operations in order, and thatthis time period created option value. as a result, we willsometimes take a bit more insolvency risk in return for ahigher yield if we believe the company has the time tosort out its issues. We can be patient, if we are being paidfor that patience.

poRTfolio UpdATe

During this quarter there were major and quite publicdevelopments in two of the longest dated holdings in theFund: Nuveen and Energy Future Holdings (“EFH”).Coincidentally, both companies have a long history andboth were involved in large leveraged buyouts in 2007.Nuveen’s leveraged buyout (“lBO”) was the largest onein the asset management business and EFH’s is, to date,the largest lBO in history. This portfolio update will focuson these two events, as they have both been quite

29

Third Avenue focused credit fund (continued)(Unaudited)

prominent in the media and both stories illustrate keyaspects of our investment process.

Nuveen Investments

On april 14, 2014, Nuveen investments, one of thelongest dated and largest holdings of the Fund, found asuitor: Tiaa-CrEF. This acquisition will give Tiaa-CrEFaccess to mutual funds, larger size, and a different clientbase; and furthers the consolidation of the assetmanagement industry in the U.S. The deal closed at $6.25billion. Tiaa-CrEFF absorbed the $4.5 billion debt,implying equity value of $1.75 billion. The transactionprice implied a 12.5-14.5x EBiTDa multiple depending onyour view on certain adjustments to EBiTDa andrepresented 2.8% of assets under management (“aUM”).as a result of this transaction, and due to the strong creditof the purchaser, Nuveen’s bonds traded up from $105to $122. at that point we sold out of all of our bonds. Theterm loan, $3.1 billion, did not trade up because it iscurrently callable. The bonds in the Fund had years of callprotection and traded to a 3% yield. The bonds aresubject to a $101 change of control put, but that is at the

option of the holder, and obviously no one would putbonds at $101 when they were trading at $122. Nuveenwas among the top holdings of the Focused Credit Fund,and thus, this transaction contributed substantially toFund performance.

Nuveen investments, a Chicago based, diversifiedinvestment manager offers institutions and high networth individuals mutual funds, separate accounts andother products. The firm dates back to 1898 and hastaken a variety of ownership structures ever since. Thelatest came about as the result of a $5.8 billion leveragedbuyout at the peak of the market in 2007. at the time ofthe acquisition by the private equity firm MadisonDearborn, Nuveen managed $195 billion in assets.Nuveen’s business has been, historically, focused onmunicipal bonds (approximately 49% of aUM) and closedend mutual funds (26% of aUM). However, over theyears, Nuveen has conducted several acquisitions.Nuveen now owns seven brands, mostly in the fixed-income space but spanning a variety of strategies. Thebrands are listed below in Exhibit 1.

30


exhibit 1: nuveen: brands and products

The lBO debt and interest payments weighted downNuveen’s balance sheet. The balance sheet continued tosuffer during the global financial crisis as credit marketsdried up. Nuveen executed several refinancingtransactions over the last few years to increase financialflexibility, but failed to materially improve its debt profile.The company also faced significant headwinds with thedeparture of key personnel, institutional client outflows,

and headline risk in the municipal bond market asconcerns about defaults in Detroit and puerto rico bondsincreased in 2013.

Conversely, from a business standpoint Nuveenpresented a very compelling story: a perfect example ofa good company with a bad balance sheet. Managementhas done an excellent job of broadening its product

offerings and distribution channels. The company offersover 200 funds in every major style box and over 80different institutional strategies. They have alsosuccessfully acquired a number of businesses, diversifyingthe sources of its aUM while maintaining a substantialexposure to fixed income, which has substantially lowervolatility than other asset classes. The team’s long-termview was that Nuveen was a fundamentally valuablecompany: it was a market-leading asset manager withstrong growth prospects, and also a very attractiveinvestment paying a 9.5% coupon. We view these typesof investments as stressed credit opportunities.

The Fund has owned Nuveen debt since 2009, and hasopportunistically added to this position over the years. atthe time of the Tiaa-CrEF acquisition, the Fund owned9.5% bonds which we were able to add in the high 80’sdollar price with yields of 15% plus. These securities wereat the bottom of Nuveen’s capital structure. We feltcomfortable with our position as this would, in fact, bethe fulcrum security in case of restructuring, a lowprobability event, in our view.

Energy Future Holdings

a significant development impacted the portfolio on april29, 2014: Energy Future Holdings (“EFH”), the electricalutilities company headquartered in Texas and largestleveraged buyout (“lBO”) in history, filed a long-awaitedbankruptcy in Delaware. as our shareholders know, theThird avenue Focused Credit Fund has been activelyinvolved in the EFH capital structure for the last few years.Over the past 12 months, we formed part of an ad hoc

committee that engaged in negotiations with EFH andother stakeholders. One of the outcomes of thesenegotiations was the restructuring Support agreement(“rSa”) included in the filing, which represents acompromise among the parties and outlines a roadmapfor the future of the company. Even though the process

is far from over and the final outcome is uncertain, this isan appropriate juncture to review our strategy, the recentevents and implications over the EFH case and the Fund.

Most investors and the media have focused on the powergeneration side of the lBO deal that originated EFH in2007. The lBO was ultimately a hefty (almost $50 billion)bet on natural gas. The expectation was that natural gasprices would either remain constant or increase, thusboosting the price of electrical power and the valuationof the company. This thesis played out originally, as gasprices rose from $6.42 per MMBtu to $13.11 per MMBtuin 2008. However, the trend of hydraulic fracturing or“fracking” boosted supply, leading to a scenario wherenatural gas traded substantially lower, as low as $2.04 perMMBtu in 2012, and ranging between $2.50 and $4.80MMBtu since then. Soon enough, market participantsrealized that once commodity hedges for EFH rolled offin 2013-2014, the company would fail to meet its debtobligations and would be in violation of its covenants.

Our approach to EFH has been much broader. We viewEFH as a large bet on natural gas and a fundamentallysolid transmission and distribution (“T&D”) business,intertwined. The focus on the generation side hasovershadowed a solid, steady and almost boring wire andtransmission business hidden within EFH. This businesshas become the focus of our investment strategy.

Exhibit 2 illustrates the complex organizational structureof EFH, and shows that there are two well defined silos:Texas Competitive Electric Holdings (“TCEH”), and EnergyFuture intermediate Holdings (“EFiH”). The generating(luminent) and retail (TXU Energy) silo, while related tothe transmission and distribution business employsdifferent inputs, has dramatically different drivers ofprofitability and, more importantly, different sensitivityto the price of natural gas.

31


32


exhibit 2: efH organizational and ownership structure

Source: EFH disclosure in First Day hearing in Delaware bankruptcy court.

EFiH is a holding company that owns 80% of the equityof Oncor, a regulated T&D business. T&D is a very steadyand predictable business, as one can accurately forecastcash flow based upon expected capital expenditures. Thenatural gas price has as little to do with T&D revenues asthe price of gasoline has to do with toll road revenues:short-term volatility in pricing has no effect on revenues,barring a sustained high price that changes usagepatterns. a stable T&D business in a demographically-agreeable state, such as Texas, is an attractive businessthat would typically be in the hands of long-term, low costcapital investors. When enmeshed in a complicatedcapital structure and obscured by daunting conditions at

an affiliated business, such a business became an unusualand attractive value proposition.

The Fund has been involved in the EFH capital structurein one form or another since practically its inception inlate 2009, as discussed above. in fact, portfolio managerJoe Zalewski has lived and breathed this credit prettymuch since joining the Fund in 2009. Exhibit 3 illustratesthe evolution of the Fund’s positions in EFH over time andacross the three entities and capital structures.

as we remained focused on identifying the fulcrumsecurity in the very complicated capital structure, wesought more equity-like exposure to Oncor, and built thisposition as securities became available in the market.


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exhibit 3: portfolio snapshots of Third Avenue focused

credit fund positions in efH capital structure

Source: Third avenue.

in October 2009, the Fund bought the first lien notes onboth the TCEH and EFiH silos based on a bullish view onthe Energy reliability Council of Texas (“ErCOT”) region.This investment generated decent results. in February2012, we changed positions quite dramatically, promptedby EFiH’s announcement that it would issue 113/4%second lien notes, with the proceeds to pay down a lowinterest intercompany loan (approximately in the singledigits). EFiH was effectively planning to use high interestdebt to pay down low interest debt, leading us to assumethat there may be plans to sever financial ties betweenthe silos. Given our bullish view on Oncor, we welcomedthe opportunity to invest at a higher leverage level atEFiH, with relative safety. We bought the second liennotes and sold out of our first lien EFiH bonds to increaseour risk exposure, and sold out of our TCEH holdings. Wecompleted the position with EFH Guaranteed Notes atthe holding company, which had guarantees from bothTCEH and EFiH. Our expectation that the company couldcome after these notes as it sought to split the entitiesapart for separate restructurings panned out.

in December 2012, a group of holders exchanged parentcompany guaranteed bonds along with parent legacybonds for new EFiH unsecured notes. The effect of thiswould be moving down to the EFiH box in the capitalstructure, where equity in Oncor resides. We werepleased to see the company come after these guaranteednotes, and we engaged with EFH on a second exchangethat would include our notes. Our view of the ultimate

effect of this exchange was to allow the company toremove the Guaranteed Notes at the parent that coulddrag EFiH into a TCEH reorganization. Ultimately, thecompany offered the exchange for all holders, leading tosubstantially all of the bonds exchanged, save for a smallamount of holdouts. By December 2012, the Fund’sposition was a levered, dedicated investment in the EFiHentity and, in our minds, the fulcrum security of atheoretical EFiH restructuring. During the first quarter of2013, we also traded all of our second lien secured bondsfor new EFiH unsecured notes. This amounted toeffectively a direct equity investment in Oncor, equity-likereturns in the case of refinancing and actual equity if theentity needed to restructure. The Fund also owns a small,speculative position in EFH legacy notes.

after EFH filed a Form 8K with the U.S. Securities andExchange Commission in March 2013, disclosing that itsdiscussions with TCEH creditors had broken down, wejoined an ad hoc committee of like-minded investors inthe EFiH Unsecured Notes. Third avenue believed that asthe fulcrum in the EFiH silo, holders of these bonds wouldultimately need to be there to negotiate with the parentand the TCEH lenders in a restructuring. Over the nextfive months, the group was involved in lengthynegotiations which broke down and led to the companymaking its November 2013 coupon payment. Thispayment upset many senior creditors in the capitalstructure but had the intended impact of resettingexpectations and erecting a framework for effectivelyreaching the rSa. in January 2014, the company andcreditors re-engaged in discussions, this time consideringthe option of a split of the two businesses. The april 1,2014 coupon date passed and the company went intograce period. Fulcrum creditors of both silos and theparent negotiated with the company; soon thereafter, therSa was signed by all negotiating parties and formed thebasis of the april 29 filing. Many sophisticated privateequity firms and well-known distressed hedge fundsnegotiated alongside us to consummate the rSa.


The main point of the plan is spin out the TCEH assets totheir creditors in a tax-free manner, without triggering taxliabilities, while the Fund’s EFiH unsecured bonds wouldconvert into the new equity of EFH. as part of this rSa,but subject to bankruptcy approval, the group haspledged to proportionally backstop a $2 billion secondlien Dip which would be mandatorily convertible (alongwith our existing unsecured notes) into the equity ofnewly reorganized and de-levered EFH. The Fund’sholdings rallied materially on the heels of the filing of therSa and the initiation of Chapter 11 proceedings. Theprice increase reflects that the market is recognizing thevalue of an unlocked,separated EFH with limitedpotential tax consequences,the additional clarity that thefiling imparted on the processas well as the further economiccommitment that the rightsoffering participants has madeto EFiH/Oncor.

We still do not know how this restructuring will turn outand, as mentioned, there is an enormous amount of workahead of us. Consistently, throughout this process, wehave maintained a positive view of the Oncor asset, whileseeking greater upside returns on investment. Theprocess continues to have legal and regulatory hurdlesfor a planned 2015 exit. Nonetheless, Third avenue isthankful for the ingenuity and resolve of the othermembers of the ad hoc group and the tireless work oflegal and financial professionals at akin Gump andCenterview partners, respectively during this process.

lastly, the Fund is no longer actively seeking newinvestors. at the present time, we believe the Fund is ableto operate well at its current size. We believe thisapproximate size range is appropriate in present marketconditions. When investing in stressed and distressedopportunities, our size allows us to be big enough to havea seat at the restructuring table, yet nimble enough toinvest in mid- cap opportunities. When and if marketconditions change, we may reconsider whether tocontinue to actively gather assets, which can often help allshareholders of the Fund by allowing us the flexibility tocarry through on our overall investment strategy. Of course,

we appreciate the support of ourcurrent investors and that theyhave spent time researching ourFund, and we continue towelcome your support.

as always, thank you for yourinvestment in Third avenueFocused Credit Fund. We lookforward to writing to you again

at the end of the next quarter.

Sincerely,

Third avenue Focused Credit TeamThomas lapointe, lead portfolio ManagerJoseph ZalewskiEdwin TaiNathaniel Kirk

34

when investing in stressed anddistressed opportunities, our size

allows us to be big enough tohave a seat at the restructuring

table, yet nimble enough toinvest in mid- cap opportunities.

Board of TrusTees

Jack W. aber Marvin Moser

david M. Barse eric rakowski

William e. Chapman, II Martin shubik

Lucinda franks Charles C. Walden

edward J. Kaier Martin J. Whitman

offICers

Martin J. Whitman — Chairman of the Board

david M. Barse — President, Chief executive officer

Vincent J. dugan — Chief financial officer, Treasurer

Michael a. Buono — Controller

W. 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 02940-8002

610-239-4600

800-443-1021 (toll-free)

InVesTMenT adVIser

Third avenue Management LLC

622 Third avenue

new York, nY 10017

IndePendenT reGIsTered PuBLIC aCCounTInG fIrM

PricewaterhouseCoopers LLP

300 Madison avenue

new York, nY 10017

CusTodIan

JPMorgan Chase Bank, n.a.

14201 dallas Parkway, 2nd floor

dallas, TX 75254

Third avenue funds

622 Third avenue

new York, nY 10017

Phone 212-888-5222

Toll free 800-443-1021

fax 212-888-6757

www.thirdave.com

third avenue funds - valuewalk · the information in these portfolio manager letters represents the...

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