Thi r d Avenue Va lue Fund

Th i r d Avenue Smal l -Cap Va lue Fund

Th i r d Avenue Real Estate Va lue Fund

Th i r d Avenue Internat iona l Va lue Fund

Th i r d Avenue Focused Cred i t Fund

FIRST QUARTER REPORTAND PORTFOLIO MANAGER COMMENTARY

January 31, 2010

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

The information in these portfolio manager letters represents the opinions of the individualportfolio manager and is not intended to be a forecast of future events, a guarantee offuture results or investment advice. Views expressed are those of the portfolio manager andmay differ from those of other portfolio managers or of the firm as a whole. Also, pleasenote that any discussion of the Funds’ holdings, the Funds’ performance, and the portfoliomanagers’ views are as of January 31, 2010 (except as otherwise stated), and are subjectto change without notice.

Third Avenue Funds are offered by prospectus only. Prospectuses contain more completeinformation on advisory fees, distribution charges, and other expenses and should be readcarefully before investing or sending money. Please read the prospectus and carefullyconsider investment objectives, risks, charges and expenses before you send money. Pastperformance is no guarantee of future results. Investment return and principal value willfluctuate so that an investor’s shares, when redeemed, may be worth more or less thanoriginal 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 numbersquoted in certain letters to shareholders.

M.J. Whitman LLC, Distributor. Date of first use of portfolio manager commentary —February 17, 2010.

This booklet consists of two separate documents.

THIRD AVENUE FUNDSPORTFOLIO MANAGER COMMENTARY_____________________________________________

CHAIRMAN’S LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1THIRD AVENUE VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5THIRD AVENUE SMALL-CAP VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11THIRD AVENUE REAL ESTATE VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15THIRD AVENUE INTERNATIONAL VALUE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22THIRD AVENUE FOCUSED CREDIT FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

THIRD AVENUE FUNDSFIRST QUARTER REPORT_____________________________________________

THIRD AVENUE VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1THIRD AVENUE SMALL-CAP VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5THIRD AVENUE REAL ESTATE VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9THIRD AVENUE INTERNATIONAL VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12THIRD AVENUE FOCUSED CREDIT FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15PORTFOLIOS OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Thi r d Avenue Va lue Fund

Th i r d Avenue Smal l -Cap Va lue Fund

Th i r d Avenue Real Estate Va lue Fund

Th i r d Avenue Internat iona l Va lue Fund

Th i r d Avenue Focused Cred i t Fund

FIRST QUARTER PORTFOLIO MANAGER COMMENTARY

January 31, 2010

Dear Fellow Shareholders:

With this communication, Third Avenue Management(“TAM”) is changing the format of our quarterly letters toyou. Instead of my co-authoring a Third Avenue ValueFund (“TAVF”) letter, I will write a Chairman’s letter toyou describing and analyzing important investmentmatters. Quarterly letters from TAVF have been put in thehands of Ian Lapey, who, with me, remains co-manager ofTAVF.

My first Chairman’s letter is entitled “In Defense ofManaged Mutual Funds”.

IN DEFENSE OF MANAGED MUTUAL FUNDS

In my opinion, the Investment Company Act of 1940, asamended (“the Act”): the principal law regulating theoperation of mutual funds, has resulted in very, veryimportant benefits to Outside, Passive, Minority Investors(“OPMIs”) because of the plethora of substantiveprotections it brings to OPMIs.

I have been in the investment business nearly 60 years.During that time, it seems as if OPMIs were almostcontinuously being ripped off by various schemes whichserved primarily to enrich salesmen and promoters. Theseinvestment schemes included tax shelters – whether realestate, oil and gas, or other assets; unregulated investmentcompanies, e.g., Bernie Cornfeld’s Fund of Funds; trading

systems; heavily margined portfolios; hedge funds; manyemerging market investments; Initial Public Offerings(“IPO’s”) where the gross spread is rarely below 7%; andPonzi schemes. A good deal of the time many OPMIsended up wiped out. Mutual fund investors are rarely, ifever, wiped out.

It is virtually impossible, or at least, extremely difficult, forrip-offs to occur in the case of non-borrowing OPMIs whohold mutual fund shares in Regulated InvestmentCompanies (“RICs”). This is so because the rules andregulations under the Act are so protective of OPMIs.Investors in mutual funds may lose money if a fundmanager is stupid or incompetent – but they will virtuallynever lose money because of theft, extortionate fees, ormanagers who fund their speculations with large amountsof borrowing.

In brief, the substantive protections delivered by the Actfor the benefit of RIC shareholders can be summarized asfollows:

1) The ability of RICs to incur debt is strictly limited. Asa matter of fact, most RICs never borrow, and theRICs run by TAM have never borrowed.

2) Management compensation is limited. Fees rarelyexceed 1.5% of assets under management. For RICs,there is no “2 and 20” which is common for hedgefunds, i.e., a 2% management fee plus 20% of profitsafter a “bogey” of say 6%, has been earned.

3) Affiliated transactions (i.e., with parties related to theRIC) are strictly controlled.

4) Fund assets, i.e., the securities portfolios of the RIC,are held by highly responsible custodians.

5) Fund management can invest only in accordance withthe RIC’s stipulated Investment Policy.

6) Financial results are audited annually.

7) In almost all cases, a majority of the managementcompany’s Board of Directors must be independent,

1

MARTIN J. WHITMANCHAIRMAN OF THE BOARD

Letter from the Chairman

i.e., not part of fund management or the fundmanagement company.

8) RICs are required to diversify if they are to obtainSubchapter M treatment under the Internal RevenueCode, and virtually all RICs do so. Subchapter Mtreatment provides that a RIC generally will not payfederal income taxes if it distributes virtually all of itsannual net income and capital gains to itsshareholders.

Though nobody seems to havemeant it that way, the Act may bea product of genius. On the onehand, OPMIs receive excellentsubstantive protections to such anextent that they can be deemed tobe getting close to an even break.On the other hand, promoters andmanagers of RICs are reasonablywell compensated; moneymanagement tends to be a quiteprofitable business for fundmanagers, i.e., managementcompanies able to achieve reasonable size and also enjoyreasonable persistence in terms of the amount of assetsunder management. Fund managers face onerousregulation under the Act, especially since the nature of thefund investment is to be passive, rather than to be control-conscious activists. Yet the managed fund industry seems tome, to attract quite competent money managers, especiallyamong that group, which includes TAM, known as ValueInvestors.

Index Funds, i.e., RICs which merely track a stock marketindex and do no fundamental research, have far lower fees,and far lower expenses, than managed funds. Yet investingin managed value RICs, such as the funds run by TAM,seems to have been much more profitable for OPMIs thaninvesting in index funds, on average, most of the time andover the long run.

Index funds are an outgrowth of believers in the EfficientMarket. The Efficient Market Hypothesis (“EMH”) andEfficient Portfolio Theory (“EPT”) make up ModernCapital Theory (“MCT”); theories which underlievirtually all academic finance. Efficient market believersare of the view that market prices, at any time, are the bestmeasure of the universal value of any business or anysecurity for any purpose of measurement. Proof of the

validity of this view, according toMCT, is the fact that no moneymanager outperforms any relevantprice index consistently.Consistently is a dirty word; itmeans all the time. Thisconsistency test is as phony as athree dollar bill. The most anymoney manager can do isoutperform relevant indices onaverage, most of the time and overthe long run. It seems as if manyvalue funds have passed this lattertest with flying colors indicatingthat there is no universal efficient

market. If one does not believe in universal efficientmarkets, index funds don’t seem to make a lot of sense.

According to MCT, efficient markets are a general law,applying to “the market”. I think that is nonsense. Thereexist myriad markets, some of which are characterized byad hoc (not universal for all purposes) efficiency; somemarkets are inherently highly inefficient in terms of settingrational prices and yet other markets are in between. Putsimply, efficient markets constitute a special case, not ageneral law.

Most OPMIs probably deal in relatively efficient ad hocmarkets. In contrast, value investors, control investors,probably most distress investors and the best of the shortsellers participate in markets characterized byinefficiencies. Value investors, control investors, distressedinvestors and skilled short sellers, tend to be very much

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“Value investors, controlinvestors, distressed investorsand skilled short sellers, tendto be very much involved in

the in-depth fundamentalanalysis that permits them to

make reasoned judgmentsabout the existence ofinefficient pricing.”

involved in the in-depth fundamental analysis that permitsthem to make reasoned judgments about the existence ofinefficient pricing. Whether or not a particular markettends toward ad hoc price efficiencies or not seems todepend on four factors:

1) Who are the market participants?

If the participants in the market are short-run focusedand untrained in fundamental value analysis, thenyou’re in an efficient market. Most individual investorsand mutual funds probably find themselves here.Value investors, control investors, distress investorsand skilled short-sellers operate elsewhere, but here, inefficient market land, you’ll find almost all of thefinance professors and economists in the UnitedStates. This is the market for those who focus on short-term securities prices. They encounter severe marketrisk as securities prices fluctuate from day to day.

2) How complex is the security being analyzed?

If the security being analyzed is analyzable by referenceto only a very limited number of computerprogrammable variables, you can bet your bottomdollar that the security will trade in a marketcharacterized by an ultra high degree of short-run priceefficiency. If analyzing the security is a complex matter– e.g., in common stock analysis TAM puts greatweight on balance sheet credit-worthiness while mostothers emphasize earnings or cash flow forecasts – themarket prices will tend to show great priceinefficiencies from the point of view of the TAM valueanalyst. Indeed, if the common stock being analyzed isthe issue of a going-concern with a perpetual life wherethe corporation has no near-term exit strategy, then formany purposes the pricing of that common stock issuewill reflect pricing inefficiencies.

Three types of securities are analyzable by reference toa very limited number of computer programmablevariables and thus tend to trade in a market that ishighly efficient in the short run. These three types areas follows:

A) Credit instruments without credit risk, e.g., U.S.Government Bonds.

B) Derivatives, including options and convertibles.

C) Risk arbitrage, i.e., where the great weight ofprobability is that there will be a relativelydeterminant workout in a relatively determinantshort period of time, say, a publicly announcedmerger.

3) How long is the market participant’s time horizon?

Insofar as the market participant is short-termconscious, for the participant’s purposes, the marketwill tend to be highly efficient. Insofar as theparticipant’s timing is long term, or indeterminate, themarket will tend to be highly inefficient. Take forexample, the manager of a Leveraged Buy Out Fund,who in the case of one of his successful buy-outs isseeking an IPO for the successful investment as an exitstrategy. The manager knows that the IPO market isextremely capricious. There are times when a commonstock issue can be marketed at super attractive prices(say 1999) and times when a new issue can’t be sold atany price (say 2008). For the manager, the IPO marketis inefficient so he takes a five year view, confident thatsometime during that interim he will succeed inhaving an IPO exit at a highly attractive (inefficient forthe OPMI) price.

4) How strict are the external forces imposing pricediscipline on the issuer or the issue?

There are all sorts of forces imposing discipline onissuers and issues. These forces include competition,government regulation, boards of directors, attorneys,accountants, labor unions. Insofar as there are strictexternal forces imposing discipline, prices will tend toreflect an ad hoc price efficiency. For example, look atthe pricing in markets for U.S. Government Bonds.Insofar as the external force imposing discipline isweak, prices will tend to reflect underlying priceinefficiencies. For example, it is generally accepted that

3

OPMIs place great weight on accounting earnings asreported. Insofar as auditors are lax (e.g., permitinsurance companies to under reserve for losses),market prices will reflect an overpriced common stock,an inefficiency in the eyes of most observers.

In MCT, there is a theory that the OPMI markets areefficient because information, when made public,impacts market prices. The problem is that mostmarket participants don’t know what information isimportant, and they don’t know that they don’t know.The tendency is that what short-run speculators thinkis important is information. Such speculators tend tobe extremely short-run conscious, overestimate theimportance of reported earnings for most companies,especially short-run estimates of income; invest tryingto pick market bottoms; have a technical-chartistapproach; ignore balance sheets and net asset values;emphasize macro factors rather than details about anissuer or issue; and are more interested in figuring outwhat “the average opinion of the average opinion”might be rather than have an independent judgmentabout underlying value. To believe that the buy-sellactions of these market participants determineanything close to a universal price efficiency is tobelieve in the “tooth fairy”. It is simply unscientific toequate OPMI pricing with a universal efficiency; therejust is no basis for concluding that there are rationalreasons pointing to a relationship between OPMIpricing and other values such as the value of control.

My family and I have substantial funds invested in ThirdAvenue Value Fund. We have no funds invested in indexfunds. So far, that has been the right way to go most of thetime, on average and over the long term. For ademonstration of this, read Ian Lapey’s TAVF quarterlyletter where TAVF’s annual performance is compared withthe annual performance of the S&P 500 and the MSCIWorld Index.

Sincerely yours,

Martin J. WhitmanChairman of the Board,Third Avenue Trust

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Dear Fellow Shareholders:

At January 31, 2010, the unaudited net asset valueattributed to the 124,623,077 shares outstanding of theThird Avenue Value Fund (“TAVF”, “Third Avenue”, orthe “Fund”) was $43.41 per share, for the Institutional andInvestor share classes. This compares with an audited netasset value of $43.46 per share at October 31, 2009; and anunaudited net asset value of $29.94 per share at January 31,2009, both adjusted for a subsequent distribution toshareholders of the Institutional share class. At February 16,2010, the unaudited net asset value was $44.42 per share,for the Institutional and Investor share classes.

QUARTERLY ACTIVITYNumber of Shares New Position Acquired

10,000,000 shares KeyCorp Common Stock(“Key Common”)

Positions Increased

500,000 shares Bank of New York Mellon Corp.Common Stock(“Bank of New York Mellon Common”)

Number of Shares Positions Increased (continued)

739,719 shares Sycamore Networks, Inc.Common Stock(“Sycamore Common”)

Positions Decreased

16,752,171 shares Ambac Financial Group Inc.Common Stock (“Ambac Common”)

342,227 shares AVX Corp. Common Stock(“AVX Common”)

1,910,000 shares Chong Hing Bank Ltd. Common Stock(“Chong Hing Common”)

5,207,000 shares Henderson Land Development Co. Ltd.Common Stock (“Henderson Common”)

48,981 shares Omega Flex Inc. Common Stock(“Omega Flex Common”)

Principal Amount Position Eliminated

$34,000,000 Nortel Networks Senior UnsecuredDebentures (“Nortel Seniors”)

The partial sales of AVX Common, Henderson Common,Chong Hing Common and Omega Flex Common weredriven by portfolio management as opposed to investmentconsiderations. Net portfolio outflows increased starting inSeptember 2009 and have continued in 2010. While thecurrent level of outflows is modest compared to thatexperienced in 2008, Fund Management has been raisingcash to maintain at least a 5% cash position and takeadvantage of select opportunities such as those discussed below.

As pricing opportunities arose during the quarter, FundManagement sold the majority of its position in AmbacCommon owing to the threat of permanent impairment tothe company’s common stock. The remaining holdings of

Third Avenue Value Fund

5

* Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Value Fund’s 10 largest issuers,and the percentage of the total net assets each represented, as of January 31, 2010: Henderson Land Development Co., Ltd., 13.39%;Cheung Kong Holdings, 11.80%; Toyota Industries Corp., 10.13%; Posco (ADR), 7.31%; Nabors Industries, Ltd., 4.57%; WharfHoldings, Ltd., 4.46%; Wheelock & Co., Ltd., 4.21%; Brookfield Asset Management, Inc., 3.71%; Investor AB, 3.42% andBank of New York Mellon, 3.23%.

IAN LAPEYCO-PORTFOLIO MANAGER OF

THIRD AVENUE VALUE FUND

Nortel Seniors were sold at an average price ofapproximately $60 compared to a cost of around $17, as thecompany has successfully sold most of its assets in auctionspursuant to Section 363 of the U.S. Bankruptcy Code.

KEY COMMON

Under the leadership of Tom Gandolfo, who joined ThirdAvenue as a consultant in 2008 and a Senior Analyst in thebeginning of 2009, Fund Management has been reviewingU.S. banks over the last several months. KeyCorp,headquartered in Cleveland, Ohio, is a bank holdingcompany and the parent of KeyBank. The company hasnearly 1,000 full service retail branches in 14 states and$93 billion in assets. While the company has struggledover the last couple of years with losses related primarily tocommercial and residential real estate, its deposit base hasremained strong, and it had a solid 12.7% Tier-1 capitalratio as of year end. Unlike some other banks that wereviewed, the company’s loss reserves, which totaled 4.3%of loans at year end, appeared to be reasonable, a favorablereflection upon management.

Shares were purchased at less than $6 per share, representinga significant discount to both tangible book value ofapproximately $8 per share and our estimated net asset valueafter adjusting for expected future loan losses and the off-balance sheet value of its healthy asset managementbusiness. Although the near-term earnings outlook is weak,future net asset value growth should be driven by anexpanding net interest margin, reduced loan loss provisionsand a return to a more normal level of demand for loans.The primary risk to the investment appears to be furtherdeterioration in its commercial real estate loan portfolio anda dilutive equity raise to repay TARP and/or retain strongcapital ratios. Fund Management would probably try toavoid dilution by participating in such an equity offering,particularly if it is at a discount.

BANK OF NEW YORK MELLON COMMON

Fund Management purchased an additional 500,000shares of Bank of New York Mellon Common at

6

approximately $27 per share during the quarter. TheFund’s original investment was in Mellon FinancialCorporation common stock in 2006. Under the leadershipof new CEO, Robert Kelly, Mellon merged with the Bankof New York in 2007. Although the merger created thelargest global custodian ($22.3 trillion under custody as ofDecember 31, 2009) and one of the largest assetmanagement firms ($1.1 trillion under management as ofDecember 31, 2009), it has been somewhat disappointingto date for shareholders. Despite healthy results in its cashgenerative core asset management and asset servicingbusinesses, the financial results of the combined companyhave been negatively impacted by numerous write-downsto its securities portfolio, particularly relating to Alt-Amortgage backed securities.

Nevertheless, the Bank of New York Mellon has faredbetter than most financial companies over the last coupleof years as it has emerged from the global credit crunchand bear market with a strong financial position (12% Tier-1 Capital ratio even after repaying TARP) and onlyminimal shareholder dilution. Furthermore, thecompany’s recent fourth quarter results were healthy, asassets under management and custody increased 20% and10%, respectively, compared to a year ago. The companyalso reported much improved results for both its securitiesand loan portfolios. The recently announced $2.3 billionacquisition of PNC’s asset servicing business appears to bean attractive strategic fit. Overall, the company nowappears to be well positioned to generate the attractive netasset value growth that Fund Management envisionedwhen the Bank of New York merger was announced.

TOYOTA INDUSTRIES

Third Avenue Value Fund has a significant investment inthe common stock of Toyota Industries (“Industries”).Toyota Industries holds a 6.4% position in Toyota Motorcommon stock and is the single largest shareholder.Subsequent to our fiscal quarter end Toyota Motor Corp.(“TMC”) recalled 8.1 million vehicles for sudden-acceleration problems and has begun a recall program to

fix braking problems on some Prius models. Thesedevelopments caused us to place our investment in ToyotaIndustries under review.

Although a fix has been established for the sudden-acceleration problem and TMC has started the recallprocess (at an estimated cost of up to $2 billion), itremains to be seen if the fix will be effective, how long therecall will take and what the long-term impact will be onTMC’s reputation.

Toyota Industries operates inmultiple segments: automotive,materials handling, logistics andtextile machinery. The companyholds the leading market sharepositions in car air conditioningcompressors and lift trucks.Industries’ business relationship withTMC is through assembly of certaincars (Vitz, RAV4, MarkX ZiO),production of automotive enginesunder consignment from TMC, andsales of components (e.g., car air-conditioner compressors, electroniccomponents) to TMC and TMCgroup companies. In the fiscal yearended March 31, 2009, TMCaccounted for 35.7% of Industries’total sales.

Industries is well financed and its common stock is tradingat a substantial discount to net asset value (“NAV”). Weestimate NAV by valuing its operating businesses plus its6.4% stake in TMC common plus the rest of its portfolioof marketable securities. Industries common stockcurrently trades at a discount of approximately 20% to thevalue of its investment portfolio (holdings in TMCcommon and other marketable securities), whileattributing no value for its operating businesses (i.e., youget the business for free). Clearly the problems at TMC

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will impact Industries’ business. The Fund has trimmed itsposition in Industries Common since the end of theJanuary 2010 quarter. In light of the TMC recall andresulting reputational damage, we continue to re-evaluateTAVF’s investment in Industries.

HONG KONG UPDATE

As of January 31, 2010, approximately 40% of the Fund’snet assets were invested in the common stocks of eight Hong

Kong-based real estate and privateequity companies. Each companyhas an extremely strong financialposition and an experiencedmanagement team with substantialinsider ownership. Each commonstock trades at an attractivevaluation compared to aconservative estimate of net assetvalue. After significant appreciationin 2009, the stock prices of all ofthese companies fell sharply inJanuary 2010, owing to concernsabout tightening measures by theChinese government in response tothe robust 10.7% GDP growth inthe fourth quarter of 2009 andreported speculation in certainmainland China propertymarkets. The tightening measures

appear to be sensible since slowing speculation in theproperty markets should result in healthier long-termfundamentals. The long-term trends driving theattractiveness of the mainland China property marketsremain intact, including urbanization, infrastructuredevelopment, household formations and increasedconsumer spending. As long-term investors, we are willingto live through the stock price volatility associated with ashort-term correction in China’s real estate markets.

“The recent reports of morerestrictive lending policies bybanks in China should result in an improved competitiveenvironment as many small,

weakly financed propertydevelopers are forced to pull

back, particularly in residentialland auctions. All of our HongKong holdings have extremelystrong financial positions andare less reliant on financingfrom local banks in China.”

One of our concerns about the mainland China expansionplans of our Hong Kong holdings is the fierce competitionin certain segments of the Chinese real estate market. Therecent reports of more restrictive lending policies by banksin China should result in an improved competitiveenvironment as many small, weakly financed propertydevelopers are forced to pull back, particularly inresidential land auctions. All of our Hong Kong holdingshave extremely strong financial positions and are lessreliant on financing from local banks in China.

Hang Lung Properties Ltd. recently reported very strongfinancial results for the second half of 2009. Earnings pershare increased to HK$4.14 from HK$0.29 a year ago,owing primarily to large increases in the fair value ofinvestment properties in both Hong Kong and mainlandChina, as well as highly profitable sales of residential unitsfrom its HarbourSide project in Hong Kong. The outlookfor the Hong Kong residential real estate market remainsvery healthy as supply remains constrained (2009 housing

8

completions were at a 13-year low). Hang Lung’s propertyleasing income increased by 9% compared to a year ago,driven by 15% growth in mainland China. Importantly, thecompany announced that its next major project, the Palace66 shopping mall in Shenyang, is expected to be completedin mid-2010 and is 80% pre-leased. Hang Lung Propertiescontinues to have a robust financial position with a net cashposition of HK$2.2 billion. The common stocks of HangLung Properties Ltd. and Hang Lung Group Ltd. (theparent company) accounted for approximately 4% of theFund’s net assets as of January 31, 2010.

We will provide an update on our other Hong Kongholdings in our next quarterly letter, as most, including theFund’s two largest positions – Henderson LandDevelopment and Cheung Kong Holdings, will bereporting year end 2009 results in March. I will be travelingto Hong Kong to meet with several of the managementteams at that time.

THIRD AVENUE VALUE FUND – 10-YEAR REVIEW

2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 ANNUALIZED1

TAVF 44.5% -45.6% 5.8% 14.7% 16.5% 26.6% 37.1% -15.2% 2.8% 20.8% 7.3%S&P 500 26.5% -37.0% 5.5% 15.8% 4.9% 10.9% 28.7% -22.1% -11.9% -9.1% -0.9%MSCI World 30.8% -40.3% 9.6% 20.7% 10.0% 15.3% 33.8% -19.5% -16.5% -12.9% 0.2%1 Annualized return including reinvestment of dividends.

-50.0%-40.0%-30.0%-20.0%-10.0%

0.0%10.0%20.0%30.0%40.0%50.0%

TAVF S&P 500 MSCI WorldAnn

ualiz

ed20

0020

0120

0220

0320

0420

0520

0620

0720

0820

09

Having just completed a volatile decade for stocks, ingeneral, and for investors in TAVF, we thought that itwould be appropriate to review our performance over theperiod. It was a difficult decade for most stock investors, asthe bear markets of 2002 and 2008 contributed to a 0.9%annualized decline for the S&P 500. The Fund’sannualized return of 7.3% was somewhat disappointingon an absolute basis (compared to its 12.9% annualizedreturn since inception on November 1, 1990), butcompared very favorably to relevant stock indices. Thefollowing observations about the Fund’s performance overthe last decade are particularly relevant:

• The largest positive contributors to performance werethe Fund’s investments in Kmart Holdings Corp.Senior Unsecured Notes (“Kmart Seniors”), HendersonLand Development Company Common Stock(“Henderson Common”), Toyota Industries CommonStock (“Toyota Industries Common”), Posco CommonStock (“Posco Common”) and Brookfield AssetManagement Common Stock (“BrookfieldCommon”). The Kmart Seniors investment wasconverted to Kmart common stock upon thecompany’s emergence from bankruptcy, and the Fund’sperformance benefitted greatly from the robustperformance of Kmart’s common stock uponemergence from bankruptcy, including its merger withSears Holding Corp. The Fund’s holdings inHenderson Common, Posco Common and BrookfieldCommon were “Safe and Cheap*” equity investments.In each case, the shares were purchased at a significantdiscount from net asset value and each company hasmaintained a strong financial position throughout ourownership. The healthy investment performance forthese securities was primarily driven by growth in netasset value as opposed to a narrowing of the discount tonet asset value.

• The Fund largely avoided significant permanentimpairments during the decade. The major exceptionwas in the bond insurance area where investments inMBIA Inc. Common Stock, MBIA Corp. SurplusNotes, Ambac Financial Group Common Stock andRadian Group Inc. Common Stock were, as a group,the largest detractors to performance over the decade.Another notable permanent impairment was theFund’s investment in the senior unsecured debt ofCollins and Aikman. Additionally, the Fund’s 2007investments in the common stocks of Japanese realestate operating companies Mitsubishi Estate Co. andMitsui Fudosan Co. were significant detractors. Thebusinesses of these strongly financed companies werenot permanently impaired, but Fund Managementreluctantly sold the securities in 2008, at aconsiderable loss, to meet redemptions.

• In comparison to an index, such as the S&P 500, theFund’s performance benefitted by not owning many ofthe worst performing common stocks over the decade.For example, ten years ago, the most heavily weightedcommon stocks in the S&P 500 Index were MicrosoftCorp., General Electric Co. and Cisco Systems, Inc.These common stocks declined 70%, 48% and 56%,respectively, during the decade. Ten years ago, thesecommon stocks were extremely richly valued at priceto book multiples of approximately 17, 12 and 26,respectively, and, therefore, were not owned in theFund. Additionally, the Fund avoided investing in thecommon stocks of the major financial firms thatcollapsed such as Bear Stearns, Lehman Brothers, FannieMae, Freddie Mac, Washington Mutual and AIG,because they did not meet our strict investment criteria.

9

* “Safe” means the companies, in our judgment, have strong finances, competent management, and an understandable business.“Cheap” means that, in our judgment, we can buy the securities for significantly less than what a private buyer might pay forcontrol of the business.

• The Fund did not avoid market risk. As the table shows,the Fund experienced negative absolute performanceduring the bear markets in 2002 and 2008. However, asmentioned above, the Fund largely avoided permanentimpairments, and, therefore, performance reboundedin the subsequent year. Fund Management focuses onminimizing investment risk and acknowledges that theFund is subject to market risk.

• The Fund outperformed the S&P 500 (and otherindices) most of the time and over the long term, butnot consistently. Fund Management’s benchmarkagnostic bottom-up investing approach resulted inperiods of both significant outperformance andunderperformance. The Fund outperformed the S&P500 Index in eight of the past ten years andunderperformed the index in only two years (2008and 2006).

• Average annual portfolio turnover for the decade wasonly 14%, compared to approximately 85% for theaverage world stock fund, based on Morningstar data.Fund Management is a patient investor. This investingapproach contributes to low transaction fees and taxes.

I shall write to you again after the April 30, 2010 quarterend.

Ian LapeyCo-Portfolio Manager,Third Avenue Value Fund

10

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Dear Fellow Shareholders:

At January 31, 2010, the end of the Fund’s fiscal firstquarter, the unaudited net asset value attributable to the68,105,761 common shares outstanding of the ThirdAvenue Small-Cap Value Fund (“Small-Cap Value” or the“Fund”) was $17.62 per share, for both the Institutionaland Investor share classes. This compares with the Fund’saudited net asset value of $17.03 per share at October 31,2009, and an unaudited net asset value at January 31,2009 of $13.18 per share, both adjusted for a subsequentdistribution to shareholders of the Institutional share class.At February 16, 2010, the unaudited net asset value was$17.75 per share for both the Institutional and Investorshare classes.

QUARTERLY ACTIVITY

During the quarter, Small-Cap Value established one newposition, added to six of its existing positions, eliminatedseven positions and reduced its holdings in 13 companies.At January 31, 2010, Small-Cap Value held positions in 47common stocks, the top 10 positions of which accountedfor approximately 34% of the Fund’s net assets.

Face Amount New Position Acquired

$15,000,000 Energy XXI Gulf Coast, Inc. 10.00% Senior Notes Due June 15, 2013(“Energy XXI Senior Notes”)

Number of Shares Increases in Existing Positions

15,100 shares Alexander & Baldwin, Inc. Common Stock (“Alex Common”)

230,513 shares HCC Insurance Holdings, Inc. Common Stock (“HCC Common”)

382,014 shares Investment Technology Group, Inc.Common Stock (“ITG Common”)

123,300 shares JAKKS Pacific, Inc. Common Stock(“JAKKS Common”)

50,000 shares Tellabs, Inc. Common Stock (“Tellabs Common”)

275,000 shares Viterra, Inc. Common Stock (“Viterra Common”)

Positions Reduced

3,533 shares Ackermans & van Haaren N.V.(“AvH Common”)

47,376 shares Bristow Group, Inc. Common Stock(“Bristow Common”)

108,400 shares Cimarex Energy Co., Common Stock (“Cimarex Common”)

4,600 shares E-L Financial Group, Ltd. Common Stock(“E-L Financial Common”)

7,500 shares Electronics for Imaging, Inc. Common Stock (“EFI Common”)

131,646 shares Genesee & Wyoming, Inc. Common Stock (“Genesee Common”)

Third Avenue Small-Cap Value Fund

CURTIS R. JENSENCHIEF INVESTMENT OFFICER &PORTFOLIO MANAGER OF THIRD AVENUE

SMALL-CAP VALUE FUND

* Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Small-Cap Value Fund’s 10largest issuers, and the percentage of the total net assets each represented, as of January 31, 2010: Sapporo Holdings, Ltd., 4.27%;Viterra, Inc., 4.00%; Lanxess AG, 3.79%; Alexander & Baldwin, Inc., 3.51%; Parco Co., Ltd., 3.44%; Brookfield AssetManagement, Inc., 3.23%; Synopsys, Inc., 3.08%; National Western Life Insurance Co., 3.00%; Tidewater, Inc., 2.83%; andInvestment Technology Group, Inc., 2.81%.

Number of Shares Positions Reduced (continued)

158 shares Kaiser Aluminum, Inc. Common Stock(“Kaiser Common”)

368,960 shares Lanxess AG Common Stock(“Lanxess Common”)

125,000 shares Lexmark International, Inc. Common Stock (“Lexmark Common”)

100,000 shares Pioneer Drilling, Inc. Common Stock(“Pioneer Common”)

30,600 shares Synopsys, Inc. Common Stock(“Synopsys Common”)

246,188 shares Vail Resorts, Inc.. Common Stock(“Vail Common”)

192,692 shares Wacker Neuson SE Common Stock (“Wacker Common”)

Number of Shares, Unitsor Face Amount Positions Eliminated

691,700 shares Canfor Corp. Common Stock(“Canfor Common”)

98,728 shares Coherent Inc. Common Stock(“Coherent Common”)

92,293 shares Haverty Furniture Co., Inc. Common Stock (“Haverty Common”)

332,156 shares Journal Communications, Inc. Common Stock (“Journal Common”)

$8,000,000 Ply Gem Industries 11.75% First Lien Secured Notes Due June 15, 2013(“Ply Gem First Lien Notes”)

417,719 units Precision Drilling Trust Units(“Precision Units”)

186,773 shares St. Mary Land and Exploration Co., Inc.Common Stock (“St. Mary Common”)

QUARTERLY ACTIVITY

In the quarter ended January 31, 2010, FundManagement initiated a new position in Energy XXISenior Notes and eliminated several small positions,including the remainder of the Fund’s successfulinvestment in Ply Gem First Lien Notes. As can be seenfrom the list above, Fund Management reduced the Fund’sholdings in several names, many of which we were busilyadding to during the darkest days of the financial crisisonly a year or so ago.

Energy XXI Senior Notes represent the Fund’s second debtinvestment in a U.S. Gulf of Mexico-focused oil and gasproducer. Securities valuations of Gulf of Mexico (“GOM”)energy companies like Energy XXI had been decimated inlate 2008 following the disruption brought on byHurricanes Ike and Gustav. The dramatic collapse incommodity prices during that period further pressured theindustry’s operating results and, in many cases, led todramatic accounting-based asset impairments. EnergyXXI’s production levels, for example, fell more than 26% inthe first quarter following the hurricanes and GAAPaccounting resulted in a $580 million impairment of thecompany’s oil and gas reserves. The opportunity in EnergyXXI Notes surfaced at the end of last year while thecompany was in the midst of a debt exchange offer designedto address a capital structure ill prepared for these sorts ofadverse developments. We believed that the company’s“troubles” – both financial and operational – weretemporary and fixable, that our capital, as creditors, waswell protected and the investment had a number of ways towin:

• the proposed exchange offer and a coincident privatefinancing included a credit-enhancing common stockoffer that also extended the company’s debt maturities;

• production that had been interrupted because of thehurricanes would return, in time, along withadditional production pending completion on morerecent projects, bolstering both cash flow and reserves;

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• the company was due to collect the proceeds of asubstantial insurance settlement, further enhancingcorporate liquidity;

• our multi-pronged valuation work, which relied onasset-based production and cash flow metrics,suggested our downside was well protected (i.e., theprobability of a loss of capital seemed remote) whilethe Notes, trading at a price of around 81% of facevalue at the time of acquisition, provided an equity-like return of more than 17% and a current yield ofapproximately 12%;

• creditors like the Fund could get further comfort fromthe relatively strong covenants within the terms of theNotes and those in the company’s bank credit facility;

• While unnecessary for a successful investment, thecompany’s exposure to a potentially large exploratorysuccess would further enhance overall corporate value;

• finally, other facts, taken together, strongly suggestedto us that management was intent on improving thebalance sheet. These clues included i) the company’smost recent proxy statement that requested a sizableexpansion of the company’s authorized share capital,signaling a potential future equity raise; ii) new“change of control” language within the new notesindenture that seemed to contemplate the impact ofan expanded equity base; iii) the fact that the companyitself had repurchased $126 million face amount ofNotes at a cost of $94 million1, suggesting a proactiveapproach toward enhancing the corporation’s financialflexibility; and iv) comments on the company’s recentconference calls and presentations committing to“debt reduction” and “further strengthening of thebalance sheet.”

While subsequent events at the company largely supportour thesis (a thesis developed with our colleagues on the

Third Avenue credit team), the investment continues toface a number of hard-to-handicap risks, chief amongthem: i) operational risk (hurricane season starts in June!);ii) political risk (uncertainty related to how the Obamaadministration might change the industry tax regime orrules on access to reserves); and iii) deal risk (the possibilitythat significant new leverage is introduced as the result ofeither a debt-financed acquisition or a takeover of thecompany by a highly leveraged acquirer).

The Fund’s investment in the distressed debt of Ply GemIndustries, a well-managed and leading building productsmanufacturer and distributor, came to a close this quarter.The First Lien Notes, purchased by the Fund at pricesranging from 55 cents to 65 cents on the dollar in late2008 and early 2009, were sold in the last few months atprices between 95 and 106. Talk about swings in investorsentiment! With the help of a juicy 113⁄4% coupon, theinvestment generated a 71% internal rate of return. Weshould have owned more of it.

Less satisfying and more sobering results were producedamong some of the other disposals during the quarter.Realized losses in the Fund’s investment in JournalCommon2, for example, reminded us that negative secularindustry trends combined with a deep recession canoverwhelm even competent and earnest managementteams and make an apparently cheap valuation almostirrelevant.

In late November 2009, Fund Management purchased aone-year, out-of-the-money put option on the Japaneseyen as it approached 87 (versus the U.S. dollar). Given theFund’s large, common stock investments in two, primarilydomestic-oriented Japanese companies, Parco andSapporo, we viewed the two percent premium as areasonably cheap “insurance policy” against a significantweakening of that currency during 2010.

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1 As of September 30, 2009, Energy XXI had repurchased $126 million of Notes at an average price of 72.13 ($90.9 million) plusaccrued interest. Source: Company 10-Q.

2 Journal Communications publishes the Milwaukee Journal Sentinel newspaper and owns radio and television stations.

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• VALUATIONViewed from multiple perspectives, what sort ofdiscount does the public market price imply measuredagainst a conservative estimate of the company’sintrinsic value? How might the company’s financesexplain the valuation? Is there a clear asymmetrybetween minimizing any downside and theinvestment’s prospective upside?

• FINANCIAL STRENGTHDoes the company have adequate resources for thecurrent and future needs of the business? Could thebalance sheet withstand a significant and prolongedbusiness downturn? Might the company becomefinancially constrained by onerous debt covenants?What contingencies are not on the balance sheet, butof potentially significant economic import? Do thecredit markets have an opinion on the companyunderlying the Fund’s equity holding?

This is not an exhaustive list, but only illustrative of thekinds of questions we ask ourselves in assessing whetherour investments continue to fit our “Safe and Cheap*”investment philosophy. We recognize that no investment isperfect. But in the spirit of continuous processimprovement and error reduction, we have maderefinement of our “checklist” a high priority for 2010.

I look forward to writing you again when we publish ourSemi-Annual Report dated April 30, 2010. Thank you foryour continued loyalty and support.

Sincerely,

Curtis R. JensenChief Investment Officer andPortfolio Manager ofThird Avenue Small-Cap Value Fund

THE CHECKLIST MANIFESTO

I recently made a small dent in my growing backlog ofreading material when I got around to reading Dr. AtulGawande’s The Checklist Manifesto.1 The book takes thereader on an easy journey through complex systems foundin everything from aviation and hospital intensive careunits to construction and concert production. TheManifesto highlights the importance of checklists as a wayto “get the simple stuff right,” and their undeniable role inreducing errors big and small within those processes. I amreminded of the Manifesto because it is that time of yearwhen we, as analysts, prepare for the avalanche of year-endcorporate results announcements and move through ourown – decidedly more modest – version of “checklists.”Checklists can be good or bad and are subject to user error.But in the end, good checklists should be thought of as a“cognitive net”, relatively simple, subject to humanjudgment, and wrapped in communication and procedure.When considering a new investment or thinking about thehealth of the holdings in the Fund’s current portfolio, ourchecklist starts with four basic areas:

• BUSINESS FUNDAMENTALSDoes the company still have attractive investment andgrowth opportunities over the medium to long term?Can we identify tangible paths toward growth in pershare business value? How has the operatingenvironment changed (e.g., stemming fromcompetition, technology, regulatory), if at all, since ouroriginal thesis? How might the current industrybusiness cycle look different than the last one? Areproblems more temporary or secular in nature?

• MANAGEMENTHas management done what they said they would?Have they allocated capital sensibly? Are they actingwith integrity and urgency in the business? Are theirincentives and compensation aligned with those of theshareholders?

* “Safe” means the companies, in our judgment, have strong finances, competent management, and an understandable business.“Cheap” means that, in our judgment, we can buy the securities for significantly less than what a private buyer might pay forcontrol of the business.

1 The Checklist Manifesto, How to Get Things Right, Gawande, Atul, Metropolitan books, 2009.

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Dear Fellow Shareholders:

At January 31, 2010, the end of the first fiscal quarter of2010, the unaudited net asset value attributable to the72,553,096 shares outstanding of the Third Avenue RealEstate Value Fund (the “Fund”) was $19.44 per share, forboth the Institutional and Investor share classes. Thiscompares with an audited net asset value of $19.60 pershare at October 31, 2009, and an unaudited net assetvalue of $13.20 per share at January 31, 2009, bothadjusted for subsequent distributions to shareholders ofthe Institutional share class. At February 16, 2010, theunaudited net asset value was $19.85 per share, for boththe Institutional and Investor share classes.

QUARTERLY ACTIVITY

The following summarizes the Fund’s investment activityduring the quarter:Investment Amount New Positions Acquired

$16,000,000 Alliance Bernstein Legacy Securities(C1), L.P. Limited Partnership Interest(“Alliance Bernstein LP Interest”)

Notional Amountor Number of Shares New Positions Acquired (continued)

$80,000,000 Japanese Yen Currency Put - ¥95 strike,expires 1/28/11 (“Yen Currency Put”)

6,331 shares NTT Urban Development Corp.Common Stock (“NTT Urban Common”)

Increases in Existing Positions

10,742,000 shares Hysan Development Company Ltd. Common Stock (“Hysan Common”)

272,000 shares Mitsubishi Estate Company Ltd.Common Stock (“Mitsubishi Common”)

131,000 shares Mitsui Fudosan Company Ltd.Common Stock (“Mitsui Common”)

16,401,804 shares Quintain Estates & Development plcCommon Stock (“Quintain Common”)

3,319,677 shares Songbird Estates plc Common Stock(“Songbird Common”)

750,000 shares Sun Hung Kai Properties Ltd. Common Stock(“Sun Hung Kai Common”)

5,009,100 shares Thomas Properties Group, Inc.Common Stock (“Thomas Common”)

3,114 shares Vornado Realty Trust Common Stock(“Vornado Common”)

Decreases in Existing Positions

1,100,000 shares British Land Company plc Common Stock (“British Land Common”)

5,000,000 shares CapitaLand Ltd. Common Stock(“CapitaLand Common”)

Third Avenue Real Estate Value Fund

MICHAEL H. WINERPORTFOLIO MANAGER OF THIRD AVENUE

REAL ESTATE VALUE FUND

* 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 January 31, 2010: Forest City Enterprises, Inc.,8.63%; Henderson Land Development Co., Ltd., 6.25%; Brookfield Asset Management, 5.23%; Vornado Realty Trust, 3.95%;Newhall Holding Co. LLC, 3.59%; Wheelock & Co., Ltd., 3.45%; Mitsubishi Estate Co., Ltd., 2.97%; Hammerson PLC,2.97%; Mitsui Fudosan Co., Ltd., 2.93%; and Sun Hung Kai Properties, Ltd., 2.79%.

Principal Amount Decreases in Existing Positions or Number of Shares (continued)

3,500,000 shares Hammerson plc Common Stock(“Hammerson Common”)

3,985,000 shares Hang Lung Properties Ltd. Common Stock (“Hang Lung Common”)

13,000 shares RAIT Financial Trust 7.75% Series A Preferred Stock(“RAIT Series A Preferred”)

167,600 shares RAIT Financial Trust 8.375% Series B Preferred Stock(“RAIT Series B Preferred”)

7,428,000 shares Wheelock & Company Ltd. Common Stock (“Wheelock Common”)

Position Eliminated

$16,215,000 Brookfield Asset Management, Inc. 7.125% Senior Notes due 6/15/2012(“Brookfield Notes”)

DISCUSSION OF SIGNIFICANT QUARTERLY ACTIVITY

As noted in last quarter’s Letter to Shareholders, the Fundhas been building cash reserves in anticipation of buyingopportunities. At quarter-end, the Fund had 18.4% of itsnet assets in cash or equivalents, plus 8.3% in performingdebt securities that are easily convertible into cash. Duringthe quarter, the Fund decreased several holdings based onproper position sizing relative to valuation, includingBritish Land Common (U.K.), CapitaLand Common(Singapore), Hammerson Common (U.K.), Hang LungCommon (Hong Kong) and Wheelock Common (HongKong). Market volatility created opportunities for the Fundto increase several holdings at discounted prices, includingHysan Common (Hong Kong), Mitsubishi Common(Japan), Mitsui Common (Japan), Songbird Common(U.K.) and Sun Hung Kai Common (Hong Kong).

The Fund participated in direct equity raises by two of itslongstanding holdings – Quintain Common and ThomasCommon. The Fund participated in a rights offering for

Quintain, a U.K.-based real estate operating companyfocused on urban regeneration projects in central London.After encountering a 40% decline in the appraised value ofits real estate holdings during 2008 and the first half of2009, Quintain elected to solidify its financial positionand announced in November 2009 that it would raise£181 million of additional equity through a fullyunderwritten rights offering. The Fund subscribed to theoffering by exercising its rights to purchase three newshares of Quintain Common for each share previouslyowned. Fund Management deemed this to be an attractiveuse of capital, as the new shares were purchased at morethan a 60% discount to the company’s adjusted net assetvalue. The proceeds were used to reduce debt levels,position the company to maintain progress on its keylarge-scale, mixed-use redevelopment projects (Wembleyand Greenwich Peninsula), and provide the capacity tomake opportunistic investments alongside its partners inits fund management business.

Thomas Properties is a U.S. real estate operating companythat acquires, develops, owns and manages a portfolioconsisting primarily of office, as well as mixed-useresidential, properties nationwide. In addition to directownership of properties, the company owns severalproperties in joint ventures with institutional investmentpartners. As many U.S. real estate companies did in 2009,the company attempted to raise equity through a publicoffering of common shares (pursuant to a previously filedshelf registration statement). Market conditions were notideal at the time of the company’s proposed offering(October 2009), causing the company to postpone theoffering. In December 2009, Fund Management enteredinto discussions with company management to purchaseapproximately 5 million shares of common stock at a 15%discount to the current market price (which represented adiscount to conservative estimates of net asset value). Theequity raise enabled the company to opportunistically payoff debt on one of its office properties at a substantialdiscount to the balance outstanding.

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The Fund invested $16 million of its $40 millioncommitment to the Alliance Bernstein Legacy Securities(C1), L.P. (“AB Fund”). The management group of the ABFund is one of the nine fund managers pre-qualified by theU.S. Treasury for co-investment under the U.S.government’s Public-Private Investment Program(“PPIP”). Under the terms of PPIP, the U.S. Treasuryprovides matching equity capital with private investors inaddition to providing attractive senior financing equal tothe total amount of equity raised. The AB Fund may raiseup to $1.1 billion of private capital that would be matchedwith $1.1 billion of capital and $2.2 billion of senior debtfrom the U.S. Treasury. PPIP was designed to help cleanseU.S. financial institutions of “Legacy Securities” –specifically, commercial mortgage backed securities(“CMBS”) and non-Agency residential mortgage backedsecurities (“RMBS”) that had ratings of AAA/Aaa whenoriginally issued. The underpinning of PPIP is the U.S.Treasury’s view that market prices for many assets todayreflect substantial liquidity discounts due to the financialcrisis and, therefore, valuations may be significantly belowwhat would be expected in normal functioning markets.Enhanced price discovery and liquidity in these marketsshould help free up capital and allow U.S. financialinstitutions to increase lending.

The AB Fund will access the equity capital and debtfinancing available from the U.S. Treasury to acquireeligible Legacy Securities. The objective of the AB Fund isto generate attractive long-term returns by conductingtop-down security analysis with bottom-up hard assetinsights through its advisor and sub-advisors, whocollectively bring extensive experience in mortgageunderwriting and investing, hard-asset and distressed-assetexpertise, mortgage servicing and special servicing. RialtoCapital Management is one of the sub-advisors. Rialto’sfounder and CEO is Jeffrey Krasnoff, the former CEO ofLNR Property Corp. (one of the Fund’s most successfulinvestments several years ago). The AB Fund has a statedinvestment period of three years and a term of up to ten

years. The advisor receives a management fee of 1% peryear on net asset value. Incentive fees are payable to thegeneral partner and the U.S. Treasury totaling 20% ofprofits after an 8% preferred return to investors. The U.S.Treasury senior debt facility earns interest at LIBOR plus1% and is due and payable in ten years. After payment ofinterest, fund expenses and the 8% preferred return,principal repayments on the senior debt facility will be50% of cash flow during years one to three; 75% of cashflow during year four; and 100% of cash flow thereafteruntil the facility is paid in full.

The Fund purchased a Japanese yen currency put with anotional amount of $80 million. The Yen Currency Puthas a strike price of ¥95 and expires on January 28, 2011.In November 2009, the exchange rate for Japanese yen tothe U.S. dollar reached a 15-year high of approximately¥86/dollar. The average over the last 15 years wasapproximately ¥112.5/dollar. Since the Fund firstacquired Japanese common stocks in early 2007, thedollar has depreciated versus the yen by about 35%.During this period, the Fund greatly benefited from nothaving hedged its yen exposure. The Fund heldinvestments (common stocks of Japanese real estatecompanies) valued at approximately $100 million on thedate it purchased the put. The currency hedge protectsabout 80% of the Fund’s yen-denominated investmentsagainst a strengthening of the dollar versus the yen bymore than 10% through January 2011. FundManagement does not necessarily have a long-term viewon foreign currency exchange rates, but it seemed prudentto hedge against a weakening yen after reaching nearhistoric levels. At January 31, 2010, the yen spot price was¥90.48.

The Fund sold $16,215,000 face amount of BrookfieldSenior Notes at an average price of 106.5% of faceamount. The Fund purchased the Brookfield Senior Notesin December 2008 at a cost of 68.4% of face amount, foran annualized return of 69%.

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ASSET BUBBLE IN CHINA?

Media coverage over the last few months would leadinvestors to believe that China’s growth story has come toan end and that the property markets have entered apricing bubble that is certain to result in a U.S.-style realestate downturn. Here are a few examples of recentheadlines from the mainstream press:

“China Seeks to Tame Boom, Stirs Growth Fears” – The Wall Street Journal, January 19, 2010

“Mainland Property BubbleExpands” – South ChinaMorning Post, December 31,2009

“Cooling this Hot Market willtest Beijing to the Full” – South China Morning Post,January 23, 2010

“World Bank voices concernsabout Chinese propertyprices” – Property Wire,January 26, 2010

“Bubble Trouble in ChineseReal Estate?” – Forbes, January25, 2010

Fund Management is by no means proficient at makingeconomic forecasts – it’s just not what we do. But we do tryto understand how the nuances of the Chinese economymay impact the financial soundness and long-term growthprospects for the Hong Kong-based companies in which theFund owns common stock. Fund Management believesthat, over the next five, ten and twenty years, mainlandChina will continue to be one of the fastest-growingeconomies in the world, and Hong Kong real estatecompanies will be among the prime beneficiaries of thatgrowth. Long-term growth seems fairly certain, but it will byno means be linear. There will no doubt be multiple growthspurts and temporary setbacks as the Chinese government

adjusts its policies to achieve its long-term goals. Whetherthese cycles will be coupled with violent swings in assetprices (bubbles) and social unrest is unknowable.

Fund Management is optimistic that the Fund’s investmentsin Hong Kong property companies are the most prudentway to capitalize on the long-term economic growth of EastAsia. At quarter-end, the Fund had 20% of its net assetsinvested in common stocks of seven Hong Kong real estateoperating companies. These companies have investedmeaningful sums in mainland China, but have done so in

what seems to be a measured andtimely fashion (e.g., commercialdevelopments in prime locations inmajor cities and early landpurchases for residentialdevelopments in second-tier cities).But the vast majority of their assets(approximately 75% on average)are in Hong Kong, and diversifiedamong commercial properties(long-term value growth) andresidential developments (highlyprofitable and cash generative).

For several years, FundManagement has emphasized thatthe investments in Hong Kong are

a conservative means to capitalize on the expected long-term economic growth of mainland China. Recently,however, it has become apparent that many marketparticipants view Hong Kong and China asindistinguishable. Fund Management believes that thereis, indeed, a very clear distinction between Hong Kongand China – both economically and in their respectiveproperty markets.

MAINLAND CHINA

The Chinese government’s stated economic growthpolicies include massive urbanization of the population.An estimated 300 million people will move from rural

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“Fund Management believesthat, over the next five, ten and twenty years, mainland

China will continue to be oneof the fastest-growing

economies in the world,and Hong Kong real estatecompanies will be amongthe prime beneficiaries

of that growth.”

areas to urban areas by 2020 – a trend that has obviousimplications on real estate related activities. Eastern China(the coastal regions) has already reached urbanization levelsabove 50%, whereas Central China has many more areaswith urbanization levels below 30%. Consumer spendingrises dramatically as urbanization rates rise, providing amajor boost to domestic demand. As China’s domesticdemand (consumption of goods and services) grows, itsreliance upon manufacturing/exports to drive economicgrowth will decline – creating a more balanced economywith sustainable growth.

Residential property prices and transaction volumesreached record levels in 2009 as a result of China’s massiveeconomic stimulus program and supportive housingpolicies were implemented in December 2008. Chineseauthorities recently became concerned that rapid priceincreases and the threat of excess speculation could driveprices beyond affordability for average homebuyers. Thisresulted in the central government instructing banks totighten lending standards and put up more reserves fromdeposits. While it is apparent that the authorities haveresponded sensibly to avoid property price bubbles, it isalso clear that they are not trying to drive a collapse inprices. Even so, the “experts” cannot agree whether therewill be a sharp correction in housing/land values that couldsend shock waves throughout the economy or thegovernment will successfully negotiate a soft landing.

Nearly half of all local government revenue comes fromselling state-owned land to private property developers.Furthermore, the central government depends on realestate development to fuel economic growth – theproperty sector affects dozens of related industries and thehealth of the real estate sector is critical to the overallhealth of the Chinese economy. Recent figures released bythe Ministry of Land and Resources showed that thegovernment netted 1.6 trillion yuan ($234 billion) fromselling approximately 1,200 square miles of land (nearlythree times Hong Kong’s land mass) in 2009. Thisrepresented 40 percent of the nation’s recent stimuluspackage. The government’s efforts to cool the market may

risk cutting into one of its main sources of revenue for theprovinces. Curtailing economic growth could result inmassive unemployment, which could lead to socialinstability. On the other hand, failing to curtail increases inhousing prices and investor speculation creates the riskthat average homebuyers will be priced out of the market,which could also lead to social instability. Clearly theChinese government will be conducting a balancing act in2010 and nobody is in a position to accurately predict theoutcome – especially Fund Management.

HONG KONG

Hong Kong has a population of about 7 million peopleliving in total land mass of approximately 426 square miles(much of which is undevelopable due to the mountainousterrain). For comparison, New York City has a populationof about 8.5 million people in a total land mass of 305square miles. Hong Kong became a “special administrativeregion” of China in 1997 after Great Britain’s 99-year leaseexpired and sovereignty was transferred to China with thestipulation that Hong Kong would retain its laws and ahigh degree of autonomy for at least 50 years after thetransfer. Hong Kong runs its own capitalistic economicand political system that is different than China. HongKong is responsible for its domestic affairs, including, butnot limited to, the judiciary, immigration and customs,public finance and currency.

Hong Kong is one of the world’s leading financial centers,with one of the world’s greatest concentrations of corporateheadquarters in the Asia-Pacific region. The Hong Kongstock exchange is one of the largest in the world – in 2009it had the largest volume of initial public offerings of anymajor stock exchange. Hong Kong’s currency is the HongKong dollar, which has been pegged to the U.S. dollar since1983. Hong Kong’s capitalistic (market driven) economy,rule of law, location (proximity to southern China),climate, educational institutions, public transportation,cosmopolitan culture and large English-speaking populationmake it a highly desirable location for internationalbusinesses to operate and find a deep talent pool.

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Hong Kong’s economy has had its share of booms and busts,and was greatly impacted by the Asian financial crisis in1998 and the SARS outbreak in 2003. However, the recentglobal financial crisis has had far less negative impact onHong Kong’s economy than on most Western economies.Furthermore, the Hong Kong economy has turned aroundquickly – in large part benefiting from the massive fiscalstimulus from mainland China and the extraordinarymonetary easing measures imported from the U.S. FederalReserve. However, mortgage lending standards in HongKong are very stringent – with average loan-to-value ratiosof 62% – and about 25% of residential purchases are madewith no debt. Compared to previous loose lending practicesof Western banks that led up to the financial crisis, it is hardto imagine Hong Kong suffering the same fate.

As in mainland China, experts can’t agree whether or notthere is a bubble forming in Hong Kong. Hong Kongauthorities have become concerned about rising assetprices; however, the dynamics that might cause a propertybubble in mainland China (e.g., massive economicstimulus programs designed to urbanize the populationand create consumer demand) are not causes for concernin Hong Kong. On the contrary, Hong Kong is alreadyone of the most urbanized areas in Asia and it has anextremely limited land supply to support residentialdevelopment. The majority of new land supply forresidential development is in the New Territories, outsidethe urban center. The volume of government land auctionshas been steadily declining over the past decade, creating asevere lack of supply for new construction. Demand forhomes, especially luxury homes – generally defined asthose costing at least HK$10 million ($1.28 million) –continues to be very strong, despite the 29% increase inhome prices in 2009. Foreign citizens have become anincreasing part of Hong Kong’s permanent population, asHong Kong’s robust economy and transparent legal andproperty rights system continue to attract businesses andtalent from other developed countries. Additionally,affluent mainland Chinese families can diversify their

wealth and gain access to Hong Kong’s educational systemby purchasing luxury homes.

Nearly all of the discussions about property bubbles (inChina and/or Hong Kong) are centered on theresidential/housing markets. The Fund owns commonstocks in seven Hong Kong real estate operatingcompanies which, collectively, have over 77% of theirassets invested in commercial properties (e.g., retail andoffice). The Hong Kong office sector suffered from highervacancy rates and declining market rents during the globalfinancial crisis, but banking, financial services andmultinational companies are all reporting expectations ofrecruiting more staff – a strong indication that office rentalrates will be increasing and vacancy rates will tighten. Thefact that there will be very little new supply of Class Aoffice buildings for the next few years bodes well for officelandlords. Hong Kong retail properties have benefitedfrom the rebound in tourist arrivals from the mainland,improvement in the labor markets and overall positiveconsumer sentiment.

THE BOTTOM LINE

The Fund has approximately 20% of its net assets investedin the common stocks of extremely well-financed HongKong real estate operating companies. Each has a long trackrecord as a publicly-traded company with talentedmanagement teams that have been through numerouscycles. Each company has navigated the recent financialcrisis by remaining conservatively financed and disciplinedabout making investments in land and new developments.Since 2006, two dozen mainland Chinese developmentcompanies have completed initial public offerings withshares listed on the Hong Kong stock exchange. The Fundhas not invested in any of these “Johnny-come-lately”developers for several reasons including, but not limited to,their lack of public track records, unproven managementteams, high price-to-book, high debt levels and lack ofdiscipline when bidding in land auctions. FundManagement believes that the Fund is extremely well

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positioned to take advantage of long-term growth in Asia,and importantly, notwithstanding the potential for cyclicalbooms and busts, with a very low probability of permanentimpairments.

I look forward to writing to you again, when we publish ourShareholder Letter for the quarter ending April 30, 2010.

Sincerely,

Michael H. WinerPortfolio Manager, Third Avenue Real Estate Value Fund

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Dear Fellow Shareholders:

At January 31, 2010, the unaudited net asset valueattributable to the 93,948,341 shares outstanding of theThird Avenue International Value Fund (the “Fund”) was$14.93 per share, for both the Institutional and Investorshare classes. This compares with the Fund’s audited netasset value at October 31, 2009 of $15.00 per share, and anunaudited net asset value of $10.59 per share at January 31,2009, both adjusted for a subsequent distribution toshareholders of the Institutional share class. At February 16,2010, the unaudited net asset value was $15.05 per shareand $15.06 per share for the Institutional and Investorshare classes, respectively.

QUARTERLY ACTIVITY

In the most recent quarter of operations, the Fundestablished new positions in three securities, added topositions in the common stocks of ten companies,eliminated one position and reduced the position in oneholding.

Principal Amount or Number of Shares New Positions Acquired

278,270 shares Alma Media Corp. Common Stock(“Alma Common”)

411,052 shares Cenovus Energy, Inc. Common Stock(“Cenovus Common”)

$2,401,000 WBL Corporation Limited 2.5% Convertible Bonds due June 2014 (“WBL Converts”)

Number of Shares Increases in Existing Positions

54,261 shares Andritz AG Common Stock (“Andritz Common”)

125,500 shares Asatsu-DK, Inc. Common Stock(“Asatsu Common”)

346,860 shares EnCana Corporation Common Stock(“EnCana Common”)

163,000 shares Mitsui Fudosan Co., Ltd. CommonStock (“Mitsui Fudosan Common”)

238,992 shares Montpelier Re Holdings Ltd.(“Montpelier Re Common”)

11,772,710 shares Resolution Limited Common Stock(“Resolution Common”)

81,852 shares Sampo Oyj - A shares (“Sampo Common”)

227,100 shares Tokio Marine Holdings, Inc. Common Stock (“Tokio Marine Common”)

5,643,000 shares WBL Corporation Limited Common Stock (“WBL Common”)

107,917 shares Weyerhaeuser Company Common Stock(“Weyerhaeuser Common”)

Third Avenue International Value Fund

AMIT B. WADHWANEY

PORTFOLIO MANAGER OF THIRD

AVENUE INTERNATIONAL VALUE FUND

* 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 January 31, 2010: WBL Corp., Ltd., 9.01%;Viterra, 5.71%; Netia S.A., 5.56%; Yuanta Financial Holding Co., Ltd., 3.09%; United Microelectronics Corp., 3.04%; BritInsurance Holdings PLC, 2.83%; Sanofi-Aventis SA, 2.73%; ; Compagnie Nationale A Portefeuille, 2.72%; Guoco Group, Ltd.,2.67%; and Sampo Oyj, 2.66%.

23

Number of Shares Position Eliminated

95,915,023 shares GuocoLeisure Limited Common Stock(“GuocoLeisure Common”)

Position Reduced

1,191,000 shares Viterra, Inc. Common Stock (“Viterra Common”)

REVIEW OF QUARTERLY ACTIVITY

During the quarter ended January 31, 2010, FundManagement added a new position to the Fund, aninvestment in the common shares of Alma Media Corp.(“Alma”), a Finnish print and online media company. Almapublishes national and regional newspapers in Finland, awell-respected national business newspaper, and also offersonline versions of its print publications. Unrelated toAlma’s print publications are several highly successfulcommercial websites which the company also operates.

For a period of years, Fund Management has beenfollowing, with interest, transformational challenges whichhave been presenting themselves to most global mediacompanies. In addition to the well-documented challengeswhich have confronted the industry in relation to shifts inthe forms and ways in which media is consumed (e.g.,print versus digital), more recently a particularly severecyclical downturn has compounded these difficultiesfacing media companies. To the benefit of Alma, itsmanagement and board were early to recognizetechnological threats to the company’s traditional printmedia business, and began building a separate commercialonline operation addressing the areas of greatestvulnerability, specifically classified advertising (i.e., realestate, automotive and employment advertisements).Meanwhile, the valuation assigned to Alma in publicmarkets, at the time of the Fund’s purchase, appeared toattach a perception of permanence to the currentdepressed level of advertising spending.

In addition to its inexpensive valuation, attractions to Almainclude a profitable and rapidly growing online mediabusiness and a print publications business which, unlike

many global peers, remains impressively profitable (i.e.,operating margins in the high-teens). Added appeal on theprint side of Alma’s business is its minimal capitalexpenditure requirements, which allow for an unusuallyhigh conversion of profit into unencumbered cash flow.Also uncommon for a company of Alma’s type is its pristinebalance sheet, which enables cash profits to be used foropportunistic acquisitions on occasion, though they aremore commonly used to fund distributions to shareholders.

Lastly, the Finnish media sector has for decades undergonevarious waves of consolidation. Alma, in several ways,appears to represent a likely lynchpin in what may be thelast significant wave of Finnish media sector consolidation.

Also during the quarter, a previously announced resourceconversion event involving one of the Fund’s holdings,EnCana Corp. (“EnCana”), was completed, resulting in anaddition to the Fund, Cenovus Energy Inc. (“Cenovus”),albeit a new position in name only. EnCana completed itspreviously announced plans to split the pre-existingcompany into two highly focused energy companies byspinning off Cenovus, an integrated oil company, fromEnCana, the latter of which, going forward, will consistprimarily of natural gas-related assets. The transaction wasdesigned to enhance long-term value for shareholders bycreating two sustainable, independent, publicly-tradedcompanies, each with an ability to employ operationalstrategies best suited to its unique assets and business plans.

The only position eliminated by the Fund during thisquarter was GuocoLeisure Common. During the period inwhich the Fund has owned GuocoLeisure Common(originally purchased when it was named BILInternational Ltd.), a significant shareholding in thiscompany has been accumulated by Guoco Group Ltd.(“Guoco”), another of the Fund’s long-term holdings. Thishas a major implication from the Fund’s perspective.Initially, what were two different standalone investmentswith independent risk factors affecting their fortunes, havenow effectively become one, representing meaningful riskaggregation on the part of the Fund. In light of the fact

24

that Guoco, with considerable on-balance sheet liquidity,is a far better capitalized entity relative to GuocoLeisure,we chose to retain our shares of Guoco in preference to thelatter.

CHINA BUBBLE?

We suspect that over the past few months, even the mostvoracious consumers of financial and economic media havebeen satiated (perhaps even inundated) by the sheerquantity of viewpoints and predictions, made from allangles, on the question of whetherChina is yet another bubblewaiting to burst, or if its fast-growing economy will insteadcontinue to move along at a briskpace, short-term speed bumpsnotwithstanding. Much ink hasbeen spilt inveighing about apotential “bubble” in Chineseasset valuations, and about theimpact that the deflation of theseasset values will inevitably have onthe banking system in the nation,and ultimately on securities prices.

As an investor in securitiesworldwide, there are inevitablylinkages that a number of theFund’s holdings have to events andeconomic developments in China.For now, we will opt to leave it tothe prognosticators to look into their crystal balls andapprise us of whatever they see awaiting the Chineseeconomy and financial markets in the near term. We do notspend much time predicting short-term, macroeconomicvariables, as such forecasts have, we believe, proventroublingly inaccurate more times than not over the courseof history. We do, however, spend a significant amount ofour time considering, on a bottom-up basis, the potentialrisks facing both the Fund’s holdings on a security-specificlevel, as well as the Fund’s portfolio as a whole. And while

there is undoubtedly a meaningful amount of uncertaintyand debate as it relates to the current status of the Chineseeconomy and the effects that any dramatic shifts mighthave upon global markets, we take comfort in the way inwhich the Fund has been constructed, and the formsthrough which the Fund has invested in and is currentlyexposed to China.

Our comfort is a function of the consistency with which wehave applied our bottom-up investment philosophy to theFund’s current sources of exposure to China. To wit, any and

all exposure to the Chineseeconomy which currently can befound in the Fund is a result of ourindividual security selection basedupon the following criteria, amongothers: strong financial positionsthat protect our holdings from anyreliance upon recurring access tocapital markets, which arenotoriously fickle; strongmanagement teams with impressivetrack records of generating growthin shareholder wealth over the longterm; and attractive valuations (i.e.,meaningful discounts to ourconservative estimates of net assetvalue), which we believe aredifficult to find along the morefashionable, well-trodden pathstaken by many investors seeking to

invest in China. Also, as we have noted in the past, thevaluations at which the Fund is willing to invest in acompany are based only upon our view of the here andnow, rather than upon any optimistic expectations offuture prosperity. We believe that investing in securitieswhich are extremely well financed, well managed, and arepriced cheaply on an as-is basis, positions the Fund tobenefit if said great expectations were to actuallymaterialize, while protecting the Fund on the downside ifsuch predictions prove to be overly optimistic.

“And while there is undoubtedlya meaningful amount of

uncertainty and debate as itrelates to the current status ofthe Chinese economy and the

effects that any dramatic shiftsmight have upon the world

markets, we take considerablecomfort in the way in which the

Fund has been constructed, and the forms through which

the Fund has invested in and iscurrently exposed to China.”

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As noted earlier, many of the Fund’s holdings arepositioned to benefit over the long term from continuedgrowth in the Chinese economy. However, while theeventuation of an optimistic scenario in the region wouldlikely provide meaningful upside to these holdings, it isimportant to note that we have not paid up for anypresupposed growth. To the contrary, we have invested incompanies valued cheaply based on today, and which arefortified by strong balance sheets and proven managementteams. A related point is that we believe a significantportion of the Fund’s “exposure” to China could becharacterized more in the form of “option value” whichcould potentially be realized in the future, rather thanexisting value which supports our core investment thesis.In other words, while some of the Fund’s holdings arepositioned to benefit from continued growth in China, nosuch expectations are embedded into our estimates of theircurrent, respective intrinsic values. The following examplesof some Fund holdings will hopefully better illustrate thesepoints.

We have recently written about Graz, Austria-basedAndritz AG, a designer and manufacturer of industrialmachinery used in the production of pulp, hydropower,steel, etc. Andritz would in all likelihood benefitsubstantially if the Chinese economy were to continue togrow briskly for the foreseeable future. For example,Chinese citizens still consume only a small fraction (i.e.,less than 25%) of the amount of paper – as measured bypaper consumption per capita – which is consumed bytheir North American and Western Europeancounterparts. Should China’s economy continue to growrapidly, the concurrent improvement in living standardswould likely result in an increase in Chinese demand forproducts such as tissue and office paper, which in turnwould result in an increase in demand for Andritz’s partsand machinery used in the production of pulp.Additionally, as a significant supplier of downstream steelprocessing equipment in China, Andritz would likelybenefit from continued growth in the nation’s industrialproduction. However with all of that said, it is important

to note that we believe that Andritz offers a compellinginvestment opportunity even in the event that theaforementioned upside potential in China fails tomaterialize. The company’s financial position, withroughly A630 million in net cash, is very strong, andprovides a cushion with which to absorb short-termweakness in demand. Andritz’s management team has anexcellent long-term (i.e., over 10-year) track record ofcreating value by operational discipline as well as throughsmart acquisitions at bargain prices, and CEO WolfgangLeitner owns about 29% of the company, thereby aligningmanagement’s interests with those of the Fund. Also,Andritz’s long-term growth opportunities are not solelyconfined to China alone. For example, the companyshould benefit from long-term trends such as growingdemand for renewable sources of energy, includinghydropower and biomass power generation, two areas forwhich Andritz is a leading supplier of equipment andmachinery. Finally, the Fund did not pay up for any of theaforementioned upside as it relates to the prospects ofcontinued Chinese growth; on the contrary, shares ofAndritz were purchased at a meaningful discount to ourestimate of net asset value, and at a mid single-digitmultiple of operating profit, while attributing zero value tothe company’s growth opportunities or the proven abilityof its excellent management team to create value throughresource conversion.

Antarchile S.A. is a Chilean holding company whoseprincipal holdings include a stake in Empresas Copec S.A.(“Copec”), an industrial conglomerate involved in severalbusinesses, including pulp, paper and wood productsmanufacturing. The fortunes of this part of Copec’sbusiness are linked to some degree to Chinese demand forpulp, paper and wood products. Given a relative lack offiber resources located within China, continued growth inthe Chinese economy would provide upside for Copec inthe form of continued growth in demand for thecompany’s pulp and forest products. However, this“optionality” notwithstanding, the as-is value of Copec,and Antarchile by extension, is neither inextricably linked

26

to, nor dependent upon an extrapolation of recent growthtrends in China into the future. China is but one of severalkey end markets for Copec’s wood products, and Copecalso operates a domestic fuel distribution business acrossChile which is highly profitable and cash generative.Additionally, unlike many companies with exposure toChina, Antarchile’s valuation was, in our view, quitecompelling on an as-is basis; at the time of purchase, themarket capitalization of Antarchile was exceeded by thevalue of its stake in Copec alone. The Fund was thereforeable to acquire a number of Antarchile’s other businessesfor free, including a stake in Colbun, Chile’s largesthydropower utility, as well as a number of fisheriesbusinesses. As in the case of Andritz, Antarchile also has astrong balance sheet and is run by what we believe is a verystrong management team. This is another well-financed,well-managed Fund holding which would benefit fromcontinued growth in China, but whose attractive valuationis not dependent on the realization of “blue sky”expectations for China.

Guoco Group Limited (“Guoco”) is a Hong Kong-basedholding company whose principal exposure to China canbe found in its interest in Guocoland Limited, aSingapore-based property developer with projects in Chinaas well as Singapore, Malaysia, and Vietnam. While thepossibility of continued rapid growth in China providesmeaningful upside potential for the Fund’s investment inGuoco, this asset rich company has interests in a numberof other areas, including Malaysian financial services(through Hong Leong Financial Group Bhd) and U.K.hotels (through GuocoLeisure). We believe that inaddition to developments within investee companies (e.g.,real estate development within and outside China andgrowth of financial service offerings), Guoco has furtheropportunities to grow its net asset value at the holdingcompany level through timely asset dispositions and theopportunistic deployment of its considerable liquidresources. Guoco has a strong financial position as a resultof past asset sales, and its valuation is attractive at a

discount to net asset value, an estimate which does not relyupon optimistic assumptions of future growth.

The fortunes of Hutchison Whampoa, Ltd., a HongKong-based holding company with investments andoperations worldwide, are linked to conditions in theChinese economy in a number of ways. The companyowns one of the largest container port operations in theworld, with a significant proportion of these assets locatedin China. Other mainland Chinese assets, either helddirectly or indirectly, include interests in infrastructure andreal estate development properties. While HutchisonWhampoa would certainly benefit from continued growthin China in the short term, we believe the company has anumber of attractive attributes which position thecompany to perform well over the long term, short-termeconomic volatility (in China and elsewhere)notwithstanding. Hutchison Whampoa has a strongbalance sheet, and its management team, led by Li Ka-Shing has periodically used its cash as a war chest duringindustry downturns to purchase assets being sold by peerswith weaker balance sheets. Conversely, the company’sfinancial statements have frequently included significant,exceptional gains generated by timely asset sales, whichhave contributed meaningfully to a solid long-term trackrecord of growth in net asset value per share. Finally, theFund’s shares of Hutchison were purchased at prices whichwe believe reflect a meaningful discount to net asset value,and which attribute minimal to no value to the company’ssizeable 3G telecommunications assets.

Leucadia National Corp. (“Leucadia”) is a U.S.-listedholding company. Its portfolio, which consists of variousinvestments in the U.S. and elsewhere, includes equity androyalty interests in a large-scale Australian iron ore miningoperation, investments which would clearly havesubstantial upside in the event of continued, strongChinese demand for iron ore. However, there are anumber of attractive attributes independent of its exposureto China, which we believe make the Fund’s investment inLeucadia a compelling one. Historically, Leucadia’s stock

27

has rarely been cheap. However, in early 2009 generalmarket conditions as well as the reaction to mark-to-market write-downs of some of its listed investments (aswell as deferred tax assets) brought Leucadia’s price downto unusually attractive levels. That Leucadia’s stock price israrely inexpensive is perhaps due primarily to thecompany’s outstanding long-term investing track record;under Ian Cumming and Joe Steinberg, Leucadia hascompounded its net asset value nearly 20% per year onaverage, over nearly 30 years. Leucadia also has asignificant amount of potential tax assets which couldshield possible future realized investment gains from taxes.Additionally, Leucadia historically has invested via uniquesecurities at different levels of the investee company capitalstructure, while often obtaining elements of control. Whilethe Fund gained partial exposure to China throughLeucadia, it has done so through a management team withan exceptional long-term track record of creating valuethrough methods not typically available to the averageinvestor, and at a price made possible by short-timeuncertainty, despite the company’s outstanding long-termperformance.

WBL Corporation Limited (“WBL”) is a Singapore-listed holding company. WBL has significant urbanresidential real estate investments in China, in variousstages of development, which would likely benefit fromstrong economic performance from the Chinese economy.However, a significant proportion of WBL’s asset valueconsists of other investments, including majority stakes intwo publicly-listed flexible printed circuit businesses, MFSTechnology Ltd. and Multi-Fineline Electronix Inc.,which are listed on the Singapore Stock Exchange and theNASDAQ, respectively. In addition to these twoconservatively financed holdings, WBL owns a collectionof other, disparate assets from which the company couldpotentially unlock significant value through resourceconversion events. For example, WBL owns an automotiveretailing business, from which it recently generatedconsiderable gains through the sale of certain propertyassets associated with the business. We believe that further

value could potentially be unlocked from many of thecompany’s assets in a similar manner. Also, it is worthnoting that WBL’s current real estate assets in China are notthe result of speculative purchases of land in recent years;on the contrary, most of WBL’s land was obtained at a lowcost. Furthermore, we believe the current value of WBL’sChinese real estate portfolio, as implied by its currentmarket capitalization, is quite inexpensive as compared tothe market value ascribed to publicly-listed peers whichown comparable assets. Finally, WBL shares have beenpurchased in the Fund at a significant discount to what webelieve is a conservative estimate of net asset value.

Yuanta Financial Holding Co., Ltd. (“Yuanta”) is aTaiwanese holding company which, through its subsidiaries,provides securities brokerage as well as commercial bankingservices. Improving relations between Taiwan and Chinahave provided Yuanta with significant potential upside, inthat the company has invested in and is prepared tocommence brokerage operations within mainland China,pending the required approvals. Comparable local Chinesebrokerage companies currently trade at far richer valuationsthan Yuanta does, despite lacking the global distributionthat Yuanta possesses. However, while this opportunityprovides a significant amount of potential upside forYuanta, the investment remains an interesting andattractive one even if the possibility of Chinese operationsfails to materialize. Yuanta remains a high-quality, well-capitalized business, which was valued at what we believewas a very attractive price at the time of purchase.

As noted earlier, we do not spend much time attemptingto predict the direction in which the Chinese economyand/or Chinese asset values will head in the short term.But what we have tried to illustrate with the examplesabove is that, while the Fund has meaningful linkages toChina and has considerable upside potential linked to itscontinued growth over the long term, we believe that theFund’s Chinese exposure is limited to investments in well-financed, well-managed companies that are priced muchmore attractively than are many of the more direct,popular and fashionable alternatives offering such

28

exposure. By focusing on bottom-up fundamentals andsticking to strict financial strength and valuation criteria,we believe that the Fund’s exposure to China has beenobtained with a focus on minimizing risk (i.e., in terms ofpermanent impairments of capital) and on investing onlyat discounts to our estimate of intrinsic value, withouthanging our hats upon any forecasts or extrapolation offuture growth. Based on these attributes, we believe thatwhatever stock market and asset value volatility may beexperienced in the short term, the Fund is well positionedover the long term to generate satisfactory returns whilelimiting investment risk.

GEOGRAPHICAL DISTRIBUTION OF INVESTMENTS

At the end of January 2010, the geographical distributionof equity securities held by the Fund was as follows:

Percentof Fund______

Canada 10.61%Japan 10.10%Singapore 9.96%Taiwan 6.12%United Kingdom 5.74%Poland 5.56%Hong Kong 5.29%United States 5.10%Germany 4.97%Finland 2.86%New Zealand 2.81%France 2.73%Belgium 2.72%Chile 2.21%South Korea 2.10%Austria 1.73%Bermuda 1.68%Sweden 1.13%Denmark 0.89%______Equities-total 84.31%Cash and Short-term Investments 15.23%Other (including currency hedges) 0.46%______Total 100.00%____________

Portfolio holdings are subject to change without notice.

Note that the preceding table should be viewed as an ex-post listing of where our investments reside, period. As wehave noted in prior letters, there is no attempt to allocatethe portfolio assets among countries (or sectors) basedupon an overarching macroeconomic view or index-related considerations.

I look forward to writing to you again when we publish ournext quarterly report for the period ended April 30, 2010.

Sincerely,

Amit WadhwaneyPortfolio Manager,Third Avenue International Value Fund

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Third Avenue Focused Credit Fund

JEFF GARYPORTFOLIO MANAGER OF THIRD AVENUE

FOCUSED CREDIT FUND

Dear Fellow Shareholders:

Thank you once again for your continued support andinvestment in the Third Avenue Focused Credit Fund (the“Fund”). The entire team at Third Avenue has been workingdiligently on your behalf to find the credit investments thatwe believe offer the best risk-adjusted return potential.

We remained very active during the most recent quarter.Fund assets grew from approximately $280 million to$545 million primarily from continued inflows. Theinvestment of these inflows, combined with a netreduction in the Fund’s cash balance, resulted in netpurchases of more than $250 million during the quarter.We can assure you that we maintained our extremelythorough research and disciplined investment processwhile adding to existing holdings and identifying newinvestment opportunities.

OVERVIEW OF PERFORMANCE AND THE CREDIT MARKETS

Net returns for the Fund were 4.4% for the three monthsended January 31, 2010, compared with the gross returns

for the Barclay’s High Yield Index of 5.7% and the CSFBLeveraged Loan index of 4.8%. This underperformancewas primarily due to a combination of the Blockbuster(“BBI”) position, the impact of strong inflows and highercash balances, as well as limited exposure to the high riskFinance credits that posted strong returns.

Blockbuster pre-announced disappointing fourth quarterresults and management changes in January. We increasedour position in the 11.75% first lien senior secured bonds,which are secured by all the assets of the company. Thesebonds require that 15% of our bonds are repaid each year ata price of 106% of par. While we fully recognize the secularheadwinds facing this business, we believe our downsidefrom current prices is manageable based on hard asset values,which includes $200 million in cash (approximately 30% ofour bond’s face value). This new bond was issued by BBI torefinance the first lien loan which we owned in the Fundand were taken out of at a gain.

Market returns continued to be very strong throughoutthe past quarter. Since the Fund nearly doubled in size overthis period, cash inflows, in a rising market, placed a slightdrag on performance. Now that the Fund’s assets undermanagement are in excess of $500 million, this should beless of an issue going forward. The Fund’s cash position hasdecreased from 28%, as of October 31, 2009, to 17.1%,as of January 31, 2010. The market softened slightly inDecember, as some investors locked in gains for 2009, andwe took advantage of the opportunity to initiate severalnew positions as well as increase select existing positions ator below our target prices.

Market returns were led by CCC-rated issues whichreturned nearly two times the index return in the most

* Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Focused Credit Fund’s 10largest issuers and the percentage of the total net assets each represented, as of January 31, 2010: Swift Transportation, 4.2%;Energy XXI Gulf Coast, Inc., 3.8%; CIT Group, Inc., 3.0%; TXU Corp., 2.9%; Lyondell Chemical Co., 2.9%; Pinnacle FoodsFinance LLC, 2.8%; First Data Corp., 2.7%; FMG Finance Ltd., 2.7%; Georgia Gulf Corp., 2.5%; and Culligan InternationalCo., 2.3%. As a relatively new fund, listing all portfolio transactions would be quite voluminous. Third Avenue Focused CreditFund’s holdings, as of January 31, 2010, are included in our First Quarter Report.

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recent quarter. This included a number of higher-riskFinance company bonds. The Finance sector had thehighest return in the high-yield index for the quarter, witha return of 9.25%. For many of the Finance sector bondsthat performed well, Fund Management determined therewas not adequate information or transparency available onspecific companies to be able to obtain a high enoughconviction level that there would be minimal downsiderisk. These bonds included AIG, ILFC, Rescap, Aiful,Takefuji, as well as several hybrid/perpetual preferredstocks of U.S. and European banks.

On the positive side of the ledger, the portfolio benefittedfrom solid performance on its largest sector weighting inEnergy, including the securities of Energy XXI, Connacher,Compton, Antero and Trico. Other investments thatperformed well included CIT, Lyondell, SwiftTransportation, Marsico, PREIT and Capmark. The Fundalso benefitted from having nearly no exposure to severalindustries that underperformed the market includingCable, Wireline, Housing, Technology and variousConsumer sectors.

The credit market started off very strong in the first twoweeks of January with returns in excess of 2%. The recenthighs peaked in mid-January, coinciding with the peak inthe equity markets. We took advantage of this opportunityto be slightly contrarian and took profits in several positionswhere we believed the rising market prices eliminated thefavorable risk/reward profiles. The credit markets have beenhit recently by the same unpredictable factors and concernsthat have affected the equity markets and most risk assetclasses. These widely divergent factors include China takingsteps to curb its growth rates, the Greek sovereign debtsituation, as well as potential fallout from the Massachusettselection results. These types of uncertainty are neverfavorable for risk asset classes. Accordingly, we scaled downor sold positions that exceeded our target price.

We view this market pullback, which has continued intoFebruary, as constructive and a good opportunity for us asinvestors. As we have said in the past, “Trees don’t grow tothe sky” and this is especially true in the credit markets. Itseems that investors are finally paying attention to the

fundamentals and capital structure of specific companiessince the rally in the credit markets began in March 2009.In general, during this rally, the riskiest securities benefittedthe most. Returns on CCC-rated high-yield bondsexceeded 100% in 2009, despite the fact that many of thesecompanies have over-leveraged balance sheets and theircash flows from operations have declined meaningfully.

Risk appetites for these types of companies appear to bediminishing. Companies that report disappointingearnings or have uncertain outlooks have seen theirsecurity prices decline recently. This is the type of marketwe favor and believe we can excel in – it is what we call a“Credit Picker’s” market. We believe that investors shouldbe invested with a manager that focuses on credit selectionand carefully measures the upside potential versusdownside risk of each security, as opposed to investingwith a manager that just buys the riskiest securities inhopes that they will increase.

Many shareholders have asked us whether the run in highyield and credit is over given the strong returns in 2009.While we do not have a crystal ball to be able to predictfuture market returns (if I did, I would be living on myfavorite island in the Caribbean playing golf ), we arehappy to share our perspective. We admit that most of theeasy money has been made and there are various reasons tobe cautious in the near term, so we are not surprised to seea temporary pullback. That being said, there are a fewreasons to be cautiously optimistic especially over thelonger term. First, spreads on high-yield bonds andleveraged loans remain above their long-term historicalaverages. Second, investors are certainly not going to beable to rebuild their nest eggs solely by receiving 0% rateson their cash and money market accounts.

Third, we know from history that the best time to investin high yield and credit is from the time that default ratespeak until default rates start to increase again on ameaningful basis. This makes intuitive sense because thereason an investor gets a higher interest rate for a high-yield bond, compared to Treasuries, is to compensate forthe risk of default and potential loss of capital. We believe,along with a number of high-yield strategists and ratings

31

Rated Speculative-Grade Bank Credit Facilities and Bonds Maturing 2010-2014*

$0

$50

$100

$150

$200

$250

$300

$350

$400

In B

illio

ns o

f US

D

SG Bond SG Bank Total

$10 $11 $21$47 $45

$110

$155

$59

$153

$212

$104

$32

$79

$234

$338

2010 2011 2012 2013 2014

* Source: Moody’s Investors ServiceNote: SG = Speculative Grade, which encompasses high-yield bonds and leveraged loans

agencies, that default rates will decline to below 5% in2010. If the credit markets remain open and worldwideGDP is in line with forecasts, there is a better chance thatthe default rate will come in even lower.

We have two prior times in history to look at when defaultrates peaked above 10% – in 1990, after the Drexelbankruptcy, and in 2002. While history does notnecessarily repeat itself exactly, it does normally at leastrhyme. The following table shows returns for the high-yieldmarket (recall that the bank loan market did not really existuntil after 2002) following each of the prior two peaks indefault rates. Notice that in the first year after each peak indefault rates the returns were very high. This was followedby several years of positive returns for high yield, except for1994 due to the big increase in interest rates.

Returns for the Merrill Lynch High-Yield IndexYear Return Year Return______ _____ _____ _____

1991 39.2% 2003 28.1%1992 17.4% 2004 10.9%1993 16.7% 2005 2.7%1994 -1.0% 2006 11.8%1995 20.5% 2007 2.2%1996 11.3%1997 13.3%

However, the credit bubble can’t end that easily and weexpect that the default rate may average in the 4+% rangefor a number of years due to the excesses of the 2005-2007leveraged buy-out boom and the large amount of debtmaturities we still expect to face in the 2012-2014timeframe. During 2009, the record amount of high-yieldissuance (approximately $160 billion) was primarily usedto refinance existing debt. Many companies issued newbonds with longer maturity dates and repaid some or all oftheir bank debt, effectively pushing out the day ofreckoning until a later date. Despite all of theserefinancings, there is still $700 billion of outstanding debtin the high-yield and leveraged loan markets that willcome due between 2012 and 2014. We believe ourinvestment strategy and our ability to focus on creditselection to add alpha and outperform will benefit fromthese markets for many years into the future. This includescapital infusion deals with first-lien status.

By way of comparison to prior years, please refer to the table below, which shows the maturity schedule going back to2004. The size of the debt maturities over the next four years is clearly unprecedented.

32

2010-2014 Refunding Needs as Compared to Prior Years*

$0

$50

$100

$150

$200

$250

$300

$350

$400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

In B

illio

ns

of

US

D

2004 Study 2005 Study 2006 Study 2007 Study 2008 Study 2009 Study 2010 Study

* Source: Moody’s Investors Service

DISCUSSION OF SELECTED SPECIFIC CREDITSPURCHASED IN THE FUND

As mentioned earlier, there were a sizeable number ofpurchases during the quarter. Some of the larger purchasesacross several of our investment categories are discussedbelow.

STRESSED PERFORMING CREDITSSequa Corp – 11.75% and 13.0% Senior NotesSequa is one of the world’s largest independent suppliersof technologically advanced maintenance, repair andoverhaul (“MRO”) services, and FAA-approvedreplacement parts (“PMA”) for gas turbine airfoils andother critical engine components for airlines, military andindustrial turbine applications. As one of the onlyalternative suppliers to aeroengine original equipmentmanufacturers (“OEMs”), Sequa is viewed as a criticalplayer in the market by airlines. Sequa is owned by theCarlyle Group, a large private equity firm.

While OEM manufacturers are facing headwinds due tolower aircraft utilization levels and delays in aircraftdeliveries, we are more constructive on the MRO and

PMA segments because airlines that have thus far delayedmaintenance activities will soon be forced to service theirplanes.

We believe this credit will likely remain a performingcredit, but in the event of a reorganization, we believe thatour downside is limited. We would be happy to own oneof the leading companies in a highly regulated industrythat has significant barriers-to-entry.

Connacher 10.25% Second Lien Secured Notes due 12/15/15Connacher Oil and Gas Limited (“Connacher”) is aCalgary-based crude oil and natural gas exploration,production and refining company. Its principal asset is a100 percent interest in approximately 98,000 acres of OilSands leases near Fort McMurray, Alberta. It also ownsconventional oil and gas properties in Canada as well as a9,500 barrel per day heavy oil refinery located in GreatFalls, Montana.

Connacher faced liquidity challenges in 2009 due to thecollapse in oil and gas prices. It raised capital through afirst lien bond deal and an equity offering in mid-2009.The company needed this capital to restart and expand

33

production in its Oil Sands properties. Our in-depthanalysis revealed that the company should have enoughliquidity to fund its capital expenditure plan and that theasset coverage through our second lien secured notes ismore than adequate. Connacher was able to get its OilSands production back on line in a timely manner andcash flow from its operations, before the Oil Sandsexpansion project, should be able to provide adequateliquidity. We purchased these bonds in the upper 80’s pricerange and they are currently priced in the mid 90’s.

CAPITAL INFUSIONSLyondell Chemical – Roll-up Debtor-in-Possession (“DIP”) LoanLyondellBasell AF SCA (“Lyondell”) is a refiner of crudeoil, including heavy high-sulfur crude oil, a significantproducer of gasoline blending components, a globalmanufacturer of chemicals and plastics and a licensor oftechnology processes. Lyondell has four reportingsegments: fuels, chemicals, polymers and technology. OnJanuary 6, 2009, certain Lyondell U.S. subsidiaries filedfor Chapter 11.

We evaluated Lyondell as a potential investmentopportunity from several different perspectives. Thecompany had a debtor-in-possession (“DIP”) loan, asecond priority DIP loan, pre-petition bank debt, as well assecured and unsecured bonds that traded at different prices.Based upon our in-depth analysis, we determined that thebest risk-reward profile existed in the second priority DIPloan, which would receive a new secured loan upon exitfrom bankruptcy with an attractive interest rate and terms.All the pre-existing debt below this loan would beconverted into equity such that Lyondell would emergewith a balance sheet that had only a modest amount ofdebt. We believe that we can potentially achieve a mid teensrate of return on this investment with minimal downside.

We seriously considered the other securities, including thepre-petition bank loan, that ranked below the secondpriority DIP loan. These securities stand to receive themajority of the equity in the reorganized company. Therewere rumors that Reliance Industries, a large India-based

chemical company, may make a bid for part or all of thenew equity in Lyondell. Our analysis led us to believe that,at the current market prices, the upside potential to buyingthe pre-petition bank debt is about equal to the downsiderisk. We calculated the probability of the upside scenario tobe a slightly lower probability than the downside scenario.As a result, we passed on buying the pre-petition bank loanand focused our investment in the second priority DIPloan. Since the time of this investment, the second priorityDIP loan that we purchased has appreciated approximately5%, while the pre-petition bank debt has fallen by nearly10%. Hopefully this example illustrates the importancethat we place on evaluating the downside risk compared tothe upside potential.

Tronox – New DIP LoanDuring the quarter, through our extensive network, wewere invited to participate in a new DIP loan for Tronox,Inc. Tronox is the world’s third largest producer oftitanium dioxide (“TiO2”) products. It is the secondlargest producer of TiO2 manufactured via proprietarychloride technology which is preferred for many of thelargest end-use applications. TiO2 is used as a whiteningpigment with applications in the coatings, plastics, paper,and personal care products industries.

Tronox filed for bankruptcy protection on January 12,2009, after a two-year downturn in profitability andliquidity tied to the declining housing constructionindustry and rising raw material costs. The company hasmade substantial cost cuts and rationalized its productionfacilities since its bankruptcy filing. In the fourth quarterof 2009, Huntsman Corp. made a bid for the companyand an auction was slated. The unsecured bond holdersbelieved the bid for the company was far too low andwanted time to propose their own plan of reorganization,which included reaching a settlement with the EPA and aconversion of the company’s bonds into the vast majorityof the new equity. However, the existing DIP loan wasscheduled to mature and these lenders wanted to berepaid.

34

Consequently, we participated in the negotiation andfunding of a new $425 million DIP loan which was usedto take out the prior DIP loan and provide the unsecuredcreditors time to finalize their own plan of reorganization.As part of this process and a condition precedent to thefunding of this new DIP loan, Tronox had to finalize anagreement with the EPA, which they did. We purchasedthis DIP loan at a price of 96.5 and we received anattractive interest rate and terms. This DIP loan iscurrently trading in the 103 price range.

DISTRESSED PERFORMING CREDITSEnergy XXI 10.0% Senior Notes due 6/15/2013Energy XXI (“EXXI”) is an independent oil and naturalgas exploration and production company with operationsfocused in the U.S. Gulf Coast and the Gulf of Mexico.(This credit is also discussed in the Third Avenue Small-Cap Value Fund shareholders’ letter, which you can referto for additional information.)

Due to hurricanes which disrupted production in the Gulfof Mexico and the collapse in commodity prices, EXXI raninto liquidity issues. During the fourth quarter, EXXIattempted to do a debt exchange whereby it wouldexchange approximately 50% of its $625 million 10%Senior Notes for new 16% second lien secured notes at aprice of 80% of par. Additionally, EXXI planned to retirethe $125 million in 10% bonds the company hadpurchased to reduce its overall debt load.

Based on our proprietary research, we determined thatEXXI’s oil reserves more than covered the value of its debtat par and the 10% notes were trading in the low 80 dollarprice range. When we discussed the rationale for the debtexchange with management, they said there were two keyreasons. First, it would reduce slightly its overall debt.Second, they wanted to modify the “Change of Control”provision in the new 16% second lien notes so it would bedifferent than the 10% Notes. A “Change of Control”provision is standard in high-yield bonds and provides that

if a company is bought out by another company, then thebondholders can force the company to repurchase theirbonds at a price of 101% of par.

EXXI wanted the flexibility to be able to issue more than50% of their outstanding common stock in a newacquisition deal. This would have triggered a “Change ofControl” in the 10% notes. This led us to conclude thatmanagement wanted to do an acquisition funded withalmost all equity, in order to substantially reduce its ratioof debt to equity. If this happened it would positivelyimpact the bonds. We purchased the 10% senior notes andagreed to the debt exchange. Following the debt exchange,the combination of the new notes traded at a higher pricethan our cost basis.

In November 2009, EXXI announced that it waspurchasing interests in oil properties from Mitsui & Co.for $283 million. These are interests in oil fields that EXXIalready owns and operates. They were able to negotiate afavorable purchase price and will incur almost noadditional operating costs. EXXI then completed an equityand convertible bond offering to fund the entiretransaction.

EXXI owns interests in two deepwater exploration fieldsbeing drilled and operated by McMoran. Our analysisattributed no value to these fields, since there was nodiscovery yet but they were drilling the wells and hadincurred costs. In January, EXXI and McMoranannounced favorable findings for one of these wells. Thestock now has a market capitalization of $1 billion and the10% and 16% notes we own now trade at par and 115%of par, respectively.

35

PORTFOLIO COMPOSITION

The following is a summary of how the portfolio waspositioned at January 31, 2010.

PORTFOLIO SORTED BY SECURITY TYPE1/31/2010 10/31/2009

First Lien Secured Bonds 14% 11%

Second Lien Secured Bonds 13% 6%

Unsecured High-Yield Bonds 31% 32%

First Lien Secured Loans 25% 23%___ ___

Total Invested 83% 72%

Cash 17% 28%___ ___

Total Portfolio 100% 100%___ ______ ___

PORTFOLIO SORTED BY INVESTMENT CATEGORY1/31/2010 10/31/2009

Performing Bonds 37% 32%

Performing Loans 3% 4%

Stressed/Distressed PerformingCapital Infusions and Debt-for-equity 43% 36%___ ___

Total Invested 83% 72%

Cash 17% 28%___ ___

Total Portfolio 100% 100%___ ______ ___

FUTURE OPPORTUNITIESAs previously discussed, we believe there are plenty ofopportunities, both near term and longer term, for theFund to invest in and add value to the portfolio. Over thenext three months, we anticipate increasing ourinvestments in several of the areas we identify as“offensive”, including energy, metals, distressed and early-stage cyclical companies, as well as capital infusion deals.

Good Opportunities Exist for Distressed Investments Overthe Next Several YearsNotwithstanding that the high-yield market returned over50% and the lowest-rated CCC debt issuances returnedmore than 100% in 2009, we believe there are significantinvestment opportunities for the Fund on the horizon. Inparticular, we believe we are still in the middle innings fordistressed investment opportunities.

The strong high-yield markets have certainly enabled somelarger companies to temporarily delay the inevitabledefault, while giving others a chance to grow into theircapital structure. During 2009, more than $160 billion ofhigh-yield debt has been issued. As previously mentioned,this has predominately been used to repay existing shorter-dated bank and bond debt. As a result, the near-termmaturities of some companies have been pushed out.Nonetheless, we note that the net debt position has notimproved and, in fact, free cash flow has deteriorated dueto the relatively higher interest rates associated with thenew issuances. For some companies, this will provideenough time for their businesses to grow into their over-leveraged capital structures. However, for others it willsimply delay the liquidity event and need to restructure.The following chart highlights that high-yield defaultsoccur on average 3.8 years following the issuance of lowerrated debt. Although the leveraged loan market was in itsinfancy during the last distressed cycle, Fund Managementbelieves similar trends will exist. In fact, given the averageLBO multiple of 6.7 times during 2007, it seems verydifficult for many of these companies to “grow” out ofwhat can only be described as materially overpaying forbusinesses during the recent LBO boom.

Once again, we thank you for your confidence in the Fundand for your time in reading our letter. We look forward tocommunicating with you after the end of the next quarter.

Sincerely,

Jeff GaryPortfolio Manager,Third Avenue Focused Credit Fund

36

Rising Defaults Typically Lag Increases in Higher Risk New Issuance

0

10

20

30

40

50

60

70

80

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 YTD09

$ B

illio

nLower Rated New Issuance

Defaulted Debt

Avg. HY LBO Leverage

4.9x 5.0x 5.3x 6.5x 5.8x 5.5x 4.7x 4.8x 4.7x 5.2x 5.3x 5.8x 6.7x 6.5x --

Lower Rated New-Issue Volume vs. High-Yield Defaulted Debt

Source: JPMorgan; S&P/LCDNote: Lower rated issuance includes bonds rated Split B or lower

Third Avenue Value Fund

Third Avenue Small -Cap Value Fund

Third Avenue Real Estate Value Fund

Third Avenue International Value Fund

Third Avenue Focused Credit Fund

FIRST QUARTER REPORT

January 31, 2010

THIRD AVENUE FUNDS

Privacy Policy

Third Avenue Funds (the “Funds”) respect your right to privacy. We also know that you expect us to conduct and processyour business in an accurate and efficient manner. To do so, we must collect and maintain certain personal informationabout you. This is the information we collect from you on applications or other forms and from the transactions youmake with us, our affiliates, or third parties. We do not disclose any information about you or any of our former cus-tomers to anyone, except to our affiliates (which may include the Funds’ affiliated money management entities) and ser-vice providers, or as otherwise permitted by law. To protect your personal information, we permit access only by autho-rized employees. Be assured that we maintain physical, electronic and procedural safeguards that comply with federalstandards to guard your personal information.

Proxy Voting Policies and Procedures

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

Schedule of Portfolio Holdings—Form N-Q

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

Third Avenue TrustThird Avenue Value FundPortfolio of Investments

at January 31, 2010(Unaudited)

1

Corporate Debt Instruments - 4.81%Consumer Products - 0.27%

16,004,748 Home Products International, Inc., 2nd Lien, Convertible, PIK,6.000%, due 3/20/17 (b) $ 14,647,545

Financial Insurance - 3.31%362,167,000 MBIA Insurance Corp.,

14.000%, due 1/15/33 (d) (h) 179,272,665Financial Services - 0.44%CIT Group, Inc.:

2,725,546 7.000%, due 5/1/13 2,507,5024,088,319 7.000%, due 5/1/14 3,674,3774,088,319 7.000%, due 5/1/15 3,572,1696,813,866 7.000%, due 5/1/16 5,876,9599,539,412 7.000%, due 5/1/17 8,168,122

23,799,129Home Development - 0.35%Standard Pacific Corp.:

10,800,000 6.250%, due 4/1/14 9,612,00010,415,000 7.000%, due 8/15/15 9,321,425

18,933,425U.S. Real Estate Operating Companies - 0.44%Forest City Enterprises, Inc.:

20,778,000 7.625%, due 6/1/15 18,907,9805,826,000 6.500%, due 2/1/17 4,740,907

23,648,887Total Corporate Debt Instruments

(Cost $377,531,491) 260,301,651

Preferred Stocks - 0.01%Auto Supply - 0.00%

759,866 ISE Corp. Series B (a) (b) (c) $ —977,469 ISE Corp. Series C (a) (b) —

—Financial Insurance - 0.00%

6,045,667 CGA Group, Ltd. Series C (Bermuda) (a) (b) —

Insurance & Reinsurance - 0.01%4,775 Ecclesiastical Insurance,

8.625% (United Kingdom) 8,3771,022,245 RS Holdings Corp., Convertible,

Class A (a) (b) (c) 271,577279,954

Total Preferred Stocks(Cost $14,103,694) 279,954

Common Stocks - 89.82%Annuities & Mutual Fund Management & Sales - 3.23%

6,000,000 Bank of New York Mellon Corp. (The) 174,540,000

Auto Supply - 0.00%217,210 ISE Corp. (a) (b) (c) —

Automotive - 10.13%18,576,400 Toyota Industries Corp. (Japan) (c) 547,835,560

Consumer Products - 0.00%#526,368 Home Products International,

Inc. (a) (b) (c) 26,318Depository Institutions - 1.94%

218,500 Carver Bancorp, Inc. (c) 1,586,31017,528,450 Chong Hing Bank, Ltd. (Hong Kong) 31,607,40310,000,000 KeyCorp 71,800,000

104,993,713

See accompanying notes to the Portfolios of Investments.

Principal ValueAmount ($) Issues (Note 1)

ValueShares Issues (Note 1)

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue Value Fund

Portfolio of Investments (continued)at January 31, 2010

(Unaudited)

2

Common Stocks (continued)Diversified Operations - 8.17%

10,000,000 Brookfield Asset Management, Inc., Class A (Canada) $ 200,900,000

48,526,822 Wharf (Holdings), Ltd. (The) (Hong Kong) 241,260,612

442,160,612Electronics Components - 0.66%

3,004,556 AVX Corp. 35,694,125Financial Insurance - 0.61%

8,955,191 Ambac Financial Group, Inc. (a) 6,179,08237 Manifold Capital Holdings,

Inc. (a) (b) (c) (f) 555,0005,266,460 MBIA, Inc. (a) 25,963,648

32,697,730Financial Services - 0.14%

234,609 CIT Group, Inc. (a) 7,465,258Holding Companies - 22.55%

83,370 Capital Southwest Corp. 6,790,48653,819,000 Cheung Kong Holdings, Ltd.

(Hong Kong) 638,082,2843,951,800 Guoco Group, Ltd. (Hong Kong) 1 38,734,405

10,665,000 Investor AB, Class A (Sweden) 184,756,5562,200,000 Jardine Matheson Holdings, Ltd.

(Hong Kong) 1 66,000,000359,250 Pargesa Holding SA (Switzerland) 30,194,341

3,317,350 RHJ International (Belgium) (a) 27,367,08087,069,500 Wheelock & Co., Ltd. (Hong Kong) 227,656,135

1,219,581,287Home Development - 0.62%

1,000,000 MDC Holdings, Inc. 33,600,000

Industrial & Agricultural Equipment - 0.11%

360,100 Mestek, Inc. (a) $ 2,772,770311,119 Omega Flex, Inc. 3,294,750

6,067,520Insurance & Reinsurance - 0.00%#

127,500 Olympus Re Holdings, Ltd. (Bermuda) (a) (b) 211,250

32,089 RS Holdings Corp., Class A (a) (b) 8,525219,775

Manufactured Housing - 0.65%500 Fleetwood Homes, Inc. (a) (b) (c) 35,000,000

Mutual Holding Companies - 0.23%637,122 Brooklyn Federal Bancorp, Inc. 5,530,21950,920 Colonial Bankshares, Inc. (a) 386,483

490,036 FedFirst Financial Corp. (a) (c) 1,727,377205,511 Gouverneur Bancorp, Inc. (c) 1,592,710274,157 Home Federal Bancorp, Inc. (c) 2,316,627242,800 SFSB, Inc. (a) (c) 582,720

12,136,136Non-U.S. Real Estate Operating Companies - 17.33%

24,220,000 Hang Lung Group, Ltd. (Hong Kong) 109,184,11430,534,000 Hang Lung Properties, Ltd.

(Hong Kong) 104,218,986114,391,738 Henderson Land Development Co.,

Ltd. (Hong Kong) (c) 724,161,532937,564,632

Oil & Gas Production & Services - 7.16%

776,800 Cenovus Energy, Inc. (Canada) 17,982,9202,000,630 Cimarex Energy Co. 98,451,002

776,800 EnCana Corp. (Canada) 23,762,31211,090,000 Nabors Industries, Ltd. (Bermuda) (a) 247,307,000

387,503,234See accompanying notes to the Portfolios of Investments.

ValueShares Issues (Note 1)

ValueShares Issues (Note 1)

Third Avenue TrustThird Avenue Value Fund

Portfolio of Investments (continued)at January 31, 2010

(Unaudited)

3

Common Stocks (continued)Steel & Specialty Steel - 7.31%

3,500,000 POSCO, ADR (South Korea) $ 395,325,000Telecommunications - 1.16%

1,575,767 Sycamore Networks, Inc. (c) 30,554,1225,008,450 Tellabs, Inc. (a) 32,204,333

62,758,455U.S. Real Estate Operating Companies - 4.97%

18,975,821 FNC Realty Corp. (a) (b) (c) 8,311,41013,764,203 Forest City Enterprises, Inc.,

Class A (a) (c) 155,673,13622,500 Forest City Enterprises, Inc.,

Class B (a) 253,5753,420,106 Tejon Ranch Co. (a) (c) 104,689,445

268,927,566Utilities, Utility Service Companies & Waste Management - 2.85%

8,816,889 Covanta Holding Corp. (a) (c) 154,295,557Total Common Stocks

(Cost $4,371,162,744) 4,858,392,478

InvestmentAmount ($)

or PartnershipUnits

Limited Partnerships - 0.12%Infrastructure - 0.12%

400,000 Brookfield Infrastructure Partners L.P. 2 6,400,000

Insurance & Reinsurance - 0.00%#1,805,000 Insurance Partners II

Equity Fund, L.P. (a) (b) 229,040

Total Limited Partnerships(Cost $8,007,814) $ 6,629,040

Short Term Investments - 5.45%Repurchase Agreement - 1.75%

94,946,292 JPMorgan Securities, Inc., 0.01%, dated 1/29/10, due 2/1/10 (e) 94,946,292

U.S. Government Obligations - 3.70%

200,000,000 U.S. Treasury Bill, 0.06%‡, due 4/29/10 (g) 199,963,800

Total Short Term Investments(Cost $294,915,636) 294,910,092

Total Investment Portfolio - 100.21%(Cost $5,065,721,379) 5,420,513,215

Liabilities in excess ofOther Assets - (0.21%) (11,207,032)

NET ASSETS - 100.00% $5,409,306,183

Investor Class:Net assets applicable to 45,496

shares outstanding $ 1,975,002

Net asset value, offering and redemption price per share $43.41

Institutional Class:Net assets applicable to

124,577,581 shares outstanding $5,407,331,181

Net asset value, offering and redemption price per share $43.41

See accompanying notes to the Portfolios of Investments.

ValueShares Issues (Note 1)

Principal ValueAmount ($) Issues (Note 1)

Third Avenue TrustThird Avenue Value Fund

Portfolio of Investments (continued)at January 31, 2010

(Unaudited)

4

Notes:ADR: American Depository Receipt.PIK: Payment-in-kind.(a) Non-income producing security.(b) Fair-valued security.(c) Affiliated issuers—as defined under the Investment

Company Act of 1940 (ownership of 5% or more of theoutstanding voting securities of these issuers).

(d) Security is exempt from registration under Rule 144A ofthe Securities Act of 1933. This security may be resoldin transactions that are exempt from registration,normally to qualified institutional buyers.

(e) Repurchase agreement collateralized by U.S. TreasuryBond, par value $98,950,000, due 11/15/39, value$97,702,686.

(f) Security is subject to restrictions on resale.(g) A portion of this security is segregated for future fund

commitments.(h) Variable rate security.# Amount represents less than 0.01% of total net assets.‡ Annualized yield at date of purchase.1 Incorporated in Bermuda.2 Bermuda exempted limited partnership.

Country Concentration% of

Net Assets________Hong Kong 40.32%United States* 28.91Japan 10.13South Korea 7.31Bermuda 4.58Canada 4.48Sweden 3.41Switzerland 0.56Belgium 0.51United Kingdom 0.00#_______Total 100.21%______________

* Includes cash equivalents.

See accompanying notes to the Portfolios of Investments.

5

See accompanying notes to the Portfolios of Investments.

Principal ValueAmount ($) Issues (Note 1)

Shares Valueor Units Issues (Note 1)

Third Avenue TrustThird Avenue Small-Cap Value Fund

Portfolio of Investmentsat January 31, 2010

(Unaudited)

Corporate Debt Instruments - 5.75%Financial Insurance - 1.59%

38,500,000 MBIA Insurance Corp., 14.000%, due 1/15/33 (f) (g) $ 19,057,500

Oil & Gas - 2.09%15,000,000 Energy XXI Gulf Coast, Inc.,

10.000%, due 6/15/13 15,000,00010,475,000 W & T Offshore, Inc., 8.250%,

due 6/15/14 (f) 10,108,37525,108,375

Transportation - 2.07%25,852,895 Swift Transportation Co., Inc.,

Term Loan B, 6.250%, due 5/10/14 (g) 24,874,182

Total Corporate Debt Instruments(Cost $69,344,120) 69,040,057

U.S. Government Obligations - 0.98%U.S. Treasury Inflation Indexed Notes - 0.98%

10,000,000 U.S. Treasury Inflation Indexed Notes, 2.000%-2.125%, due 1/15/14-1/15/19 11,699,281

Total U.S. Government Obligations(Cost $10,914,874) 11,699,281

Sharesor Units

Common Stocks - 80.30%Aerospace & Defense - 0.15%

150,380 Herley Industries, Inc. (a) 1,840,651Agriculture - 4.00%

5,384,187 Viterra, Inc. (Canada) (a) 47,988,125

Chemicals & Allied Products - 4.47%

1,194,682 Lanxess AG (Germany) $ 45,526,919396,931 Westlake Chemical Corp. 8,148,993

53,675,912Computer Peripherals - 1.33%

707,309 Imation Corp. (a) 6,323,342374,753 Lexmark International, Inc.,

Class A (a) 9,664,88015,988,222

Consumer Products - 2.12%1,171,771 JAKKS Pacific, Inc. (a) 12,889,4811,379,185 K-Swiss, Inc., Class A (a) (c) 12,523,000

25,412,481Electronics Components - 3.78%

741,242 Bel Fuse, Inc., Class B (c) 14,061,361847,936 Electronics for Imaging, Inc. (a) 9,827,578820,175 Park Electrochemical Corp. 21,529,594

45,418,533Energy/Services - 7.37%

864,993 Bristow Group, Inc. (a) 30,880,2501,663,262 Bronco Drilling Co., Inc. (a) (c) 8,349,5751,910,022 Pioneer Drilling Co. (a) 15,184,675

726,313 Tidewater, Inc. 34,005,97588,420,475

Forest Products & Paper - 3.63%21,530,352 Catalyst Paper Corp.

(Canada) (a) (b) (c) (e) 5,327,9691,708,906 Glatfelter 23,582,9033,157,200 TimberWest Forest Corp. Units

(Canada) (a) 14,645,51043,556,382

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio of Investments (continued)

at January 31, 2010(Unaudited)

Shares Valueor Units Issues (Note 1)

Shares Valueor Units Issues (Note 1)

Common Stocks (continued)Healthcare Services - 4.26%

3,221,822 Cross Country Healthcare, Inc. (a) (c) $ 29,189,707

937,773 Pharmaceutical Product Development, Inc. 21,906,377

51,096,084Holding Companies - 9.60%

486,410 Ackermans & van Haaren NV (Belgium) 33,602,377

1,931,632 Brookfield Asset Management, Inc., Class A (Canada) 38,806,487

1,283,102 JZ Capital Partners, Ltd. (Guernsey) 5,312,1601,039,680 JZ Capital Partners, Ltd. Limited

Voting Shares (Guernsey) (e) 4,304,371495,300 Leucadia National Corp. (a) 11,060,049

475,780,230 PYI Corp., Ltd. (Hong Kong)1 (a) (c) 22,061,049115,146,493

Industrial Equipment - 2.75%276,674 Alamo Group, Inc. 4,966,298

2,260,867 Wacker Neuson SE (Germany) 28,042,97633,009,274

Insurance & Reinsurance - 3.70%190,022 Arch Capital Group, Ltd.

(Bermuda) (a) 13,594,17437,474 E-L Financial Corp., Ltd. (Canada) 15,091,587

581,233 HCC Insurance Holdings, Inc. 15,751,41444,437,175

Life Insurance - 3.00%221,383 National Western Life Insurance Co.,

Class A (c) 35,974,738

Metals Manufacturing - 4.27%1,089,112 Encore Wire Corp. $ 21,793,131

836,479 Kaiser Aluminum Corp. 29,402,23751,195,368

Non-U.S. Real Estate Operating Companies - 7.71%

5,274,600 Parco Co., Ltd. (Japan) (c) 41,254,8349,698,000 Sapporo Holdings, Ltd. (Japan) 51,248,502

92,503,336Oil & Gas - 1.80%

439,707 Cimarex Energy Co. 21,637,982Securities Trading Services - 2.81%

1,642,635 Investment Technology Group, Inc. (a) 33,674,018

Semiconductor Equipment Manufacturers & Related - 1.66%

1,774,506 Electro Scientific Industries, Inc. (a) (c) 19,892,212

Software - 3.08%1,736,160 Synopsys, Inc. (a) 36,928,123

Telecommunications - 1.61%360,814 Sycamore Networks, Inc. 6,996,183

1,917,523 Tellabs, Inc. (a) 12,329,67319,325,856

Transportation - 0.22%88,767 Genesee & Wyoming, Inc.,

Class A (a) 2,615,964

6

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio of Investments (continued)

at January 31, 2010(Unaudited)

Shares Valueor Units Issues (Note 1)

Principal ValueAmount ($) Issues (Note 1)

7

Common Stocks (continued)U.S. Real Estate Operating Companies - 6.98%

1,319,534 Alexander & Baldwin, Inc. $ 42,159,111269,014 Alico, Inc. 6,897,519322,646 Tejon Ranch Co. (a) 9,876,194737,412 Vail Resorts, Inc. (a) 24,850,784

83,783,608Total Common Stocks

(Cost $1,026,283,156) 963,521,012

InvestmentAmount ($)Limited Partnerships - 0.57%

Holding Companies - 0.57%1,000,000 AP Alternative Assets, L.P.

(Guernsey) (a) (b) 6,840,000Total Limited Partnerships

(Cost $20,000,000) 6,840,000

NotionalAmount ($)Purchased Options - 0.27%

Foreign Currency Put Options - 0.27%

75,000,000 Japan Currency, strike 100 Yen, expires 2/22/10 1,140

50,000,000 Japan Currency, strike 100 Yen, expires 9/14/10 411,455

100,000,000 Japan Currency, strike 95 Yen, expires 11/30/10 2,805,880

Total Purchased Options(Cost $5,105,000) 3,218,475

Short Term Investments - 12.61%Repurchase Agreement - 4.70%

56,338,607 JPMorgan Securities, Inc., 0.01%, dated 1/29/10, due 2/1/10 (d) $ 56,338,607

U.S. Government Obligations - 7.91%

95,000,000 U.S. Treasury Bills, 0.13%-0.17%†, due 2/4/10-7/29/10 (h) 94,962,577

Total Short Term Investments(Cost $151,303,909) 151,301,184

Total Investment Portfolio - 100.48%(Cost $1,282,951,059) 1,205,620,009

Liabilities in excess ofOther Assets - (0.48%) (5,794,641)

NET ASSETS - 100.00% $1,199,825,368

Investor Class:Net assets applicable to 12,474

shares outstanding $ 219,786Net asset value, offering and

redemption price per share $17.62

Institutional Class:Net assets applicable to

68,093,287 shares outstanding $ 1,199,605,582Net asset value, offering and

redemption price per share $17.62

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio of Investments (continued)

at January 31, 2010(Unaudited)

Notes:(a) Non-income producing security.(b Fair-valued security.(c) Affiliated issuers—as defined under the Investment

Company Act of 1940 (ownership of 5% or more of theoutstanding voting securities of these issuers).

(d) Repurchase agreement collateralized by U.S. TreasuryBond, par value $58,715,000, due 11/15/39, value$57,974,868.

(e) Security is subject to restrictions on resale.(f) Security is exempt from registration under Rule 144A of

the Securities Act of 1933. This security may be resoldin transactions that are exempt from registration, nor-mally to qualified institutional buyers.

(g) Variable rate security.(h) A portion of this security is segregated for future fund

commitments.† Annualized yield at date of purchase.1 Incorporated in Bermuda.

Country Concentration% of

Net Assets________United States* 69.34%Canada 10.16Japan 7.71Germany 6.13Belgium 2.80Hong Kong 1.84Guernsey 1.37Bermuda 1.13_______Total 100.48%______________

* Includes cash equivalents.

8

See accompanying notes to the Portfolios of Investments.

9

Corporate Debt Instruments - 8.25%U.S. Real Estate Investment Trusts - 7.36%

16,500,000 Brandywine Operating Partnership L.P., 3.875%, due 10/15/26 $ 16,376,250

Developers Diversified Realty Corp.:10,000,000 3.500%, due 8/15/11 9,625,00020,000,000 3.000%, due 3/15/12 18,650,00025,000,000 Macerich Co. (The), 3.250%,

due 3/15/12 (d) 23,500,000ProLogis:

14,000,000 2.250%, due 4/1/37 13,177,50019,929,000 1.875%, due 11/15/37 17,861,3665,000,000 2.625%, due 5/15/38 4,518,750

103,708,866U.S. Real Estate Operating Companies - 0.89%

13,000,000 General Growth Properties, Term Loan A, due 2/24/10* (f) 12,593,750

Total Corporate Debt Instruments(Cost $76,512,334) 116,302,616

SharesPreferred Stocks - 0.69%

U.S. Real Estate Investment Trusts - 0.15%

112,000 RAIT Financial Trust, 7.750% Series A 1,191,68082,400 RAIT Financial Trust, 8.375% Series B 918,760

2,110,440U.S. Real Estate Operating Companies - 0.54%

383,500 Forest City Enterprises, Inc., $25 par, 7.375%, due 2/1/34 7,574,125

Total Preferred Stocks(Cost $14,447,500) 9,684,565

Common Stocks - 71.31%Non-U.S. Real Estate Consulting/Management - 1.19%

3,309,535 Savills PLC (United Kingdom) $ 16,754,260Non-U.S. Real Estate Investment Trusts - 7.64%

4,421,808 British Land Co. PLC (United Kingdom) 30,965,874

1,670,168 Derwent London PLC (United Kingdom) 34,973,706

6,900,712 Hammerson PLC (United Kingdom) 41,828,514107,768,094

Non-U.S. Real Estate Operating Companies - 38.68%

3,673,126 Brookfield Asset Management, Inc., Class A (Canada) 73,793,101

13,128,500 Capitaland, Ltd. (Singapore) 36,036,2743,362,300 Daibiru Corp. (Japan) 25,329,4639,000,000 Hang Lung Properties, Ltd.

(Hong Kong) 30,718,90013,913,000 Henderson Land Development

Co., Ltd. (Hong Kong) 88,076,8105,701,000 Hongkong Land Holdings, Ltd.

(Hong Kong) 1 26,737,69013,500,000 Hysan Development Co., Ltd.

(Hong Kong) 33,524,1732,572,000 Mitsubishi Estate Co., Ltd. (Japan) 41,829,0152,431,000 Mitsui Fudosan Co., Ltd. (Japan) 41,340,331

6,331 NTT Urban Development Corp. (Japan) 4,664,17221,869,072 Quintain Estates & Development

PLC (United Kingdom) (a) 20,537,5408,285,677 Songbird Estates PLC

(United Kingdom) (a) 21,721,1123,050,000 Sun Hung Kai Properties, Ltd.

(Hong Kong) 39,401,98018,587,500 Wheelock & Co., Ltd. (Hong Kong) 48,599,778

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue Real Estate Value Fund

Portfolio of Investmentsat January 31, 2010

(Unaudited)Principal Value

Amount ($) Issues (Note 1)Shares Valueor Units Issues (Note 1)

10

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

20,845,000 Wheelock Properties, Ltd. (Hong Kong) $ 13,075,194

545,385,533U.S. Real Estate Investment Trusts - 5.18%

1,376,992 ProLogis 17,350,099862,024 Vornado Realty Trust 55,755,712

73,105,811U.S. Real Estate Operating Companies - 18.62%

500,500 Consolidated-Tomoka Land Co. (c) 16,556,54012,982,327 FNC Realty Corp. (a) (b) (c) 5,686,25910,090,773 Forest City Enterprises, Inc.,

Class A (a) (c) 114,126,64328,893,141 Newhall Holding Co. LLC,

Class A Units (a) (c) 50,562,9971,228,228 St. Joe Co. (The) (a) 31,933,928

785,584 Tejon Ranch Co. (a) 24,046,7267,420,473 Thomas Properties Group, Inc. (c) 19,664,253

262,577,346Total Common Stocks

(Cost $1,057,094,127) 1,005,591,044

InvestmentAmount ($)Limited Partnerships - 1.14%

Investment Fund - 1.14%16,000,000 Alliance Bernstein Legacy

Securities (C1), L.P. (a) (b) 16,138,768Total Limited Partnerships

(Cost $16,016,700) 16,138,768

Purchased Options - 0.18%Foreign Currency Put Options - 0.18%

80,000,000 Japan Currency, strike 95 Yen, expires 1/28/11 $ 2,568,392

Total Purchased Options(Cost $1,958,000) 2,568,392

PrincipalAmount ($)Short Term Investments - 19.12%

Repurchase Agreement - 17.35%244,592,258 JPMorgan Securities, Inc., 0.01%,

dated 1/29/10, due 2/1/10 (e) 244,592,258U.S. Government Obligations - 1.77%

25,000,000 U.S. Treasury Bill, 0.06%†, due 4/29/10 24,995,475

Total Short Term Investments(Cost $269,588,426) 269,587,733

Total Investment Portfolio - 100.69%(Cost $1,435,617,087) 1,419,873,118

Liabilities in excess of Other Assets - (0.69%) (9,704,280)

NET ASSETS - 100.00% $1,410,168,838

Investor Class:Net assets applicable to 208,298

shares outstanding $ 4,048,461Net asset value, offering and

redemption price per share $19.44

Institutional Class:Net assets applicable to 72,344,798

shares outstanding $1,406,120,377Net asset value, offering and

redemption price per share $19.44

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue Real Estate Value FundPortfolio of Investments (continued)

at January 31, 2010(Unaudited)

Shares Valueor Units Issues (Note 1)

Notional ValueAmount ($) Issues (Note 1)

11

Notes:(a) Non-income producing security.(b) Fair-valued security.(c) Affiliated issuers—as defined under the Investment

Company Act of 1940 (ownership of 5% or more of theoutstanding voting securities of these issuers).

(d) Security is exempt from registration under Rule 144A ofthe Securities Act of 1933. This security may be resoldin transactions that are exempt from registration, nor-mally to qualified institutional buyers.

(e) Repurchase agreement collateralized by U.S. TreasuryBond, par value $254,900,000, due 11/15/39, value$251,686,858.

(f) Variable rate security.* Issuer in default.† Annualized yield at date of purchase.1 Incorporated in Bermuda.

Country Concentration% of

Net Assets________United States* 53.18%Hong Kong 19.87United Kingdom 11.83Japan 8.02Canada 5.23Singapore 2.56________Total 100.69%________________

* Includes cash equivalents.

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue Real Estate Value FundPortfolio of Investments (continued)

at January 31, 2010(Unaudited)

Third Avenue TrustThird Avenue International Value Fund

Portfolio of Investmentsat January 31, 2010

(Unaudited)

12

Principal ValueAmount ($) Issues (Note 1)

ValueShares Issues (Note 1)

Corporate Debt Instruments - 0.26%Electronics Components - 0.26%

2,401,000SGDWBL Corp., Ltd., 2.500%, due 6/10/14 (Singapore) $ 3,698,180

Total Corporate Debt Instruments(Cost $3,694,150) 3,698,180

SharesCommon Stocks and Warrants - 84.05%

Advertising - 2.10%1,437,900 Asatsu-DK, Inc. (Japan) 29,454,131

Agriculture - 6.61%155,356 United International Enterprises,

Ltd. (Denmark) 1 12,556,1248,989,514 Viterra, Inc. (Canada) (a) 80,121,645

92,677,769Building & Construction Products/Services - 0.45%

10,482,120 Tenon, Ltd. (New Zealand) (a) (c) 6,325,561Corporate Services - 0.68%

22,522,784 Boardroom, Ltd. (Singapore) (c) 9,529,640Diversified Operations - 5.96%

1,635,342 Antarchile S.A. (Chile) 30,959,4805,371,200 Hutchison Whampoa, Ltd.

(Hong Kong) 36,769,850344,189 Lundbergforetagen AB, Class B

(Sweden) 15,814,87683,544,206

Electronics Components - 9.01%35,203,669 WBL Corp., Ltd. (Singapore) (c) 126,420,287

Forest Products & Paper - 5.34%60,271,095 Catalyst Paper Corp.

(Canada) (a) (b) (c) (e) $ 14,914,87612,000,000 Catalyst Paper Corp.

(Canada) (a) (b) (c) (e) (f) 2,969,55844,971,082 Rubicon, Ltd. (New Zealand) (a) (c) 33,134,019

598,656 Weyerhaeuser Co. 23,886,37474,904,827

Holding Companies - 9.50%761,561 Compagnie Nationale

a Portefeuille (Belgium) 38,102,3363,815,400 Guoco Group, Ltd. (Hong Kong) 2 37,397,4511,270,888 Leucadia National Corp. (a) 28,378,929

543,085 LG Corp. (South Korea) (a) 29,403,956133,282,672

Insurance - 13.84%297,027 Allianz SE (Germany) 33,119,227

13,249,502 BRIT Insurance Holdings NV(United Kingdom) 3 39,647,481

1,397,603 Montpelier Re Holdings, Ltd. (Bermuda) 23,605,515

243,689 Munich Re (Germany) 36,659,4431,533,625 Sampo Oyj, Class A (Finland) 37,296,576

881,900 Tokio Marine Holdings, Inc. (Japan) 23,839,096194,167,338

Investment Companies - 1.51%16,608,933 Resolution, Ltd. (Guernsey) (a) 21,212,835

Machinery - 1.74%432,791 Andritz AG (Austria) 24,350,644

Media - 0.20%278,270 Alma Media Corp. (Finland) 2,855,080

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue International Value FundPortfolio of Investments (continued)

at January 31, 2010(Unaudited)

13

Common Stocks and Warrants (continued)Metals & Mining - 2.86%

5,745,000 Dundee Precious Metals, Inc. (Canada) (a) (c) (f) $ 17,999,299

512,500 Dundee Precious Metals, Inc. Warrants, expires 6/29/12 (Canada) (a) (e) 74,293

2,360,000 Dundee Precious Metals, Inc. Warrants, expires 11/20/15 (Canada) (a) (e) 2,758,943

448,956 Newmont Mining Corp. 19,242,25440,074,789

Non-U.S. Real Estate Operating Companies - 3.80%

2,735,600 Daibiru Corp. (Japan) 20,608,2981,923,000 Mitsui Fudosan Co., Ltd. (Japan) 32,701,545

53,309,843Oil & Gas Production & Services - 2.13%

411,052 Cenovus Energy, Inc. (Canada) 9,515,854667,567 EnCana Corp. (Canada) 20,420,874

29,936,728Other Financial - 3.09%

67,766,000 Yuanta Financial Holding Co., Ltd. (Taiwan) 43,273,850

Pharmaceuticals - 4.13%1,009,880 GlaxoSmithKline PLC

(United Kingdom) 19,637,766514,600 Sanofi-Aventis SA (France) 38,243,248

57,881,014Technology - Hardware - 3.04%

84,824,750 United Microelectronics Corp. (Taiwan) (a) 42,616,830

Telecommunications - 5.56%49,496,693 Netia S.A. (Poland) (a) (c) $ 77,956,889

Transportation - 2.50%5,233,000 Seino Holdings Co., Ltd. (Japan) 35,074,115

Total Common Stocks and Warrants(Cost $1,262,774,759) 1,178,849,048

NotionalAmount ($)Purchased Options - 0.46%

Foreign Currency Put Options - 0.46%

75,000,000 Euro Currency, strike 1.260 Euro, expires 2/1/10 —

75,000,000 Euro Currency, strike 1.329 Euro, expires 1/27/11 2,439,795

75,000,000 Japan Currency, strike 98 Yen,expires 2/22/10 6,090

75,000,000 Japan Currency, strike 90 Yen, expires 12/1/10 3,949,230

Total Purchased Options(Cost $12,690,000) 6,395,115

PrincipalAmount ($)Short Term Investments - 15.57%

Repurchase Agreement - 12.01%168,416,182 JPMorgan Securities, Inc., 0.01%,

dated 1/29/10, due 2/1/10 (d) 168,416,182U.S. Government Obligations - 3.56%

50,000,000 U.S. Treasury Bills, 0.03%-0.06%†, due 3/18/10-4/29/10 49,995,029

Total Short Term Investments(Cost $218,411,765) 218,411,211

See accompanying notes to the Portfolios of Investments.

ValueShares Issues (Note 1)

ValueShares Issues (Note 1)

Third Avenue TrustThird Avenue International Value FundPortfolio of Investments (continued)

at January 31, 2010(Unaudited)

14

Total Investment Portfolio - 100.34%(Cost $1,497,570,674) $1,407,353,554

Liabilities in excess ofOther Assets - (0.34%) (4,788,942)

NET ASSETS - 100.00% $1,402,564,612

Investor Class:Net assets applicable to 23,070

shares outstanding $ 344,482Net asset value, offering and

redemption price per share $14.93

Institutional Class:Net assets applicable to

93,925,271 shares outstanding $1,402,220,130Net asset value, offering and

redemption price per share $14.93

Notes:SGD: Singapore Dollar.(a) Non-income producing security.(b) Fair-valued security.(c) Affiliated issuers—as defined under the Investment

Company Act of 1940 (ownership of 5% or more of theoutstanding voting securities of these issuers).

(d) Repurchase agreement collateralized by U.S. TreasuryBond, par value $175,515,000, due 11/15/39, value$173,302,546.

(e) Security is subject to restrictions on resale.(f) Security is exempt from registration under Rule 144A of

the Securities Act of 1933. This security may be resold intransactions that are exempt from registration, normallyto qualified institutional buyers.

† Annualized yield at date of purchase.1 Incorporated in Bahamas.2 Incorporated in Bermuda.3 Incorporated in Netherlands.

Country Concentration% of

Net Assets________United States * 21.13%Canada 10.61Japan 10.10Singapore 9.96Taiwan 6.12Poland 5.56Hong Kong 5.29Germany 4.97United Kingdom 4.23Finland 2.86New Zealand 2.81France 2.73Belgium 2.72Chile 2.21South Korea 2.10Austria 1.73Bermuda 1.68Guernsey 1.51Sweden 1.13Denmark 0.89________Total 100.34%________________

* Includes cash equivalents.

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustThird Avenue Focused Credit Fund

Portfolio of Investmentsat January 31, 2010

(Unaudited)

15

Corporate Debt Instruments - 82.62%Aerospace - 3.71%

1,300,000 Aveos Fleet Performance, Inc., Term Loan B, 6.501%, due 10/16/14 (b) $ 448,500

9,000,000 DAE Aviation Holdings, Inc., 11.250%, due 8/1/15 (a) 8,302,500

Sequa Corp.:4,200,000 11.750%, due 12/1/15 (a) 4,221,0007,083,187 PIK, 13.500%, due 12/1/15 (a) 7,260,267

20,232,267Building Products - 0.58%

3,013,333 Nortek, Inc., 11.000%, due 12/1/13 3,179,066Cable - 1.09%

6,000,000 Virgin Media Secured Finance PLC, 6.500%, due 1/15/18 (United Kingdom) (a) 5,932,500

Chemicals - 7.53%13,000,000 Georgia Gulf Corp., 9.000%,

due 1/15/17 (a) 13,422,50014,997,533 Lyondell Chemical Co., Term Loan,

5.793%, due 6/3/10 (b) 15,756,7836,500,000 Terra Capital, Inc., 7.750%,

due 11/1/19 (a) 6,792,500Tronox, Inc.:

3,941,176 Term Loan B1, 9.250%, due 9/20/10 (b) 4,039,706

1,058,824 Term Loan B2, 9.250%, due 9/20/10 (b) 1,085,294

41,096,783Consumer Products - 3.96%

15,560,000 Culligan International Co., Term Loan, 2.490%, due 11/24/12 (b) 12,588,040

2,000,000 Nebraska Book Co., Inc., 10.000%, due 12/1/11 (a) 2,052,500

6,966,506 Spectrum Brands, Inc., Term Loan B, 7.717%, due 6/30/12 (b) $ 6,966,506

21,607,046Consumer Services - 1.83%

9,500,000 Hertz Corp. (The), 10.500%, due 1/1/16 9,998,750

Diversified Manufacturing - 2.82%8,000,000 Trimas Corp., 9.750%,

due 12/15/17 (a) 8,020,0007,269,110 World Color Press, Inc.,

Term Loan, 9.000%, due 7/21/12 (Canada) (b) 7,366,029

15,386,029Diversified Media - 2.39%

9,500,000 Nielsen Finance LLC/Nielsen Finance Co., 10.000%, due 8/1/14 9,927,500

3,488,533 TL Acquisitions, Inc., Term Loan, 2.750%, due 7/3/14 (b) 3,106,734

13,034,234Energy - 12.45%

7,000,000 Antero Resources Finance Corp., 9.375%, due 12/1/17 (a) 7,350,000

12,500,000 Compton Petroleum Finance Corp., 7.625%, due 12/1/13 (Canada) 10,093,750

10,000,000 Connacher Oil & Gas, 10.250%, due 12/15/15 (Canada) (a) 9,650,000

Energy XXI Gulf Coast, Inc.:10,138,319 10.000%, due 6/15/13 10,138,3199,261,155 PIK, 16.000%, due 6/15/14 (a) 10,696,6347,000,000 Hercules Offshore LLC, 10.500%,

due 10/15/17 (a) 7,245,0001,000,000 Stallion OilField Services/Stallion

Oilfield Finance Corp., 9.750%,due 2/1/15* (a) 645,000

See accompanying notes to the Portfolios of Investments.

Principal ValueAmount ($) Issues (Note 1)

Principal ValueAmount ($) Issues (Note 1)

Third Avenue TrustThird Avenue Focused Credit Fund

Portfolio of Investments (continued)at January 31, 2010

(Unaudited)

16

Corporate Debt Instruments (continued)Energy (continued)

11,500,000 Trico Shipping AS, 11.875%, due 11/1/14 (Norway) (a) $ 12,132,500

67,951,203Financials - 8.36%

11,000,000 Capmark Financial Group, Inc., Term Loan, 2.425%, due 3/23/11* (b) 3,318,337

CIT Group, Inc.:2,245,499 7.000%, due 5/1/15 1,962,0056,242,498 7.000%, due 5/1/16 5,384,1558,739,498 7.000%, due 5/1/17 7,483,195

GMAC, Inc.:5,150,000 7.250%, due 3/2/11 5,214,3753,000,000 7.000%, due 2/1/12 3,007,500

10,877,258 Marsico Parent Co. LLC, Term Loan B, 5.312%, due 12/14/14 (b) 7,423,728

5,000,000 National Money Mart Co., 10.375%, due 12/15/16 (Canada) (a) 5,300,000

2,925,000 Nuveen Investments, Inc., Term Loan, 12.500%, due 7/31/15 (b) 3,076,126

4,000,000 PREIT Associates L.P., 4.000%, due 6/1/12 (a) 3,480,000

45,649,421Food & Beverage - 2.78%Pinnacle Foods Finance LLC/

Pinnacle Foods Finance Corp.:2,000,000 9.250%, due 4/1/15 2,020,000

13,000,000 9.250%, due 4/1/15 (a) 13,130,00015,150,000

Gaming - 1.30%2,000,000 Harrah’s Operating Co., Inc.,

11.250%, due 6/1/17 2,135,0006,000,000 Harrah’s Operating Co., Inc.,

Term Loan B2, 3.249%, due 1/28/15 (b) 4,978,128

7,113,128

Healthcare - 3.89%5,000,000 Accellent Inc., 8.375%,

due 2/1/17 (a) $ 5,075,0006,000,000 Biomet, Inc., PIK, 10.375%,

due 10/15/17 6,570,0007,250,000 HCA, Inc., PIK, 9.625%, due 11/15/16 7,703,1252,000,000 US Oncology Holdings, Inc., PIK,

6.428%, due 3/15/12 (b) 1,900,00021,248,125

Media - 2.82%Clear Channel Worldwide Holdings, Inc.:

1,000,000 Series A, 9.250%, due 12/15/17 (a) 1,027,5004,000,000 Series B, 9.250%, due 12/15/17 (a) 4,140,0005,000,000 DEX Media West LLC/Dex Media

West Finance Co., 8.500%,due 8/15/10 * 6,350,000

2,000,000 DEX Media West LLC, Term Loan B, due 10/24/14 (b) 1,955,000

2,000,000 RH Donnelley Corp., Term Loan D1, due 6/30/11 (b) 1,950,000

15,422,500Metals & Mining - 4.98%

4,266,285 Aleris International, Inc., Term Loan, 13.000%, due 2/13/10 (b) (f) 4,364,942

FMG Finance Party, Ltd. (Australia):2,000,000 10.000%, due 9/1/13 (a) 2,125,000

10,998,000 10.625%, due 9/1/16 (a) 12,510,2258,000,000 Murray Energy Corp., 10.250%,

due 10/15/15 (a) 8,180,00027,180,167

Retail - 3.40%17,330,000 Blockbuster, Inc., 11.750%,

due 10/1/14 (a) 12,737,5505,500,000 Rite Aid Corp., 10.250%,

due 10/15/19 (a) 5,843,75018,581,300

See accompanying notes to the Portfolios of Investments.

Principal ValueAmount ($) Issues (Note 1)

Principal ValueAmount ($) Issues (Note 1)

Third Avenue TrustThird Avenue Focused Credit Fund

Portfolio of Investments (continued)at January 31, 2010

(Unaudited)

17

Corporate Debt Instruments (continued)Technology - 2.69%

16,957,954 First Data Corp., Term Loan B1, 2.982% due 9/24/14 (b) $ 14,702,783

Telecommunications - 6.30%8,000,000 Clearwire Communications

LLC/Clearwire Finance Inc.,12.000%, due 12/1/15 (a) 8,080,000

11,970,000 Digicel Group, Ltd., 8.875%, due 1/15/15 (Bermuda) (a) 11,670,750

9,000,000 Intelsat Jackson Holdings, Ltd., 11.250%, due 6/15/16 (Bermuda) 9,607,500

5,000,000 West Corp., 9.500%, due 10/15/14 5,050,00034,408,250

Transportation - 6.73%5,954,523 Accuride Corp., Term Loan B,

due 6/30/13* (b) 5,975,7873,000,000 Navios Maritime Holdings/Finance,

8.875%, due 11/1/17(Marshall Islands) (a) 3,120,000

3,000,000 Navistar International Corp., 8.250%, due 11/1/21 3,045,000

Swift Transportation Co., Inc.:1,300,000 8.023%, due 5/15/15 (a) (b) 1,118,0003,000,000 12.500%, due 5/15/17 (a) 2,715,0002,500,000 Swift Transportation Co., Inc.,

Term Loan, due 5/10/14 (b) 2,306,25016,562,939 Swift Transportation Co., Inc.,

Term Loan B, 6.250%, due 5/10/14 (b) 15,935,915

2,500,000 United Maritime Group LLC/United Maritime Group Finance Corp., 11.750%,due 6/15/15 (a) 2,531,250

36,747,202

Utilities - 3.01%500,000 Energy Future Holdings Corp.,

10.000%, due 1/15/20 (a) $ 516,25019,468,112 Texas Competitive Electric Holdings Co.

LLC, Term Loan, 3.731%,due 10/10/14 (b) 15,896,259

16,412,509Total Corporate Debt Instruments

(Cost $442,298,567) 451,033,263

SharesCommon Stocks - 0.27%

Building Products - 0.02%3,000 Nortek, Inc. (d) 118,500

Financial Services - 0.25%42,780 CIT Group, Inc. (d) 1,361,260

Total Common Stocks(Cost $1,189,015) 1,479,760

PrincipalAmount ($)Short Term Investments - 23.32%

Repurchase Agreement - 23.32%127,275,620 JPMorgan Securities, Inc., 0.01%,

dated 1/29/10, due 2/1/10 (c) (e) 127,275,620Total Short Term Investments

(Cost $127,275,620) 127,275,620Total Investment

Portfolio - 106.21%(Cost $570,763,202) 579,788,643

Liabilities in excess ofOther Assets - (6.21%) (33,905,939)

NET ASSETS - 100.00% $545,882,704

See accompanying notes to the Portfolios of Investments.

Principal ValueAmount ($) Issues (Note 1)

Principal ValueAmount ($) Issues (Note 1)

Third Avenue TrustThird Avenue Focused Credit Fund

Portfolio of Investments (continued)at January 31, 2010

(Unaudited)

18

Investor Class:Net assets applicable to 18,503,384

shares outstanding $195,767,780Net asset value, offering and

redemption price per share $10.58

Institutional Class:Net assets applicable to 33,084,922

shares outstanding $350,114,924Net asset value, offering and

redemption price per share $10.58

Notes:PIK: Payment-in-kind.(a) Security is exempt from registration under Rule 144A of

the Securities Act of 1933. This security may be resoldin transactions that are exempt from registration, nor-mally to qualified institutional buyers.

(b) Variable rate security.(c) Repurchase agreement collateralized by U.S. Treasury

Bond, par value $132,640,000, due 11/15/39, value$130,968,006.

(d) Non-income producing security.(e) A portion of this security is segregated for future fund

commitments.(f) Effective February 8, 2010, the maturity date is extended

to May 13, 2010.* Issuer in default.

Country Concentration% of

Net Assets________United States* 89.81%Canada 5.94Bermuda 3.90Australia 2.68Norway 2.22United Kingdom 1.09Marshall Islands 0.57________Total 106.21%________________

* Includes cash equivalents.

See accompanying notes to the Portfolios of Investments.

Third Avenue TrustNotes to Portfolios of Investments

January 31, 2010(Unaudited)

19

1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization:Third Avenue Trust (the “Trust”) is an open-end, management investment company organized as a Delaware businesstrust pursuant to a Trust Instrument dated October 31, 1996. The Trust currently consists of five non-diversified(within the meaning of Section 5(b)(2) of the Investment Company Act), separate investment series: Third AvenueValue Fund, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund, Third Avenue InternationalValue Fund and Third Avenue Focused Credit Fund (commenced investment operations on August 31, 2009) (each a“Fund” and, collectively, the “Funds”).

Accounting policies:The policies described below are followed consistently by the Funds and are in conformity with accounting principlesgenerally accepted in the United States of America.

Security valuation:Generally, the Funds’ investments are valued at market value. Securities traded on a principal stock exchange, includ-ing The NASDAQ Stock Market, Inc. (“NASDAQ”), are valued at the last quoted sales price, the NASDAQ officialclosing price, or in the absence of closing sales prices on that day, securities are valued at the mean between the closingbid and asked price. In accordance with procedures approved by the Trust’s Board of Trustees (the “Board”), the Fundsmay adjust the prices of securities traded in foreign markets, as appropriate, to reflect the fair value as of the time theFunds’ net asset values are calculated. Debt instruments with maturities greater than 60 days, including floating rateloan securities, are valued on the basis of prices obtained from a pricing service approved as reliable by the Board orotherwise pursuant to policies and procedures approved by the Board. Temporary cash investments are valued at cost,plus accrued interest, which approximates market value. Short-term debt securities with 60 days or less to maturity maybe valued at amortized cost.

Each Fund may invest up to 15% of its total net assets in securities which are not readily marketable, including thosewhich are restricted as to disposition under applicable securities laws (“restricted securities”). Restricted securities andother securities and assets for which market quotations are not readily available are valued at “fair value”, as determinedin good faith by the Trust’s Valuation Committee as authorized by the Board of the Trust, under procedures establishedby the Board. At January 31, 2010, such securities had a total fair value of $59,260,665 or 1.10% of net assets of ThirdAvenue Value Fund, $12,167,969 or 1.01% of net assets of Third Avenue Small-Cap Value Fund, $21,825,027 or1.55% of net assets of Third Avenue Real Estate Value Fund and $17,884,434 or 1.28% of net assets of Third AvenueInternational Value Fund. There were no fair valued securities for Third Avenue Focused Credit Fund at January 31,2010. Among the factors considered by the Trust’s Valuation Committee in determining fair value are: the type of secu-rity, trading in unrestricted securities of the same issuer, the financial condition of the issuer, the percentage of theFund’s beneficial ownership of the issuer’s common stock and debt securities, the operating results of the issuer and the

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

20

discount from market value of any similar unrestricted securities of the issuer at the time of purchase and liquidationvalues of the issuer. The fair values determined in accordance with these procedures may differ significantly from theamounts which would be realized upon disposition of the securities. Restricted securities often have costs associatedwith subsequent registration. The restricted securities currently held by the Funds are not expected to incur any mate-rial future registration costs.

Fair Value Measurements:In accordance with Financial Accounting Standards Board Accounting Standard Codification (“FASB ASC”) FASBASC 820-10, Fair Value Measurements and Disclosures (formerly Statement of Financial Accounting Standards (“SFAS”)No. 157), the Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuationtechniques used to measure the fair value. Fair value is defined as the price that a Fund would receive upon selling aninvestment in an orderly transaction to an independent buyer in the principal or most advantageous market for theinvestment under current market conditions. The hierarchy gives the highest priority to valuations based upon unad-justed quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority tovaluations based upon unobservable inputs that are significant to the valuation (level 3 measurements). FASB ASC 820-10-35-39 to 55 provides three levels of the fair value hierarchy as follows:

• Level 1—Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities thatthe Funds have the ability to access at the measurement date;

• Level 2—Inputs other than quoted prices that are observable for the asset or liability either directly or indi-rectly, including inputs in markets that are not considered to be active;

• Level 3—Significant unobservable inputs (including the Funds’ own assumptions in determining the fairvalue of investments)

A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is signifi-cant to the fair value measurement. However, the determination of what constitutes “observable” requires significantjudgment by the Adviser. The Adviser considers observable data to be market data which is readily available, regularlydistributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are activelyinvolved in the relevant market.

Effective October 31, 2009, the Funds adopted the authoritative guidance included in FASB ASC 820-10, Fair ValueMeasurements and Disclosures (formerly FSP FAS 157-4). This FASB provides guidance in determining fair value whenthe volume and level of activity for the asset or liability significantly decreased and identifying transactions that are notorderly. FASB ASC 820-10-35-51A to 51H indicates that if an entity determines that either the volume and/or levelof activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or pricequotations or observable inputs are not associated with orderly transactions, increased analysis and management judg-

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

21

ment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate tosupplement or replace a market approach in those circumstances. The guidance provides a list of factors to determinewhether there has been a significant decrease in relation to normal market activity. Regardless of the valuation tech-nique and inputs used, the objective for the fair value measurement in those circumstances is unchanged from what itwould be if markets were operating at normal activity levels and/or transactions were orderly; that is, to determine thecurrent exit price as promulgated by FASB ASC 820-10. The guidance also requires additional disclosures regardinginputs and valuation techniques used, change in valuation techniques and related inputs, if any, and more disaggre-gated information relating to debt and equity securities.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated withinvesting in those securities.

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

22

The following is a summary by level of inputs used to value the Funds’ investments as of January 31, 2010:

Third Avenue Third Avenue Third Avenue Third AvenueThird Avenue Small-Cap Real Estate International FocusedValue Fund Value Fund Value Fund Value Fund Credit Fund__________________ __________________ __________________ __________________ __________________

Level 1: Quoted PricesInvestments in Securities:

Common Stocks & Warrants:Aerospace & Defense $ — $ 1,840,651 $ — $ — $ —Advertising — — — 29,454,131 —Agriculture — 47,988,125 — 92,677,769 —Annuities & Mutual Fund

Management & Sales 174,540,000 — — — —Automotive 547,835,560 — — — —Building & Construction

Products/Services — — — 6,325,561 118,500Chemical & Allied Products — 53,675,912 — —Computer Peripherals — 15,988,222 — — —Consumer Products — 25,412,481 — — —Corporate Services — — — 9,529,640 —Depository Institutions 104,993,713 — — — —Diversified Operations 442,160,612 — — 83,544,206 —Electronics Components 35,694,125 45,418,533 — 126,420,287 —Energy/Services — 88,420,475 — — —Financial Insurance 32,142,730 — — — —Financial Services 7,465,258 — — — 1,361,260Forest Products & Paper — 38,228,413 — 57,020,393 —Healthcare Services — 51,096,084 — — —Holding Companies 1,219,581,287 115,146,493 — 133,282,672 —Home Development 33,600,000 — — — —Industrial & Agricultural Equipment 6,067,520 — — — —Industrial Equipment — 33,009,274 — — —Insurance — — — 194,167,338 —Insurance & Reinsurance — 44,437,175 — — —Investment Companies — — — 21,212,835 —Life Insurance — 35,974,738 — — —Machinery — — — 24,350,644 —Media — — — 2,855,080 —Metals & Mining — — — 40,074,789 —Metals Manufacturing — 51,195,368 — — —Mutual Holding Companies 12,136,136 — — — —

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

23

Third Avenue Third Avenue Third Avenue Third AvenueThird Avenue Small-Cap Real Estate International FocusedValue Fund Value Fund Value Fund Value Fund Credit Fund__________________ __________________ __________________ __________________ __________________

Non-U.S. Real Estate Consulting/Management $ — $ — $ 16,754,260 $ — $ —

Non-U.S. Real Estate Investment Trusts — — 107,768,094 — —Non-U.S. Real Estate

Operating Companies 937,564,632 92,503,336 545,385,533 53,309,843 —Oil & Gas — 21,637,982 — — —Oil & Gas Production & Services 387,503,234 — — 29,936,728 —Other Financial — — — 43,273,850 —Pharmaceuticals — — — 57,881,014 —Securities Trading Services — 33,674,018 — — —Semiconductor Equipment

Manufacturers & Related — 19,892,212 — — —Software — 36,928,123 — — —Steel & Specialty Steel 395,325,000 — — — —Technology-Hardware — — — 42,616,830 —Telecommunications 62,758,455 19,325,856 — 77,956,889 —Transportation — 2,615,964 — 35,074,115 —U.S. Real Estate Investment Trusts — — 73,105,811 — —U.S. Real Estate Operating Companies 260,616,156 83,783,608 206,328,090 — —Utilities, Utility Service Companies

& Waste Management 154,295,557 — — — —Preferred Stocks:Insurance & Reinsurance 8,377 — — — —U.S. Real Estate Investment Trust — — 2,110,440 — —U.S. Real Estate Operating Companies — — 7,574,125 — —Limited Partnerships:Infrastructure 6,400,000 — — — —____________________ ____________________ ____________________ ____________________ ____________________

Total for Level 1 Securities $4,820,688,352 $958,193,043 $959,026,353 $1,160,964,614 $1,479,760____________________ ____________________ ____________________ ____________________ ____________________

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

24

Third Avenue Third Avenue Third Avenue Third AvenueThird Avenue Small-Cap Real Estate International FocusedValue Fund Value Fund Value Fund Value Fund Credit Fund__________________ __________________ __________________ __________________ __________________

Level 2: Other Significant Observable InputsInvestments in Securities:

Common Stocks:U.S. Real Estate Operating Companies $ — $ — $50,562,997 $ — $ —Debt Securities issued by the U.S. Treasury and other government corporations and agencies:U.S. Treasury Inflation Indexed Notes — 11,699,281 — — —Corporate Debt Instruments 245,654,106 69,040,057 116,302,616 3,698,180 451,033,263Purchased Options:Foreign Currency Put Options — 3,218,475 2,568,392 6,395,115 —Short Term Investments:Repurchase Agreement 94,946,292 56,338,607 244,592,258 168,416,182 127,275,620U.S. Government Obligations 199,963,800 94,962,577 24,995,475 49,995,029 —____________________ ____________________ ____________________ ____________________ ____________________

Total for Level 2 Securities 540,564,198 235,258,997 439,021,738 228,504,506 578,308,883____________________ ____________________ ____________________ ____________________ ____________________Level 3: Significant Unobservable InputsInvestments in Securities:

Common Stocks:Auto Supply — — — — —Consumer Products 26,318 — — — —Financial Insurance 555,000 — — — —Forest Products & Paper — 5,327,969 — 17,884,434 —Insurance & Reinsurance 219,775 — — — —Manufactured Housing 35,000,000 — — — —U.S. Real Estate Operating Companies 8,311,410 — 5,686,259 — —Limited Partnerships:Holding Companies — 6,840,000 — — —Insurance & Reinsurance 229,040 — — — —Investment Fund — — 16,138,768 — —Preferred Stock:Auto Supply — — — — —Financial Insurance — — — — —Insurance & Reinsurance 271,577 — — — —Corporate Debt Instruments 14,647,545 — — — —____________________ ____________________ ____________________ ____________________ ____________________

Total for Level 3 Securities 59,260,665 12,167,969 21,825,027 17,884,434 —____________________ ____________________ ____________________ ____________________ ____________________Total Value of Investments $5,420,513,215 $1,205,620,009 $1,419,873,118 $1,407,353,554 $ 579,788,643____________________ ____________________ ____________________ ____________________ ________________________________________ ____________________ ____________________ ____________________ ____________________

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

25

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

Net change inunrealized

appreciation/(depreciation)

Net change in attributable toBalance as of unrealized Balance as of assets still

10/31/09 appreciation/ Net Transfer out 1/31/10 held at(fair value) (depreciation) purchases of Level 3 (fair value) period end_______________ _______________ ___________ ______________ ______________ ________________

Third Avenue Value FundCommon Stocks:

Auto Supply $ — $ — $ — $ — $ — $ —Consumer Products 26,318 — — — 26,318 —Financial Insurance 38,067 516,933 — — 555,000 516,933Insurance & Reinsurance 485,375 (265,600) — — 219,775 (265,600)Manufactured Housing 35,000,000 — — — 35,000,000 —U.S. Real Estate

Operating Companies 7,077,981 1,233,429 — — 8,311,410 1,233,429Corporate Debt Instruments 14,647,545 — — — 14,647,545 —Limited Partnerships:

Insurance & Reinsurance 234,146 (5,106) — — 229,040 (5,106)Preferred Stocks:

Auto Supply — — — — — —Financial Insurance — — — — — —Insurance & Reinsurance 271,577 — — — 271,577 —___________ ___________ ___________ ____________ ___________ ___________

Total $57,781,009 $ 1,479,656 $ — $ — $59,260,665 $ 1,479,656___________ ___________ ___________ ____________ ___________ ______________________ ___________ ___________ ____________ ___________ ___________

Third Avenue Small-Cap Value FundCommon Stocks:

Forest Products & Paper $ 5,167,444 $ 160,525 $ — $ — $ 5,327,969 $ 160,525Limited Partnerships:

Holding Companies 6,412,500 427,500 — — 6,840,000 427,500___________ ___________ ___________ ____________ ___________ ___________Total $11,579,944 $ 588,025 $ — $ — $12,167,969 $ 588,025___________ ___________ ___________ ____________ ___________ ______________________ ___________ ___________ ____________ ___________ ___________

Third Avenue Real Estate Value FundCommon Stocks:

U.S. Real EstateOperating Companies $59,252,009 $ 843,851 $ — $(54,409,601) $ 5,686,259 $ 843,851

Limited Partnerships:Investment Fund — 104,247 16,034,521 — 16,138,768 104,247___________ ___________ ___________ ____________ ___________ ___________

Total $59,252,009 $ 948,098 $16,034,521 $(54,409,601) $21,825,027 $ 948,098 ___________ ___________ ___________ ____________ ___________ ______________________ ___________ ___________ ____________ ___________ ___________

Third Avenue International Value FundCommon Stocks:

Forest Products & Paper $17,345,597 $ 538,837 $ — $ — $17,884,434 $ 538,837

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

26

Floating rate obligations:The Funds may invest in debt securities with interest payments or maturity values that are not fixed, but float in con-junction with an underlying index or price. These securities may be backed by U.S. government or corporate issuers,or by collateral such as mortgages. The indices and prices upon which such securities can be based include interest rates,currency rates and commodities prices. Floating rate securities pay interest according to a coupon which is reset peri-odically. The reset mechanism may be formula based on, or reflect the passing through of, floating interest paymentson an underlying collateral pool. These obligations generally exhibit a low price volatility for a given stated maturity oraverage life because their coupons adjust with changes in interest rates.

Repurchase agreements:The Funds may invest excess cash in repurchase agreements whereby the Funds purchase securities, which serve as col-lateral, with an agreement to resell such collateral at the maturity date of the repurchase agreement. Securities pledgedas collateral for repurchase agreements are held by the Funds’ custodian bank until maturity of the repurchase agree-ment. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase valuein the event of default. In the event of default, the Funds have the right to liquidate the collateral and apply the pro-ceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the otherparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.

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

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

• Investment transactions: At the prevailing rates of exchange on the date of such transactions.Security transactions:Security transactions are accounted for on a trade date basis.

2. INVESTMENTS

The following information is based upon the book basis of investment securities as of January 31, 2010:Small-Cap Real Estate International Focused

Value Fund Value Fund Value Fund Value Fund Credit Fund_______ _______ _______ _________ _________Gross unrealized appreciation $1,201,291,001 $ 154,687,755 $ 206,319,219 $ 149,371,252 $ 14,899,076Gross unrealized depreciation (846,499,165) (232,018,805) (222,063,188) (239,588,372) (5,873,635)_________________________ _________________________ ______________ ______________ ____________Net unrealized appreciation/

(depreciation) $ 354,791,836 $ (77,331,050) $ (15,743,969) $ (90,217,120) $ 9,025,441_________________________ _________________________ _________________________ _________________________ ____________Aggregate book cost $5,065,721,379 $1,282,951,059 $1,435,617,087 $1,497,570,674 $570,763,202_________________________ _________________________ _________________________ _________________________ _____________________________________ _________________________ _________________________ _________________________ ____________

Third Avenue TrustNotes to Portfolios of Investments (continued)

January 31, 2010(Unaudited)

27

3. COMMITMENTS AND CONTINGENCIES

Third Avenue Value Fund has committed a $1,755,000 capital investment to RS Holdings of which $1,022,245 hasbeen funded as of January 31, 2010. Under certain circumstances this commitment may be payable to RS Holdings,although the Adviser believes that this commitment is no longer enforceable. Accordingly, Third Avenue Value Fundhas segregated securities valued at $732,755 to meet this contingency.

Third Avenue Small Cap Value Fund has committed $5,000,000 to Swift Transportation Co., Inc. pursuant to a revolv-ing credit loan, of which the entire amount has not been funded as of January 31, 2010. This commitment may bepayable upon demand of Swift Transportation Co., Inc. Accordingly, Third Avenue Small Cap Value Fund has segre-gated securities valued at $5,000,000 to meet this contingency.

Third Avenue Focused Credit Fund has committed $1,892,139 to RH Donnelley Corp. pursuant to a revolving creditloan, of which the entire amount has not been funded as of January 31, 2010. This commitment may be payable upondemand of RH Donnelley Corp. Accordingly, Third Avenue Focused Credit Fund has segregated securities valued at$1,892,139 to meet this contingency.

In addition, Third Avenue Focused Credit Fund has committed $1,000,000 to Swift Transportation Co., Inc. pursuantto a revolving credit loan, of which the entire amount has not been funded as of January 31, 2010. This commitmentmay be payable upon demand of Swift Transportation Co., Inc. Accordingly, Third Avenue Focused Credit Fund hassegregated securities valued at $1,000,000 to meet this contingency.

In the normal course of business, the Funds enter into contracts that contain a variety of representations and warrantiesand which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, asthis would involve future claims that may be made against the Funds that have not yet occurred. However, based onexperience, the Funds expect the risk of loss to be remote.

For additional information regarding the accounting policies of the Funds, refer to the most recent financial statementsin the N-CSR filing at www.sec.gov.

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BOARD OF TRUSTEES

Jack W. Aber Marvin MoserDavid M. Barse Eric Rakowski

William E. Chapman, II Martin ShubikLucinda Franks Charles C. WaldenEdward J. Kaier Martin J. Whitman

OFFICERS

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

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

Joseph J. Reardon — Chief Compliance Officer

TRANSFER AGENT

PNC Global Investment Servicing (U.S.) Inc.P.O. Box 9802

Providence, RI 02940-8002610-239-4600

800-443-1021 (toll-free)

INVESTMENT ADVISER

Third Avenue Management LLC622 Third Avenue

New York, NY 10017

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP300 Madison AvenueNew York, NY 10017

CUSTODIAN

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

Dallas, TX 75254

Third Avenue Funds622 Third Avenue

New York, NY 10017Phone 212-888-5222

Toll Free 800-443-1021Fax 212-888-6757www.thirdave.com