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The definition of security under the Investment Company Act, 15 U. Note, however, that under Section 3 a 1 A of the Investment Company Act, an issuer that holds itself out as being engaged primarily in the business of investing, reinvesting, or trading in securities is considered an investment company.
Thus, a Real Estate Fund that does not want to classified as an investment company should avoid making statements about its business that suggest that the fund is in the business of investing, reinvesting, or trading in securities. In some cases, where a Real Estate Fund is investing in securities and therefore needs to find an exclusion from registration but does not want to be bound by the requirements of the Section 3 c 1 investor limit or Section 3 c 7 investors must be qualified purchasers exceptions from the definition of investment company, it may be able to rely on the 3 c 5 C Exception.
This exclusion may apply where the Real Estate Fund is "not engaged in the business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates In general, a Qualifying Interest must represent an actual interest in real estate or be a loan or lien actually backed by real estate. Among the types of investments that the SEC staff has found to be Qualifying Interests are fee interests, installment land contracts, leaseholds, mortgage loans, deeds of trust, and other interests secured by real estate, condominiums, and cooperative housing loans, real estate and portfolios consisting of several different types of qualifying interests.
The SEC staff has also taken the position that interests in securities backed by mortgages or other interests in real estate, or interests in companies that invest in mortgages or other interests in real estate are Real Estate Related Assets. A Real Estate Fund should generally not be subject to regulation under the Advisers Act or the Investment Company Act if it invests solely in 1 direct fee interests in real estate; 2 single-member limited liability companies that invest solely in direct fee interests in real estate or 3 majority controlling interests in limited liability companies, or general partner interests in limited partnerships, that invest in real estate.
This is because these types of interests should generally not be deemed to be a security, and therefore the fund will not involve in investing in securities at all, which is a prerequisite to regulation under the both acts. Real estate fund managers often have conflicts of interest that are different than those of other private equity fund managers.
As always, it is important to identify those conflicts, disclose them to potential investors and create mechanisms for addressing them as they arise. Two such possible conflicts include:. A primary conflict of interest that arises in Real Estate Funds is the use of affiliates to provide services to the fund at rates determined by the fund sponsor. Some examples of these kinds of services include acquisition management, development management, construction management, leasing management, property management, and disposition management.
She said that the SEC staff is "concerned that disclosure about these arrangements may be non-existent or potentially misleading, particularly with regard to whether or not the related parties charge market rates. It is very important for Real Estate Fund managers both to disclose any fees that the fund will pay to related parties, to disclose the amount of those fees, and to have a mechanism such as requiring Limited Partner Advisory Committee consent for determining the amount of any fees to related parties that were not-disclosed and, perhaps even those that were , to be sure that they are at market rates.
Real estate fund managers should also maintain documentation that evidences that payments to related parties are at market rates. Another area of potential conflict for Real Estate Fund managers is the allocation of overhead expenses to the fund. In general, fund managers typically are restricted under fund governing documents from allocating any of their overhead to the fund.
Real Estate Fund managers need to be very careful, therefore, if they want to pass salaries of real estate professionals under their employ to the fund as they sometimes wish to do and believe is appropriate, because the use of their own employees eliminates the need to pay an arguably less-qualified third party to do the work for the fund.
If the manager plans to use this practice, then they should clearly disclose it in the offering documents, have a mechanism in place to ensure that the fund is paying market rates, and have an allocation procedure in place if the personnel serve multiple funds or business lines of the manager. There are some key ways in which Real Estate Fund economics potentially may vary from those of other private equity funds.
The primary potential variation can arise where the Real Estate Fund has current income e. While in most private equity fund waterfalls and even many Real Estate Fund waterfalls current income flows through the waterfall in the same manner as other income, some Real Estate Funds have separate waterfalls for current income and disposition proceeds. This occurs most often in Real Estate Funds that focus on current income generation e.
There are many different potential variations on how the dual waterfalls will work, but often the waterfall for current income will allow the general partner to start receiving a carried interest once the limited partners receive a certain preferred return even if they have not yet received a return of their capital, as would typically be the case if there were a single waterfall and likely will be the case in the disposition proceeds waterfall.
The use of hurdles is relatively common in real estate joint ventures, and as a result some Real Estate Fund managers also use hurdles as part of their fund waterfalls. These hurdles may be based on equity multiples, or they may be based on internal rates of return. The following are selected U. Real Estate Funds. Real Estate Fund on gains from U. While a thorough discussion of the different ways in which Real Estate Funds may address and attempt to mitigate the issues related to FIRPTA is beyond the scope of this practice note, two possible approaches include:.
Where a Real Estate Fund wishes to attract non-U. In this structure, the U. The goal of this structure is to reduce the effective rate of U. The debt must be carefully structured in order to navigate the U. Where a real estate fund wishes to attract either non-U. Tax filing obligations for non-U. Under recent legislation, non-U.
However, REITs are subject to a number of limitations as to their permitted assets and income and the tax benefits of this structure may be outweighed by such limitations and the costs of establishing and operating this kind of REIT. Unlike most private equity funds, Real Estate Funds may encounter issues related to taxation as "dealers. The classification of real estate for this purpose is a facts and circumstances test. Some primary indicia of dealer property classification include the owner's intention when it purchases the land to develop it for sale rather than hold it for investment , frequent sales of land, efforts to increase land values through development and improvements, and significant efforts to market and negotiate sales of the property.
Some Real Estate Funds may structure their investments to reduce the chance that they will be seen as dealer activity, including by stating in their governing documents that the fund's purpose is "investment" activity, holding real property for investment for at least one year after completion of development activities, and selling properties in bulk rather than one by one.
Real Estate Funds are a significant portion of overall private equity funds, and an important part of the U. Partially as a result, Real Estate Fund managers have come under heightened regulatory scrutiny, and therefore need particular guidance from their counsel. It is important that counsel assist their Real Estate Fund clients in analyzing whether and where they may need to register as investment advisers, help them with the resulting regulatory process and obligations, and also help prepare them for regulatory examination.
Likewise, Real Estate Fund counsel should help managers identify, disclose, and mitigate all potential conflicts of interest. In preparing fund documentation, Real Estate Fund counsel may be asked to help draft economic provisions that are different than those in traditional private equity funds.
Counsel also needs to consider the unique tax issues that arise from investments in real estate. In summary, to be effective counsel to Real Estate Fund clients, attorneys should familiarize themselves with the matters raised in this article and keep in mind that Real Estate Funds, while similar in many ways to other private equity funds, require specialized analysis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. All Rights Reserved. Password Passwords are Case Sensitive.
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Introduction While closed-end real estate private equity funds Real Estate Funds are generally structured similarly to traditional private equity funds, there are several key differences. Overview: Industry Overview and Types of Real Estate Funds Industry Overview Although Real Estate Funds make up only a portion of overall private closed-end funds, they nonetheless are a significant asset class in their own right.
Focus on Real Estate Funds For the first few years after that, the SEC staff focused on learning more about hedge funds and private equity funds. Real Estate Fund Strategies In order to understand and advise Real Estate Funds, it is important to be familiar with the kinds of strategies that they employ. This is a lower risk strategy that generally focuses on fully-leased multi-tenant properties in strong markets. This strategy involves lower leverage and generally has steady cash flows.
This is a moderate risk strategy that is similar to the core strategy but with some additional element of risk, such as imminent large lease expiration. Value add. This is a medium risk strategy that generally involves the purchase of property or other real estate assets that require some but not a high level of improvement.
This is a higher risk strategy that generally involves the purchase of property or other real estate assets that require a high level of improvement or investment. These funds purchase real estate for development or entitlement. The fund adds value and seeks a return based on the manager's expertise in obtaining entitlements and completing development. Distressed real estate. This strategy involves investment in distressed real estate assets at a low price, with plans to revitalize the asset and sell it at a higher price.
Real estate asset classes. Real Estate Funds may also focus on different types of real estate, such as agricultural, commercial, hospitality, industrial, multifamily residential, single family residential, and retail. Likewise, Real Estate Funds may focus on different geographic locations, such as certain U.
Regulatory Considerations All private fund managers need to consider regulatory requirements that may apply to them, including without limitation the Investment Advisers Act of , as amended Advisers Act , the Investment Company Act of , as amended Investment Company Act and related state laws. Investment Advisers Act The Advisers Act defines an "investment adviser" as any person who, for compensation, is engaged in the business of advising others or issuing reports or analyses regarding securities.
Howey Test While the Advisers Act definition of securities is not exactly the same as the definition under the Securities Act of , as amended Act or the Securities Exchange Act of , as amended, case law related to those definitions is relevant to the definition of security under the Advisers Act. Application of Law: When Real Estate Interests are "Securities" under the Advisers Act Many real estate funds hold only or primarily two types of assets: 1 membership interests in single member limited liability companies that in turn own fee title to real estate and 2 either general partner or limited partner interests in limited partnerships or comparable interests in limited liability companies that own fee title to real estate.
Private Funds All of the assets of private funds are considered securities portfolios. The 3 c 5 C Exception In some cases, where a Real Estate Fund is investing in securities and therefore needs to find an exclusion from registration but does not want to be bound by the requirements of the Section 3 c 1 investor limit or Section 3 c 7 investors must be qualified purchasers exceptions from the definition of investment company, it may be able to rely on the 3 c 5 C Exception.
Regulatory Conclusions Unique to Real Estate Funds A Real Estate Fund should generally not be subject to regulation under the Advisers Act or the Investment Company Act if it invests solely in 1 direct fee interests in real estate; 2 single-member limited liability companies that invest solely in direct fee interests in real estate or 3 majority controlling interests in limited liability companies, or general partner interests in limited partnerships, that invest in real estate.
Conflicts of Interest Real estate fund managers often have conflicts of interest that are different than those of other private equity fund managers. Two such possible conflicts include: Use of Affiliates to Provide Services A primary conflict of interest that arises in Real Estate Funds is the use of affiliates to provide services to the fund at rates determined by the fund sponsor.
This table describes the fees and expenses that you pay if you buy and hold shares of Third Avenue Real Estate Value Fund. The following example is intended to help you compare the cost of investing in Third Avenue Real Estate Value Fund with the cost of investing in other mutual funds. The Fund seeks to acquire these securities at a discount to what the Adviser believes is their intrinsic value. The Fund may also acquire senior securities, such as preferred stocks and debt instruments including high-yield, distressed and mortgage-backed securities that may be in default and may have any or no credit rating of real estate companies or loans secured by real estate that the Adviser believes have above-average yield potential.
Commodities Risk. Prices of commodities such as timber and oil have historically been very volatile. Reductions in commodity prices will likely cause the prices of the securities of companies holding real estate affected by those industries to decline. The value of high-yield, lower. A bankruptcy filing by an issuer may adversely and permanently affect the market position and operations of the issuer.
This means that the Fund may have investments in fewer issuers. A non-diversified fund can be more volatile than a diversified fund. A decrease in the performance of real estate securities may cause a drop in the per share value of the Fund, as there is no industry diversification to offset such a decrease. Real Estate Risk.
In addition to general market conditions, the value of the Fund will be affected by the strength of the real estate markets. The Adviser may identify opportunities in areas of the real estate sector that appear to be temporarily depressed. The prices of securities in this sector may tend to go down more than those of companies in other industries. The following bar chart and table provide an indication of the risks of investing in Third Avenue Real Estate Value Fund.
Michael Winer, Team Leader. Jason Wolf, Team Leader. Ryan Dobratz, Portfolio Manager since Third Avenue International Value Fund seeks long-term capital appreciation. This table describes the fees and expenses that you pay if you buy and hold shares of Third Avenue International Value Fund. The following example is intended to help you compare the cost of investing in Third Avenue International Value Fund with the cost of investing in other mutual funds. The Fund seeks to achieve its objective primarily by acquiring equity securities, including common stocks and convertible securities, of well-financed companies meaning companies with high quality assets and conservative levels of liabilities located outside of the United States.
While the Fund may invest in companies located anywhere in the world, it currently expects that most of its assets will be invested in the more developed countries and, under. The Fund may also acquire senior securities, such as preferred stocks and debt instruments including high-yield and distressed securities that may be in default and may have any or no credit rating , that the Adviser believes are undervalued. Foreign Securities and Emerging Markets Risk.
Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries, and as a result, the securities markets of emerging markets countries can be more volatile than more developed markets may be.
The value of high-yield, lower quality securities is affected by the creditworthiness of the. The Fund may invest from time to time in smaller and mid-size companies, whose securities tend to be more volatile and less liquid than securities of larger companies. The prices of securities in these industries may tend to go down more than those of companies in other. The following bar chart and table provide an indication of the risks of investing in Third Avenue International Value Fund.
Investment Adviser. Portfolio Managers. Matthew Fine, Team Leader. Amit Wadhwaney, Team Leader. Third Avenue Focused Credit Fund seeks long-term total return, which may include investment returns from a combination of sources including capital appreciation, fees and interest income. This table describes the fees and expenses that you pay if you buy and hold shares of Third Avenue Focused Credit Fund.
The following example is intended to help you compare the cost of investing in Third Avenue Focused Credit Fund with the cost of investing in other mutual funds. Additionally, certain other high-yield bonds may be unrated by rating agencies, but determined to be of similar quality as other below investment grade bonds and credit instruments by the Adviser.
In making these investments, the Adviser will seek to purchase instruments that the Adviser believes are undervalued. The Fund may have significant. Changing Distribution Levels Risk. The amount of the distributions paid by the Fund generally depends upon the amount of taxable income earned by the Fund from the investments it holds.
In certain circumstances the Fund may be treated as receiving taxable income even though no cash is received. The Fund may not be able to pay distributions or may have to reduce distribution levels if the cash distributions that the Fund receives from its investments decline.
Therefore, the prices of foreign securities in particular countries or regions may, at times, move in a different direction from those of U. High-Yield and Distressed Risk. The value of high-yield, lower quality securities is affected. The repayment of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer might not make any interest or other payments.
Typically such workout or bankruptcy proceedings result in only partial recovery of cash payments or an exchange of the defaulted obligation for other debt or equity securities of the issuer or its affiliates, which may in turn be illiquid or speculative. For example, a court could invalidate or subordinate a debt obligation of, or reclaim amounts paid by a debtor to, the Fund. To the extent that any such payments are recaptured from the Fund the resulting loss will be borne by the Fund and its investors.
The Fund may not be able to sell these investments at the best prices or at the value the. Fund places on them. Prices of securities have historically fluctuated. The Fund is non-diversified and may focus or concentrate its investments in fewer issuers than a diversified mutual fund of comparable size. The Fund may invest from time to time in smaller and mid-size companies whose securities.
The following bar chart and table provide an indication of the risks of investing in Third Avenue Focused Credit Fund. During the period shown in the above bar chart, the highest return for a quarter was 7. Thomas Lapointe, Team Leader. Nathaniel Kirk, Portfolio Manager since Edwin Tai, Portfolio Manager since Joseph Zalewski, Portfolio Manager since You may sell shares by making a redemption request of the Fund in writing or, if so elected on your account application, by telephone.
Purchase and sale transactions. Investment Philosophy of Third Avenue Funds. The Funds identify investment opportunities through intensive research of individual companies and, generally, do not focus solely on stock market conditions and other macro factors. The Funds may also invest in high-yield or distressed securities the Third Avenue Focused Credit Fund intends to invest a substantial amount of its assets in such securities. The Funds follow a strategy of long-term investing. The guidelines supplement limits imposed by regulatory agencies and the Prospectus.
The guidelines are not meant to impose rigid limitations and from time to time the Committee fully expects exceptions to occur. However, exceptions may only occur with prior approval from the Committee. These guidelines serve to provide enhanced oversight of more concentrated positions.
Who May Want to Invest. The Funds, other than Third Avenue Focused Credit Fund, may be appropriate for investors seeking long-term capital appreciation. Third Avenue Focused Credit Fund may be appropriate for long-term investors seeking alternatives to equity investments and seeking long-term total return, which may include returns from a combination of sources including capital appreciation, fees and interest income.
The Funds are not appropriate for short-term investors or those primarily seeking current income or for those investors who cannot withstand the risk of loss. Investment Strategies. Third Avenue Value Fund. The Fund may also acquire senior securities, such as convertible securities, preferred stocks and debt instruments including high-yield and distressed securities that may be in default and may have any or no credit rating , that the Adviser believes are undervalued.
Acquisitions of these senior securities and debt instruments will generally be limited to those providing: 1 protection against the issuer taking certain actions which could reduce the value of the security, and 2 above-average current yields, yields to events e. The Fund may invest in certain derivative instruments primarily to hedge against foreign currency risk and, at certain times, market, industry or geographic risk.
Examples of companies that might qualify under one of these categories include, but are not limited to:. Third Avenue International Value Fund. The Fund may invest in securities of companies of any capitalization, including, from time to time, smaller-capitalization companies. The Fund may invest in. Third Avenue Focused Credit Fund. The Fund does not seek to invest for current yield, but rather for total return, which may include investment returns from a combination of sources including capital appreciation, fees and interest.
High-yield bonds, generally, are bonds that are rated below investment grade by some or all of the relevant rating agencies. Additionally, certain other high-yield bonds may be unrated by rating agencies but are determined by the Adviser to be of similar quality as other below investment grade bonds and credit instruments. Bank debt is debt that has been issued to one or more banks or commercial lenders by a company and usually carries a lien or senior loan on the assets of the company.
This type of debt is often syndicated among large institutions and traded among them and in private secondary markets. Loans made to bankrupt companies or to refinance distressed companies will most often have a lien on the assets of the company and can have a super-priority over other obligations of the company. Convertible debt is debt that is convertible into other securities, usually common stock of the company, or can be exchanged for securities of a related issuer. In making these investments, the Adviser will seek to purchase instruments that the Adviser believes are undervalued, and the Adviser may sometimes use derivatives for hedging.
The Fund may have significant investments in distressed and defaulted securities and intends to focus on a relatively small number of issuers. The Fund may invest without limitation in distressed securities or other debt that is in default or the issuers of which are in bankruptcy. The Fund invests in companies regardless of market capitalization. It may invest in both domestic and foreign securities, including securities in emerging markets. The Fund may hold significant positions in equity securities, including common stocks and convertible securities, or other assets that the Fund receives as part of a reorganization process, and may hold those assets until such time as the Adviser believes that a disposition is most advantageous.
The Fund may also purchase significant positions in equity securities, including common stocks and convertible securities. Investment Risks. The magnitude of these fluctuations will be greater when the maturity of the debt securities is longer. In addition, the Federal Reserve has purchased large quantities of securities issued or guaranteed by the U.
As the Federal Reserve tapers or reduces Quantitative Easing, and when the Federal Reserve raises the federal funds rate, there is a risk that interest rates across the U. Because the Funds may determine not to hedge their foreign currency risk, the U. From time to time, foreign capital markets may exhibit more volatility than those in the U.
Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries, and as a result, the securities markets. Issuers of high-yield securities are not as strong financially as those with higher credit ratings, so the securities are usually considered speculative investments. These issuers are more vulnerable to financial setbacks and recession than are more creditworthy issuers, which may impair their ability to make interest and principal payments.
The Funds may also invest in distressed securities, which the Adviser considers to be issued by companies that are, or might be, involved in reorganizations or financial restructurings, either out of court or in bankruptcy. The value of the Funds will similarly fluctuate and you could lose money.
The Funds are non-diversified and may focus or concentrate their investments in fewer issuers than a diversified mutual fund of comparable size. A concentrated or non-diversified fund can be more volatile than a diversified fund, and volatility may be expected to increase when a Fund makes significant investments in a single issuer or issuers within a particular industry or geographic region because the Fund is more susceptible to adverse effects from such issuer or issuers.
The Funds may invest from time to time in smaller and mid-size companies whose securities tend to be more volatile and less liquid than those of larger companies. The Funds may not be able to sell these investments at the best prices or at the value the Funds place on them.
The Funds frequently identify opportunities in industries that appear to be temporarily depressed. The prices of securities in these industries may tend to go down. When a Fund owns significant non-equity investments in a rising stock market particularly the Third Avenue Focused Credit Fund, which invests primarily in credit instruments , a Fund may produce smaller gains than a fund invested primarily in stocks.
In addition to general market conditions, the value of the Funds investing in real-estate related securities particularly the Third Avenue Real Estate Value Fund, which focuses its investments in real estate will be affected by the strength of the real estate markets.
Prices of commodities, such as timber and oil, have historically been very volatile. There is even a potential risk of loss by the Funds of their entire investment in such securities. For example, a court could invalidate or subordinate a debt obligation of, or reclaim amounts paid by a debtor to, the Funds.
To the extent that any such payments are recaptured from the Funds the resulting loss will be borne by the Funds and their investors. The Adviser, on behalf of the Funds, may also participate on committees formed by creditors to negotiate with debtors with respect to restructuring issues. The amount of the distributions paid by each Fund generally depends upon the amount of taxable income earned by the Fund from the investments it holds. In certain circumstances a Fund may be treated as receiving taxable income even though no cash is received.
A Fund may not be able to pay distributions or may have to reduce distribution levels if the cash distributions that it receives from its investments declines. The Investment Adviser and Distributor. The Adviser provides investment advisory or sub-advisory services to seven other open-end U.
The Adviser or its predecessor has been an investment adviser for mutual funds since its organization in The Distributor receives no compensation for distributing the Funds. Affiliated Managers Group, Inc. In general, for a period of up to 36 months from the time of any deferral, reimbursement, or payment pursuant to the above-described contractual expense limitations, the Adviser may recover from each class of the Fund fees deferred and expenses paid to the extent that such repayment would not cause the Net Annual Fund Operating Expenses of each class to exceed the contractual expense limitation amounts set forth above, but any repayment will not include interest.
The Expense Limitation Agreement can only be terminated prior to expiration by the independent Trustees of the Fund. All of the Third Avenue Funds are managed by teams of portfolio managers. Each team works collaboratively in developing investment strategies and selecting securities. Each team has a Leader or Co-Leaders who have final authority over security selection and portfolio construction. He joined Third Avenue Management in Prior to joining Third Avenue, Mr.
Lapey was an equity research analyst with Credit Suisse First Boston and Salomon Brothers, covering the housing and furniture industries. Earlier in his career, Mr. Lapey received an M. Cunningham spent five years as the Research Director at Olstein Funds.
Cunningham holds a B. He joined the Adviser in and has focused his efforts on managing high net worth and institutional separate accounts. Additionally, Mr. Previously, Mr. Lehmann was an analyst at Robert M. Lehmann holds a B. Previously, Ms. Lie was an equities analyst at Prudential Securities where she covered technology and imaging stocks. Lie began her career at Motorola, where she managed a team of software engineers and developed both software and hardware components for encryption key management systems.
Lie has an M. He joined the Adviser in Jensen received an M. He joined Third Avenue in , and focuses his research on smaller capitalization companies across industries, with particular expertise in energy, basic materials, industrials and financials. Bui served as portfolio manager at Stark Investments, where he co-managed a long-short U. Bui holds a B. He joined Third Avenue in and has focused on small-cap equities.
Page was a small-cap value analyst with Citizens Advisers, a socially responsible investment firm. Earlier in his career, he helped cover technology companies at Robertson Stephens. Page has an M. Winer owned and managed a real estate development business. He is currently a Director of Tejon Ranch Company, a land development and agribusiness company, and Newhall Holding Company, a privately-held land development company.
Winer received his B. Wolf analyzed U. Wolf has a B. He joined Third Avenue in Dobratz was a research analyst at Morningstar where he was the primary analyst on several North American Real Estate Investment Trusts, real estate holding companies and homebuilders. Dobratz holds an M. Amit B. Wadhwaney 1. Wadhwaney was a securities analyst, and subsequently Director of Research, for M. Whitman, LLC. Wadhwaney was also a paper and forest products analyst at Bunting Warburg, a Canadian brokerage firm.
Wadhwaney holds an M. Honors with Distinction and an M. He has been involved with the Fund since Fine joined Third Avenue in Wadhwaney in an effort to identify investment opportunities. Fine has conducted investment research on location in more than twenty countries across North America, Latin America, Europe and Asia. Fine holds a B. He helped launch the Fund with his arrival at Third Avenue Management in He joined Third Avenue in , after seven years at J.
While at J. Morgan, he was most recently in high-yield research, specializing in health care and covering over 80 issuers. Kirk worked on J. He also worked with J. Kirk holds an M. In , Mr. Prior to that Mr. Tai holds a B. He has an M. Previously, he was a distressed debt and special situations portfolio manager at Credit Suisse Securities. Prior to that he was a senior distressed debt and special situations analyst at Investment firm 3V Capital, which he helped build out as the spun-off proprietary trading group of Libertas Partners.
Zalewski has a B. Investors can choose from among two classes of shares of a Fund: Investor Class and Institutional Class. As described above, the classes differ to the extent they bear certain class specific minimums and expenses. When choosing a share class, it is important to consider your method of investing, directly with a Fund or through certain broker-dealers or other financial intermediaries, the amount you plan to invest and the expenses of each class.
The Investor Class shares have no up-front sales charges or deferred sales charges. Shareholders in the Investor Class shares also pay distribution 12b-1 fees of 0. Institutional Class shares have no up-front sales charges or deferred sales charges. Shareholders in the Institutional Class shares do not pay any distribution 12b-1 or service fees.
Institutional Class shares may be offered without regard to the minimum initial investment requirement to investors purchasing such shares through qualified plans, wrap fee accounts or other fee-based programs. Converting from Investor Class to Institutional Class shares may not be available at certain financial intermediaries, or there may be additional costs involved associated with this exchange charged by your financial intermediary.
You may convert from Investor Class to Institutional Class shares by calling Third Avenue Funds at or your financial intermediary if you hold your investment in the Fund through a financial intermediary. A shareholder may receive a different number of Investor Class shares than the number of Institutional Class shares converted, although the total dollar value will be the same.
A Fund may also redeem your shares if your account balance falls below a certain amount. If you are one of the Original Institutional Class Shareholders, your account is exempt from this conversion. A conversion from Investor Class shares to Institutional Class shares of the same Fund or from Institutional Class shares to Investor Class shares of the same Fund pursuant to the preceding paragraphs should generally not be a taxable exchange for federal income tax purposes.
If you invest through a third party such as a bank, broker-dealer, trust company or other financial intermediary, rather than directly with a Fund, certain purchase and redemption policies, fees, and minimum investment amounts may differ from those described in this Prospectus, including possible fees for Original Institutional Class Shareholders purchasing additional shares. This compensation may provide such affiliated or unaffiliated entities with an incentive to favor sales of shares of a Fund over other investment options.
Because these distribution fees are deducted from the net assets of. The Plan permits the Investor Class to pay a 0. The price you will pay for a share of a class of the Funds is the NAV of that class. The NAV of each class of a Fund is determined by dividing the value of its allocable share of portfolio securities, cash, and other assets, including accrued interest and dividends, owned by the Fund, less all liabilities of the class, including its accrued expenses, by the total number of outstanding shares of the class.
Your order will be priced at the next NAV calculated following receipt of your transaction in good order by the transfer agent or your broker-dealer or financial intermediary. Your order will be deemed to be received before the close of trading if the order was received before that time by the transfer agent or by certain broker-dealers or financial intermediaries.
Certain short-term securities with maturities of 60 days or less may be valued based on amortized cost. These types of assets can include high-yield bonds, defaulted securities and private investments that do not trade publicly, among other things. Details of fair valuation methodologies and determinations for all fair valued positions.
If the principal market for a security has closed before the time as of which the NAV is being calculated, the Funds, pursuant to procedures approved by the Board of Trustees, may consider information regarding more recent trades on other markets along with other factors. The Trust has retained a third-party service provider that, under certain circumstances selected by the Trust, applies a statistical model to provide fair value pricing for equity securities whose principal markets are no longer open when the Funds calculate their NAVs if certain events have occurred after the principal markets have closed but prior to the time as of which the Funds compute their NAVs.
Foreign securities held by a Fund generally trade on foreign markets which may be open on days when the NYSE is closed. The Funds generally will not accept new account applications to establish an account with a non-U. The Adviser utilizes a portion of its assets to pay all or a portion of the charges of various programs that make shares available to their customers. Subject to tax limitations and approval by the Board of Trustees on a Fund-by-Fund basis, each of the Funds pays a portion of these charges representing savings of expenses the Fund would otherwise.
See below for mailing instructions. Whitman LLC. You may or may not need to complete and sign an account application when purchasing through a broker-dealer or financial intermediary, depending on its arrangements with the Funds. The Funds reserve the right to reject any purchase order. Assuming BNY Mellon Investment Servicing or the Funds properly act on telephone or Internet instructions and follow reasonable procedures to protect against unauthorized transactions, neither BNY Mellon Investment Servicing nor the Funds will be responsible for any losses due to telephone or Internet transactions.
You may be responsible for any fraudulent telephone or Internet order as long as BNY Mellon Investment Servicing or the Funds take reasonable measures to verify the order. Telephone purchase orders will only be accepted from financial institutions which have been approved previously by the Funds or the Adviser, or by investors who have established ACH capabilities for an account.
To choose this option, complete the Online Account Access section of the Application or make subsequent arrangements in writing. Only bank accounts held at domestic institutions that are ACH members may be used for Internet transactions. All ACH transactions will be considered in good order on the date the payment for shares is received by the Funds. This process may take up to 48 hours from the time the shareholder places the order with BNY Mellon Investment Servicing.
The Fund may alter, modify or terminate the Internet purchase option at any time. Paying for Shares by Mail. If you are sending documents via U. Box Providence, RI Additional Payments. Prior to sending a wire, please notify BNY Mellon Investment Servicing at , Option 1 to insure proper credit to your account. Direct your bank to wire funds as follows:. ABA : Acct : Heavy wire traffic over the Federal Reserve System may delay the arrival of purchase orders made by wire.
Under this plan, a predetermined amount, selected by you, will be deducted from your checking account. The Automatic Investment Plan option may be elected on the Application. Transactions made through your broker-dealer or other financial intermediary may be subject to charges imposed by the broker-dealer or financial intermediary, who may also impose higher initial or additional amounts for investment than those established by the Funds.
At the sole discretion of the Adviser, the initial and any additional investment minimums may be waived for certain investors. When purchasing shares directly from a Fund, you may pay by check payable to the particular Fund. The Funds will only accept checks drawn in U. Starter checks on newly established bank accounts will not be accepted.
The Funds will not accept any of the following cash equivalents: money orders, travelers checks, cashier checks, bank checks, official checks and treasurers checks, foreign bank drafts, payable through checks or third party checks, or other third party transactions. If you purchase Fund shares by check, you may not receive redemption proceeds until there is a reasonable belief that the check has cleared, which may take up to fifteen calendar days after the purchase date.
If you purchase shares through a broker-dealer or other financial intermediary, they are responsible for forwarding or arranging payment promptly. The Funds reserve the right to cancel any purchase order, and will do so, under ordinary circumstances, within 48 hours of receipt of the order. In the interest of economy and convenience to investors, the Funds no longer issue certificates representing Fund shares.
Individual Retirement Accounts. The account will be maintained by the custodian, BNY. Fees are subject to change. Annual maintenance fees will automatically be deducted from the IRA account, unless a check for the fees is received by BNY Mellon Investment Servicing prior to December 15th of each year.
You may request distributions from your IRA via telephone. Important Note: If you do not want telephone liquidation privileges to apply to your account you can elect to opt out on your application or contact BNY Mellon Investment Servicing at the number above.
If you are self-employed, you may be able to purchase shares of the Funds through tax-deductible contributions to retirement plans for self-employed persons, known as Keogh Plans. However, the Funds do not currently act as a sponsor or administrator for such plans.
Fund shares may also be purchased for other types of qualified pension or profit sharing plans which are employer-sponsored, including deferred compensation or salary reduction plans, known as k plans, which give participants the right to defer portions of their compensation for investment on a tax-deferred basis until distributions are made.
Distribution and Servicing Arrangements. The Adviser or its affiliates pay certain costs of marketing the Funds out of their own resources. The Adviser or its affiliates may also share with third party financial intermediaries certain marketing expenses or pay for the opportunity to distribute the Funds; sponsor informational meetings, seminars and client awareness events; support marketing materials or business building programs; or pay third parties in connection with marketing to financial intermediaries.
The Adviser or its affiliates may also pay amounts to third parties, including brokerage firms, banks, financial advisors, retirement plan service providers, and other financial intermediaries for providing recordkeeping, subaccounting, transaction processing and other administrative services, and a portion of these payments may be borne by the Funds.
The amount of these payments is determined from time to time by the Adviser and may differ among such financial intermediaries. Such payments may provide incentives for financial intermediaries to make shares of the Funds available to their customers, and may result in the Funds having greater access to such parties and their customers than would be the case if no payments were made.
These payment arrangements will not change the price an investor. You may wish to inquire whether such arrangements exist when purchasing or selling or evaluating any recommendations to purchase or sell shares of the Funds through any intermediary. You may redeem your shares on any day during which the NYSE is open for trading, either directly from a Fund or through certain broker-dealers or other financial intermediaries.
Fund shares will be redeemed at the NAV next calculated after your order is received in good order by a Fund or its designees. Redemption requests that contain a restriction as to the time, date or share price at which the redemption is to be effective will not be honored. You can redeem less than all of your shares, but if you retain shares with a value below a minimum amount, your account may be closed at the discretion of the Adviser. If you are sending documents via express delivery, registered or certified mail, send a written request, together with any share certificates that have been issued, to:.
Written redemption requests, stock powers and any share certificates issued must be submitted and signed exactly as the account is registered. Such requests may require a signature guarantee and additional documents. Telephone and Internet Redemptions. You may redeem shares by telephone or Internet by electing this service on the Application. You may redeem. Transactions may be made on any business day until the close of the NYSE, normally p.
Redemption proceeds will be mailed to your address of record, or, if previously established, sent to your bank account via wire or ACH. In this regard, BNY Mellon Investment Servicing will require personal identification information before accepting a telephone or Internet redemption order.
Please contact your broker-dealer or other financial intermediary for information on how to redeem your shares through them. A shareholder may incur a brokerage fee for such a transaction, no part of which is received by the Adviser or the Funds. The transfer agent will automatically deduct the wire fee from the redemption proceeds. Broker-dealers handling redemption transactions generally may charge a service fee.
The Funds have the right to redeem your shares at current NAV at any time and without prior notice if and to the extent that such redemption is necessary to reimburse a Fund for any loss sustained by reason of your failure to make full payment for shares of the Fund you previously purchased or subscribed for. Whether the Trust will exercise the right to redeem shareholder accounts will be determined by Trust management on a case-by-case basis. Payment of Redemption Proceeds.
A Fund will usually make payment for redemptions of Fund shares within one business day, but not later than seven calendar days, after receipt of a redemption request. You should note that you may not receive redemption proceeds of recently purchased Fund shares that have been paid for by check until there is a reasonable belief that the check has cleared, which may take up to fifteen calendar days after the purchase date. If you request payment of redemption proceeds by wire transfer, payment will be transmitted only on days that commercial banks are open for business and only to the bank and account previously authorized by you on your application or separate signature guaranteed letter of instruction.
Neither the Funds, nor the transfer agent, will be responsible for any delays in wired redemption proceeds due to heavy wire traffic over the Federal Reserve System. A notary public is not an acceptable guarantor. Signature guarantees are required on any:.
Additional documents may be required when shares are registered in the name of a corporation, partnership, association, agent, fiduciary, trust, estate or other. If you did not previously elect the telephone redemption service on your Application, or wish to change any information previously provided to the Funds including the bank to which redemption proceeds are to be wired , or wish to add information to establish electronic transfer capabilities ACH , you must submit a signature guaranteed letter of instruction.
This is designed to protect you and the Funds and their service providers from fraud. Escheatment of Shares to State. The escheatment time period varies by state. Notice of all changes concerning the Systematic Withdrawal Plan must be received by BNY Mellon Investment Servicing at least two weeks prior to the next scheduled payment. Frequent Trading and Early Redemption Fee. The Funds are intended for long-term investors and not for those who wish to trade frequently in their shares.
The Funds will not knowingly accommodate frequent trading in Fund shares. The Funds believe that excessive short-term trading of Fund shares creates risks for the Funds and their long-term shareholders, including interference with efficient portfolio management, increased administrative and brokerage costs,. The procedures of the Funds require that the Adviser monitor the trading activities of Fund accounts on a regular basis. Each Fund reserves the right to refuse a purchase order including an order placed as part of an exchange for any reason if the Adviser believes, in its sole discretion, that a shareholder is engaging in short-term trading activities that may be harmful to the Fund and its shareholders.
Transactions accepted by a financial intermediary from a shareholder who has previously been barred from future purchases are not deemed accepted by the Funds and may be cancelled or revoked by the Funds. In the event that any purchase order is refused or revoked, the purchase price will be refunded as soon as possible. To discourage frequent short-term trading in Fund shares, each Fund imposes a redemption fee on redemptions, including exchanges to other Third Avenue Funds, according to the following schedule:.
Third Avenue Value Fund,. For example, if you purchase shares of any Fund you will be charged a fee for any redemptions made within the following 60 days, beginning on the purchase date, and including the 60th day. This redemption fee is assessed and retained by the Funds for the benefit of the remaining shareholders. The redemption fee is not a sales charge and is not paid to the Adviser or any third party.
The redemption fee applies to redemptions from the Funds and exchanges from one Fund to another Fund, but not to redemptions of shares acquired through dividend or capital gain distributions which have been automatically reinvested into these Funds. Each Fund reserves the right to modify the terms of, or terminate, this fee at any time. The fee is applied to the shares being redeemed or exchanged in the order in which they were purchased.
For this purpose, shares of any Fund will be treated as redeemed as follows: first, reinvested shares; second, shares held more than sixty 60 days after issuance; and third, shares held for sixty 60 days or less after issuance. The Funds will not impose redemption fees in the following situations:.
The Funds monitor activity at the omnibus level in order to try to identify unusual trading patterns that may indicate short-term trading by individual accounts within the omnibus account. The Funds reserve the right to remove any waiver granted to such a party. Utilizing these information rights will assist. To assist in discouraging attempts to arbitrage pricing of securities particularly in Third Avenue International Value Fund , the Trust has retained a third-party provider that, under certain circumstances, applies a statistical model to provide fair value pricing for certain equity securities.
Inter-Fund Exchange Privilege. You may exchange shares of a class of one Fund of the Trust for shares of the same class of another Fund of the Trust, in writing or by telephone, at NAV without the payment of any fee or charge, except that a fee will be applicable upon the following: the exchange of shares of any Fund held for sixty 60 days or less after issuance. An exchange is considered a sale of shares and may result in capital gain or loss for federal and state income tax purposes.
If you want to use this exchange privilege, you should elect the service on your Application. If the Funds or their designees receive exchange instructions in writing, by telephone at , or by Internet at www. For an exchange request to be in good order, it must include your name as it appears on the account, the account number, the amount to be exchanged, the names of the Funds from which and to which the exchange is to be made and a signature guarantee as may be required.
As a regulated investment company, a Fund is not allowed to utilize any net operating loss realized in a taxable year in computing investment company taxable income in any prior or subsequent taxable year. As more fully described in the SAI, a Fund is allowed to carry forward certain capital losses. Each Fund expects. The Third Avenue Focused Credit Fund intends to pay dividends from income it earns on its investments less expenses on a calendar quarter basis. Third Avenue Focused Credit Fund intends to make capital gains distributions, if any, typically in December of each year, and may pay additional distributions at other times in order to avoid the excise tax discussed above.
Distributions from investment company taxable income, which includes short-term capital gains, are subject to tax as ordinary income. Distributions of net long-term capital gain are subject to tax as a long-term capital gain regardless of the length of time you have held Fund shares.
Each Fund will notify you of the tax status of ordinary income distributions and capital gain distributions after the end of each calendar year. Shareholders automatically reinvesting distributions in the form of additional shares of the same class of the Fund will generally be treated for federal income tax purposes in the same manner as if they had received a cash distribution and will have a cost basis for federal income tax purposes in each share received equal to the NAV of a share of a Fund on the date of distribution.
If you purchase shares at a time when a Fund has recognized income or capital gains which have not yet been distributed, the subsequent distribution may result in taxable income to you even though such distribution may be, for you, the economic equivalent of a return of capital. You will generally recognize taxable gain or loss on a sale, exchange or redemption of shares in an amount equal to the difference between the amount received and your cost basis in such shares. This gain or loss will generally be capital and will be long-term capital gain or loss if the shares were held for more than one year.
Any loss recognized by shareholders upon a taxable disposition of shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends received with respect to such shares. A loss realized on the disposition of shares of a Fund will be disallowed to the extent identical or substantially identical shares are acquired in a day period beginning 30 days before and ending 30 days after the date of such disposition.
In that event, the basis of the replacement shares of a Fund will be adjusted to reflect the disallowed loss. You should be aware that an exchange of shares in a Fund for shares in other Funds operated by the Trust is treated for federal income tax purposes as a sale and a purchase of shares, which may result in recognition of a gain or loss and be subject to federal income tax.
The Federal tax law generally requires that the cost basis and holding period of mutual fund shares be reported to both the Internal Revenue Service and shareholders for sales, redemptions or exchanges of mutual fund shares that. This information will generally be reported on Form B.
The cost basis of a share is generally the purchase price, adjusted for dividends, returns of capital and other corporate actions. If you hold shares in a Fund through a broker or another nominee , please contact that broker or nominee with respect to the reporting of cost basis and available elections for your account.
The applicable cost basis method will be used to determine which specific shares you are treated as selling when there have been multiple purchases on different dates at differing share prices i. Therefore, the cost basis method used may impact the amount of the capital gain or loss recognized and the character long-term or short-term of such gain or loss.
The Funds do not recommend any particular method of determining cost basis. The Funds are not required to, and in many cases the Funds do not possess the information to, take all possible basis, holding period or other adjustments into account in reporting cost basis information to you. Therefore, shareholders and their tax advisers should carefully review the cost basis information provided by the Funds.
You are encouraged to consult your tax adviser regarding the application of the cost basis reporting rules and, in particular, which cost basis calculation method you should select. The SAI contains a more detailed summary of the federal tax rules that apply to the Funds and their shareholders. Legislative, judicial or administrative action may change the tax rules that apply to the Funds or their shareholders and any such change may be retroactive.
The preceding discussion is meant to be only a general summary of the potential federal income tax consequences of an investment in the Funds by U. The tax law is subject to revision and special rules may apply depending upon your specific tax status or if you are investing through a tax-deferred retirement account. You should consult your tax advisers as to the federal, state, local and non-U. You should specify on your Application how you wish to receive distributions.
If no election is made on the Application, all distributions will automatically be reinvested in additional shares of that class of the Fund. Each Fund offers four options:. Any distribution payments returned by the post office as undeliverable will be reinvested in additional shares of the same class of the applicable Fund at the NAV next determined.
The Funds may be required to backup withhold on taxable dividends and certain other payments to shareholders who do not furnish to the Funds their correct taxpayer identification number in the case of individuals, their social security number , and make certain certifications, or who are otherwise subject to backup withholding. Investors should be sure to provide this information when they complete the Application.
Backup withholding is not an additional tax.
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