2014 tam annual and shareholder letters

Third Avenue Value Fund

Third Avenue Small-cap Value Fund

Third Avenue real estate Value Fund

Third Avenue International Value Fund

Third Ave nue Focused credit Fund

Portfolio Manager Commentary and Annual Report

ocTober 31, 2014

Third Avenue Funds

THE POWER OF ORIGINAL THINKING

This booklet consists of two separate documents

T H I R D AV E N U E F U N D S

Portfolio Manager commentary

Chairman’s Letter Page 1

Third Avenue Value Fund (TAVFX, TVFVX) Page 4

Third Avenue Small-Cap Value Fund (TASCX, TVSVX) Page 10

Third Avenue Real Estate Value Fund (TAREX, TVRVX) Page 14

Third Avenue International Value Fund (TAVIX, TVIVX) Page 19

Third Avenue Focused Credit Fund (TFCIX, TFCVX) 7

T H I R D AV E N U E F U N D S

Annual report

Third Avenue Value Fund Page 1

Third Avenue Small-Cap Value Fund Page 8

Third Avenue Real Estate Value Fund Page 15

Third Avenue International Value Fund Page 22

Third Avenue Focused Credit Fund Page 28

Statement of Assets and Liabilities Page 38

Statement of Operations Page 40

Statements of Changes in Net Assets Page 42

Statement of Cash Flows Page 44

Financial Highlights Page 45

Notes to Financial Statements Page 55

4 Q 2 0 1 4 T h i r d A v e n u e F u n d s P o r t f o l i o M a n a g e r C o m m e n t a r y

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Third Avenue Value Fund Page 4

Third Avenue Small-Cap Value Fund Page 10

Third Avenue Real Estate Value Fund Page 14

Third Avenue International Value Fund Page 19

Third Avenue Focused Credit Fund Page 27

THIRD AVENUE FUNDS Portfolio Manager Commentary

October 31, 2014

Letter from the Chairman

Inside Portfolio Manager Commentary from

Dear Fellow Shareholders,

Efficient Market Theorists (EMTs) place a premium value on being ignorant about

companies and the securities the companies issue. Such EMTs include most financial

academics as well as promoters of Index Funds and Exchange Traded Funds (ETFs) such as

John C. Bogle, founder of the Vanguard Group. For these EMTs, research is restricted to

studying markets and security price fluctuations. To EMTs the study of companies and

securities is someone else’s business.

For EMTs, trying to conduct research on companies and securities is a waste of time and

money. They believe that passive investors should hold funds having the lowest expense

ratios in the form of ETFs and Index Funds which do not have to bear the expense of

having to undertake fundamental research in depth.

To prove that fundamental research is useless for passive market participants, EMTs

correctly point out that no active investment vehicles (from Mutual Funds to ETFs)

outperform a market or benchmark consistently. Consistently is a dirty word meaning all

the time. Consistency is an absolutely phony test because it de facto imposes a short term

investment horizon. The most any active investor (or any investor for that matter) can

hope to achieve is to outperform (or at least equal the performance after fees) most of

the time, on average, and over the long term. Some mutual funds, such as those managed

by Third Avenue, are value funds where buy, sell and hold decisions are made based

almost wholly on examining in depth companies and the securities they issue. Other

mutual funds are run by high volume traders who place primary emphasis on forecasting

near term market movements and near term security prices. Many value funds, including

most of those managed by Third Avenue Management (TAM), do outperform most of the

time, on average, and over the long term as was demonstrated to investors at the October

2014 Third Avenue Value Conference. I do agree that the average mutual fund which

concentrates on forecasting markets and security prices probably has a very tough time

trying to outperform consistently. But those Funds are not TAM Funds.

An important factor that EMTs seem to miss completely is that the vast majority of Wall

Street analysis and Wall Street wealth derives from the fundamental in depth analysis of

companies and securities, not from the study of markets and securities prices. These

individuals and entities which focus on companies and securities include, beside Value

Investors, Active Investors, Control Investors, Distress Investors, Credit Analysts, and

promoters of pre Initial Public Offerings (IPOs) of Venture Capital undertakings. Certainly

Martin J. Whitman Chairman of the Board



2


the vast majority of investment fortunes on Wall Street are made by promoters or investors who

focus on the in depth study and understanding of companies and the securities they issue, not by

passive traders.

If a passive investor wants to undertake an in depth analysis of individual companies and individual

securities, it has never been easier than it is now in 2014. Subsequent to the Securities Acts

Amendments of 1964, there has been a disclosure explosion in the US and also in Canada, the

United Kingdom, Hong Kong and much of Europe. It is now possible for an outsider to know more

about more companies than ever before and have the information be accurate. As evidence of this,

just look at the successful take-over of companies in hostile or semi-hostile changes of control since

the 1980’s where having non-public information is a show-stopper.

For Third Avenue today, it is not so much about how we access the information available in the

public domain about the companies that we research, it is about our superior use of that

information to make buy, sell or hold decisions. Another differentiating factor to be a successful,

long term, value investor in equities as an analyst is to pay considerable attention to the credit-

worthiness of an individual issuer. This is something that seems alien to most EMTs; for example,

Modigilani, Miller and Merton were awarded Nobel Prizes for writing, in effect, about how important

it was to be indifferent to the quality of corporate balance sheets. In fact, the future is so

unpredictable that the value investor has to rely heavily on strong balance sheets of companies to

be able to survive through dangerous and unpredictable periods such as 2008 and 2009.

The problem with most financial academics is that they think efficient markets are all pervasive. That

is just not so. Efficient markets certainly do exist for market participants who operate without any

knowledge, or any interest, in understanding companies and the securities companies issue.

Efficient markets also exist for securities that can be analyzed by referring to only a very few

computer programmable variables. These securities are mostly “sudden death” securities such as

options, warrants and risk arbitrage where there will be relatively determinate work-outs in

relatively determinate periods of time, such as when a cash tender offer exists. The vast majority of

securities seem to exist in relatively inefficient markets, such as exist for long-term, value investors

dealing in markets characterized by the extreme short termism of market participants. The basic

problem with academics is that they take a special case, “sudden death” securities, and apply the

principles valid there to all securities. That is, of course, not unexpected for people trained only to

examine markets (not companies) and security price fluctuations (not securities).

While I think the concept of efficiency entails assuming the existence of a logical fair value price,

there are ways of explaining why inefficient pricing exists and persists. For example, today many

rapidly growing, blue chip Hong Kong listed equities of well financed companies, sell at 40% to 80%

discounts from readily ascertainable Net Asset Value (NAV) and two times to six times reported

earnings. It seems likely such huge discounts and low price-to-earnings ratios could not exist in the

Hong Kong market if there were any prospects in any of these companies for changes of control or

going private –two resource conversion events.

One point about low turnover value mutual funds, such as those which are an integral part of TAM:

an investor ought to look at more than past performance. Importantly, what kind of protections do

funds, such as Third Avenue Value Fund provide against financial catastrophe? I think a lot. First, if

the Fund’s portfolio consists largely of the common stocks of well-financed companies, bad times


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such as 2008 provide well-managed companies with opportunities to make highly attractive

acquisitions of companies and assets such as was the case, among others, for Brookfield Asset

Management and Wheelock & Company in 2008 and 2009. Second, most of the time, for most of

the common stocks of companies held in the portfolio of any mutual fund, NAV will be higher in

the next reporting period than it was in the prior period. This offers no guaranty of favorable

market price behavior for the mutual fund, but it may tend to put the long term odds in favor of

good fund stock price performance. Third, and most important, the Investment Company Act of

1940, as amended, provides more protection for Fund shareholders than I think does any other

set of regulations in the world. To summarize, important investment protections for fund investors

in Registered Investment Companies include the following:

o As a practical matter, a mutual fund cannot borrow except in dire emergencies

o The fund has to meet certain diversification requirements

o “Affiliated” transactions are restricted

o Fees are controlled, expenses are limited

o Fund shareholders have the right to receive 100% of net income in annual cash payments

Note that the actual management of a value fund, rather than a high turnover trading fund, is

similar to the management of many non-trading hedge funds. The fees charged by value funds

tend to be only a fraction of the fees charged by hedge funds.

Finally, I think our readers might find it interesting to contrast what TAM does as a value manager

compared with venture capitalists that finance companies, both start-ups and existing businesses

pre IPO.

Value Venture Capital

Easy for an outside investor to make an investment Yes Often No

Own a marketable, margin- eligible security Yes Usually No

Attempts to buy in at 30%-80% discount to readily ascertainable NAV in a growing business

Yes No

Attempts to buy in at 80%-90% discount from estimated future IPO price, or takeover price

No Yes

Tend to be a solid business Yes No

Change of control or going private Less likely More likely

Growth prospects Moderate High

Wall Street sponsorship No Yes

Large promotional compensation No Yes

Failure due to business risk Very low Very high

I shall write to you again when Third Avenue reports for the period to end January 31, 2015 are

published.

Sincerely Yours,

Martin J. Whitman

Chairman of the Board


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Value Fund Port fo l i o Manager Commentary

T H I R D AV E N U E

O C T O B E R 3 1 , 2 0 1 4


On October 16, 2014, Third Avenue hosted its 17th Annual Value Conference. I would like to

share some thoughts from a conversation that I had with our CEO, David Barse, which was

part of the formal presentation schedule.

One of the questions related to how Third Avenue thinks about all the attention that passive

investing has garnered from the greater investment community recently. While clearly

market flows into ETFs have been robust, we believe that the risks of ETFs are not well

understood by the market, as it appears the “galloping herd” believes this passive strategy is

infallible. A five year bull market in which stocks moved in lockstep (i.e., high correlation) has

provided the perfect backdrop for this trend. Investor risk aversion falls during the good

times, fueling the mistaken assumption that a passive benchmark is a recommended

allocation of an investor’s capital, and that it is risk-free. We have a different view; the risks

to an investment exist in spite of them not being materialized. The benchmark is only risk-

free in a relative world, i.e., relative to itself. At Third Avenue we ask the same question in

every market environment: what can potentially go wrong with an investment? We do this

because we are interested in long-term absolute investment performance. Well researched

active investing in a concentrated fashion can, and in the history of Third Avenue has,

produced investment outperformance over the long term. The value added by active

investing is the ability to own well researched concentrated positions, and not have to be

forced to own securities where you do not want to allocate your capital.

From a flows standpoint, passive strategies have seen relatively strong inflows. We believe

this rush to ETFs has lessened broader investor focus on similar and/or competing strategies

to our longer term focused funds. As fewer market participants take our longer-term view,

we suspect we will see even more long-term opportunities for investment, as short-term

swings are magnified by the “herd” rushing in the same direction. As we discuss later in this

letter, the volatility that we witnessed in the fourth fiscal quarter of 2014 provided the

opportunity for us to put our cash to work, in new names and in existing positions that had

sold off to attractive levels. The appraised net asset values (NAVs) of our companies, set

with a three to five year initial investment horizon, did not change through the general

market sell-off, and we moved against the herd to selectively increase Fund holdings and

opportunistically enter into new positions.

Another topic we covered during the conversation was where we are finding value in today’s

markets and what themes we are pursuing. We do, to an extent, pursue investment themes

in our idea generation and portfolio construction. This is different from a macro view, and

more often than not, these themes are distilled from breaking down the investments that

our team currently finds attractive.

Third Avenue Value Team

Chip Rewey, CFA Lead Portfolio Manager

Michael Lehmann Portfolio Manager

Yang Lie Portfolio Manager

Vic Cunningham, CFA Portfolio Manager

Andrea Sharkey, CFA Research Analyst

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 October 31, 2014:

Covanta Holding Corp., 6.07%; Bank Of New York Mellon Corp., 5.43%; Cavco Industries Inc., 5.27%; Total S.A., 4.18%; Apache Corp., 4.04%; Comerica Inc., 4.01%; POSCO, 3.90%; Daiwa Securities Group Inc., 3.50%; Weyerhaeuser Co., 3.46%; Devon Energy Corp., 3.45%


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Value Fund

Thematic recognition, whether housing, timber or asset sensitive regional banks can lead to

additional investments, or finding a superior investment from the initial idea generation. For

example, our investment in Weyerhaeuser, the largest held position at Third Avenue, is

representative of our view of a strong US housing recovery, a view shared with and championed by

our Third Avenue Real Estate team. Weyerhaeuser provides a compelling, yet not obvious,

exposure to the US housing theme through its engineered wood products business, especially on

the heels of the Weyerhaeuser Real Estate Company (WRECO) split off . In addition to

Weyerhaeuser, our holdings in Canfor and Cavco Industries should benefit from a longer-term

recovery in US housing. Canfor and Cavco are two well-capitalized and attractively priced

companies involved in different points in the residential “value chain”. Cavco, a direct play on

housing, is the second largest US producer of manufactured homes. Canfor is an integrated forest

products company, focused primarily in lumber used to build houses. We started analyzing Canfor

when doing our research on Weyerheauser as it is a competitor, but found its old growth log

export market to Asia is very attractive.

Well capitalized, asset sensitive regional banks are another theme we are very bullish on today.

The problems that banks faced going into the financial crisis are now completely reversed. No

longer are banks full of troubled loans and facing liquidity problems. Now, banks are awash in

excess capital due to shifts in regulation, and are facing a tepid loan growth environment due to a

slower than historical economic recovery. Over time, we expect banks to better manage and

deploy this excess capital, which should be helped by improving loan growth and a steeper rate

curve that will once again provide a positive investment spread. Why regional banks? When we

compare regional banks to money center banks, we find that the former are more attractive based

on a price to tangible book basis with a better return profile, are very well capitalized and provide

downside protection through extremely strong balance sheets, as verified by their above average

performance in the “stress tests”. Comerica and KeyCorp, top holdings of the Fund, share positive

leverage to this theme.

As in the US housing and regional banks themes, it is typically the case that we find a basket of well

capitalized and attractively priced companies through which we incorporate our views or themes

in the portfolio. But in general we will work on and pass on many more stocks than we will ever

own. We do not look at this effort as fruitless, but rather as a benefit of building what we call our

institutional knowledge of a company and the industry in which it operates. Often, we find we like

the company and the industry, but the discount to our NAV is not compelling enough to merit a

buy decision at the current time. In this situation, we add the name to our formal watch list, with

the thought that all-else-equal, we would like to own the name at a better entry point. In fact, we

wrote about the importance of a patient buy decision in our last letter and the impact on

downside protection and eventual upside return. Thus, it should not come as a surprise to our

shareholders that over the quarter we have added to portfolio names on weakness, and we were

able to deploy capital into four new names. We acted opportunistically on a double digit stock

price decline from summer 2014 peaks on each individual buy. Three of these names came from

our watch list: Valmont, CBS Incorporated and Brookdale. It is worth noting that Brookdale was co-

sourced from our Real Estate team. General Motors was more an opportunistic buy, although as a

firm we have extensive knowledge of the automotive space and the name.


6

Pressing the Agricultural Theme with Valmont The agricultural sector is another example of a fruitful area of idea generation for us over the past

few years. Due to weather-related factors, the supply trends have been all over the board, creating

high volatility in the stock prices of agriculture-related companies. The volatility in supply is

countered by a very strong and steady demand. World population and income levels are growing,

driving demand for beef and other protein products. As demand for protein grows, agricultural

demand grows with it. At Third Avenue, we are attracted to those situations. Short-term dislocations

can produce attractive prices, when the long-term trends are favorable. This means that on occasion

we have the opportunity to acquire shares at a discount from our conservatively estimated NAV in

the well capitalized companies that we consider to have the ability to compound their NAVs at

double digit rates over time. We believe this combination has the potential to generate attractive

returns for our shareholders.

We discussed our investment in AGCO, a manufacturer of agricultural equipment, in a recent

shareholder letter. Another twist on this theme is irrigation. The largest user of freshwater is

agriculture. Thus, irrigation demand is connected with the overall demand for food as the world

population grows. It is also driven by water scarcity. Only 2.5% of the total worldwide water supply is

fresh water and of that only 30% of fresh water is available to humans. Irrigation demand also stems

from (i) conversion from flood based to mechanized irrigation, (ii) replacement demand for parts,

and (iii) conversion of non-irrigated land. Mechanized irrigation can improve water application

efficiency by 40-90% over traditional irrigation methods such as drip. During the quarter, the Fund

acquired shares of Valmont Industries. Valmont is the leader in mechanized irrigation equipment

with 40% market share.

As a manufacturer of fabricated metal products, Valmont also makes poles, towers and other

structures used for utility transmission, outdoor lighting and wireless communication systems.

Valmont’s utility business is also facing a supply/demand imbalance, similar to what we observe in

agriculture. While the utility business is facing short-term pressures on pricing, we are optimistic

about the longer-term prospects of this industry, given an aging electric power infrastructure in

North America and growth potential in developing countries. According to the US Department of

Energy, investment in electric transmission infrastructure declined from 1980-1999, while electricity

consumption increased by approximately 58%, resulting in increased grid congestion and power

outages, some of which were very disruptive (e.g., the August 2003 blackout in the Northeast and

rolling blackouts in California in 2001). Further, spending on transmission should be positively

impacted by the implementation of FERC Order 1000, a series of measures that requires planning for

the connection of renewable energy to the electric grid.

We were able to acquire shares of this well-capitalized, well-positioned company which has

compounded book value at nearly 16% over ten years, with our cost basis at a 12% discount to our

conservatively estimated NAV. The company’s stock declined recently as a result of pricing pressure

in the utility segment and weaker irrigation demand after drought-induced record years in 2012-

2013. Interestingly, during the quarter, one of Valmont’s competitors in the utility structures

business was acquired by Trinity Industries. This could result in better supply/demand

characteristics, and in any case, demonstrates potential attractiveness in a resource conversion

scenario.

Value Fund


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General Motors (GM): The Benefits of Looking Under the Hood

GM, one of the largest automotive companies in the world, has been on the receiving end of much

criticism over the last five years. So much so, that its stock price dropped to levels below its 2010

IPO of $30 per share. Much of this criticism has been well deserved. A high profile bankruptcy

coupled with long-term pension woes have turned investors off from this company. GM further

compounded its problems earlier in the year by getting embroiled in a high profile ignition recall

scandal.

In late September, amidst all the negative recall headlines, S&P upgraded GM's debt to investment

grade. The report caught our attention and inspired us to look under GM's hood. Indeed, negative

sentiment corresponds to a dated perception of GM. GM today is very different from the company

that, saddled by debt and management problems, filed for bankruptcy in 2009. Today, the century

old automaker has a clean and strong balance sheet, significantly streamlined operations and is

one of the most attractively valued large caps in the US.

Everything we do at Third Avenue starts with the balance sheet. We were happy to learn that GM's

automotive unit was carrying a net cash balance of $20 billion, which is impressive considering that

GM's market capitalization is only around $50 billion. During GM's analyst day in October, the CFO

referred to its priority of maintaining a "fortress-like” balance sheet. We like that! GM is sharing

the wealth too with a current dividend of 4%, which appears sustainable given GM's strong

financial position.

In the past, management had a propensity to postpone tough decisions, leaving the company

vulnerable to steep losses. Management is now positioning the company for less boom and bust

results. One fact that resonated with us was that GM had lost $7 billion in North America in 2006

despite higher car sales than current levels. Now sales are lower, but GM is on pace to earn $8

billion in North America this year. Head-count and platforms have been reduced so now GM's

break-even levels are over 30% lower than before the crisis. Overseas, GM still has work to do to

restore consistent profitability. Cost cutting programs in other geographies are harder to

implement. Despite taking a dour outlook on future overseas earnings, we still felt GM's valuation

was heavily discounted. The struggles overseas obscure GM’s success in China. China is the largest

car market in the world. GM has a long, distinguished history in China and currently holds 14%

market share and is generating roughly $2billion in profits through a joint venture relationship,

primarily on the local strength of its Buick brand. Moreover, its projected that China will be the

largest luxury market in the world by the end of the decade and GM is confident that its Cadillac

brand is well positioned to grow with this trend. Furthermore, GM has substantially improved its

pension plans and the liabilities are at manageable levels. If interest rates rise, as many expect,

those liabilities could improve dramatically.

One of the more common concerns investors have regarding GM is that car sales in the US will

decline. We don't share that view. Although sales have improved from the bottom in 2009, they

aren't back to 2006 levels. Most importantly, the average age of vehicles remains elevated: 40% of

vehicles on the road in the US are over 12 years old. We believe the replacement cycle will last

longer than people expect. In addition, fuel efficient cars and enhanced technology in vehicles will

Value Fund


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drive future sales as well. Although we believe the negative thesis on GM is over-done, we

acknowledge that there are risks to this investment. As discussed in the previous paragraph, our

thesis hinges to some extent on GM having a strong business in the US, thus a slowdown of the US

economy may have a negative impact on this investment. Auto manufacturing is a cyclical

business, and we took this into consideration as we conservatively estimated our NAV for GM.

Finally, recalls are a risk of investing in any automotive company, but we are comfortable with that

risk given GM's strong balance sheet and current cash flows. Third Avenue's credit team has

studied the company closely over the last five years and gave us valuable insights in assessing the

risks to this investment.

A lot has transpired in GM since the bankruptcy in terms of balance sheet improvement and

streamlining of the business. As value investors it is hard to pass on such an attractively priced

company, in spite of (or maybe even because of) the excessive negative sentiment it has

generated. After a very detailed look under the hood of GM, we think that the “new” GM is an

attractive use of your and our capital.

Content Trumps Distribution at CBS During the quarter the Fund initiated a position in CBS Corporation. CBS derives revenues from i)

advertising on its owned and operated TV and radio networks, ii) content licensing and distribution

and iii) affiliate and subscription fees (retransmission fees). The investment opportunity presented

itself when shares sold off in the quarter, likely due to the unwinding of short-term event driven

positions in the stock following the spin-off of its outdoor advertising unit, CBS Outdoors, and

short-term concerns over a softer ad market.

However, we believe the long-term investment case is compelling, as the company is well

positioned to capitalize on a new phase of industry transformation where boundaries between

distribution and content are being blurred. The new paradigm is likely to benefit the content

owners over distributors as the digital revolution has opened multiple new avenues of distribution

that will compete for quality content. This change in relative leverage in the media value chain is

likely to translate into earnings growth via i) retransmission fees and ii) content monetization. We

believe CBS will benefit significantly from this secular change as it is one of the best curators of

content in the industry. Over the last decade, the mix of the 20 highest rated shows in the US has

changed meaningfully, but the one constant factor has been CBS’s ability to get eight to ten of the

top 20 shows consistently, something which no other network has come even close to matching.

At its core, this ability to consistently create top notch programming is what differentiates CBS

management from all the other networks, in our view. CBS should benefit from incremental

demand from content distributors, including TV networks, Subscription Video on Demand (SVOD),

and virtual MVPDs (multichannel video programming distributors).

CBS is also leading the way in pushing for broadcast station retransmission fees and has grown

EBITDA contribution from its retransmission by 18 times to approximately $500 million since 2008

and is targeting $1 billion in retransmission revenue by 2017 and $2 billion by 2020. As of now the

company is pacing ahead of its $2 billion target. As these high margin fees are a “new” source of

revenues for existing content, they almost entirely flow down to earnings. Furthermore, CBS has a

strong balance sheet with net debt to EBITDA of 1.6x, and is able to generate $1.5 billion to $2

Value Fund


9

billion of free cash flow per year. CBS is embarking on a $6 billion share buy-back program,

allowing it to retire close to 20% of its outstanding shares in the coming six quarters.

We believe CBS presents a compelling investment opportunity, with our cost basis at a meaningful

20% discount to our conservative estimate of NAV, and is likely to continue to grow NAV at 10%+ a

year via i) retransmission fees, ii) content monetization and iii) share buyback. While short-term

volatility around advertising spot market prices should be expected over our initial three to five

year horizon, more material risks that would lead us to reconsider our investment would include

an inability to continue to produce high quality content or a failure to achieve a higher normalized

compensation level for this content.

In closing, we wanted to reflect on the volatility in the broader markets from July to August, where

a steep move down was quickly met by a frenzied rally into quarter end. Critical to our philosophy

is our recognition that the appraised Net Asset Values of our companies did not change over the

sell-off and ensuing rally. What did change was the discount to the NAV, which provided us with

the opportunity to deploy capital opportunistically. A price conscious buy decision is a key lynchpin

to our philosophy. We have said before that we work on many more companies than we will ever

add to the portfolio, with the dual benefit of this work serving to broaden our institutional

knowledge and to fill our work-in-progress list of strong companies that we continue to monitor

should an attractive opportunity develop. The popularity of short-term “hedged” and passive

strategies, in our opinion, will continue to drive volatility at a high level, creating overvalued

situations to harvest and undervalued situations to opportunistically buy. We view our three to

five year holding period as a pillar of strength and a strong differentiator to value creation.

We continue to be extremely positive about the outlook for our portfolio companies. Recent

market volatility has not compromised our investment theses. Instead, it has presented a buying

opportunity; we have added to several names in the Fund. We thank you, as always, for your trust

and your support of the Value Fund. We look forward to writing to you again at the end of the next

quarter and wish you a happy and healthy new year.

Sincerely,

The Third Avenue Value Team

Chip Rewey, Lead Portfolio Manager

Michael Lehmann, Portfolio Manager

Yang Lie, Portfolio Manager

Victor Cunningham, Portfolio Manager

Value Fund


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Small-Cap Value Fund Port fo l i o Manager Commentary


O C T O B E R 3 1 , 2 0 1 4


I am honored to have taken the sole lead position on the Third Avenue Small-Cap Value

Fund (Fund). My co-Portfolio Manager, Tim Bui, and I will continue to pursue the

concentrated approach to value investing that has been the pledge of the firm since its

founding. This vision for the Fund is rooted in Marty Whitman’s investment philosophy,

which I embrace fully. Marty’s teachings have been an important influence on my own

approach to investing.

We scour the investment universe seeking companies that combine the three main

features that represent the pillars of Third Avenue’s investment philosophy:

creditworthiness, a meaningful discount to a conservatively estimated net asset value

(NAV) and the ability to consistently compound NAV. As we seek investments for the Third

Avenue Small-Cap Value Fund, we are not looking for the “flavor of the month” in the US

small cap universe; our initial targeted holding period is three to five years. We engage in

rigorous financial statement analysis combined with industry studies and peer comparisons

in our approach to determining value. We set our NAV as if we were acquiring the

company, and then seek an appropriate discount from this target to enter an investment.

A patient “price conscious” buy is a critical first step in both protecting capital and in

realizing an attractive investment return up to our NAV.

We pursue financially healthy companies that have the ability to compound NAV, which is

a critical differentiator of our investment philosophy versus shorter-term investors who

focus solely on the ability to close the discount to an NAV target. The ability of Fund

holdings to compound NAVs at double digit annual rates provides for the means to achieve

a return from generating book value growth, measured in our view by retained earnings

growth, while also recognizing the likely closing of the static discount to our NAV target.

Compounding retained earnings growth also provides protection on the downside by

allowing us to “risk time and not capital”. Yes, we like to see what we refer to as resource

conversion, i.e., a spinoff, sale, buyback or any other event that will highlight the

undervaluation of our investment, but it is critical that the first three aspects of our

investment philosophy come first. By focusing on creditworthiness and compounding, our

philosophy builds in the high likelihood that the price conscious discount that we have

identified will close over time. The disciplined implementation of this approach is what

differentiates this Fund from the “galloping herds”.

Sincerely,


Third Avenue Small-Cap Value Fund

Third Avenue Small-Cap Team

Chip Rewey, CFA Lead Portfolio Manager

Tim Bui, CFA Portfolio Manager

Evan Strain, CFA Research Analyst

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Small-Cap Value Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of October 31, 2014:

HCC Insurance Holdings, Inc., 3.12%; Progress Software Corp., 2.76%; Unifirst Corp., 2.59%; JZ Capital Partners Ltd., 2.56%; FTI Consulting, Inc., 2.23%; Genpact, Ltd., 2.15%; Legg Mason, Inc., 2.14%; Tetra Tech, Inc., 2.10%; EMCOR Group, Inc., 2.08%; World Fuel Services Corp., 2.04%

From the Lead Portfolio Manager Chip Rewey

Lead Portfolio Manager of the Third Avenue Small-Cap Value Fund


1 1

Small-Cap Value Fund


As we reflect on the fourth fiscal quarter, a humorous saying comes to mind: “Don’t let the facts

get in the way of a good story”. Perhaps this could be sage advice for entertaining friends, but

clearly not an appropriate approach to investment management and portfolio construction. The

story of August to October 2014, of course, was the sell-off in small caps. The financial press

buzzed with the sell-off story, but the facts just aren’t there. For the quarter ended October 31,

2014, the Fund’s Institutional Class share returned 3.02%, trailing the Russell 2000 Value Index’s

return of 4.10%.1 While the story is the sell-off that occurred from July month end to October 13,

the Fund was down 5.61% while the Russell 2000 Value Index was down 5.89%; the quarter ending

rally changed the facts. Because we focus on creditworthiness and downside protection, we are

not too surprised to have trailed a “risk-on” rally over the last two weeks of the quarter (Fund up

9.15% vs. Russell 2000 Value up 10.62%), and as a result of this rally, for the quarter overall.

Volatility such as this demonstrates a misplaced short-term focus vs. a fundamental driven

philosophy of creditworthiness, discount to NAV and ability to compound NAV over our initial

three to five year investment horizon.

As we read and reflected on Marty Whitman’s letter this quarter, one quote stands out clearly

“…Wall Street analysis and Wall Street wealth derives from the fundamental in depth analysis of

companies and securities, and not from the study of markets and securities prices”. The volatility

witnessed from August to October, in our minds, is another reinforcing example of Marty’s

philosophy. The NAVs of each of the companies we hold, which we derive through independent

fundamental research, did not change over the ten-week sell-off and two-week snap-back

recovery. What changed was the pricing of these securities in the markets.

Over the years, you have heard Third Avenue discuss the importance of executing on price

conscious buys and remaining opportunistic. A price conscious buy sets the basis for future return

potential and, as importantly, provides downside protection to avoid a return-sapping capital loss.

In our view, the sell-off in the quarter provided the opportunity to increase our weightings in

several portfolio names, and for a price conscious buy on a few new names where the discount

relative to our NAV appraisal widened.

During the quarter we initiated three new positions, which we discuss below, and eliminated 16

positions. Many of these sales should be seen as completing the sale process of smaller position

sizes. Of course this reduced the number of names in the Fund, now 65 at quarter end, and

increased its concentration, a weighted average of 1.53% for each position. We view this level of

diversification as more typical for the Fund, 60-65 names, with an average position size of 1.5% or

greater.

1 The Fund’s one‐year, five-year, ten-year and since inception (April 1, 1997) average annual returns for the periods ending October 31, 2014 were 7.09%, 13.18%, 6.85% and 9.07%, respectively. The Fund’s one-year, five-year and ten-year returns for the periods ending September 30, 2014 were 5.11%, 11.17% and 6.38%, respectively. The Russell 2000 Value one‐year, five-year, ten-year and since Fund inception (April 1, 1997) average annual returns for the period ended October 31, 2014 were 7.89%, 16.15%, 7.81% and 9.74%, respectively. The Fund’s Total Annual Fund Operating Expenses (as a percentage of net assets) were 1.12% for the Institutional Class and 1.37% for the Investor Class, as stated in the Fund’s prospectus dated February 28, 2014. Third Avenue Small-Cap Value Fund is offered by prospectus only. The prospectus contains more complete information on advisory fees, distribution charges, and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. The Fund’s returns should be viewed in light of its investment policy and objectives and quality of its portfolio securities and the periods selected. M.J. Whitman LLC Distributor. If you should have any questions, or for updated information (including performance data current to the most recent month‐end) or a copy of the Fund’s prospectus, please call 1‐800‐443‐1021 or go to our web site at www.thirdave.com. Current performance may be lower or higher than performance quoted.


1 2


New Positions Barnes Group Inc. is a unique industrial company, with several smaller divisions, a few of which in

our opinion are hidden gems for the company. Barnes’ operations in industrial tooling supply,

spring and nitrogen spring motion control, commercial aerospace original equipment (OE),

maintenance and aftermarket exposure don't make for a quick and easy summary. However, these

operations combine for a unique and attractive NAV, with an extremely visible long-term ability to

drive book value growth. On the industrial side, over the past two years, Barnes has divested its

under-scale European and US distribution businesses at peak valuations, and invested in

intellectual property-driven machine tool companies specializing in hot-runner technology, which

have and should continue to drive revenues and margin expansion for the company. On the

aerospace side, Barnes not only has high value OE engine content on platforms such as the 787

and A350 which have multi-year build backlogs, but also has the exclusive “life of program” right to

supply replacement parts for CFM (GE/Safran Joint Venture) engines. This Revenue Sharing

Program (RSP) business is a hidden aftermarket gem for Barnes that should compound value for

decades as these engine programs are still actively being built, and will need to be serviced

multiple times over their multi-decade service lives. The long-term visibility of revenues and cash

flow from these programs also serve to support long-term creditworthiness and downside

protection.

Anixter International is a distributor of all types of cables and electrical wires for intra office and

industrial plants to manage network connectivity and electrical systems. It also has a small division

that distributes nuts and bolts for equipment manufacturers. We like Anixter because it is a very

well-managed company with a global footprint, a scalable business model and large addressable

markets—good ingredients for compounding value. The company serves as a crucial link between

some 1,600 wire and cable manufacturers and over 100,000 customers who buy roughly 450,000

types of wires, cables and related data products. The company positions its role as the manager of

procurement, inventory, quality testing, engineering advisory and just in time delivery for the

Fortune 1000 companies. Anixter’s business model is unique in a sense that the items that it sells

account for only about 5%-10% of the final value of its customers’ products or processes, but

these products would cost the customers many times more if these items were mis-handled or

delayed in delivery. Thus, customers normally seek competency rather than price in selecting

distributors. Investors in Anixter are protected not only by the company’s competitive position and

a strong balance sheet, but also the aligned interest of management. As an additional positive,

Sam Zell, the Chairman, owns 11.5% of the shares, which in our opinion supports shareholder

friendly decisions, including the current practice of distributing all of the free cash flow via special

dividends or stock buy backs.

Clean Harbors Corporation (CLH) provides a unique mix of high margin, high barrier to entry

businesses in the oil service, waste management and recycling industries. On the oil service side,

CLH provides drilling services and fluid management in North America and globally. Through its

Safety Kleen division, it recycles used motor oil to ultra high purity levels and re-markets it as its

Ecopower brand. Its lodging services division provides remote location accommodations for the

materials sector globally. These and other diverse sector exposures not only provide a balanced

ability to compound value for the long term, but also likely provide interesting fodder for future

resource conversion activity through spin-offs, divestures and targeted acquisitions.


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In closing we will reflect on another closing; that is the end of the US Federal Reserve’s

Quantitative Easing (QE) program in October. While we will leave our views on the program’s

success or failure for perhaps another occasion, we believe the ending of the program is a clear

positive for our fundamental driven philosophy. The program acted as a prop to equity markets, as

it ultimately promoted risk-taking. Over the course of the program, many market participants

viewed QE as a back-stop or put option wherein weaker companies with stressed balanced sheets

would be, in effect, bailed out by the ability to issue capital easily and cheaply into risk-seeking

markets. A strong balance sheet is a key determinant of our measure of credit-worthiness of a

company, which is a key tenet of our investment philosophy. As QE ends, we believe the broader

investment community will migrate back to a focus on downside protection as well as upside risk-

driven optionality. Said differently, we believe individual stock selection will return as a key

differentiator of markets and managers, as opposed to Exchange Traded Funds directional

exposure driven investing. We look forward to this balance returning to the markets, noting we

have not wavered from our view in our management philosophy.

We thank you for your continued trust and support of the Fund.

Sincerely,

Third Avenue Small-Cap Value Team


Tim Bui, Portfolio Manager



1 4

Real Estate Value Fund Port fo l i o Manager Commentary


O C T O B E R 3 1 , 2 0 1 4


We are pleased to provide you with the Third Avenue Real Estate Value Fund’s (Fund)

report for the quarter ended October 31, 2014.

Portfolio Activity As stock market volatility reemerged during the quarter, the prices for most real estate

securities declined, allowing the Fund to deploy more than $200 million of capital,

marking the fourth quarter of the 2014 fiscal year as one of the Fund’s most active

periods in its 16 year history. Investment activity included initiating positions in the

common stock of Countrywide plc and Globe Trade Centre, completing the debt-for-

equity exchange and subscribing to a subsequent rights offering in IVG Immobilien, and

increasing positions in 19 existing holdings. The Fund also exited its positions in the

shares of PHH and Morrisons. An overview of the Fund’s new positions and options

activity during the quarter is described below, followed by a discussion of how the Fund is

positioned to mitigate some of the primary “investment” risks that exist for publicly

traded real estate securities today.

Countrywide is a leading provider of real estate services in the UK, with the largest sales

and leasing network in the country, comprised of almost 1,400 offices. The company has

a solid balance sheet (0.7 times net debt to EBITDA) and strong sponsorship, with Oaktree

Capital owning nearly 30% of the company after recently adding to its stake and also

having board representation. The company has been steadily expanding its footprint

since 2008, in spite of the fact that the UK residential market has seen several years of

depressed transaction activity. There is certainly a possibility that this is the “new normal”

but there are signs that the market is recovering, with transaction volumes picking up

meaningfully in 2013 and on pace to hit the 1 million mark by the end of 2014 (vs. the

long-term average of 1.4 million transactions per year). Countrywide’s much-expanded

brokerage platform is positioned to benefit from increased transaction volume. We

estimate that cash flow could increase by 75% from current levels if transaction volumes

return to the long-run average of 1.4 million and by 60% even if transaction volumes

increase to 1.2 million. In the meantime, the company is returning excess capital to

shareholders in the form of dividends and stock buybacks, which are quite value-

enhancing given the current discounted share price.

Globe Trade Centre (GTC) is a real estate operating company that owns, operates, and

develops commercial and residential properties in Eastern European markets, with its

largest exposure to Poland. We have followed the company for several years but never

invested in the common shares as the company was saddled with too much debt and the

prior controlling shareholder (Kardan N.V.) was not in a position to put more capital into

the enterprise. However, in November 2013, Lone Star, a US-based private equity

manager, acquired Kardan’s controlling stake and replaced the existing board and

Third Avenue Real Estate Team

Michael Winer Co-Lead Portfolio Manager

Jason Wolf, CFA Co-Lead Portfolio Manager

Ryan Dobratz, CFA Portfolio Manager

Larry Hedden, CFA Research Analyst

Mohammad Tabibian Research Analyst

Kon-Yao Kwek Research Associate

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Real Estate Value Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of October 31, 2014:

Weyerhaeuser Co., 4.93%; Cheung Kong Holdings, Ltd., 3.85%; Forest City Enterprises, Inc., Class A, 3.78%; Songbird Estates PLC, 3.29%; First Industrial Realty Trust, Inc., 3.14%; Newhall Holding Co. LLC, Class A, 3.12%; Hammerson PLC, 3.00%; Lowe's Cos, Inc., 2.97%; Inmobiliaria Colonial SA, 2.95%; Equity Commonwealth, 2.86%


1 5

Real Estate Value Fund

management team. The company recently announced its plan to raise equity through a rights

offering in order to fix the balance sheet and execute on growth initiatives, including an identified

pipeline of acquisitions. Following this announcement, the Fund initiated a small position in GTC

Common well below our estimate of NAV, with plans to fully participate in its pro-rata share of the

rights offering. Should the offering be completed, the company’s balance sheet will once again be

sound and we believe the new management team should be able to materially increase net asset

value by making opportunistic acquisitions and undertaking selective developments. With the

addition of GTC Common, the Fund now has about 8% of its assets in Continental Europe, with a

focus on companies that are being restructured, recapitalized or reorganized.

The Fund utilized its flexible mandate to write out-of-the-money put options on securities that it

would like to own – just at lower prices. In our view, this type of activity is a “win-win” for the

Fund. If the put options are in-the-money at expiration, shares will be “put” to the Fund at the

strike price and the premiums received will reduce our cost basis. If the put options expire out-of-

the-money, the Fund will have earned the premium – representing an excellent short-term return

on its idle cash balances. During the quarter, the Fund received attractive premiums by writing

out-of-the-money put options on Lennar and Realogy common stocks. Should the options expire

out-of-the-money, the Fund will have earned annualized yields exceeding 25% on the segregated

cash which amounted to approximately 3% of the Fund’s net assets.

“Investment” Risks in Real Estate

To quote our Founder and Chairman Marty Whitman: “One can’t really use the word ‘risk’ without

putting an adjective in front of it.” That is to say, it is not very useful to talk about “general” risk

but only specific risks. For instance, at Third Avenue we are less concerned with “market” risk (i.e.,

inevitable fluctuations in market prices) and instead focus our efforts on identifying and avoiding

“investment” risks (i.e., something going wrong with an investment) which can lead to permanent

losses of capital.

The prospect of losing money is not a matter which we take lightly. Before we hypothesize about

prospective returns on an investment, we focus on what could go wrong. But when times are

good, risk aversion seems to fade away. And now seems to be one of those times as it is our view

that many market participants don’t seem to be focused on what could go wrong and are investing

as if there aren’t any risks in real estate. That is not the case at Third Avenue. While real estate and

real estate securities have outperformed the general markets over the last 20 years, there are

clearly certain risk factors unique to the sector, which are the focus of our attention. Below is a

summary of those risks and a discussion of the measures taken by Fund management to mitigate

them.

Interest Rate Risk

One of the major considerations when analyzing real estate companies today is what impact rising

interest rates could have on property values. As interest rates have fallen to historically low levels

globally, the initial yields (i.e., cap rates) that investors demand when investing in assets have also

fallen to record lows, leading to record high capital values in most major markets. However,

looking out over the next three to five years, it is likely that interest rates will increase from current


1 6

levels, leading to higher initial yields and reduced asset values. The Fund has reduced its exposure

to securities that have been bid up in price by yield-seeking investors and are most vulnerable to

rising rates (e.g., REITs with long lease terms) and has focused instead on investments that should

serve to protect capital in a rising rate environment, such as the securities of well-financed

companies trading at discounts to a conservative estimate of NAV. In addition, the Fund has

selectively added securities to the portfolio that could prosper in a rising rate environment,

including the common stocks of well-financed property companies that have assets with shorter

lease terms (e.g., hotels, apartments, etc.) as well as real estate-related companies that would earn

higher profits in a higher rate environment (e.g., US banks). The Fund seems well positioned for a

rising rate environment as evidenced during 2013 when interest rates began rising and REITs

underperformed relative to other non-REIT investments owned in the Fund.

Access to Capita l Risk

Since the Fund was launched in 1998 it has had to navigate through the Russian debt crisis, the

technology boom and ensuing bust, the SARS epidemic, the Great Recession and, more recently,

the European sovereign debt crisis. These types of events seem to occur almost every four to five

years and lock up the capital markets in the process. The magnitude and the duration of these lock

ups vary, but there are inevitably casualties after the dust settles as real estate is a capital intensive

business where companies eventually need to access the capital markets. In order to avoid

exposure to those companies that are vulnerable in times of market dislocation, the Fund focuses

its investments in the common stocks of well-capitalized issuers that don’t require continuous

access to the capital markets. For example, the Fund tends to avoid investing in companies such as

mortgage REITs that tend to own highly-leveraged portfolios of loans or securities subject to “mark

to market” risk and don’t retain cash flow. Instead the Fund is focused on issuers with incredibly

strong balance sheets, like Weyerhaeuser and Cheung Kong, which not only can withstand times of

market dislocations but are likely to capitalize on opportunities in times of distress by buying assets

at attractive prices from less creditworthy counterparts.

Supply Risk

Nothing can hurt a local property market more than a wave of speculative building that fails to get

leased up and is eventually dumped on the market, pressuring rental rates for all owners. The

positive note here is that new building activity remains at near record lows in almost every major

market, both on the commercial and residential side. There are certainly pockets of increased

supply in certain markets (e.g., multi-family in Washington DC, prime residential in Central London,

and industrial in Southern California), but these seem to be more the exception than the norm,

which creates a constructive backdrop for existing owners to fill vacancies and increase rents. It

also presents a good window of opportunity for those companies that control well-located

development sites and have the balance sheets and management teams capable of delivering new

projects to capitalize on demand for new product. A number of the Fund’s holdings are well-

positioned in this regard, including Songbird Estates, Newhall Land, Westfield Corp., Forest City

Enterprises, and Brookfield Asset Management.

Demand Risk

There is a lot of truth in the old adage that the only three things that matter in real estate are

location, location and location. For this reason, the Fund focuses its investments in companies that



1 7

control properties and portfolios in urban markets where there is a captive demand for their space

and barriers to entry that limit supply. Some of the Fund’s largest investments are in markets like

London, New York City, Hong Kong and Sydney. The Fund also favors investing in traditional

property types such as retail, office, multifamily, industrial and hotel as there is a functional need

for this type of space in any market as well as an alternative use should it be necessary. By favoring

these types of properties and locations, the Fund tends to eschew some of the more specialized

property types and properties located in tertiary markets that are likely to be subject to

technological obsolescence or unfit for other tenants’ needs if a tenant vacates (e.g., cell towers,

data centers, suburban office, single tenant retail, casinos, etc.). In our view, it is difficult to justify

paying 20 times cash flow for an asset where one can’t be certain it is going to be relevant in ten

years’ time.

Management Risk

As outside passive minority investors (OPMIs), nearly all elements of control rest with the

management teams of the companies and their respective boards of directors. That is usually fine

by us; in exchange for lack of control, the Fund is able to purchase securities at cheaper prices

compared to what a control buyer would have to pay in a negotiated transaction. OPMIs must rely

on company management teams to undertake initiatives to increase shareholder value and close

any NAV discount. We have often stated that the hardest part of our job as analysts is our

evaluation of management. We have witnessed (fortunately, most often from the sideline) many

management teams overextend balance sheets, make aggressive acquisitions that destroy value,

diversify into non-related businesses, take on outsized development projects, or fail to take the

necessary steps to maximize value – often to protect their jobs and compensation packages. We

don’t have a perfect record of evaluating management, but when we make a mistake we tend to

move on quickly. For instance, earlier this year the Fund purchased the common stock of WM

Morrisons, a UK grocer that was struggling with challenges in its local market. The stock was

trading at discount to the underlying value of its real estate, providing a safety net (downside

protection) if the business couldn’t be turned around. A few months after making our initial

investment, the board announced that it was going to be increasing the common dividend. In our

view, the company should have cut the dividend to retain capital and cushion losses instead of

trying to manipulate the share price by paying a higher dividend that it could ill afford. We voted

with our feet and sold the stock, realizing a loss in the process. We try to prevent these mistakes

by focusing on companies that are run by accomplished management teams with long-term track

records and significant skin in the game – aligning their incentives with the Fund.

Catastrophic Event Risk

There are some events for which one simply cannot prepare nor predict. Floods, hurricanes,

earthquakes, acts of terror and fraud are just a few. In an instant, one of those events could wipe

out a company’s value without any real chance of defense or recovery. While we can’t totally avoid

these “black swan” events, we can mitigate risks by investing in well-capitalized companies with

easy-to-understand business models and by maintaining a prudently concentrated portfolio

around those types of companies. Over the past six years we have tried to optimize our portfolio

construction process and set more stringent limitations on position size, exposure to a single



1 8

country outside of the United States and exposure to any single property type. In the process we

believe that we have enhanced the portfolio management process and risk-adjusted return profile as

the impact from a catastrophic event should be more limited than what it could have been in the past.

Redemption Risk

One of the big advantages of investing in publicly traded real estate securities is the ability to access

some of the best properties, markets and management teams in the world with the added benefit of

having daily liquidity. Over recent years, flows for real estate funds have mostly been positive and one

of the reasons why REIT valuations are near all-time highs. When fund flows turn negative, securities

must be sold to meet those redemptions. The Fund is not immune to redemptions, but we tend to

have ample excess cash to meet any redemption requests without the immediate need to sell

securities. We consider the Fund to be fully invested when cash reaches 3% of net assets. The Fund also

focuses on companies with an equity market cap of $1 billion or greater. Should the Fund need to raise

capital by selling shares, we are generally able to do so without materially disturbing the price for that

security. Furthermore, the Fund has minimal exposure to the securities that comprise most of the

major global real estate indices today. In fact, only about 8% of the Fund overlaps with the FTSE/EPRA

NAREIT Developed Index. This differentiated positioning is primarily a byproduct of our bottom-up

fundamental analysis of the individual companies but does have an added benefit. If redemptions in

the real estate sector do materialize, the Fund might avoid much of that selling pressure (by not being

invested in the largest constituents of the index) and could potentially take advantage of it by utilizing

some of its excess cash to purchase securities at bargain prices from forced sellers.

The risks highlighted above are not all encompassing but do highlight some of the major factors that we

take into consideration as we analyze real estate securities, construct the portfolio and assess the

Fund’s exposures. Some of these various risks are out of our control (e.g., Catastrophic Risk) but we

address the ones that we can by taking the steps outlined above. We realize that by employing a more

conservative approach to mitigating these various risks, the Fund sacrifices some of the “upside” that

others may enjoy in a strong market. However, we believe those sacrifices should continue to enable

the Fund to capture less of the “downside” in a challenging market. The Fund’s long-term results

illustrate the success of this more balanced approach to investing in real estate securities.

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

Best wishes for a healthy and prosperous New Year.

Sincerely,

The Third Avenue Real Estate Value Team

Michael Winer, Co-Lead Portfolio Manager

Jason Wolf, Co-Lead Portfolio Manager

Ryan Dobratz, Portfolio Manager



1 9

International Value Fund Port fo l i o Manager Commentary


O C T O B E R 3 1 , 2 0 1 4


As you all well know, but it may be worth revisiting in the context of recent Fund

performance, the Third Avenue International Value Fund (Fund) employs an opportunistic

and long-term approach to fundamental value investing across international markets. The

Fund has an unconstrained investment mandate which allows us to pursue what we

believe are the best opportunities across geographies, industries and asset classes. We

uncover each one of these opportunities by conducting thorough bottom-up company-

specific research. The investments we select come together in a concentrated, high

conviction portfolio, typically between 30 - 40 securities (vs. ~3000 stocks in the MSCI

ACWI ex USA Index). It is natural, then, that our process results in a Fund showing minimal

overlap with any broad market index. Many of our holdings are not part of an index at all

and the Fund in aggregate has a 98% active share.1 Indeed, it is something of a rare

occurrence for the Fund and an index to have similar characteristics or performance.

Further, given a highly differentiated portfolio with minimal overlap with any index, it

should not be surprising that high levels of tracking error, meaning periods of material

outperformance and underperformance, have been the norm over the life of the Fund.

We construct a differentiated portfolio driven by company-specific fundamentals,

including highly idiosyncratic factors such as the potential for value creating resource

conversion opportunities. Portfolio performance, over the long-term, will thus be driven

by the activities of these businesses, their ability to compete in specific industries and the

deal-making acumen of those in decision making positions. However, short-term

performance may ebb and flow to the tune of macro developments.

For the fiscal quarter ending on October 31, 2014, the Fund’ Institutional Class shares

returned -11.64% as compared to a commonly used international equity index such as the

MSCI ACWI ex USA, which returned -5.20% for the same period.2 While we emphasize

absolute performance over relative performance and are not particularly concerned with

index composition, we provide index returns for convenience. Furthermore, the

performance period under review is quite short for investors who are focused on time

Third Avenue International Team

Matthew Fine, CFA Lead Portfolio Manager

James Hounsell Research Analyst

Jane Spiegel Research Analyst

Harrison Vigersky Research Analyst

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue International Value Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of October 31, 2014:

Telefonica Deutschland Holding AG, 6.35%; Hutchison Whampoa Ltd., 4.47%; Weyerhaeuser Co., 4.38%; Rubicon, Ltd., 4.33%; White Mountains Insurance Group Ltd., 4.26%; Pargesa Holding S.A., 4.01%; Tenon, Ltd., 3.96%; Capstone Mining Corp., 3.91%; Daimler AG, 3.71%; GP Investment, Ltd., 3.48%

1 Active Share is measured relative to the MSCI AC World ex USA Index. Active Share is the percentage of a fund’s portfolio that differs from the benchmark index. The Morgan Stanley Capital International All Country World ex USA Index is an unmanaged index of common stocks and includes securities representative of the market structure of over 50 developed and emerging market countries (other than the United States) in North America, Europe, Latin America and the Asian Pacific Region. 2 The Fund’s one‐year, five-year, ten-year and since inception (December 31, 2001) average annual returns for the periods ending October 31, 2014 were -10.79%, 4.45%, 4.71% and 8.36%, respectively. The Fund’s one-year, five-year and ten-year returns for the periods ending September 30, 2014 were -6.03%, 4.28% and 5.16%, respectively. The MSCI ACWI ex USA one‐year, five-year, ten-year and since Fund inception (December 31, 2001) average annual returns for the periods ending October 31, 2014 were 0.49%, 6.55%, 7.06% and 7.72%, respectively. The Fund’s Total Annual Fund Operating Expenses (as a percentage of net assets) were 1.44% for the Institutional Class and 1.69% for the Investor Class, as stated in the Fund’s prospectus dated February 28, 2014. Third Avenue International Value Fund is offered by prospectus only. The prospectus contains more complete information on advisory fees, distribution charges, and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. The Fund’s returns should be viewed in light of its investment policy and objectives and quality of its portfolio securities and the periods selected. M.J. Whitman LLC Distributor. If you should have any questions, or for updated information (including performance data current to the most recent month‐end) or a copy of the Fund’s prospectus, please call 1‐800‐443‐1021 or go to our web site at www.thirdave.com. Current performance may be lower or higher than performance quoted.


2 0

International Value Fund

periods of three to five years (or longer) and is therefore only akin to one mile of a marathon.

These points notwithstanding, we appreciate that it can be a challenge to fully understand the

performance of a Fund from the outside looking in. We will therefore devote a portion of this

letter to a discussion of these broad market movements which have negatively influenced the

performance of the Fund during the quarter. It is our view that, as a result of recent purchases and

dispositions as well as increasingly attractive valuations of a number of the Fund’s holdings, the

Fund today is positioned extremely well to produce very attractive long-term returns. My personal

response has been to materially increase my own investment in the Fund throughout the quarter.

Following the performance discussion, we review investment activity during the quarter.

Germany and the Euro

In several ways, the last few months have been a reminder that few, if any, of the fundamental

problems leading to the 2011 European Sovereign Crisis have actually been “solved”. Many

symptoms are subject to ongoing treatment yet the illnesses linger. The reminders have come in

many forms. Spreads between German and Greek bonds widened materially, political opposition

to important economic structural reforms and anti-austerity movements continue to flare up and

unpleasant German macroeconomic data is prevalent. European equities in general saw a material

decline during the quarter though German equities saw among the strongest declines. The MSCI

Germany index was down -6.97%, while the MSCI World returned 0.18% and MSCI USA had 4.86%

returns over the fourth fiscal quarter. The Fund has roughly 16% of its holdings in Germany, well in

excess of the index. We continue to be very pleased with the business developments and resource

conversion activity surrounding each of our four German companies-- Telefonica Deutschland,

Daimler AG, Leoni AG and Munich Re, in order of size.

Recent negative investment returns have been compounded by the close to 7% decline of the Euro

in which roughly 35% of the Fund is denominated, relative to the US dollar. While it is healthy to

frequently reevaluate the theses underpinning each of our investments, in this case, we have not

been given any cause to change course. In fact, while in the short-term this has had a negative

impact on the portfolio’s performance, the Euro decline is of net benefit to a number of globally

exposed European companies, such as Daimler AG, which continues to produce operating

performance exceeding our highest expectations. Further, just as at the height of the European

Sovereign Crisis when we initiated investments in several European companies, we emphasize

business fundamentals and business prospects rather than the short-term trading environment,

except when the environment provides us with an attractive opportunity to buy or sell. In this

case, we have taken the opportunity to add to several European names, including Daimler AG and

Leoni AG.

Small -Cap Sel lof f

The decline in global equities during the quarter was pervasive but particularly acute in smaller

capitalization companies as compared to larger ones. The performance of global indices during the

quarter and the year disguise the bifurcation of performance between smaller capitalization stocks

and large capitalization stocks. In what was a decidedly negative quarter (August through October)


2 1

for global equities, the rush for the door was felt more acutely in small-cap companies as is readily

apparent in the performance data for small-cap global equities, which for the quarter have

underperformed large-cap companies by -2.15% as measured by comparing MSCI ACWI ex USA

Large Cap to the MSCI ACWI ex USA Small Cap Indices. With a median market capitalization3 of $4.1

billion for the Fund and $7.2 billion for the index, it is clear that the Fund has a tendency to be more

active in smaller companies. There is no strategic or tactical underpinning whatsoever behind this

tendency. Historically, we have simply been able to find more attractive opportunities in less well-

followed and less well-trafficked companies where we can add value through a considerable

amount of proprietary research. This tendency has led us disproportionately to smaller companies.

A highly differentiated portfolio is also a byproduct of this approach. Declines in the prices of

various positions in the Fund have made their valuations extremely exciting. One might also observe

that the preponderance of our recently made investments have been smaller-capitalization

companies as we respond to seemingly impulsive and indiscriminate selling of various smaller

companies. These developments leave us thrilled for the future performance prospects of the Fund.

Natural Resources

In addition to smaller capitalization companies, the equity prices of many natural resource related

companies have been hit extremely hard of late. It is our view that generalizations about

commodity prices are to be avoided as each commodity has its own distinct supply and demand

characteristics. One might recall that we sold both of our gold mining companies early in the year

while initiating positions in two copper mining companies. Aside from digging giant holes in the

ground, the two have very little in common. That said, wide swaths of commodity related

companies have seen their share prices decline markedly of late, particularly so if they are both

commodity related and have small market capitalizations. The two copper mining companies we

purchased earlier in the year, Antofagasta and Capstone Mining, to varying degrees fit this

description. Both have seen their share prices decline. We maintain the firm belief that well-

understood copper supply fundamentals, which continue to increase the cost of producing copper,

make it probable that the price of copper will increase over time. That aside, even at the current

price of copper, Capstone Mining is expected to generate an after tax free cash flow yield of

approximately 12%. We have a difficult time fathoming how this is not widely viewed as a

compelling proposition at present, though we expect that it will be over time. While our recent

investments in natural resource related companies have not helped our performance yet, we view

them to be some of the most exciting propositions within the Fund and in equity markets generally.

Further, recent equity market declines, particularly for European and smaller-capitalization

companies, have rendered a number of existing portfolio positions surprisingly inexpensive. For all

of these reasons, our confidence in the Fund’s ability to produce strong performance over longer

periods of time has only grown as the year has progressed.

Positions Exited During the Quarter During the quarter, we eliminated five positions: Straits Trading Ltd, Allianz AG, Precision Drilling

Corp, D’Ieteren NV and Piramal Enterprises Ltd.


3 Data as of September 30, 2014.


2 2

Straits Trading Ltd

The Fund acquired its shares of Straits in January 2013. Fellow shareholders may recall that the

Fund had swapped its shares of WBL Corp, a Fund holding since May 2005 and the Fund’s largest

holding since 2009, for shares of Straits Trading. For several years we had worked diligently to

encourage a change in strategy within WBL’s board, attempting to produce a more proactive

approach to value creation and realization. We shared a number of simple yet excellent ideas with

regard to value creation. In the end, the resistance within WBL’s board proved a considerable

obstacle, notwithstanding a number of changes we and other shareholders were able to make to

the composition of the board over that time. Gradually, we concluded that the untangling of this

knot required a single shareholder with control or virtual control of WBL to direct the process of

harvesting the considerable value held hostage within the company. For this reason, we

contributed our shares of WBL to Straits, already one of the largest shareholders of WBL, which in

turn made Straits rather than WBL the largest position in the Fund. Shortly thereafter, recognizing

that the balance of power had changed, companies historically affiliated with WBL rallied together

to produce an attractive takeover offer for WBL. Straits accepted this offer and the Fund benefited

via our ownership of Straits and later as recipients of some of the proceeds, which Straits paid out

in the form of a special dividend.

The transaction, among several others executed by Straits during the last couple of years,

positioned the company very nicely to execute on a plan to transform itself from an investment

company rich with property and a variety of other investments, into a real estate-focused business

profiting from the entire eco-system of real estate, from property development to real estate asset

management. Straits is progressing down this path with an attractive business plan, considerable

financial wherewithal and a very sensible management team. Our decision to exit the position

derives first from the liquidity of the position and secondarily from its valuation. Our position was

initially sized for a larger asset base and grew unwieldy as the size of the Fund declined. Given the

very high level of controlling-family ownership and related low level of public float, Straits stock

trades quite sparsely in public markets. It had always been our intention to exit the position

through a “block transaction” rather than by selling into the open market. When presented with

multiple opportunities to do just that we availed ourselves of the liquidity and greatly enhanced

the flexibility of the Fund. Further, we would certainly not characterize Straits as an expensive or

even “fully valued” company. It is reasonably attractive from a valuation perspective but the world

in which the Fund operates has changed and materially more attractive valuations are currently

available to the Fund and therefore the Fund’s flexibility to take advantage of various other

investment opportunities has become increasingly important. PGS, described in the following

section, is one such example. The combination of these considerations drove the decision to

conclude a nine year investment at this time. From our initial investment in WBL in May 2005

through to our exit of Straits Trading, we realized an IRR of 6.2%.

Allianz AG

We had initially purchased shares of Allianz, a global insurance company, in March 2008 and

increased the position as we entered the global financial crisis. It was an environment in which all

manner of financial institutions were deemed to be toxic with virtually no thought given to the

tremendous distinctions in business models and financial positions. Allianz was also later maligned



2 3

in the European Sovereign Crisis because it is an enormous owner of European sovereign bonds.

These crises came and went (for the moment), there never was an insurance industry crisis and

the frequency and severity of major insurance events has in the meantime been very benign. This

last detail has led to the accumulation of hefty underwriting profits and in turn overcapitalization

throughout the industry. Too much capital puts pressure on prices and tempts risk underwriters to

stretch against their otherwise better judgment. Admittedly, this dynamic is most obvious within

the catastrophe reinsurance industry rather than primary insurance, which is Allianz’s largest

business. However, overcapitalization is not exclusive to reinsurance and falling reinsurance pricing

can in turn put downward pressure on primary insurance rates. This pricing pressure is only

exacerbated by the low interest rate environment which causes paltry returns to be produced by

insurance company investment portfolios The low interest rate environment, particularly in

Europe, has also put acute pressure on the profitability of Allianz’s life insurance business. Also,

somewhere between one quarter and one third of Allianz’s value is attributable to its asset

management division, which is primarily comprised of its ownership of PIMCO. Independent of

what one might believe about the state of the fixed income market, one could justifiably be

cautious about how large of a firm PIMCO had become and whether they could continue to

produce quality results at that scale. At a minimum, one could easily be skeptical of PIMCO’s ability

to continue to grow such a colossal asset base. With all of these considerations in mind, we had

reduced our position in Allianz materially earlier in the year. At the end of the Fund’s second

quarter (April 30, 2014), our position in Allianz was firmly in the Fund’s top ten holdings. As we

headed into September of this year, the month in which Bill Gross’s departure from PIMCO was

announced, the position size had been reduced to the 26th largest position in the Fund. The

September announcement of Gross’s departure was for us a final straw of sorts. We certainly don’t

know where the dust will settle for PIMCO, but the other parts of the business do not compel us to

hold on until we find out. All told we realized an IRR of 3.1% since our initial investment in March

2008.

Precision Drilling Corp

We first purchased shares of Precision Drilling in late 2011. The company, a North American land

drilling company, operates in an industry renowned for historical boom and bust cycles, use of too

much financial leverage and serial acquisition strategies. Precision Drilling is better than many on

each of these counts but still exists within an industry driven by factors largely out of its control.

With a multi-year tailwind in the form of a North American shale drilling boom having pushed the

company along, and a sizeable capital expenditure cycle reemerging in the industry, which has a

good probability of creating more supply than is necessary (often at exactly the wrong time), we

began selling our holdings in Precision Drilling as early as April 2014. By the end of August we had

sold ninety percent of the shares we held coming into the year. We completed the last ten percent

in September and October. In hindsight, our timing might suggest some sort of prescience given

the stock’s performance post our sale, though in reality the decision was driven by our perception

of the mounting risks we described. Our investment in Precision Drilling produced an IRR of 6.2%

during the three year holding period.



2 4

S.A. D’Ieteren NV

We exited D’Ieteren after an atypically short holding period of roughly one and a half years and

would conclude that it was a mistake. This Belgian family-controlled holding company has a

monopoly on Belgian import and distribution of the entire Volkswagen brand lineup. D’Ieteren also

operates a vehicle glass repair and replacement business that is the world’s largest by a wide

margin. From a business perspective, the latter is clearly the higher quality and more valuable of

the two businesses. We sold our shares of D’Ieteren for two primary reasons. First, having sold a

business not long before our purchase, the company had a considerable amount of excess capital

on its balance sheet. It was our understanding at the time of our purchase that the company

intended to make an acquisition with its excess capital but, in the event that they failed to identify

an attractive acquisition within a fairly narrow band of industries, some portion of the excess

capital would then be distributed to shareholders. The time horizon of the acquisition search has

become less specific and the range of businesses of interest appears to have widened. Secondly,

we have growing concerns about the vehicle glass replacement and repair industry, which

represents the bulk of D’Ieteren’s value. There is some evidence that the competitive landscape is

changing in several geographies and not for the better. Additionally, technological trends in

passenger vehicles have some probability of upending the apple cart for the vehicle glass repair

and replacement industry. In the event that technology embedded in vehicle glass grows prevalent

(not a long shot), the potential exists for the technology to drive glass repair and replacement work

back to auto dealerships which specialize in technology specific to a single automotive brand, as

opposed to less expensive third party providers which provide more generalized services across all

brands of automobiles. In short, the business of repairing windshields may require an awful lot

more sophistication in the not too distant future. In contrast, our investment in Leoni AG is very

much on the right side of the long-term trend of increasing electronics embedded in passenger

vehicles. Given the way in which our D’Ieteren investment developed, we chose to sell the entire

position which, over our entire holding period, had been among the smallest positions in the Fund.

We realized an IRR of negative 10.3%.

Piramal Enterprises Ltd

We first purchased shares of Piramal Enterprises in June 2013. This Indian family-controlled

holding company was, at the time of our purchase, mostly a pool of cash and financial assets that

would soon be converted into cash. Over recent quarters, Piramal has begun putting its liquidity to

work, thereby clarifying, to some extent, what its future may hold. Coincident with these

developments, Indian equity markets became euphoric during Narendra Modi’s ascendency and

coronation. During the period of our ownership, Piramal’s stock price has appreciated much more

so than its underlying value has grown or its prospects have improved, and is therefore much less

cheap than it used to be. In today’s environment, we have more attractive uses for our capital. Our

investment in Piramal produced an IRR of 15.9%, which is materially better than the Fund’s

performance over the same period though quite similar to Indian equity market indices over that

time frame.

New Investments Initiated During the Quarter During the quarter, the Fund initiated a new position in Petroleum Geo-Services (PGS), which is a

global leader in marine seismic services. The Fund has owned PGS once before, so in some regards



2 5

the position is not “new”. Further, this is the third time the Fund has invested in the marine seismic

industry. The undeniable fact of the industry is that it has historically been prone to industrial cycles

of considerable amplitude. Previously, we owned PGS in the wake of the Macondo blow-out (BP’s

accident in the Gulf of Mexico in 2010) that resulted not only in an environmental disaster but in a

virtual halt to exploration activity in the Gulf of Mexico. Under normal circumstances the Gulf of

Mexico is an area very busy with exploration activity, so when activity halted, the companies that

provide exploration and development services (e.g., seismic) found themselves with far more

capacity than the shrunken industry demand could absorb. Capacity utilization rates and pricing of

services suffered significantly. We purchased PGS in that environment and later concluded the

investment very successfully as the industry normalized. In the earlier days of the Fund’s operation,

we came to have a considerable portion of the Fund (roughly 15%) invested in oil service

companies. The opportunity then was not the result of an accident but rather that hydrocarbon

exploration and production companies were increasingly buckling under pressure from

shareholders who demanded better returns on capital and the return of more free cash flow to

shareholders. These are shareholder euphemisms for “invest less money”, which is exactly what the

oil majors did. However, most companies are loath to shrink, which is the fate of a company in the

business of harvesting and depleting natural resources, unless of course the company is able to find

and replace as much as it produces. The narrative may sound familiar as it is again on the front page

of today’s newspapers with stunning similarity to the early 2000s. Oil majors are again bowing to

pressure and capital expenditure budgets are again shrinking. While we don’t expect another

“desktop drilling” scandal will develop as it did in the early 2000s, the significant and indisputable

rates at which oil and gas majors are depleting their existing resource bases necessitates that new

resources will eventually have to be found. The marine seismic industry bears the brunt and the

benefit of this manic behavior.

What is particularly attractive about the seismic industry today, and PGS specifically, has much to do

with the structure of the industry. At no time in our experience has there been such a strong

bifurcation within the seismic industry. PGS is head and shoulders above its competitors in terms of

balance sheet quality, vessel quality and some would say the quality of its management team.

Further, the valuation of the industry is extremely compelling with PGS, the best in class, currently

trading at less than 60% of stated book value. To be sure, there is little chance that the headwind

being endured by the industry will subside overnight. In fact, our ideal scenario is for the downturn

to persist long enough to further cripple one or two competitors which have frightfully weak

balance sheets. It is our expectation that industry capacity will continue to be curtailed through the

removal of higher cost vessels and that owing to its modern low cost fleet and industry-best balance

sheet, PGS will emerge from cyclical lows as an even more dominant player.

During the year to date, we have greatly increased the liquidity of the portfolio through the

disposition of multiple large, less-liquid positions, enhancing our ability to respond quickly to new

and more exciting investment opportunities. Our activity on the new opportunity front has been

brisk. These investments represent a broad range of businesses and geographies but share a few

features that reflect our investment philosophy. The companies we have added to the Fund have

solid balance sheets, pricing that reflects a considerable discount to long-term business value and

an underlying value that we believe is not only enduring but has clear prospects for compounding



2 6

over time. The short-term performance impact of environments such as the one experienced

during this quarter may be unpleasant in the moment, but in truth, an opportunistic value Fund’s

ability to produce attractive long-term performance is only enhanced by such environments. We

believe that the current portfolio holds some of the most exciting investment ideas in the

international equity space and furthermore that the Fund is as well-positioned and attractively

valued as it has been in years.

Thank you for your continued interest and support of the Fund. The Third Avenue International

Value team and I look forward to writing to you next quarter. In the meantime, should you have

any questions or comments please don’t hesitate to reach out.

Best wishes for a happy and prosperous New Year!

Sincerely,

Matthew Fine, Lead Portfolio Manager




2 7

-15% -10% -5% 0% 5% 10% 15%

Oil

Small Cap

CCC

Distressed

Leveraged Loans

Emerging Mkts

B

US HY

BB

USD

10-yr Trsy

S&P 500

YTD Q3 2014 Oct-14

Focused Credit Fund Port fo l i o Manager Commentary


O C T O B E R 3 1 , 2 0 1 4


Three months feels like an eon; so much has changed in the market! This is, therefore, a

good time to take a step back and get some perspective. Yes, a lot has changed; prices for

most financial assets have had dramatic swings over the last three months. But, not

everything has changed. The fundamentals underlying most of the Fund’s investments, as

well as the outlook for the longer-term US economy and default rates are still the same. We

view the recent market dislocation as an opportunity to generate returns for the Fund going

forward.

The last three months were quite eventful across markets and geographies, as volatility and

fear returned quite abruptly to financial markets. Fear and volatility reinforced and

exacerbated the trend we have seen for most of 2014. While “lower quality” or “riskier”

assets (small cap equities, high yield bonds, commodities) slightly trailed their “higher

quality” or “safer” counterparts (large cap equities, investment grade bonds and treasuries)

for most of the year returns were positive across the board. But in the last three months,

riskier assets generated large negative returns and significantly underperformed higher

quality assets, as shown below. In fact, countering almost every macro prediction from the

beginning of this year, and in spite of the perceived market consensus around rising US

interest rates and the Fed formally ending QE3, US Treasuries are among the best

performing assets for 2014.

Third Avenue Focused Credit Team

Tom Lapointe, CFA Lead Portfolio Manager

Joseph Zalewski Portfolio Manager

Nathaniel Kirk Portfolio Manager

Edwin Tai, CFA Portfolio Manager

Brian Lennon Restructuring Attorney

Andrew Pelisek Research Analyst

Casey Savage Research Analyst

Robert Sherman Trader

Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Focused Credit Fund’s 10 largest issuers, and the percentage of the total net assets each represented, as of October 31, 2014:

IHeart Communications Inc, 4.90%; Affinion Group Inc, 4.58%; Reichhold Industries Inc, 4.14%; Energy Future Intermediate Holding Co LLC, 3.88%; The Sun Products Corp, 3.51%; Lehman Brothers Inc, 3.11%; Claire's Stores Inc, 2.81%; 21st Century Oncology Inc, 2.59%; Western Express Inc, 2.56%; MPM Holdings Inc, 2.42%

Returns of Various Assets1

1 10 year US Government Treasury Notes (10-yr Tsy) are a debt obligation issued by the United States government that matures in 10 years. The J.P. Morgan High-Yield Index is designed to mirror the investable universe of the US dollar domestic high yield corporate bond market, excluding the most aggressively rated bonds and those trading at distressed levels. J.P. Morgan BB, B, CCC and High Yield Indexes are designed to mirror the investable universe of the US dollar domestic BB, B, CCC and High Yield corporate debt markets, respectively. The HFRI Event Driven: Distressed/Restructuring Index (Distressed) is composed of strategies which employ an investment process focused on corporate fixed income instruments, primarily on corporate credit instruments of companies trading at significant discounts to their value at issuance or obliged (par value) at maturity as a result of either formal bankruptcy proceeding or financial market perception of near term proceedings. The MSCI EM Index captures large and mid-cap stocks across 23 Emerging Markets. The J.P. Morgan Leveraged Loan Index is designed to mirror the investable universe of US dollar institutional leveraged loans, including US and international borrowers. The Russell 2000 Index measures the performance approximately 2,000 small-cap companies in the US. The S&P 500 Index is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The Deutsche Bank Long US Dollar Index (USD) Futures Index reflects the return from investing in the first USDX futures contract listed on NYBOT, it represents a bullish dollar view. The NASDAQ Commodity Crude Oil (Oil) index is designed to measure the performance of a Brent Crude Oil through the use of futures contracts.

Source: J.P. Morgan, Morningstar, Credit Suisse and HFRI. Data as of 10/31/14, Q3 2014 is calendar quarter.


2 8

Focused Credit Fund

In our view, this recent market downturn was more of a “correction”, punctuating a five year bull

market, than the result of a change in fundamentals or direction of the US economy. Equity

markets bounced back rapidly since the October 15 lows but high yield and distressed bond

markets are recovering at a much slower pace. From a fundamentals standpoint, we would expect

the distressed bond market to rebound just as equities did. Market fundamentals remain

unchanged and prices are more attractive. Instead, investors have been reluctant to commit

capital to new or existing investments. We think that the lag in the recovery of the distressed bond

market might be due to the fact that hedge funds and other large investors are still “digesting”

losses, preparing for year end, holding on to cash to face potential redemptions and other factors

that are not related to the companies themselves. This correction was exacerbated by a variety of

negative surprises and a lot of money was lost over the last quarter. Many hedge funds had large

positions in Fannie Mae and Freddie Mac, Lehman SIPA Claims, AbbVie Inc., and oil and gas. Each

one of these investments struggled this quarter. Consequently, media sources have estimated

large hedge funds losses. Perhaps somewhere around $25 billion in Fannie and Freddie, $1 billion

to $2 billion in Lehman and more than $25 billion in oil and gas. In addition, in some cases, we

have seen funds selling their more liquid names to raise cash, putting technical pressure on

otherwise fine credits. We are not going to predict when this will turn around. What we can say is

that if we are correct on our positive assessment of the economy, and default rates remain low

over the near term, the portfolio and the distressed market are attractively valued, both on an

absolute as well as a relative basis. This is particularly the case when considering that both high

quality high yield and investment grade are more sensitive to interest rates (four years and six

years duration, respectively) and that high quality high yield offers only four percent income, and

investment grade only two percent.

A number of macro events over the last three months should actually help stabilize and grow the

US economy further. The rally in Treasuries and lower rates across the curve helps consumers,

businesses and the overall economy. Whether it is mortgage, credit card, auto or other consumer

loans, the cost to finance has stayed low and even decreased, giving the consumer extra cash in

their pocket. From the business standpoint, low rates continue to encourage borrowing and

investing in longer-term assets “cap-ex”, while giving over-levered entities more time to grow into

the balance sheet. The appreciation of the US dollar relative to most currencies and the dramatic

fall in oil prices, from $100+ per barrel to just under $80, also have a net positive effect on the US

economy.

While it is impossible to predict where interest rates, oil and the US dollar will be next quarter, let

alone over the long term, on the margin recent developments are a tailwind to our thesis that the

US economy is on a strong and improving footing. All this bodes well for our portfolio.


2 9

Focused Credit Fund

Fund Performance For the year-to-date period ending our fourth fiscal quarter, October 31, 2014, the Third Avenue Focused

Credit Fund’s Institutional Class share returned -0.41%2 while the Barclays High Yield Index returned

4.72% over the period.3 Performance across different asset classes and market segments exhibits

significant dispersion year-to-date. The Morningstar’s Bank Loan Category4 average returned 1.59% and

the Morningstar’s High Yield Bond Category5 average returned 3.52%. The strong rally in Treasuries

resulted in higher quality bonds outperforming lower quality bonds. Investment grade bonds returned

7.19% (JPM Investment Grade), the JPM US High Yield Index returned 4.70%, BB bonds returned 6.83%, B

returned 4.27% and CCC returned 1.32%. The S&P 500 and Russell 2000 Indexes returned 10.99% and

1.90%.

The Fund’s performance in 2014 has been a tale of two halves. During the first half of 2014, the Fund had

positive returns and outperformed its benchmark and peers in spite of having virtually zero exposure to

the high quality securities that benefitted from the rally in Treasuries during the year. We can attribute

this result to good security selection. Dramatic changes as the year progressed had a significant effect on

the Fund. The portfolio gave back most of the year’s performance between June and October. Some of

that negative performance can be attributed to big market movements, driven by technical and other

factors that primarily affected distressed names. While most of the Fund is unique and typically does not

move with the market, when market moves take on the magnitude of the ones we have seen in the past

couple of months, the Fund feels it.

Here’s an example that illustrates the extent of the current market turmoil: the figure below shows bond

prices for one of the Fund’s core holdings, iHeart Communications Inc. (previously Clear Channel Media

Holdings Inc.), a 4.9% position in the Fund as of October 31, 2014. iHeart Communications operates as a

media and entertainment company. It is among the largest, most liquid names in the distressed market.

Before the market turmoil, its bonds were trading at $105. As the market dislocation ensued, this credit

has traded down 25 points. In fact, there has been no change in the business over the last three months

and their most recent earnings reports were positive. The bond remains in the low 80s even though

higher quality BBs have rebounded. This bond pays a 14% coupon, which is more than 1% income a

month in addition to the discount in the price.

2 The Fund’s one‐year, five-year and since inception (August 31, 2009) average annual returns for the periods ending October 31, 2014 were 2.93%, 9.27% and 9.50%, respectively. The Fund’s one-year, five-year and since inception (August 31, 2009) returns for the periods ending September 30, 2014 were 9.78%, 10.53% and 10.63%, respectively. The Fund’s Total Annual Fund Operating Expenses (as a percentage of net assets) were 0.91% for the Institutional Class and 1.16% for the Investor Class, as stated in the Fund’s prospectus dated February 28, 2014. Third Avenue Focused Credit Fund is offered by prospectus only. The prospectus contains more complete information on advisory fees, distribution charges, and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. The Fund’s returns should be viewed in light of its investment policy and objectives and quality of its portfolio securities and the periods selected. M.J. Whitman LLC Distributor. If you should have any questions, or for updated information (including performance data current to the most recent month‐end) or a copy of our prospectus, please call 1‐800‐443‐1021 or go to our web site at www.thirdave.com. Current performance may be lower or higher than performance quoted. 3 The Barclay’s High Yield Index one‐year, five year and since Fund inception (August 31, 2009) average annual returns for the period ended October 31, 2014 were 5.82%, 10.44% and 11.65%, respectively. 4 Average year‐to‐date return of the 243 funds included in the Morningstar Bank Loan Category, for the period ended October 31, 2014. 5 Average year‐to‐date return of the 767 funds included in the Morningstar High Yield Bond Category, for the period ended October 31, 2014.

Source: Bloomberg. Data as of November 25, 2014

Price in USD, iHeartCommunications Inc. 14% Notes due 2/21/2021

70

75

80

85

90

95

100

105

110

Jan-14 Apr-14 Jul-14 Oct-14


3 0

Focused Credit Fund

Most of the rest of the Fund’s underperformance over the last quarter has been driven by company

specific events. It is important to note that we believe most of these events have not caused

permanent impairments and recent performance has not affected our longer-term thesis. We will

review three of the largest detractors from performance below.

Fannie Mae & Freddie Mac Preferred – Government Sponsored Entities (GSE)

We have been invested in Fannie and Freddie preferred stock since 2011. Our thesis is premised on

five arguments: 1) Fannie and Freddie are solvent and highly profitable entities; 2) they have

significant equity value even if liquidated; 3) Fannie and Freddie have paid back the government

bailout; 4) the “Net Worth Sweep”, which transfers all the profits of Fannie and Freddie to the

Treasury Department, violates the principles of conservatorship and the Housing Reform Act (HERA);

and 5) we do not believe there is a way to replicate these institutions without grave political and

economic consequences.

On October 1st, US District Judge Royce Lamberth dismissed Fannie Mae and Freddie Mac preferred

shareholders’ lawsuits against the government. While this is only one of three major suits against the

Federal Housing Finance Agency (FHFA) and Department of Treasury, Lamberth’s decision was a

setback (for argument #4) and prompted a significant decline in our preferred stock, from

approximately $0.36 of par to approximately $0.12 of par. According to Judge Lamberth (with whom

we respectfully disagree), the Net Worth Sweep did not violate HERA and has caused no harm to the

GSE preferred stockholders. Judge Lamberth, however, did state that we are entitled to our

liquidation preference, and thus the preferred stock retained its rights and standing. We have always

believed that the government lawsuits would be appealed to the Federal Court of Appeals, if not the

US Supreme Court, and more importantly, that the lawsuits in and of themselves were not the

solution. Victories in the suits would give the preferred and common shareholders leverage in

negotiating with the government for a timely resolution. However, the solution for Fannie and Freddie

preferred stock, and ultimately housing reform, is political. Only the Executive Branch and/or

Congress can determine it. We took advantage of the recent sell-off and purchased more Fannie and

Freddie after the end of the quarter. While the Judge’s ruling is a short-term set-back and GSE

preferred stock will fluctuate with political headlines and developments in the legal trials, we continue

to believe in the fundamental value of Fannie & Freddie preferred stock, that the rule of law is on our

side, and that the risk/reward profile at $0.12 is highly attractive.

Lehman SIPA Claims

As we wrote in our last letter, the Court of Appeals for the Second Circuit ruled against the LBI Trustee

in August. While this decision implies that our “free option" for 50% upside has expired, we expect to

make money and will ultimately recover $0.46-$0.47 (up from our initial estimates of $0.42-$0.45) on

our LBI claim versus our purchase price of $0.44. This is a prime example of how we had limited

downside in this investment, yet a meaningful probability for a large return. In September, LBI paid a

distribution of $0.17 to all claims holders.


3 1

Focused Credit Fund

Nii Capital Corp

Nii Capital Corp is a mobile communication services provider operating under the Nextel brand in

Latin America. When we invested in Nextel over one year ago, the company was experiencing declines

in their main markets and spending part of their significant cash to build out and improve their

networks. They were also able to access the capital markets to issue Senior debt and extend out their

liquidity runway. The company’s results and cash burn over the next 12 months were worse than we

anticipated and traction on reversing the decline in subscribers was taking longer. The company filed

for bankruptcy in September as its business has been struggling with fierce competition in Brazil and

Mexico. We sold out of our position and realized a permanent loss. Nextel may well succeed in their

business plan, but it is not clear that the bonds we owned will benefit based on the timing and

ultimate value of the business.

Progress on Five Restructurings The Fund has seen significant progress on a number of restructurings. At this point we have

completed or nearly completed the restructuring process for several of the holdings in the portfolio,

thus removing much of the uncertainty generated by this process. Given recent market turmoil, some

of these investments are currently trading at or below where they were as they were entering a

restructuring, even though we believe that each investment is now fundamentally more sound. In

others, like Codere or Energy Future Holdings, we are currently in a gain position. We expect many of

these investments that have recently emerged from the restructuring process to bear fruit in the next

six to 12 months.

As you know, unlike most mutual funds, we don’t shy away from the event-driven/ restructuring

space. In fact, about 45%6 of the portfolio is in event-driven7 credit types of investments which

include capital infusions8, distressed investing9 and debt-for-equity.10 We are drawn to these types

of investments which offer a potential stream of returns that are not correlated to interest rates or

the high yield/ leveraged loan markets, as the outcome of these events are not always linked to

macroeconomic factors.

As with everything we do, our investments in this space are driven by thorough fundamental company

analysis which seeks to determine the valuation of the company and identify the fulcrum security11 in

the capital structure, as this would allow us to participate in the company’s reorganization. As we

scour the investment universe, we look for good businesses with bad balance sheets that we believe

can be fixed. And by a good business, we mean a business that has a clear purpose or has a reason for

being, which ultimately is a necessary condition for reorganization, as otherwise the company ceases

to exist. As such, we blend our credit research with an equity-like focus and leverage off Third

Avenue’s long history in distressed, restructuring and bankruptcy.

6 As of the end of September 2014. 7 The definition of event-driven is quite broad as it includes all strategies that seek to exploit pricing inefficiencies that may occur when companies are involved in a corporate event such as merger, takeover, spin-off, asset sale, restructuring, reorganization, liquidations, bankruptcy and others. This covers a wide spectrum and includes diverse strategies such as merger arbitrage, credit arbitrage and activist investing among others. 8 Capital infusions include DIP financing, rescue and exit capital. 9 Distressed investing refers to issuers whose securities trade at a spread greater than or equal to 1,000 bps above corresponding treasury levels. 10 Debt-for-equity is an investment in which we buy the debt of a company and receive cash and/ or equity through the restructuring. 11 The fulcrum security is a concept at the core of our investment process which we have discussed at length in our Q1 2014 shareholder letter.


3 2

Focused Credit Fund

Ideal Standard: Out of Court Restructuring

Ideal Standard is one of Europe’s leading manufacturers and distributors of bathroom and

kitchen fixtures. The company has leading market share throughout most countries in Europe.

Bain Capital bought the company for $1.8 billion through a LBO in 2007. This is a good

example of an investment in our Fund: we bought a good business at a significant discount,

we are invested alongside high quality institutional investors and the investment has such

complexity that it is rarely (if ever) part of a traditional high yield mutual fund.

We initiated a position in Ideal Standard in December 2013 at a 70% discount to where Bain

had invested. We were able to accumulate 25% of the notes that we believed would be (and

in the end were) the fulcrum (11.75% EUR Senior Secured Notes), buying from investors

selling off the company on liquidity concerns. Up until this point this was a fairly routine

investment. Complications started when the company went into reorganization and initiated

an exchange offer that did not allow minority note holders, such as Third Avenue, to

participate in the equity, and intended to leave us with a high-yielding fixed income

instrument only. We contested this exchange offer and threatened a legal action in the US.

This gave us leverage; we were able to negotiate revisions to the exchange offer that allowed

us to get a 20% stake in the equity. The restructuring was completed in spring 2014. The

recapitalization values the company at $500 million today. We believe this investment, a 2.1%

position in the Fund as of October 31, 2014, has significant upside and limited downside.

Codere Financial: International Out of Court Restructuring

Codere is a leading gaming company engaged in the management of gaming machines,

gaming halls, racetracks and betting locations in Spain, Italy, Mexico, Brazil, Argentina and

Uruguay. The investment is an example of a distressed European situation where the

company and bondholders were able to negotiate an out of court restructuring via a UK

scheme of arrangement.

Codere is a robust business, troubled by its exposure to Argentina and currency devaluation

risk in Latin America. Codere maintains a leadership position within its core markets, which

have higher barriers to entry. The company also has a flexible cost structure that allows for

robust cash flow generation. We analyzed Codere for a long time and purchased Senior

Secured Bonds in the $0.40 to $0.50 range, earlier this year, acting opportunistically on a

market dip caused by uncertainty in the restructuring process in Spain. Together with several

like-minded value investors, we were able to create a sustainable capital structure. Third

Avenue was part of the back-stop group, i.e., the group providing last-resort support for the

unsubscribed portion of the issuance, which deployed approximately $450 million of new

capital. While the restructuring occurred out of court, the process was quite complex. It

required getting comfortable with the insolvency (concurso) process in Spain and ultimately

leveraging off the potential to access the UK judicial system.

Ideal Standard Capital Structure*

Initial Positions

Revolving facilities Senior Secured Notes Preferred Equity Equity

Revolving facilities Senior Secured notes (A Notes) Senior Notes (B Notes) Equity linked notes (C Notes) Legacy Senior notes Equity

Pro-Forma Positions

* Initial and pro-forma positions refer to positions before and after the restructuring. The Fund’s position is indicated in bold.

Codere Financial Capital Structure*

Initial Positions

Super Senior Credit Facility Senior Secured Bonds PIK Loan Equity

Super Senior Credit Facility 2L Note 3L Note Equity

Pro-Forma Positions


3 3

Focused Credit Fund

Energy Future Holdings: Capital Infusion/ Control Investment

Energy Future Holdings (EFH), the electrical utilities company headquartered in Texas, is also

the largest LBO and one of the largest non-financial bankruptcies in history. We wrote

extensively about our investment in this company in our Q2 2014 letter. EFH is an example of

how we can use the bankruptcy process to actively bid for a company.

After acquiring a material stake in the unsecured notes of the EFIH silo (which has a claim on

the transmission business Oncor in which we are interested), we joined four like-minded

funds to pursue value maximization through restructuring discussions. We formed part of a

group that had exchanged notes into an equity-like note with 12.25% payment in kind (PIK)

interest. In April of this year, our group announced a plan to backstop a $1.9 billion rights

offering in order to pay down debt and effectively buy the business through a bankruptcy

process. If successful, it would have been the second largest rights offering in history.

Unfortunately our plan will not go through as another group emerged with a topping bid,

prompting the company to conduct a full auction process. Our group is currently considering

options. In the meantime, the price of the bonds has more than doubled and we are receiving

the coupon.

This investment is a perfect example of the “not bad” downside of a fulcrum security, if our

analysis is correct. In an upside scenario we would take the equity of the company and the

potential for substantial gains in the future. The “downside” would be the payment in full of

our bonds and accrued interest --clearly not a terrible outcome. EFH is a 4.4% holding in the

Fund, as of October 31, 2014.

Momentive Performance Materials: Debt-for-Equity

Momentive is a private specialty chemical company for which Apollo Global Management was

the equity sponsor. The company is one of the largest global producers of silicones (well

known as economically sensitive chemical commodities) and quartz materials used in

semiconductors.

The company struggled in mid-2012, as new capacity that came on-line in 2011 started to

impact its margins and cash flows. At this point, we established a core position in Momentive

at an attractive discount to our conservatively estimated NAV. Continued pricing pressure and

liquidity issues led the company to file for bankruptcy in April 2014.

This company has an extremely complex capital structure. We purchased the Second Lien

Notes, which were the fulcrum security. Subordinate Notes and HoldCo PIK Notes that were

below us in the capital structure were “wiped out” with the bankruptcy. The First Lien Notes

and 1.5 Lien Notes above us got “crammed up” with takeback notes with very low yields. First

and 1.5 Liens are currently litigating the issue but we believe the ruling supporting this

transaction will stand. This was a straightforward process for us as we were invested in the

fulcrum security and our notes were exchanged for equities. We continue to hold these

Energy Future Holdings Capital Structure*

Initial Positions

Operating Company Debt EFIH 1st Lien Bonds EFIH 2nd Lien Bonds EFIH Unsecured Bonds EFH Legacy Bonds Private Equity

Operating Company Debt 1st Lien Exit Debt EFH/EFIH Post-Reorg Equity

Pro-Forma Positions

Momentive Capital Structure*

Initial Positions

1st Lien Notes 1.5 Lien Notes 2nd Lien Notes Subordinate Notes HoldCo PIK Notes

1st Lien Notes 1.5 Lien Notes Equity

Pro-Forma Positions



3 4

Focused Credit Fund

securities and believe they offer significant return potential from here. This is a good business,

bound to recover with the silicone market and the broader US economy. Momentive is a 2.4%

position in the portfolio, as of October 31, 2014.

21st Century Oncology: Rescue Financing

21st Century Oncology is a premier cancer care services and oncology radiation provider, with

150 facilities in the US. It also operates 35 centers located in six countries in Latin America.

21st Century Oncology has a large market share across all of these markets and is a

wonderfully innovative company. However, most recently it has been under distress and

dealing with liquidity concerns that can be mainly attributed to Medicare pricing and

regulatory risk that most companies in the Health Care sector carry, as well as its highly

levered balance sheet. Like most of the names in our Fund, this is an extremely contrarian

investment.

We initially invested in the company in 2012, but the events over the last year have been

most interesting. In January 2014, the company filed for an IPO. Over the course of the next

three months the bonds traded up from $0.80 to par. Then, in May the IPO was pulled, for

what we believe were the previous concerns (regulatory and financial leverage). In July, the

“Proposed Regulatory Rules” came out, which the market viewed as worse than expected.

The bonds traded down to $0.80; and we took the opportunity to double our position.

In light of the company’s liquidity issues and because we found this investment so compelling,

we elected to “get private” and offered rescue financing through a $17.5 million bridge loan

that helped address immediate liquidity concerns. This loan was concurrent with a

Restructuring Support Agreement (RSA) that would equitize our bonds and provided

bondholders with 95% of the equity and board/operational control. The plan also allowed the

sponsor to raise a significant amount of outside capital to retain their equity stake ($150

million in equity behind the bonds). In late September, 21st Century received a $325 million

capital injection from the Canadian Pension Plan Investment Board. With a very low cost of

capital and extremely long dated time horizon, this is a great partner for the company. We

still own the bonds, as we believe, with a great partner and recent credit enhancement,

coupled with a new favorable final regulatory rule, the bonds remain attractive. Thus, we hold

a 2.6% position in 21st Century Oncology, as of October 31, 2014.

21st Century Oncology Capital Structure*

Initial Positions

Revolver Cap Leases 2nd Lien Notes Senior Sub Notes Equity

Revolver Cap Leases 2nd Lien Notes Senior Sub Notes Equity

Pro-Forma Positions

Looking Forward

From a fundamentals standpoint, the US economy seems to be recovering and default rates

continue to be at historical lows. From a credit standpoint, we are confident that almost all of

our investment theses continue to hold, in spite of the most recent episode of market

dislocation. Furthermore, as market volatility subsides, we expect some of the restructurings

discussed above and other “beaten up” investments to start to play out adding upside to the

income generated by the Fund. This gives us conviction in the portfolio as we look forward to

2015.



3 5

Focused Credit Fund

We thank you, as always, for your trust and your support of the Focused Credit Fund. We look

forward to writing to you again at the end of the next quarter and wish you a happy and

prosperous New Year.

Sincerely,

Third Avenue Focused Credit Fund Team

Thomas Lapointe, Lead Portfolio Manager

Joseph Zalewski, Portfolio Manager

Nathaniel Kirk, Portfolio Manager

Edwin Tai, Portfolio Manager

[This page intentionally left blank.]


Third Avenue Small -Cap Value Fund

Third Avenue Real Estate Value Fund


Third Avenue Focused Credit Fund

ANNUAL REPORT

OCTOBER 31, 2014

THIRD AVENUE MANAGEMENT


THIRD AVENUE FUNDS

Privacy Policy

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

Proxy Voting Policies and Procedures

The Funds have delegated the voting of proxies relating to their voting securities to the Funds’ investment adviser pursuant to the adviser’s proxyvoting guidelines. A description of these proxy voting guidelines and procedures, as well as information relating to how a Fund voted proxiesrelating to portfolio securities during the most recent 12-month period 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 fiscal year on Form N-Q. TheFunds’ Form N-Q is available on the SEC’s website at http://www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Roomin Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

At October 31, 2014, the audited net asset values attributable to each of the 569,966 common shares outstanding of the Third Avenue ValueFund Investor Class and 35,707,495 common shares outstanding of Third Avenue Value Fund Institutional Class were $59.54 and $59.69 pershare, respectively. This compares with audited net asset values at October 31, 2013 of $55.93 and $55.93 per share, respectively, adjusted for asubsequent distribution to shareholders.

Average Annual Returns for the periods ended October 31, 2014 _________________________________________________ One Year ended Three Five Ten Since 10/31/14 Year Year Year Inception ____________ ________ ________ ________ ________Third Avenue Value Fund Investor Class† 6.45% 13.45% N/A N/A 7.39%Third Avenue Value Fund Institutional Class^ 6.70% 13.72% 8.71% 5.61% 11.81%MSCI World Index‡ 9.25% 15.02% 12.02% 7.52% 7.99%S&P 500 Index‡ 17.27% 19.77% 16.69% 8.20% 10.48%

† Investor Class commenced investment operations on December 31, 2009.^ Institutional Class commenced investment operations on November 1, 1990. ‡ The date used to calculate the Since Inception performance for the index is the inception date of the Institutional Class.

The Third Avenue Value Fund Institutional Class (the “Fund”) generated positive 6.70% returns over the last fiscal year but underperformed itsbenchmark, the MSCI World Index, which returned 9.25% over the same period. We continue to be positive about the outlook for our portfoliopositions, despite our disappointment in recent performance. Our investment theses on portfolio positions and our investment philosophy havenot been compromised. The companies continue to be very strong businesses and continue to trade at large discounts to our conservativeestimates of net asset value. We have been buyers of several of these existing positions during the recent market weakness, adding to severalpositions in the Fund.

The top performers in the Fund during the year were: Cavco Industries, Inc., Covanta Holding Corp. and Intel Corp. We invested in Intelcommon stock in early 2013 when the shares sold off meaningfully on investor fears of a poor near term outlook due to weak PC end-userdemand and general macro related weakness in IT spending. In our view, these were shorter term, macro related concerns. The strengths of Intelshowed through in its second quarter 2014 earnings report which benefitted from an improvement in PC demand, helped by upgrades drivenby the expiration of support for Windows XP and a realized 11% increase in pricing in its data center offerings, where Intel continues to be themarket leader. We closed this position at a profit as the discount gap narrowed.

Positions that detracted from performance over the fiscal year included: Daiwa Securities Group Inc., Lehman Brothers Holdings, Inc., SIPAClaims and AGCO Corp. AGCO is a pure-play agricultural company dedicated to farm machinery, grain storage solutions and proteinproduction equipment. It maintains an investment grade balance sheet, is highly cash generative, and has been consistently profitable. Its currentvaluation is depressed due to near term concerns regarding farmers’ incomes as well as general volatility in commodity markets.

The Fund added 14 new names during the year. Valmont Industries, Inc., General Motors Co., CBS Corp., Class B, and Brookdale Senior Living,Inc. are the most recent additions. Valmont is the leader in mechanized irrigation equipment with 40% market share. This is a well-capitalized,well-positioned company which we were able to purchase at a discount to our conservatively estimated Net Asset Value as a result of pricing pressurestemming from temporary demand/supply imbalances both in the agricultural and utilities sectors.

The Fund sold off eight names during the year, including Henderson Land Development Co., Ltd., Intel Corp. and Tellabs Inc. The Fund’sTellabs, Inc. position was eliminated as full value was reached due to its takeover by private equity company Marlin Equity Partners.

THE INFORMATION IN THE PORTFOLIO MANAGEMENT DISCUSSION REPRESENTS A FACTUAL OVERVIEW OF THEFUND’S PERFORMANCE AND IS NOT INTENDED TO BE A FORECAST OF FUTURE EVENTS, A GUARANTEE OF FUTURERESULTS NOR INVESTMENT ADVICE. VIEWS EXPRESSED ARE THOSE OF THE INVESTMENT TEAM AND MAY DIFFERFROM THOSE OF OTHER INVESTMENT TEAMS OR THE FIRM AS A WHOLE. ALSO, PLEASE NOTE THAT ANY DISCUSSIONOF THE PORTFOLIO’S HOLDINGS, THE FUND’S PERFORMANCE, AND THE INVESTMENT TEAM’S VIEWS ARE AS OFOCTOBER 31, 2014, AND ARE SUBJECT TO CHANGE.

The Fund’s performance may be influenced by a foreign country’s political, social and economic situation. Other risks include currencyfluctuations, less liquidity, lack of efficient trading markets, and different auditing and legal standards. These risks may result in more volatilityfor the Fund. These and other risks are described more fully in the Fund’s prospectus.

1

Third Avenue TrustThird Avenue Value FundPortfolio Management DiscussionOctober 31, 2014 (Unaudited)

Third Avenue TrustThird Avenue Value FundPortfolio Management Discussion (continued)October 31, 2014 (Unaudited)

Third Avenue Value Fund is offered by prospectus only.The prospectus contains more complete information on advisory fees, distribution charges,and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee of future results. Investmentreturn and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. The Fund’s returnsshould be viewed in light of its investment policy and objectives and quality of its portfolio securities and the periods selected. M.J. Whitman LLCDistributor.

If you should have any questions, or for updated information (including performance data current to the most recent month-end) or a copy of ourprospectus, please call 1-800-443-1021 or go to our web site at www.thirdave.com. Current performance may be lower or higher than performancequoted.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performanceof 23 of the world’s most developed markets. The S&P 500 Index is a widely recognized benchmark of U.S. stock market performance that isdominated by the stocks of large U.S. companies. The MSCI World Index and the S&P 500 Index are not securities that can be purchased orsold, and their total returns are reflective of unmanaged portfolios. The returns include reinvestment of all distributions.

2

Performance Illustration

COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE VALUE FUND – INVESTOR CLASS (TVFVX),THE MSCI WORLD INDEX AND THE STANDARD & POOR’S 500 INDEX (S&P 500 INDEX)

FROM INCEPTION OF THE FUND (12/31/09) THROUGH OCTOBER 31, 2014

Average Annual Total Return

Since Inception 1 Year 3 Years (12/31/09) 6.45% 13.45% 7.39%

* Includes reinvestment of all distributions.

As with all mutual funds, past performance does not indicate future results. Performance may reflect fee waivers, expense offset arrangementand/or recovery. Total return would have been lower if the Adviser had not waived certain expenses. Conversely, total return would have beenhigher if the Adviser had not recovered previously waived expenses. Also, the returns shown in the graph and table do not reflect the deductionof taxes that a shareholder would pay on fund distribu tions or the redemption of fund shares.

$14,115

$20,029

$16,634

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000

$19,000

$20,000

$21,000

$22,000

S&P 500 Index*MSCI World Index*TVFVX*

10/31/1410/31/1310/31/1210/31/1110/31/1012/31/09

Inception Date

3

Third Avenue TrustThird Avenue Value Fund – Investor ClassComparison of a $10,000 Investment(Unaudited)

Third Avenue TrustThird Avenue Value Fund – Institutional ClassComparison of a $10,000 Investment(Unaudited)


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE VALUE FUND – INSTITUTIONAL CLASS (TAVFX),THE MSCI WORLD INDEX AND THE STANDARD & POOR’S 500 INDEX (S&P 500 INDEX)

FOR THE TEN YEARS ENDED OCTOBER 31, 2014


1 Year 3 Years 5 Years 10 Years 6.70% 13.72% 8.71% 5.61%



$17,261

$20,643

$22,003

$5,000

$10,000

$15,000

$20,000

$25,000

S&P 500 Index*MSCI World Index*TAVFX*

10/31/1410/31/1210/31/1010/31/0810/31/0610/31/04

4

5

The accompanying notes are an integral part of the financial statements.

The summary of the Fund’s investments as of October 31, 2014 is as follows:

% of Net Assets

Indu

stry

0 5 10 15

Cash & Equivalents (Net)

Other

Media & Entertainment

Semiconductor & Related

Agricultural Equipment

Materials

Software

Telecommunications

Non-U.S. Real Estate Operating Companies

Steel & Specialty Steel

Securities Brokerage

U.S. Real Estate Operating Companies

Manufactured Housing

Utilities

Automotive

Insurance & Reinsurance

Depository Institutions

Asset Management

Diversified Holding Companies

Oil & Gas Production & Services

Third Avenue TrustThird Avenue Value FundIndustry Diversification(Unaudited)

6


Third Avenue TrustThird Avenue Value FundPortfolio of Investmentsat October 31, 2014

Principal Value Amount ($) Security† (Note 1)

Value Shares Security† (Note 1)

Corporate Bonds & Notes - 0.21%Consumer Products - 0.21%

21,505,076 Home Products International, Inc., 2nd Lien, Convertible, 6.000% Payment-in-kind Interest, due 3/20/17 (b) (c) (d) (e) . . . . . . . . . . . . . . $ 4,507,464Total Corporate Bonds & Notes

(Cost $21,505,076) . . . . . . . . . . . . . . . . . . . 4,507,464Claims - 0.75%

Securities Brokerage - 0.75% 63,101,500 Lehman Brothers Holdings, Inc., SIPA Claims (a) . . . . . . . . . . . . . . . . . . . . . . 16,210,775

Total Claims (Cost $15,775,375) . . . . . . . . . . . . . . . . . . . 16,210,775

SharesCommon Stocks & Warrants - 95.08%

Agricultural Equipment - 2.25% 1,101,513 AGCO Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,808,041

Asset Management - 7.70% 3,034,813 Bank of New York Mellon Corp. (The) . . . . . . . . 117,507,959 1,007,504 Brookfield Asset Management, Inc., Class A (Canada). . . . . . . . . . . . . . . . . . . . . 49,337,471 166,845,430

Automotive - 6.48% 417,265 Cie Generale des Etablissements Michelin (France) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,179,107 1,406,100 General Motors Co. . . . . . . . . . . . . . . . . . . . . . . 44,151,540 1,292,093 Toyota Industries Corp. (Japan) . . . . . . . . . . . . 59,931,489 140,262,136

Consumer Discretionary - 1.76% 616,405 Target Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,106,157

Consumer Products - 0.00% 526,368 Home Products International, Inc.(a)(b)(c)(d). . . . —

Depository Institutions - 7.45% 1,817,049 Comerica, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 86,745,919 5,644,398 KeyCorp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,506,054 161,251,973

Diversified Holding Companies - 10.31% 3,990,000 Cheung Kong Holdings, Ltd. (Hong Kong). . . . . 70,794,762 658,302 Investor AB, Class B (Sweden) . . . . . . . . . . . . . 23,553,610 151,543,880 Lai Sun Garment International, Ltd. (Hong Kong) (a) (c) . . . . . . . . . . . . . . . . . . . 22,667,634 561,726 Pargesa Holding S.A. (Switzerland) . . . . . . . . . 43,640,824 12,988,000 Wheelock & Co., Ltd. (Hong Kong) . . . . . . . . . . 62,552,214 223,209,044

Financial Insurance - 0.01% 37 Manifold Capital LLC (a) (b) (c) (d) . . . . . . . . . 259,000

Industrials - 1.04% 165,180 Valmont Industries, Inc. . . . . . . . . . . . . . . . . . . 22,492,561

Insurance & Reinsurance - 6.51% 108,073 Alleghany Corp. (a) . . . . . . . . . . . . . . . . . . . . . . $ 48,014,672 962,488 Loews Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,964,477 127,500 Olympus Re Holdings, Ltd. (Bermuda) (a) (b) (d) . . . . . . . . . . . . . . . . . . 40,800 81,699 White Mountains Insurance Group, Ltd. (Bermuda) . . . . . . . . . . . . . . . . . . . . . . . . . . 51,055,339 141,075,288

Manufactured Housing - 5.27% 1,566,626 Cavco Industries, Inc. (a) (c) . . . . . . . . . . . . . . 114,160,037

Materials - 2.46% 2,285,500 Canfor Corp. (Canada) (a) . . . . . . . . . . . . . . . . 53,211,055

Media & Entertainment - 2.03% 809,000 CBS Corp., Class B, Non Voting Shares . . . . . . 43,863,980

Non-U.S. Real Estate Operating Companies - 2.74%

11,781,000 Hang Lung Group, Ltd. (Hong Kong) . . . . . . . . . 59,245,663Oil & Gas Production & Services - 11.67%

1,132,000 Apache Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 87,390,400 1,245,606 Devon Energy Corp.. . . . . . . . . . . . . . . . . . . . . . 74,736,360 1,524,802 Total S.A. (France) . . . . . . . . . . . . . . . . . . . . . . 90,610,297 252,737,057

Securities Brokerage - 3.50% 9,883,700 Daiwa Securities Group, Inc. (Japan) . . . . . . . . 75,761,101

Semiconductor & Related - 2.11% 2,336,868 NVIDIA Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,662,401

Senior Housing - 1.28% 822,000 Brookdale Senior Living, Inc. (a). . . . . . . . . . . . 27,709,620

Software - 2.66% 2,322,155 Symantec Corp. . . . . . . . . . . . . . . . . . . . . . . . . 57,635,887

Steel & Specialty Steel - 3.90% 1,180,432 POSCO, ADR (South Korea) . . . . . . . . . . . . . . . . 84,471,714

Telecommunications - 2.70% 17,628,928 Vodafone Group PLC (United Kingdom). . . . . . . 58,460,404

U.S. Real Estate Operating Companies - 5.18%

1,221,894 Tejon Ranch Co. (a) (c) . . . . . . . . . . . . . . . . . . . 36,876,761 200,255 Tejon Ranch Co., Warrants, expire 8/31/16 (a) (c). . . . . . . . . . . . . . . . . . 420,535 2,214,890 Weyerhaeuser Co. (f). . . . . . . . . . . . . . . . . . . . . 74,996,175 112,293,471

Utilities - 6.07% 5,956,007 Covanta Holding Corp. . . . . . . . . . . . . . . . . . . . 131,449,074

Total Common Stocks & Warrants (Cost $1,680,328,235) . . . . . . . . . . . . . . . . . 2,058,971,094

7


Limited Partnerships - 0.00%#Insurance & Reinsurance - 0.00%#

1,805,000 Insurance Partners II Equity Fund, L.P. (a) (b). . . . $ 92,941Total Limited Partnerships

(Cost $0) . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,941Total Investment Portfolio - 96.04%

(Cost $1,717,608,686) . . . . . . . . . . . . . . . . . 2,079,782,274 Other Assets less Liabilities - 3.96% . . . . . . . 85,707,697 NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $2,165,489,971Notes:ADR: American Depositary Receipt.SIPA: Securities Investor Protection Act of 1970.(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 the outstanding voting securities of these issuers).(d) Security subject to restrictions on resale.

Shares/ MarketPrincipal Acquisition Value

Amount ($) Issuer Date Cost Per Unit__________ _______________________ ________ ________ _________526,368 Home Products International, Inc. 5/30/07 $54,667,471 $0.00

$ 21,505,076 Home Products International, Inc.2nd Lien, Convertible,6.000% Payment-in-kindInterest, due 3/20/17 3/16/07-10/2/14 21,505,076 20.96

37 Manifold Capital LLC 9/24/97-11/10/06 37,712,514 7,000.00127,500 Olympus Re Holdings, Ltd. 12/20/01 11,911,136 0.32

At October 31, 2014, these restricted securities had a total market value of $4,807,264 or 0.22% of net assets of the Fund.

(e) Payment-in-kind (“PIK”) security. Income may be paid in additional securities.(f) Security is a Real Estate Investment Trust.† U.S. issuer unless otherwise noted.# Amount represents less than 0.01% of total net assets.

Country Concentration % of Net Assets _________United States 57.18%Hong Kong 9.94Japan 6.27France 5.85Canada 4.74South Korea 3.90United Kingdom 2.70Bermuda 2.36Switzerland 2.01Sweden 1.09 _______Total 96.04% _______ _______

Schedule of Written Options

Number Expirationof Contracts Security Date Strike Price Value

2,000 CBS Corp., Class B, Non Voting Shares, Put 11/22/14 $52.50 $206,000(Premiums received $315,500)

Investment Value Amount ($) Security† (Note 1)

Third Avenue TrustThird Avenue Value FundPortfolio of Investments (continued)at October 31, 2014

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio Management DiscussionOctober 31, 2014 (Unaudited)

At October 31, 2014, the audited net asset values attributable to each of the 351,223 common shares outstanding of the Third Avenue Small-Cap Value Fund Investor Class and 18,041,377 common shares outstanding of the Third Avenue Small-Cap Value Fund Institutional Class were$28.18 and $28.27 per share, respectively. This compares with audited net asset values at October 31, 2013 of $26.33 and $26.35 per share,respectively, adjusted for a subsequent distribution to shareholders.

Average Annual Returns for the periods ended October 31, 2014 _________________________________________________ One Year ended Three Five Ten Since 10/31/14 Year Year Year Inception ____________ ________ ________ ________ ________Third Avenue Small-Cap Value Fund Investor Class† 6.85% 15.31% N/A N/A 11.90%Third Avenue Small-Cap Value Fund Institutional Class^ 7.09% 15.57% 13.18% 6.85% 9.07%Russell 2000 Index‡ 8.06% 18.18% 17.39% 8.67% 8.66%Russell 2000 Value Index‡ 7.89% 17.94% 16.15% 7.81% 9.74%S&P Small Cap 600 Index‡ 9.29% 19.97% 19.24% 9.88% 10.62%

† Investor Class commenced investment operations on December 31, 2009.^ Institutional Class commenced investment operations on April 1, 1997. ‡ The date used to calculate the Since Inception performance for the index is the inception date of the Institutional Class.

The Third Avenue Small-Cap Value Fund Institutional Class (the “Fund”) generated a positive 7.09% return over the last fiscal year but slightlyunderperformed its benchmark. The Russell 2000 Value Index return was 7.89% over the same period.

The top performers in the Fund for the year were: Multi-Color Corp., Susser Holdings Corp. and Legg Mason, Inc. Susser is the second-largestindependent convenience store operator and motor fuel distributer in the state of Texas and one of the largest company-operated conveniencestore chains in the US. Susser stock outperformed as Energy Transfer Partners L.P. acquired the company.

Positions that detracted from performance over the fiscal year were: Dundee Corp., Stepan Co. and Blucora Inc. Dundee Corp. is a holdingcompany based in Toronto, Canada with wealth management, real estate and resources holdings. Dundee Corp.’s share performance has beenweak in the most recent period, though it is hard to pinpoint any single business line or set of data points that accounts for that performance.We view the share price decline as a widening of an already attractive discount.

Portfolio activity reduced the total number of portfolio holdings, increasing portfolio concentration. However, the Fund added 18 new names,including Genpact Ltd., SunCoke Energy, Inc. and CSG Systems Intl., Inc. Genpact underperformed the broader equity markets in 2013 asmanagement’s forecasted growth, while solid, fell short of raised expectations. Genpact, founded as the captive offshore outsourcing business forGeneral Electric, is adding and diversifying revenue sources as it weans its way off of its former parent. We believe it is poised to benefit fromhealthy longer term demand trends for outsourcing. Genpact enjoys long-term customer contracts that generate a high proportion of recurringrevenues and a strong balance sheet that generates ample cash flow to promote downside protection and flexibility for new growth opportunities.

The Fund sold out of 33 names during the year, reflecting our view that the market prices for these holdings had risen to close to our estimateof Net Asset Value or were replaced with better risk versus reward opportunities. Dispositions included Tellabs Inc., Segro PLC, Wacker NeusonSE and Pioneer Energy Services Corp. The Fund’s Tellabs Inc. position was eliminated as full value was reached due to its takeover by privateequity company Marlin Equity Partners.


Small-cap companies carry additional risks because their share prices may be more volatile, and their securities may be less liquid than larger,more established companies. Such investments may increase the risk of greater price fluctuations. These and other risks are described more fullyin the Fund’s prospectus.

Third Avenue Small-Cap Value Fund is offered by prospectus only. The prospectus contains more complete information on advisory fees,distribution charges, and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee offuture results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less thanoriginal cost. The Fund’s returns should be viewed in light of its investment policy and objectives and quality of its portfolio securities and theperiods selected. M.J. Whitman LLC Distributor.

8

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio Management Discussion (continued)October 31, 2014 (Unaudited)


The Russell 2000 Index measures the performance of small companies. The Russell 2000 Value Index measures the performance of those Russell2000 companies with lower price-to-book ratios and lower forecasted growth values. The S&P Small Cap 600 Index is a small cap index thatcovers approximately 3% of the U.S. equities market and consists of companies that meet specific inclusion criteria to ensure that they are investableand financially viable. The Russell 2000 Index, the Russell 2000 Value Index, and the S&P Small Cap 600 Index are not securities that can bepurchased or sold, and their total returns are reflective of unmanaged portfolios. The returns include reinvestment of all distributions.

9

Third Avenue TrustThird Avenue Small-Cap Value Fund – Investor ClassComparison of a $10,000 Investment(Unaudited)


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE SMALL-CAP VALUE FUND – INVESTOR CLASS (TVSVX),THE RUSSELL 2000 INDEX, THE RUSSELL 2000 VALUE INDEX AND THE S&P SMALL CAP 600 INDEX





As with all mutual funds, past performance does not indicate future results. Performance may reflect fee waivers, expense offset arrangementand/or recovery. Total return would have been lower if the Adviser had not waived certain expenses. Conversely, total return would have beenhigher if the Adviser had not recovered previously waived expenses. Also, the returns shown in the graph and table do not reflect the deductionof taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

$17,223

$20,005

$21,622

$19,041

$5,000

$10,000

$15,000

$20,000

$25,000

S&P Small Cap 600 Index*Russell 2000 Value Index*Russell 2000 Index*TVSVX*

10/31/1410/31/1310/31/1210/31/1110/31/1012/31/09

Inception Date

10

Third Avenue TrustThird Avenue Small-Cap Value Fund – Institutional ClassComparison of a $10,000 Investment(Unaudited)


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE SMALL-CAP VALUE FUND – INSTITUTIONAL CLASS (TASCX),THE RUSSELL 2000 INDEX, THE RUSSELL 2000 VALUE INDEX AND THE S&P SMALL CAP 600 INDEX

FOR THE TEN YEARS ENDED OCTOBER 31, 2014





$19,405

$22,962

$25,658

$21,221

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

S&P Small Cap 600 Index*Russell 2000 Value Index*Russell 2000 Index*TASCX*

10/31/1410/31/1210/31/1010/31/0810/31/0610/31/04

11

12



% of Net Assets

Indu

stry

0 5 10 15 20


Other

Media

Metals Manufacturing

Asset Management

Consumer Products and Services

Healthcare

Auto Parts and Services

Chemicals & Industrial Materials

Industrial Capital Equipment Manufacturers

Electronic Components

Energy Services


Insurance & Reinsurance


Industrial Equipment

Software and Services

Consulting and Information Technology Services

Bank & Thrifts

Industrial Services

Third Avenue TrustThird Avenue Small-Cap Value FundIndustry Diversification(Unaudited)

13


Common Stocks - 99.49%Asset Management - 2.15%

214,432 Legg Mason, Inc. . . . . . . . . . . . . . . . . . . . . . . . $ 11,150,464Auto Parts and Services - 3.05%

239,800 Cooper Tire & Rubber Co. . . . . . . . . . . . . . . . . . 7,723,958 205,504 Standard Motor Products, Inc. . . . . . . . . . . . . . 8,121,518 15,845,476

Bank & Thrifts - 8.70% 89,071 City National Corp. . . . . . . . . . . . . . . . . . . . . . . 7,010,778 172,239 Commerce Bancshares, Inc. . . . . . . . . . . . . . . . 7,795,537 85,900 Cullen/Frost Bankers, Inc. . . . . . . . . . . . . . . . . 6,941,579 169,563 Prosperity Bancshares, Inc. . . . . . . . . . . . . . . . 10,239,910 154,801 UMB Financial Corp. . . . . . . . . . . . . . . . . . . . . . 9,223,044 404,375 Valley National Bankcorp . . . . . . . . . . . . . . . . . 4,035,662 45,246,510

Chemicals & Industrial Materials - 3.53% 188,024 Stepan Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,325,703 420,036 SunCoke Energy, Inc. (a). . . . . . . . . . . . . . . . . . 10,038,860 18,364,563

Consulting and Information Technology Services - 8.49%

175,189 ExlService Holdings, Inc. (a) . . . . . . . . . . . . . . . 4,903,540 286,592 FTI Consulting, Inc. (a) . . . . . . . . . . . . . . . . . . . 11,572,585 637,466 Genpact Ltd. (Bermuda) (a) . . . . . . . . . . . . . . . 11,187,528 168,903 ICF International, Inc. (a) . . . . . . . . . . . . . . . . . 6,137,935 119,665 Syntel, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . 10,364,186 44,165,774

Consumer Products and Services - 2.43% 147,715 CST Brands, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 5,650,099 153,458 VCA, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,993,081 12,643,180

Diversified Holding Companies - 6.59% 63,408 Ackermans & van Haaren NV (Belgium) . . . . . . 7,905,440 579,165 Dundee Corp., Class A (Canada) (a). . . . . . . . . 8,211,753 1,980,031 JZ Capital Partners, Ltd. (Guernsey) . . . . . . . . . 13,319,091 203,082 Leucadia National Corp. . . . . . . . . . . . . . . . . . . 4,829,290 34,265,574

Electronic Components - 3.74% 95,456 Anixter International, Inc. . . . . . . . . . . . . . . . . . 8,129,987 202,611 Ingram Micro, Inc., Class A (a). . . . . . . . . . . . . 5,438,079 258,850 Insight Enterprises, Inc. (a) . . . . . . . . . . . . . . . 5,888,837 19,456,903

Energy Services - 3.75% 243,879 Era Group, Inc. (a) . . . . . . . . . . . . . . . . . . . . . . 5,704,330 77,326 SEACOR Holdings, Inc. (a) . . . . . . . . . . . . . . . . 6,375,529 96,552 SemGroup Corp., Class A . . . . . . . . . . . . . . . . . 7,410,366 19,490,225

Forest Products & Paper - 1.47% 302,611 P.H. Glatfelter Co. . . . . . . . . . . . . . . . . . . . . . . . 7,634,875

Healthcare - 2.98% 211,700 Patterson Cos., Inc. . . . . . . . . . . . . . . . . . . . . . $ 9,126,387 55,907 Teleflex, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,380,107 15,506,494

Industrial Capital Equipment Manufacturers - 3.58%

250,500 Barnes Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 9,158,280 421,279 Rofin-Sinar Technologies, Inc. (a). . . . . . . . . . . 9,432,437 18,590,717

Industrial Equipment - 7.87% 257,200 Actuant Corp., Class A . . . . . . . . . . . . . . . . . . . 8,150,668 126,606 Alamo Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . 5,423,801 112,871 EnerSys, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,088,299 263,921 LSB Industries, Inc. (a). . . . . . . . . . . . . . . . . . . 9,904,955 127,523 Regal-Beloit Corp. . . . . . . . . . . . . . . . . . . . . . . 9,050,307 67,398 Tredegar Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 1,281,910 40,899,940

Industrial Services - 15.97% 215,957 ABM Industries, Inc. . . . . . . . . . . . . . . . . . . . . . 5,969,051 113,800 Clean Harbors, Inc. (a) . . . . . . . . . . . . . . . . . . . 5,647,894 162,718 Cubic Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,849,516 440,861 Darling Ingredients, Inc. (a) . . . . . . . . . . . . . . . 7,759,154 245,483 EMCOR Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 10,833,165 202,246 Multi-Color Corp. . . . . . . . . . . . . . . . . . . . . . . . 9,970,728 407,544 Tetra Tech, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 10,926,255 120,710 UniFirst Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 13,466,408 257,019 World Fuel Services Corp. . . . . . . . . . . . . . . . . . 10,599,464 83,021,635

Industrials - 0.59% 74,000 United Stationers, Inc. . . . . . . . . . . . . . . . . . . . 3,090,980

Insurance & Reinsurance - 6.16% 20,143 Alleghany Corp. (a) . . . . . . . . . . . . . . . . . . . . . . 8,949,132 121,590 Arch Capital Group, Ltd. (Bermuda) (a) . . . . . . 6,847,949 311,085 HCC Insurance Holdings, Inc. . . . . . . . . . . . . . . 16,235,526 32,032,607

Media - 1.89% 129,726 Madison Square Garden, Co. (The), Class A (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 9,828,042

Metals Manufacturing - 1.92% 66,648 Encore Wire Corp. . . . . . . . . . . . . . . . . . . . . . . . 2,528,625 107,276 Kaiser Aluminum Corp. . . . . . . . . . . . . . . . . . . . 7,461,046 9,989,671

Securities Trading Services - 0.94% 111,048 Broadridge Financial Solutions, Inc.. . . . . . . . . 4,878,339

Software and Services - 8.14% 614,387 Allscripts Healthcare Solutions, Inc. (a) . . . . . . 8,429,390 352,298 CSG Systems International, Inc. . . . . . . . . . . . . 9,339,420 206,607 InterDigital, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 10,212,584 554,455 Progress Software Corp. (a) . . . . . . . . . . . . . . . 14,360,384 42,341,778



Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio of Investmentsat October 31, 2014

14


Common Stocks (continued)U.S. Real Estate Investment Trust - 1.31%

189,619 Tanger Factory Outlet Centers Inc. . . . . . . . . . . $ 6,782,672U.S. Real Estate Operating Companies - 4.24%

143,227 Alico, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,285,076 203,867 Brookdale Senior Living, Inc. (a). . . . . . . . . . . . 6,872,357 151,065 Forestar Group, Inc. (a). . . . . . . . . . . . . . . . . . . 2,636,084 84,239 Vail Resorts, Inc.. . . . . . . . . . . . . . . . . . . . . . . . 7,274,880 22,068,397

Total Common Stocks (Cost $392,335,656) . . . . . . . . . . . . . . . . . . 517,294,816

Total Investment Portfolio - 99.49% (Cost $392,335,656) . . . . . . . . . . . . . . . . . . 517,294,816 Other Assets less Liabilities - 0.51% . . . . . . . 2,656,056 NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $519,950,872

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

Country Concentration % of Net Assets _________United States 90.36%Bermuda 3.47Guernsey 2.56Canada 1.58Belgium 1.52 _______Total 99.49% _______ _______

Third Avenue TrustThird Avenue Small-Cap Value FundPortfolio of Investments (continued)at October 31, 2014


Third Avenue TrustThird Avenue Real Estate Value FundPortfolio Management DiscussionOctober 31, 2014 (Unaudited)

At October 31, 2014, the audited net asset values attributable to each of the 11,552,175 common shares outstanding of the Third Avenue RealEstate Value Fund Investor Class and 89,450,144 common shares outstanding of the Third Avenue Real Estate Value Fund Institutional Classwere $31.84 and $32.05 per share, respectively. This compares with audited net asset values at October 31, 2013 of $28.74 and $28.86 per share,respectively, adjusted for a subsequent distribution to shareholders.

Average Annual Returns for the periods ended October 31, 2014 _________________________________________________ One Year ended Three Five Ten Since 10/31/14 Year Year Year Inception ____________ ________ ________ ________ ________Third Avenue Real Estate Value Fund Investor Class† 10.84% 18.34% N/A N/A 12.94%Third Avenue Real Estate Value Fund Institutional Class^ 11.11% 18.63% 13.70% 7.44% 11.89%FTSE EPRA/NAREIT Developed Index‡ 10.66% 13.55% 12.95% 8.06% 10.89%

† Investor Class commenced investment operations on December 31, 2009.^ Institutional Class commenced investment operations on September 17, 1998. ‡ The date used to calculate the Since Inception performance for the index is the inception date of the Institutional Class.

Third Avenue Real Estate Value Fund Institutional Class (the “Fund”) generated 11.11% returns over the last fiscal year, outperforming itsbenchmark. The FTSE EPRA/NAREIT Developed Index returned 10.66% over the same period.

The largest contributors to performance during the fiscal year were the common stocks of Songbird Estates PLC, and Cheung Kong Holdings,Ltd. and the private equity of Newhall Holding Co. LLC. Songbird Estates is a UK based holding company that is the controlling shareholderof the Canary Wharf Group (“Canary Wharf”), a UK based real estate operating company that owns more than 7 million square feet of class-Aoffice and retail space and also controls the largest development pipeline in London with 11 million square feet of entitlements. During the year,the value of Canary Wharf’s development pipeline began to be recognized and Songbird’s stock increased by more than 60%. Newhall is a landdevelopment company based in the US that owns more than 30,000 acres in Los Angeles County that are entitled for more than 20,000residential homesites, and in excess of 600 acres of commercial development. During the year, fundamentals for the residential markets inSouthern California improved as excess inventory was absorbed, sales activity picked up, and residential prices increased in most sub-markets.Given this backdrop, Newhall’s units increased in price during the year. Cheung Kong is a Hong Kong based holding company with investmentsin property, power, infrastructure, and other private equity like holdings. During the year the company monetized some of its non-coreinvestments, paid shareholders a special dividend, and began to see the benefits of some of the contrarian investments it made in Europe overthe past few years. As a result, the stock price responded favorably, increasing by more than 23% during the fiscal year.

The three largest detractors to performance during the year were Tejon Ranch Co., Inmobiliaria Colonial S.A. and Wheelock & Co., Ltd. Despitethe negative performance during the fiscal year, our long-term investment theses for all three investments remain intact as each companycontinues to have a strong financial position, trades at a discount to our estimate of net asset value, and has prospects to increase its net assetvalue by 10% or more per year when looking out over the next three to five years. For example, Inmobiliaria Colonial, a Spanish real estateoperating company, declined in price during the period however remains incredibly well positioned when looking out over the medium to longterm. This is a result of the company raising more than 1.3 billion Euro of capital during the past year to reduce its debt levels and position thecompany to benefit from leasing up its portfolio which sits nearly 20% vacant today. As the company executes on filling this vacant space, it isour expectation that the cash flows and underlying value of the portfolio will increase from current levels.

Generally speaking, real estate securities have had strong performance over the past five years. The Fund is therefore utilizing its flexible mandateto get exposure to securities that are more likely to exhibit inefficient pricing than those in the broader real estate indices. For instance, recentportfolio activity included initiating positions in Zions Bancorporation and Realogy Holdings Corp., both non-traditional real estate companies.Zions is a bank holding company with more than 50% of its loans secured by real estate. It also has a very attractive geographic footprint withits core business located in Utah, Texas and Coastal California. Realogy is the largest residential brokerage company in the US; it is involved withroughly one in every four residential transactions. In addition to these two new positions, the Fund has initiated eight positions and closed eightpositions over the last fiscal year.

After taking into account recent activity, the Fund’s invested capital remains concentrated in the pockets of the real estate universe that offertremendous value, including the US residential markets, companies with entitlements for new developments in well-located markets, small andmid-sized property companies that could be acquisition targets, and other special situations. The Fund also continues to have about 15% of itscapital in Cash & Equivalents. This “dry powder” should serve to cushion the Fund’s returns in a down market as well as provide the capitalnecessary to add other attractive investments as opportunities arise.

15

Third Avenue TrustThird Avenue Real Estate Value FundPortfolio Management Discussion (continued)October 31, 2014 (Unaudited)


Real estate investments may be subject to special risks, including risks related to general and local economic conditions, and changes in real estatevalues that may have negative effects on issuers related to the real estate industry. The Fund’s investments in small and medium capitalizationstocks may experience more volatility than larger capitalization stocks. These and other risks are described more fully in the Fund’s prospectus.

Third Avenue Real Estate Value Fund is offered by prospectus only. The prospectus contains more complete information on advisory fees,distribution charges, and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee offuture results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less thanoriginal cost. The Fund’s returns should be viewed in light of its investment policy and objectives and quality of its portfolio securities and theperiods selected. M.J. Whitman LLC Distributor.

If you should have any questions, or for updated information (including performance data current to the most recent month-end) or a copy ofour prospectus, please call 1-800-443-1021 or go to our web site at www.thirdave.com. Current performance may be lower or higher thanperformance quoted.

The FTSE EPRA/NAREIT Developed Index is designed to reflect the stock performance of companies engaged in specific aspects of the NorthAmerican, European and Asian Real Estate markets. The FTSE EPRA/NAREIT Developed Index is not a security that can be purchased or sold,and its total returns are reflective of unmanaged portfolios. The returns include reinvestment of all distributions.

16

Third Avenue TrustThird Avenue Real Estate Value Fund – Investor ClassComparison of a $10,000 Investment(Unaudited)


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE REAL ESTATE VALUE FUND – INVESTOR CLASS (TVRVX)AND THE FTSE EPRA/NAREIT DEVELOPED INDEX






$18,004

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

10/31/1410/31/1310/31/1210/31/1110/31/1012/31/09

FTSE EPRA/NAREIT Developed Index*TVRVX*

$17,417

Inception Date

17

Third Avenue TrustThird Avenue Real Estate Value Fund – Institutional ClassComparison of a $10,000 Investment(Unaudited)


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE REAL ESTATE VALUE FUND – INSTITUTIONAL CLASS (TAREX)AND THE FTSE EPRA/NAREIT DEVELOPED INDEX FOR THE TEN YEARS ENDED OCTOBER 31, 2014





$21,709

$20,473

$5,000

$10,000

$15,000

$20,000

$25,000

10/31/1410/31/1210/31/1010/31/0810/31/0610/31/04

FTSE EPRA/NAREIT Developed Index*TAREX*

18

19



% of Net Assets

Indu

stry

0

5 10 15 20 25 30


Short Term Investments

Senior Housing

Real Estate Consulting/Management

Non-U.S. Real Estate Consulting/Management

Retail-Building Products

Lodging & Hotels

Banks

Forest Products & Paper


Non-U.S. Real Estate Investment Trusts

U.S. Real Estate Investment Trusts

Non-U.S. Real Estate Operating Companies

0

Third Avenue TrustThird Avenue Real Estate Value FundIndustry Diversification(Unaudited)

20


Term Loans - 0.11%Non-U.S. Real Estate Operating Companies - 0.11%

Concrete Investment I, Term Loan (Netherlands): 50,450 EUR Tranche A2, 2.007%, due 3/31/16 (d)(g) . . . $ 63,221 19,273 EUR Tranche A3, 2.007%, due 3/31/16 (d)(g) . . . 24,152 Concrete Investment II, Term Loan (Netherlands): 34,283 EUR Tranche A2, 2.007%, due 3/31/16 (d)(g) . . . 42,961 4,818 EUR Tranche A3, 2.007%, due 3/31/16 (d)(g) . . . 6,038 IVG Immobilien AG, Term Loan (Netherlands): 1,029,107 EUR Tranche A1, 9.506%, due 9/30/17 (d)(g) . . . 1,289,624 1,525,378 EUR Tranche A2, 9.506%, due 9/30/17 (d)(g) . . . 1,911,526

Total Term Loans (Cost $3,631,007) . . . . . . . . . . . . . . . . . . . . 3,337,522

SharesCommon Stocks & Warrants - 80.03%

Banks - 4.68% 1,939,049 PNC Financial Services Group, Inc., Warrants, expire 12/31/18 (a) . . . . . . . . . . . 46,304,490 1,156,551 Wells Fargo & Co., Warrants, expire 10/28/18 (a) . . 24,819,585 2,773,300 Zions Bancorporation . . . . . . . . . . . . . . . . . . . . 80,342,501 151,466,576

Forest Products & Paper - 6.72% 1,735,200 Rayonier, Inc. (c). . . . . . . . . . . . . . . . . . . . . . . . 58,077,144 4,706,158 Weyerhaeuser Co. (c) . . . . . . . . . . . . . . . . . . . . 159,350,510 217,427,654

Lodging & Hotels - 3.97% 6,117,746 Hersha Hospitality Trust (c) . . . . . . . . . . . . . . . 44,598,368 450,000 Hyatt Hotels Corp., Class A (a) . . . . . . . . . . . . . 26,649,000 6,302,119 Millennium & Copthorne Hotels PLC (United Kingdom) . . . . . . . . . . . . . . . . . . . . . 57,262,663 128,510,031

Non-U.S. Real Estate Consulting/Management - 2.24%

6,002,254 Countrywide PLC (United Kingdom) . . . . . . . . . 43,976,074 2,752,003 Savills PLC (United Kingdom). . . . . . . . . . . . . . 28,351,196 72,327,270

Non-U.S. Real Estate Investment Trusts - 10.61%

72,421,056 Dexus Property Group (Australia) . . . . . . . . . . . 77,114,187 366,031 Gecina S.A. (France) . . . . . . . . . . . . . . . . . . . . . 49,538,651 9,910,908 Hammerson PLC (United Kingdom) . . . . . . . . . 97,187,526 8,839,052 Segro PLC (United Kingdom). . . . . . . . . . . . . . . 53,759,399 800,000 Wereldhave N.V. (Netherlands) . . . . . . . . . . . . . 65,564,731 343,164,494

Non-U.S. Real Estate Operating Companies - 24.94%

1,546,126 Brookfield Asset Management, Inc., Class A (Canada). . . . . . . . . . . . . . . . . . . . . 75,713,790 7,018,000 Cheung Kong Holdings, Ltd. (Hong Kong). . . . . 124,520,712 10,998,950 City Developments Ltd. (Singapore) . . . . . . . . . 80,906,108 3,888,963 Globe Trade Centre S.A. (Poland) (a) . . . . . . . . 7,017,747 8,377,000 Hang Lung Properties Ltd. (Hong Kong) . . . . . . 26,140,487

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

10,438,657 Henderson Land Development Co., Ltd. (Hong Kong) . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,464,620 11,373,967 Hysan Development Co., Ltd. (Hong Kong) . . . . 51,845,513 135,653,174 Inmobiliaria Colonial S.A. (Spain) (a) . . . . . . . . 95,536,390 21,869,072 Quintain Estates & Development PLC (United Kingdom) (a) . . . . . . . . . . . . . . . . . . 28,686,715 25,312,837 Songbird Estates PLC (United Kingdom) (a). . . 106,293,507 11,760,055 Westfield Corp. (Australia) (c) . . . . . . . . . . . . . 81,963,142 11,975,500 Wheelock & Co., Ltd. (Hong Kong) . . . . . . . . . . 57,675,857 806,764,588

Real Estate Consulting/Management - 2.01% 1,584,200 Realogy Holdings Corp. (a) . . . . . . . . . . . . . . . . 64,968,042

Retail-Building Products - 2.97% 1,681,330 Lowe’s Cos., Inc. . . . . . . . . . . . . . . . . . . . . . . . . 96,172,076

Senior Housing - 1.95% 1,873,595 Brookdale Senior Living, Inc. (a). . . . . . . . . . . . 63,158,888

U.S. Real Estate Investment Trusts - 14.68% 3,460,150 Equity Commonwealth . . . . . . . . . . . . . . . . . . . 92,420,607 5,208,031 First Industrial Realty Trust, Inc. . . . . . . . . . . . 101,712,845 1,179,882 Post Properties, Inc. . . . . . . . . . . . . . . . . . . . . . 66,002,599 2,515,510 Starwood Waypoint Residential Trust (b) . . . . . 65,856,052 1,829,978 Tanger Factory Outlet Centers, Inc.. . . . . . . . . . 65,458,313 760,194 Vornado Realty Trust. . . . . . . . . . . . . . . . . . . . . 83,226,039 474,676,455

U.S. Real Estate Operating Companies - 5.26% 5,846,798 Forest City Enterprises, Inc., Class A (a) . . . . . 122,139,610 941,627 Tejon Ranch Co. (a) . . . . . . . . . . . . . . . . . . . . . 28,418,303 139,089 Tejon Ranch Co., Warrants, expire 8/31/16 (a) . . 292,087 3,369,445 Trinity Place Holdings, Inc. (a) (d) (e) . . . . . . . 19,295,656 170,145,656

Total Common Stocks & Warrants (Cost $1,936,010,870) . . . . . . . . . . . . . . . . . 2,588,781,730Preferred Stocks - 1.05%

Non-U.S. Real Estate OperatingCompanies - 1.05%

189,696 Concrete Investment II SCA (Luxembourg) (a) . . 33,993,569Total Preferred Stocks

(Cost $27,535,807) . . . . . . . . . . . . . . . . . . . 33,993,569

UnitsPrivate Equities - 3.12%

U.S. Real Estate Operating Companies - 3.12% 28,847,217 Newhall Holding Co. LLC, Class A Units (a) (b) . . . 100,965,259

Total Private Equities (Cost $75,516,192) . . . . . . . . . . . . . . . . . . . 100,965,259

Third Avenue TrustThird Avenue Real Estate Value FundPortfolio of Investmentsat October 31, 2014

Principal Value Amount Security† (Note 1)


21


Purchased Options - 0.07%Foreign Currency Put Options - 0.07% (a)

46,000,000 AUD Australian Currency, strike 0.9250 AUD, expire 11/6/14 . . . . . . . . . . . . . . . . . . . . . . . $ 2,114,137 35,000,000 AUD Australian Currency, strike 0.8593 AUD, expire 12/4/14 . . . . . . . . . . . . . . . . . . . . . . . 121,002

Total Purchased Options (Cost $634,536) . . . . . . . . . . . . . . . . . . . . . . 2,235,139

Principal Amount ($)Short Term Investments - 3.09%

U.S. Government Obligations - 3.09% 100,000,000 U.S. Treasury Bills, 0.02%#, due 11/6/14. . . . . 99,999,792

Total Short Term Investments (Cost $99,999,792) . . . . . . . . . . . . . . . . . . . 99,999,792

Total Investment Portfolio - 87.47% (Cost $2,143,328,204) . . . . . . . . . . . . . . . . . 2,829,313,011 Other Assets less Liabilities - 12.53% (f) . . . . 405,369,989 NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . $3,234,683,000Notes:AUD: Australian Dollar.EUR: Euro.(a) Non-income producing security.(b) Affiliated issuers - as defined under the Investment Company Act of 1940 (ownership of 5%

or more of the outstanding voting securities of these issuers).(c) Security is a Real Estate Investment Trust.(d) Fair-valued security.(e) Security subject to restrictions on resale.

Market Value

Shares Issuer Acquisition Date Cost Per Unit__________ _______________________ ____________ _________ _________3,369,445 Trinity Place Holdings, Inc. 10/2/13-11/6/13 $13,477,776 $5.73

At October 31, 2014, the restricted security had a total market value of $19,295,656 or 0.60% of net assets of the Fund.

(f) Includes restricted cash pledged to and received from counterparty as collateral manage-ment for forward foreign currency contracts and options.

(g) Variable rate security. The rate disclosed is in effect as of October 31, 2014.† U.S. issuer unless otherwise noted.# Annualized yield at date of purchase.

Country Concentration % of Net Assets _________United States* 46.69%United Kingdom 12.85Hong Kong 10.22Australia 4.99Spain 2.95Singapore 2.50Canada 2.34Netherlands 2.13France 1.53Luxembourg 1.05Poland 0.22 _______Total 87.47% _______ _______* Includes cash equivalents.

Schedule of Written Options

Notional Amount/Number of ExpirationContracts Security Date Strike Price Value

46,000,000 AUD Australian Currency, Call 11/6/14 0.9400AUD $ —35,000,000 AUD Australian Currency, Call 12/4/14 0.8730AUD 415,5664,600 Lennar Corp., Put 11/22/14 $37.00 50,6005,400 Lennar Corp., Put 11/22/14 $38.00 64,8004,000 Realogy Holdings Corp., Put 11/22/14 $32.50 50,000 ___________

(Premiums received $2,526,543) $580,966 ___________ ___________AUD: Australian Dollar.

Schedule of Forward Foreign Currency Contracts

Settlement Settlement Value at UnrealizedContracts to Sell Counterparty Date Value 10/31/14 Appreciation

96,683,000 EUR Goldman Sachs & Co. 11/26/14 $122,275,203 $121,177,901 $1,097,30296,683,000 EUR Morgan Stanley & Co. LLC 11/26/14 122,284,417 121,177,901 1,106,516 _____________

$2,203,818 _____________ _____________EUR: Euro.

Notional Value Amount Security† (Note 1)

Third Avenue TrustThird Avenue Real Estate Value FundPortfolio of Investments (continued)at October 31, 2014

Third Avenue TrustThird Avenue International Value FundPortfolio Management DiscussionOctober 31, 2014 (Unaudited)

At October 31, 2014, the audited net asset values attributable to each of the 697,613 common shares outstanding of the Third AvenueInternational Value Fund Investor Class and 19,260,527 common shares outstanding of the Third Avenue International Value Fund InstitutionalClass were $17.58 and $17.63 per share, respectively. This compares with audited net asset values at October 31, 2013 of $19.74 and $19.74per share, respectively, adjusted for a subsequent distribution to shareholders.

Average Annual Returns for the periods ended October 31, 2014 _________________________________________________ One Year ended Three Five Ten Since 10/31/14 Year Year Year Inception ____________ ________ ________ ________ ________Third Avenue International Value Fund Investor Class† (10.96%) 5.92% N/A N/A 3.67%Third Avenue International Value Fund Institutional Class^ (10.79%) 6.16% 4.45% 4.71% 8.36%MSCI All Country World ex US Index‡ 0.49% 8.25% 6.55% 7.06% 7.72%† Investor Class commenced investment operations on December 31, 2009.^ Institutional Class commenced investment operations on December 31, 2001.‡ The date used to calculate the Since Inception performance for the index is the inception date of the Institutional Class.

Third Avenue International Value Fund Institutional Class (the “Fund”) generated -10.79% returns over the last fiscal year, underperforming itsbenchmark. The MSCI All Country World ex-US Index returned 0.49% over the same period.

Much of the Fund’s underperformance can be attributed to its overweight to German equity, which had poor performance over the period. Inaddition, the depreciation of the Euro relative to the USD, the underperformance of small caps and the broad based decline in commodity relatedstocks weighed on portfolio performance.

The top performers in the Fund were: Weyerhaeuser Co., Netia S.A. and Segro PLC. Weyerhaeuser, the second largest owner of timberlands inthe US, is a Real Estate Investment Trust which also incorporates wood products and wood fiber businesses. This company is benefiting from arecovery in the US housing market, which albeit slow, continues to expand at a healthy pace. Weyerhaeuser is also uniquely well positioned toprovide much needed timber and lumber to fast growing Asian markets. Weyerhaeuser recently merged and spun out its home building business,WRECO, to TRI Pointe Homes, realizing significant value for what had been an underperforming asset.

Positions that detracted from performance over the fiscal year were: Straits Trading Co. Ltd., Vard Holdings Ltd. and Petroleum Geo-ServicesASA (PGS). Straits Trading continues its transformation from a holding and investment company with disparate assets into an integrated realestate investment firm. While those who understand its direction have been able to appreciate its important milestones, it may take more timefor the value creation occurring within Straits to be widely understood. The Fund has closed the position at a profit.

Portfolio activity has been a main focus during the past year. We added seven investments and disposed of 14. The seven new names are:Antofagasta PLC., Arcos Dorados Holdings Inc., BinckBank N.V., Capstone Mining Corp., PGS, Santos Brasil Participacoes S.A. and VardHoldings Ltd. Arcos Dorados is the world’s largest McDonald’s franchisee, holding the exclusive rights to own, operate and grant franchises ofMcDonald’s restaurants in twenty Latin American countries. Significant headwinds on emerging market economies and currencies have createdinteresting investment opportunities in the region. While all of Arcos Dorados’ revenues are denominated in a variety of local currencies, thecompany reports its financial results in US dollars. Thus, local currency weakness has had a negative impact on Arcos Dorados’ reported earningsand shares declined substantially over the past three years. What depreciating currencies obscure, however, is Arcos Dorados’ outstandingoperating performance in local currency terms, meaning before they are translated into US dollars, its reporting currency. Arcos Dorados’depressed valuation suggests that investors are not giving the company credit for the high returns on capital it continues to generate and theconsiderable increases in business value it continues to create in constant currency terms. Investors are also overlooking an outstandingmanagement team as well as the fact that long-term fundamentals of the Latin American market remain quite favorable. The dispositions includeStraits Trading, Netia and Allianz.

22

Third Avenue TrustThird Avenue International Value FundPortfolio Management Discussion (continued)October 31, 2014 (Unaudited)


The Fund’s performance may be influenced by a foreign country’s political, social and economic situation. Other risks include currency fluctuations,less liquidity, lack of efficient trading markets, and different auditing and legal standards. These risks may result in more volatility for the Fund.These and other risks are described more fully in the Fund’s prospectus.

Third Avenue International Value Fund is offered by prospectus only. The prospectus contains more complete information on advisory fees,distribution charges, and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee offuture results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less thanoriginal cost. The Fund’s returns should be viewed in light of its investment policy and objectives and quality of its portfolio securities and theperiods selected. M.J. Whitman LLC Distributor.


The MSCI All Country World ex US Index is an unmanaged index of common stocks and includes securities representative of the market struc-ture of over 50 developed and emerging market countries (other than the United States) in North America, Europe, Latin America and the AsianPacific Region. This index is not a security that can be purchased or sold, and its total returns are reflective of unmanaged portfolios. The returnsinclude reinvestment of all distributions.

23

24

Third Avenue TrustThird Avenue International Value Fund – Investor ClassComparison of a $10,000 Investment(Unaudited)


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE INTERNATIONAL VALUE FUND – INVESTOR CLASS (TVIVX)AND THE MSCI ALL COUNTRY WORLD EX US INDEX



Since Inception 1 Year 3 Years (12/31/09) (10.96%) 5.92% 3.67%



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

10/31/1410/31/1310/31/1210/31/1110/31/10

$11,901

$13,068

TVIVX*MSCI All Country World ex US Index*

Inception Date12/31/09

25

Third Avenue TrustThird Avenue International Value Fund – Institutional ClassComparison of a $10,000 Investment(Unaudited)


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE INTERNATIONAL VALUE FUND – INSTITUTIONAL CLASS (TAVIX)AND THE MSCI ALL COUNTRY WORLD EX US INDEXFOR THE TEN YEARS ENDED OCTOBER 31, 2014


1 Year 3 Years 5 Years 10 Years (10.79%) 6.16% 4.45% 4.71%



$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Morgan Stanley Capital International All Country World Free ex US Index10/31/1410/31/1210/31/1010/31/0810/31/0610/31/04

$19,789

$15,850

TAVIX*MSCI All Country World ex US Index*

26


Third Avenue TrustThird Avenue International Value Fund Industry Diversification(Unaudited)


% of Net Assets

Indu

stry

0 5 10 15


Other

Investment Technology Services

Securities Brokerage

Pharmaceuticals

Transportation Infrastructure

Capital Goods

Retail & Restaurants

Media

Financials

Diversified Operations

Oil & Gas Production & Services

Building & Construction Products/Services

Insurance

Automotive

Metals & Mining

Forest Products & Paper

Telecommunications

Real Estate


27


Common Stocks - 93.11%Automotive - 6.99%

167,974 Daimler AG (Germany) . . . . . . . . . . . . . . . . . . . $ 13,057,090 201,823 LEONI AG (Germany) . . . . . . . . . . . . . . . . . . . . . 11,545,533 24,602,623

Building & Construction Products/Services - 6.34%

10,350,426 Tenon, Ltd. (New Zealand) (a) (b). . . . . . . . . . . 13,917,610 378,215 Titan Cement Co. S.A. (Greece) . . . . . . . . . . . . . 8,384,345 22,301,955

Capital Goods - 2.19% 252,888 Nexans S.A. (France) (a) . . . . . . . . . . . . . . . . . . 7,715,082

Diversified Holding Companies - 10.80% 6,054,307 GP Investments, Ltd., BDR (Brazil) (a) (b) . . . . 12,241,042 488,433 Leucadia National Corp. . . . . . . . . . . . . . . . . . . 11,614,937 181,761 Pargesa Holding S.A. (Switzerland) . . . . . . . . . 14,121,119 37,977,098

Diversified Operations - 4.47% 1,240,200 Hutchison Whampoa, Ltd. (Hong Kong) . . . . . . 15,720,091

Financials - 2.76% 980,237 BinckBank N.V. (Netherlands). . . . . . . . . . . . . . 9,705,451

Forest Products & Paper - 8.71% 57,024,696 Rubicon, Ltd. (New Zealand) (a) (b) . . . . . . . . . 15,224,425 455,543 Weyerhaeuser Co. (c) . . . . . . . . . . . . . . . . . . . . 15,424,686 30,649,111

Household Appliances - 0.76% 137,425 De’Longhi S.p.A. (Italy) . . . . . . . . . . . . . . . . . . . 2,683,093

Insurance - 6.97% 48,366 Munich Re (Germany) . . . . . . . . . . . . . . . . . . . . 9,506,644 24,007 White Mountains Insurance Group, Ltd. (Bermuda) . . . . . . . . . . . . . . . . . . . . . . . . . . 15,002,454 24,509,098

Investment Technology Services - 1.64% 158,118 Otsuka Corp. (Japan) . . . . . . . . . . . . . . . . . . . . 5,757,424

Media - 2.74% 394,829 Vivendi S.A. (France) . . . . . . . . . . . . . . . . . . . . 9,635,829

Metals & Mining - 7.05% 982,963 Antofagasta PLC (Chile) . . . . . . . . . . . . . . . . . . 11,046,383 7,347,212 Capstone Mining Corp. (Canada) (a) . . . . . . . . 13,755,040 24,801,423

Oil & Gas Production & Services - 5.19% 2,071,199 Petroleum Geo-Services ASA (Norway) . . . . . . . 10,271,626 15,000,000 Vard Holdings Ltd. (Singapore) (a) . . . . . . . . . . 7,997,976 18,269,602

Pharmaceuticals - 1.85% 70,402 Sanofi (France) . . . . . . . . . . . . . . . . . . . . . . . . . 6,498,592

Real Estate - 9.64% 2,119,551 Atrium European Real Estate, Ltd. (Austria). . . 11,099,893 141,000 Mitsui Fudosan Co., Ltd. (Japan) . . . . . . . . . . . 4,402,916 2,571,313 Oberoi Realty Ltd. (India) . . . . . . . . . . . . . . . . . 10,272,689 1,339,326 Segro PLC (United Kingdom) (c) . . . . . . . . . . . . 8,145,824 33,921,322

Retail & Restaurants - 2.28% 1,301,100 Arcos Dorados Holdings, Inc. Class A (Argentina). . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,014,776

Securities Brokerage - 1.82% 833,600 Daiwa Securities Group, Inc. (Japan) . . . . . . . . 6,389,758

Telecommunications - 8.85% 4,545,484 Telefonica Deutschland Holding AG (Germany). . 22,334,669 2,655,947 Vodafone Group PLC (United Kingdom). . . . . . . 8,807,554 31,142,223

Transportation Infrastructure - 2.06% 1,134,002 Santos Brasil Participacoes S.A. (Brazil) . . . . . 7,230,813

Total Common Stocks (Cost $335,581,304) . . . . . . . . . . . . . . . . . . 327,525,364

Total Investment Portfolio - 93.11% (Cost $ 335,581,304). . . . . . . . . . . . . . . . . . 327,525,364 Other Assets less Liabilities - 6.89% 24,238,572 NET ASSETS - 100.00% $351,763,936Notes:BDR: Brazilian Depositary Receipt.(a) Non-income producing security.(b) Affiliated issuers - as defined under the Investment Company Act of 1940 (ownership of 5%

or more of the outstanding voting securities of these issuers).(c) Security is a Real Estate Investment Trust.† U.S. issuer unless otherwise noted.

Country Concentration % of Net Assets _________Germany 16.05%New Zealand 8.28United States 7.69France 6.78Brazil 5.54United Kingdom 4.82Japan 4.70Hong Kong 4.47Bermuda 4.27Switzerland 4.01Canada 3.91Austria 3.16Chile 3.14India 2.92Norway 2.92Netherlands 2.76Greece 2.38Argentina 2.28Singapore 2.27Italy 0.76 _______Total 93.11% _______ _______



Third Avenue TrustThird Avenue International Value FundPortfolio of Investmentsat October 31, 2014

28

Third Avenue TrustThird Avenue Focused Credit FundPortfolio Management DiscussionOctober 31, 2014 (Unaudited)

At October 31, 2014, the audited net asset values attributable to each of the 86,771,905 common shares outstanding of the Third AvenueFocused Credit Fund Investor Class and 193,282,560 common shares outstanding of the Third Avenue Focused Credit Fund Institutional Classwere $10.61 and $10.60 per share, respectively. This compares with audited net asset values at October 31, 2013 of $10.28 and $10.25 per share,respectively, adjusted for subsequent distributions to shareholders.

Average Annual Returns for the periods ended October 31, 2014 _____________________________________ One Year ended Three Five Since Inception 10/31/14 Year Year (8/31/09) ____________ ________ ________ ____________Third Avenue Focused Credit Fund Investor Class 2.67% 9.48% 9.04% 9.26%Third Avenue Focused Credit Fund Institutional Class 2.93% 9.76% 9.27% 9.50%Barclays Capital U.S. Corporate High Yield Index 5.82% 9.39% 10.44% 11.65%Credit Suisse Leveraged Loan Index 3.77% 6.11% 6.59% 7.17%

Third Avenue Focused Credit Fund Institutional Class (the “Fund”) generated a 2.93% return over the last fiscal year, underperforming theBarclays Capital U.S. Corporate High Yield Index and the Credit Suisse Leveraged Loan Index which returned 5.82% and 3.77%, respectively.

The top performers in the Fund were: Energy Future Holdings Corp., Cengage Learning Acquisitions, Inc. and Nuveen Investments, Inc. EnergyFuture Intermediate Holdings Co. LLC, an electrical utilities company headquartered in Texas, filed for bankruptcy earlier in 2014. The filinghas provided more clarity to the restructuring process, benefitting the bonds. Nuveen Investments, a Chicago based, diversified investmentmanager offers institutions and high net worth individuals mutual funds, separate accounts and other products. Nuveen, one of the longest datedand largest holdings of the Fund, was purchased by TIAA CREF. As a result of this transaction, and due to the strong credit of the purchaser,Nuveen’s bonds rallied. At that point we sold out of all of our bonds.

Positions that detracted from performance over the fiscal year were: Altegrity, Inc., NII Capital Corp., and Global Geophysical Services, Inc.Altegrity is a global, diversified risk and information services company serving commercial customers and government entities. The companyincludes three major business segments and operates via three main subsidiaries. Altegrity’s bonds struggled as the security subsidiary lost twogovernment contracts. NII Capital Corp. is a mobile communication services provider operating under the Nextel brand in Latin America. Thecompany filed for bankruptcy in September as its business has been struggling with fierce competition in Brazil and Mexico.

During the year the Fund added and sold off several investments, many from the same issuer. New positions include Affinion Group, Inc., SunProducts Corp. and Western Express, Inc. It is worth expanding on Affinion as this is now a core position of the Fund. Affinion is a global leaderin consumer membership, insurance and loyalty products. Affinion’s US membership business has been under pressure, due to a pullback bylarge financial institutions. We purchased Affinion’s bonds in the 70s-80s. While the company was free cash flow positive, investors were worriedabout the company’s ability to refinance its 2015 maturities. At the end of 2013, we participated in negotiations which extended maturities from2015 to 2018. As a result of these negotiations, the Fund obtained new notes with higher coupons, better collateral coverage, stronger covenantsand an ownership stake in the company. The company has five years of runway to grow its loyalty and international business and turn aroundits membership division and we have an investment with a lower probability of default at better terms. The Fund’s dispositions include RadioOne, Inc., Sprint Capital Corp. and Shingle Springs Tribal Gaming Authority.

29

Third Avenue TrustThird Avenue Focused Credit FundPortfolio Management Discussion (continued)October 31, 2014 (Unaudited)


The Fund’s investments in high-yield and distressed securities may expose the Fund to greater risks than if the Fund only owned higher-grade secu-rities. The value of high-yield, lower quality securities is affected by the creditworthiness of the issuers of the securities and by general economic andspecific industry conditions. Issuers of high-yield securities are not as strong financially as those with higher credit ratings, so the securities are usuallyconsidered speculative investments. These and other risks are described more fully in the Fund’s prospectus.

Third Avenue Focused Credit Fund is offered by prospectus only. The prospectus contains more complete information on advisory fees, dis-tribution charges, and other expenses and should be read carefully before investing or sending money. Past performance is no guarantee of futureresults. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than originalcost. The Fund’s returns should be viewed in light of its investment policy and objectives and quality of its portfolio securities and the periodsselected. M.J. Whitman LLC Distributor.


The Barclays Capital U.S. Corporate High Yield Index comprises issues that have at least $150 million par value outstanding, a maximum creditrating of Ba1 or BB+ (including defaulted issues) and at least one year to maturity. The Credit Suisse Leveraged Loan Index is designed to mirrorthe investible universe of the $US-denominated leveraged loan market. The Barclays Capital U.S. Corporate High Yield Index and the CreditSuisse Leveraged Loan Index are not securities that can be purchased or sold, and their total returns are reflective of unmanaged portfolios. Thereturns include reinvestment of all distributions.

Third Avenue TrustThird Avenue Focused Credit FundComparison of a $10,000 Investment(Unaudited)

30


COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THIRD AVENUE FOCUSED CREDIT FUND—INVESTOR CLASS (TFCVX),THIRD AVENUE FOCUSED CREDIT FUND—INSTITUTIONAL CLASS (TFCIX),

THE BARCLAYS CAPITAL U.S. CORPORATE HIGH YIELD INDEX AND THE CREDIT SUISSE LEVERAGED LOAN INDEXFROM INCEPTION OF THE FUND (8/31/09) THROUGH OCTOBER 31, 2014

Average Annual Total Return Since Inception Fund 1 Year 3 Years 5 Years (8/31/09) TFCVX 2.67% 9.48% 9.04% 9.26% TFCIX 2.93% 9.76% 9.27% 9.50%

* Includes reinvestment of all distributions.As with all mutual funds, past performance does not indicate future results. Performance may reflect fee waivers, expense offset arrangement and/orrecovery. Total return would have been lower if the Adviser had not waived certain expenses. Conversely, total return would have been higher if theAdviser had not recovered previously waived expenses. Also, the returns shown in the graph and table do not reflect the deduction of taxes that ashareholder would pay on fund distribu tions or the redemption of fund shares.

$14,306

$15,984

$17,677

$15,800

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

Credit Suisse Leveraged Loan Index*Barclays Capital U.S. Corporate High Yield Index*TFCIX*TFCVX*

10/31/1410/31/1310/31/1210/31/1110/31/1010/31/09Inception Date 8/31/09

31


Third Avenue TrustThird Avenue Focused Credit Fund Industry Diversification(Unaudited)


% of Net Assets

Indu

stry

0 5 10 15


Other

Telecommunications

Food & Beverage

Home Construction

Manufacturing

Transportation Services

Retailers

Gaming & Entertainment

Healthcare

Consumer Products

Metals & Mining

Utilities

Energy

Chemicals

Media/Cable

Services

Financials

32


Corporate Bonds & Notes - 65.00%Chemicals - 2.71%

118,199,570 Reichhold Industries, Inc., 9.000% Cash or 11.000% Payment-in-kind Interest, due 5/18/17 (a)(g) . . . . . . . . . . . . . . . . . . . . $ 65,009,764 15,390,000 Vertellus Specialties, Inc., 9.375%, due 10/1/15 (a) . . . . . . . . . . . . . . . . . . . . . . 15,505,425 80,515,189

Consumer Products - 5.59% Ideal Standard International S.A. (Luxembourg): 28,614,938 EUR Series B, 11.750% Cash or 17.750% Payment-in-kind Interest, due 5/1/18 (g) . . 33,527,948 27,991,455 EUR Series C, 11.750% Cash or 17.750% Payment-in-kind Interest,

due 5/1/18 (e)(g) . . . . . . . . . . . . . . . . . . . . . 28,237,348 140,000,000 Sun Products Corp. (The), 7.750%, due 3/15/21 (a) . . . . . . . . . . . . . . . . . . . . . . 104,300,000 166,065,296

Energy - 5.03% 8,500,000 American Eagle Energy Corp., 11.000%, due 9/1/19 (a) . . . . . . . . . . . . . . . . . . . . . . . 7,607,500 20,000,000 Endeavour International Corp., due 3/1/18* . . 14,700,000 Global Geophysical Services, Inc.*: 45,925,000 due 5/1/17 . . . . . . . . . . . . . . . . . . . . . . . . . 5,281,375 15,599,000 due 5/1/17 . . . . . . . . . . . . . . . . . . . . . . . . . 1,676,893 Hercules Offshore, Inc.: 11,000,000 10.250%, due 4/1/19 (a) . . . . . . . . . . . . . . . 8,002,500 32,380,000 8.750%, due 7/15/21 (a) . . . . . . . . . . . . . . . 21,047,000 3,000,000 7.500%, due 10/1/21 (a) . . . . . . . . . . . . . . . 1,882,500 5,000,000 6.750%, due 4/1/22 (a) . . . . . . . . . . . . . . . . 2,956,250 20,150,000 IronGate Energy Services LLC, 11.000%, due 7/1/18 (a) . . . . . . . . . . . . . . . . . . . . . . . 19,444,750 3,000,000 Lone Pine Resources, Inc., Escrow, due 2/15/17 (b)* . . . . . . . . . . . . . . . . . . . . . — New Gulf Resources LLC/NGR Finance Corp.: 10,000,000 11.750%, due 5/15/19 (a) . . . . . . . . . . . . . . 9,350,000 5,000,000 10.000% Cash or 12.000% Payment-in-kind Interest, due 11/15/19 (a)(g) . . . . . . . . . . . . 3,700,000 8,000,000 Niska Gas Storage Canada ULC / Niska Gas Storage Canada Finance Corp., 6.500%, due 4/1/19 (Canada) (a) . . . . . . . . 5,990,000 Platinum Energy Solutions, Inc.: 2,090,633 1st Lien, 11.000%, due 10/1/18 (a)(b)(c). . . . 2,090,633 4,876,227 2nd Lien, 12.000%, Cash or 14.000% Payment-in-kind Interest, due 10/1/20 (a)(b)(g). . . . . . . . . . . . . . . . . . 4,876,227 Quicksilver Resources, Inc.: 12,000,000 9.125%, due 8/15/19. . . . . . . . . . . . . . . . . . 6,060,000 22,847,000 11.000%, due 7/1/21. . . . . . . . . . . . . . . . . . 11,766,205 25,000,000 CAD Southern Pacific Resource Corp., 8.750%, due 1/25/18 (Canada) (a) . . . . . . . . . . . . . . 6,876,359 17,500 ^ US Shale Solutions, Inc., 12.500%, due 9/1/17 (a) . . . . . . . . . . . . . . . . . . . . . . . 16,012,500 149,320,692

Financials - 4.10% 30,000,000 CNG Holdings, Inc., 9.375%, due 5/15/20 (a). . . 22,875,000 51,500,000 DFC Finance Corp., 10.500%, due 6/15/20 (a) . . 50,598,750

Financials (continued) Lehman Brothers Holdings, Inc.*: 31,000,000 due 9/26/08 . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,572,500 17,185,861 due 10/14/08 . . . . . . . . . . . . . . . . . . . . . . . . 2,534,915 10,000,000 due 10/22/08 . . . . . . . . . . . . . . . . . . . . . . . . 1,475,000 25,000,000 due 11/24/08 . . . . . . . . . . . . . . . . . . . . . . . . 3,687,500 12,205,000 due 12/23/08 . . . . . . . . . . . . . . . . . . . . . . . . 1,800,238 97,000,000 due 3/23/09 . . . . . . . . . . . . . . . . . . . . . . . . . 14,307,500 6,771,301 due 4/3/09 . . . . . . . . . . . . . . . . . . . . . . . . . . 998,767 30,000,000 due 1/14/11 . . . . . . . . . . . . . . . . . . . . . . . . . 4,462,500 10,000,000 due 1/24/13 . . . . . . . . . . . . . . . . . . . . . . . . . 1,487,500 50,000,000 due 9/26/14 . . . . . . . . . . . . . . . . . . . . . . . . . 7,687,500 7,113,000 due 2/9/17 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,040,276 15,000,000 EUR Lehman Brothers Treasury Co. B.V., due 6/25/10 (Netherlands)*. . . . . . . . . . . . . 4,417,349 121,945,295

Food & Beverage - 1.32% 40,755,000 American Seafoods Group LLC/American Seafoods Finance, Inc., 10.750%, due 5/15/16 (a) . . . . . . . . . . . . . . . . . . . . . . 39,328,575

Gaming & Entertainment - 3.10% 105,000,000 Caesars Entertainment Operating Co., Inc., 10.000%, due 12/15/18. . . . . . . . . . . . . . . . 15,487,500 Codere Finance Luxembourg S.A. (Luxembourg)*: 55,878,000 EUR due 6/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . 42,014,060 26,910,000 due 2/15/19 (a) . . . . . . . . . . . . . . . . . . . . . . 16,415,100 18,258,582 Majestic Star Casino, LLC, 12.500% Cash or 14.500% Payment-in-kind Interest, due 12/1/16 (a)(g) . . . . . . . . . . . . . . . . . . . . 18,258,582 92,175,242

Healthcare - 4.24% 79,800,000 21st Century Oncology, Inc., 9.875%, due 4/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . 77,007,000 InVentiv Health, Inc.: 42,136,000 10.000% Cash or 12.000% Payment-in-kind Interest, due 8/15/18 (a)(g) . . . . . . . . . . . . . 38,133,080 14,927,000 11.000%, due 8/15/18 (a) . . . . . . . . . . . . . . 10,672,805 125,812,885

Home Construction - 2.10% New Enterprise Stone & Lime Co., Inc.: 20,700,292 5.000% Cash and 8.000% Payment-in-kind Interest, due 3/15/18 (g) . . . . . . . . . . . . . . . 22,252,814 41,458,000 11.000%, due 9/1/18. . . . . . . . . . . . . . . . . . 40,006,970 62,259,784

Manufacturing - 3.20% 31,000,000 Euramax International, Inc., 9.500%, due 4/1/16. . . . . . . . . . . . . . . . . . . 30,457,500 68,000,000 Liberty Tire Recycling LLC, 11.000%, due 10/1/16 (a) . . . . . . . . . . . . . . . . . . . . . . 64,600,000 95,057,500

Media/Cable - 6.92% 43,000,000 Cengage Learning Acquisitions, Inc., Escrow, due 4/15/20 (b)*. . . . . . . . . . . . . . . — 166,951,484 iHeartCommunications Inc., 12.000% Cash plus 2.000% Payment-in-kind Interest, due 2/1/21 (g) . . . . . . . . . . . . . . . . . . . . . . . 145,665,170

Third Avenue TrustThird Avenue Focused Credit FundPortfolio of Investmentsat October 31, 2014

Principal ValueAmount‡/Units Security† (Note 1)

Principal Value Amount‡ Security† (Note 1)

33


Corporate Bonds & Notes (continued)Media/Cable (continued)

LBI Media, Inc.: 25,000,000 10.000%, due 4/15/19 (a) . . . . . . . . . . . . . . $ 26,000,000 33,694,375 13.500%, due 4/15/20 (a) . . . . . . . . . . . . . . 33,862,847 205,528,017

Metals & Mining - 5.74% 61,500,000 CAD Allied Nevada Gold Corp., 8.750%, due 6/1/19 (a) . . . . . . . . . . . . . . . . . . . . . . . 29,193,470 6,700,000 American Gilsonite Co., 11.500%, due 9/1/17 (a) . . . . . . . . . . . . . . . . . . . . . . . 7,001,500 48,957,000 EUR Boats Investments Netherlands B.V., 11.000% Payment-in-kind Interest, due 3/31/17 (Netherlands) (g) . . . . . . . . . . . 48,439,372 New World Resources N.V. (Netherlands): 34,966,026 EUR 8.000% Cash or 11.000% Payment-in-kind Interest, due 4/7/20 (a)(g) . . . . . . . . . . . . . . 34,177,747 13,403,643 EUR 4.000% Cash or 8.000% Payment-in-kind Interest, due 10/7/20 (a)(g) . . . . . . . . . . . . . 7,474,556 37,500,000 Noranda Aluminum Acquisition Corp., 11.000%, due 6/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . 37,875,000 23,500,000 Walter Energy, Inc., 8.500%, due 4/15/21 . . . . 6,345,000 170,506,645

Retailers - 3.19% Claire’s Stores, Inc.: 2,500,000 8.875%, due 3/15/19. . . . . . . . . . . . . . . . . . 2,143,750 115,250,000 7.750%, due 6/1/20 (a) . . . . . . . . . . . . . . . . 81,251,250 15,526,000 J.C. Penney Corp., Inc., 6.375%, due 10/15/36 . 11,295,165 94,690,165

Services - 7.29% 120,998,706 Affinion Group Holdings, Inc., 13.750% Cash or 14.500% Payment-in-kind Interest, due 9/15/18 (a)(g) . . . . . . . . . . . . . . . . . . . . 99,823,932 41,552,020 Affinion Investment LLC, 13.500%, due 8/15/18 (a) . . . . . . . . . . . . . . . . . . . . . . 35,319,217 Altegrity, Inc.: 35,740,000 13.000% Payment-in-kind Interest, due 7/1/20 (a)(g) . . . . . . . . . . . . . . . . . . . . . 15,189,500 120,871,840 12.000% Cash and 2.000% Payment-in-kind Interest, due 7/1/20 (a)(g) . . . . . . . . . . . . . . 51,370,532 20,000,000 SunGard Availability Services Capital Inc., 8.750%, due 4/1/22 (a) . . . . . . . . . . . . . . . . 14,800,000 216,503,181

Technology - 0.92% 20,000,000 Avaya, Inc., 10.500%, due 3/1//21 (a) . . . . . . . 17,625,000 4,954,085 First Data Holdings, Inc., 14.500% Payment-in-kind Interest, due 9/24/19 (a)(g). . 5,260,000 28,118,000 THQ, Inc., due 8/15/14* . . . . . . . . . . . . . . . . . . 4,358,290 27,243,290

Telecommunications - 1.00% Nortel Networks Ltd. (Canada)*: 5,000,000 due 4/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . 4,881,250 21,667,000 due 7/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . 24,700,380 29,581,630

Transportation Services - 3.86% 40,000,000 Ceva Group PLC, 9.000%, due 9/1/21 (United Kingdom) (a) . . . . . . . . . . . . . . . . . . 38,500,000

Transportation Services (continued) 85,000,000 Western Express, Inc., 12.500%, due 4/15/15 (a) . . . . . . . . . . . . . . . . . . . . . . $ 76,075,000 114,575,000

Utilities - 4.69% 20,000,000 Coso Geothermal Power Holdings LLC, 7.000%, due 7/15/26 (a) . . . . . . . . . . . . . . . 10,273,606 4,000,000 Energy Future Holdings Corp., due 11/15/34*. . 3,260,000 Energy Future Intermediate Holdings Co. LLC./ EFIH Finance, Inc., 100,065,046 due 12/1/18* (a) . . . . . . . . . . . . . . . . . . . . . 115,324,966 Texas Competitive Electric Holdings Co. LLC / TCEH Finance, Inc.*: 60,000,000 due 11/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . 6,300,000 40,000,000 due 11/1/16 . . . . . . . . . . . . . . . . . . . . . . . . . 4,200,000 139,358,572

Total Corporate Bonds & Notes (Cost $2,134,627,387) . . . . . . . . . . . . . . . . . 1,930,466,958Term Loans - 10.61%

Chemicals - 2.77% 33,388,000 Reichhold Holdings International B.V., DIP Loan, 12.000%, due 2/17/15 (Netherlands) (b) . . 33,388,000 24,550,000 Reichhold Holdings Inc., DIP Loan, 12.000%, due 2/17/15 (b) . . . . . . . . . . . . . . . . . . . . . . 24,550,000 25,000,000 Vertellus Specialties, Inc., Term Loan, 10.500%, due 10/10/19 (c) . . . . . . . . . . . . . . . . . . . . . 24,250,000 82,188,000

Energy - 1.83% 40,703,101 Global Geophysical Services, Inc., OID, DIP Loan B, 12.000%, due 5/1/15 (b)(c). . . . . . . . . . . . . 40,703,101 15,000,000 Templar Energy LLC, Term Loan B, 2nd Lien, 8.500%, due 11/25/20 (c) . . . . . . . . . . . . . . 13,678,125 54,381,226

Financials - 0.07% Concrete Investment I, Term Loan (Netherlands): 32,255 EUR Tranche A2, 2.007%, due 3/31/16 (b)(c) . . . 40,420 12,322 EUR Tranche A3, 2.007%, due 3/31/16 (b)(c) . . . 15,442 Concrete Investment II, Term Loan (Netherlands): 21,918 EUR Tranche A2, 2.007%, due 3/31/16 (b)(c) . . . 27,467 3,081 EUR Tranche A3, 2.007%, due 3/31/16 (b)(c) . . . 3,860 IVG Immobilien AG, Term Loan (Netherlands): 657,954 EUR Tranche A1, 9.506%, due 9/30/17 (b)(c) . . . 824,514 986,105 EUR Tranche A2, 9.506%, due 9/30/17 (b)(c) . . . 1,235,736 2,147,439

Gaming & Entertainment - 0.66% 20,000,000 Land Holdings LLC, Term Loan, 12.000%, due 6/27/20 (c) . . . . . . . . . . . . . . . . . . . . . . 19,600,000

Healthcare - 0.72% 22,300,139 Rural/Metro Corp., Term Loan, 8.000% Cash and 1.000% Payment-in-kind Interest, due 6/30/18 (c)(g) . . . . . . . . . . . . . 21,296,632

Retailers - 1.06% 17,000,000 Gymboree Corp., Term Loan, 1st Lien, 5.000%, due 2/23/18 (c) . . . . . . . . . . . . . . . 10,724,161 26,886,694 Weight Watchers International, Inc., Term Loan, 4.000%, due 4/2/20 (c) . . . . . . . . . . . . . . . . 20,885,207 31,609,368



Third Avenue TrustThird Avenue Focused Credit FundPortfolio of Investments (continued)at October 31, 2014

34


Term Loans (continued)Services - 1.13%

74,052,531 Education Management LLC, Term Loan C2, 1st Lien, 5.250%, due 6/1/16 (c). . . . . . . . . $ 33,693,901

Utilities - 2.37% Longview Power LLC*: 6,725,151 DIP Loan, 9.000%, due 11/27/15 (b)(c). . . . 16,743,783 53,047,387 Term Loan, due 3/1/14 . . . . . . . . . . . . . . . . . 34,480,802 29,429,232 Term Loan, due 10/31/17 . . . . . . . . . . . . . . . 19,129,000 70,353,585

Total Term Loans (Cost $329,622,689) . . . . . . . . . . . . . . . . . . 315,270,151Claims - 3.43%

Financials - 3.11% 360,000,000 Lehman Brothers, Inc., SIPA Claims (d) . . . . . . 92,484,000

Food & Beverage - 0.32% Pescanova S.A. (Spain): 188,150,508 EUR Ordinary Claims, due 12/31/40 (d) . . . . . . . 9,431,221 1,803,190 EUR Subordinate Claim, due 12/31/40 (b)(d) . . . — 9,431,221

Total Claims (Cost $130,384,817) . . . . . . . . . . . . . . . . . . 101,915,221Municipal Bonds - 0.14%

Gaming & Entertainment - 0.07% 5,200,000 New York City, NY, Industrial Development Agency Civic Facility Revenue, Bronx Parking Development Co. LLC OID, due 10/1/37* . . . . . . . . . . . . . . . . . . . . . . . . 2,028,000

Utilities - 0.07% 4,000,000 Puerto Rico Electric Power Authority, 7.000%, due 7/1/33 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,080

Total Municipal Bonds (Cost $4,793,642) . . . . . . . . . . . . . . . . . . . . 4,028,080

SharesConvertible Preferred Stocks - 0.53%

Transportation - 0.53% 4,435 CEVA Holdings LLC, Series A-1 (d)(e) . . . . . . . . 5,810,138 10,196 CEVA Holdings LLC, Series A-2 (d)(e) . . . . . . . . 9,813,332 15,623,470

Total Convertible Preferred Stocks (Cost $17,733,658) . . . . . . . . . . . . . . . . . . . 15,623,470Preferred Stocks - 1.98%

Energy - 0.11% 1,122,431 Lone Pine Resources, Inc. (Canada) (b)(d) . . . . 3,120,358

Financials - 1.87% 120,774 Concrete Investment II SCA (Luxembourg) (d) . . . 21,642,730 100,000 Federal Home Loan Mortgage Corp., 5.300% (d) . . . . . . . . . . . . . . . . . . . . . . . . . 571,000 60,000 Federal Home Loan Mortgage Corp., Series G (c)(d) . . . . . . . . . . . . . . . . . . . . . . . 365,400 89,283 Federal Home Loan Mortgage Corp., Series H, 5.100% (d) . . . . . . . . . . . . . . . . . . 603,553

Financials (continued) 63,188 Federal Home Loan Mortgage Corp., Series K, 5.790% (d) . . . . . . . . . . . . . . . . . . $ 413,250 52,500 Federal Home Loan Mortgage Corp., Series L (c)(d) . . . . . . . . . . . . . . . . . . . . . . . 315,525 207,640 Federal Home Loan Mortgage Corp., Series M (c)(d) . . . . . . . . . . . . . . . . . . . . . . . 1,260,894 23,500 Federal Home Loan Mortgage Corp., Series N (c)(d) . . . . . . . . . . . . . . . . . . . . . . . 152,515 336,223 Federal Home Loan Mortgage Corp., Series P, 6.000% (d) . . . . . . . . . . . . . . . . . . 2,131,654 224,580 Federal Home Loan Mortgage Corp., Series R, 5.700% (d) . . . . . . . . . . . . . . . . . . 1,513,669 165,000 Federal Home Loan Mortgage Corp., Series S (c)(d) . . . . . . . . . . . . . . . . . . . . . . . 1,021,350 100,000 Federal Home Loan Mortgage Corp., Series U, 5.900% (d) . . . . . . . . . . . . . . . . . . 319,000 637,722 Federal Home Loan Mortgage Corp., Series V, 5.570% (d) . . . . . . . . . . . . . . . . . . 2,015,202 392,089 Federal Home Loan Mortgage Corp., Series W, 5.660% (d) . . . . . . . . . . . . . . . . . . 1,239,001 203,813 Federal Home Loan Mortgage Corp., Series X, 6.020% (d) . . . . . . . . . . . . . . . . . . 642,011 100,000 Federal Home Loan Mortgage Corp., Series Y, 6.550% (d) . . . . . . . . . . . . . . . . . . 344,000 500,000 Federal Home Loan Mortgage Corp., Series Z, 8.375% (c)(d) . . . . . . . . . . . . . . . . 2,125,000 96,750 Federal National Mortgage Association, Series H, 5.810% (d) . . . . . . . . . . . . . . . . . . 603,720 478,000 Federal National Mortgage Association, Series M, 4.750% (d) . . . . . . . . . . . . . . . . . . 3,041,275 1,293,000 Federal National Mortgage Association, Series 0, 7.000% (c)(d) . . . . . . . . . . . . . . . . 8,404,500 100,000 Federal National Mortgage Association, Series P (c)(d) . . . . . . . . . . . . . . . . . . . . . . . 312,000 564,650 Federal National Mortgage Association, Series S, 8.250% (c)(d) . . . . . . . . . . . . . . . . 2,399,762 750,000 Federal National Mortgage Association, Series T, 8.250% (d) . . . . . . . . . . . . . . . . . . 4,237,500 55,674,511

Total Preferred Stocks (Cost $61,098,389) . . . . . . . . . . . . . . . . . . . 58,794,869Private Equities - 0.54%

Automotive - 0.36% 10,000,000 International Automotive Components Group LLC. (d) . . . . . . . . . . . . . . . . . . . . . . . 10,625,000

Consumer Products - 0.15%1,451,633,736,280 Ideal Standard International Equity S.A.

Alpecs (Luxembourg) (d)(e) . . . . . . . . . . . . . 4,354,901Energy - 0.03%

19,700 Thunderbird Resources L.P. (b)(d)(i) . . . . . . . . . 1,043,306Total Private Equities

(Cost $15,149,957) . . . . . . . . . . . . . . . . . . . 16,023,207




35


Common Stocks & Warrants - 7.31%Chemicals - 2.43%

867,448 MPM Holdings, Inc. (d) . . . . . . . . . . . . . . . . . . . $ 28,625,784 1,310,842 MPM Holdings, Inc., Restricted Shares (d)(e) . . 43,257,786 478,500 Phosphate Holdings, Inc. (d)(f). . . . . . . . . . . . . 148,335 72,031,905

Energy - 0.82% 4,000,000 Forest Oil Corp. (d) . . . . . . . . . . . . . . . . . . . . . . 3,240,000 124,461 Geokinetics Holdings USA, Inc. (d)(e) . . . . . . . . 12,757,252 374,199 Lone Pine Resources, Inc. (b)(d) . . . . . . . . . . . . — 374,199 Lone Pine Resources Canada Ltd. (Canada) (b)(d) . . . . . . . . . . . . . . . . . . . . . . 973,263 1,122,431 Lone Pine Resources, Inc. Multiple Voting Shares (b)(d) . . . . . . . . . . . . . . . . . . . . . . . . — 5,000 New Gulf Resources LLC, Warrants (d) . . . . . . . 962,500 50,000 Platinum Energy Solutions, Inc. (b)(d)(e) . . . . . 1,208,500 10,874 Platinum Energy Solutions, Inc., Warrants (b)(d)(e) . . . . . . . . . . . . . . . . . . . . — 63,924 Thunderbird Resources Equity, Inc. (b)(d) . . . . 5,292,262 24,433,777

Financials - 1.27% 3,725,000 Federal Home Loan Mortgage Corp. (d) . . . . . . 7,673,500 1,700,000 Rescap Liquidating Trust . . . . . . . . . . . . . . . . . 27,030,000 1,407,040 WMI Holdings Corp. (d). . . . . . . . . . . . . . . . . . . 3,025,136 37,728,636

Gaming & Entertainment - 0.47% 999,955 Isle of Capri Casinos, Inc. (d). . . . . . . . . . . . . . 7,429,666 255,200 Pinnacle Entertainment, Inc. (d). . . . . . . . . . . . 6,540,776 13,970,442

Media/Cable - 1.20% 971,678 Cengage Learning Holdings II, Inc. (d) . . . . . . . 27,206,984 2,311,360 Radio One, Inc., Class D (d)(f) . . . . . . . . . . . . . 5,755,286 681,637 Spanish Broadcasting System, Inc., Class A (d)(f) . . . . . . . . . . . . . . . . . . . . . . . . 2,746,997 35,709,267

Metals & Mining - 0.66% 711,375 AK Steel Holding Corp. (d) . . . . . . . . . . . . . . . . 5,385,109 1,961,723 Allied Nevada Gold Corp. (d) . . . . . . . . . . . . . . 2,726,795 1,500,000 Noranda Aluminum Holding Corp. . . . . . . . . . . 6,615,000 1,954,569 Tembec, Inc. (Canada) (d) . . . . . . . . . . . . . . . . 4,959,911 19,686,815

Services - 0.17% 499,061 Affinion Group, Inc., Warrants, Series A (d) . . . . 748,592 6,422,764 Affinion Group, Inc., Warrants, Series B (d). . . . 256,911 225,000 Kelly Services, Inc., Class A . . . . . . . . . . . . . . . 3,966,750 4,972,253

Transportation - 0.15% 4,710 CEVA Holdings LLC (d)(e) . . . . . . . . . . . . . . . . . 4,533,288

Utilities - 0.14% 32,549,441 EME Reorganization Trust. . . . . . . . . . . . . . . . . 4,231,427

Total Common Stocks & Warrants (Cost $227,044,490) . . . . . . . . . . . . . . . . . . 217,297,810

Closed-End Funds - 3.05%Financials - 3.05%

344,343 Ares Dynamic Credit Allocation Fund, Inc. . . . . $ 5,805,623 2,052,559 BlackRock Corporate High Yield Fund, Inc.. . . . 24,322,824 886,926 BlackRock Credit Allocation Income Trust . . . . 12,008,978 393,556 Deutsche High Income Opportunities Fund, Inc. . 5,671,142 765,074 First Trust High Income Long/Short Fund . . . . . 13,151,622 504,626 Neuberger Berman High Yield Strategies Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,640,878 655,108 New America High Income Fund, Inc. (The) . . . 6,256,281 612,153 Western Asset High Yield Defined Opportunity Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,210,712 1,207,569 Western Asset Managed High Income Fund, Inc. . . 6,616,271

Total Closed-End Funds (Cost $91,649,113) . . . . . . . . . . . . . . . . . . . 90,684,331

Total Investment Portfolio - 92.59% (Cost $3,012,104,142) . . . . . . . . . . . . . . . . . 2,750,104,097 Other Assets less Liabilities - 7.41% (h) . . . . 219,917,324 NET ASSETS - 100.00% $2,970,021,421Notes:CAD: Canadian Dollar.DIP: Debtor-In-Possession.EUR: Euro.OID: Original Issue Discount.SIPA: Securities Investor Protection Act of 1970.(a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This

security may be resold in transactions that are exempt from registration, normally toqualified institutional buyers.

(b) Fair-valued security.(c) Variable rate security. The rate disclosed is in effect as of October 31, 2014.(d) Non-income producing security.(e) Security subject to restrictions on resale.

Shares/ MarketPrincipal ValueAmount Issuer Acquisition Date Cost Per Unit__________ _______________________ ____________ ________ _________

1,451,633,736,280 Alpecs S.A. 10/31/14 4,421,661 $ 0.00*4,710 CEVA Holdings LLC 5/29/13 5,355,643 962.484,435 CEVA Holdings LLC, Series A-1,

Convertible Pfd. 5/29/13 4,435,224 1,310.0610,196 CEVA Holdings LLC, Series A-2,

Convertible Pfd. 5/29/13 13,298,434 962.47124,461 Geokinetics Holdings USA, Inc. 5/22/13-5/14/14 13,060,780 102.50

27,991,455 EUR Ideal Standard International S.A., Series C, 11.750% Cash or 15.750% Payment-in-kind Interest, due 5/1/18 10/31/14 32,073,171 100.88

1,310,842 MPM Holdings, Inc., Restricted Shares 10/24/14 21,367,809 33.0050,000 Platinum Energy Solutions, Inc. 10/4/13 1,486,746 24.1710,874 Platinum Energy Solutions, Inc.,

Warrants 10/4/13 9,743 0.00

EUR: Euro.* Amount less than $0.01.At October 31, 2014, these restricted securities had a total market value of $109,972,545, or 3.70% of net assets of the Fund.




36


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

(g) Payment-in-kind (“PIK”) security. Income may be paid in additional securities or cash atthe discretion of the issuer.

(h) A portion is segregated for future fund commitment.(i) Security is held in the blocker.* Issuer in default.^ Expressed in units.† U.S. issuer unless otherwise noted.‡ Denominated in U.S. Dollars unless otherwise noted.

Country Concentration % of Net Assets _________United States 79.95%Luxembourg 4.92Netherlands 4.38Canada 1.73United Kingdom 1.29Spain 0.32 _______Total 92.59% _______ _______

Schedule of Forward Foreign Currency Contracts

Settlement Settlement Value at UnrealizedContracts to Sell Counterparty Date Value 10/31/14 Appreciation

49,000,000 CAD Goldman Sachs & Co. 11/26/14 $43,729,646 $43,448,601 $ 281,04570,000,000 EUR Goldman Sachs & Co. 11/26/14 88,526,354 87,734,690 791,66470,000,000 EUR JPMorgan Chase Bank, N.A. 11/26/14 88,570,804 87,734,690 836,11420,000,000 EUR Macquarie Bank, Ltd. 11/26/14 25,293,000 25,067,055 225,945 _____________

$2,134,768 _____________ _____________CAD: Canadian Dollar.EUR: Euro.


[This page intentionally left blank.]

38


Small-Cap Real Estate Value Fund Value Fund Value Fund ___________________ ___________________ ___________________Assets:Investments at value (Notes 1 and 5): Unaffiliated issuers† . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,900,890,843 $517,294,816 $2,660,256,561 $ $ Affiliated issuers‡ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,891,431 — 166,821,311 4 8 _____________________ ___________________ _____________________ _ Total investments# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,079,782,274 517,294,816 2,827,077,872 3 2Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,626,718 2,919,745 355,275,085 6 1Dividends and interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,035,533 573,461 3,137,046 2 6Receivable for securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,314 165,405 — 1 4Restricted cash pledged to counterparty for collateral management . . . . . . . . . . . . . . . . . . . . . . . . 300,000 — 50,540,000 — —Receivable for fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,355 24,579 4,599,091 1 4Foreign currency at value^ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 3 7Purchased foreign currency options* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,235,139 — —Unrealized appreciation for forward foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,203,818 — 2Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,181 41,744 160,579 5 1Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 657,204 — 9 _____________________ ___________________ _____________________ _ Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,177,070,375 521,019,750 3,245,885,834 3 3 _____________________ ___________________ _____________________ _

Liabilities:Written equity options at value** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,000 — 165,400 — —Written foreign currency options at value*** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 415,566 — —Payable for securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,549,606 — 2,742,313 — 4Payable for fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,445,561 436,626 2,839,551 5 4Restricted cash received from counterparty for collateral management . . . . . . . . . . . . . . . . . . . . . . — — 1,861,709 — —Payable to Adviser (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,639,719 386,367 2,373,719 4 1Auditing and tax fees payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,080 90,720 108,210 9 1Payable for shareholder servicing fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,687 56,840 409,123 5 2Foreign capital tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 3 1Other Liabilities^ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 20,094 — 3Distribution fees payable (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,486 11,277 43,750 5 3Payable to trustees and officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,257 3,605 21,015 3 1Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,008 83,443 202,384 1 1 _____________________ ___________________ _____________________ _ Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,580,404 1,068,878 11,202,834 1 5 _____________________ ___________________ _____________________ _ Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,165,489,971 $519,950,872 $3,234,683,000 $3 $2 _____________________ ___________________ _____________________ _ _____________________ ___________________ _____________________ _

Summary of net assets:Capital stock, $0.001 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,657,439,919 $300,897,105 $2,464,435,043 $ $3Accumulated undistributed net investment income/(distributions in excess of net investment income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,992,748 (5,660,013) 24,181,494 1 8Accumulated net realized gain/(loss) on investments and foreign currency transactions . . . . . . . . . 73,832,462 99,768,375 55,924,431 (1 1Net unrealized appreciation on investments and translation of foreign currency denominated assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362,224,842 124,945,405 690,142,032 (8 ( _____________________ ___________________ _____________________ _ Net assets applicable to capital shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,165,489,971 $519,950,872 $3,234,683,000 $3 $2 _____________________ ___________________ _____________________ _ _____________________ ___________________ _____________________ _

Investor Class:Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,935,659 $ 9,897,953 $ 367,833,588 $ _____________________ ___________________ _____________________ _ _____________________ ___________________ _____________________ _ Outstanding shares of beneficial interest, unlimited number of shares authorized . . . . . . . . . . . . . 569,966 351,223 11,552,175 8 _____________________ ___________________ _____________________ _ _____________________ ___________________ _____________________ _ Net asset value, offering and redemption price per share± . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59.54 $28.18 $31.84 $ _________ _________ _________ _ _________ _________ _________ _

Institutional Class:Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,131,554,312 $510,052,919 $2,866,849,412 $2 _____________________ ___________________ _____________________ _ _____________________ ___________________ _____________________ _ Outstanding shares of beneficial interest, unlimited number of shares authorized . . . . . . . . . . . . . 35,707,495 18,041,377 89,450,144 1 _____________________ ___________________ _____________________ _ _____________________ ___________________ _____________________ _ Net asset value, offering and redemption price per share± . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59.69 $28.27 $32.05 $ _________ _________ _________ _ _________ _________ _________ _ † Cost of unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,481,571,146 $392,335,656 $1,997,843,470 $2 ‡ Cost of affiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 236,037,540 $ — $ 144,850,198 # Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,717,608,686 $392,335,656 $2,142,693,668 $3 ^ Cost of foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ — $ * Cost of purchased foreign currency options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 634,536 $ ** Premiums received for written equity options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (315,500) $ — $ (1,892,007) $ *** Premiums received for written foreign currency options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ (634,536) $ ± Redemption price is gross of redemption fees (Note 7)

Third Avenue TrustStatement of Assets and LiabilitiesFor the Year Ended October 31, 2014

39


S R International Focused V V V Value Fund Credit Fund _ _ _ ___________________ ___________________

U $ $ $ $286,142,287 $2,741,453,479 A 1 — 1 41,383,077 8,650,618 _ _ ___________________ _____________________ T 2 5 2 327,525,364 2,750,104,097

9 2 3 6,237,809 196,648,386 4 5 3 2,979,088 65,384,869 7 1 — 16,439,035 4,513,688 3 — 5 — —

R 1 2 4 158,212 4,858,065 — — — 3,775 786,488

— — 2 — —U — — 2 — 2,134,768

1 4 1 52,545 188,128 — — 6 — 963,380 _ _ ___________________ _____________________

T 2 5 3 353,395,828 3,025,581,869 _ _ ___________________ _____________________

2 — 1 — —W — — 4 — —P 5 — 2 — 44,891,454

3 4 2 552,929 4,374,559 — — 1 — —

P 1 3 2 464,837 1,912,911 1 9 1 91,615 192,053 2 5 4 58,926 215,905 — — — 312,287 143,002

— — 2 — 3,284,890 1 1 4 5,275 349,925

1 3 2 3,338 18,794 2 8 2 142,685 176,955 _ _ ___________________ _____________________

T 1 1 1 1,631,892 55,560,448 _ _ ___________________ _____________________ N $ $ $3 $351,763,936 $2,970,021,421 _ _ ___________________ _____________________ _ _ ___________________ _____________________

$1 $ $ $357,331,187 $3,135,338,592

n 7 (5 2 17,976,710 82,237,153

7 9 5 (14,936,867) 13,057,343

d 3 1 6 (8,607,094) (260,611,667) _ _ ___________________ _____________________ $ $ $3 $351,763,936 $2,970,021,421 _ _ ___________________ _____________________ _ _ ___________________ _____________________

$ $ $ 12,265,927 $ 920,914,073 _ _ ___________________ _____________________ _ _ ___________________ _____________________

5 3 1 697,613 86,771,905 _ _ ___________________ _____________________ _ _ ___________________ _____________________ $ $ $ $17.58 $10.61 _ _ _ _________ ____________ _ _ _ _________ ____________

$ $ $ $339,498,009 $2,049,107,348 _ _ ___________________ _____________________ _ _ ___________________ _____________________

3 1 8 19,260,527 193,282,560 _ _ ___________________ _____________________ _ _ ___________________ _____________________ $ $ $ $17.63 $10.60 _ _ _ _________ ____________ _ _ _ _________ ____________

$ $ $1 $288,787,261 $3,004,695,930 $ $ $ $ 46,794,043 $ 7,408,212 $ $ $2 $335,581,304 $3,012,104,142 C $ $ $ $ 3,838 $ 786,488 $ $ $ $ — $ — $ (3 $ $ $ — $ — $ $ $ $ — $ —

40


Small-Cap Real Estate Value Fund Value Fund Value Fund ___________________ ___________________ ___________________Investment Income: Dividends - unaffiliated issuers* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,567,888 $ 5,641,614 $ 76,441,475 $ $ Dividends - affiliated issuers (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 322,827 — — Interest - unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,743 3,365 142,633 3 2 Interest - affiliated issuers (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — Interest - payment-in-kind securities unaffiliated issuers (Note 1) . . . . . . . . . . . . . . . . . . . . . . — — — — 4 Interest - payment-in-kind securities affiliated issuers (Notes 1 and 5) . . . . . . . . . . . . . . . . . . 1,234,479 — — — — Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,544 — 70,631 2 1 ___________________ ___________________ ___________________ _ _ Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,977,654 5,644,979 76,977,566 3 2 ___________________ ___________________ ___________________ _ _

Expenses: Investment advisory fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,976,830 5,465,902 23,817,568 1 2 Shareholder servicing fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,149,632 545,000 2,751,579 7 1 Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 646,998 263,604 461,155 2 1 Trustees’ and officers’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291,016 72,825 271,045 1 2 Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,213 53,789 304,665 1 2 Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,135 27,371 193,342 2 1 Accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,372 51,520 195,080 8 2 Auditing and tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,028 80,516 95,711 7 1 Administration fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,303 33,403 145,552 4 1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,194 26,996 83,032 4 6 Distribution fees (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,267 29,381 713,177 6 2 Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,104 4,998 206,738 2 4 Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,363 38,821 109,832 4 2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,144 36,935 154,104 7 9 ___________________ ___________________ ___________________ _ _ Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,402,599 6,731,061 29,502,580 1 2 Less: Expenses waived (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — ( —

Expenses reduced by custodian fee expense offset arrangement (Note 3) . . . . . . . . . (131,137) (4,333) (193,342) ( ( ___________________ ___________________ ___________________ _ _ Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,271,462 6,726,728 29,309,238 1 2 ___________________ ___________________ ___________________ _ _ Net investment income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,706,192 (1,081,749) 47,668,328 1 2 ___________________ ___________________ ___________________ _ _

Realized and unrealized gain/(loss) on investments, written options and foreign currency transactions: Net realized gain on investments - unaffiliated issuers# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,065,083 103,626,275 58,826,479 9 1 Net realized gain/(loss) on investments - affiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,887,394 — — ( — Net realized gain on written equity options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 370,495 — — Net realized gain/(loss) on foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (309,294) 2,463 15,227,191 ( 1 Net change in unrealized appreciation/(depreciation) on investments . . . . . . . . . . . . . . . . . . . . (48,958,299) (61,111,690) 145,156,972 (1 Net change in unrealized appreciation/(depreciation) on written equity options . . . . . . . . . . . . 109,500 — 1,726,607 — — Net change in unrealized appreciation/(depreciation) on translation of other assets and liabilities denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . (114,419) (33,979) 8,384,294 (4 Net change in deferred taxes on unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — ( ___________________ ___________________ ___________________ _ _ Net gain/(loss) on investments and foreign currency transactions . . . . . . . . . . . . . . . 102,679,965 42,483,069 229,692,038 (7 ___________________ ___________________ ___________________ _ _Net increase/(decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . $166,386,157 $ 41,401,320 $277,360,366 $ ___________________ ___________________ ___________________ _ _ ___________________ ___________________ ___________________ _ _* Net of foreign withholding taxes of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,257,688 $ 22,023 $ 1,810,635 $ # Net of foreign capital gains tax of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ — $

Third Avenue TrustStatement of OperationsFor the Year Ended October 31, 2014

41


S R International Focused V V V Value Fund Credit Fund _ _ _ ___________________ ___________________

D $ 8 $ $ 7 $ 31,332,734 $ 6,296,214 D — — 3 — — I 3 3 1 304 247,278,297 I — — — — — I — — — — 40,930,089 I 1 — — — — O 1 — 7 2,992 1,294,988 _ _ _ ____________________ ____________________ T 8 5 7 31,336,030 295,799,588 _ _ _ ____________________ ____________________

I 2 5 2 10,896,871 21,083,384 S 2 5 2 700,001 1,436,578 T 6 2 4 224,001 186,974 T 2 7 2 119,901 261,788 R 1 5 3 124,739 200,051 C 1 2 1 297,144 115,847 A 1 5 1 81,015 275,834 A 1 8 9 77,200 177,532 A 1 3 1 47,946 154,611 I 1 2 8 45,378 63,381 D 9 2 7 67,051 2,959,116 L 7 4 2 23,031 469,796 R 7 3 1 45,965 233,914 I — — — — 987,830 M 1 3 1 70,028 93,100 _ _ _ ____________________ ____________________ T 2 6 2 12,820,271 28,699,736 L — — — (517,819) —

E ( ( ( (30,906) (112,846) _ _ _ ____________________ ____________________ N 2 6 2 12,271,546 28,586,890 _ _ _ ____________________ ____________________ N 6 ( 4 19,064,484 267,212,698 _ _ _ ____________________ ____________________

c N 1 1 5 94,214,067 19,124,304 N 5 — — (6,862,826) — N — — 3 — — N ( 2 1 (2,769,091) 13,614,505 N ( ( 1 (160,409,707) (310,528,061) N 1 — 1 — — N a ( ( 8 (439,693) 3,618,547 N — — — (106,159) (143,002) _ _ _ ____________________ ____________________ N 1 4 2 (76,373,409) (274,313,707) _ _ _ ____________________ ____________________ $ $ $ $ (57,308,925) $ (7,101,009) _ _ _ ____________________ ____________________ _ _ _ ____________________ ____________________

$ $ $ $ 1,241,890 $ — $ $ $ $ 349,749 $ —

42


Third Avenue TrustStatements of Changes in Net Assets

Value Fund Small-Cap Value Fund _________________________________________________________ _________________________________________________________ For the For the For the For the Year Ended Year Ended Year Ended Year Ended October 31, 2014 October 31, 2013 October 31, 2014 October 31, 2013 _________________________ _________________________ _________________________ _________________________Operations: Net investment income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,706,192 $ 38,144,508 $ (1,081,749) $ 4,003,053 Net realized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,643,183 200,578,894 103,628,738 41,069,148 Net change in unrealized appreciation/(depreciation) . . . . . . . . . . . . . . . . . . . . (48,963,218) 292,412,333 (61,145,669) 131,673,113 _____________________ _____________________ ___________________ __________________ Net increase/(decrease) in net assets resulting from operations . . . . . . . . . . . . $ 166,386,157 $ 531,135,735 $ 41,401,320 $176,745,314 _____________________ _____________________ ___________________ __________________

Dividends and Distributions to Shareholders from: Net investment income: Investor Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,149,550) (662,490) — (56,749) Institutional Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,085,744) (67,040,237) (849,043) (5,943,573) Net realized gains: Investor Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (750,926) (182,590) Institutional Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (40,845,424) (14,015,569) _____________________ _____________________ ___________________ __________________ Decrease in net assets from dividends and distributions . . . . . . . . . . . . . . . . . (85,235,294) (67,702,727) (42,445,393) (20,198,481) _____________________ _____________________ ___________________ __________________

Capital Share Transactions: Proceeds from sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,843,094 108,651,386 20,936,904 39,489,467 Net asset value of shares issued in reinvestment of dividends and distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,139,122 62,685,199 41,203,254 19,454,567 Redemption fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,858 37,496 3,629 9,098 Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (716,104,569) (631,116,635) (220,855,475) (185,694,079) _____________________ _____________________ ___________________ __________________ Net increase/(decrease) in net assets resulting from capital share transactions . . (547,108,495) (459,742,554) (158,711,688) (126,740,947) _____________________ _____________________ ___________________ __________________ Net increase/(decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (465,957,632) 3,690,454 (159,755,761) 29,805,886 Net assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,631,447,603 2,627,757,149 679,706,633 649,900,747 _____________________ _____________________ ___________________ __________________ Net assets at end of year* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,165,489,971 $2,631,447,603 $519,950,872 $679,706,633 _____________________ _____________________ ___________________ __________________ _____________________ _____________________ ___________________ __________________ * Including accumulated undistributed net investment income/

(distributions in excess of net investment income) of . . . . . . . . . . . . . . . . $ 71,992,748 $ 65,156,179 $ (5,660,013) $ (6,399,388) _____________________ _____________________ ___________________ __________________ _____________________ _____________________ ___________________ __________________

43


V S Real Estate Value Fund International Value Fund Focused Credit Fund _ _________________________________________________________ _________________________________________________________ _________________________________________________________ F F F F For the For the For the For the For the For the Y Y Y Y Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended O O O O October 31, 2014 October 31, 2013 October 31, 2014 October 31, 2013 October 31, 2014 October 31, 2013 _ _________________________ _________________________ _________________________ _________________________ _________________________ _________________________

N $ $ $ ( $ $ 47,668,328 $ 12,064,503 $ 19,064,484 $ 17,225,059 $ 267,212,698 $ 101,268,989 N 1 2 1 4 74,424,165 45,935,939 84,582,150 112,356,026 32,738,809 35,623,309 N ( 2 ( 1 155,267,873 303,563,601 (160,955,559) 145,848,472 (307,052,516) 40,390,810 _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ N $ $ $ 4 $ $ 277,360,366 $ 361,564,043 $ (57,308,925) $ 275,429,557 $ (7,101,009) $ 177,283,108 _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________

N I ( ( — ( (1,571,043) (1,984,170) (394,709) (132,718) (81,551,899) (33,907,910) I ( ( ( ( (20,726,891) (55,413,731) (15,699,040) (10,467,684) (114,190,590) (59,015,537) N I — — ( ( (2,422,235) (3,241,659) — — — — I — — ( ( (27,463,643) (85,265,725) — — — — _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ D ( ( ( ( (52,183,812) (145,905,285) (16,093,749) (10,600,402) (195,742,489) (92,923,447) _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________

P 8 1 2 3 1,206,714,273 502,790,138 51,854,263 125,757,821 2,639,140,846 1,046,386,244 N d 8 6 4 1 49,667,615 137,806,815 14,817,419 9,818,297 165,082,808 77,209,559 R 1 3 3 9 70,645 65,503 16,624 40,511 250,689 144,354 C ( ( ( ( (402,672,506) (450,890,690) (899,641,397) (337,115,088) (1,400,052,915) (424,364,998) _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ N ( ( ( ( 853,780,027 189,771,766 (832,953,091) (201,498,459) 1,404,421,428 699,375,159 _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ N ( 3 ( 2 1,078,956,581 405,430,524 (906,355,765) 63,330,696 1,201,577,930 783,734,820 N 2 2 6 6 2,155,726,419 1,750,295,895 1,258,119,701 1,194,789,005 1,768,443,491 984,708,671 _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ N $ $ $ $ $3,234,683,000 $2,155,726,419 $ 351,763,936 $1,258,119,701 $ 2,970,021,421 $1,768,443,491 _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ *

$ $ $ (5 $ ( $ 24,181,494 $ (13,767,666) $ 17,976,710 $ 12,726,420 $ 82,237,153 $ 26,719,035 _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________ _ _ _ _____________________ _____________________ _____________________ _____________________ ______________________ _____________________

44


Focused Credit Fund ___________________

Cash Flows from Operating Activities: Net decrease in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,101,009) Adjustments to reconcile net decrease in net assets resulting from operations to net cash used by operating activities: Purchases of long-term securities* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,600,204,918) Purchases of short-term securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,461,720) Proceeds from sales and paydowns of long-term securities** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,336,207,523 Decrease in restricted cash pledged to counterparty for collateral management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,930,000 Net change in unrealized (appreciation)/depreciation on investment securities and deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,671,063 Net realized gains from investment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,124,304) Amortization of premium and discount - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,099,283) Increase in interest and dividends receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,774,299) Payment-in-kind interest income and other non-cash receipt of income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,268,938) Net change in unrealized (appreciation)/depreciation on forward foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,229,113) Increase in foreign currency held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (786,488) Increase in prepaid expenses, other assets and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,030,219) Increase in payable to Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840,396 Increase in accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,269,938 ______________________ Net Cash Used by Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,197,161,371) ______________________

Cash Flows from Financing Activities: Proceeds from issuance of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,640,572,511 Cash payments on shares redeemed net of redemption fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,395,921,397) Distributions paid to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,659,681) ______________________ Net Cash Provided by Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,213,991,433 ______________________

Cash: Net change in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,830,062 Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,818,324 ______________________ Cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 196,648,386 ______________________ ______________________

Cash Flow Information: Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 987,830 ______________________

Noncash Investing and Financing Activities: Capital shares issued in reinvestment of distributions paid to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 165,082,808 Noncash investment transactions - Mergers, restructurings, dividend reinvestments and payment-in-kind interest income . . . . . . . . . . . . . . . . . . . . 572,581,024

* Includes amounts for investments in securities sold short of $9,094,518.** Includes amounts for investments in securities sold short of $9,562,468.

Third Avenue TrustStatement of Cash FlowsFor the Year Ended October 31, 2014

45


Third Avenue Value Fund _____________________________________________________________________ For the Period Ended Years Ended October 31, October 31, ____________________________________________________ 2014 2013 2012 2011 2010* _________ _________ _________ _________ _____________Investor Class:Net asset value, beginning of period . . . . . . . . . . . . . . . . . $57.73 $48.47 $44.00 $50.09 $46.32 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 1.39± 0.61** 0.27 0.37 0.59 Net gain/(loss) on investment transactions (both realized and unrealized) . . . . . . . . . . . . . . . . . . . 2.223 9.893 4.992 (5.56)2 3.181 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 3.61 10.50 5.26 (5.19) 3.77 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (1.80) (1.24) (0.79) (0.90) — _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (1.80) (1.24) (0.79) (0.90) — _______ _______ _______ _______ _______Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . $59.54 $57.73 $48.47 $44.00 $50.09 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.45% 22.07% 12.36% (10.62%) 8.16%5

Ratios/Supplemental Data: Net assets, end of period (in thousands) . . . . . . . . . . $33,936 $36,811 $25,796 $25,547 $18,553 Ratio of expenses to average net assets Before fee waivers/expense offset

arrangement/recovery . . . . . . . . . . . . . . . . . 1.33% 1.35% 1.36% 1.38% 1.46%6

After fee waivers/expense offset arrangement/recovery7 . . . . . . . . . . . . . . . . . 1.32% 1.35%† 1.40%† 1.40%† 1.40%6#

Ratio of net investment income to average net assets . 2.36%± 1.15%** 0.61% 0.75% 1.54%6

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 31% 21% 16% 6% 2%5

1 Includes redemption fees of $0.04 per share.2 Includes redemption fees of $0.01 per share.3 Includes redemption fees of less than $0.01 per share.4 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser

had not waived certain expenses. Conversely, total return would have been higher if the Adviser had not recovered previously waived expenses. Total return is calculated assuming an initial investment made at the netasset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period and redemption on the last day of the period and is not annualized.

5 Not annualized.6 Annualized.7 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 1.40%.† The Adviser recovered a portion of its previously waived fees.# The Adviser waived a portion of its fees.* Period from December 31, 2009 (commencement of operations) through October 31, 2010.** Investment income per share reflects a special dividend received during the period which amounted to $0.44 per share. Excluding the special dividend, the ratio of net investment income to average net assets would

have been 0.33%.± Investment income per share reflects special dividends received during the period which amounted to $0.41 per share. Excluding the special dividends, the ratio of net investment income to average net assets would

have been 1.67%.@ Calculated based on the average number of shares outstanding during the period.

Third Avenue TrustFinancial HighlightsSelected data (for a share outstanding throughout each period) and ratios are as follows:

46


Third Avenue Value Fund _____________________________________________________________________ Years Ended October 31, _____________________________________________________________________ 2014 2013 2012 2011 2010 _________ _________ _________ _________ _________Institutional Class:Net asset value, beginning of year . . . . . . . . . . . . . . . . . . $57.86 $48.53 $44.08 $50.13 $44.60 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 1.53± 0.77** 0.37 0.43 0.71 Net gain/(loss) on investment transactions (both realized and unrealized)1 . . . . . . . . . . . . . . . . . . 2.23 9.87 4.98 (5.51) 5.96 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 3.76 10.64 5.35 (5.08) 6.67 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (1.93) (1.31) (0.90) (0.97) (1.14) _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (1.93) (1.31) (0.90) (0.97) (1.14) _______ _______ _______ _______ _______Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . $59.69 $57.86 $48.53 $44.08 $50.13 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.70% 22.40% 12.61% (10.42%) 15.25%Ratios/Supplemental Data: Net assets, end of year (in thousands) . . . . . . . . . . . $2,131,554 $2,594,637 $2,601,961 $3,451,647 $5,040,109 Ratio of expenses to average net assets Before fee waivers/expense offset

arrangement/recovery . . . . . . . . . . . . . . . . . 1.08% 1.10% 1.11% 1.13% 1.19% After fee waivers/expense offset

arrangement/recovery3 . . . . . . . . . . . . . . . . . 1.07% 1.10%† 1.15%† 1.15%† 1.15%#

Ratio of net investment income to average net assets . 2.61%± 1.45%** 0.83% 0.86% 1.55% Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 31% 21% 16% 6% 2%1 Includes redemption fees of less than $0.01 per share.2 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser


3 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 1.15%effective December 31, 2009.

† The Adviser recovered a portion of its previously waived fees.# The Adviser waived a portion of its fees.** Investment income per share reflects a special dividend received during the period which amounted to $0.44 per share. Excluding the special dividend, the ratio of net investment income to average net assets would


have been 1.92%.@ Calculated based on the average number of shares outstanding during the year.

Third Avenue TrustFinancial HighlightsSelected data (for a share outstanding throughout each year) and ratios are as follows:

47


Third Avenue Small-Cap Value Fund _____________________________________________________________________ For the Period Ended Years Ended October 31, October 31, ____________________________________________________ 2014 2013 2012 2011 2010* _________ _________ _________ _________ _____________Investor Class:Net asset value, beginning of period . . . . . . . . . . . . . . . . $28.10 $22.13 $20.25 $19.35 $18.19 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income/(loss)@ . . . . . . . . . . . . . . . . . (0.11) 0.06** (0.04) (0.01) 0.02 Net gain on investment transactions (both realized and unrealized) . . . . . . . . . . . . . . . . . . . . . . . . . 1.962 6.572 2.012 1.101 1.142 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 1.85 6.63 1.97 1.09 1.16 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . — (0.16) (0.02) (0.19) — Distributions from realized gains . . . . . . . . . . . . . . . . (1.77) (0.50) (0.07) — — _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (1.77) (0.66) (0.09) (0.19) — _______ _______ _______ _______ _______Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . $28.18 $28.10 $22.13 $20.25 $19.35 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.85% 30.74% 9.77% 5.58% 6.38%4



After fee waivers/expense offset arrangement/recovery6 . . . . . . . . . . . . . . . . . 1.35% 1.37% 1.38%† 1.40%† 1.40%5#

Ratio of net investment income/(loss) to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.41%) 0.25%** (0.18%) (0.07%) 0.10%5


1 Includes redemption fees of $0.02 per share.2 Includes redemption fees of less than $0.01 per share.3 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser


4 Not annualized.5 Annualized.6 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 1.40%.† The Adviser recovered a portion of its previously waived fees.# The Adviser waived a portion of its fees.* Period from December 31, 2009 (commencement of operations) through October 31, 2010.** Investment income per share reflects special dividends received during the period which amounted to $0.11 per share. Excluding the special dividends, the ratio of net investment income/(loss) to average net assets

would have been (0.18%).@ Calculated based on the average number of shares outstanding during the period.


48


Third Avenue Small-Cap Value Fund _____________________________________________________________________ Years Ended October 31, _____________________________________________________________________ 2014 2013 2012 2011 2010 _________ _________ _________ _________ _________Institutional Class:Net asset value, beginning of year . . . . . . . . . . . . . . . . . . $28.16 $22.18 $20.30 $19.38 $17.17 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income/(loss)@ . . . . . . . . . . . . . . . . . (0.05) 0.15** 0.01 0.03 0.12 Net gain on investment transactions (both realized and unrealized)1 . . . . . . . . . . . . . . . . . . 1.97 6.54 2.01 1.10 2.23 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 1.92 6.69 2.02 1.13 2.35 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (0.04) (0.21) (0.07) (0.21) (0.14) Distributions from realized gains . . . . . . . . . . . . . . . . (1.77) (0.50) (0.07) — — _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (1.81) (0.71) (0.14) (0.21) (0.14) _______ _______ _______ _______ _______Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . $28.27 $28.16 $22.18 $20.30 $19.38 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09% 31.05% 9.99% 5.80% 13.73%Ratios/Supplemental Data: Net assets, end of year (in thousands) . . . . . . . . . . . $510,053 $667,712 $641,684 $794,495 $1,050,173 Ratio of expenses to average net assets Before fee waivers/expense offset


arrangement/recovery3 . . . . . . . . . . . . . . . . . 1.10% 1.12% 1.13%† 1.15%† 1.14%#

Ratio of net investment income/(loss) to average net assets (0.17%) 0.62%** 0.07% 0.15% 0.65% Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 40% 39% 33% 34% 9%1 Includes redemption fees of less than $0.01 per share.2 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser



† The Adviser recovered a portion of its previously waived fees.# The Adviser waived a portion of its fees.** Investment income per share reflects special dividends received during the period which amounted to $0.11 per share. Excluding the special dividends, the ratio of net investment income to average net assets would



49


Third Avenue Real Estate Value Fund _____________________________________________________________________ For the Period Ended Years Ended October 31, October 31, ____________________________________________________ 2014 2013 2012 2011 2010* _________ _________ _________ _________ _____________Investor Class:Net asset value, beginning of period . . . . . . . . . . . . . . . . $29.40 $26.53 $21.40 $22.90 $20.47 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 0.50± 0.10 0.16 0.02 0.40 Net gain/(loss) on investment transactions (both realized and unrealized)1 . . . . . . . . . . . . . . . . . . 2.60 4.99 4.97 (0.63) 2.03 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 3.10 5.09 5.13 (0.61) 2.43 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (0.26) (0.84) — (0.89) — Distributions from realized gains . . . . . . . . . . . . . . . . (0.40) (1.38) — — — _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (0.66) (2.22) — (0.89) — _______ _______ _______ _______ _______Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . $31.84 $29.40 $26.53 $21.40 $22.90 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.84% 20.61% 23.97% (2.89%) 11.87%3



After fee waivers/expense offset arrangement/recovery5 . . . . . . . . . . . . . . . . . 1.33% 1.33% 1.34% 1.40%† 1.40%4#

Ratio of net investment income to average net assets . 1.63%± 0.36% 0.68% 0.11% 2.27%4


1 Includes redemption fees of less than $0.01 per share.2 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser


3 Not annualized.4 Annualized.5 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 1.40%.† The Adviser recovered previously waived fees.# The Adviser waived a portion of its fees.* Period from December 31, 2009 (commencement of operations) through October 31, 2010.± Investment income per share reflects a special dividend received during the period which amounted to $0.06 per share. Excluding the special dividend, the ratio of net investment income to average net assets would



50


Third Avenue Real Estate Value Fund _____________________________________________________________________ Years Ended October 31, _____________________________________________________________________ 2014 2013 2012 2011 2010 _________ _________ _________ _________ _________Institutional Class:Net asset value, beginning of year . . . . . . . . . . . . . . . . . . $29.56 $26.66 $21.45 $22.93 $19.86 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 0.56± 0.18 0.22 0.06 0.44 Net gain/(loss) on investment transactions (both realized and unrealized) . . . . . . . . . . . . . . 2.631 4.991 4.991 (0.62)1 2.892 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 3.19 5.17 5.21 (0.56) 3.33 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (0.30) (0.89) — (0.92) (0.26) Distributions from realized gains . . . . . . . . . . . . . . . . (0.40) (1.38) — — — _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (0.70) (2.27) — (0.92) (0.26) _______ _______ _______ _______ _______Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . $32.05 $29.56 $26.66 $21.45 $22.93 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.11% 20.87% 24.29% (2.66%) 16.94%Ratios/Supplemental Data: Net assets, end of year (in thousands) . . . . . . . . . . . $2,866,849 $2,010,557 $1,689,612 $1,579,121 $1,652,647 Ratio of expenses to average net assets Before fee waivers/expense offset


arrangement/recovery4 . . . . . . . . . . . . . . . . . 1.08% 1.08% 1.09% 1.15%† 1.14%#

Ratio of net investment income to average net assets . 1.82%± 0.65% 0.96% 0.26% 2.09% Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 14% 13% 4% 32% 26%1 Includes redemption fees of less than $0.01 per share.2 Includes redemption fees of $0.01 per share.3 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser



† The Adviser recovered previously waived fees.# The Adviser waived a portion of its fees.± Investment income per share reflects a special dividend received during the period which amounted to $0.06 per share. Excluding the special dividend, the ratio of net investment income to average net assets would



51


Third Avenue International Value Fund _____________________________________________________________________ For the Period Ended Years Ended October 31, October 31, ____________________________________________________ 2014 2013 2012 2011 2010* _________ _________ _________ _________ _____________Investor Class:Net asset value, beginning of period . . . . . . . . . . . . . . . . $19.96 $16.14 $15.29 $16.31 $15.51 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 0.39± 0.25** 0.08 0.09 0.32 Net gain/(loss) on investment transactions (both realized and unrealized)1 . . . . . . . . . . . . . . . . . . (2.55) 3.68 0.99 (0.85) 0.48 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . (2.16) 3.93 1.07 (0.76) 0.80 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (0.22) (0.11) (0.22) (0.26) — _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (0.22) (0.11) (0.22) (0.26) — _______ _______ _______ _______ _______Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . $17.58 $19.96 $16.14 $15.29 $16.31 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10.96%) 24.49% 7.20% (4.76%) 5.16%4

Ratios/Supplemental Data: Net assets, end of period (in thousands) . . . . . . . . . . $12,266 $35,013 $18,533 $13,997 $6,920 Ratio of expenses to average net assets Before fee waivers and expense offset arrangement . . . . . . . . . . . . . . . . . . . . . . . . 1.71% 1.69% 1.69% 1.69% 1.77%5

After fee waivers and expense offset arrangement3# . . . . . . . . . . . . . . . . . . . . . . . 1.65% 1.65% 1.65% 1.65% 1.65%5

Ratio of net investment income to average net assets . 1.99%± 1.37%** 0.53% 0.56% 2.55%5


1 Includes redemption fees of less than $0.01 per share.2 Performance figures may reflect fee waivers and/or expense offset arrangement. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense offset arrangement, the total return

would have been lower. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during theperiod and redemption on the last day of the period and is not annualized.

3 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 1.65%.4 Not annualized.5 Annualized.# The Adviser waived a portion of its fees.* Period from December 31, 2009 (commencement of operations) through October 31, 2010.** Investment income per share reflects a special dividend received during the period which amounted to $0.15 per share. Excluding the special dividend, the ratio of net investment income to average net assets would




52


Third Avenue International Value Fund _____________________________________________________________________ Years Ended October 31, _____________________________________________________________________ 2014 2013 2012 2011 2010 _________ _________ _________ _________ _________Institutional Class:Net asset value, beginning of year . . . . . . . . . . . . . . . . . . $20.00 $16.16 $15.33 $16.33 $15.18 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 0.43± 0.25** 0.12 0.10 0.24 Net gain/(loss) on investment transactions (both realized and unrealized)1 . . . . . . . . . . . . . . . . . . (2.54) 3.74 0.97 (0.81) 1.09 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . (2.11) 3.99 1.09 (0.71) 1.33 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (0.26) (0.15) (0.26) (0.29) (0.18) _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (0.26) (0.15) (0.26) (0.29) (0.18) _______ _______ _______ _______ _______Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . $17.63 $20.00 $16.16 $15.33 $16.33 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10.79%) 24.89% 7.39% (4.51%) 8.84%Ratios/Supplemental Data: Net assets, end of year (in thousands) . . . . . . . . . . . $339,498 $1,223,107 $1,176,256 $1,277,674 $1,517,296 Ratio of expenses to average net assets Before fee waivers and expense offset

arrangement . . . . . . . . . . . . . . . . . . . . . . . . 1.46% 1.44% 1.44% 1.44% 1.51% After fee waivers and expense offset

arrangement3# . . . . . . . . . . . . . . . . . . . . . . . 1.40% 1.40% 1.40% 1.40% 1.40% Ratio of net investment income to average net assets . 2.19%± 1.40%** 0.80% 0.58% 1.58% Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 22% 11% 20% 24% 13%1 Includes redemption fees of less than $0.01 per share.2 Performance figures may reflect fee waivers and/or expense offset arrangement. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense offset arrangement, the total return

would have been lower. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during theperiod and redemption on the last day of the period and is not annualized.

3 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 1.40%.# The Adviser waived a portion of its fees.** Investment income per share reflects a special dividend received during the period which amounted to $0.15 per share. Excluding the special dividend, the ratio of net investment income to average net assets would




53


Third Avenue Focused Credit Fund _____________________________________________________________________ Years Ended October 31, _____________________________________________________________________ 2014 2013 2012 2011 2010 _________ _________ _________ _________ _________Investor Class:Net asset value, beginning of year . . . . . . . . . . . . . . . . . . $11.08 $10.25 $10.51 $11.36 $10.25 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 1.09 0.88 0.76 0.85 0.83 Net gain/(loss) on investment transactions (both realized and unrealized) . . . . . . . . . . . . . . . . . . . (0.76)1 0.781 0.131 (0.81)2 0.893 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 0.33 1.66 0.89 0.04 1.72 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (0.80) (0.83) (0.69) (0.79) (0.60) Distributions from realized gains . . . . . . . . . . . . . . . . — — (0.46) (0.10) (0.01) _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (0.80) (0.83) (1.15) (0.89) (0.61) _______ _______ _______ _______ _______Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . $10.61 $11.08 $10.25 $10.51 $11.36 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.67% 16.61% 9.60% 0.24% 17.19%Ratios/Supplemental Data: Net assets, end of year (in thousands) . . . . . . . . . . . $920,914 $752,422 $335,216 $338,098 $248,975 Ratio of expenses to average net assets Before fee waivers/expense offset


arrangement/recovery5 . . . . . . . . . . . . . . . . . 1.15% 1.16% 1.14% 1.18% 1.21%†

Before interest expense . . . . . . . . . . . . . . . . . . . 1.13% 1.16% 1.14% 1.18% 1.21%†

Ratio of net investment income to average net assets . 9.35% 8.12% 7.61% 7.64% 7.69% Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 53% 58% 72% 105% 129%1 Includes redemption fees of less than $0.01 per share.2 Includes redemption fees of $0.01 per share.3 Includes redemption fees of $0.02 per share.4 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser


5 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 1.40%.Effective March 11, 2011, the expense limitation has been reduced to 1.20%.

† The Adviser recovered previously waived fees.@ Calculated based on the average number of shares outstanding during the year.


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Third Avenue Focused Credit Fund _____________________________________________________________________ Years Ended October 31, _____________________________________________________________________ 2014 2013 2012 2011 2010 _________ _________ _________ _________ _________Institutional Class:Net asset value, beginning of year . . . . . . . . . . . . . . . . . . $11.07 $10.24 $10.50 $11.36 $10.26 _______ _______ _______ _______ _______Income/(loss) from investment operations: Net investment income@ . . . . . . . . . . . . . . . . . . . . . . 1.12 0.92 0.79 0.88 0.86 Net gain/(loss) on investment transactions (both realized and unrealized)1 . . . . . . . . . . . . . . . . . . (0.77) 0.77 0.13 (0.83) 0.87 _______ _______ _______ _______ _______ Total from investment operations . . . . . . . . . . . . . . . . 0.35 1.69 0.92 0.05 1.73 _______ _______ _______ _______ _______Less dividends and distributions to shareholders: Dividends from net investment income . . . . . . . . . . . (0.82) (0.86) (0.72) (0.81) (0.62) Distributions from realized gains . . . . . . . . . . . . . . . . — — (0.46) (0.10) (0.01) _______ _______ _______ _______ _______ Total dividends and distributions . . . . . . . . . . . . . . . . (0.82) (0.86) (1.18) (0.91) (0.63) _______ _______ _______ _______ _______Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . $10.60 $11.07 $10.24 $10.50 $11.36 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______Total return2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.93% 16.91% 9.89% 0.37% 17.38%Ratios/Supplemental Data: Net assets, end of year (in thousands) . . . . . . . . . . . $2,049,107 $1,016,021 $649,492 $765,467 $759,666 Ratio of expenses to average net assets Before fee waivers/expense offset


arrangement/recovery3 . . . . . . . . . . . . . . . . . 0.92% 0.91% 0.89% 0.92% 0.94%†

Before interest expense . . . . . . . . . . . . . . . . . . . 0.88% 0.91% 0.89% 0.92% 0.94%†

Ratio of net investment income to average net assets . 9.62% 8.48% 7.94% 7.87% 7.99% Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . 53% 58% 72% 105% 129%1 Includes redemption fees of less than $0.01 per share.2 Performance figures may reflect fee waivers, expense offset arrangement and/or recovery of previously waived fees. Past performance is no guarantee of future results. Total return would have been lower if the Adviser


3 As a result of an expense limitation, the ratio of expenses (exclusive of taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items) to average net assets will not exceed 0.95%.† The Adviser recovered previously waived fees.@ Calculated based on the average number of shares outstanding during the year.


1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

Third Avenue Value Fund seeks to achieve its investment objective of long-term capital appreciation mainly by acquiring common stocks of well-financed companies (meaning companies with high quality assets and conservative levels of liabilities) at a discount to what the Adviser believesis their intrinsic value. The Fund may invest in companies of any market capitalization. The Fund may also acquire senior securities, such asconvertible securities, preferred stocks and debt instruments (including high-yield and distressed securities that may be in default and may haveany or no credit rating), that the Adviser believes are undervalued. The Fund invests in both domestic and foreign securities.

Third Avenue Small-Cap Value Fund seeks to achieve its investment objective of long-term capital appreciation mainly by acquiring equitysecurities, including common stocks and convertible securities, of well-financed (meaning companies with high quality assets and conservativelevels of liabilities) small companies at a discount to what the Adviser believes is their intrinsic value. Under normal circumstances, the Fundexpects to invest at least 80% of its net assets (plus the amount of any borrowing for investment purposes) in securities of companies that areconsidered small. The Fund considers a “small company” to be one whose market capitalization is within the range of capitalizations during themost recent 12-month period of companies in the Russell 2000 Index, the S&P Small Cap 600 Index or the Dow Jones Wilshire U.S. Small-CapIndex at the time of investment (based on month-end data). The Fund may also acquire senior securities, such as preferred stocks and debtinstruments (including high-yield and distressed securities that may be in default and may have any or no credit rating), that the Adviser believesare undervalued. The Fund invests in both domestic and foreign securities.

Third Avenue Real Estate Value Fund seeks to achieve its investment objective of long-term capital appreciation primarily by investing in equitysecurities, including common stocks and convertible securities, of well-financed (meaning companies with high quality assets and conservativelevels of liabilities) real estate and real estate-related companies, or in companies which own significant real estate assets or derive a significantportion of gross revenues or net profits from real estate-related companies at the time of investment (“real estate companies”). The Fund seeks toacquire these securities at a discount to what the Adviser believes is their intrinsic value. Under normal circumstances, at least 80% of the Fund’snet assets (plus the amount of any borrowing for investment purposes) will be invested in securities of real estate companies. The Fund may investin companies of any market capitalization. The Fund may also acquire senior securities, such as preferred stocks and debt instruments (includinghigh-yield, distressed and mortgage-backed securities that may be in default and may have any or no credit rating) of real estate companies orloans secured by real estate that the Adviser believes have above-average yield potential. The Fund invests in both domestic and foreign securities.

Third Avenue International Value Fund seeks to achieve its investment objective of long-term capital appreciation primarily by acquiring equitysecurities, including common stocks and convertible securities, of well-financed companies (meaning companies with high quality assets andconservative levels of liabilities) located outside of the United States. While the Fund may invest in companies located anywhere in the world, itcurrently expects that most of its assets will be invested in the more developed countries and, under normal circumstances, at least 80% of its netassets (plus the amount of any borrowing for investment purposes) will be invested in securities of issuers located outside of the United States atthe time of investment. The Fund may also acquire senior securities, such as preferred stocks and debt instruments (including high-yield anddistressed securities that may be in default and may have any or no credit rating), that the Adviser believes are undervalued.

Third Avenue Focused Credit Fund seeks to achieve its investment objective of long-term total return mainly by investing in bonds and othertypes of credit instruments and intends to invest a substantial amount of its assets in credit instruments that are rated below investment grade bysome or all relevant independent rating agencies, including Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and Fitch Ratings.Under normal circumstances, at least 80% of the Fund’s net assets (plus the amount of any borrowing for investment purposes) will be investedin bonds and other types of credit instruments. Credit instruments include high-yield bonds (commonly known as “junk bonds” or “junk debt”),bank debt, convertible bonds or preferred stock, loans made to bankrupt companies (including debtor-in-possession loans), loans made to refinancedistressed companies and other types of debt instruments. In making these investments, the Adviser will seek to purchase instruments that theAdviser believes are undervalued. The Fund may have significant investments in distressed and defaulted securities and intends to focus on arelatively small number of issuers. The Fund may also purchase equity securities or hold significant positions in equity or other assets that theFund receives as part of a reorganization process, and may hold those assets until such time as the Adviser believes that a disposition is mostadvantageous.

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Third Avenue TrustNotes to Financial StatementsOctober 31, 2014

Because of the Funds’ disciplined and deliberate investing approach, there may be times when a Fund will have a significant cash position. Asubstantial cash position can adversely impact Fund performance in certain market conditions, and may make it more difficult for a Fund toachieve its investment objective.

Accounting policies:The policies described below are followed consistently by the Funds in the preparation of their financial statements in conformity with accountingprinciples generally accepted in the United States of America (“U.S. GAAP”). The Trust is an investment company and, accordingly, follows theinvestment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification (“FASBASC”) Topic 946-Investment Companies, which is part of U.S. GAAP.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect thereported amounts and disclosures. Actual results could differ from those estimates.

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

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

Each Fund may invest up to 15% of its total net assets in securities which are not readily marketable, including those which are restricted as todisposition under applicable securities laws (“restricted securities”). Restricted securities and other securities and assets for which market quotationsare not readily available are valued at “fair value”, as determined in good faith by the Committee as authorized by the Board, under proceduresestablished by the Board. At October 31, 2014, such securities had a total fair value of $4,900,205 or 0.23% of net assets of Third Avenue ValueFund, $22,633,178 or 0.70% of net assets of Third Avenue Real Estate Value Fund, and $136,136,872 or 4.58% of net assets of Third AvenueFocused Credit Fund. There were no fair valued securities for Third Avenue Small-Cap Value Fund and Third Avenue International Value Fundat October 31, 2014. Among the factors that may be considered by the Committee in determining fair value are: the type of security, trading inunrestricted securities of the same issuer, the financial condition of the issuer, the percentage of the Fund’s beneficial ownership of the issuer’scommon stocks and debt securities, comparable multiples of similar issuers, the operating results of the issuer and the discount from market valueof any similar unrestricted securities of the issuer at the time of purchase and liquidation values of the issuer. The fair values determined inaccordance with these procedures may differ significantly from the amounts which would be realized upon disposition of the securities.

Fair value measurements:In accordance with FASB ASC 820-10, Fair Value Measurements and Disclosures, the Funds disclose the fair value of their investments in ahierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. Fair value is defined as the price that a Fund wouldreceive upon selling an investment 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 unadjusted quoted prices in activemarkets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that aresignificant to the valuation (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

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

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Third Avenue TrustNotes to Financial Statements (continued)October 31, 2014

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

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

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

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

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

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

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

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

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

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

Term Loans—Term loans are valued by independent pricing services based on the average of evaluated quoted prices received from multiple dealersor valued relative to other benchmark securities when broker-dealer quotes are unavailable. Inputs may include quoted prices for similar investmentsin active markets, interest rates, coupon rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security featuresin order to estimate the relevant cash flows which is then discounted to calculate fair values. To the extent that these inputs are observable, thevalues of term loans are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

Municipal Bonds—Municipal bonds are valued by independent pricing services based on pricing models that take into account, among otherfactors, information received from market makers and broker-dealers, current trades, bid-ask lists, offerings, market movements, the callability of

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the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable, the values of municipalbonds are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

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

The following is a summary by level of inputs used to value the Funds’ investments as of October 31, 2014:

Third Avenue Third Avenue Third Avenue Third Avenue Third Avenue Small-Cap Real Estate International Focused Value Fund Value Fund Value Fund Value Fund Credit Fund ___________________ ___________________ ___________________ ___________________ ___________________Level 1: Quoted Prices†Investments in Securities: Common Stocks & Warrants: Building & Construction Products/Services $ — $ — $ — $ 8,384,345 $ — Chemicals — — — — 148,335 Diversified Holding Companies 223,209,044 20,946,483 — 37,977,098 — Energy — — — — 3,240,000 Financials — — — 9,705,451 37,728,636 Forest Products & Paper — 7,634,875 217,427,654 15,424,686 — Insurance & Reinsurance 141,034,488 32,032,607 — — — Non-U.S. Real Estate Operating Companies 59,245,663 — 806,764,588 — — Services — — — — 3,966,750 U.S. Real Estate Operating Companies 112,293,471 22,068,397 150,850,000 — — Other 1,522,888,628 421,293,363 1,394,443,832 226,891,749 73,597,951 Preferred Stocks: Financials — — — — 26,856,155 Closed-End Funds: Financials — — — — 90,684,331 ________________________ _____________________ ________________________ _____________________ ________________________ Total for Level 1 Securities 2,058,671,294 503,975,725 2,569,486,074 298,383,329 236,222,158 ________________________ _____________________ ________________________ _____________________ ________________________Level 2: Other Significant Observable Inputs†Investments in Securities: Common Stocks: Building & Construction Products/Services — — — 13,917,610 — Diversified Holding Companies — 13,319,091 — — — Forest Products & Paper — — — 15,224,425 — Preferred Stocks: Financials — — — — 7,175,626 Debt Securities issued by the U.S. Treasury and other government corporations and agencies: Municipal Bonds — — — — 4,028,080 Corporate Bonds & Notes — — — — 1,799,711,709 Term Loans — — — — 103,231,394 Claims 16,210,775 — — — 92,484,000 Purchased Options: Foreign Currency Put Options — — 2,235,139 — — Short Term Investments: U.S. Government Obligations — — 99,999,792 — — ________________________ _____________________ ________________________ _____________________ ________________________ Total for Level 2 Securities 16,210,775 13,319,091 102,234,931 29,142,035 2,006,630,809 ________________________ _____________________ ________________________ _____________________ ________________________

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Summary by level of inputs (continued)

Third Avenue Third Avenue Third Avenue Third Avenue Third Avenue Small-Cap Real Estate International Focused Value Fund Value Fund Value Fund Value Fund Credit Fund ___________________ ___________________ ___________________ ___________________ ___________________Level 3: Significant Unobservable InputsInvestments in Securities: Common Stocks & Warrants: Chemicals $ — $ — $ — $ — $ 71,883,570 Consumer Products —* — — — — Energy — — — — 21,193,777* Financial Insurance 259,000 — — — — Insurance & Reinsurance 40,800 — — — — Services — — — — 1,005,503 Transportation — — — — 4,533,288 U.S. Real Estate Operating Companies — — 19,295,656 — — Limited Partnerships: Insurance & Reinsurance 92,941 — — — — Convertible Preferred Stocks: Transportation — — — — 15,623,470 Preferred Stocks: Energy — — — — 3,120,358 Financials — — — — 21,642,730 Non-U.S. Real Estate Operating Companies — — 33,993,569 — — Corporate Bonds & Notes 4,507,464 — — — 130,755,249* Term Loans — — 3,337,522 — 212,038,757 Claims — — — — 9,431,221* Private Equities: Automotive — — — — 10,625,000 Consumer Products — — — — 4,354,901 Energy — — — — 1,043,306 U.S. Real Estate Operating Companies — — 100,965,259 — — ________________________ _____________________ ________________________ _____________________ ________________________ Total for Level 3 Securities 4,900,205 — 157,592,006 — 507,251,130 ________________________ _____________________ ________________________ _____________________ ________________________ Total Value of Investments $2,079,782,274 $517,294,816 $2,829,313,011 $327,525,364 $2,750,104,097 ________________________ _____________________ ________________________ _____________________ ________________________ ________________________ _____________________ ________________________ _____________________ ________________________Investments in Other Financial Instruments:Level 1: Quoted Prices Written Equity Options $ — $ — $ (165,400) $ — $ —Level 2: Other Significant Observable Inputs Written Foreign Currency Options — — (415,566) — — Written Equity Options (206,000) — — — — Forward Foreign Currency Contracts - Assets — — 2,203,818 — 2,134,768 ________________________ _____________________ ________________________ _____________________ ________________________ Total Market Value or Appreciation/(Depreciation) of Other Financial Instruments $ (206,000) $ — $ 1,622,852 $ — $ 2,134,768 ________________________ _____________________ ________________________ _____________________ ________________________ ________________________ _____________________ ________________________ _____________________ ________________________

† The value of security that was transferred from Level 1 on October 31, 2013 to Level 2 on October 31, 2014 for Third Avenue Small-Cap Value Fund was $13,969,145. Thetransfer was due to decrease in trading activities at period end. The values of securities that were transferred from Level 1 on October 31, 2013 to Level 2 on October 31, 2014 forThird Avenue International Value Fund and Third Avenue Focused Credit Fund were $12,635,038 and $3,310,650, respectively. The transfers were due to lack of quoted pricesin active markets at period end.

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

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

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60


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

Common Corporate Limited Stocks Bonds & Notes Partnerships Total ___________________ ___________________ ___________________ ___________________Balance as of 10/31/13 (fair value) Consumer Products $ 26,318 $ 3,691,276 $ — $ 3,717,594 Financial Insurance 812,000 — — 812,000 Insurance & Reinsurance 65,025 — 169,492 234,517 Manufacturing Housing 85,815,088 — — 85,815,088Transfer out of Level 3^ Manufacturing Housing (85,815,088) — — (85,815,088)Payment-in-kind Consumer Products — 1,234,479 — 1,234,479Return of capital Financial Insurance (629,000) — — (629,000) Insurance & Reinsurance (33,206) — (32,494) (65,700)Net change in unrealized gain/(loss) Consumer Products (26,318) (418,291) — (444,609) Financial Insurance 76,000 — — 76,000 Insurance & Reinsurance 8,981 — (92,475) (83,494)Net realized gain/(loss) Insurance & Reinsurance — — 48,418 48,418Balance as of 10/31/14 (fair value) Consumer Products —* 4,507,464 — 4,507,464 Financial Insurance 259,000 — — 259,000 Insurance & Reinsurance 40,800 — 92,941 133,741 Manufacturing Housing — — — — ___________________ _____________________ _____________________ _____________________Total $ 299,800 $ 4,507,464 $ 92,941 $ 4,900,205 ___________________ _____________________ _____________________ _____________________ ___________________ _____________________ _____________________ _____________________Net change in unrealized gain/(loss) related to securities still held as of October 31, 2014 $ (452,103) _____________________ _____________________^ Transfer out is recorded utilizing value as of the beginning of the period. The transfer is due to security no longer restricted at period end.* Investments fair valued at zero.


Preferred Private Common Stocks Stocks Equities Term Loans Total ___________________ ___________________ ___________________ ___________________ ___________________Balance as of 10/31/13 (fair value) U.S. Real Estate Operating Companies $16,751,774 $ — $ 91,229,323 $ — $107,981,097Purchases Non-U.S. Real Estate Operating Companies — 27,535,807 — 3,653,068 31,188,875Sales Non-U.S. Real Estate Operating Companies — — — (20,453) (20,453)Net change in unrealized gain/(loss) Non-U.S. Real Estate Operating Companies — 6,457,762 — (293,486) 6,164,276 U.S. Real Estate Operating Companies 2,543,882 — 9,735,936 — 12,279,818Net realized gain/(loss) Non-U.S. Real Estate Operating Companies — — — (1,607) (1,607)Balance as of 10/31/14 (fair value) Non-U.S. Real Estate Operating Companies — 33,993,569 — 3,337,522 37,331,091 U.S. Real Estate Operating Companies 19,295,656 — 100,965,259 — 120,260,915 _____________________ _____________________ _____________________ _____________________ _____________________Total $19,295,656 $33,993,569 $100,965,259 $ 3,337,522 $157,592,006 _____________________ _____________________ _____________________ _____________________ _____________________ _____________________ _____________________ _____________________ _____________________ _____________________Net change in unrealized gain/(loss) related to securities still held as of October 31, 2014 $ 18,444,094 _____________________ _____________________


Preferred and Convertible Private Corporate Common Stocks Preferred Equities Bonds & Notes Term Loans and Warrants Stocks and Claims Total ___________________ ___________________ ___________________ ___________________ ___________________ ___________________Balance as of 10/31/13 (fair value) Aerospace $ — $ 2,488,160 $ — $ — $ — $ 2,488,160 Energy 5,242,313 — 14,377,272* — — 19,619,585 Financials — — — 6,113,114(a) 556,847(c) 6,669,961 Healthcare — 3,001,947 — — — 3,001,947 Metals & Mining — 1,360,000 — 14,248,607(a) — 15,608,607 Technology 7,873,040 — — — — 7,873,040 Transportation — — 4,592,162 14,320,558(b) — 18,912,720Transfer in level 3^ Healthcare — 22,187,588 — — — 22,187,588 Utilities — 47,454,429 — — — 47,454,429Purchases Automotive — — — — 8,800,000(c) 8,800,000 Chemicals — 54,461,720 77,181,727 — — 131,643,447 Consumer Products 65,468,900 — — — 4,421,661(c) 69,890,561 Energy 25,397,001† 39,482,008 7,459,933† 1,496,576(a) 1,969,982(c) 75,805,500 Financials — 2,349,298 — 17,525,643(a) — 19,874,941 Food & Beverage — — — — 30,796,067†(d) 30,796,067 Gaming & Entertainment — 19,600,000 — — — 19,600,000 Healthcare — 5,622,075 — — — 5,622,075 Media/Cable —† — — — — — Metals & Mining 47,612,652 — — — — 47,612,652 Services — — 2,095,119 — — 2,095,119 Utilities — 9,750,151 — — — 9,750,151Sales Aerospace — (2,787,514) — — — (2,787,514) Energy (7,237,500) — (41,888) — — (7,279,388) Financials — (13,077) — (6,325,076)(a) (556,847)(c) (6,895,000) Healthcare — (9,946,499) — — — (9,946,499) Metals & Mining — (1,700,000) — (14,040,735)(a) — (15,740,735) Services — — (2,243,407) — — (2,243,407)Bond discount Chemicals — 617,751 — — — 617,751 Energy 37,320 611,629 — — — 648,949 Gaming & Entertainment — 16,574 — — — 16,574 Healthcare — 286,059 — — — 286,059 Metals & Mining 102,306 99,961 — — — 202,267Payment-in-kind Energy 535,945 — — — — 535,945 Healthcare — 187,137 — — — 187,137

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Third Avenue Focused Credit Fund (continued)

Preferred and Convertible Private Corporate Common Stocks Preferred Equities Bonds & Notes Term Loans and Warrants Stocks and Claims Total ___________________ ___________________ ___________________ ___________________ ___________________ ___________________Net change in unrealized gain/(loss) Aerospace $ — $ 3,342,564 $ — $ — $ — $ 3,342,564 Automotive — — — — 1,825,000(c) 1,825,000 Chemicals — 2,858,529 (5,298,157) — — (2,439,628) Consumer Products (3,703,604) — — — (66,760)(c) (3,770,364) Energy (952,928) 609,464 (570,161) 1,623,782(a) (926,676)(c) (216,519) Financials — (187,755) — 3,527,238(a) 25,573(c) 3,365,056 Food & Beverage — — — — (21,364,846)(d) (21,364,846) Gaming & Entertainment — (16,574) — — — (16,574) Healthcare — (394,395) — — — (394,395) Metals & Mining (6,062,655) 28,029 — 762,659(a) — (5,271,967) Services — — (109,022) — — (109,022) Technology (3,514,750) — — — — (3,514,750) Transportation — — (58,874) 1,302,912(b) — 1,244,038 Utilities — 13,149,005 — — — 13,149,005Net realized gain/(loss) Aerospace — (3,043,210) — — — (3,043,210) Energy (42,791) — (31,379) — — (74,170) Financials — (1,027) — 801,811(a) (25,573)(c) 775,211 Healthcare — 352,720 — — — 352,720 Metals & Mining — 212,010 — (970,531)(a) — (758,521) Services — — 1,262,813 — — 1,262,813Balance as of 10/31/14 (fair value) Aerospace — — — — — — Automotive — — — — 10,625,000(c) 10,625,000 Chemicals — 57,938,000 71,883,570 — — 129,821,570 Consumer Products 61,765,296 — — — 4,354,901(c) 66,120,197 Energy 22,979,360† 40,703,101 21,193,777* 3,120,358(a) 1,043,306(c) 89,039,902 Financials — 2,147,439 — 21,642,730(a) — 23,790,169 Food & Beverage — — — — 9,431,221*(d) 9,431,221 Gaming & Entertainment — 19,600,000 — — — 19,600,000 Healthcare — 21,296,632 — — — 21,296,632 Media/Cable —* — — — — — Metals & Mining 41,652,303 — — — — 41,652,303 Services — — 1,005,503 — — 1,005,503 Technology 4,358,290 — — — — 4,358,290 Transportation — — 4,533,288 15,623,470(b) — 20,156,758 Utilities — 70,353,585 — — — 70,353,585 _____________________ _____________________ _____________________ ___________________ ___________________ _____________________Total $130,755,249 $212,038,757 $98,616,138 $40,386,558 $25,454,428 $507,251,130 _____________________ _____________________ _____________________ ___________________ ___________________ _____________________ _____________________ _____________________ _____________________ ___________________ ___________________ _____________________Net change in unrealized gain/(loss) related to securities still held as of October 31, 2014 $ (17,741,376) _____________________ _____________________^ Transfers out are recorded utilizing values as of the beginning of the period. The transfers are due to decrease in trading activities at period end.* Includes investments fair valued at zero.† Investments acquired through corporate actions with zero cost.(a) Preferred Stocks(b) Convertible Preferred Stocks(c) Private Equities(d) Claims

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

Range Fair Value at (WeightedThird Avenue Value Fund 10/31/14 Valuation Technique(s) Unobservable Inputs(s) Average)

Other (b) $ 4,900 Range Fair Value at (WeightedThird Avenue Real Estate Value Fund 10/31/14 Valuation Technique(s) Unobservable Inputs(s) Average)

Private Equities $100,965 Broker Quote # $3.50Preferred Stocks 33,994 Broker Quote # $179.20Common Stocks 19,296 Option Pricing Model (a) Share volatility 0.58% (N/A)Term Loans 3,337 Book Value Restructuring value 1.0x (1.0x)

$157,592 Range Fair Value at (WeightedThird Avenue Focused Credit Fund 10/31/14 Valuation Technique(s) Unobservable Inputs(s) Average)

Corporate Bonds $123,788 Broker Quote # $15.50-$915.00Term Loans 100,788 Book Value Restructuring value 1.0x (1.0x)Term Loans 94,506 Broker Quote # $65.00-$98.00Common Stocks 89,174 Broker Quote # $33.00-$962.48Preferred Stocks 21,643 Broker Quote # $179.20Term Loans 16,744 Book Value Restructuring value $248.97Convertible Preferred Stocks 15,623 Broker Quote # $962.47-$1,310.06Private Equities 14,980 Broker Quote # $0.00*-$1.06Claims 9,431 Broker Quote # $5.01Corporate Bonds 6,967 Book Value Restructuring value 1.0x (1.0x)Other (b) 13,607 $507,251#Valuation techniques and significant unobservable inputs used by third-party pricing vendors or brokers, which are described in Note 1, were not provided to the Adviser. The appropriateness of fair values for these securities isbased on results of back testing, broker due diligence, unchanged price review and consideration of macro or security specific events.(a) Represents amounts used when the reporting entity has determined that market participants would take into account premiums and discounts, as applicable, when pricing the investments.(b) Includes securities less than 0.50% within each respective Fund.* Amount less than $0.01.

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

Security transactions and investment income:Security transactions for financial statement purposes are accounted for on a trade date basis. Dividend income is recorded on the ex-dividenddate or, for certain foreign dividends, as soon as the Funds become aware of the dividends. Interest income is determined on the basis of couponinterest accrued using the effective interest method which adjusts for amortization of premiums and accretion of discounts. Dividend income onthe Statement of Operations are shown net of any foreign taxes withheld on income from foreign securities. Payments received from certaininvestments held by the Funds may be comprised of dividends, capital gains and return of capital. The Funds originally estimate the expectedclassification of such payments. These amounts may subsequently be reclassified upon receipt of information from the issuer. Realized gains andlosses from securities transactions are recorded on an identified cost basis.

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

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

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

The net assets of the Funds are presented at market values using the foreign exchange rates at the close of the period. The Funds do not generallyisolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changesin the market prices of the investments held.

Similarly, the Funds do not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market pricesof investments sold during the period. Accordingly, realized and unrealized foreign currency gains/(losses) are included in the reported net realizedgain/(loss) and unrealized appreciation/(depreciation) on investments transactions and balances.

Net realized gains/(losses) on foreign currency transactions represent net foreign exchange gains/(losses) from foreign currency exchange contracts,disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and thedifference between the amount of investment income and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalentamounts actually received or paid. Net unrealized currency gains/(losses) from valuing foreign currency denominated assets and liabilities at periodend exchange rates are reflected as a component of net unrealized appreciation/(depreciation) on the Statement of Assets and Liabilities. Thechange in net unrealized currency gains/(losses) for the period is reflected on the Statement of Operations.

Pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion ofgains and losses realized on sales and maturities of foreign denominated debt securities are generally treated as ordinary income.

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

For the year ended October 31, 2014, the total in-kind payments with respect to PIK securities that were received by the Third Avenue ValueFund and the Third Avenue Focused Credit Fund in the amounts of $1,234,479 or 1.37% of total investment income and $40,930,089 or 13.84%of total investment income, respectively, are shown as a separate line item on the Statement of Operations.

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

These securities are generally considered to be restricted, as the Funds are ordinarily contractually obligated to receive approval from the Agentbank and/or borrower prior to disposition. Remaining maturities of term loans may be less than the stated maturities shown as a result of contractualor optional payments by the borrower. Such prepayments cannot be predicted with certainty. The interest rate disclosed reflects the rate in effecton October 31, 2014.

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

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

During the year ended October 31, 2014, Third Avenue Value Fund, Third Avenue Real Estate Value Fund and Third Avenue Focused CreditFund used forward foreign currency contracts for hedging against foreign currency risks. As of October 31, 2014, the Third Avenue Value Fundno longer held any forward foreign currency contracts.

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

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

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When the Funds write an option, an amount equal to the premium received by the Funds is recorded as a liability and is subsequently adjustedto the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Funds, on theexpiration date, as realized gains on written options or foreign currency. The difference between the premium and the amount paid on effectinga closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paidfor the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of theunderlying security or currency in determining whether the Funds have a realized gain or loss. If a put option is exercised, the premium reducesthe cost basis of the security or currency purchased by the Funds. In purchasing and writing options, the Funds bear the market risk of anunfavorable change in the price of the underlying security or the risk that the Funds may not be able to enter into a closing transaction due to anilliquid market. Exercise of a written option could result in the Funds purchasing a security or currency at a price different from the current marketvalue. The Funds may execute transactions in both listed and over-the-counter options. Listed options involve minimal counterparty risk sincelisted options are guaranteed against default by the exchange on which they trade. When purchasing over-the-counter options, the Funds bear therisk of economic loss from counterparty default, equal to the market value of the option.

During the year ended October 31, 2014, Third Avenue Real Estate Value Fund and Third Avenue International Value Fund used purchasedoptions on foreign currency for hedging purposes and/or to protect against losses in foreign currencies. As of October 31, 2014, the Third AvenueInternational Value Fund no longer held any purchased options on foreign currency.

During the year ended October 31, 2014, Third Avenue Value Fund used written put options on equities to gain long exposure to the underlyinginstruments and enhance the yield of the Fund. Third Avenue Real Estate Value Fund used written call options on foreign currency for hedgingpurposes and written put options on equities to gain long exposure to the underlying instruments.

Summary of derivatives information:The following tables present the value of derivatives held as of October 31, 2014, by their primary underlying risk exposure and respective locationon the Statements of Assets and Liabilities:


Statement of Assets andDerivative Contract Liabilities Location Options_________________ ____________________ ________

Liabilities:Equity contracts Written equity options at value $ (206,000)


Statement of Assets and Forward ForeignDerivative Contract Liabilities Location Options Currency Contracts_________________ ____________________ ________ _________________

Assets:Foreign currency contracts Purchased foreign currency options $2,235,139 $ —Foreign currency contracts Unrealized appreciation for forward foreign currency contracts — 2,203,818 _________ _________Total $2,235,139 $2,203,818 _________ _________ _________ _________Liabilities:Equity contracts Written equity options at value $ (165,400) $ —Foreign currency contracts Written foreign currency options at value (415,566) — _________ _________Total $ (580,966) $ — _________ _________ _________ _________


Statement of Assets and Forward ForeignDerivative Contract Liabilities Location Currency Contracts_________________ ____________________ _________________

Assets:Foreign currency contracts Unrealized appreciation for forward foreign currency contracts $2,134,768

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The following tables present the effect of derivatives on the Statement of Operations during the year ended October 31, 2014, by primary riskexposure:


Amount of Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income_______________________________________________________________________________ WrittenDerivative Contract Options_________________ ___________

Equity contracts $ 109,500(a)

Amount of Realized Gain/(Loss) on Derivatives Recognized in Income_______________________________________________________________________________ Forward ForeignDerivative Contract Currency Contracts_________________ ______________

Foreign currency contracts $(34,804)(c)


Amount of Realized Gain/(Loss) on Derivatives Recognized in Income_______________________________________________________________________________ Purchased Written Forward ForeignDerivative Contract Options Options Currency Contracts Total_________________ _________ _________ _________________ ______

Equity contracts $ — $ 370,495(b) $ — $ 370,495Foreign currency contracts (3,054,594)(c) 1,547,764(c) 18,293,699(c) 16,786,869 __________ _________ __________ __________

Total $(3,054,594) $1,918,259 $18,293,699 $17,157,364 __________ _________ __________ __________ __________ _________ __________ __________

Amount of Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income_______________________________________________________________________________ Purchased Written Forward ForeignDerivative Contract Options Options Currency Contracts Total_________________ _________ _________ _________________ ______

Equity contracts $ — $1,726,607(a) $ — $ 1,726,607Foreign currency contracts 3,191,679(d) 2,101,522(d) 3,099,194(d) 8,392,395 _________ _________ _________ __________

Total $3,191,679 $3,828,129 $3,099,194 $10,119,002 _________ _________ _________ __________ _________ _________ _________ __________


Amount of Realized Gain/(Loss) on Derivatives Recognized in Income_______________________________________________________________________________ PurchasedDerivative Contract Options_________________ ___________

Foreign currency contracts $(2,729,117)(c)


Amount of Realized Gain/(Loss) on Derivatives Recognized in Income_______________________________________________________________________________ Forward ForeignDerivative Contract Currency Contracts_________________ _______________

Foreign currency contracts $19,611,428(c)

Amount of Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income_______________________________________________________________________________ Forward ForeignDerivative Contract Currency Contracts_________________ _______________

Foreign currency contracts $4,229,113(d)(a) Included in “Net change in unrealized appreciation/(depreciation) on written equity options”.(b) Included in “Net realized gain on written equity options”.(c) Included in “Net realized gain/(loss) on foreign currency transactions”.(d) Included in “Net change in unrealized appreciation/(depreciation) on translation of other assets and liabilities denominated in foreign currency”.

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Derivatives volume:The tables below disclose the volume of the Funds’ forward foreign currency contracts and options activities during the year ended October 31,2014 (amounts denominated in U.S. Dollars unless otherwise noted, except number of contracts). Please refer to the tables in the Summary ofderivatives information for derivative-related gains and losses associated with volume activity (measured at each month-end).

Third Avenue Third Avenue Third Avenue Third Avenue Real Estate International Focused Value Fund Value Fund Value Fund Credit Fund ____________________ ____________________ ____________________ ____________________Exchange Traded Equity Options:Average Ending Value Written — 16,820 — —OTC Equity Options:Average Ending Value Written 15,846 — — —Foreign Currency Options:Average Notional Balance Purchased — 105,576,923AUD 115,083,282EUR —Average Notional Balance Purchased — — 61,634,462JPY —Average Notional Balance Written — 105,576,923AUD — —Forward Foreign Currency Contracts:Average Settlement Value Purchased — — — 13,056,456Average Settlement Value Sold 750,056 161,457,659 — 240,685,298AUD: Australian DollarEUR: EuroJPY: Japanese Yen

Floating rate obligations:The Funds may invest in debt securities with interest payments or maturity values that are not fixed, but float in conjunction with an underlyingindex or price. These securities may be backed by corporate issuers. The indices and prices upon which such securities can be based include interestrates and currency rates. Floating rate securities pay interest according to a coupon which is reset periodically.

Dividends and distributions to shareholders:The amount of dividends and distributions paid to shareholders from net investment income and net realized capital gains on sales of securities,respectively are determined in accordance with U.S. federal income tax law and regulations which may differ from U.S. GAAP. Such dividendsand distributions are recorded on the ex-dividend date. The majority of dividends and capital gains distributions from a Fund may be automaticallyreinvested into additional shares of that Fund, based upon the discretion of the Fund’s shareholders.

Income tax information:The Funds have complied and intend to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investmentcompanies, and each Fund intends to distribute all of its taxable net investment income and net realized capital gains, if any, to its shareholders.Therefore, no provision for U.S. federal income taxes is included on the accompanying financial statements.

Income, including gains, from investments in foreign securities received by the Funds may be subject to income, withholding or other taxesimposed by foreign countries.

Management has analyzed the tax positions taken on the Funds’ U.S. federal income tax returns for all open tax years (generally the current andprior three tax years), and has concluded that no provision for U.S. federal income tax is required in the Funds’ financial statements. This conclusionmay be subject to future review and adjustment at a later date based upon factors including, but not limited to, on-going analyses of and changesto tax laws, regulations and interpretations thereof. The Funds are subject to possible examination by the relevant taxing authorities for tax yearsfor which the applicable statutes of limitations have not expired.

Expense allocation:Expenses attributable to a specific Fund are charged to that Fund. Expenses attributable to the Trust are generally allocated using the ratio of eachFund’s average net assets relative to the total average net assets of the Trust. Certain expenses are shared with Third Avenue Variable Series Trust,an affiliated fund group. Such costs are allocated using the ratio of the Funds’ average net assets relative to the total average net assets of the Fundsand Third Avenue Variable Series Trust.

Share class accounting:Investment income, common expenses and realized/unrealized gains/(losses) on investments are allocated to the two classes of shares of each Fundon the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that share class.

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Trustees’ and officers’ fees:The Trust does not pay any fees to its officers for their services as such, except for the Chief Compliance Officer, and the Associate Director ofCompliance, to whom the Trust paid $321,046 for the year ended October 31, 2014. The Trust does pay, together with Third Avenue VariableSeries Trust, Trustees who are not affiliated with the Adviser a fee of $5,000 for each meeting of the Board that each Trustee attends, in additionto reimbursing all Trustees for travel and incidental expenses incurred by them in connection with their attendance at meetings. If a special meetingis required, Trustees will each receive $2,500. The Trust, together with Third Avenue Variable Series Trust, also pays each independent Trustee anannual retainer of $65,000 (the lead independent Trustee receives an additional retainer of $12,000). The Trustees on the Audit Committee eachreceive $2,000 for each audit committee meeting and the audit committee chairman receives an annual retainer of $6,000.

2. INVESTMENTS

Purchases and sales/conversions:

The aggregate cost of purchases and aggregate proceeds from sales and conversions of investments, excluding short-term investments, fromunaffiliated and affiliated issuers (as defined in the Investment Company Act of 1940 as ownership of 5% or more of the outstanding votingsecurities of these issuers) for the year ended October 31, 2014 were as follows:

Purchases Sales ________ ____ Third Avenue Value Fund: Affiliated $ 2,947,994 $ 25,618,906 Unaffiliated 656,355,543 969,164,377 Third Avenue Small-Cap Value Fund: Unaffiliated 232,221,743 369,868,370 Third Avenue Real Estate Value Fund: Affiliated 69,334,006 — Unaffiliated 939,030,051 310,355,231 Third Avenue International Value Fund: Affiliated — 8,160,793 Unaffiliated 177,224,416 902,017,330 Third Avenue Focused Credit Fund: Affiliated 3,034,982 — Unaffiliated 2,630,264,919 1,335,913,961

Written options transactions during the period are summarized as follows:

Third Avenue Value Fund Equity Options Written Number Premiums of Contracts Received _____________________ ___________________ Options outstanding at October 31, 2013 — $ — ________ _____________ Options written 2,000 315,500 ________ _____________ Options outstanding at October 31, 2014 2,000 $315,500 ________ _____________ ________ _____________

Third Avenue Real Estate Value Fund Currency Equity Options Written Options Written Notional Premiums Number of Premiums Amount ‡ Received Contracts Received _____________________ ___________________ _______________ _________________ Options outstanding at October 31, 2013 128,000,000 $ 2,040,020 — $ — ___________________ ________________ _________ _______________ Options written 493,000,000 4,830,954 18,261 2,262,502 Options terminated in closing purchase transactions (294,500,000) (3,363,408) — — Options exercised (83,500,000) (1,090,002) — — Options expired (162,000,000) (1,783,028) (4,261) (370,495) ___________________ ________________ _________ _______________ Options outstanding at October 31, 2014 81,000,000 $ 634,536 14,000 $1,892,007 ___________________ ________________ _________ _______________ ___________________ ________________ _________ _______________‡ In Australian Dollars.

3. INVESTMENT ADVISORY SERVICES, ADMINISTRATION AND SERVICE FEE AGREEMENTS AND EXPENSE OFFSET ARRANGEMENT

Each Fund has an Investment Advisory Agreement with the Adviser for investment advice and certain management functions. The terms of theInvestment Advisory Agreements provide the annual advisory fees based on the total average daily net assets for the Funds which are indicated asbelow. These fees are calculated daily and paid monthly.

Annual Fund Management Fee___ ___________Third Avenue Value Fund 0.90%Third Avenue Small-Cap Value Fund 0.90%Third Avenue Real Estate Value Fund 0.90%Third Avenue International Value Fund 1.25%Third Avenue Focused Credit Fund 0.75%

Additionally, the Adviser pays certain expenses on behalf of the Funds which are partially reimbursed by the Funds, including service fees due tothird parties, the compensation expense for the Funds’ Chief Compliance Officer and the Associate Director of Compliance and other miscellaneousexpenses. At October 31, 2014, Third Avenue Value Fund, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund, ThirdAvenue International Value Fund and Third Avenue Focused Credit Fund had amounts payable to the Adviser of $4,753, $3,127, $19,208, $2,451and $81,263, respectively, for reimbursement of expenses paid by the Adviser.

Under current arrangements, whenever, in any fiscal year, each Fund’s normal operating expenses, including the investment advisory fee, butexcluding taxes, interest, brokerage commissions, acquired fund fees and expenses, and extraordinary items, exceeds the expense limitation based oneach Fund’s average daily net assets, the Adviser has agreed to waive a portion of its advisory fees and/or reimburse each Fund in an amount equalto that excess. This arrangement is set to expire on February 28, 2015, subject to annual renewal. The expense limitations for each Fund are disclosedin its corresponding Financial Highlights. Below are the corresponding contingent liabilities to the Adviser in effect as of October 31, 2014:

Expenses Waived through Fiscal Periods ending

October 31, October 31, October 31,2012 2013 2014___________ ___________ ___________

Subject to Repayment until October 31, Expiration

Fund Date 2015 2016 2017____ _________ __________ __________ __________Third Avenue International Value Fund 2/28/2015 $384,146 $383,912 $517,819

The waived fees and reimbursed expenses may be paid to the Adviser during the following three-year period after the end of the fiscal year inwhich an expense is waived or reimbursed by the Adviser, to the extent that the payment of such fees and expenses would not cause a Fund toexceed the limitations disclosed in the corresponding financial highlights. These expense limitations can be terminated at any time.

The Trust has entered into an Administration Agreement with the Adviser pursuant to which the Adviser, as administrator, is responsible for providingvarious administrative services to the Trust. The Adviser has in turn entered into a Sub-Administration Agreement with BNY Mellon InvestmentServicing (U.S.) Inc. (“BNY Mellon”) pursuant to which BNY Mellon provides certain of these administrative services on behalf of the Adviser.Each Fund pays the Adviser a fee calculated at an annual rate of 0.0055% of the average daily net assets of each respective Fund for such services.The Adviser pays BNY Mellon an annual sub-administration fee for sub-administration services provided to the Trust equal to $199,778.

Both the Trust and the Adviser have entered into agreements with financial intermediaries to provide recordkeeping, processing, shareholdercommunications and other services to customers of the intermediaries investing in the Funds and have agreed to compensate the intermediariesfor providing those services. Certain of those services would be provided by the Funds if the shares of each customer were registered directly withthe Funds’ transfer agent. Accordingly, the Funds have agreed to reimburse a portion of the intermediary fees paid by the Adviser pursuant toprovisions adopted by the Board. Each Fund pays a portion of the intermediary fees attributable to shares of the Fund not exceeding the estimatedexpense the Fund would have paid its transfer agent had each customer’s shares been registered directly with the transfer agent instead of heldthrough the intermediary accounts. The Adviser pays the remainder of the fees. The fees incurred by the Funds are reflected as shareholder servicingfees in the Statements of Operations. For the year ended October 31, 2014, such fees amounted to $2,149,632 for Third Avenue Value Fund,$545,000 for Third Avenue Small-Cap Value Fund, $2,751,579 for Third Avenue Real Estate Value Fund, $700,001 for Third Avenue InternationalValue Fund and $1,436,578 for Third Avenue Focused Credit Fund.

The Funds have an expense offset arrangement in connection with their custodian contract. Credits realized as a result of uninvested cash balancesare used to reduce a portion of the Funds’ custodian expenses. The following amounts are the reduction of expenses due to this arrangement forthe year ended October 31, 2014. These amounts are reflected as “Expenses reduced by custodian fee expense offset arrangement” in the Statementsof Operations.

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Fund Custody Credit____ ___________Third Avenue Value Fund $131,137Third Avenue Small-Cap Value Fund 4,333Third Avenue Real Estate Value Fund 193,342Third Avenue International Value Fund 30,906Third Avenue Focused Credit Fund 112,846

4. LINE OF CREDIT

Each Fund and Third Avenue Variable Series Trust are participants in a single committed, unsecured $100,000,000 line of credit with The Bankof Nova Scotia, to be used only for temporary or emergency purposes. The interest on the loan is calculated at a variable rate based on the LIBOR,Federal Funds or Prime Rates. A commitment fee of 0.10% per annum of the available line of credit is charged, of which each participating Fundand Third Avenue Variable Series Trust pays its pro rata share, based on the ratio of its individual net assets to the net assets of all participants atthe time the fee is due and payable. The fee is paid quarterly in arrears and is included in “Miscellaneous” expenses in the Statement of Operations.Because all of the Funds in Third Avenue Trust and Third Avenue Variable Series Trust participate, there is no assurance that an individual Fundwill have access to all or any part of the $100,000,000 at any particular time. During the period from April 23, 2014 (commencement of line ofcredit agreement) to October 31, 2014, there were no loans outstanding under the line of credit.

5. RELATED PARTY TRANSACTIONS

Investment in affiliates:A summary of the Funds’ transactions in securities of affiliated issuers for the year ended October 31, 2014 is set forth below:

Third Avenue Value Fund Shares/ Shares/ Principal Amount Gross Gross Principal Amount Investment Income Held at Oct. 31, Purchases Sales and Held at Oct. 31, Value at Nov. 1, 2013 - Name of Issuer: 2013 and Additions Reductions 2014 Oct. 31, 2014 Oct. 31, 2014_____________ ______________ ______________ ______________ ______________ ______________ ______________Cavco Industries, Inc.†* 1,537,742 — 1,537,742 1 — $ — $ —Cavco Industries, Inc. 271,366 1,537,742 1 242,482 1,566,626 114,160,037 —Home Products International, Inc. 526,368 — — 526,368 — —Home Products International, Inc., 2nd Lien, Convertible, 6.000% Payment-in-kind Interest, due 3/20/17 20,270,597 1,234,479 2 — 21,505,076 4,507,464 1,234,479 2

Lai Sun Garment International, Ltd. 171,393,000 27,422,880 3 47,272,000 151,543,880 22,667,634 —Manifold Capital LLC 37 — — 37 259,000 —Sycamore Networks, Inc.* 3,480,368 — 3,480,368 — — —Tejon Ranch Co. 1,221,894 — — 1,221,894 36,876,761 —Tejon Ranch Co., Warrants, expire 8/31/16 200,255 — — 200,255 420,535 —Tellabs, Inc.* 24,934,737 — 24,934,737 4 — — — ___________________ _______________Total Affiliates $178,891,431 $1,234,479 ___________________ _______________ ___________________ _______________

1 Exchange of shares.2 Payment-in-kind interest.3 Exercise of rights.4 Tender offer.† Restricted security subject to restrictions on resale.* As of October 31, 2014, no longer an affiliate.

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Third Avenue Real Estate Value Fund Shares/Units Gross Gross Shares/Units Investment Income Held at Oct. 31, Purchases Sales and Held at Oct. 31, Value at Nov. 1, 2013 - Name of Issuer: 2013 and Additions Reductions 2014 Oct. 31, 2014 Oct. 31, 2014_____________ ______________ ______________ ______________ ______________ ______________ ______________Consolidated-Tomoka Land Co.* 500,500 — 500,500 — $ — $ —Newhall Holding Co. LLC, Class A Units 28,847,217 — — 28,847,217 100,965,259 —Starwood Waypoint Residential Trust** — 2,515,510 — 2,515,510 65,856,052 322,827Thomas Properties Group, Inc.* 7,354,979 — 7,354,979 1 — — — ___________________ _____________Total Affiliates $166,821,311 $322,827 ___________________ _____________ ___________________ _____________

1 Merger.* As of October 31, 2014, no longer an affiliate.** As of October 31, 2013, not an affiliate.

Third Avenue International Value Fund Shares Gross Gross Shares Investment Income Held at Oct. 31, Purchases Sales and Held at Oct. 31, Value at Nov. 1, 2013 - Name of Issuer: 2013 and Additions Reductions 2014 Oct. 31, 2014 Oct. 31, 2014_____________ ______________ ______________ ______________ ______________ ______________ ______________Boardroom, Ltd.* 22,522,784 — 22,522,784 — $ — $ —GP Investments, Ltd., BDR 8,734,788 — 2,680,481 6,054,307 12,241,042 —Netia S.A.* 33,297,746 — 33,297,746 — — —Rubicon, Ltd. 67,993,649 — 10,968,953 57,024,696 15,224,425 —Straits Trading Co. Ltd.* 26,437,649 — 26,437,649 — — —Tenon, Ltd. 10,405,851 — 55,425 10,350,426 13,917,610 — _________________ _____________Total Affiliates $41,383,077 $ — _________________ _____________ _________________ _____________BDR: Brazilian Depositary Receipt* As of October 31, 2014, no longer an affiliate.

Third Avenue Focused Credit Fund Shares/ Shares/ Principal Amount Gross Gross Principal Amount Investment Income Held at Oct. 31, Purchases Sales and Held at Oct. 31, Value at Nov. 1, 2013 - Name of Issuer: 2013 and Additions Reductions 2014 Oct. 31, 2014 Oct. 31, 2014_____________ ______________ ______________ ______________ ______________ ______________ ______________Phosphate Holdings, Inc. 478,500 — — 478,500 $ 148,335 $ —Radio One, Inc., 12.500%, due 5/24/16* 39,000,690 — 39,000,690 — — —Radio One, Inc., Class D 1,980,578 330,782 — 2,311,360 5,755,286 —Spanish Broadcasting System, Inc., 12.500% due 4/15/17* 22,000,000 2,000,000 24,000,000 — — —

Spanish Broadcasting System, Inc., Class A 382,686 298,951 — 681,637 2,746,997 — _______________ _____________Total Affiliates $8,650,618 $ — _______________ _____________ _______________ _____________* As of October 31, 2014, no longer an affiliate.

Certain employees of the Adviser serve as members of the board of directors of companies in which the Funds have investments. As a result ofsuch service, for the year ended October 31, 2014, the Funds received the following board member fees from these companies that board membersemployed by the Adviser agreed to have paid directly to the benefit of the Funds. These fees are included in “Other Income” on the accompanyingStatements of Operations.Fund Fees_____ ________Third Avenue Value Fund $117,463Third Avenue Real Estate Value Fund 38,999

6. DISTRIBUTION EXPENSES

The Board has adopted a distribution plan (the “Plan”) pursuant to Rule 12b-1 under the Investment Company Act. The Plan provides that, ascompensation for distribution and related services provided to Third Avenue Value Fund Investor Class (“TVFVX”), Third Avenue Small-CapValue Fund Investor Class (“TVSVX”), Third Avenue Real Estate Value Fund Investor Class (“TVRVX”), Third Avenue International Value FundInvestor Class (“TVIVX”), and Third Avenue Focused Credit Fund Investor Class (“TFCVX”), each Fund’s Investor Class accrues a fee calculatedat the annual rate of 0.25% of average daily net assets of the class. Such fees may be paid to institutions that provide distribution services. Theamount of fees paid during any period may be more or less than the cost of distribution and other services provided. Financial Industry RegulatoryAuthority (“FINRA”) rules impose a ceiling on the cumulative distribution fees paid.

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For the year ended October 31, 2014, distribution expenses were as follows:

Fund Distribution Fees_____ _____________Third Avenue Value Fund $ 94,267Third Avenue Small-Cap Value Fund 29,381Third Avenue Real Estate Value Fund 713,177Third Avenue International Value Fund 67,051Third Avenue Focused Credit Fund 2,959,116

7. CAPITAL SHARE TRANSACTIONS

Each Fund is authorized to issue an unlimited number of shares of each class of beneficial interest with $0.001 par value.

Transactions in capital stock of each class were as follows:

Third Avenue Value Fund:

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Investor Class Investor Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 128,958 $ 7,522,597 236,398 $ 12,612,994Shares issued upon reinvestment of dividends and distributions 19,744 1,110,369 13,142 647,390Shares redeemed* (216,421) (12,890,194) (144,111) (7,622,451) _________________ _____________________ __________________ _____________________Net increase/(decrease) (67,719) $ (4,257,228) 105,429 $ 5,637,933 _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Institutional Class Institutional Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 1,394,237 $ 81,320,497 1,820,186 $ 96,038,392Shares issued upon reinvestment of dividends and distributions 1,404,457 79,028,753 1,259,150 62,037,809Shares redeemed* (11,933,084) (703,200,517) (11,850,032) (623,456,688) _________________ _____________________ __________________ _____________________Net decrease (9,134,390) $(542,851,267) (8,770,696) $(465,380,487) _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

Third Avenue Small-Cap Value Fund:

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Investor Class Investor Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 97,022 $ 2,676,320 130,796 $ 3,254,427Shares issued upon reinvestment of dividends and distributions 27,798 749,981 10,644 237,778Shares redeemed* (200,461) (5,455,727) (85,830) (2,122,174) _________________ _____________________ __________________ _____________________Net increase/(decrease) (75,641) $ (2,029,426) 55,610 $ 1,370,031 _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Institutional Class Institutional Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 665,083 $ 18,260,584 1,478,630 $ 36,235,040Shares issued upon reinvestment of dividends and distributions 1,498,269 40,453,273 860,196 19,216,789Shares redeemed* (7,835,804) (215,396,119) (7,558,576) (183,562,807) _________________ _____________________ __________________ _____________________Net decrease (5,672,452) $(156,682,262) (5,219,750) $(128,110,978) _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

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Third Avenue Real Estate Value Fund:

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Investor Class Investor Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 9,071,471 $ 271,817,715 3,223,891 $ 88,684,390Shares issued upon reinvestment of dividends and distributions 140,095 3,963,299 206,129 5,171,770Shares redeemed* (2,597,093) (79,984,262) (779,847) (20,986,092) _________________ _____________________ __________________ _____________________Net increase 6,614,473 $ 195,796,752 2,650,173 $ 72,870,068 _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Institutional Class Institutional Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 30,409,505 $ 934,896,558 15,341,907 $ 414,105,748Shares issued upon reinvestment of dividends and distributions 1,608,740 45,704,316 5,269,569 132,635,045Shares redeemed* (10,577,919) (322,617,599) (15,986,629) (429,839,095) _________________ _____________________ __________________ _____________________Net increase 21,440,326 $ 657,983,275 4,624,847 $ 116,901,698 _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

Third Avenue International Value Fund:

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Investor Class Investor Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 308,783 $ 6,102,443 762,336 $ 13,688,140Shares issued upon reinvestment of dividends and distributions 19,726 389,379 7,774 131,765Shares redeemed* (1,384,742) (27,293,669) (164,894) (2,955,523) _________________ _____________________ __________________ _____________________Net increase/(decrease) (1,056,233) $ (20,801,847) 605,216 $ 10,864,382 _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Institutional Class Institutional Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 2,308,070 $ 45,751,820 6,247,580 $ 112,069,681Shares issued upon reinvestment of dividends and distributions 730,534 14,428,040 571,476 9,686,532Shares redeemed* (44,920,114) (872,331,104) (18,461,777) (334,119,054) _________________ _____________________ __________________ _____________________Net decrease (41,881,510) $(812,151,244) (11,642,721) $(212,362,841) _________________ _____________________ __________________ _____________________ _________________ _____________________ __________________ _____________________

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Third Avenue Focused Credit Fund:

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Investor Class Investor Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 84,897,396 $ 986,124,742 45,395,691 $ 496,920,185Shares issued upon reinvestment of dividends and distributions 6,954,244 80,285,714 3,040,119 32,842,155Shares redeemed* (72,968,925) (860,699,914) (13,244,809) (143,844,871) _________________ _______________________ __________________ _____________________Net increase 18,882,715 $ 205,710,542 35,191,001 $ 385,917,469 _________________ _______________________ __________________ _____________________ _________________ _______________________ __________________ _____________________

For the Year Ended For the Year Ended October 31, 2014 October 31, 2013 _________________________________ _________________________________ Institutional Class Institutional Class _________________________________ _________________________________ Shares Amount Shares Amount _________________________________ _________________________________Shares sold 140,734,447 $1,653,016,104 50,142,269 $ 549,466,059Shares issued upon reinvestment of dividends and distributions 7,400,932 84,797,094 4,117,795 44,367,404Shares redeemed* (46,620,041) (539,102,312) (25,906,733) (280,375,773) _________________ _______________________ __________________ _____________________Net increase 101,515,338 $1,198,710,886 28,353,331 $ 313,457,690 _________________ _______________________ __________________ _____________________ _________________ _______________________ __________________ _____________________* Redemption fees are netted with redemption amounts.

Third Avenue Value Fund, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund, Third Avenue International Value Fund,and Third Avenue Focused Credit Fund charge a redemption fee of 1%, 1%, 1%, 2%, and 2%, respectively, for shares redeemed or exchanged forshares of another Fund within 60 days or less of the purchase date.

8. COMMITMENTS AND CONTINGENCIES

At October 31, 2014, Third Avenue Focused Credit Fund had the following commitments and contingencies:

Amount of Funded Value ofIssuer Type Commitment Commitment Segregated Securities_____ ______ _____________ ____________ __________________Longview Power LLC Debtor-In-Possession Loan $13,818,803 $6,725,151 $7,093,652

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

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

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

9. RISKS RELATING TO CERTAIN INVESTMENTS

Foreign securities:Investments in the securities of foreign issuers may involve investment risks different from those of U.S. issuers including possible political oreconomic instability of the country of the issuer, the difficulty of predicting international trade patterns, the possibility of currency exchangecontrols, the possible imposition of foreign taxes on income from and transactions in such instruments, the possible establishment of foreigncontrols, the possible seizure or nationalization of foreign deposits or assets, or the adoption of other foreign government restrictions that mightadversely affect the foreign securities held by the Funds. Foreign securities may also be subject to greater fluctuations in price than securities ofdomestic corporations or the U.S. Government.

High yield debt:The Funds may invest in high yield, lower grade debt (sometimes referred to as “junk bonds”). The market values of these higher yielding debtsecurities tend to be more sensitive to economic conditions and individual corporate developments than those of higher rated securities. In addition,the secondary market for these bonds is generally less liquid.

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Claims:An investment in claims is speculative and carries a high degree of risk. Claims are illiquid instruments which generally do not pay interest. Claimsmay also be allowed or disallowed in whole or part. If allowed, they may be settled by a pro-rata distribution of the assets of the estate. The marketsin claims are not regulated by federal securities laws or the SEC. Because claims are unsecured, holders of claims may have a lower priority interms of payment than certain other creditors in a bankruptcy proceeding.

Credit and interest rate risk:The market value of debt securities is affected by changes in prevailing interest rates and the perceived credit quality of the issuer. When prevailinginterest rates fall or perceived credit quality improves, the market value of the affected debt securities generally rises. Conversely, when interestrates rise or perceived credit quality weakens, the market value of the affected debt securities generally declines.

Market risk:Prices of securities (and stocks in particular) have historically fluctuated. The value of the Funds will similarly fluctuate and you could lose money.

Counterparty risk:The Funds are exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactionswill default. The potential loss to the Funds could exceed the value of the financial assets recorded in the Funds’ financial statements. Financialassets, which potentially expose the Funds to counterparty risk, consist principally of cash due from counterparties and investments. The Adviserseeks to minimize the Funds’ counterparty risk by performing reviews of each counterparty and by minimizing concentration of counterparty riskby undertaking transactions with multiple customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is onlymade once the Funds have received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. Thetrade will fail if either party fails to meet its obligation.

At October 31, 2014, the Funds had counterparty concentration of credit risk primarily with Goldman Sachs International, JPMorgan ChaseBank, N.A., Macquarie Bank Ltd. and Morgan Stanley Capital Services LLC.

The Funds are party to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with selectcounterparties that govern transactions, over-the-counter derivatives and foreign exchange contracts entered into by the Funds and thosecounterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events ofdefault or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlementof all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financialstatements of the Funds.

The considerations and factors surrounding the settlement of certain purchases and sales made on a delayed-delivery basis are governed by MasterSecurities Forward Transaction Agreements (“Master Forward Agreements”) between the Funds and select counterparties. The Master ForwardAgreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, andmaintenance of collateral.

The counterparty risk associated with certain contracts may be reduced by master netting arrangements to the extent that if an event of defaultoccurs, all amounts with the counterparty are terminated and settled on a net basis. The Funds’ overall exposure to counterparty risk with respectto transactions subject to master netting arrangements can change substantially within a short period, as it is affected by each transaction subjectto the arrangement.

Collateral requirements:

For derivatives traded under an ISDA Master Agreement and/or Master Forward Agreement, the collateral requirements are typically calculatedby netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateralcurrently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of a Fund and cash collateral received from the counterparty, if any, is reported separatelyon the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged bythe Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimumtransfer amount threshold (e.g. $500,000) before a transfer is required, which is determined at the close of business of a Fund and any additionalrequired collateral is delivered to/pledged by a Fund on the next business day. Typically, a Fund and its counterparties are not permitted to sell,re-pledge or use the collateral they receive. To the extent amounts due to a Fund from its counterparties are not fully collateralized, contractuallyor otherwise, a Fund bears the risk of loss from counterparty non-performance. The Funds attempt to mitigate counterparty risk by entering intoagreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stabilityof those counterparties.

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For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in theStatement of Assets and Liabilities.

Third Avenue Value FundAt October 31, 2014, the Fund's derivative assets and liabilities (by type) on a gross basis are as follows:

Assets Liabilities __________ __________Derivative Financial Instruments:

Options $ — $206,000 ________ _______Total derivative assets and liabilities in the Statement of Assets and Liabilities — 206,000 ________ _______Derivatives not subject to a master netting agreement or similar agreement ("MNA") — — ________ _______Total derivative assets and liabilities subject to a MNA $ — $206,000 ________ _______ ________ _______

The following tables present the Fund's derivative liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateralpledged by the Fund as of October 31, 2014:

Amount of Liabilities Derivatives Non-cash Cash Net Amount Subject to a MNA by Available Collateral Collateral of DerivativeCounterparty Counterparty for Offset1 Pledged2 Pledged2 Liabilities__________ _______________ __________ __________ __________ __________Morgan Stanley Capital Services LLC $206,000 $ — $ — $(206,000) $ —

1 The amount of derviatives for offset is limited to the amount of assets and/or liabilites that are subject to a MNA.2 Excess of collateral pledged to the individual counterparty may not be shown for financial reporting purposes.

Third Avenue Real Estate Value FundAt October 31, 2014, the Fund's derivative assets and liabilities (by type) on a gross basis are as follows:


Options $2,235,139 $580,966Forward Foreign Currency Contracts 2,203,818 — ________ _______

Total derivative assets and liabilities in the Statement of Assets and Liabilities 4,438,957 580,966 ________ _______Derivatives not subject to a master netting agreement or similar agreement ("MNA") — (165,400) ________ _______Total derivative assets and liabilities subject to a MNA $4,438,957 $415,566 ________ _______ ________ _______

The following tables present the Fund's derivative assets by counterparty net of amounts available for offset under a MNA and net of the related collateralreceived by the Fund as of October 31, 2014:

Amount of Assets Derivatives Non-cash Cash Net Amount Subject to a MNA by Available Collateral Collateral of DerivativeCounterparty Counterparty for Offset1 Received2 Received2 Assets3__________ _______________ __________ __________ __________ __________Goldman Sachs International $1,218,304 $(415,566) $ — $ — $ 802,738Macquarie Bank Ltd. 2,114,137 — — — 2,114,137Morgan Stanley Capital Services LLC 1,106,516 — — — 1,106,516 ________ ________ ________ ________ ________ $4,438,957 $(415,566) $ — $ — $4,023,391 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________1 The amount of derviatives for offset is limited to the amount of assets and/or liabilities that are subject to a MNA.2 Excess of collateral received from the individual counterparty may not be shown for financial reporting purposes.3 Net amount represents the net amount receivable from the counterparty in the event of default.

The following tables present the Fund's derivative liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateralpledged by the Fund as of October 31, 2014:

Amount of Liabilities Derivatives Non-cash Cash Net Amount Subject to a MNA by Available Collateral Collateral of DerivativeCounterparty Counterparty for Offset1 Pledged2 Pledged2 Liabilities__________ _______________ __________ __________ __________ __________Goldman Sachs International $415,566 $(415,566) $ — $ — $ —Macquarie Bank Ltd. — — — — — ________ ________ ________ ________ ________ $415,566 $(415,566) $ — $ — $ — ________ ________ ________ ________ ________ ________ ________ ________ ________ ________1 The amount of derviatives for offset is limited to the amount of assets and/or liabilites that are subject to a MNA.2 Excess of collateral pledged to the individual counterparty may not be shown for financial reporting purposes.

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Third Avenue Focused Credit FundAt October 31, 2014, the Fund's derivative assets and liabilities (by type) on a gross basis are as follows:


Forward Foreign Currency Contracts $2,134,768 $ — ________ _______Total derivative assets and liabilities in the Statement of Assets and Liabilities 2,134,768 — ________ _______Derivatives not subject to a master netting agreement or similar agreement ("MNA") — — ________ _______Total derivative assets and liabilities subject to a MNA $2,134,768 $ — ________ _______ ________ _______

The following tables present the Fund's derivative assets by counterparty net of amounts available for offset under a MNA and net of the related collateralreceived by the Fund as of October 31, 2014:

Amount of Assets Derivatives Non-cash Cash Net Amount Subject to a MNA by Available Collateral Collateral of DerivativeCounterparty Counterparty for Offset1 Received2 Received2 Assets3__________ _______________ __________ __________ __________ __________Goldman Sachs International $1,072,709 $ — $ — $ — $1,072,709JPMorgan Chase Bank N.A. 836,114 — — — 836,114Macquarie Bank Ltd. 225,945 — — — 225,945 ________ ________ ________ ________ ________ $2,134,768 $ — $ — $ — $2,134,768 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________1 The amount of derviatives for offset is limited to the amount of assets and/or liabilites that are subject to a MNA.2 Excess of collateral received from the individual counterparty may not be shown for financial reporting purposes.3 Net amount represents the net amount receivable from the counterparty in the event of default.

Loans and other direct debt instruments:The Funds may invest in loans and other direct debt instruments issued by corporate borrowers. These loans represent amounts owed to lendersor lending syndicates (loans and loan participations) or to other parties. Direct debt instruments may involve a risk of loss in case of default orinsolvency of the borrower and may offer less legal protection to the Fund in the event of fraud or misrepresentation. In addition, loan participationsinvolve a risk of insolvency of the lending bank or other financial intermediary. The markets in loans are not regulated by federal securities lawsor the SEC.

Cash concentration:The Funds’ cash balances are held at a major regional U.S. bank. The Funds’ cash balances, which typically exceed Federal Deposit InsuranceCorporation insurance coverage, subject the Funds to a concentration of credit risk. The Funds regularly monitor the credit ratings of this financialinstitution in order to mitigate the credit risk that exists with the balances in excess of insured amounts.

Off-balance sheet risk:The Fund enters into derivatives which may represent off-balance sheet risk. Off-balance sheet risk exists when the maximum potential loss on aparticular investment is greater than the value of such investment as reflected in the Statement of Assets and Liabilities.

Fund concentration:The Funds hold relatively concentrated portfolios that may contain fewer securities or industries than the portfolios of other mutual funds. Holdinga relatively concentrated portfolio may increase the risk that the value of a Fund could decrease because of the poor performance of one or a fewinvestments. Additionally, the Funds may encounter some difficulty in liquidating securities of concentrated positions.

Liquidity risk:The Funds hold investments in private debt instruments, restricted securities, and securities having substantial market and/or credit risk whichmay be difficult to sell at certain periods of time and thus may not be able to dispose of at the value the Fund places on them. At October 31,2014, the percentages of such securities in each Fund as determined by the Adviser are: Third Avenue Value Fund, 0.22%; Third Avenue Small-Cap Value Fund, 2.56%; Third Avenue Real Estate Value Fund, 3.89%; Third Avenue International Value Fund, 8.28%; Third Avenue FocusedCredit Fund, 14.25%.

10. FEDERAL INCOME TAXES

The amount of dividends and distributions paid by the Funds from net investment income and net realized capital gains are determined inaccordance with U.S. federal income tax law and regulations which may differ from U.S. GAAP. Such dividends and distributions are recorded bythe Funds on the ex-dividend date. In order to present accumulated undistributed net investment income (loss), accumulated net realized gain(loss) on investments and foreign currency transactions and capital stock on the Statement of Assets and Liabilities that more closely representtheir tax character, certain adjustments have been made. “Book/tax” differences are either temporary or permanent in nature. To the extent thesedifferences are permanent in nature, such amounts are reclassified within the capital accounts based on their tax-basis treatment. Temporarydifferences do not require reclassification. Permanent differences are primarily due to reclassification of certain transactions involving foreign

77


securities and currencies, investments in passive foreign investment companies, real estate investment trusts (“REITs”) and partnerships, thedifference in the treatment of amortization of discount on certain debt instruments, certain derivative instruments and other book to taxadjustments. Net investment income (loss), net realized capital gain (loss) on investments and foreign currency transactions and net assets werenot affected by these changes. For the year ended October 31, 2014, the adjustments were as follows:

Increase/(Decrease) to Undistributed Net Realized Gain (Loss) Increase/(Decrease) on Investments and Increase/(Decrease) to Accumulated Net Foreign Currency to Capital Stock Investment Income (Loss) Transactions ________________ ___________________ __________________Third Avenue Value Fund $ 4,137 $ 28,365,671 $(28,369,808)Third Avenue Small-Cap Value Fund — 2,670,167 (2,670,167)Third Avenue Real Estate Value Fund (18) 12,578,766 (12,578,748)Third Avenue International Value Fund — 2,279,555 (2,279,555)Third Avenue Focused Credit Fund 1,563 (15,952,091) 15,950,528

The tax character of dividends and distributions paid during the year ended October 31, 2014 was as follows:

Ordinary Net Income Capital Gains Total ________ ____________ _____Third Avenue Value Fund $85,235,294 $ — $ 85,235,294Third Avenue Small-Cap Value Fund (a) 9,492,508 32,952,885 42,445,393Third Avenue Real Estate Value Fund (a) 42,288,878 9,894,934 52,183,812Third Avenue International Value Fund 16,093,749 — 16,093,749Third Avenue Focused Credit Fund 195,742,489 — 195,742,489

The tax character of dividends and distributions paid during the fiscal year ended October 31, 2013 was as follows:

Ordinary Net Income Capital Gains Total ________ _____________ _____Third Avenue Value Fund $67,702,727 $ — $ 67,702,727Third Avenue Small-Cap Value Fund (a) 8,725,103 11,473,378 20,198,481Third Avenue Real Estate Value Fund (a) 67,790,507 78,114,778 145,905,285Third Avenue International Value Fund 10,600,402 — 10,600,402Third Avenue Focused Credit Fund 92,923,447 — 92,923,447

At October 31, 2014, the accumulated undistributed earnings on a tax basis were:

Undistributed Net Ordinary Income Capital Gains _____________ _____________Third Avenue Value Fund $ 77,254,402 $ 37,729,056Third Avenue Small-Cap Value Fund (a) 11,288,803 89,194,521Third Avenue Real Estate Value Fund (a) 49,021,269 62,884,383Third Avenue International Value Fund 21,457,154 —Third Avenue Focused Credit Fund (a) 44,914,557 —

This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences.

(a) Includes short-term capital gains, which are taxed as ordinary income.

For the year ended October 31, 2014, certain Funds generated net capital gains which were offset by prior year capital loss carryforwards as follows:

Third Avenue Value Fund $ 85,425,077Third Avenue International Value Fund 83,809,583Third Avenue Focused Credit Fund 38,021,473

The Regulated Investment Company Modernization Act of 2010 generally allows capital losses incurred in a taxable year beginning after December 22,2010 (“post-enactment year”) to be carried forward for an unlimited period to the extent not utilized. However, any capital loss carryforward generatedin a post-enactment year must be carried forward to offset subsequent year net capital gains before any capital loss carryforward from a pre-enactmentyear can be used. This may increase the risk that a capital loss generated in a pre-enactment year will expire unutilized. Additionally, post-enactmentcapital loss carryforwards will retain their character as either short-term or long-term capital losses.

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As of October 31, 2014, Third Avenue International Value Fund has a capital loss carryforward which should be available to offset certain capitalgains generated in future years as follows:

Capital Losses incurredin a pre-enactment year Short-Term Long-Term____________________ ____________ __________Expiration Date___________10/31/2018 $11,954,748 $ —________________ ______________

$11,954,748 —Capital Losses incurredin a post-enactment year____________________No Expiration Date — —___________ ________________ ______________________________ ______________Total $11,954,748 $ —________________ ______________________________ ______________

No distributions of capital gains are expected to be paid to shareholders of the Third Avenue International Value Fund until either net capitalgains in excess of such carryforward is recognized or such carryforward expires. It is uncertain whether the Fund will be able to realize the fullbenefit of pre-enactment year capital loss carryforward prior to its expiration date.

The U.S. federal income tax basis of the Funds’ investments and the total unrealized appreciation/(depreciation) as of October 31, 2014 were asfollows: Total Net Total Unrealized Other Unrealized Tax Basis Appreciation/ Cost Basis Appreciation/ of Investments Appreciation (Depreciation) (Depreciation) Adjustments (Depreciation) ___________________ __________________ __________________ _____________________ __________________ __________________Third Avenue Value Fund $1,686,766,939 $ 527,993,036 $(134,977,701) $ 393,015,335 $ 51,254 $ 393,066,589Third Avenue Small-Cap Value Fund 398,710,615 127,741,369 (9,157,168) 118,584,201 (13,755) 118,570,446Third Avenue Real Estate Value Fund 2,172,924,115 707,626,906 (51,238,010) 656,388,896 1,953,407 658,342,303Third Avenue International Value Fund 342,043,874 55,360,261 (69,878,771) (14,518,510) (551,154) (15,069,664)Third Avenue Focused Credit Fund 2,959,589,433 260,321,958 (469,807,294) (209,485,336) (746,390) (210,231,726)

The difference between book and tax basis total unrealized appreciation/(depreciation) on investments and foreign currency transactions is primarilyattributable to deferred losses on wash sales, mark-to-market treatment of investments in certain passive foreign investment companies, investmentsin REITs and partnerships, differences in the treatment of amortization of discount on certain debt instruments and other timing differences.Other cost basis adjustments are primarily attributable to unrealized appreciation/(depreciation) on certain derivatives, net unrealized appreciation/(depreciation) on receivables and payables on foreign currency and other book to tax differences.

11. SUBSEQUENT EVENTS

The Adviser has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and hasdetermined that there were no events, except those listed below, that would require additional disclosure in the Funds’ financial statements.

On December 9, 2014, the Funds made the following per share distribution to shareholders of record on December 8, 2014. This informationshould not be used in completing your income tax returns as it may not represent final tax information. Ordinary Short-Term Long-Term Income Capital Gains Capital Gains ________ ____________ ____________Third Avenue Value Fund Institutional Class $2.2541 $ — $1.0638Third Avenue Value Fund Investor Class 2.0899 — 1.0638Third Avenue Small-Cap Value Fund Institutional Class — 0.6554 4.9544Third Avenue Small-Cap Value Fund Investor Class — 0.6554 4.9544Third Avenue Real Estate Value Fund Institutional Class 0.5079 — 0.6263Third Avenue Real Estate Value Fund Investor Class 0.4397 — 0.6263Third Avenue International Value Fund Institutional Class 1.2014 — —Third Avenue International Value Fund Investor Class 1.1112 — —Third Avenue Focused Credit Fund Institutional Class 0.2775 0.0575 —Third Avenue Focused Credit Fund Investor Class 0.2716 0.0575 —

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Third Avenue TrustReport of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of Third Avenue Trust

In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of oper-ations, of cash flows, and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ThirdAvenue Value Fund, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund, Third Avenue International Value Fund andThird Avenue Focused Credit Fund (collectively constituting Third Avenue Trust, hereafter referred to as the “Trust”) at October 31, 2014, theresults of each of their operations and cash flows (Third Avenue Focused Credit Fund only) for the year then ended, the changes in each of theirnet assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity withaccounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referredto as “financial statements”) are the responsibility of the Trust’s management; our responsibility is to express an opinion on these financial state-ments based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evalu-ating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2014 by cor-respondence with the custodian, agent banks and brokers, and the application of alternative auditing procedures where securities purchased hadnot been received, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLPNew York, New YorkDecember 30, 2014

80

Third Avenue TrustAnnual Renewal of Investment Advisory AgreementsOctober 31, 2014 (Unaudited)

At a meeting of the Board of Trustees of the Trust (the “Board”) held on June 4-5, 2014, the Trustees, by a unanimous vote (including a separatevote of those Trustees who are not “interested persons” (as the term is defined in the Investment Company Act) (the “Independent Trustees”)),approved the renewal of each Fund’s Investment Advisory Agreement (collectively, the “Agreements”). Prior to voting on the Agreements, theIndependent Trustees met separately with their independent legal counsel for a discussion of the Adviser’s presentation and materials referred tobelow.

In advance of the meeting, the Independent Trustees, through their independent legal counsel, requested extensive materials, and the Adviserprovided them, to assist the Board in considering the renewal of the Agreements. The Independent Trustees also constituted an ad hoc committeeto work with representatives of the Adviser to evaluate the adequacy and extent of the information to be provided for their consideration. Thiscommittee communicated frequently with the Adviser’s representatives and independent legal counsel. At its June 4, 2014 meeting, the Boardengaged in a detailed discussion of the materials with the Adviser. In considering the Agreements, the Trustees did not identify any single over-riding factor and instead considered all factors collectively. As a part of their decision-making process, the Trustees considered information derivedfrom their multi-year service on the Trust’s Board and their familiarity with the Adviser and its investment process. Among other things, theynoted that the Adviser has managed each Fund since its inception, and expressed their belief that a long-term relationship with a capable, con-scientious adviser is in the best interest of the Funds. The following is a summary of the discussions and conclusions regarding the material factorsthat formed the basis for the Board’s approval.

Factors Considered

A. Financial Condition of the Adviser; Advisory Fees; Profitability

The Trustees received a presentation from representatives of the Adviser, including a report prepared by Lipper Inc., and reviewed, among otherthings:

1. the financial condition of the Adviser to determine that the Adviser is solvent and sufficiently well capitalized to perform its ongoing respon-sibilities to the Funds;

2. the information sources and methodology used in the selection of funds included in the comparison universe and the competitive fund groupused in comparative analyses of each Fund’s advisory fees and expense ratios and in analyzing the Fund’s performance;

3. each Fund’s advisory fee and total expenses versus those of the comparison universe and competitive fund group, focusing on the totalexpense ratio of each Fund and the funds in its respective comparison universe and competitive fund group;

4. performance analyses of each Fund and funds in its comparative universe and competitive fund group;

5. a comparison of fees paid to the Adviser versus fees paid by similar funds advised and sub-advised by the Adviser, as well as any similar sep-arate advisory accounts;

6. information presented in respect of economies of scale, noting that each Fund’s assets had declined significantly over the last five years(except for the Focused Credit Fund, which has had sharply increasing assets since inception in 2009 and a lower expense ratio in 2013 than2010 and the Real Estate Value Fund, which has had a steady increase in assets since 2009 and a lower expense ratio in 2013 than 2009);that the Adviser has agreed to waive its fees and/or reimburse expenses to maintain an expense limitation for each Fund; and the extensiveresources that the Adviser continues to dedicate to its business even while Fund assets generally have declined in recent years;

7. the profitability to the Adviser resulting from each Agreement (including the fall-out benefits noted below), reviewing the dollar amount ofexpenses allocated and revenue received by the Adviser and the method used to determine such expenses and corresponding profit; and

8. fallout benefits, including (i) fees for providing administrative services and (ii) research services received by the Adviser in connection withexecuting Fund portfolio transactions.

B. Description of Personnel and Services Provided by the Adviser

The Trustees reviewed with representatives of the Adviser, and considered:

1. the nature, extent and quality of services rendered to the Funds, including the Adviser’s investment, senior management and operationalpersonnel (and additions to them), and the oversight of day-to-day operations of the Funds provided by the Adviser;

2. the Adviser’s research and portfolio management capabilities, particularly the intensive research undertaken in connection with the Adviser’sdeep value philosophy; and

3. the value added over time through the Adviser’s active management style that includes participation in corporate restructurings and otheractivist investments.

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Third Avenue TrustAnnual Renewal of Investment Advisory Agreements (continued)October 31, 2014 (Unaudited)

C. Investment Performance of the Funds and Adviser

1. The Trustees reviewed total return information for each Fund versus the comparison universe and competitive funds group for various periods.The Trustees also reviewed information pertaining to the Funds’ risk-adjusted performance and risk measures.

ConclusionsThe Trustees concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate. The Trustees con-sidered and evaluated each Fund’s performance over various time periods in light of market conditions, the Adviser’s investing style and circum-stances particular to that Fund. TheTrustees understood the relevant circumstances and the efforts the Adviser was making to improve performanceover time. They also considered the advisory fee and expense ratio of each Fund and evaluated the comparisons to those of funds in the comparableuniverse and competitive fund group and the performance analysis, as discussed in the Adviser’s presentation.

The Trustees discussed the Adviser’s profitability, and it was noted that the profitability percentage for each Fund was well below the maximumprofitability levels found in relevant court cases upholding board approval of particular advisory agreements. The Trustees concluded that in lightof considerations noted above, each Fund’s fee paid to the Adviser was reasonable, although for certain Funds the Trustees agreed to continue toclosely monitor the Funds’ performance, fees and expenses. The Trustees also considered the advisory fees charged for similar funds advised andsub-advised by the Adviser, as well as any separate advisory accounts, and reviewed the nature of the services provided and differences, from theAdviser’s perspective, in managing the Funds as compared to advisory services provided to other advised and sub-advised funds and any separateaccounts. The Trustees recognized that differences in fees paid were consistent with the differences in services provided by the Adviser.

The Trustees considered whether material economies of scale are present and, if present, are shared with the Funds and considered each Fund’s feestructure and the extensive resources that the Adviser dedicates to its investment advisory process to the benefit of the Funds. The Trustees con-cluded that, because of declining overall assets in the Funds, other than the Focused Credit and Real Estate Value Funds, material economies ofscale were not present to be shared with the Funds. For the Focused Credit and Real Estate Value Funds, the Trustees concluded that each wascapacity constrained and, given the considerable resources devoted to their management, their management fees reflected an appropriate sharingof economies of scale.

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Interested Trustees________________

Term of Office Position(s) and Length of Held With Principal Occupation(s) Other DirectorshipsName, Date of Birth & Address Time Served* Registrant During Past 5 Years held by Trustee______________________________ ____________________ ___________________ _________________________________________ ______________________________

Third Avenue TrustManagement of the Trust(Unaudited)

83

David M. Barse**DOB: June 1962622 Third AvenueNew York, NY 10017

Trustee since 9/01 President, CEO andTrustee

President (5/98 to Present), Trustee (9/01 toPresent), CEO (9/03 to Present) (5 funds) ofThird Avenue Trust; President (7/99 toPresent), Trustee (9/01 to Present) and CEO(9/03 to Present) of Third Avenue VariableSeries Trust; CEO (4/03 to Present), President(2/98 to 9/12) of Third Avenue ManagementLLC; CEO (7/99 to Present), President (6/95to Present), Director (1/95 to Present) of M.J.Whitman, Inc. and its successor, M.J.Whitman LLC (registered broker-dealer);Director (5/13 to Present) of Third AvenueCapital Plc.; President of two other fundsadvised by Third Avenue Manage ment LLC(6/99 to Present).

Director (7/96 to Present) ofCovanta Holding Corp. (utilities/waste manage ment); Trustee (3/01to Present) of Mani fold CapitalHold ings, Inc. (credit enhance-ment) Board Member (7/12 toPresent) of the Big Apple chapterof the World President’sOrganization; Director (1/08 toPresent) of Third AvenueManagement Private Foundation.

Martin J. Whitman**DOB: September 1924622 Third Avenue New York, NY 10017

Trustee since 11/90 Chairman andTrustee

Chairman (3/90 to Present) (5 funds) of ThirdAvenue Trust; Chairman (7/99 to Present) ofThird Avenue Variable Series Trust; Co-ChiefInvestment Officer (2003 to 2010) of ThirdAvenue Management LLC; CEO, Presidentand Director (10/74 to Present) of Martin J.Whitman & Co., Inc. (formerly M.J.Whitman & Co. Inc.) (private investmentcompany); Distin guished Management Fellow(1972 to 2007) of the Yale School ofManagement at Yale University; CharteredFinancial Analyst.

Director (1991 to 2011) of NaborsIndustries, Inc. (international oildrilling services).

Information pertaining to the Trustees and officers of the Trust is set forth below. The fund complex includes five portfolios in the Third AvenueTrust and one portfolio in the Third Avenue Variable Series Trust. The Statement of Additional Information (SAI) includes additional informationabout the Trustees and is available upon request, without charge, by calling (800) 443-1021.

Third Avenue TrustManagement of the Trust (continued)(Unaudited)

84

Jack W. AberDOB: September 1937

Trustee since 8/02 Trustee Professor Emeritus of Finance, BostonUniversity School of Management (2012 to Present); Professor of Finance of BostonUniversity School of Management (1972 to 2012).

Trustee, The AMG Funds (1999 to2013) (43 portfolios); and Trusteeof Appleton Growth Fund (2001to Present); Trustee of Aston Funds(2010 to Present) (25 portfolios);Trustee of Third Avenue VariableSeries Trust (8/02 to Present).

Independent Trustees___________________Correspondence intended for any Independent Trustee may be sent to: Third Avenue Management LLC, 6 22 Third Avenue, 32nd Floor, New York, NY 10017.

Term of Office Position(s) and Length of Held With Principal Occupation(s) Other DirectorshipsName & Date of Birth Time Served* Registrant During Past 5 Years held by Trustee______________________________ ____________________ ___________________ _________________________________________ ______________________________

William E. Chapman, IIDOB: September 1941

Trustee since 8/02 Trustee President and Owner (1998 to Present) ofLongboat Retirement Planning Solutions(consulting firm); part-time employee delivering retirement and investment educa-tion seminars (1/00 to 11/09) for HewittAssociates, LLC (consulting firm).

Trustee, The AMG Funds (1999 toPresent) (43 portfolios); Director ofHarding, Loevner Funds, Inc. (2008to Present) (6 portfolios); Trustee ofAston Funds (2010 to Present) (25portfolios); Trustee (5/02 to 6/13) ofBowdoin College; Director, TheMutual Fund Directors Forum(2010 to Present); Director,Sarasota Memorial HealthcareFoundation (2011 to Present).Trusteeof Third Avenue Variable Series Trust(8/02 to Present).

Lucinda FranksDOB: July 1946

Trustee since 2/98 Trustee Journalist and author (1969 to Present). Trustee of Third Avenue VariableSeries Trust (7/99 to Present).

Edward J. KaierDOB: September 1945

Trustee since 8/02 Trustee Partner (7/07 to Present) at Teeters HarveyGilboy & Kaier LLP (law firm).

Trustee, The AMG Funds (1999to Present) (43 portfolios); andTrustee of Aston Funds (2010 toPresent) (25 portfolios); Trustee ofThird Avenue Variable SeriesTrust (8/02 to Present).


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Independent Trustees___________________

Term of Office Position(s) and Length of Held With Principal Occupation(s) Other DirectorshipsName & Date of Birth Time Served* Registrant During Past 5 Years held by Trustee______________________________ ____________________ ___________________ _________________________________________ ______________________________Eric RakowskiDOB: June 1958

Trustee since 8/02 Trustee Professor (1990 to Present) at University ofCalifornia at Berkeley School of Law.

Trustee, The AMG Funds (1999to Present) (43 portfolios);Director of Harding, LoevnerFunds, Inc. (2008 to Present) (6portfolios); Trustee of Aston Funds(2010 to Present) (25 portfolios);Trustee of Third Avenue VariableSeries Trust (8/02 to Present).

Martin ShubikDOB: March 1926

Trustee since 11/90 Trustee Seymour H. Knox Professor (1975 to 2007)of Mathematical Institutional Economics, YaleUniversity; Emeritus (2007 to Present).

Trustee of Third Avenue VariableSeries Trust (7/99 to Present).

Charles C. WaldenDOB: July 1944

Trustee since 5/96 Trustee President and Owner (2006 to Present) ofSound Capital Associates, LLC (consultingfirm); Chartered Financial Analyst.

Director, Special OpportunitiesFund, Inc. (2009 to Present).Trustee of Third Avenue VariableSeries Trust (7/99 to Present).

* Each trustee serves until his successor is duly elected and qualified. ** Messrs. Whitman and Barse are “interested trustees” of the Trust due to their employment with and indirect ownership interests in the Adviser and the Distributor, M.J.Whitman LLC.


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Vincent J. DuganDOB: September 1965622 Third Avenue New York, NY 10017

Treasurer and CFO Treasurer and Chief Financial Officer (CFO) (9/04 to Present) (5 funds) ofThird Avenue Trust; Treasurer and CFO (9/04 to Present) of Third AvenueVariable Series Trust; Chief Operating Officer (COO) and CFO (8/04 to Present)of Third Avenue Management LLC; COO and CFO (8/04 to Present) of ThirdAvenue Holdings Delaware LLC; COO and CFO (8/04 to Present) of M.J.Whitman LLC and subsidiaries; COO and CFO (8/04 to Present) of certainother funds advised by Third Avenue Management LLC (8/04 to Present).

N/A

Michael A. BuonoDOB: May 1967622 Third AvenueNew York, NY 10017

Controller Controller (5/06 to Present) (5 funds) of Third Avenue Trust, Third AvenueVariable Series Trust, Third Avenue Management LLC and M.J. Whitman LLCand subsidiaries.

N/A

Principal Trust Officers Who Are Not Trustees_______________________________________ Position(s) Held With Other DirectorshipsName, Date of Birth & Address Registrant Principal Occupation(s) During Past 5 Years held by Officer______________________________ ______________________ ______________________________________________________________________ ___________________

W. James Hall IIIDOB: July 1964622 Third AvenueNew York, NY 10017

General Counsel General Counsel and Secretary (6/00 to Present) (5 funds) of Third AvenueTrust; General Counsel and Secretary (9/00 to Present) of Third Avenue VariableSeries Trust; General Counsel and Secretary (9/00 to Present) of EQSF Advisers,Inc., and its successor, Third Avenue Management LLC; General Counsel andSecretary (5/00 to Present) of M.J. Whitman, Inc. and its successor, M.J.Whitman LLC; General Counsel and Secretary of certain other funds advised byThird Avenue Management LLC (7/02 to Present).

N/A

Joseph J. ReardonDOB: April 1960622 Third AvenueNew York, NY 10017

Chief ComplianceOfficer

Chief Compliance Officer (4/05 to Present) (5 funds) of Third Avenue Trust,Third Avenue Variable Series Trust and Third Avenue Management LLC.

N/A

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Third Avenue FundsSchedule of Shareholder Expenses(Unaudited)

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, such as redemption fees; and (2) ongoing costs, including managementfees, shareholder servicing fees, distribution fees (if applicable) and other Fund expenses. This example is intended to help you understand yourongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period, May 1, 2014, and held for the six month period endedOctober 31, 2014.

Actual ExpensesFor each Class of each Fund in the table below, the first line provides information about actual account values and actual expenses. You may usethe information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide youraccount value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first lineunder the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison PurposesThe second line of each Class in the table below provides information about hypothetical account values and hypothetical expenses based on theClass’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypotheticalaccount values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use thisinformation to compare the ongoing costs of investing in the Class of the Fund and other funds. To do so, compare this 5% hypothetical examplewith the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such asredemption fees. Therefore, the second line of each Class in the table is useful in comparing ongoing costs only, and will not help you determinethe relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Theexamples also assume all dividends and distributions have been reinvested.

Expenses Paid Beginning Ending During the Period Account Value Account Value May 1, 2014 to Annualized May 1, 2014 October 31, 2014 October 31, 2014* Expense Ratio _______________________ ___________________________ ____________________________ ______________________Third Avenue Value Fund

Investor ClassActual $1,000.00 $1,019.70 $6.72 1.32%Hypothetical $1,000.00 $1,018.55 $6.72 1.32%

Institutional ClassActual $1,000.00 $1,020.90 $5.45 1.07%Hypothetical $1,000.00 $1,019.81 $5.45 1.07%

Third Avenue Small-Cap Value FundInvestor Class

Actual $1,000.00 $1,035.30 $6.93 1.35%Hypothetical $1,000.00 $1,018.40 $6.87 1.35%


Third Avenue Real Estate Value FundInvestor Class

Actual $1,000.00 $1,039.80 $6.94 1.35%Hypothetical $1,000.00 $1,018.40 $6.87 1.35%


Third Avenue International Value FundInvestor Class

Actual $1,000.00 $ 882.10 $7.83 1.65%Hypothetical $1,000.00 $1,016.89 $8.39 1.65%

Institutional ClassActual $1,000.00 $ 883.20 $6.65 1.40%Hypothetical $1,000.00 $1,018.15 $7.12 1.40%

Third Avenue Focused Credit FundInvestor Class

Actual $1,000.00 $ 918.40 $5.56 1.15%Hypothetical $1,000.00 $1,019.41 $5.85 1.15%

Institutional ClassActual $1,000.00 $ 919.60 $4.35 0.90%Hypothetical $1,000.00 $1,020.67 $4.58 0.90%

* Expenses (net of fee waivers and expense offset arrangement) are equal to the Class’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the mostrecent fiscal year (184) divided by 365.

The following information represents the tax status of dividends and distributions paid by the Funds during the fiscal year ended October 31, 2014.This information is presented to meet regulatory requirements and no current action on your part is required. The information and distributionsreported below will differ from the information and distributions taxable to shareholders for the calendar year ending December 31, 2014.

The Funds are required to designate the portion of any distributions made to shareholders during their fiscal year beginning on November 1,2013 and ending on October 31, 2014 that were from capital gains. Depending upon your instructions, distributions from the Funds were eitherpaid to you in cash or reinvested into your account.

During the fiscal year-ended October 31, 2014 Third Avenue Small Cap-Value Fund’s per-share distributions to Investor class shareholdersconsisted of $0.367 from short-term capital gain and $1.40 from long-term capital gain. Distributions to Institutional Class shareholdersconsisted of $0.037 from net investment income, $0.367 from short-term capital gains and $1.40 from long-term capital gains. Distributionsfrom short-term capital gain are treated as ordinary income for U.S. federal income tax purposes.

During the fiscal year-ended October 31, 2014 Third Avenue Real Estate Value Fund’s per-share distributions to Investor Class shareholdersconsisted of $0.261 from net investment income, $0.269 from short-term capital gains and $0.133 from long-term capital gain. Distributionsto Institutional Class shareholders consisted of $0.304 from net investment income, $0.269 from short-term capital gains and $0.133 from long-term capital gain. Distributions from short-term capital gain are treated as ordinary income for U.S. federal income tax purposes.

For the fiscal year ended October 31, 2014, the designations below are applicable to the ordinary income dividends paid by each Fund inaccordance with Section 854 of the Internal Revenue Code. Qualified Dividends Received Dividend Income Deduction for Individuals for Corporations _______________________ ___________________________Third Avenue Value Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,655,226 23.13%Third Avenue Small-Cap Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,202,674 43.51%Third Avenue Real Estate Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,442,805 2.67%Third Avenue International Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,230,018 7.60%

The following Funds intend to elect to pass through to shareholders the income taxes paid to foreign countries which may be eligible for theforeign tax credit in accordance with Section 853 of the Internal Revenue Code. Gross foreign source income and foreign tax expenses for theyear ended October 31, 2014 are as follows: Gross Foreign Foreign Tax Source Income Pass Through _____________________ ____________________Third Avenue International Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,576,097 $1,591,640

Information necessary to complete your income tax returns for the calendar year ending December 31, 2014 will be issued by the Funds in theearly part of 2015.

88

Third Avenue TrustFederal Tax Status of Dividends and Distributions(Unaudited)

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This publication does not constitute an offer or solicitation of any transaction in any securities.

Any recommendation contained herein may not be suitable for all investors. Information

contained in this publication has been obtained from sources we believe to be reliable, but cannot

be guaranteed.

The information in these portfolio manager letters represents the opinions of the individual

portfolio manager and is not intended to be a forecast of future events, a guarantee of future

results or investment advice. Views expressed are those of the portfolio manager and may differ

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

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

as of October 31, 2014 (except as otherwise stated), and are subject to change without notice.

Certain information contained in the following letters constitute “forward-looking statements,”

which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,”

“expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe,” or the negatives

thereof (such as “may not,” “should not,” “are not expected to,” etc.) or other variations thereon or

comparable terminology. Due to various risks and uncertainties, actual events or results or the

actual performance of any fund may differ materially from those reflected or contemplated in such

forward-looking statement.

Third Avenue Funds are offered by prospectus only. Prospectuses contain more complete

information on advisory fees, distribution charges, and other expenses and should be read

carefully before investing or sending money. Please read the prospectus and carefully consider

investment objectives, risks, charges and expenses before you send money. Past performance is

no guarantee of future results. Investment return and principal value will fluctuate so that an

investor’s shares, when redeemed, may be worth more or less than original cost.

If you should have any questions, please call 1-800-443-1021, or visit our web site at:

www.thirdave.com, for the most recent month-end performance data or a copy of the Funds’

prospectus. Current performance results may be lower or higher than performance numbers

quoted in certain letters to shareholders.

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

November 26, 2014.

BOARD OF TRUSTEES Jack W. Aber Eric Rakowski David M. Barse Martin Shubik William E. Chapman, II Charles C. Walden Lucinda Franks Martin J. Whitman Edward J. Kaier

OFFICERSMartin J. Whitman — Chairman of the Board

David M. Barse — President, Chief Executive OfficerVincent J. Dugan — Chief Financial Officer, Treasurer

Michael A. Buono — ControllerW. James Hall — General Counsel, SecretaryJoseph J. Reardon — Chief Compliance Officer

TRANSFER AGENTBNY Mellon Investment Servicing (U.S.) Inc.

P.O. Box 9802Providence, RI 02940-8002

610-239-4600800-443-1021 (toll-free)

INVESTMENT ADVISERThird Avenue Management LLC

622 Third AvenueNew York, NY 10017

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPricewaterhouseCoopers LLP

300 Madison AvenueNew York, NY 10017

CUSTODIANJPMorgan Chase Bank, N.A.

14201 Dallas Parkway, 2nd FloorDallas, TX 75254

ABOUT THIRD AVENUE MANAGEMENTThird Avenue Management LLC is a New York-based global asset manager that has adhered to a proven value investment philosophy since its founding in 1986. Third Avenue’s disciplined approach seeks to

maximize long-term, risk-adjusted returns by focusing on corporate financial stability, and price conscious, opportunistic security selection throughout the capital structure.

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


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

2014 tam annual and shareholder letters

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