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Third Avenue Value Fund Third Avenue Small-Cap Value Fund Third Avenue Real Estate Value Fund

Third Avenue Inter national Value Fund Third Avenue Focused Credit Fund

PORTFOLIO MANAGER COMMENTARY AND FIRST QUARTER REPORT


JANUARY 31, 2012

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 January 31, 2012 (except as otherwise stated), and are subject to change without notice. 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 investors 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: March 1, 2012.

This booklet consists of two separate documents.

THIRD AVENUE FUNDS PORTFOLIO MANAGER COMMENTARY _____________________________________________


CHAIRMANS LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 THIRD AVENUE VALUE FUND (TAVFX, TVFVX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 THIRD AVENUE SMALL-CAP VALUE FUND (TASCX, TVSVX) . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 THIRD AVENUE REAL ESTATE VALUE FUND (TAREX, TVRVX) . . . . . . . . . . . . . . . . . . . . . . . . . . 19 THIRD AVENUE INTERNATIONAL VALUE FUND (TAVIX, TVIVX) . . . . . . . . . . . . . . . . . . . . . . . . . 27 THIRD AVENUE FOCUSED CREDIT FUND (TFCIX, TFCVX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

THIRD AVENUE FUNDS FIRST QUARTER REPORT _____________________________________________


THIRD AVENUE VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 THIRD AVENUE SMALL-CAP VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 THIRD AVENUE REAL ESTATE VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 THIRD AVENUE INTERNATIONAL VALUE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 THIRD AVENUE FOCUSED CREDIT FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Third Avenue Value Fund Third Avenue Small-Cap Value Fund Third Avenue Real Estate Value Fund Third Avenue Inter national Value Fund Third Avenue Focused Credit Fund

FIRST QUARTER PORTFOLIO MANAGER COMMENTARY


January 31, 2012

Letter from the Chairman (Unaudited)


2) Primacy of Short-Termism Prediction of, and reliance, on immediate market prices and changes in those prices; these are crucial to equity pricing in securities markets dominated by Outside Passive Minority Investors (OPMIs). Determining near-term outlooks for a company tends to be a much more important variable in conventional analysis than is determining underlying value.

MARTIN J. WHITMAN
CHAIRMAN OF THE BOARD Dear Fellow Shareholders: The Third Avenue investment team approaches security analysis from a different perspective than most conventional security analysts. In fact, the Third Avenue approach has more in common with corporate finance than it does with the conventional approach. The conventional approach is accepted as basic tenets by Modern Capital Theory (MCT), in Graham and Dodd valuations (G&D) and, to some extent, in Generally Accepted Accounting Principles (GAAP). The differences between conventional security analysis and other financial analysis bottom on conventional security analysis over emphasis of three factors and consequent under emphasis of other factors that are equally important, and even more important, in most fundamental financial analyses. These other areas of finance include running a private business, control investing, most of distress investing, credit analysis and venture capital. The three factors overemphasized in conventional security analysis are as follows: 1) Primacy of the Income Account, i.e., the primacy of flows generated from operations as a valuation determinant whether those flows are earnings flow or cash flows. (Earnings flows are streams of income which create wealth for economic entities while consuming cash. In the corporate world earnings flows probably are more common than cash flows available for securities holders).

3) Primacy of Top Down Analysis The most important element in predicting market prices in conventional analysis are macro factors such as Gross Domestic Product (GDP), the level of interest rates, technical market considerations, industry sectors and the trends in stock market indices. For conventional analysis, micro factors looked at from the bottom-up, such as loan covenants, appraisals of management, strength of financial positions and access to capital markets are down-weighted compared to top-down considerations. As to the primacy of the income account, G&D recognized certain of its shortcomings, even though the most important component of their bottom-up analyses was forecasting future earnings. As G&D stated on Page 551 of the 1962 edition of Securities Analysis, Principles and Technique: Most of all security analysts should reflect fully on the rather startling truth that as long as a business remains a private corporation or partnership the net asset value appearing on the balance sheet is likely to constitute the point of departure for determining what the enterprise is worth. But once it makes its appearance as a publicly held company even though the shares distributed to the public may constitute only a small part of the total the net-worth figure seems to lose virtually all its significance. Value then becomes dependent almost exclusively on the expected future earnings This overemphasis on forecasting future flows from operations (whether earnings flows or cash flows) would be

Letter from the Chairman (continued) (Unaudited)


justifiable in the real world of fundamentalism, i.e., financial activities other than stock market trading, if the businesses being analyzed were strict going concerns; financed as they always have been financed; managed by operators in the same way they have always been managed; not subject to takeovers; mergers, going private or other resource conversion events; and without needs to ever access capital markets. The problem is that there are very few, if any, such companies whose common stocks are publicly traded in existence. Rather than being strict going concerns, virtually all businesses whose equities are publicly traded combine going concern characteristics with investment company characteristics. While income accounts, i.e., flow data, are integrally related to net asset value (NAV), for many companies NAV and changes in NAV are far more important determinants of value than are earnings, or cash flows, from operations. Such NAV-centered companies include Berkshire Hathaway, most mutual funds, most income-producing real estate entities (such as Forest City Enterprises), most control investors (such as Brookfield Asset Management), and most conglomerates (such as Cheung Kong Holdings). In conventional analysis, managements are appraised almost exclusively as operators. In the real world, in which Third Avenue operates, managements are appraised not only as operators but also as investors and financiers. Management roles as investors and financiers are frequently more important than their roles as operators in our analysis. Even when emphasizing the primacy of the income account, many conventional analysts handicap themselves by failing to consider the importance of NAV in many instances as a tool for predicting future earnings. Graham and Dodd, for example, believe that the past earnings record is the best tool for predicting future earnings, virtually ignoring NAV. However, NAV is an essential tool (though not the sole tool) for predicting future earnings in those instances where data on Return on Equity (ROE) are important to understanding a business. E, or Equity, by the way, is NAV. Industries where ROE becomes a tool for predicting future earnings include income producing real estate, commercial banks, insurance companies, investment companies, conglomerates and hedge funds. The vast bulk of Third Avenues common stock investments are in companies where the NAV figure is an important valuation tool. Most of the issues acquired by Third Avenue Funds have been acquired at prices that represent meaningful discounts from estimated NAVs. Third Avenues approach to finding values seems to be a lot more broadly based than is the case for conventional stock market analysis. In this regard, Third Avenue seems to be in good company. Others more broadly based in their analyses include those running private businesses, most distress investors, virtually all control investors, most credit analysts and virtually all first and second stage venture capitalists. Factors considered by Third Avenue and these other economics analysts in appraising a company and its securities encompass the following: 1) Credit worthiness 2) Flows both cash and earnings 3) Long-term outlook 4) Salable assets which can be disposed of without compromising much, or at all, the going concern dynamics. 5) Resource conversions such as changes in control, mergers and acquisitions, going private, and major changes in assets or major changes in liabilities. 6) Access to capital markets both credit markets and equity markets. In general, there probably is no primacy of anything. If anything, since the 2007-2008 economic meltdown, for Third Avenue there has been a primacy of credit-worthiness in analyzing any equity security. At Third Avenue there never has existed a Primacy of Earnings, a Primacy of ShortTermism or a Primacy of Top-Down Analysis.

Letter from the Chairman (continued) (Unaudited)


It seems important to define credit-worthiness, both for private sector analysis and the analysis of sovereigns. Creditworthiness has three elements: 1) Amount of indebtedness 2) Terms of indebtedness 3) How productive are the Use of Proceeds this third factor is usually the most important. It ought to be noted that in the aggregate, indebtedness is almost never repaid by entities which remain credit-worthy. Rather, maturing debt is refinanced and new levels of debt are incurred as credit-worthy entities expand and become more productive. Despite the 2008-2009 economic meltdown, most of the companies held since then in Third Avenue portfolios have grown and prospered, e.g., the Hong Kong Holdings, Brookfield Asset Management and Posco. Today each of these companies has considerably more borrowing capacity than they had when the positions were initially acquired by Third Avenue. A primacy of earnings approach clearly is in conflict with the desire of most corporations to minimize income tax burdens. Income from operations are taxed at maximum corporate rates. Taxation of capital gains is much preferred, because the taxpayer usually can control the timing as to when the tax becomes payable. And the ultimate corporate tax shelter for businesses which dont need cash return is unrealized appreciation. In conventional analyses today, there is almost no understanding of risk. The prime example of this is the conventional belief that long-term U.S. Treasury Notes, selling near par, are safe and free from risk. Not so. The U.S. Treasury Notes, paying say 2%-3%, do not carry any credit risk; but, they are replete with several other types of risk, e.g., inflation risk and capital deprecation risk, while at the same time there are no prospects for capital appreciation. The huge amounts of realistic risk inherent in owning U.S. Treasuries today is offset greatly if the portfolio holding these instruments is a dollar-average and will continue to acquire new U.S. Treasuries as interest rates fluctuate. Nonetheless, for most portfolios in 2012, the way to guard against economic risk is to be a total return investor in things such as Third Avenue Funds, rather than to be a cash return investor in U.S. Treasuries. The common stocks in Third Avenue Funds almost all have the following characteristics: 1) The companies enjoy super strong financial positions, which provide insurance to investors and opportunism to management 2) The common stocks were acquired at prices that represent meaningful discounts from estimated NAVs. 3) The companies provide comprehensive, relatively complete, disclosures and operate in markets where regulators provide significant protections for minority investors. 4) The companies seem to have excellent prospects for growing NAV by not less than 10% compounded annually over the next three to seven years. Short-termism is rampant among market participants. Much of short-termism is appropriate, justifiable and essential for many market participants. It just happens to be irrelevant largely for Third Avenue, which focuses mostly on buy-and-hold, long-term investments. One had better be very short-term conscious where the portfolio is highly leveraged; where the market participant doesnt know much about the company or the securities it issues; where the market participant uses trading systems, or a technical approach to the market; and where the more important variable in an analysis is what is the near-term outlook, rather than what are the underlying values existing in the company and the companys securities. Even for the largest institutions, it seems to be impossible to have underlying knowledge about an individual security where the portfolio consists of a huge numbers of securities (say over 500 different common stocks); and those securities are traded frequently. This includes high frequency trading portfolios. If thats where ones interest and attention lies,

Letter from the Chairman (continued) (Unaudited)


one should be short term. This is not what TAM does. TAM believes in limited diversification. Diversification is only a surrogate, and usually a damn poor surrogate, for knowledge, control and price consciousness. TAM has to be moderately diversified, because the various Third Avenue Funds are essentially passive, rather than control, investors. Also, there are certain types of securities I call them sudden death securities where all the focus has to be short term. These securities are derivatives and risk arbitrage securities, with risk arbitrage being defined as situations where there will be a relatively determinant workout in a relatively determinant period of time, e.g., a publicly announced merger or tender offer. more important factor in value realization than top-down factors (probably absent social unrest). Second, Third Avenue, like everybody else, doesnt seem to be too accurate as a top down forecaster, especially when it comes to shortterm forecasts.

Even Third Avenue is sometimes short-term oriented, but not most of the time. This occurs where there is a resource conversion event, such as a merger or tender offer, where the price to be paid is a substantial premium above the preannouncement market price. In that situation, the Third Avenue fund manager tends to make a market decision, rather than an investment decision. Although the price offered in the resource conversion may still reflect a big discount from NAV, as long as it reflects a substantial market premium, the Third Avenue fund manager is likely to take his profit and move on to something else. Resource conversions do occur periodically.

A good example of how we meld the top-down with the bottom-up lies in the reasoning behind our investments in Hong Kong, China and South Korea. The top-down analysis centers on the belief that over the next three to seven years, that part of the world will grow faster than the rest of the industrialized world, especially Europe and North America. The bottom-up analyses center on the facts that the businesses in which Third Avenue has invested are all eminently Ians promotion is well credit worthy; that the common deserved. I have the utmost stocks were acquired at significant to our estimate of NAV; confidence in him. My family discountsthe common stocks are the and that and I will remain significant issues of companies that provide shareholders in Third Avenue comprehensive, written, disclosures; and are regulated by government Value Fund. agencies whose principal interest seems to be investor protection. Prior to 2008, long-term, buy-and-hold investors did not have to pay too much attention to top-down factors, such as the business cycle. This no longer seems true. Since the meltdown, business cycle factors seem to have become more important than had been the case from the end of World War II until 2008. Despite this, Third Avenue will continue to give more weight in the vast majority of its analyses to bottom-up factors, rather than top-down factors.
PROMOTION OF IAN LAPEY TO SOLE MANAGER OF THIRD AVENUE VALUE FUND

For analysts who subscribe to the G&D approach to investing, there is nothing more important in an analysis than to give dominant weight to top-down predictions of the outlook for the economy and the outlook for specific securities markets. Third Avenue, on the other hand, does not ignore top-down considerations but certainly underweights their importance compared with bottom-up considerations. For this, there are two reasons. First, over the long term bottom-up analysis will tend to be a much

As many of you know, I entered the mutual fund business when I was 67 years old and having a pre-determined succession plan has always been very important to me, so that I can be assured that my family and fellow shareholders money will be managed by someone I can depend upon

Letter from the Chairman (continued) (Unaudited)


long after I retire. To that end, I designated Ian Lapey as my successor as manager of the Third Avenue Value Fund in 2006. I have co-managed Third Avenue Value Fund with him since 2009. Ian is a most adept analyst across industries and asset classes and is a very capable value and distressed investor. Therefore, Ian was promoted to sole Portfolio Manager of Third Avenue Value Fund, as of March 1, 2012. I have not retired. I remain Chairman of the Third Avenue Trust Board of Trustees and will continue actively mentoring our research team. I will also manage a private concentrated value fund, available to accredited investors. Ians promotion is well deserved. I have the utmost confidence in him. My family and I will remain significant shareholders in Third Avenue Value Fund. I know that Ian will always act in the best interest of our shareholders. Ian, of course, will continue to be supported by the same team of portfolio managers and analysts who have supported me for these many years. I will write you again when we publish our reports for the quarter to end April 30, 2012. Sincerely yours,

Martin J. Whitman Chairman of the Board

Third Avenue Value Fund (Unaudited)


Number of Shares or Principal Amount 14,277,000 shares 273,000 shares 674,579 shares Positions Decreased (continued) Henderson Land Development Ltd. Common Stock (Henderson Common) Hutchison Whampoa Ltd. Common Stock (Hutchison Common) Investor AB Common Stock (Investor Common) MBIA Insurance Corp. 14% Surplus Notes (MBIA Surplus Notes) Posco Common Stock (Posco Common) Tejon Ranch Co. Common Stock (Tejon Common) Toyota Industries Corp. Common Stock (Toyota Industries Common) Wharf Holdings Ltd. Common Stock (Wharf Common) Position Eliminated Nabors Industries Ltd. Common Stock (Nabors Common)

IAN LAPEY
PORTFOLIO MANAGER OF THIRD AVENUE VALUE FUND Dear Fellow Shareholders: At January 31, 2012, the unaudited net asset value attributed to the 72,701,558 shares outstanding of the Third Avenue Value Fund Institutional Class (TAVF, Third Avenue, or the Fund) was $44.26 per share. This compares with an audited net asset value of $43.18 per share at October 31, 2011, and an unaudited net asset value of $51.54 per share at January 31, 2011, both adjusted for a subsequent distribution to shareholders. At February 28, 2012, the unaudited net asset value was $47.79 per share.
QUARTERLY ACTIVITY* Number of Shares 380,000 shares Number of Shares 532,700 shares 3,412,000 shares New Position Devon Energy Corp. Common Stock (Devon Common) Positions Decreased Brookfield Asset Management Inc. Common Stock (Brookfield Common) Cheung Kong Holdings Ltd. Common Stock (Cheung Kong Common) 1,545,000 shares 64,100 shares 1,239,000 shares Number of Shares 2,190,000 shares $127,000,000 279,037 shares

PORTFOLIO MANAGEMENT TRANSITION

As of March 1, 2012, I will have the honor of assuming the role as sole portfolio manager of the Fund. I have had the privilege of working side-by-side, for more than five years, with my mentor and former Co-Manager Martin Whitman. Marty has not retired. He remains Chairman of Third Avenue Funds and will continue to be a source of wisdom and advice for me and the entire 29 person investment team at Third Avenue. During my nearly eleven year tenure at Third Avenue, I have grown to understand,

* Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Value Funds 10 largest issuers, and the percentage of the total net assets each represented, as of January 31, 2012: Henderson Land Development Co., Ltd., 13.96%; Cheung Kong Holdings, 11.10%; Posco (ADR), 9.11%; Wheelock & Co., Ltd., 5.63%; Toyota Industries Corp., 4.88%; Hutchison Whampoa, 4.85%; Brookfield Asset Management, Inc., 4.84%; Investor AB, 4.79%; Hang Lung Group, Ltd., 4.74%; and Covanta Holding Corp., 3.88%.

Third Avenue Value Fund (continued) (Unaudited)


appreciate and adopt Martys investment philosophy, which he has espoused and published for many years and is ingrained in all of Third Avenues talented analysts and portfolio managers. Some of the foundations of this philosophy include: Focus on the balance sheet and readily ascertainable net asset value. As Marty discusses in this quarters Chairmans letter, conventional security analysis overemphasizes the Primacy of the Income account. At Third Avenue, we focus primarily on the balance sheet in valuing securities. We do not value securities based on complicated models using projections that are inherently unreliable, but instead focus on readily ascertainable net asset value (NAV). That is, we typically value securities on an as is basis. Only invest in common stocks issued by companies with strong financial positions. A strong financial position protects against permanent impairments of capital. It is our anchor to windward. It can enable a company to choose when it accesses the capital markets and thereby avoid issuing dilutive equity at inopportune times. Additionally, strongly-financed companies can be opportunistic during periods of industry weakness and make acquisitions at attractive prices or develop new products. Focus on the long term. As Marty notes in his Chairmans letter, there is a Primacy of Short-Termism in conventional security analysis. Of course, this creates terrific opportunities for investors like us who are truly focused on long term capital appreciation. Often, our best opportunities are found in industries where the near term outlook is poor. Worry about investment risk, not market risk. Third Avenues focus is on the underlying business fundamentals of our holdings and protecting against investment risk the permanent loss of capital. Predicting the short-term swings in market prices is not one of our skillsets and not relevant for long-term, fundamental, bottom-up investors. Do not try to pick the bottom. Since we cant forecast market prices, we will buy when pricing is good enough. If the price of a security falls after our initial purchase we will usually average down, assuming there is no change to the investment thesis. Avoid industries in secular decline. Third Avenues value investing approach differs from that of many other value investors in that cheapness is never a sufficient condition to purchase a security. We prefer to be investing in businesses with healthy long-term growth outlooks and are willing to live through periods of cyclical weakness, but try to avoid investing in dying businesses. Own the fulcrum security. Our strategy of investing in the most senior security in a companys capital structure that will participate in a reorganization has proven successful. As creditors, it gives us two ways to win: 1) if the security remains a performing loan, we will earn an attractive return (at least 15%); or, 2) if the company reorganizes, our security will participate in the reorganization, often being converted to equity upon emergence from bankruptcy. In a well-financed company, the fulcrum security is usually the common stock. As equity holders, we will benefit from resource conversions that may include share buy backs, spin offs, sales of assets or a merger/acquisition. Pay close attention to a management teams longterm track record and incentives. The hardest part of our jobs as analysts is assessing management teams. As long term investors, the success of an investment will usually be determined by managements ability to grow the value of the business over time, often by being opportunistic and utilizing the companys strong financial position to make attractive acquisitions or investments. In evaluating management teams we scrutinize proxy materials to understand how a management team is incentivized and place much more weight on their long term track record than initial meetings, which can be misleading. We prefer conservative management teams to promotional ones

Third Avenue Value Fund (continued) (Unaudited)


and value insider ownership in fully vested common shares as opposed to options. at quarter end) and daily liquidity. The Funds private equity-like approach has achieved its goal of outperforming, on average over the long term (11.5% annual return since its November 1, 1990 inception, versus 9.4% for the S&P 500 and 7.2% for the MSCI World Index1). My goal as sole manager with the support of the entire 29 person investment team will be to continue this long-term track record of outperformance.

These principles, many of which I discussed in the Principles of Value Investing section of the July 31, 2011 shareholder letter, will continue to drive the Funds management going forward. There will be no change to the Funds investment strategy. I joined Third Avenue nearly eleven years ago after reading an PORTFOLIO OVERVIEW interview with Marty Whitman in These principles ... will which he discussed Third Avenues investment philosophy. I was continue to drive the Funds In reviewing thethe current positioning of Fund, it is particularly impressed by the focus management going forward. helpful to discuss the five primary on the balance sheet, which categories of investments: real differed from the approaches of There will be no change to the estate, energy, publicly-traded some other value investors. I will Funds investment strategy. private equity, infrastructure and continue to follow this approach, other deep value investments. although shareholders can expect the portfolio to become more diversified over time. Real Estate 42% of the Funds net assets. Nevertheless, it will still be more concentrated than most Our focus on readily ascertainable net asset value, as described mutual funds. above, has always viewed income-producing real estate as an Third Avenues investment approach is often compared to attractive investment, when the security is available at a a private equity-like approach to investing in public significant discount from the underlying real estate. This is securities. However, the Fund provides several advantages certainly true today for our Hong Kong-based real estate and compared to most private equity funds, including lower investment companies, as well as for Forest City Enterprises fees, better pricing (the Fund sold for 0.8 times book value Common. The Funds real estate exposure is primarily in
1

The Funds one-year, five-year average annual and ten-year average annual returns for the period ended January 31, 2012 were -13.68%, -4.20% and 5.09%, respectively. Fund performance returns are net of fees and assume reinvestment of dividends. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that an investors shares, when redeemed, may be worth more or less than original cost. Current performance results may be lower or higher than performance numbers quoted. 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. M.J. Whitman LLC, Distributor. The S&P 500 Index is an unmanaged index (with no defined investment objective) of common stocks. The S&P 500 Index is a registered trademark of McGraw-Hill Co., Inc. The S&P 500 Indexs one-year, five-year average annual and ten-year average annual returns for the period ended January 31, 2012 were 4.22%, 0.33% and 3.52%, respectively. The MSCI World Index is an unmanaged, free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of 23 of the worlds most developed markets. The MSCI World Indexs one-year, five-year average annual and ten-year average annual returns for the period ended January 31, 2012 were -2.45%, -1.08% and 4.99%, respectively. The Indices are not securities that can be purchased or sold, and their total returns are reflective of unmanaged portfolios. The returns include reinvestment of interest, capital gains and dividends.

Third Avenue Value Fund (continued) (Unaudited)


commercial and residential real estate in Hong Kong and China and, to a lesser degree, North America. Unlike many other funds that invest in publicly-traded real estate securities, the Fund prefers real estate operating companies to real estate investment trusts, because real estate operating companies can reinvest their earnings to grow net asset value. Energy 12% of the Funds net assets The Funds energy exposure consists primarily of: Henderson Lands 40% stake in Hong Kong and China Gas; the common stock of Covanta Holding Corp, a leading waste to energy provider and the successor to Danielson Holding Corp; Brookfield Asset Managements hydroelectric power assets; and of the common stocks of three Exploration and Production companies (Enanca Corp, Cenovus Energy Inc. and Devon Energy Corp). The Devon Common position was initiated this quarter and is discussed in greater detail below. Publicly-Traded Private Equity 10% of the Funds net assets The Fund has two significant investments in companies whose primary value is in their portfolio of publicly-traded common stocks. Investor AB is a Swedish investment company that is primarily invested in the publicly-traded common stocks of large European companies such as: Atlas Copco (industrial production equipment), AstraZeneca (pharmaceuticals), SEB (banking), ABB (power and automation technologies) and Ericsson (communications equipment). Toyota Industries has a large portfolio of Japanese common stocks, including a 6.9% stake in Toyota Motor Common along with diversified manufacturing operations that produce automobiles, engines, air conditioning compressors, materials handling equipment (e.g., forklifts), textile machinery and logistics-related equipment. Investor AB Common and Toyota Industries Common trade at historically wide discounts to our estimates of net asset value of 35% and 40%, respectively, and prospects for NAV growth appear to be attractive. Infrastructure 5% of the Funds net assets. The Funds exposure to infrastructure consists primarily of Hutchison Whampoas port operations in Asia and Europe and Brookfield Infrastructure Partners. Both Brookfield and Hutchison Whampoa are expected to make additional acquisitions of infrastructure assets, particularly in Europe. Other Deep Value Investments 25% of the Funds net assets These include: investments in the common stock of Posco, a leading Korean steel producer, that trades below book value and at about nine times earnings; the common stocks of the Bank of New York Mellon and Key Corp., both of which trade at significant discounts compared to net asset value; Fleetwood Homes, the second largest player in the manufactured housing industry, whose assets were acquired in two separate bankruptcy auctions; and the common stocks of several cash-rich high-tech companies (Applied Materials, Tellabs and Sycamore Networks).
REVIEW OF QUARTERLY ACTIVITY

During 2011, the Fund reduced its energy exposure, by selling its positions in the common stocks of Cimarex Energy Co. and Nabors Industries at premiums to their current prices, at the time of this writing. Owing to the recent decline in natural gas prices, to about $2.50 per Mcfe (thousand cubic feet equivalent), the prices of many common stocks and bonds of natural gas producers have fallen. Fund Management has been reviewing several opportunities in this sector and initiated a position in Devon Common in early 2012. Devon Energy Corp. is an Oklahoma-based oil and gas exploration and production company. We have been following Devon for several years, as Devon and Cimarex (a common stock holding between 2007 and 2011) are the primary two operators in the Woodford - Cana shale play in Oklahoma. Devon has a very strong financial position, with cash and short-term investments of $6.8 billion, compared to total debt of $9.3 billion. The companys management has

Third Avenue Value Fund (continued) (Unaudited)


an impressive long-term track record, as evidenced by its annual growth of production and reserves per share (reasonable proxies for net asset value) at 8% and 11% CAGRs (compound annual growth rates), respectively, since the company went public in 1988. Management has been willing to sell assets when prices have been attractive, such as in 2009 and 2010 when it exited its Gulf of Mexico and international operations at about $45 per barrel of proved reserves compared to its current valuation at about $10. In January, the company announced a joint venture agreement with Sinopec, a Chinese energy producer, in which Sinopec will pay a rich price for a one-third interest in five recently discovered oil shale plays and pay 80% of the total development costs through 2014. Fund Management sold the vast majority of its remaining holdings in MBIA Surplus Notes during the quarter. Including interest received, the sales were made at a small profit to the Fund. Other portfolio activity during the quarter was driven by portfolio considerations. As of the end of the quarter, the Funds cash position was approximately 4%.
CONTINUED HEALTHY BUSINESS PERFORMANCE FOR FUND HOLDINGS

NAV. These actions appear to have been driven by a 13D filing by Third Avenue Management LLC in October 2011. Investor AB raised its dividend by 1 SEK, to 6 SEK per share (4.5% yield), and noted that a steadily rising dividend in combination with lower operating costs may well result in a structurally lower discount longer term. Posco reported an 11% decline in earnings in 2011, but a still healthy 10.7% operating margin in its steel business, despite competitive industry conditions. Reported NAV increased by 6% (8% including dividends), which, combined with the 24% stock price decline, resulted in a massive widening of the discount. Management indicated that it may pursue initial public offerings for unlisted subsidiaries and sell marketable securities of non-core investments, such as the common stocks of Korean financial companies. These actions may result in a narrowing of the common stocks discount to NAV. Covanta reported strong 2011 results, including a 4% increase in revenues and 24% increase in earnings per share (EPS). Free cash flow totaled $280 million (14% of the market capitalization), enabling the company to repurchase 10% of its outstanding shares and initiate a quarterly dividend (2% yield). The company also provided healthy guidance for 2012, including EBITDA and EPS growth of 5% and 15%, respectively. These results were well received by investors as Covanta Common is up 20% year to date as of this writing. The Bank of New York Mellon reported essentially flat earnings in 2011 and 3% and 8% increases in its core two business metrics, assets under custody and assets under management, respectively. The company repurchased 2.6% of its shares in 2011 and initiated a restructuring plan, under new CEO Gerald Hassell, that started to generate benefits in the form of lower staff expenses in the fourth quarter (down 2% year over year and 5% compared to the third quarter).

As I noted in last quarters letter, there was a massive divergence between the business and stock performance of the Funds major holdings in 2011. Recently reported results for our holdings continue to be healthy, and, in some cases, the management teams are taking steps to try to improve the highly discounted valuations of their common stocks. Examples include the following: Forest City Enterprises announced several steps that should reduce the discount at which its common stock trades to net asset value. These include repositioning or disposing of its land business, reducing debt and focusing on its core commercial rental projects in core cities. Additionally, the company announced a reduction in its board size and that it will publish a schedule of NAV components, which we expect to highlight disparity between the current stock price and

10

Third Avenue Value Fund (continued) (Unaudited)


Hang Lung Properties reported that underlying profit increased by 29% during the second half of the year, driven by 11% growth in leasing income (15% in China and 7% in Hong Kong). The companys newly opened (August 2011) shopping center in Jinan is 100% leased and generating an impressive initial yield of 7%. The Funds other significant Hong Kong holdings will be reporting second half 2011 results in March. These results are also expected to be strong.

TRIP TO HONG KONG AND CHINA DISCOUNTS NOT WARRANTED BASED ON BUSINESS CONDITIONS

I visited Hong Kong and Shenyang, China in late January through early February. This was my second trip to Hong Kong and China, although, in combination with other analysts at Third Avenue, we have now made more than 20 trips to the region. I toured commercial and residential properties (owned by both our companies and their competitors) and had meetings with management teams, other investors, sell-side analysts and regulators. Business conditions appeared to be quite healthy and very much at odds with the discounted valuations of the Hong Kong-based companies whose common stocks are owned by the Fund. Commercial real estate fundamentals in Hong Kong continue to be strong. I visited Harbour City, which is owned by Wharf Holdings Ltd., whose common stock is held by the Fund. This remarkable shopping center accounts for more than 6% of all of Hong Kongs retail sales. The picture below shows the line of people waiting to get in a Chanel store, at 3:00 p.m., on a Wednesday afternoon.

The recent 5-15% correction in Hong Kong residential property prices is probably healthy and does not seem likely to be the beginning of a crash. Supply remains relatively low and underlying demand is strong, partially owing to continued demand from mainland China. The measures introduced by the government over the last year seem to have been constructive and are working. Based on my meeting with the CFO of Chong Hing Bank, whose common stock is held by the Fund, mortgages continue to perform well and foreclosures are minimal. In Shenyang, China, the commercial and residential real estate markets are much more competitive than in Hong Kong. Our companies appear to have very good locations, but returns for the projects are likely to be low initially. However, as has been the case in Shanghai, where leasing income has been increasing rapidly for many of our holdings, the returns should improve over time. Importantly, these are not leveraged projects.

The Funds performance has improved so far in 2012, driven primarily by appreciation in our Hong Kong-based securities. These securities drove the Funds poor performance in 2011. However, as noted in previous letters, this segment of the portfolio has generated an 83% cumulative

11

return over the past seven years. The business performance for these companies has been strong, and my visit to Hong Kong and Shenyang confirmed that this is likely to continue in 2012. Despite the recent appreciation, the securities continue to trade at meaningful discounts from net asset value. I shall write to you again when we publish our Second Quarter Report dated April 30, 2012. Thank you for your continued interest in the Fund.

Ian Lapey Portfolio Manager, Third Avenue Value Fund

12

Third Avenue Small-Cap Value Fund (Unaudited)


Number of Shares 24,107 shares 89,242 shares 74,250 shares New Positions Acquired Alleghany Corp. Common Stock (Alleghany Common) Compass Minerals International Inc. Common Stock (Compass Common) Excel Trust Inc. 8.125% Preferred (Excel Preferred) J&J Snack Foods Corp. Common Stock (J&J Common) Transatlantic Holdings Inc. Common Stock (Transatlantic Common) Increases in Existing Positions 79,500 shares 15,306 shares 175,650 shares 279,487 shares 53,702 shares 55,004 shares 8,150 shares 64,304 shares 2,079 shares 1,026,000 shares Canfor Corp. Common Stock (Canfor Common) Cimarex Energy Co. Common Stock (Cimarex Common) Electro Scientific Industries Inc. Common Stock (ESI Common) Electronics for Imaging, Inc. Common Stock (EFI Common) Emcor Group Inc. Common Stock (Emcor Common) Haemonetics Corp. Common Stock (Haemonetics Common) Mantech International Corp. Common Stock (Mantech Common) Pioneer Drilling Co. Common Stock (Pioneer Common) SEACOR Holdings, Inc. Common Stock (SEACOR Common) Segro PLC Common Stock (Segro Common)

CURTIS R. JENSEN
CHIEF INVESTMENT OFFICER & PORTFOLIO MANAGER OF THIRD AVENUE SMALL-CAP VALUE FUND Dear Fellow Shareholders: At January 31, 2012, the end of the first fiscal quarter, the unaudited net asset value attributable to the 36,024,093 common shares outstanding of the Third Avenue Small-Cap Value Fund Institutional Class (Small-Cap Value or the Fund) was $20.98 per share, compared with the Funds audited net asset value of $20.17 per share at October 31, 2011, and an unaudited net asset value at January 31, 2011 of $21.28 per share, both adjusted for a subsequent distribution. At February 28, 2012, the unaudited net asset value was $21.50 per share.
QUARTERLY ACTIVITY*

53,668 shares 90,218 shares

During the quarter, Small-Cap Value initiated five new positions, added to 14 of its 63 existing positions, eliminated six positions and reduced its holdings in 27 companies. At January 31, 2012, Small-Cap Value held positions in 60 common stocks, the top 10 positions of which accounted for approximately 24.90% of the Funds net assets.

* Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Small-Cap Value Funds 10 largest issuers, and the percentage of the total net assets each represented, as of January 31, 2012: Lanxess AG, 3.10%; Vail Resorts, Inc., 2.93%; Ingram Micro, Inc., 2.82%; Alexander & Baldwin, Inc., 2.56%; Seacor Holdings, Inc., 2.53%; Madison Square Garden, Inc., 2.39%; Liberty Media Corp, 2.19%; Mantech International Corp., 2.18%; Lexmark International Inc., 2.12%; and Ackermans and Van Haaren NV, 2.08%.

13

Third Avenue Small-Cap Value Fund (continued) (Unaudited)


Number of Shares 78,483 shares 15,500 shares 7,500 shares 10,000 shares Increases in Existing Positions (continued) SemGroup Corp. Class A Common Stock (SemGroup Common) Sensient Technologies Corp. Common Stock (Sensient Common) Teleflex Inc. Common Stock (Teleflex Common) Westlake Chemical Corp. Common Stock (Westlake Common) Positions Reduced Ackermans & van Haaren N.V. Common Stock (AvH Common) Aeropostale, Inc. Common Stock (Aeropostale Common) Alexander & Baldwin, Inc. Common Stock (Alex Common) Alico, Inc. Common Stock (Alico Common) American Eagle Outfitters, Inc. Common Stock (American Eagle Common) Arch Capital Group Ltd. Common Stock (Arch Common) Bel Fuse Inc. Class B Common Stock (Bel Fuse Common) Bristow Group, Inc. Common Stock (Bristow Common) Cross Country Healthcare, Inc. Common Stock (Cross Country Common) Encore Wire Corp. Common Stock (Encore Common) HCC Insurance Holdings, Inc. Common Stock (HCC Common) ICF International, Inc. Common Stock (ICF Common) Number of Shares 144,167 shares 98,200 shares 273,216 shares 161,992 shares 146,485 shares 50,000 shares 48,885 shares 100,724 shares 63,704 shares 207,770 shares 285,148 shares 173,869 shares 40,614 shares 1,114,350 shares 59,528 shares Positions Reduced (continued) Investment Technology Group, Inc. Common Stock (ITG Common) JAKKS Pacific, Inc. Common Stock (JAKKS Common) Kaiser Aluminum Corp. Common Stock (Kaiser Common) Lanxess AG Common Stock (Lanxess Common) Leucadia National Corp. Common Stock (Leucadia Common) Lexmark International, Inc. Common Stock (Lexmark Common) Madison Square Garden Co. Class A Common Stock (MSG Common) MEMC Electronic Materials, Inc. Common Stock (MEMC Common) Minerals Technologies Inc. Common Stock (Minerals Technologies Common) Oshkosh Corp. Common Stock (Oshkosh Common) Park Electrochemical Corp. Common Stock (Park Common) P.H. Glatfelter Co. Common Stock (Glatfelter Common) Stepan Co. Common Stock (Stepan Common) Viterra, Inc. Common Stock (Viterra Common) Wacker Neuson SE Common Stock (Wacker Common) Positions Eliminated K-Swiss, Inc. Common Stock (K-Swiss Common) National Western Life Insurance Co. Class A Common Stock (NWLI Common) Pharmaceutical Product Development, Inc. Common Stock (PPD Common)

8,280 shares 50,000 shares 50,000 shares 3,397 shares 115,000 shares

367,450 shares 85,750 shares 26,602 shares 681,787 shares

61,797 shares 197,472 shares 97,695 shares

726,681 shares 25,465 shares 369,582 shares

14

Third Avenue Small-Cap Value Fund (continued) (Unaudited)


Number of Shares 45,720 shares 25,823 shares 141,456 shares Positions Eliminated (continued) Synopsys, Inc. Common Stock (Synopsys Common) Tejon Ranch Co. Common Stock (Tejon Ranch Common) Tidewater, Inc. Common Stock (Tidewater Common)

REVIEW OF QUARTERLY ACTIVITY

Fund Management identified and initiated a number of new positions during the quarter, but our energies tilted toward the sales of holdings or resizing various positions, including the sale of Pharmaceutical Product Development (PPD) Common that was eliminated in connection with the leveraged buyout of the company. Synopsys Common was sold at a price approximating our estimate of fair value and following the announcement by Synopsys that it intended to acquire a competitor on terms we found unpalatable. Both positions had been positive contributors during their respective holding periods and were exited at attractive rates of return. Of the five new positions initiated during the quarter four of them might be viewed as compounders, with above average growth potential embedded within each one. These are discussed in some detail below, the common thread in each case is a set of disappointments; but, ones which we perceive to be temporary in nature or fixable. Such results put many companies out of favor with investor/speculators who focus, myopically, on short-term results but provide opportunities for investors like the Fund with longer-term investment horizons. The Funds small position in Excel Preferred is meant to complement the portfolios existing common stock investment in that real estate investment trust. A portion of our idea origination process includes a review of current, publicly announced mergers and acquisitions from
1

which we not only glean valuation data points but also periodically find arbitrage opportunities where the inevitable shuffling of in-play securities occasionally results in temporarily mispriced assets. We believed that such was the case with Alleghany Common and Transatlantic Common. Transatlantic, one of the worlds largest property casualty reinsurance companies, appeared to be in play last autumn and the presence of competing suitors, partners and hostile bidders, combined with our industry knowledge, piqued our curiosity. When Alleghany, a property casualty insurance holding company whose stock had been on our wish list for some time, announced that it and Transatlantic had agreed to merge1 and saw its share price decline in reaction to the announcement, our research wheels started to turn. Industry conditions for both primary insurers and their reinsurance counterparts have been under pressure in recent years, suffering from both a softening underwriting environment and record low interest rates. In turn, weak fundamentals have been reflected in industry valuations, as illustrated in the table below:
1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Bloomberg N.A. Reinsurance Company Index - Historic P:B (FFH CN, RE, PRE, AXS, RNR, TRH, VR, AHL, ENH, PTP, FSR)

Source: Bloomberg, Third Avenue estimates

The property casualty industry recorded one of its worst years on record in 2011, as insured losses and reinsurers were similarly hit by the accumulation of global catastrophes2. As a result of their experiences in 2011,

On February 6, 2012 Transatlantic and Alleghany shareholders approved the merger. When the merger is completed, Transatlantic shareholders will receive a combination of cash and Alleghany stock. 2 The earthquake/tsunami in Japan, flooding in Thailand and earthquake in New Zealand, collectively, are estimated by Aon Benfield to have insured losses of nearly US$ 60 billion. (By comparison Hurricane Katrina perhaps the most costly insured loss on record was estimated to have cost $67 billion.)

15

Third Avenue Small-Cap Value Fund (continued) (Unaudited)


reinsurers have taken a firmer stance on pricing and early indications suggest industry underwriting conditions appear to be improving, though it would be premature to characterize the gradual improvement as a hard market. The chart below from Guy Carpenter (www.guycarp.com) neatly describes this bad news is good news cycle that the reinsurance industry tends to experience over time.
LONG-TERM EVOLUTION OF SHAREHOLDERS FUNDS FOR THE GUY CARPENTER GLOBAL REINSURANCE COMPOSITE
180 160

of salt in North America and the U.K., used for highway de-icing and in various consumer and industrial applications. Compass is also the leading North American producer of Sulphate of Potash (SOP), a specialty fertilizer used for higher value added crops and of Magnesium Chloride. While it might be easy to dismiss these businesses as just another set of commodities, the companys assets enjoy many favorable advantages: Its various operations including the worlds largest salt mine sit at the lowest end of their respective industry cost curves, critical in solidifying a low-cost advantage and enjoy a long life reserve base; The companys salt segment benefits from an oligopolistic industry structure, where demand trends are generally considered inelastic and where few costeffective substitutes exist. Additionally the companys transportation infrastructure provides an added advantage that is important in a product with a low value/weight ratio; Compass boasts one of only three all-natural solar SOP plants in the world (the others being in Chile and China); the companys highly energy-efficient facilities deliver further cost advantages within its served markets;

Hard Market So ening

USD Billions

140 120 100 80 60

Hard Market Excess Capital So Market Crisis

Source: Guy Carpenter & Company, LLC

Both Alleghany Common and Transatlantic Common were purchased at wide discounts to book value, a metric that we view as a reasonable proxy for economic or intrinsic value of the businesses and that ought to provide a measure of downside protection. Management teams in both cases have proven to be disciplined underwriters and above average capital allocators, resulting in attractive compounding in per share book values, despite the inherently commodity like characteristics of the business. Alleghany, in particular, has a reputation as a conservative, albeit opportunistic and sometimes contrarian, investor that may be more assertive with Transatlantics $13 billion investment portfolio. In sum, we believe (i) share valuations as reflected by the public markets have overly discounted industry conditions that may be on the mend; (ii) little to no credit is attributed to managements ability to successfully invest its vast portfolios over time; and (iii) our alignment with likeminded, owner-managers, coupled with a very strong balance sheet, improves the odds of preserving and growing our capital with a modicum of investment risk. Compass Minerals is a producer of salts, fertilizer and magnesium chloride. The company is the leading producer

98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 9M 11

19

The company experienced a difficult confluence of events in 2011 whose negative impact will undoubtedly linger into part of 2012: In August a tornado struck its salt mine in Goderich, Ontario, damaging surface operations and curtailing production; an unusually wet summer harvest season at the companys Great Salt Lake evaporation plant disrupted production of SOP; and mild weather within its core service regions this winter weakened demand for deicing salt. We view these setbacks, which have translated into short-term margin pressure, as temporary in nature, though they highlight the weather sensitive nature of the business. If history rhymes in any way, the companys longer-term outlook ought to be reasonably bright. The cash generative nature of the business has allowed the company to pay a

16

Third Avenue Small-Cap Value Fund (continued) (Unaudited)


healthy and growing dividend while maintaining a strong balance sheet. Compass management has been steadily investing in its productive capacity in a multi-year program that ought to not only enhance its cost structure but also continue to raise the companys future earnings and cash generation capacity. We believe our entry point in the stock in the high $60s incorporated much of the aforementioned short-term bad news, but gives little credit to the companys irreplaceable assets, stability, returns and longer-term growth prospects. Compass Common was initially purchased at a modest discount from our conservative estimate of net asset value and a more meaningful discount to what we believe a knowledgeable and reasonable industrial buyer might pay for control of the business. J&J Snack Foods manufactures you guessed it snack foods and distributes frozen beverages to a wide range of food service and supermarket customers nationwide. Management believes that the company is the largest manufacturer of soft pretzels in the United States, Mexico and Canada, which it sells under more than a dozen different brand names. Other snacks include burritos, churros, cookies and pies. The company also markets frozen drinks under names such ICEE, Slush Puppie and Arctic Blast. J&J generates ancillary business from the sale and maintenance of equipment for its customers, including ovens, display cases and frozen beverage dispensers. It is not a sexy business, but it seems to work: since its founding more than 40 years ago, the company has been profitable in every quarter; diluted earnings per share have compounded at nearly 13% annually during the past 10 years; and the dividend has increased every year since its inception, six years ago. Management has accomplished all of this while keeping the balance sheet debt free and issuing virtually no equity. With a 21% ownership stake in the company, Founder, Chairman and CEO Gerald Shreiber would appear to fit the owner-manager that Third Avenue seeks in its investments. But cheap stock prices and good news rarely go hand in hand. Our opportunity to build a position and the Fund only has a modest position at this point arose coincident with the company announcing disappointing results in its most recent quarter. Among other culprits were significantly higher ingredient and packaging costs and weakness in certain product lines. Management has announced its intent to raise prices, but these will undoubtedly take time to impact the companys bottom line. J&J appears to be a compounder but one that has temporarily stumbled.
PORTFOLIO POSITIONING, INVESTING OBSERVATIONS

There must be some kind of way out of here, Said the joker to the thief, Theres too much confusion, I cant get no relief. All Along the Watchtower3 As we step back and survey the broader investment landscape, we can sympathize with those who admit to being a tad confused about the macro picture. For instance, does Eurozone insolvency put us on the edge of another financial collapse? Is there more likely to be inflation or deflation? Will the Feds interest rate suppression strategy help the global economy? It would be easy to let such topics consume an investment analysis. While our approach attempts to reasonably handicap the influences such macro developments may have on any given investment, we steadfastly avoid the urge to make predictions around such and, more importantly, try not to let it paralyze us. While remaining macro aware when it comes to investing, the starting point for Third Avenues investment philosophy might be described as expecting the unexpected. Focused on the micro considerations of an investment, this means:

Originally written and recorded by Bob Dylan, the song quickly became identified with Jimi Hendrix whose interpretation, by virtue of Hendrixs distinctive guitar playing, carried a more haunting sense of cataclysm than Dylans original version.

17

Third Avenue Small-Cap Value Fund (continued) (Unaudited)


(i) Identifying companies with strong balance sheets whose financial strength will cushion the business during times of economic duress and can create a competitive edge for the management team; abundant and cheap natural gas resources helps to level the competitive playing field;

Hold a lot of optionality, mostly by virtue of their super strong financial positions that allows the management teams extraordinary flexibility. For example, seven of the (ii) Aligning ourselves with like-minded executives whose Funds holdings initiated cash dividends in the past year. incentives encourage them to focus on the long-term Importantly, these dividends do not harm the balance development of the business while acting in the best sheet or impinge on the ability to undertake growth interests of passive, minority shareholders like the Fund; investments and to maintain a proper level of investment (iii) Insisting on a margin of safety and protecting the in the business. In other cases, downside by buying securities optionality equates to resource only when they trade at a Our view is that the global conversion, i.e., refinancing of meaningful discount to the liabilities or sale of assets. For economy is generally underlying economic value of the asset; improving but that it pays to be example, Semgroup, the operator of oil and gas midstream assets, created prepared for the worst even a publicly-listed entity from what (iv) Holding investments in companies whose businesses while we hope for the best. We had been an illiquid ownership in we understand and which have one of its crude oil pipelines, do this by investing only in multiple attractive avenues for enhancing its value for Semgroup growth over our investment companies with the financial shareholders. time horizon. stability to weather any Todays low interest rates penalize Translated into the portfolio today temporary shocks, even if they savers and encourage speculators. we note two important Western governments have and will are extremely severe, and by continue to debase their currencies characteristics of the Funds new investments in the past year or two: and finance non-productive focusing on long-term Have been dominated by U.S. investment results, a view that activities with more and more debt. On the other hand, small signs of companies. While our preference helps us remain patient during improvement in the U.S. economy has always been to favor U.S.and the growing belief that China short-term declines. domiciled companies, our underwill manage its large, control lying belief is that (i) the U.S. economy into a soft landing lead economy remains among the us to believe that global equities were oversold in 2011, most resilient in the world, affording domestic hence the recovery in the fourth quarter that has stretched companies a cushion against inflationary headwinds in into the early weeks of 2012. That said, macro issues remain Asia and Latin America and deflationary forces in (ahem, Europe) that could reignite volatility in risk assets at Europe; (ii) U.S. companies (aided and abetted by a any moment. Our view is that the global economy is weak currency) may be good takeover bait for foreign generally improving but that it pays to be prepared for the buyers looking to buy, for example, natural resources, worst even while we hope for the best. We do this by technology or brands; (iii) the U.S. may be in the first investing only in companies with the financial stability to stages of a renaissance in its manufacturing base as weather any temporary shocks, even if they are extremely

18

Third Avenue Small-Cap Value Fund (continued) (Unaudited)


severe, and by focusing on long-term investment results, a view that helps us remain patient during short-term declines. One investment that epitomizes this philosophy was the aforementioned PPD, which we sold when The Carlyle Group offered to buy the company at a 30% premium to market value and a substantial premium to our cost basis. We added PPD to the portfolio in the middle part of the last decade. We saw a financially strong, well-managed and resilient pharmaceutical company that we knew we could stand by for the long term. When PPDs stock price declined sharply in 2009, we reassessed the company and added to our position. That turned out to be the right move as the majority of our returns (mid-20s IRR to the Fund) were earned since that period, where we bought a good company on price weakness. In 2010, PPD spun-off Furiex Pharmaceuticals, monetizing an asset that the Fund was then able to sell. Then, a little more than a year later, PPD became an acquisition target. Our in-depth knowledge of the company and willingness to take the long view, even in the face of price declines, is what made the investment such a success for the Fund. I look forward to writing you again when we publish our Second Quarter report dated April 30, 2012. Thank you for your continued support.

Sincerely, Curtis R. Jensen Chief Investment Officer and Portfolio Manager, Third Avenue Small-Cap Value Fund

19

Third Avenue Real Estate Value Fund (Unaudited)

MICHAEL H. WINER
CO-PORTFOLIO MANAGER OF THIRD AVENUE REAL ESTATE VALUE FUND

JASON WOLF
CO-PORTFOLIO MANAGER OF THIRD AVENUE REAL ESTATE VALUE FUND

Dear Fellow Shareholders: At January 31, 2012, the end of the first fiscal quarter of 2012, the unaudited net asset value attributable to the 69,981,912 shares outstanding of the Third Avenue Real Estate Value Fund Institutional Class (the Fund) was $22.24 per share. This compares with an audited net asset value of $21.45 per share at October 31, 2011, and an unaudited net asset value of $23.63 per share at January 31, 2011. At February 28, 2012, the unaudited net asset value was $23.98 per share.
QUARTERLY ACTIVITY*

Number of Shares or Notional Amount AUD 130 million AUD 130 million

New Positions Acquired (continued) Australian Dollar Calls expires 3/7/12 (Aussie Calls) Australian Dollar Puts expires 3/7/12 (Aussie Puts) Increases in Existing Positions City Developments Ltd. Common Stock (City Developments Common) Derwent London Plc Common Stock (Derwent Common) First Industrial Realty Trust, Inc. Common Stock (First Industrial Common) Japanese Yen/U.S. Dollar Forward Foreign Currency Contracts (JPY/USD Forward) Positions Reduced Bellway plc Common Stock (Bellway Common)

1,220,950 shares 3,487 shares 212,059 shares

The following summarizes the Funds investment activity during the quarter:
Number of Shares 9,661,263 shares 63,254 shares New Positions Acquired Centro Retail Australia Common Stock (Centro Common) Rouse Properties, Inc. Common Stock (Rouse Common)

2,087,068,261

746,648 shares

* 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 January 31, 2012: Forest City Enterprises, Inc., 7.26%; Brookfield Asset Management, 5.23%; Lowe's Cos., Inc., 4.82%; Cheung Kong Holdings, Ltd., 4.82%; Hammerson PLC, 4.63%; Sun Hung Kai Properties, Ltd., 4.06%; Wheelock & Co., Ltd., 3.57%; Weyerhaeuser Co., 3.44%; Taylor Wimpey PLC, 3.42%; and Vornado Realty Trust, 3.24%.

20

Third Avenue Real Estate Value Fund (continued) (Unaudited)


Number of Shares 526,415 shares 350,000 shares Positions Reduced (continued) Berkeley Group Holdings plc Common Stock (Berkeley Common) Lennar Corp. Common Stock (Lennar Common) Positions Eliminated Mitsubishi Estate Co. Ltd. Common Stock (Mitsubishi Common) Mitsui Fudosan Co. Ltd. Common Stock (Mitsui Fudosan Common)

888,000 shares 923,000 shares

DISCUSSION OF QUARTERLY ACTIVITY

During the quarter the Fund acquired two new common stocks (Centro Common and Rouse Common, discussed below) and increased its position in City Developments Common, taking advantage of recent volatility in Asian property stocks and averaging down the Funds cost basis. Additionally, the Fund eliminated the common stocks of two Japanese real estate operating companies (Mitsubishi Common and Mitsui Common). Despite these two stocks trading at substantial discounts to net asset value (NAV), Fund Management determined that the Funds capital could be better allocated to investments that are not dependent upon a general recovery of the morose Japanese equity markets. Furthermore, Fund Management has become frustrated with Japanese corporate governance and the reluctance of many corporate boards to take reasonable actions that would stimulate interest in their stocks (e.g., share repurchases, higher dividends, mergers and acquisitions, etc.). The Fund also trimmed its holdings in three housing-related common stocks, taking profits as the market values appreciated substantially. The Fund acquired Centro Retail Australia common shares (Centro Common) in exchange for its holdings in Centro Properties Group (CNP) senior bank debt, which it purchased earlier in the quarter. CNP was an Australianbased real estate investment trust (REIT) that expanded aggressively in the 2004-2007 timeframe, amassing a portfolio of more than 700 shopping centers in Australia and the United States. Most of these properties were

acquired at top dollar and financed with short-term borrowings a strategy that forced CNP to seek relief from creditors and undertake a significant restructuring in late 2007. With nearly $18 billion of debt outstanding and numerous stakeholders across its corporate structure, CNPs reorganization was incredibly complex and essentially left the company at a standstill for four years. Meaningful progress was made last year, as the companys debt traded out of original lenders hands, and the new creditor group accelerated the reorganization process. As the first step in its reorganization, CNP sold its U.S. shopping center portfolio to Blackstone for more than $9 billion and made a cash distribution to its senior creditors with the proceeds. The second step was converting the remaining creditor claims to equity in a new company Centro Retail. This newly-formed company is solely focused on the ownership and management of CNPs legacy shopping center portfolio in Australia. The company has a vastly improved financial position, steady cash flows from its 99% leased shopping center portfolio and reduced debt levels (roughly 40% of appraised value). The company has attracted a new management team that is incentivized to maximize value for shareholders. By purchasing CNPs senior bank debt and exchanging it for Centro Common upon the emergence of the new company, the Fund was able to back in to a sizable position in Centro Common at prices that represent about a 30% discount to our conservative estimate of current NAV. In Fund Managements view, Centro Retail is well positioned to increase the underlying NAV quite rapidly as it (i) undertakes redevelopment opportunities that were neglected during the restructuring process, (ii) renegotiates rents to market rates (during the restructuring the company primarily extended existing terms just to keep tenants in place), and (iii) takes advantage of its improved credit profile to refinance its high cost debt at lower rates. In addition, it seems likely that the large discount, at which we estimate Centro Common trades relative to NAV and its peers, should narrow after inclusion in the major global real estate indices later this year. If the discount does not dissipate, we

21

Third Avenue Real Estate Value Fund (continued) (Unaudited)


believe the company would be a likely candidate for a takeover bid, as its retail platform would be highly coveted by a number of institutional and strategic investors. Similar to the Funds other investments in Australian REITs, the Fund is getting paid to wait for the underlying values to be recognized by either public or private market participants. In Centros case, the Fund is earning a 7% annualized dividend yield on its original investment. In its continuing efforts to become a top-tier mall REIT, General Growth Properties spun off a 30-property portfolio of lower productivity malls. The spin off was completed by distributing common shares of Rouse Properties, pro rata, to General Growths shareholders (including the Fund). General Growth Common is a 1.7% position in the Fund. As a standalone REIT, Rouses strategy will be to reposition its underperforming mall portfolio by renovating existing space, expanding space for new tenants, reconfiguring the existing tenant base, and extending out shorter-term leases on more attractive terms. Rouses portfolio generally consists of regional malls in one mall towns. The prospects that a new mall will be built to compete with one of these malls is highly unlikely. In order to fund its repositioning efforts, Rouse will seek to raise approximately $200 million through a rights offering later this year. Over the longer term, Rouse could have an opportunity to create additional value by acting as a consolidator in the class-B and C malls or, once the portfolio is stabilized, it might be an attractive acquisition candidate for another mall REIT or institutional investor. Fund Management is still assessing the quality of the companys portfolio and the new management teams strategy in order to determine if the Fund will participate in Rouses capital raise. Irrespective of whether or not the Fund acquires a larger stake in Rouse Common, Fund Management believes the spin off enhances the future prospects for General Growth Properties, as its sole focus will be on its higher quality malls.
PORTFOLIO POSITIONING

and the only prudent way to invest capital within a sector that is dominated by relative value investors. One of the challenges of investing with an unfettered mandate is explaining our portfolio positioning to shareholders who may be more familiar with the standard real estate industry jargon of overweighting and underweighting geographies or sectors against an index. Our investment approach is very different, involving specific stock selection criteria based on bottomup fundamental analysis of individual securities (without regard to weighting in an index), with the goal of constructing a portfolio that can generate above-average long-term returns with limited risk of permanent impairment of capital. The last six months was one of the most active investment periods in the Funds history. The Funds cash balance decreased from 16.3%, at July 30, 2011, to 4.5%, at January 31, 2012. At its current cash level, Fund Management views the Fund as being fully invested and we are excited about the prospects for our investments. Finding value in real estate securities (particularly REITs) is not pervasive today. We have to dig deep to find suitable undervalued securities and accept what we deem to be manageable risks (primarily market risk). This requires a disciplined and selective temperament with a long-term (three to five year) investment holding period. The portfolio is currently invested among four distinct investment themes, each of which Fund Management believes offers real estate securities investors exceptional value: (1) Core Blue Chips, (2) Asian Growth, (3) Housing Related and (4) Special Situations. 1. Core Blue Chips: Common stocks of real estate operating companies (REOCs) or REITs that own high quality assets in global gateway cities and have management teams with proven track records of creating value for shareholders. Examples of Core Blue Chips include Forest City Common (U.S.), Brookfield Common (Canada), Hammerson Common (U.K.), Vornado Common (U.S.) and Westfield Common (Australia). At quarter-end, Core Blue Chips represented approximately 28% of the Funds net assets, delineated by country as follows:

Third Avenues investment approach is often described as unconventional and unconstrained. We believe this is true,

22

Third Avenue Real Estate Value Fund (continued) (Unaudited)


United States United Kingdom Canada Australia Hong Kong 12.2% 5.8% 5.2% 3.0% 1.8% The Fund has been investing in several well-financed Asian REOCs for over six years. Long-term holdings, such as Henderson Land, Hysan Development, Hong Kong Land and Wheelock & Co., have all been substantial contributors to the Funds performance. Notwithstanding their long-term contributions, each security trades at a substantial discount to NAV, which we believe will continue to compound at above-average rates. Cheung Kong and Sun Hung Kai are both relatively new additions to the portfolio and have not yet been contributors (or significant detractors) to the Funds performance. 3. Housing Related: Common stocks of well-financed U.S. and U.K. companies whose businesses are significantly tied to homebuilding, land development and/or building products. Examples of Housing Related securities in the Fund include: Lennar Common, Newhall Common, Lowes Common, Taylor Wimpey Common and Weyerhaeuser Common. Each of these securities was purchased at depressed valuations and stands to benefit tremendously from the ultimate recovery in the U.S. and U.K. housing markets (which appears to have begun). At quarter-end, Housing Related companies represented approximately 21% of the Funds net assets, delineated by country as follows: United States United Kingdom 16.0% 5.4%

Most of the Core Blue Chips have been long-time holdings in the Fund. Brookfield Common and Vornado Common have both been significant contributors to the Funds performance over the past ten years and Fund Management expects they will continue to provide above-average returns going forward. On the other hand, Forest City Common has been the Funds largest detractor to performance over the last few years, despite the fact that it trades at a 35% discount to our conservative estimate of NAV (as of January 31, 2012). The Funds investment in Forest City Common was discussed in detail in last quarters letter to shareholders. Forest City recently announced several strategic initiatives that are consistent with the recommendations noted in the Schedule 13D filed by Fund Management in October 2011. Since the 13D filing, Forest City Common has appreciated 48.7%, through February 28, 2012. 2. Asian Growth (at a steep discount): Common stocks of extremely well-financed Asian REOCs that have historically generated double-digit, compounded NAV growth. Examples of Asian Growth companies in the Fund include Cheung Kong Common, Sun Hung Kai Common, Henderson Common, Hong Kong Land Common, Hysan Common, Wheelock Common and CapitaLand Common. Despite superior growth prospects over the next three to five years, the common stocks trade at steep discounts to conservative NAV estimates. At quarter-end, Asian Growth companies represented approximately 23% of the Funds net assets, delineated by country as follows: Hong Kong Singapore 19.1% 4.3%

Most of the Funds Housing Related investments were made when the securities were priced at levels reflecting the severe downturn in U.S. and U.K. housing markets. These contrarian investments have started to generate decent returns for the Fund as the markets seem to be recognizing the beginning of a housing recovery. Lennar, Lowes, Taylor Wimpey, Berkeley Group and Bellway are examples that have each been solid contributors to recent performance. One Housing Related investment (Newhall Land) has yet to provide a positive return to the Fund. Newhall is a 2.5% position in the Fund and is currently priced at 49% below the Funds cost. Newhalls primary asset is a

23

Third Avenue Real Estate Value Fund (continued) (Unaudited)


master-planned community consisting of approximately 20,000 residential lots and land for commercial development. The project is located approximately 30 miles north of downtown Los Angeles in Valencia, California. It is one of the few remaining master-planned communities in Los Angeles County and is expected to be one of the primary providers of residential lots for homebuilders over the next 20 years. Depending upon market demand, Newhall expects to begin selling lots to homebuilders by 2014. However, the company does not currently generate any meaningful cash flow (in fact, it will be a net user of cash for several years, as entitlement processing continues and land development commences), and the equity securities are thinly traded. Approximately 85% of the equity is controlled by six investors, including the Fund, Lennar Corp. and four private equity/hedge funds (that each charge substantially higher management fees than the Fund). As a result, it is difficult for market participants to value the company and even more difficult to acquire a meaningful stake. Newhalls current enterprise value (based on its trading price) is approximately $375 million. While pre-financial crisis valuations may not be totally relevant today, this valuation compares to Newhalls appraised value of $2.7 billion in 2007 (prior to its Chapter 11 bankruptcy filing and reorganization). It is possible that the Funds investment in Newhall will go unrecognized for a while longer. But as the California housing market recovers (which it always does), Newhall is destined to be ground zero for homebuilders seeking buildable lots in Los Angeles County as there is literally almost no place else to go. The Funds investment in Newhall has several potential catalysts for value realization, including: (a) an IPO, (b) sale to a strategic buyer, or (c) a merger or acquisition with a publicly-traded company. 4. Special Situations: Common stocks or debt securities of companies in real estate or related industries (e.g., REITs, REOCs, homebuilders, etc.) that are not necessarily viewed by Fund Management as long-term core holdings. Generally, they were purchased at substantial discounts to NAV, with the thesis that the value will ultimately be recognized by the public markets or the company is a likely candidate for a resource conversion event (e.g., takeover, corporate reorganization, sale of significant assets, major share repurchases, etc.). Examples of Special Situations in the Fund include First Industrial Common (U.S. REIT), Dexus Common (Australian REIT), Centro Common (Australian REIT), Songbird Common (U.K. REOC), Segro Common (U.K. REIT) and Hovnanian Senior Secured Notes (U.S. homebuilder). At quarter-end, Special Situations represented approximately 24% of the Funds net assets, delineated by country as follows: Australia United States United Kingdom Japan Hong Kong 7.6% 7.3% 6.2% 1.4% 1.1%

Most of the Funds Special Situation investments are relatively recent. A few have already generated positive returns including First Industrial and Centro, while several have been a drag on performance including Songbird and Segro. First Industrial is a U.S. REIT that owns a portfolio of industrial properties. The Fund first acquired First Industrial Common in August 2010 with the thesis that if the company was unable to reduce its debt load through property dispositions, the Fund would be willing to assist the company by making a substantial equity infusion. It turned out that the company was able to solve its leverage issues on its own. The stock has since appreciated substantially, but still trades at a discount to NAV. On the other hand, the Funds investment in Songbird Common has been a drag on performance. Songbird owns a 70% stake in Canary Wharf Group, which owns 8 million square feet of prime office and retail properties in East London. Songbird Common is publicly traded, but the ownership is concentrated in four institutional

24

Third Avenue Real Estate Value Fund (continued) (Unaudited)


investments in Housing Related and Special Situations, as investors, including two sovereign wealth funds, a large well as our willingness to concentrate in Blue Chips and private equity fund and a wealthy New York family. The Asian Growth companies, differentiate the Fund from its 30% of Canary Wharf that is not owned by Songbird peers. Instead of settling on investments in mediocre is controlled, in large part, by Brookfield Asset companies, Fund Management has the latitude to make Management (one of the Funds largest holdings). opportunistic investments in nontraditional securities that Songbird Common trades at roughly a 40% discount to offer unique return profiles. When Fund Management conservative NAV estimates but, primarily due to its believes there is a lack of investable securities (at cheap complex corporate structure, the discount has persisted enough prices), the Fund may take a more conservative and widened. Our thesis (which so far has not panned position, by holding cash and out) is that all parties have a The Funds investments in taking advantage of market common interest to increase shareholder value and a Housing Related and Special volatility by writing covered calls and selling out-of-the-money puts simplified corporate structure Situations, as well as our (as it has done in the past), while (or possibly a going private waiting for opportunities to arise. transaction) would crystalize willingness to concentrate value and eliminate the As illustrated above, each in Blue Chips and Asian discount. Value realization is no investment theme has its share of Growth companies, doubt taking longer than winners and losers. Fund anticipated, but we believe a differentiate the Fund from its Management continuously resolution is a matter of when peers. Instead of settling on challenges its investment thesis not if. In the meantime, (including NAV estimates, growth NAV has and should continue investments in mediocre projections, financial condition, to grow, as Canary Wharf companies, Fund etc.) on each security in the deploys its nearly US$2 billion Management has the latitude portfolio. Securities that have cash hoard into new substantial unrealized gains are developments on the property to make opportunistic candidates for sale, especially if (for which is has entitlements investments in nontraditional market prices approach NAV and to develop an additional 6 growth prospects become million+ square feet). securities that offer unique uncertain. Likewise, securities with return profiles. unrealized losses may be candidates The portfolio construction process for sale, if it is determined that our is dynamic. The Fund will likely thesis was incorrect, there is a permanent impairment of own Core Blue Chips and Asian Growth companies for the value, or other securities are identified that offer more foreseeable future. However, Housing Related and Special favorable risk-adjusted returns. The recent sale of Mitsubishi Situations are generally more opportunistic and the Funds Common and Mitsui Common are examples of securities weighting in these themes may vary dramatically from year that were sold (realizing losses) because our thesis on to year. The vast majority of the Funds peers tend to focus Japanese investments changed and we identified other on common stocks that are represented and heavily securities that offered a more favorable risk-reward weighted in their designated benchmark. As a result, their potential. We do not automatically sell winners if the portfolios tend to be concentrated in the universe of REITs securities still trade at meaningful discounts to NAV and and REOCs that comprise the benchmark. The Funds

25

Third Avenue Real Estate Value Fund (continued) (Unaudited)


there are still prospects for continued above-average gains. Nor do we employ stop losses and automatically sell losers. Significant declines or losses prompt us to reevaluate a security. However, employing a strategy of automatically selling based solely on stock price movements is better left to traders, who do not necessarily do the fundamental analysis to understand individual securities.
U.S. REITS ARE FULLY PRICED AND EXPOSED TO POTENTIAL NEGATIVE FUNDS FLOWS

REITs are fully priced and do not offer appropriate riskadjusted returns for the Fund. In fact, according to Green Street Advisors, a real estate consulting firm, at February 1, 2012, U.S. REITs traded at an average 11% premium to NAV. Our U.S. REIT exposure remains modest at 11%, giving the Fund some insulation from a sudden pullout by the Japanese retail investors. While U.S. REITs are trading at a premiums to net asset value, the Fund trades at a 22% discount to NAV based on Fund Managements internal estimates. The largest discount is in the Asian Growth companies, while the smallest discount is in the Core Blue Chips. The discounts to NAV by investment theme are estimated as follows: Core Blue Chips Asian Growth Housing Related Special Situations 12% 29% 23% 26%

As retail and institutional investors have flocked to equity securities that offer predictable dividends in a low interest rate environment, REIT stocks have been buoyed by investor flows into the sector. Over the past three years, a substantial percentage of investor flows into U.S. REITs were from Japanese mutual funds that cater to retail investors seeking high yields. Several sell-side research firms have recently begun tracking investor flows from these Japanese funds. Estimates of current Japanese fund investments in U.S. REITs range from $27 billion to $40 billion, with $17 billion to $20 billion of net inflows over the past year. Considering that the total equity market capitalization of U.S. REITs is approximately $500 billion, any changes in sentiment by Japanese investors (who are traditionally short-term oriented, top-down investors) or regulatory changes for Japanese mutual funds could have a dramatic impact on investor flows and U.S. REIT stock prices. Japans Financial Services Agency (FSA) is reported to be considering tighter regulation of high-risk, complicated mutual funds marketed to inexperienced investors. Many of the Japanese mutual funds established to invest in REITs offer investors double-digit annual yields by paying out not only income (interest and dividends) and capital gains, but also unrealized capital appreciation. In some cases, the funds are returning capital to maintain their illusory high yields. If the FSA enacts regulations that limit the source of mutual fund dividend payments, the attractiveness of these funds could change dramatically and the U.S. REIT sector could experience substantial negative investor flows. Fund Management has been consistent during the past three years in its thesis that, in general, U.S.

As noted above, Fund Management does not have a targeted allocation to these four investment themes. If the Asian Growth companies appreciate to valuations approaching our estimates of fully valued, they will likely be trimmed down in size or eliminated from the portfolio (especially if growth projections become unsustainable). The same goes for some of the Housing Related and Special Situations securities that were more opportunistic investments, as opposed to longterm holdings. That is to say, the Fund will continue to concentrate its investments in sensibly priced real estate securities and hold cash until ideas meeting our strict value criteria can be identified.
THE THIRD AVENUE REAL ESTATE TEAM

We are pleased to announce that Ryan Dobratz, a long-time analyst on the Fund, has been promoted to Senior Research Analyst. Although only our two names appear at the bottom of this letter, Ryan has been instrumental over the past six years in identifying and evaluating investment opportunities for the Fund. His promotion is well deserved. We would also like to welcome Larry Hedden, who recently joined the real estate team as a Research Analyst. We are fortunate to

26

have the support of such bright and enthusiastic real estate analysts, as well as the support of the entire Third Avenue investment team. We look forward to writing to you again next quarter. Sincerely,

Michael H. Winer Co-Portfolio Manager, Third Avenue Real Estate Value Fund

Jason Wolf Co-Portfolio Manager, Third Avenue Real Estate Value Fund

27

Third Avenue International Value Fund (Unaudited)

AMIT B. WADHWANEY
CO-PORTFOLIO MANAGER OF THIRD AVENUE INTERNATIONAL VALUE FUND Dear Fellow Shareholders: At January 31, 2012, the unaudited net asset value attributable to the 79,117,114 shares outstanding of the Third Avenue International Value Fund Institutional Class (the Fund) was $15.26 per share, compared with the Funds audited net asset value at October 31, 2011 of $15.07 per share, and an unaudited net asset value of $17.46 per share at January 31, 2011, both adjusted for the distribution of $0.26 per share. At February 28, 2012, the unaudited net asset value was $16.22 per share.
QUARTERLY ACTIVITY* Number of Shares 201,693 shares 32,000 shares 13,460 shares 596,308 shares 546,200 shares 4,582,718 shares 126,142 shares

MATTHEW FINE
CO-PORTFOLIO MANAGER OF THIRD AVENUE INTERNATIONAL VALUE FUND
Increases in Existing Positions Daimler AG Common Stock (Daimler Common) Guoco Group Ltd. Common Stock (Guoco Common) Nexans S.A. Common Stock (Nexans Common) Petroleum Geo-Services ASA Common Stock (PGS Common) Precision Drilling Corp. Common Stock (Precision Drilling Common) Segro PLC Common Stock (Segro Common) Titan Cement Co. Common Stock (Titan Common) Decreases in Existing Positions Allianz SE Common Stock (Allianz Common) Alma Media Corp. Common Stock (Alma Media Common)

In the most recent quarter, the Fund established two new positions, added to positions in the common shares of seven companies, reduced twelve existing positions and eliminated three positions.
Number of Shares 4,226,000 shares 2,600,200 BDRs New Positions Acquired Daiwa Securities Group, Inc. Common Stock (Daiwa Common) GP Investments Ltd. Brazilian Depositary Receipts (GP Investments BDRs)

64,921 shares 103,027 shares

* 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 January 31, 2012: WBL Corp., Ltd., 7.62%; Netia S.A., 5.55%; Viterra, 4.77%; Leucadia National Corp., 3.74%; Weyerhaeuser Co., 3.71%; Taylor Wimpey PLC, 3.35%; Sanofi, 3.27%; LG Corp., 3.04%; White Mountains Insurance Group Ltd., 2.91%; and Yuanta Financial Holdings Co., Ltd., 2.89%.

28

Third Avenue International Value Fund (continued) (Unaudited)


Number of Shares or Warrants 122,394 shares 329,500 shares 787,900 shares 437,000 shares 36,543 shares Decreases in Existing Positions (continued) Andritz AG Common Stock (Andritz Common) Asatsu-DK Inc. Common Stock (ADK Common) Dundee Precious Metals, Inc. Common Stock (Dundee Common) Mitsui Fudosan Co., Ltd. Common Stock (Mitsui Fudosan Common) Muenchener RueckversicherungsGesellschaft AG Common Stock (Munich Re Common) Netia S.A. Common Stock (Netia Common) Resolution Ltd. Common Stock (Resolution Common) Sampo Oyj Common Stock (Sampo Common) Seino Holdings Co., Ltd. Common Stock (Seino Common) Viterra, Inc. Common Stock (Viterra Common) Positions Eliminated Dundee Precious Metals Inc. November 2015 Warrants (Dundee 2015 Warrants) L.E. Lundbergforetagen AB Class B Common Stock (Lundbergs Common) Tokio Marine Holdings, Inc. Common Stock (Tokio Marine Common)

the past 25 years. It is not surprising that Japanese brokerage houses find it difficult to make money in such an environment. Depressed revenues from securities trading and issuance cannot cover fixed expenses, and in late 2011 the stock prices of Japanese brokerage houses fell well below their 30-year lows. Share price declines have been precipitous; over the six years ended January 31, 2012, Daiwa Securities Group (Daiwa) common stock produced a total return of -77%, in yen terms. During the quarter, we initiated a position in the common stock of Daiwa, the second largest Japanese brokerage. Even though it is losing money now, Daiwa has a solid and growing market share in the retail distribution of financial products (including mutual funds) in Japan, and it sports a strong balance sheet. The company avoided forays into toxic products during the financial crisis and managed to preserve its financial position. In fact, with a capital adequacy ratio of 27% (versus a required minimum of 8%), it ranks among the better capitalized financial services firms globally. Daiwas common stock trades at a roughly 40% discount to our estimate of net asset value, defined as liquidation value for the brokerage and investment banking businesses and a conservative estimate of the private market value of Daiwas consistently profitable asset management business. This kind of valuation discounts a doomsday scenario and ignores any potential for improvement, either from reviving market activity in Japan or from cost reduction plans currently underway at Daiwa. Another new position added to the Fund during the quarter was an investment in GP Investments Ltd. (GP), one of the largest Brazilian private equity firms headed by one of the more successful investment teams in Latin America. Between 2006 and 2008, GP conducted an IPO and completed multiple bond offerings, including a perpetual bond, and later a secondary equity issuance. This series of very well-timed capital raisings provided GP with a permanent capital base and the ability to invest considerable amounts of its own capital alongside the investors in the private equity funds that it manages. GP has a relatively

4,307,593 shares 5,809,070 shares 704,696 shares 847,000 shares 1,350,400 shares

108,300 warrants

550,175 shares 237,700 shares

REVIEW OF QUARTERLY ACTIVITY

The Japanese economy and stock market have been moribund for so long that investors are starting to forget their existence. In late 2011 Japans TOPIX stock index approached levels not seen since the depths of the 2009 financial crisis, which were the lowest levels reached during

29

Third Avenue International Value Fund (continued) (Unaudited)


liquid balance sheet and is well positioned to invest considerable amounts of capital in the current environment, which is marked by much more reasonable valuations than has been the case for a number of years. GPs own valuation has also changed considerably since the highs of the Brazilian equity market. As recently as 2008 (at the time of GPs secondary equity issuance), GP was valued at nearly three times its then net asset value, a remarkable vote of confidence in the prospective growth potential of the business and, implicitly, in the teams ability to compound the businesss underlying value. That was then. Today, following a few missteps and a decline in the value of its listed holdings, expectations appear much more muted, and GP was purchased at an approximately 24% discount to net asset value, which itself is based on relatively depressed prices of underlying assets and assigns virtually no value to the management company of one of the largest private equity firms in Latin America. At the end of January, Fund holding Catalyst Paper Corp. (Catalyst) filed for protection under the Canadian equivalent of Chapter 11. Catalyst attempted to negotiate, on a consensual basis, a recapitalization plan with two groups of bondholders and the companys unions, but was unsuccessful. The companys failure to garner the requisite support from the holders of one of the series of bonds and the rejection of the modified contract terms by one of the union locals (despite ratification by five other union locals at the mills) forced the company to file for bankruptcy. We expect the shares will have insignificant economic value at the end of this reorganization process and, therefore, have exited the position completely at the time of this writing. This very disappointing result is the consequence of a significant misjudgment on our part. Our investment thesis assumed that falling newsprint demand would result in both
1

a contraction of aggregate capacity, as well as a consolidation of the industry, which would result in economically rational planning of production and pricing as has been the case in a number of other paper grades, such as uncoated freesheet and containerboard. The falling demand for newsprint and groundwood paper grades did, indeed, result in a sharp contraction in aggregate industry capacity and the industry consolidation is well advanced, especially in the Eastern part of North America. However, our assumption that sensible production management and pricing discipline would follow was flawed. When demand dipped, pyrrhic price wars erupted in the quest for market share. As a result, one by one, each of the companies in the North American newsprint industry filed for bankruptcy. Catalyst, whose balance sheet was the best among its peers, was the last one to fall. Over the six years, ended January 31, 2012, Catalysts share price performance constituted a roughly -8.4% cumulative drag on the Funds performance, the large majority of which was felt back in 2007 and 2008. While Catalyst had a materially better balance sheet than its peers, this clearly proved insufficient to sustain it through the downturn that its industry faced. This painful experience, now behind us, has taught us several lessons. We will no longer hold large positions in securities in which we are restricted (by securities law, consensual agreements or otherwise) from selling our investment at will. We will also approach companies operating in competitive, economically sensitive, or cyclical industries with an even greater degree of stringency regarding balance sheet strength and the relative absence of nonfinancial liabilities.
WHERE WE ARE AND WHERE WE ARE GOING

During calendar 2011, the Fund returned -15.3%1, including reinvested dividends. While we are very much long-term investors, and the Fund is managed with a longer

The Funds five-year and ten-year average annual returns for the period ended December 31, 2011 were -3.74% and 8.16%, respectively. Fund performance returns are net of fees and assume reinvestment of dividends. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that an investors shares, when redeemed, may be worth more or less than original cost. Current performance results may be lower or higher than performance numbers quoted. 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. M.J. Whitman LLC, Distributor.

30

Third Avenue International Value Fund (continued) (Unaudited)


time horizon in mind (say, three to five years), we are disappointed with such a result. We are particularly disappointed, though, because in many cases the lackluster stock price performance has belied the strong underlying fundamentals and positive business-related developments at many of the Funds holdings, and we believe that the Fund is poised to deliver solid performance going forward, over the long term. In short, we believe that the Funds holdings trade at meaningful discounts to their underlying net asset values (NAVs). While we cannot control the timing of when these discrepancies between share price and NAV (or intrinsic value) are recognized, our experience has been that in most cases such discounts do not persist, as they are eventually recognized by either the public securities markets or through what we call resource conversion (mergers and acquisitions, share buybacks, asset dispositions, etc.). Further, one can do quite well, even in environments in which the discounts persist, provided that one has successfully identified investments in which the underlying NAV will grow over time. The long-term evidence seems to support these assertions. December 31, 2011 marked the ten-year anniversary of the Funds inception (December 31, 2001). Since inception, the Fund has generated annualized returns of 8.96%2 (as of January 31, 2012). While we do not manage the Fund to benchmark considerations, for the purposes of comparison, the MSCI All Country World exU.S. Index has generated annualized returns of 7.93%3 over that same period. While the Funds performance in 2011 was disappointing, it is our belief that, as we write this today, the Funds portfolio is rather inexpensive, and therein lies considerable
2

potential for solid absolute returns going forward, over the long term. Consider the table below, which provides some statistics on the largest twenty holdings in the Fund, as of January 31, 2012. At that date, the Funds ten largest holdings comprised 40.8% of assets, while the twenty largest made up 64.5% of assets.
THIRD AVENUE INTERNATIONAL VALUE FUND: TOP 20 POSITIONS4 Summary Statistics Top 10 Positions Percentage of Fund Assets Weighted Average P/B: Weighted Average ROE: Top 20 Positions Percentage of Fund Assets Weighted Average P/B: Weighted Average ROE: Percent Common Stock Investment of Assets WBL Corp. Ltd. 7.6% Netia SA 5.6% Viterra, Inc. 4.8% Leucadia National Corp. 3.7% Weyerhaeuser Co. 3.7% Taylor Wimpey plc 3.3% Sanofi 3.3% LG Corp. 3.0% White Mountains Insurance Group, Ltd. 2.9% Yuanta Financial Holding Co., Ltd. 2.9% Allianz SE 2.6% Nexans SA 2.6% Resolution Limited 2.5% P/B5 1.00x 0.99x 0.98x 1.20x 2.59x 0.77x 1.33x 1.42x 0.87x 1.20x 0.93x 0.80x 0.65x 40.8% 1.20x 11.6% 64.5% 1.06x 9.2% ROE6 10.1% 10.8% 6.9% 29.2% 7.2% 16.7% 10.4% 9.6% 3.2% 13.2% 7.2% -8.8% 16.0%

The Funds one-year, five-year average annual and ten-year average annual returns for the period ended January 31, 2012 were -12.28%, -2.19% and 9.04%, respectively. 3 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. An index is a hypothetical measure of performance based on the ups and downs of securities that make up a particular market it does not show actual investment return. This index is not a security that can be purchased or sold, and the total return is reflective of an unmanaged portfolio. The returns include reinvestment of interest, capital gains, and dividends. The index returns for the one-, five- and ten-year periods ended January 31, 2012 were -8.34%, -1.26% and 7.93%, respectively.

31

Third Avenue International Value Fund (continued) (Unaudited)


Common Stock Investment Mnchner RckversicherungsGesellschaft Hutchison Whampoa Ltd. Mitsui Fudosan Co. Ltd. Guoco Group Limited SEGRO plc Asatsu-DK Inc. Pargesa Holding SA Percent of Assets P/B5 2.5% 2.4% 2.4% 2.3% 2.2% 2.2% 2.2% 0.87x 0.89x 1.11x 0.54x 0.63x 0.94x 0.71x ROE6 2.4% 18.8% 4.2% 9.0% 4.5% -1.3% -1.1%

well below) the book value of its assets, as long as that company is not generating meaningful value creation from those assets, statistical cheapness may prove a moot point for investors who seek outsized returns in the future. Indeed, such a situation, in which a business chronically fails to generate sufficient return on its assets or equity, however cheaply those assets and equity are valued, describes the dreaded value trap which all value investors seek to avoid. With that caveat in mind, the table also illustrates the return-on-common equity (ROE) of each of those same Fund holdings. Generally speaking, ROE represents a companys earnings as a percentage of common shareholders equity (or book value). As you can see in the table, the weighted average ROE for the Funds Top 10 and Top 20 holdings was 11.6% and 9.2% over the last twelve months, respectively, suggesting that these holdings, notwithstanding many negative stock price movements, have indeed generated solid returns from their assets, which the Fund is currently not paying much for. These statistics illustrated above are encouraging in that they suggest, first, that the assets owned by the Funds investments are currently being valued rather inexpensively (as implied by a P/B of near 1). Additionally, the weighted average ROE of around 10% suggests that these holdings are generating solid earnings power from those relatively inexpensive assets. However, we cannot emphasize enough that we neither select investments nor manage the Fund based on statistics like those seen above. Indeed, statistics like the ROE (and even the P/B ratio, though to a lesser extent) are accounting, not real economic constructs. For example, ROE can be manipulated by things such as revenue and income recognition policies, by the point in time in a business or industry cycle, etc. In short, these statistics can be manipulated. We decided to include the table because it provides an objective, accounting-based snapshot of the valuation and profitability of the Funds largest holdings. However, what is much more important to us is our conviction that the Funds holdings are trading at significant

Source: Capital IQ 4. As of January 31, 2012 5. P/B ratios are calculated by Capital IQ based on the most recent book value data. Share prices are as of 2/8/2012 or 2/9/2012 for Asian listings. 6. ROE is calculated by Capital IQ based on the last twelve months of available data for each security.

Let us briefly provide some background to the table. The commonly cited price-to-book (P/B) ratio compares how a company is currently valued in the stock market as compared to its book value, or the accounting value of all of its assets as valued in the financial statements, after deducting total book liabilities. The P/B ratio has a number of analytical limitations, most notably in cases in which the accounting values of a businesss assets and liabilities differ, sometimes substantially, from their true economic values. Despite such limitations, the P/B ratio is a commonly used, objective benchmark that could provide a somewhat reasonable snapshot of the statistical cheapness of a stock or portfolio. Indeed, the P/B ratio arguably provides a more dependable assessment of valuation than do ratios based on current earnings or cash flow, as those ratios may swing wildly based on short-term, cyclical phenomena. Based on the data in the preceding table, the weighted average priceto-book (P/B) ratios for the Funds Top 10 and Top 20 holdings are currently 1.2 times and 1.06 times, respectively. We believe these valuations are quite modest, given the potential for value creation within those holdings. While these figures may seem attractive on the surface, statistical cheapness is clearly not a panacea for investors. Even if a companys stock price is trading at around (or even

32

Third Avenue International Value Fund (continued) (Unaudited)


discounts to our estimates of their true, economic value (NAV), and that these holdings are creating, or have the potential to create, meaningful value going forward, whether or not such value creation is formally recognized in the earnings reports and financial statements. We acknowledge that merely pointing to the discounts to NAV at which the Funds holdings trade, and asserting our confidence that these discounts will ultimately be recognized, requires some degree of patience from our fellow shareholders, particularly in the face of share price declines like those seen in 2011. But rather than simply pointing to our encouragement from the attractiveness of the portfolio, we thought it might be helpful to distinguish in some detail between the recent performance of the stock prices of many of the Funds holdings and real-world, actual events that have been taking place within many of these same holdings, which lend credence to our conviction that the significant discrepancies between stock prices and net asset values are beginning to become recognized. Indeed, some of the more encouraging developments of 2011 have affected some of the holdings whose stock prices performed poorly. For example, one of the largest detractors from the Funds performance during calendar 2011 was WBL Corp. Ltd. (WBL), a Singapore-based company which was the Funds largest holding as of January 31, 2012. Regular readers of these letters are likely quite familiar with WBL, as we have written often about the hidden value that lies within this obscure holding company. The companys disparate assets range from investments in two publicly-listed flexible printed circuit businesses (which supply key components to the likes of Apples iPhone and Research in Motions Blackberry) to various property assets (from those connected to its automotive dealerships throughout Southeast Asia, to a lowcost land portfolio in China, to land on Australias Sunshine Coast, that is potentially much more valuable under alternative uses). To summarize what we have already written in greater detail in past letters (see the First Quarter 2010 Letter, among others), we believe that WBL has a unique
3

collection of assets of considerable value which, due in part to the companys obscurity and in part to the complexity of its corporate structure, have not yet been reflected in the companys common stock price. The stock trades at a large discount to the estimated value of its high quality assets, a discrepancy which we believe will be recognized over time. Recent events suggest that others share our view about the potential of this investment. In January 2012, two of WBLs Directors, including its Chairman, failed to receive enough votes from shareholders to be re-elected, while a third Director, who had been nominated by another large shareholder, did not stand for re-election and was replaced by another appointee. These changes at the Board level may well reflect the desire of WBLs shareholder base to expedite the process of crystallizing some of WBLs latent value, which we believe to be significant. Similarly, the stock price performance of Netia S.A. (Netia), the Polish provider of telecommunications services that is the Funds second largest position, was slightly better than flat in 2011 in local terms but down over 10% in U.S.-dollar terms, despite the significant progress that its management team has made in increasing cash generation, improving profit margins and growing its business. For example, Netia generated about 380 million zloty (roughly US$120 million) in EBITDA3 over the twelve months ended September 30, 2011, and is estimated to have generated nearly 400 million zloty in EBITDA during calendar 2011, which is an improvement of over 160% from the 150 million zloty generated in 2008, just three years earlier. Beyond continued operational improvements, we have often written about how Netias fortress-like balance sheet provides flexibility and the ability to be opportunistic. In September 2011, Netia announced two acquisitions that, once again, confirmed the companys position as the prime consolidator of the Polish alternative telecom market. The valuations of these two acquisitions are quite attractive, at

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): one frequently used measure of operating cash flow.

33

Third Avenue International Value Fund (continued) (Unaudited)


about 4 times EBITDA after taking expected synergies into account. Netias own valuation remains quite modest, at less than 5 times EBITDA, and the company has considerable long-term growth opportunities, not the least of which is the continued growth of broadband demand in Poland. Furthermore, given its high-quality assets including a nationwide fiber optic network we believe that Netia might ultimately make an attractive takeover candidate. Thus, despite its stock price performance in 2011, the underlying investment case remains very attractive. Developments at Viterra, Inc., the Funds third largest holding, have been similarly promising. Viterra, as we have noted in the past, owns a significant amount of grain elevators and other grain handling infrastructure located primarily in the Canadian Prairie Provinces and in South Australia - which are essential components in moving grains from the farm to ports in these two major grain exporting areas. Viterra recently announced record results for its 2011 fiscal year (ended October 31, 2011), including EBITDA of over C$700 million, handily surpassing the previous peak of around C$530 million, reached in 2008. In addition to the strong current performance of the business, recent events suggest that the upside could be even greater still. The Canadian government recently ruled that, effective August 1, 2012, the Canadian Wheat Board (CWB) will no longer have a marketing monopoly on the sale of wheat, durum and barley for export and human consumption in Western Canada. This means that Western Canadian growers will have the freedom to market these grains to buyers of their choice, including Viterra. Should this ruling stand (it is being challenged by opponents of the legislation), Viterras earnings power seems likely to increase considerably, via additional market share gained from less efficient operators (which have to date been allocated rail cars by the CWB, despite their relatively inefficient operations). Despite its strong business performance and the recent favorable news regarding the CWB, Viterras stock price has been sluggish throughout much of the past twelve months. In our opinion, the recent share price performance does not reflect the compelling attributes of this investment. With Viterras dominant grain handling market share in Western Canada and South Australia, it would be difficult for a new competitor to enter these markets and establish themselves with a meaningful amount of scale, absent an acquisition of one of the major players already present. Viterra occupies an essential position at what is effectively a choke point in the global grain supply chain, and its current valuation of less than 7 times EBITDA seems modest, considering the solid long-term fundamentals supporting grain demand, including global population growth and increasing meat production driven by growing middle classes in emerging countries. Furthermore, as the owner of high quality, defensible, agricultural infrastructure assets, Viterra is wellsituated in an area which is of considerable interest to the large global agricultural commodities traders and logistics companies. Finally, in late 2011, Alberta Investment Management Corp. (AIMCo), Viterras largest shareholder since 2009, had a representative appointed to Viterras Board of Directors and declared its commitment to Viterras long-term success and value creation. The involvement and commitment of AIMCo, one of Canadas largest and most respected institutional investment managers, seems likely to complement an already promising investment case. Numerous other examples of positive developments affecting many of the Funds largest holdings abound. For example, Bermuda-based White Mountains Insurance Group Ltd. (White Mountains), an insurance holding company whose shares were purchased in the Fund during the third quarter of 2011, recently completed its sale of Esurance Holdings, Inc. to Allstate Corp. The sale of Esurance, a direct writer of personal auto insurance via the Internet, was the latest of a number of successful deals executed by White Mountains management team. After the completion of this sale, which brought in proceeds of roughly $1 billion, White Mountains has undeployed capital totaling approximately $2 billion. This significant dry powder is now available to a management team with an exceptional record of value creation via timely buying

34

Third Avenue International Value Fund (continued) (Unaudited)


and selling of businesses. Even if an acquisition opportunity does not become immediately available, White Mountains will likely continue to repurchase shares at meaningful discounts to NAV, which should continue to build value over time. In fact, since January 2010, White Mountains has repurchased about $475 million worth of shares, including over $135 million during the third quarter of 2011 alone. for the deployment of excess capital. In all three examples noted above (Sanofi, GSK, and White Mountains), the companies have repurchased shares at what we believe to be inexpensive valuations, and all three also have the financial strength and/or substantial cash flow generation to continue opportunistically repurchasing shares as and when they are priced accordingly.

In summary, though recent performance has been In several other cases, the management teams of companies somewhat disappointing, we believe the Funds portfolio is held by the Fund have addressed the attractive valuation of attractively valued, and we remain encouraged by what have their own shares by repurchasing stock. Examples include been promising company-level business developments Sanofi and GlaxoSmithKline (GSK), two European affecting many of the Funds holdings. We cannot control pharmaceutical holdings which have used their prolific free or predict the timing of when these discrepancies between cash flow generation to buy back stock prices and intrinsic values are shares at attractive valuations, in recognized, either in the market or Though recent performance through resource conversion addition to reinvesting cash flow into growing segments that are less activities. However, as noted earlier, has been somewhat reliant on patent protection, such as has that such disappointing, we believe the our experiencetend been to persist vaccines, consumer healthcare discrepancies not Funds portfolio is attractively indefinitely, particularly in markets products, and treatments used in emerging markets (branded where there is a legitimate threat of valued, and we remain generics, over-the-counter changes of corporate control (e.g., medications, etc.). During calendar encouraged by what have been through takeovers). We continue to 2011, Sanofi opportunistically see meaningful potential for value promising company-level repurchased nearly 1.1 billion creation among many of the business developments (about $1.4 billion) of shares at Funds holdings, and events driven affecting attractive prices. GSK completed by other major stakeholders in 2.2 billion (about $3.5 billion) of many of the Funds holdings. these companies whether other share repurchases in 2011 and large shareholders, management recently announced its intention to teams through share repurchases repurchase another 1-2 billion worth of shares in 2012. and/or operational improvements, or others seem to imply a wider recognition of that latent value present within Share buybacks might not seem particularly exciting, and the many of these holdings. Therefore, we remain confident in value that repurchases can create is not readily seen in a the positioning of the Funds portfolio for 2012 and companys earnings release or in financial ratios such as those beyond, short-term fluctuations notwithstanding. noted earlier. But when used to acquire undervalued securities, they represent a sensible way to build wealth over time. If one MATTHEW FINE PROMOTED TO CO-PORTFOLIO MANAGER were to think of it along the lines of purchasing dollar bills for Switching gears, as mentioned in the previous quarterly only 70, or 80, or 90 cents whatever the case may be - it is letter, the enterprise of managing the Fund cannot be the easy to see how this may prove to be a compelling way to build work of a single individual, given its labor intensity, and I wealth over time absent more attractive, external opportunities

35

Third Avenue International Value Fund (continued) (Unaudited)


(Amit) am grateful to the team of diligent and enterprising analysts on the research team at Third Avenue who have made this possible. It is, therefore, my pleasure to welcome Matt Fine as a Co-Portfolio Manager of the Fund. Matt and I have worked together for almost a decade, and he is one of those who have greatly contributed to my education as an investor. I look forward to prospecting for interesting investment opportunities for the Fund with him in the years ahead!
GEOGRAPHICAL DISTRIBUTION OF INVESTMENTS

noted in prior letters, there is no attempt to allocate the portfolio assets among countries (or sectors) based upon an overarching macroeconomic view or index-related considerations. We look forward to writing to you again when we publish our Quarterly Report for the period ended April 30, 2012. Sincerely,

At the end of January 2012, the geographical distribution of securities held by the Fund was as follows:
Country _____ Canada United Kingdom United States Singapore Japan Germany France Poland Hong Kong South Korea Bermuda Taiwan Austria Switzerland New Zealand Greece Norway Chile Finland Brazil Equities total Cash & Other Total % of Net Assets ________ 10.57 10.07 9.45 8.39 7.35 7.01 5.82 5.55 4.68 3.04 2.91 2.89 2.38 2.17 2.13 1.73 1.72 1.58 1.36 0.49 ______ 91.29 8.71 ______ 100.00% ______ ______

Amit Wadhwaney Co-Portfolio Manager, Third Avenue International Value Fund

Matthew Fine Co-Portfolio Manager, Third Avenue International Value Fund

Note that the table above should be viewed as an ex-post listing of where our investments reside, period. As we have

36

Third Avenue Focused Credit Fund (Unaudited)

THOMAS LAPOINTE
PORTFOLIO MANAGER OF THIRD AVENUE FOCUSED CREDIT FUND

Dear Fellow Shareholders, What a difference a quarter makes. When I wrote to you at the end of our October quarter, I remarked that greed would have to replace fear as the dominant emotion in the worlds markets in order for us to see realization of the substantial value embedded in the Funds portfolio. The gloomy outlook stemmed from fears of a sovereign debt default in Europe (particularly with Italy on the brink), an economic crash landing for China and the possibility of a double dip recession in the United States. During those fear fueled months, we added to most of the existing positions in the Fund. Our willingness to buy when others were fearful (to paraphrase Warren Buffett) was not just an expression of contrarianism. It was informed by an acutely different outlook. Our analysis of Italys debt situation, which took up the bulk of our last letter, convinced us that a catastrophic default would simply not be allowed to happen in a world regulated by central bankers who lived through the consequences of the Lehman Brothers default in 2008. Our take on the U.S. economy has been (and still is) that it will be stronger a

year from now than it is today and that default rates will remain modest. During our last fiscal quarter, two things have happened to validate our views. The first is that U.S. economic numbers have, for the most part, come in better than expected and default rates have remained at the low levels that we have been anticipating. This has been positive for risk assets worldwide, including domestic and global equities and high-yield debt. The second event was the establishment of Long-Term Repo Operations (LTRO) by the European Central Bank which injected substantial liquidity into the Euro zone and has set up the ECB as a credible backstop for European sovereign borrowers, making it a lender of last resort in much the same way that the U.S. Federal Reserve is the ultimate lender to U.S. institutions. The LTRO has so far silenced the bears and stopped a liquidity crisis in Europe from turning into a solvency crisis and allowed for a mechanism to recapitalize the banking system with low cost capital. It also stops banks from pulling substantial liquidity from the real economy.

* Portfolio holdings are subject to change without notice. The following is a list of Third Avenue Focused Credit Fund's 10 largest issuers, as of January 31, 2012: Lehman Brothers Holdings, 5.85%; IntelSat Luxembourg SA, 4.97%; Koosharem Corp., 4.50%; Nuveen Investments, Inc., 4.12%; Clear Channel Communications, Inc., 4.06%; Caesars Entertainment Operating Co., Inc., 4.03%; Energy Future Holdings Corp./TXU Corp., 3.32%; CityCenter Holdings, 3.06%; Aveos Fleet Performance, 2.93%; and Platinum Energy Solutions, Inc., 2.85%.

37

Third Avenue Focused Credit Fund (continued) (Unaudited)


Europe still has a debt issue to contend with, as nothing the ECB has done has removed a eurocent of debt from any countrys balance sheet or stimulated GDP growth. But the ECB has substantially reduced the risk of a sovereign default. By the time you receive this letter, the ECB will have made one last injection into the Eurozone, adding between $500 million and $1 trillion of liquidity into the system, through the three year LTRO program. In response to the ECBs actions we are already seeing that some of Europes financial institutions are once again able to finance themselves in the private capital markets. In the long run, this will serve to reduce reliance on the ECB and help return us to an environment of normally functioning private markets. performance. Historically, high-yield credit performance has been more closely tied to equities than to investment grade corporates or Treasuries. In recent months, both equities and high yield have staged recoveries, but the pace of the recovery in stocks has been far more rapid. Some mean reversion seems in order.

The gap between high yield and equities will narrow, we believe, because of improving fundamentals on the part of corporate borrowers. At current prices, the market is anticipating default rates that are far higher than seems realistic. New high-yield issuance since the start of 2012 is north of $30 billion, which puts us on track for a record year. Most of this newly issued debt The Fund underperformed last year because we owned is being used to refinance and lower-rated bonds and loans in an strengthen corporate balance environment where investors, We believe the purchases sheets. Maturities are being worried about global macroextended. Borrowing costs economic shocks, flocked to the we made during the latter continue to fall. This serves to safety of higher rated corporate months of 2011 have mitigate the risk of default. bonds and Treasury bonds. Typically, lower-rated credits trade positioned the Fund well During the down months we were more like stocks while higher able to purchase securities at fire to deliver superior rated credits trade in line with sale prices, lowering the Funds performance. Treasuries. For most of the last total cost basis. Given the Funds year, Treasuries were the favored current yield to maturity of asset. In addition, one specific 10.5% (and 30-day SEC yield of 8.45%) and the investment cost the Fund 300 basis points of performance. discount that we have paid for our securities, we can say that if prices were to recover to where they were a The Fund invested heavily into existing positions starting year ago that the Fund would deliver a substantial in August and extending through November and into the double digit return. The world is in no worse shape recent rally, with cash reaching a low point of 5%. The now than it was a year ago and conditions at our Fund now has a prudent cash position of approximately portfolio companies are largely improving in ways that 10%, which affords us dry powder to make opportunistic we believe will drive future returns. investments as we unearth them. Two percentage points of that cash is the result of recent interest payments owed We are also seeing key investment theses starting to to the Fund that we are about to receive. The Fund become reality in important investments, particularly currently owns issues from 57 companies, with 40% of in our largest position, the bonds of Lehman Brothers our assets concentrated in the top ten holdings. Holdings, and in the bonds of Ainsworth Lumber. These are also some of the investments that we added We believe the purchases we made during the latter months to most enthusiastically during the down months. of 2011 have positioned the Fund well to deliver superior

38

Third Avenue Focused Credit Fund (continued) (Unaudited)


FROM THESIS TO REALITY Lehman Brothers Holdings

liquidate its holdings. These bonds represent claims on the assets of the former investment bank, which is in the final processes of being reorganized in order to pay its creditors. In mid-December, bankruptcy court judge James Peck confirmed Lehmans Plan of Reorganization. The plan represents compromises among the debtors three key creditor groups, and two dozen foreign subsidiaries. After more than three years, Lehman will exit bankruptcy in February and begin making semi-annual cash distributions to bondholders in March. We continue to believe Lehman bonds have limited downside and attractive upside. With the plan approved, Chapter 11 process risk has been eliminated. In addition, we believe Lehmans assets are conservatively valued and much of the work done in appraising those assets took place during the global recession years. Prices for many of Lehmans assets have improved since they were first appraised. There is also additional upside from claims reduction. As distributions are made to the Fund through the liquidation of Lehmans assets, the size of the investment relative to the overall portfolio will naturally shrink. Meanwhile, the payments we receive will fund any number of new investments. In the next two weeks the Lehman Estate is will distribute $18 billion worth of cash and over the course of the dissolution of the estate, it will distribute more than $60 billion. This represents as much as 38% of the entire U.S. distressed debt market. Other investment funds operating in our space will have substantial capital to deploy into distressed assets like those owned by the Focused Credit Fund.
Ainsworth Lumber Co.

Lehman is the Funds largest position, at 6% of assets. In March, the company will make its first distribution of capital to shareholders, which will convert 20% of our position into a $10 million cash payment to the Fund. Lehmans bonds generated a 14% return for the Fund during the last fiscal year. We expect similar returns in the future as Lehman enters its distribution phase. This is the beginning of the realization of our investment thesis, which we expect will play out over the next two to three years. Lehman is a unique investment. The other holders of these debts are largely hedge funds and institutions. So far as we know, we are the only high-yield mutual fund with a meaningful position in this issue. We believe there are three reasons for this: i) As Lehman tumbled towards default in late 2008 it was an investment grade rated bond, with low coupons trading from 70-95 cents, meaning that only investment grade bond funds owned it pre-bankruptcy. Once Lehman filed, the bonds dropped instantly into the teens. High-yield mutual funds did not have time to look at it or add it to their portfolios, nor was it ever added to any high-yield indexes, even though the market value of the outstanding debt is multiples of what has been issued by major index components like Ford, HCA or CIT Group. ii) Lehman does not pay a coupon, so funds managed for yield, rather than total return, have stayed away. iii) Perhaps the most important factor is this: Lehman is a very complicated bankruptcy to understand and evaluate. For Third Avenue, which built it into the Funds largest position, it was worth the work and attention. For a rival fund with, say 300 securities in its portfolio and an average 30 basis point weighting, Lehman might not be worth the intellectual effort. Lehman was added to the portfolio over a year-and-a-half ago and we have continued adding whenever prices seem attractive. We added meaningfully to the position over the last six months when the market swooned and a well-known private investor was rumored to have been forced to

We added significantly to our stake in Ainsworth bonds in the latter part of 2011, paying an average price of 70 cents on the dollar. Ainsworth is a leading manufacturer and supplier of oriented strand board (OSB) that are used primarily for new home construction in the United

39

Third Avenue Focused Credit Fund (continued) (Unaudited)


States, Canada and Japan. Ainsworth has production capacity of 1.6 billion square feet per year (3/8-inch basis), which includes three wholly-owned OSB manufacturing facilities in Grande Prairie, Alberta, 100 Mile House, British Columbia, and Barwick, Ontario. While Ainsworth is a deeply cyclical business and new home construction is at trough levels, we are being paid 20% yield to maturity to wait until housing demand and home prices rebound. Given the low prices that we have paid for these bonds, we do not need the housing market to return to anything resembling the peak levels of the middle part of the last decade. Far more modest improvements will serve our investment well. While we would not predict when the housing market might recover, we do believe that we have invested at the bottom of Ainsworths cycle. If these bonds return to par (they traded at or above par in the spring of 2011 and the housing market is certainly no worse today than it was then) these bonds have the potential to generate a 50% return for the Fund. There is also another way for us to win. Ainsworth is operating in a consolidating industry. A buyer could emerge that could improve the companys financial position and thus credit-enhance our bonds. Such talk of resource conversion is not just idle speculation. Brookfield Asset Management owns 55% of Ainsworths equity. Brookfield specializes in rehabilitating and opportunistically selling companies like Ainsworth. Brookfields equity has long been a major component of Third Avenue portfolios, so this is a company that we know extremely well and that we have invested alongside in the past. We believe it is a benefit to have a competent strategic partner with interests aligned with ours.
Rising Dividends

investments are candidates for restructuring and others we expect to remain as performing credits. In either case, we get paid while we wait. Paying lower prices gives us capital appreciation potential as performing bonds trade back towards par. It also increases the yield to the Fund, adding to our total return. We are happy to report that the Fund has offered rising distributions in each of the last four quarters, from 17 cents per share, to 18 cents, to 20 cents and, in the most recent quarter, 22 cents.
THE CURRENT CASE FOR HIGH YIELD

If you are an institutional investor with $100 million to put to work in bonds today, you face an interesting choice. Consider a hypothetical portfolio of high-yield bonds with 5-year maturities, versus one with 5-year Treasuries. On one hand, you have 5-year Treasuries, where you can avoid default risk and earn $1 million a year. On the other hand, you have high yield, where, as compensation for enduring default risk, you can earn $6 million more per year. Generally speaking, high yield is particularly attractive now for several reasons: default rates are low; the U.S. economy is improving; rising equity valuations provide alternatives to restructurings; corporations have extended their maturities through refinancing; and systemic risks from Europe are on the wane.

The Focused Credit Fund is a total return vehicle, rather than a pure income generator. But, income is a part of total return and it is always on the mind of bond investors. Fortunately, income is generated as a consequence of our low cost purchases of bonds and loans. Some of our

High-yield bonds would need to have average annual default rates of 12%, over the 5-year period (for a cumulative 60% default rate), in order to underperform Treasuries, assuming average loss rates (of 50%). To put this into perspective, over the last 25 years, the average annual default rate has been approximately 4%. Given the 2% default rate over the trailing 12 months and our expectation for an environment in which default rates remain low for the next several years, it seems very unlikely to us that high yield would underperform Treasuries over that time frame.

40

Third Avenue Focused Credit Fund (continued) (Unaudited)


As always, we thank you for your support of the Third Avenue Focused Credit Fund. My team and I believe that this is a good time to be invested in the high yield and distressed credit space and we have invested alongside you and on the same terms. We look forward to writing you after the end of the Funds second fiscal 2012 quarter in April. Sincerely,

Thomas Lapointe Portfolio Manager, Third Avenue Focused Credit Fund

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Third Avenue Value Fund Third Avenue Small-Cap Value Fund Third Avenue Real Estate Value Fund Third Avenue Inter national Value Fund Third Avenue Focused Credit Fund

FIRST QUARTER REPORT


January 31, 2012

THIRD AVENUE FUNDS

Privacy Policy Third Avenue Funds (the Funds) respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms and from the transactions you make with us, our affiliates, or third parties. We do not disclose any information about you or any of our former customers to anyone, except to our affiliates (which may include the Funds affiliated money management entities) and service providers, or as otherwise permitted by law. To protect your personal information, we permit access only by authorized employees. Be assured that we maintain physical, electronic and procedural safeguards that comply with federal standards to guard your personal information. Proxy Voting Policies and Procedures The Funds have delegated the voting of proxies relating to their voting securities to the Funds investment adviser pursuant to the advisers proxy voting guidelines. A description of these proxy voting guidelines and procedures, as well as information relating to how a Fund voted proxies relating 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 HoldingsForm N-Q The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds Form N-Q is available on the SECs website at http://www.sec.gov, and may be reviewed and copied at the SECs Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Third Avenue Trust Third Avenue Value Fund Portfolio of Investments at January 31, 2012 (Unaudited)
Principal Amount ($) Corporate Bonds & Notes - 0.26% Consumer Products - 0.08% 18,010,162 Home Products International, Inc., 2nd Lien, Convertible, PIK, 6.000%, due 3/20/17 (b) (c) (e) $ Financial Insurance - 0.18% 9,630,000 MBIA Insurance Corp., 14.000%, due 1/15/33 (d) (f) Total Corporate Bonds & Notes (Cost $27,176,665) Shares Preferred Stocks - 0.01% Insurance & Reinsurance - 0.01% 4,775 Ecclesiastical Insurance, 8.625% (United Kingdom) 1,022,245 RS Holdings Corp., Convertible, Class A (a) (b) (c) (e) Total Preferred Stocks (Cost $1,022,936) Common Stocks - 95.14% Annuities & Mutual Fund Management & Sales - 3.72% 6,000,000 Bank of New York Mellon Corp. (The) Auto Supply - 0.00% 191,736 ISE, Ltd.1 (a) (b) 460,467 ISE, Ltd. Restricted Voting Shares1 (a) (b) (e) Automotive - 4.88% 5,515,800 Toyota Industries Corp. (Japan) Consumer Products - 0.00%# 526,368 Home Products International, Inc. (a) (b) (c) (e) Value (Note 1) Shares Depository Institutions - 3.00% 14,567 Carver Bancorp, Inc. (a) $ 10,728,450 Chong Hing Bank, Ltd. (Hong Kong) 10,000,000 KeyCorp 2,636,688 Diversified Operations - 12.19% 5,147,197 Brookfield Asset Management, Inc., Class A (Canada) 16,546,000 Hutchison Whampoa, Ltd. (Hong Kong) 14,272,822 Wharf (Holdings), Ltd. (The) (Hong Kong) Financial Insurance - 0.02% 37 Manifold Capital Holdings, Inc. (a) (b) (c) (e) Holding Companies - 22.66% 83,370 Capital Southwest Corp. 26,752,000 Cheung Kong Holdings, Ltd. (Hong Kong) 7,904,996 Investor AB, Class A (Sweden) 160,000,000 Lai Sun Garment International, Ltd. (Hong Kong) (a) (c) 1,334,600 RHJ International (Belgium) (a) 1,982,750 RHJ International (Belgium) (a) (e) 57,217,500 Wheelock & Co., Ltd. (Hong Kong) Insurance & Reinsurance - 0.00%# 127,500 Olympus Re Holdings, Ltd. (Bermuda) (a) (b) (e) 9,337 RS Holdings Corp., Class A (a) (b) (c) (e) Value (Note 1) 137,072 19,367,181 77,700,000 97,204,253

5,922,450 8,559,138

156,835,093 157,346,267 81,161,457 395,342,817

8,286 194,023 202,309

555,000 7,398,254 360,129,047 155,369,050 14,441,737 6,075,092 9,025,468 182,601,979 735,040,627

120,780,000 158,193,897

142,800 1,772 144,572

26,318

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Value Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Shares Common Stocks (continued) Manufactured Housing - 2.58% 1,014 Fleetwood Homes, Inc. (a) (b) (c) (e) $ Mutual Holding Companies - 0.30% 47,859 Colonial Financial Services, Inc. (a) 232,032 FedFirst Financial Corp. (c) 205,511 Gouverneur Bancorp, Inc. (c) 249,757 Home Federal Bancorp, Inc. (c) 242,800 SFSB, Inc. (a) (c) ^ Non-U.S. Real Estate Operating Companies - 21.94% 24,220,000 Hang Lung Group, Ltd. (Hong Kong) 30,534,000 Hang Lung Properties, Ltd. (Hong Kong) 83,412,054 Henderson Land Development Co., Ltd. (Hong Kong) Oil & Gas Production & Services - 2.39% 776,800 Cenovus Energy, Inc. (Canada) 380,000 Devon Energy Corp. 1,304,301 EnCana Corp. (Canada) Semiconductor Equipment Manufacturers - 0.76% 2,000,000 Applied Materials, Inc. Steel & Specialty Steel - 9.11% 3,220,963 POSCO, ADR (South Korea) Telecommunications Equipment - 2.29% 1,871,861 Sycamore Networks, Inc. (a) (c) 10,008,450 Tellabs, Inc. Value (Note 1) Shares U.S. Real Estate Operating Companies - 5.41% FNC Realty Corp. (a) (b) (c) Forest City Enterprises, Inc., Class A (a) (c) Forest City Enterprises, Inc., Class B (a) (c) Tejon Ranch Co. (a) (c) Value (Note 1)

83,804,000 594,887 3,243,807 1,726,292 3,584,013 607,000 9,755,999

9,487,910 8,764,203 22,500 1,875,106

6,641,537 115,073,985 296,100 53,440,521 175,452,143

153,809,008 104,925,806 452,806,142 711,540,956

Utilities, Utility Service Companies & Waste Management - 3.89% 8,816,889 Covanta Holding Corp. (c) 125,993,344 Total Common Stocks (Cost $2,829,653,340) 3,085,838,812 Investment Amount ($) or Partnership Units Limited Partnerships - 0.37% Infrastructure - 0.36% 400,000 Brookfield Infrastructure Partners L.P. (Canada)2 11,668,000 Insurance & Reinsurance - 0.01% 1,805,000 Insurance Partners II Equity Fund, L.P. (a) (b) 376,839 Total Limited Partnerships (Cost $8,007,814) 12,044,839 Total Investment Portfolio - 95.78% (Cost $2,865,860,755) 3,106,645,098 Other Assets less Liabilities - 4.22% 136,789,511 NET ASSETS - 100.00% $ 3,243,434,609

28,306,592 24,247,800 24,951,278 77,505,670

24,560,000 295,555,565

36,351,541 38,032,110 74,383,651

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Value Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Value (Note 1) Investor Class: Net assets applicable to 584,131 shares outstanding $ Net asset value, offering and redemption price per share
(f) Variable rate security. The rate disclosed is in effect as of January 31, 2012. # Amount represents less than 0.01% of total net assets. ^ Classified as Level 3 security in the summary by level of inputs table. 1 Incorporated in Cayman Islands. 2 Bermuda exempted limited partnership. Country Concentration % of Net Assets ________ 47.07% 22.63 9.11 6.84 4.88 4.79 0.46 0.00# 0.00# _______ 95.78% _______ _______

25,860,972 $44.27

Institutional Class: Net assets applicable to 72,701,558 shares outstanding $ 3,217,573,637 Net asset value, offering and redemption price per share $44.26
Notes: ADR: American Depositary Receipt. PIK: Payment-in-kind. (a) Non-income producing security. (b) Fair-valued security. (c) Affiliated issuersas defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of these issuers). (d) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. (e) Restricted security subject to restrictions on resale.
Acquisition Shares/ Principal Amount __________ Issuer _______________________ 1,014 Fleetwood Homes, Inc. 526,368 Home Products International, Inc. $18,010,162 Home Products International, Inc., 2nd Lien, Convertible, PIK, 6.000%, due 3/20/17 460,467 ISE, Ltd. Restricted Voting Shares 37 Manifold Capital Holdings, Inc. 127,500 Olympus Re Holdings, Ltd. 1,982,750 RHJ International 9,337 RS Holdings Corp., Class A 1,022,245 RS Holdings Corp., Convertible, Class A Pfd. 1/31/12 Carrying Acquisition Acquisition Value Date Cost Per Unit ________ ________ _________ 8/14/09-4/29/11 $71,000,000 $82,646.94 5/30/07 54,667,471 0.05

Hong Kong United States South Korea Canada Japan Sweden Belgium Bermuda United Kingdom Total

# Amount represents less than 0.01% of total net assets.

3/16/07-10/24/11 3/8/06 - 4/11/08 9/24/97-11/10/06 12/20/01 3/29/05-3/14/07 5/9/03

18,010,162 14.64 4,280,822 42,781,514 15,000.00 12,019,608 1.12 50,259,540 4.55 9,105 0.19 0.19

3/18/02-4/20/04 1,013,140

At January 31, 2012, these restricted securities had a total market value of $96,386,069 or 2.97% of net assets of the Fund.

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Small-Cap Value Fund Portfolio of Investments at January 31, 2012 (Unaudited)
Shares Preferred Stocks - 0.24% U.S. Real Estate Investment Trust - 0.24% 74,250 Excel Trust, Inc., 8.125% $ Total Preferred Stocks (Cost $1,856,250) Common Stocks - 77.30% Agriculture - 1.95% 1,389,387 Viterra, Inc. (Canada) Auto Supply - 0.97% 407,365 Superior Industries International, Inc. Chemicals & Industrial Materials - 8.37% 89,242 Compass Minerals International, Inc. 363,859 Lanxess AG (Germany) 123,626 Minerals Technologies, Inc. 177,910 Sensient Technologies Corp. 71,282 Stepan Co. 219,484 Westlake Chemical Corp. Computer Peripherals - 2.12% Lexmark International, Inc., Class A Consulting and Information Technology Services - 3.41% ICF International, Inc. (a) ManTech International Corp., Class A Value (Note 1) Shares 655,492 405,684 1,134,929 857,266 198,327 Electronics Components - 6.76% Bel Fuse, Inc., Class B (c) $ Electronics for Imaging, Inc. (a) Ingram Micro, Inc., Class A (a) MEMC Electronic Materials, Inc. (a) Park Electrochemical Corp. Energy/Services - 6.82% Bristow Group, Inc. Pioneer Drilling Co. (a) SEACOR Holdings, Inc. (a) SemGroup Corp., Class A (a) Value (Note 1) 13,273,713 6,961,537 21,540,952 3,917,706 6,023,191 51,717,099 13,203,910 6,478,507 19,333,699 13,153,472 52,169,588 7,297,471 315,644 14,560,753 22,173,868 6,670,122 6,237,199 15,035,117 27,942,438

1,874,813 1,874,813

14,951,118 7,401,822

269,138 726,290 211,228 496,920

6,520,913 23,699,619 7,844,070 7,048,794 6,125,975 12,828,840 64,068,211 16,212,516

Forest Products & Paper - 2.90% 623,800 Canfor Corp. (Canada) (a) 21,530,352 Catalyst Paper Corp. (Canada) (a) (b) (c) (d) (e) 985,166 P.H. Glatfelter Co. Healthcare Services - 3.65% 1,081,057 Cross Country Healthcare, Inc. (a) 96,016 Haemonetics Corp. (a) 245,712 Teleflex, Inc.

464,542

330,208 475,306

9,358,095 16,707,006 26,065,101 2,738,678 4,979,171 7,717,849

Consumer Products - 1.01% 53,668 J&J Snack Foods Corp. 325,862 JAKKS Pacific, Inc.

Holding Companies - 6.59% 197,855 Ackermans & van Haaren NV (Belgium) 15,887,925 731,866 JZ Capital Partners, Ltd. (Guernsey) 4,096,996 1,590,916 JZ Capital Partners, Ltd. Limited Voting Shares (Guernsey) (d) 8,905,971 308,007 Leucadia National Corp. 8,550,274 475,780,230 PYI Corp., Ltd. (Hong Kong)1 (c) 13,005,997 50,447,163

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Trust Third Avenue Small-Cap Value Fund Third Avenue Small-Cap Value Fund Portfolio of Investments Portfolio of Investments (continued) at January 31, 2012 at January 31, 2012 (Unaudited)
Shares Common Stocks (continued) Industrial Equipment - 4.09% 133,849 Alamo Group, Inc. 569,485 Oshkosh Corp. (a) 920,788 Wacker Neuson SE (Germany) Industrial Services - 1.85% 221,350 EMCOR Group, Inc. 129,059 UniFirst Corp. Value (Note 1) Shares Retail - 1.59% 239,800 A eropostale, Inc. (a) 585,456 American Eagle Outfitters, Inc. Securities Trading Services - 2.86% 596,785 Broadridge Financial Solutions, Inc. 667,088 Investment Technology Group, Inc. (a) Semiconductor Equipment Manufacturers - 0.94% 473,977 Electro Scientific Industries, Inc. Telecommunications Equipment - 1.49% 144,867 Sycamore Networks, Inc. (a) 2,260,907 Tellabs, Inc. U.S. Real Estate Investment Trust - 0.34% Excel Trust, Inc. U.S. Real Estate Operating Companies - 6.25% Alexander & Baldwin, Inc. Alico, Inc. Vail Resorts, Inc. Total Common Stocks (Cost $552,592,526) $ Value (Note 1) 3,925,526 8,249,075 12,174,601 14,304,936 7,564,778 21,869,714

3,895,006 13,827,096 13,549,856 31,271,958 6,381,521 7,792,582 14,174,103

24,107 194,536 9,824 413,070 90,218

203,389 636,678

245,455 234,070

2,969,100 73,637

Insurance & Reinsurance - 4.47% Alleghany Corp. (a) 6,975,360 Arch Capital Group, Ltd. (Bermuda) (a) 7,013,023 E-L Financial Corp., Ltd. (Canada) 3,723,068 HCC Insurance Holdings, Inc. 11,466,823 Transatlantic Holdings, Inc. 5,002,588 34,180,862 Media - 4.58% Liberty Media Corp. - Liberty Capital, Series A (a) 16,761,320 Madison Square Garden, Co. (The), Class A (a) 18,266,292 35,027,612 Metals Manufacturing - 2.39% Encore Wire Corp. 6,700,922 Kaiser Aluminum Corp. 11,558,377 18,259,299 Non-U.S. Real Estate Investment Trust - 1.34% SEGRO PLC (United Kingdom) 10,283,772 Oil & Gas - 0.56% Cimarex Energy Co. 4,298,928

7,194,971

2,813,317 8,591,447 11,404,764

207,876

2,640,025

413,727 253,091 514,448

19,569,287 5,856,526 22,435,077 47,860,890 591,508,272

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Small-Cap Value Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Investment Amount ($) Limited Partnerships - 1.13% Holding Companies - 1.13% 1,000,000 AP Alternative Assets, L.P. (Guernsey) (b) (d) Total Limited Partnerships (Cost $20,000,000) Notional Amount ($) Purchased Options - 0.01% Foreign Currency Put Options - 0.01% (a) 75,000,000 Euro Currency, strike 1.20 Euro, expires 3/7/12 Total Purchased Options (Cost $2,400,000) Principal Amount ($) Short Term Investments - 11.76% U.S. Government Obligations - 11.76% 90,000,000 U.S. Treasury Bills, 0.04%-0.10%, due 4/26/12-11/15/12 Total Short Term Investments (Cost $89,980,249) Value (Note 1) Total Investment Portfolio - 90.44% (Cost $666,829,025) Other Assets less Liabilities - 9.56% NET ASSETS - 100.00% Value (Note 1)

$ 692,053,480 73,120,356 $ 765,173,836

8,630,750 8,630,750

Investor Class: Net assets applicable to 440,455 shares outstanding $ Net asset value, offering and redemption price per share 62,040 62,040

9,239,269 $20.98

Institutional Class: Net assets applicable to 36,024,093 shares outstanding $ 755,934,567 Net asset value, offering and redemption price per share $20.98

89,977,605 89,977,605

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Trust Third Avenue Small-Cap Value Fund Third Avenue Small-Cap Value Fund Portfolio of Investments Portfolio of Investments (continued) at January 31, 2012 at January 31, 2012 (Unaudited)

Notes: (a) Non-income producing security. (b) Fair-valued security. (c) Affiliated issuersas defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of these issuers). (d) Restricted security subject to restrictions on resale.
Acquisition Shares/ Investment Amount __________ Issuer _______________________ $ 1,000,000 AP Alternative Assets, L.P. 21,530,352 Catalyst Paper Corp. 1,590,916 JZ Capital Partners, Ltd. Limited Voting Shares 1/31/12 Carrying Acquisition Acquisition Value Date Cost Per Unit ________ ________ _________ 6/8/06 $20,000,000 $8.63 10/23/06-4/7/08 42,768,308 0.01 6/16/09-6/19/09 5,409,402 5.60

At January 31, 2012, these restricted securities had a total market value of $17,852,365 or 2.33% of net assets of the Fund.

(e) Issuer filed for bankruptcy effective 2/3/12. Annualized yield at date of purchase. 1 Incorporated in Bermuda. Country Concentration % of Net Assets ________ 73.28% 4.87 3.43 2.83 2.07 1.70 1.34 0.92 _______ 90.44% _______ _______

United States * Germany Canada Guernsey Belgium Hong Kong United Kingdom Bermuda Total

* Includes cash equivalents.

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Real Estate Value Fund Portfolio of Investments at January 31, 2012 (Unaudited)
Principal Amount ($) Corporate Bonds & Notes - 0.62% U.S. Homebuilder - 0.62% 11,320,000 K. Hovnanian Enterprises, Inc., 10.625%, due 10/15/16 $ Total Corporate Bonds & Notes (Cost $10,348,788) Shares or Units Common Stocks - 92.37% Forest Products & Paper - 3.44% 2,751,058 Weyerhaeuser Co. Non-U.S. Homebuilder - 5.40% 2,196,068 Bellway PLC (United Kingdom) 308,778 Berkeley Group (Holdings) PLC (United Kingdom) (a) 81,911,973 Taylor Wimpey PLC (United Kingdom) (a) Non-U.S. Real Estate Consulting/Management - 1.09% Savills PLC (United Kingdom) Non-U.S. Real Estate Investment Trusts - 18.07% Centro Retail Australia (Australia) (a) Centro Retail Australia, Class Action True-Up Securities (Australia) (a) (b) Commonwealth Property Office Fund (Australia) Derwent London PLC (United Kingdom) Dexus Property Group (Australia) Hammerson PLC (United Kingdom) Mirvac Group (Australia) SEGRO PLC (United Kingdom) Westfield Group (Australia) Value (Note 1) Shares or Units Non-U.S. Real Estate Operating Companies - 35.13% Brookfield Asset Management, Inc., Class A (Canada) $ Capitaland, Ltd. (Singapore) Cheung Kong Holdings, Ltd. (Hong Kong) City Developments Ltd. (Singapore) Daibiru Corp. (Japan) Hang Lung Properties Ltd. (Hong Kong) Henderson Land Development Co., Ltd. (Hong Kong) Hongkong Land Holdings, Ltd. (Hong Kong)1 Hysan Development Co., Ltd. (Hong Kong) Quintain Estates & Development PLC (United Kingdom) (a) Songbird Estates PLC (United Kingdom) (a) Sun Hung Kai Properties, Ltd. (Hong Kong) Wheelock & Co., Ltd. (Hong Kong) Value (Note 1)

2,746,126 9,933,300 9,933,300 20,128,500 5,727,000 3,389,950 3,362,300 8,377,000 55,076,181 25,504,288 6,164,855 54,728,453 86,397,596 8,570,637 2,940,095 11,373,967 21,869,072 22,721,694 4,692,100 17,522,908 17,902,500

83,674,459 42,086,063 77,095,509 26,573,047 22,541,791 28,786,386 46,526,095 15,141,489 44,731,473 13,612,171 39,027,177 64,978,987 57,133,428 561,908,075 77,109,420 42,964,807

3,309,535

9,661,263 7,717,855 29,880,091 673,655 41,415,719 12,457,812 24,713,436 8,339,052 5,240,298

18,872,659 30,770,533 17,759,609 39,132,408 74,028,379 32,402,719 28,883,133 47,288,580 289,138,020

Retail-Building Products - 4.82% 2,874,000 Lowes Cos., Inc. U.S. Homebuilder - 2.69% 1,999,293 Lennar Corp., Class A U.S. Real Estate Investment Trusts - 7.63% 3,723,831 First Industrial Realty Trust, Inc. (a) 1,686,371 General Growth Properties, Inc. 63,254 Rouse Properties, Inc. 641,794 Vornado Realty Trust

42,749,580 26,610,934 781,819 51,908,299 122,050,632

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Real Estate Value Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Shares Value or Units (Note 1) Common Stocks (continued) U.S. Real Estate Operating Companies - 14.10% 500,500 Consolidated-Tomoka Land Co. (c) $ 14,314,300 6,490,864 FNC Realty Corp. (a) (b) 4,543,605 8,846,798 Forest City Enterprises, Inc., Class A (a) (c) 116,158,458 29,513,141 Newhall Holding Co. LLC, Class A Units (a) (c) 40,028,673 941,627 Tejon Ranch Co. (a) 26,836,369 7,354,979 Thomas Properties Group, Inc. (c) 23,609,483 225,490,888 Total Common Stocks (Cost $1,426,684,382) 1,477,658,527 Investment Amount ($) Limited Partnerships - 2.18% Investment Fund - 2.18% 36,000,000 Alliance Bernstein Legacy Securities (C1) L.P.2 (b) Total Limited Partnerships (Cost $36,000,000) Number of Contracts Purchased Options - 1.08% Index Call Options - 1.06% (a) 18,721 Hang Seng Property Index, strike 22,946.77 HKD, expires 1/30/13 17,800 Hang Seng Property Index, strike 24,025.65 HKD, expires 1/30/13 Notional Amount ($) Foreign Currency Put Options - 0.02% (a) 75,000,000 Australian Currency, strike 0.9900 AUD, expires 3/7/12 55,000,000 Australian Currency, strike 0.9925 AUD, expires 3/7/12 Total Purchased Options (Cost $12,403,830) Total Investment Portfolio - 96.25% (Cost $1,485,437,000) Other Assets less Liabilities - 3.75% (d) (e) NET ASSETS - 100.00% Investor Class: Net assets applicable to 1,947,401 shares outstanding 34,870,900 34,870,900 Net asset value, offering and redemption price per share Value (Note 1)

159,375 131,397 290,772 17,272,373

1,539,735,100 59,959,061 $ 1,599,694,161

43,182,906 $22.17

Institutional Class: Net assets applicable to 69,981,912 shares outstanding $ 1,556,511,255 Net asset value, offering and redemption price per share $22.24

9,493,896 7,487,705 16,981,601

See accompanying notes to the Portfolios of Investments.

Third Avenue Trust Third Avenue Real Estate Value Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)

Notes: AUD: Australian Dollar HKD: Hong Kong Dollar (a) Non-income producing security. (b) Fair-valued security. (c) Affiliated issuersas defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of these issuers). (d) A portion of this security is segregated for future fund commitment. (e) Includes $9,640,000 of cash restricted as collateral for forward foreign currency contracts to broker. 1 Incorporated in Bermuda. 2 Cayman Islands exempted limited partnership.

Country Concentration % of Net Assets ________ United States Hong Kong United Kingdom Australia Canada Singapore Japan Total 35.49% 21.97 17.33 10.53 5.23 4.29 1.41 ________ 96.25% ________ ________

Schedule of Written Options Notional Amount ($) 50,000,000 25,000,000 55,000,000 Security Australian Currency, Call Australian Currency, Call Australian Currency, Call (Premiums received $3,217,300) Expiration Date 3/7/12 3/7/12 3/7/12 Strike Price 1.0267 AUD 1.0268 AUD 1.0300 AUD Value $(1,801,250) (898,750) (1,844,914) _________ $(4,544,914) _________ _________

AUD: Australian Dollar

Schedule of Forward Foreign Currency Contracts Contracts to Buy 8,613,426,595 Contracts to Sell 11,628,710,000
JPY: Japanese Yen

Currency JPY Currency JPY

Counterparty Settlement Date JPMorgan Chase Bank N.A. 10/29/12 Counterparty Settlement Date JPMorgan Chase Bank N.A. 10/29/12

Settlement Value $ 112,569,985 Settlement Value $ 145,000,000

Value at 1/31/12 $113,510,268 Value at 1/31/12 $153,246,559

Unrealized Appreciation $940,283 Unrealized Depreciation $(8,246,559)

See accompanying notes to the Portfolios of Investments.

10

Third Avenue Trust Third Avenue International Value Fund Portfolio of Investments at January 31, 2012 (Unaudited)
Shares Common Stocks and Warrants - 90.79% Advertising - 2.18% 958,400 Asatsu-DK, Inc. (Japan) Agriculture - 4.77% 4,310,964 Viterra, Inc. (Canada) 1,100,000 Viterra, Inc. (Canada) (d) Automotive - 1.99% 439,290 Daimler AG (Germany) Building & Construction Products/Services - 2.23% 10,482,120 Tenon, Ltd. (New Zealand) (a) (c) 1,265,006 Titan Cement Co. S.A. (Greece) Capital Goods - 2.56% 503,196 Nexans S.A. (France) Corporate Services - 0.77% 22,522,784 Boardroom, Ltd. (Singapore) (c) Diversified Operations - 3.94% 1,204,745 Antarchile S.A. (Chile) 3,039,200 Hutchison Whampoa, Ltd. (Hong Kong) Electronics Components - 7.62% WBL Corp., Ltd. (Singapore) (c) Forest Products & Paper - 5.43% 72,271,095 Catalyst Paper Corp. (Canada) (a) (b) (c) (e) (f) 51,395,523 Rubicon, Ltd. (New Zealand) (a) (c) 2,265,983 Weyerhaeuser Co. 37,050,140 Value (Note 1) Shares 2,725,400 1,644,208 592,505 378,181 Holding Companies - 11.26% Guoco Group, Ltd. (Hong Kong)1 $ Leucadia National Corp. LG Corp. (South Korea) (a) Pargesa Holding S.A. (Switzerland) Insurance - 8.92% Allianz SE (Germany) Munich Re (Germany) Sampo Oyj, Class A (Finland) White Mountains Insurance Group Ltd.1 Value (Note 1) 28,289,647 45,643,214 37,132,107 26,519,917 137,584,885 31,311,883 30,010,281 12,155,550 35,522,515 109,000,229 30,711,679 3,865,870 4,509,108

26,682,299 46,390,049 11,837,040 58,227,089 24,274,436

284,772 230,350 461,416 78,722

6,058,179 21,196,503 27,254,682 31,241,593 9,400,534 19,262,196 28,901,654 48,163,850 93,078,223

1,059,524 19,944,267 45,364,980 66,368,771

Investment Companies - 2.51% 7,136,445 Resolution, Ltd. (Guernsey) Machinery - 0.32% 41,679 Andritz AG (Austria) Media - 0.37% 539,470 Alma Media Corp. (Finland) Metals & Mining - 4.78% 1,593,200 Dundee Precious Metals, Inc. (Canada) (a) 500,400 Dundee Precious Metals, Inc. Warrants, expires 6/29/12 (Canada) (a) 1,672,046 Kinross Gold Corp. (Canada) 22,869 Kinross Gold Corp. Warrants, expires 9/17/14 (Canada) (a) 397,186 Newmont Mining Corp. Oil & Gas Production & Services - 4.66% 993,802 EnCana Corp. (Canada)

14,951,643 69,867 18,893,269 25,544 24,418,995 58,359,318

19,011,432

See accompanying notes to the Portfolios of Investments.

11

Third Avenue Trust Third Avenue International Value Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Shares Common Stocks and Warrants (continued) Oil & Gas Production & Services (continued) 1,647,210 Petroleum Geo-Services ASA (Norway) (a) 1,645,500 Precision Drilling Corp. (Canada) (a) Other Financial - 2.89% Yuanta Financial Holding Co., Ltd. (Taiwan) (a) Pharmaceuticals - 5.28% 1,104,214 GlaxoSmithKline PLC (United Kingdom) 540,537 Sanofi (France) Value (Note 1) Notional Value Amount ($) (Note 1) Purchased Options - 1.05% Foreign Currency Put Options - 1.05% (a) 138,000,000 Canadian Currency, strike 1.02 Canadian Dollar, expires 2/10/12 $ 175,950 106,185,000 Euro Currency, strike 1.366 Euro, expires 5/31/12 5,553,476 136,315,000 Euro Currency, strike 1.366 Euro, expires 5/31/12 7,156,918 123,000,000 Japan Currency, strike 86.08 Yen, expires 2/6/12 Total Purchased Options (Cost $17,353,455) 12,886,344 Total Investment Portfolio - 91.84% (Cost $1,268,809,070) 1,122,275,412 Other Assets less Liabilities - 8.16% 99,668,312 NET ASSETS - 100.00% $1,221,943,724 Investor Class: Net assets applicable to 938,759 shares outstanding Net asset value, offering and redemption price per share

21,084,962 16,886,601 56,982,995

62,589,892

35,327,459

24,534,222 39,926,912 64,461,134

Real Estate - 9.96% Atrium European Real Estate, Ltd. (Jersey) 1,750,000 Mitsui Fudosan Co., Ltd. (Japan) 7,761,203 SEGRO PLC (United Kingdom) 61,235,872 Taylor Wimpey PLC (United Kingdom) (a) 5,486,319

25,188,986 28,768,696 26,881,696 40,913,977 121,753,355

14,329,395 $15.26

Securities Brokerage - 1.24% 4,226,000 Daiwa Securities Group, Inc. (Japan) 15,191,866 Telecommunications - 5.55% 38,601,902 Netia S.A. (Poland) (a) (c) 67,829,672 Transportation - 1.56% 2,504,000 Seino Holdings Co., Ltd. (Japan) 19,120,021 Total Common Stocks and Warrants (Cost $1,251,455,615) 1,109,389,068

Institutional Class: Net assets applicable to 79,117,114 shares outstanding $1,207,614,329 Net asset value, offering and redemption price per share $15.26

See accompanying notes to the Portfolios of Investments.

12

Third Avenue Trust Third Avenue Trust Third Avenue Small-Cap Value Fund Third Avenue InternationalValue Fund Portfolio of Investments Portfolio of Investments (continued) at January 31, 2012 at January 31, 2012 (Unaudited)
Notes: (a) Non-income producing security. (b) Fair-valued security. (c) Affiliated issuersas defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of these issuers). (d) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. (e) Restricted security subject to restrictions on resale.
1/31/12 Carrying Acquisition Value Cost Per Unit ________ _________ 1/3/06-3/10/09 $136,646,535 $0.01 Acquisition Date ________

Country Concentration % of Net Assets ________ United States Canada Singapore United Kingdom Japan Germany France Poland Hong Kong South Korea Taiwan Guernsey Switzerland New Zealand Jersey Greece Norway Chile Finland Austria Total 13.41% 10.57 8.39 7.56 7.35 7.00 5.82 5.55 4.68 3.04 2.89 2.51 2.17 2.13 2.06 1.73 1.72 1.58 1.36 0.32 ________ 91.84% ________ ________

Acquisition Shares Issuer __________ _______________________ 72,271,095 Catalyst Paper Corp.

At January 31, 2012, the restricted security had a total market value of $1,059,524 or 0.09% of net assets of the Fund.

(f) Issuer filed for bankruptcy effective 2/3/12. 1 Incorporated in Bermuda.

Equity swaps outstanding as January 31, 2012 were as follows: Target Security Price ______ _____ GP Investments Ltd., BDR BRL 4.061 (a) Floating Expiration Rate Counterparty Date _______ __________ ________ 3-month LIBOR JPMorgan Chase Bank N.A. 1/29/13 Nominal Shares _______ 2,600,200 Unrealized Depreciation __________ $ (119,989)

(a) Fund pays floating rate and variance under target price and receives variance over target price. BDR: Brazilian Depositary Receipt. BRL: Brazilian Real. LIBOR: London Interbank Offered Rate.

See accompanying notes to the Portfolios of Investments.

13

Third Avenue Trust Third Avenue Focused Credit Fund Portfolio of Investments at January 31, 2012 (Unaudited)
Principal Amount () Corporate Bonds & Notes - 69.61% Aerospace - 0.73% 7,000,000 DAE Aviation Holdings, Inc., 11.250%, due 8/1/15 (a) Consumer Products - 1.42% 17,000,000 Armored Autogroup, Inc., 9.250%, due 11/1/18 (a) Energy - 8.53% Energy XXI Gulf Coast, Inc.: 15,000,000 9.250%, due 12/15/17 10,000,000 7.750%, due 6/15/19 9,000,000 GMX Resources, Inc., PIK, 11.000%, due 12/1/17 (a) 22,068,000 Hercules Offshore, Inc., 10.500%, due 10/15/17 (a) Platinum Energy Solutions, Inc.: 6,169,354 14.250%, due 3/1/15 5,000,000 14.250%, due 3/1/15 (a) 7,024,000 Stallion Oilfield Holdings, Ltd., 10.500%, due 2/15/15 10,000,000 Trinidad Drilling, Ltd., 7.875%, due 1/15/19 (Canada) (a) Financials - 9.68% Lehman Brothers Holdings, Inc.*: due 9/26/08 due 11/24/08 due 3/23/09 (c) due 1/24/13 due 9/26/14 Marsico Holdings LLC/Marsico Co. Notes Corp., PIK, 10.625%, due 1/15/20 (a) Nuveen Investments, Inc.: 10.500%, due 11/15/15 10.500%, due 11/15/15 (a) Value (Note 1) Principal Amount () Food & Beverage - 2.34% 9,945,000 Harmony Foods Corp., 10.000%, due 5/1/16 (a) 9,000,000 Pinnacle Foods Finance LLC/ Pinnacle Foods Finance Corp., 9.250%, due 4/1/15 4,000,000 Post Holdings, Inc., 7.375%, due 2/15/22 (a) Gaming & Entertainment - 10.02% 47,511,000 Caesars Entertainment Operating Co., Inc., 12.750%, due 4/15/18 1,000,000 Chester Downs & Marina LLC, 9.250%, due 2/1/20 (a) CityCenter Holdings LLC/CityCenter Finance Corp., PIK: 28,787,265 10.750%, due 1/15/17 880 10.750%, due 1/15/17 (a) 6,850,000 Marina District Finance Co., Inc., 9.875%, due 8/15/18 13,000,000 MGM Resorts International, 7.500%, due 6/1/16 13,399,000 Shingle Springs Tribal Gaming Authority, 9.375%, due 6/15/15 (a) Healthcare - 5.38% 10,000,000 InVentiv Health, Inc., 10.000%, due 8/15/18 (a) 4,000,000 Kindred Healthcare, Inc., 8.250%, due 6/1/19 13,910,000 Multiplan, Inc., 9.875%, due 9/1/18 (a) 13,775,000 Radiation Therapy Services, Inc., 9.875%, due 4/15/17 Value (Note 1)

10,156,331 9,315,000 4,150,000 23,621,331

7,350,000

14,280,000

16,462,500 10,375,000 7,110,000 22,178,340 6,416,128 5,162,500 7,621,040 10,650,000 85,975,508

40,621,905 1,025,000 30,874,342 944 6,439,000 13,097,500 8,910,335 100,969,026

31,000,000 25,000,000 97,000,000 10,000,000 50,000,000 12,000,000

8,563,750 6,906,250 26,796,250 2,775,000 13,937,500 2,220,000 24,197,250 12,138,750 97,534,750

9,100,000 3,690,000 15,231,450 9,676,938

23,100,000 11,700,000

See accompanying notes to the Portfolios of Investments.

14

Third Avenue Trust Third Avenue Focused Credit Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Principal Amount () Corporate Bonds & Notes (continued) Healthcare (continued) Rotech Healthcare, Inc.: 7,658,000 10.750%, due 10/15/15 11,100,000 10.500%, due 3/15/18 Home Construction - 5.38% Ainsworth Lumber Co., Ltd., PIK, 11.000%, due 7/29/15 (Canada) (a) 8,410,000 K. Hovnanian Enterprises, Inc., 10.625%, due 10/15/16 21,591,000 Nortek, Inc., 10.000%, due 12/1/18 33,022,825 Media - 10.82% Clear Channel Communications, Inc.: 9.000%, due 3/1/21 PIK, 11.000%, due 8/1/16 Cumulus Media, Inc., 7.750%, due 5/1/19 (a) Intelsat Luxembourg S.A., 11.250%, due 2/4/17 (Luxembourg) Nara Cable Funding Ltd., 8.875%, due 12/1/18 (Ireland) (a) Spanish Broadcasting System, Inc., 12.500%, due 4/15/17 (a) Value (Note 1) Principal Amount () Paper & Packaging - 0.30% 3,000,000 Reynolds Group Issuer Inc. / Reynolds Group Issuer LLC, 9.000%, due 4/15/19 (a) $ Services - 1.05% 11,000,000 EnergySolutions, Inc. / EnergySolutions LLC, 10.750%, due 8/15/18 Technology - 1.70% 16,250,000 EVERTEC, Inc., 11.000%, due 10/1/18 Telecommunications - 3.54% Digicel Group, Ltd. (Jamaica)1: 11,970,000 8.875%, due 1/15/15 (a) 6,150,000 10.500%, due 4/15/18 (a) 3,000,000 Hughes Satellite Systems Corp., 7.625%, due 6/15/21 (a) 18,600,000 Sprint Capital Corp., 6.875%, due 11/15/28 Transportation Services - 2.86% 26,145,000 General Maritime Corp., 12.000%, due 11/15/172* 25,750,000 Swift Services Holdings, Inc., 10.000%, due 11/15/18 Utilities - 1.65% 5,060,000 Dynegy Holdings LLC, 8.750%, due 2/15/12* 8,350,000 Energy Future Holdings Corp., 10.000%, due 1/15/20 5,995,000 Texas Competitive Electric Holdings Co. LLC, 11.500%, due 10/1/20 (a) Value (Note 1)

7,753,725 8,769,000 54,221,113

3,000,000

10,615,000

24,602,004 7,379,775 22,238,730 54,220,509

17,184,375

12,119,625 6,534,375 3,180,000 13,880,250 35,714,250

20,000,000 32,367,289 7,519,000 49,450,000 2,000,000 9,000,000

17,500,000 23,466,285 7,086,658 50,068,125 1,910,000 9,090,000 109,121,068

718,987 28,099,687 28,818,674

Metals & Mining - 4.21% 22,717,000 CEMEX Espa~ 9.250%, na, due 5/12/20 (Luxembourg)3 (a) 6,500,000EUR CEMEX Finance LLC, 9.625%, due 12/14/17 (a) 15,750,000 Murray Energy Corp., 10.250%, due 10/15/15 (a)

3,111,900 8,997,125 4,556,200 16,665,225

19,309,450 7,141,923 15,986,250 42,437,623

See accompanying notes to the Portfolios of Investments.

15

Third Avenue Trust Third Avenue Focused Credit Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Principal Amount () Corporate Bonds & Notes (continued) Total Corporate Bonds & Notes (Cost $735,968,483) Term Loans - 11.39% Aerospace - 1.84% Aveos Fleet Performance, Inc. (Cayman Islands): 2,574,468 Revolving Credit, 11.250%, due 3/12/13 (c) (d) ^ 3,180,308 Term Loan, 11.250%, due 3/12/13 (c) (d) ^ 6,985,729 Term Loan B, PIK, 10.750%, due 3/12/15 (c) (d) ^ 7,167,231 Term Loan B2, 10.750%, due 3/12/15 (c) (d) ^ Financials - 2.34% Marsico Parent Co. LLC, Term Loan B: 5.313%, due 12/14/14 (c) 5.625%, due 12/14/14 (c) Nuveen Investments, Inc., Term Loan, 12.500%, due 7/31/15 Value (Note 1) Principal Amount () Value (Note 1)

$ 701,728,452

2,497,234 3,084,899 6,426,871 6,593,852 18,602,856

600,889 48,200,677 4,925,000

227,136 18,219,856 5,146,625 23,593,617

Services - 4.50% 64,810,757 Koosharem Corp., Term Loan, 10.250%, due 6/30/14 (c) (f) $ 45,367,530 Utilities - 1.98% 29,069,472 Texas Competitive Electric Holdings Co. LLC, Non-Extended Term Loan, 3.795%, due 10/10/14 (c) 19,956,192 Total Term Loans (Cost $157,175,314) 114,857,753 Municipal Bonds - 1.40% Gaming & Entertainment - 1.40% New York City, NY, Industrial Development Agency Civic Facility Revenue, Bronx Parking Development Co. LLC, OID: 10,000,000 5.750%, due 10/1/27 5,114,400 5,200,000 5.750%, due 10/1/37 2,657,772 12,330,000 5.875%, due 10/1/46 6,296,684 Total Municipal Bonds (Cost $16,226,726) 14,068,856

12,606,402

Gaming & Entertainment - 0.63% Hicks Sport Group LLC, Term Loan B, due 12/22/10* (c) Media - 0.10% 997,326 Spanish Broadcasting System, Inc., Term Loan, 2.020%, due 6/10/12 (c)

6,345,218

992,340

See accompanying notes to the Portfolios of Investments.

16

Third Avenue Trust Third Avenue Focused Credit Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Shares Preferred Stocks - 2.06% Financials - 2.06% 280,000 Ally Financial Inc., Series A, 8.500% (c) $ 500,000 Federal Home Loan Mortgage Corp., Series Z, 8.375% (c) (e) 208,000 Federal National Mortgage Association, Series M, 4.750% (e) 417,000 Federal National Mortgage Association, Series 0, 7.000% (c) (e) 500,000 Federal National Mortgage Association, Series S, 8.250% (c) (e) 1,000,000 Federal National Mortgage Association, Series T, 8.250% (c) (e) 480,000 GMAC Capital Trust I, 8.125% (c) Total Preferred Stocks (Cost $25,851,800) Private Equities - 1.76% Aerospace - 1.08% 573,251 Aveos Holding Co. (Cayman Islands) (d) (e) ^ Financials - 0.12% 4,568,957 Cerberus CG Investor I LLC (e) 4,568,918 Cerberus CG Investor II LLC (e) 2,284,632 Cerberus CG Investor III LLC (e) Utilities - 0.56% Bosque LLP (e) ^ Total Private Equities (Cost $14,271,161) Value (Note 1) Shares or Units Common Stocks & Warrants - 3.01% Energy - 1.81% 218,852 Compton Petroleum Corp. (Canada) (e) $ 45,681 Compton Petroleum Corp. Warrants, expires 8/23/14 (Canada) (e) 25 Platinum Energy Solutions, Inc. Units (b) (e) (h) (i) 8,000 Platinum Energy Solutions, Inc. Warrants (b) (e) Financials - 0.79% 4,091,292 Centro Retail Australia (Australia) (e) 3,268,312 Centro Retail Australia, Class Action True-Up Securities (Australia) (b) (e) Transportation Services - 0.41% 718,636 Scorpio Tankers, Inc. (Monaco)2 (e) Total Common Stocks & Warrants (Cost $19,491,550) Value (Note 1)

5,854,800 720,750 397,800 917,400 756,250 1,450,000 10,651,200 20,748,200

938,530 57,403 15,197,266 2,000,000 18,193,199 7,992,077 7,992,077 4,146,530 30,331,806

10,891,763 502,585 502,581 251,310 1,256,476 5,608,500 17,756,739

14,956

See accompanying notes to the Portfolios of Investments.

17

Third Avenue Trust Third Avenue Focused Credit Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)
Number of Value Contracts (Note 1) Purchased Options - 0.05% Equity Put Options - 0.05% (e) 2,000 Overseas Shipping Group, strike $13, expires 4/21/12 $ 460,000 Total Purchased Options (Cost $609,130) 460,000 Total Investment Portfolio - 89.28% (Cost $969,594,164) 899,951,806 Other Assets less Liabilities - 10.72% (g) 108,075,883 NET ASSETS - 100.00% $ 1,008,027,689 Investor Class: Net assets applicable to 30,936,672 shares outstanding $ Net asset value, offering and redemption price per share Institutional Class: Net assets applicable to 69,815,976 shares outstanding $ Net asset value, offering and redemption price per share

309,706,603 $10.01

Notes: EUR: Euro. PIK: Payment-in-kind. OID: Original Issue Discount. (a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. (b) Fair-valued security. (c) Variable rate security. The rate disclosed is in effect as of January 31, 2012. (d) Affiliated issuersas defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of these issuers). (e) Non-income producing security. (f) Includes 86,558 shares of common stock warrants and 10,866 shares of common stock Series A warrants. (g) Includes $340,000 of cash restricted as collateral for forward foreign currency contracts to broker. (h) Restricted security subject to restrictions on resale.
1/31/12 Carrying Value Per Unit _________ $607,890.64

698,321,086 $10.00

Acquisition Units __________ 25

Acquisition Issuer Date _______________________ ________ Platinum Energy Solutions, Inc. Units 2/28/11

Acquisition Cost ________ $2,500,000

At January 31, 2012, the restricted security had a total market value of $15,197,266 or 1.51% of net assets of the Fund.

(i) Includes 6,185,000 shares of comon stock and 2,500 shares of preferred stock. * Issuer in default. ^ Classified as Level 3 security in the summary by level of inputs table. Denominated in U.S. Dollars unless otherwise noted. 1 Incorporated in Bermuda. 2 Incorporated in Marshall Islands. 3 Incorporated in Spain.

See accompanying notes to the Portfolios of Investments.

18

Third Avenue Trust Third Avenue Focused Credit Fund Portfolio of Investments (continued) at January 31, 2012 (Unaudited)

Country Concentration % of Net Assets ________ United States Luxembourg Canada Cayman Islands Jamaica Australia Monaco Ireland Total 72.63% 6.88 3.60 2.93 1.85 0.79 0.41 0.19 ________ 89.28% ________ ________ Unrealized Appreciation __________ $182,337 $ 26,313 _______ $208,650 _______ _______

Schedule of Forward Foreign Currency Contracts Contracts to Sell _____________ 4,000,000 1,000,000 Currency _______ Euro Euro Counterparty Settlement Date __________ _____________ JPMorgan Chase Bank N.A. 10/3/12 JPMorgan Chase Bank N.A. 10/9/12 Settlement Value _____________ $5,422,400 $1,336,400 Value at 1/31/12 _____________ $5,240,063 $1,310,087

See accompanying notes to the Portfolios of Investments.

19

Third Avenue Trust Notes to Portfolios of Investments January 31, 2012 (Unaudited)
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 Trust Instrument dated October 31, 1996. The Trust currently consists of five non-diversified (within the meaning of Section 5(b)(2) of the Investment Company Act), separate investment series: Third 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 Avenue Management LLC (the Adviser) provides investment advisory services to each of the Funds in the Trust. Accounting policies: The policies described below are followed consistently by the Funds and are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Security valuation: Generally, the Funds investments are valued at market value. Securities traded on a principal stock exchange, including The NASDAQ Stock Market, Inc. (NASDAQ), are valued at the last quoted sales price, the NASDAQ official closing price, or in the absence of closing sales prices on that day, securities are valued at the mean between the closing bid and asked price. In accordance with procedures approved by the Trusts Board of Trustees (the Board), the Funds have retained a third party provider that, under certain circumstances, applies a statistical model to provide fair value pricing 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 their NAVs. Debt instruments with maturities greater than 60 days, including floating rate loan securities, are valued on the basis of prices obtained from a pricing service approved as reliable by the Board or otherwise pursuant to policies and procedures approved by the Board. Temporary cash investments are valued at cost, plus accrued interest, which approximates market value. Short-term debt securities with 60 days or less to maturity may be valued at amortized cost. 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 to disposition under applicable securities laws (restricted securities). Restricted securities and other securities and assets for which market quotations are not readily available are valued at fair value, as determined in good faith by the Trusts Valuation Committee as authorized by the Board of the Trust, under procedures established by the Board. At January 31, 2012, such securities had a total fair value of $94,378,977 or 2.91% of net assets of Third Avenue Value Fund, $8,946,394 or 1.17% of net assets of Third Avenue Small-Cap Value Fund, $39,414,505 or 2.46% of net assets of Third Avenue Real Estate Value Fund, $1,059,524 or 0.09% of net assets of Third Avenue International Value Fund, and $17,197,266 or 1.71% of net assets of Third Avenue Focused Credit Fund. Among the factors that may be considered by the Trusts Valuation Committee in determining fair value are: the type of security, trading in

20

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) unrestricted securities of the same issuer, the financial condition of the issuer, the percentage of the Funds beneficial ownership of the issuers common stocks and debt securities, the operating results of the issuer and the discount from market value of any similar unrestricted securities of the issuer at the time of purchase and liquidation values of the issuer. The fair values determined in accordance with these procedures may differ significantly from the amounts which would be realized upon disposition of the securities. Restricted securities often have costs associated with subsequent registration. The restricted securities currently held by the Funds are not expected to incur any material future registration costs. Fair value measurements: In accordance with Financial Accounting Standards Board Accounting Standard Codification (FASB ASC) FASB ASC 820-10, Fair Value Measurements and Disclosures, the Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. Fair value is defined as the price that a Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under current market conditions. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The three levels of the fair value hierarchy as follows: Level 1Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date; Level 2Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active;

Level 3Significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments) A financial instruments level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. However, the determination of what constitutes observable requires significant judgment by the Fund. The Fund considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

21

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) The following are certain inputs and techniques that the Funds generally use to evaluate how to classify each major category of assets and liabilities for Level 2 and Level 3, in accordance with U.S. GAAP. Equity Securities (Common and Preferred Stocks)Equity securities traded in inactive markets and certain foreign equity securities 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 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 or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3. U.S. Treasury ObligationsU.S. Treasury obligations are valued by independent pricing services based on pricing models that evaluate the mean between the most recently quoted bid and ask price. The models also take into consideration data received from active market makers and broker-dealers, yield curves, and the spread over comparable U.S. Treasury issues. The spreads change daily in response to market conditions and 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. Treasury obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3. Corporate Bonds & NotesCorporate bonds and notes are generally comprised of two main categories: investment grade bonds and high yield bonds. Investment grade bonds are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, and option adjusted spread models that include base curve and spread curve inputs. Adjustments to individual bonds can be applied to recognize trading differences compared to other bonds issued by the same issuer. High yield bonds are valued by independent pricing services based primarily on broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector specific trends. To the extent that these inputs are observable, the values of corporate bonds 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 ContractsForward foreign currency contracts are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, actual trading information and foreign currency exchange rates gathered from leading market makers and foreign currency exchange trading centers throughout the world. To the extent that these inputs are observable, the values of forward foreign currency contracts are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

22

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) Term LoansTerm Loans are valued by independent pricing services based on the average of quoted prices received from multiple dealers or valued relative to other benchmark securities when broker-dealer quotes are unavailable. To the extent that these inputs are observable, the values of Term Loans are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3. Municipal BondsMunicipal bonds are valued by independent pricing services based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-ask lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable, the values of municipal bonds are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3. OptionsOptions are valued by independent pricing services or by brokers based on pricing models that take into account, among other factors, changes in the price of the underlying securities, time until expiration, and volatility of the underlying security. To the extent that these inputs are observable, the values of options are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3. Equity SwapsEquity Swap values are based on the performance of the underlying security which is valued by independent pricing services. The performance is based on the change in the price of the underlying securities. To the extent that this input is observable, the value of the equity swap is categorized as Level 2. To the extent that this input is unobservable, the value is categorized as Level 3.

23

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) The following is a summary by level of inputs used to value the Funds investments as of January 31, 2012:
Third Avenue Value Fund _________ _________ Level 1: Quoted Prices Investments in Securities: Common Stocks & Warrants: Auto Supply $ Consumer Products Energy Financials Forest Products & Paper Insurance & Reinsurance Mutual Holding Companies 9,148,999 Non-U.S. Real Estate Investment Trusts U.S. Real Estate Operating Companies 168,810,606 Others # 2,816,100,780 Limited Partnerships - Infrastructure 11,668,000 Purchased Options - Equity Put Options Preferred Stocks# _______8,286 __________ ___ Total for Level 1 Securities _3,005,736,671 __________ _________ Level 2: Other Significant Observable Inputs Investments in Securities: Common Stocks - U.S. Real Estate Operating Companies Debt Securities issued by the U.S. Treasury and other government corporations and agencies: Municipal Bonds - Gaming & Entertainment Corporate Bonds & Notes# 5,922,450 Term Loans# Private Equities - Financials Purchased Options# Short Term Investments U.S. Government Obligations _________ __________ _ Total for Level 2 Securities ____5,922,450 __________ ______ Third Avenue Small-Cap Value Fund _________ _________ Third Avenue Real Estate Value Fund _________ _________ Third Avenue International Value Fund _________ _________ Third Avenue Focused Credit Fund _________ _________

7,401,822 $ $ 7,717,849 21,858,224 55,076,181 65,309,247 34,180,862 10,283,772 289,138,020 47,860,890 180,918,610 461,889,209 907,953,438 1,043,020,297 ___1,874,813 ___________ ___________ _________ _________ _ _______ ______ _ 593,067,441 _1,433,086,249 _1,108,329,544 _________ _________ _ _ _________ _________ _________ _ ________

995,933 7,992,077 4,146,530 460,000 __20,748,200 ______ ___ _____ __ __34,342,740 ______ ___ _____ __

40,028,673

62,040

9,933,300 17,272,373

12,886,344

14,068,856 701,728,452 96,254,897 1,256,476

89,977,605 _________ ___________ ___________ _________ _________ _ _______ _ 90,039,645 ___67,234,346 ___________ _________ _________ _ _ _12,886,344 _________ _______ _______

_______ _ ______ ___ _ _813,308,681 ______ ___ ______ __

24

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) Summary by level of inputs (continued):
Third Avenue Value Fund _________ _________ Level 3: Significant Unobservable Inputs Investments in Securities: Common Stocks & Warrants: Auto Supply $ * Consumer Products 26,318 Energy Financials Financial Insurance 555,000 Forest Products & Paper Insurance & Reinsurance 144,572 Manufactured Housing 83,804,000 Mutual Holding Companies 607,000 Non-U.S. Real Estate Investment Trusts Services U.S. Real Estate Operating Companies 6,641,537 Limited Partnerships: Holding Companies Insurance & Reinsurance 376,839 Investment Fund Preferred Stocks Insurance & Reinsurance 194,023 Corporate Bonds & Notes Consumer Products 2,636,688 Term Loans - Aerospace Private Equities: Aerospace Utilities _________ __________ _ Total for Level 3 Securities ___94,985,977 __________ _______ Total Value of Investments $3,106,645,098 __________ __________ __________ __________ Third Avenue Small-Cap Value Fund _________ _________ Third Avenue Real Estate Value Fund _________ _________ Third Avenue International Value Fund _________ _________ Third Avenue Focused Credit Fund _________ _________

$ 315,644 8,630,750

$ * 4,543,605 34,870,900

1,059,524

17,197,266 * * 18,602,856 10,891,763

________ _________ _ ___8,946,394 _________ ______ $692,053,480 _________ _________ _________ _________

___________ _________ ___39,414,505 _________ _ _______ $1,539,735,100 ___________ _________ ___________ _________

___________ _________ _ ___________ ____1,059,524 ______ $1,122,275,412 ___________ __________ ___________ __________

5,608,500 _______ __ ______ ___ __52,300,385 ______ ___ _____ __ $899,951,806 _______ __ ______ ___ _______ __ ______ ___

25

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) Summary by level of inputs (continued):
Third Avenue Value Fund _________ _________ Investments in Other Financial Instruments: Level 2: Other Significant Observable Inputs Call Options Written Equity Swaps Forward Foreign Currency Contracts Total Value of Appreciation/ (Depreciation) of Other Financial Instruments

Third Avenue Small-Cap Value Fund _________ _________ $

Third Avenue Real Estate Value Fund _________ _________

Third Avenue International Value Fund _________ _________

Third Avenue Focused Credit Fund _________ _________ $ _______ __ ____208,650 __ ___

_________ __________ _

$ (4,544,914) $ (119,989) (7,306,276) ________ ___________ ___________ _________ _________ _ _______ _ _ $ ________ $__(11,851,190) $ ________ ________ ___________ _____(119,989) _________ _________ _ ________ ______ _________ ___________ ___________ _ _ _______ _

$__________ _________ __________ __________ _

$______ ___ 208,650 _______ __ ______ ___ _______ __

# *

Significant transfers between Level 1 and Level 2 included securities valued at $1,941,399,556, $94,718,250, $867,102,436, $879,735,363 at October 31, 2011 for Third Avenue Value Fund, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund and Third Avenue International Value Fund respectively which are currently included in Level 1 at January 31, 2012 that had previously been included in Level 2 at October 31, 2011. These changes were primarily the result of certain securities trading outside the U.S. whose values were adjusted by the application of fair value factors as a result of significant market movements following the close of local trading at October 31, 2011. Please refer to the Portfolios of Investments for industry specifics of the portfolio holdings and note that Level 3 securites are those indicated by (b) and ^. Securities have zero values.

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

26

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) Following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:
Net change in unrealized appreciation/ (depreciation) attributable to assets still held at period end ________________ $ (1,275) 2,961,000 36,420 1,042,789 (158,113) ___ ___________ $ ___________ ___3,880,821 ___ ___________

Balance as of 10/31/11 (fair value) _______________ Third Avenue Value Fund Common Stocks: Auto Supply Consumer Products Financial Insurance Insurance & Reinsurance Manufactured Housing Mutual Holding Companies U.S. Real Estate Operating Companies Corporate Bonds & Notes# Limited Partnerships: Insurance & Reinsurance Preferred Stocks: Insurance & Reinsurance Total Third Avenue Small-Cap Value Fund Common Stocks: Forest Products & Paper Limited Partnerships: Holding Companies Total $

Net change in unrealized appreciation/ (depreciation) _______________

Transfer in Level 3 ______________ $ 570,580


_____ ______

Balance as of 1/31/12 (fair value) ______________ $ * 26,318 555,000 144,572 83,804,000 607,000 6,641,537 2,636,688 376,839
___ 194,023 ___________

* $ 26,318 555,000 145,847 (1,275) 80,843,000 2,961,000 36,420 6,641,537 1,593,899 534,952 1,042,789 (158,113) _____ _________ $ 3,880,821 _____ _________ _____ _________

194,023 ____________ __ $90,534,576 ____________ __ ____________ __

$570,580 _____ ______ _____ ______

$94,985,977 ___ ___________ ___ ___________

$ 1,375,955 9,167,500 ____________ __ $10,543,455 ____________ __ ____________ __

$(1,060,311) (536,750) _____ _________ $(1,597,061) _____ _________ _____ _________

315,644

$(1,060,311)
___ (536,750) ___________

_____ ______

___8,630,750 ___________

$ ______ _____ _____ ______

$ ___________ ___8,946,394 ___ ___________

$(1,597,061) ___ ___________ ___ ___________

27

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) Reconciliation of Level 3 investments (continued):
Net change in unrealized appreciation/ (depreciation) attributable to Balance as of assets still 1/31/12 held at (fair value) period end ______________ ________________

Balance as of 10/31/11 (fair value) _______________ Third Avenue Real Estate Value Fund Common Stocks: Non-U.S. Real Estate Investment Trusts $ U.S. Real Estate Operating Companies 4,543,605 Limited Partnerships: Investment Fund 37,324,299 __________ Total $41,867,904 __________ __________ Third Avenue International Value Fund Common Stocks: Forest Products & Paper $4,618,680 Third Avenue Focused Credit Fund Private Equities: Aerospace $10,891,763 Financials 1,599,151 Utilities 5,065,900 Common Stocks & Warrants: Energy 13,119,000 Financials Services * Term Loans# 27,607,381 __________ Total $58,283,195 __________ __________ * # ** +

Net change in unrealized appreciation/ (depreciation) _______________

Net purchases/ (sales) ___________

Realized gain ___________

Transfer out Level 3 ______________

**

* 4,543,605

(2,453,399) __________ $(2,453,399) __________ __________ $(3,559,156) $ 383,540

________ $ ________ ________ $ $ 159,060

________ $ ________ ________ $ $

___________ $ ___________ ___________ $ $ (1,599,151)

34,870,900 __________ $39,414,505 __________ __________ $ 1,059,524 $10,891,763 5,608,500

(2,453,399) __________ $(2,453,399) __________ __________ $(3,559,156) $ 383,540

4,078,266 (1,151,830) __________ $ 3,309,976 __________ __________

(125,000) ** 669,577+ ________ $ 703,637 ________ ________

125,000 ________ $125,000 ________ ________

(8,522,272) ___________ $(10,121,423) ___________ ___________

17,197,266 4,168,266 * * 18,602,856 (1,151,830) __________ __________ $52,300,385 __________ $ 3,399,976 __________ __________ __________

Securities have zero values. Please refer to the Portfolios of Investments for industry specifics of the portfolio holdings and note that Level 3 securities are those indicated by (b) and ^. Security received through corporate action with zero cost. Include payment-in-kind interest of $374,413 and amortization discount of $295,164.

Transfers into, and out of, Level 3 are valued utilizing values as of the beginning of the period. Transfers from Level 2 to Level 3 or from Level 3 to Level 2 are due to decline or an increase in market activity (e.g. frequency of trades), which resulted in a lack of or increase in available market inputs to determine price.

28

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) In February 2010, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 201006 Additional Disclosures about Fair Value Measurements Required beginning in 2010. ASU 2010-06 includes new requirements to disclose the following: significant transfers in and out of Level 1 and 2 measurements and the reasons for the transfer, and gross presentation of activity within the Level 3 roll forward about purchases, sales, issuances and settlements. Management has adopted the amended guidance and determined that there was no material impact to the Trusts financial statements except for additional disclosures regarding Level 1 and 2 made in the notes. Disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-04 and its impact on the financial statements. Security transactions: Security transactions are accounted for on a trade date basis. Foreign currency translation and foreign investments: The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows: Investments and assets and liabilities denominated in foreign currencies: At the prevailing rates of exchange on the valuation date. Investment transactions: At the prevailing rates of exchange on the date of such transactions.

Term loans: The Funds typically invest in loans which are structured and administered by a third party entity (the Agent) that acts on behalf of a group of lenders that make or hold interests in the loan. These securities generally pay interest at rates

29

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) which are periodically pre-determined by reference to 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 LIBOR or the prime rate offered by one or more major United States banks, or the certificate of deposit rate. These securities are generally considered to be restricted, as the Funds are ordinarily contractually obligated to receive approval from the Agent bank and/or borrower prior to disposition. Remaining maturities of term loans may be less than the stated maturities shown as a result of contractual or optional payments by the borrower. Such prepayments cannot be predicted with certainty. The interest rate disclosed reflects the rate in effect on January 31, 2012. Forward foreign currency contracts: The Funds may be exposed to foreign currency risks associated with portfolio investments and therefore may use forward foreign currency contracts to hedge or manage these exposures. The Funds also may buy forward foreign currency contracts to gain exposure to currencies. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/(depreciation) on investments and foreign currency translations. When the contract is closed, the Funds record a realized gain or loss equal 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 it does establish a rate of exchange that can be achieved in the future. Although forward foreign currency contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Funds could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. During the period ended January 31, 2012, Third Avenue Real Estate Value Fund and Third Avenue Focused Credit Fund used forward foreign currency contracts for hedging against foreign currency risks. Option contracts: The Funds may purchase and sell (write) put and call options on various instruments including securities and foreign currency to manage 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 a certain date or during a specified period. The cost of securities acquired through the exercise of a call option is increased by the premiums paid. The proceeds from securities sold through the exercise of a purchased put option are decreased by the premiums paid. Investments in over-the-counter option contracts require the Funds to fair value or mark-to market the options on a daily basis, which reflects the change in the market value of the contracts at the close of each days trading. The cost of purchased options that expire unexercised are treated by the Funds, on expiration date, as realized losses on investments.

30

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) When the Funds write an option, an amount equal to the premium received by the Funds is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Funds, on the expiration date, as realized gains on written options. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for 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 the underlying security or currency in determining whether the Funds have a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the security or currency purchased by the Funds. In purchasing and writing options, the Funds bear the market risk of an unfavorable 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 an illiquid market. Exercise of a written option could result in the Funds purchasing a security or currency at a price different from the current market value. The Funds may execute transactions in both listed and over-the-counter options. Listed options involve minimal counter-party risk since listed options are guaranteed against default by the exchange on which they trade. When purchasing over-the-counter options, the Funds bear the risk of economic loss from counterparty default, equal to the market value of the option. During the period ended January 31, 2012, Third Avenue Small-Cap Value Fund, Third Avenue Real Estate Value Fund, Third Avenue International Value Fund and Third Avenue Focused Credit Fund used purchased options on equity, index and foreign currency to gain long exposure to the underlying instruments and/or to protect against losses in foreign currencies. During the period ended January 31, 2012, Third Avenue Real Estate Value Fund used written put options on foreign currency for hedging against foreign currency risks. Swap Agreements: The Funds may enter into total return, interest rate, equity and other swap agreements. Interest rate swap agreements generally involve the agreement by a fund to pay a counterparty a fixed or floating rate on a fixed notional amount and to receive a fixed or floating rate on a fixed notional amount, but may also include an agreement to pay or receive payments derived from changes in interest rates. Periodic payments are generally made during the life of the swap agreement according to the terms and conditions of the agreement and at termination or maturity. Total return swap agreements involve the commitments to pay or receive an amount generally determined by reference to a security, index or other measure in exchange for a specific market linked return, based on notional amounts. To the extent that the total return of the security, index or other measure underlying the transaction exceeds or falls short of the offsetting interest rate-based obligation, the fund will receive or make a payment to the counterparty. During the period ended January 31, 2012, Third Avenue International Value Fund participated in an equity swap. Details of the open swap at period end are included in the Funds Portfolio of Investments under the caption Equity Swaps.

31

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited) During the period ended January 31, 2012, Third Avenue International Value Fund used equity swaps to gain exposure to the underlying investment. 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 underlying index or price. These securities may be backed by corporate issuers. The indices and prices upon which such securities can be based include interest rates and currency rates. Floating rate securities pay interest according to a coupon which is reset periodically.
2. INVESTMENTS

The following information is based upon the book basis of investment securities as of January 31, 2012:
Small-Cap Real Estate Value Fund Value Fund Value Fund _________ _________ _________ Gross unrealized appreciation $ 826,159,145 $119,550,428 $ 220,497,368 Gross unrealized depreciation ____________ ___________ ___ _____ (585,374,802) _(94,325,973) (166,199,268) ___ ________ _________ __ _____ Net unrealized appreciation/ (depreciation) $__240,784,343 ___________ $ __ ____ 54,298,100 ____________ $ _________ ___ _ _ ________ _ 25,224,455 _____ Aggregate book cost $2,865,860,755 ___________ $1,485,437,000 $666,829,025 ___ _____ ____________ __________ ___ ________ __________ __ _____ ____________ ___________ ___ _____ ___ ________ __ _____ Credit Fund _________ $ 111,045,484 $ 45,227,785 __(257,579,142) __ _____ _ _______ _____ (114,870,143) _ _____ International Value Fund _________ Focused

$_ __(146,533,658) $ _ _____ _______ _____ __(69,642,358) _____ $1,268,809,070 $ 969,594,164 __ _ _______ _____ __ _____ _ _____ __ _ _______ _____ __ _____ _ _____

32

Third Avenue Trust Notes to Portfolios of Investments (continued) January 31, 2012 (Unaudited)
3. COMMITMENTS AND CONTINGENCIES

At January 31, 2012, Third Avenue Real Estate Value Fund had the following commitment and contingency:
Issuer _____ Alliance Bernstein Legacy Securities (C1) L.P. Type _____ Limited Partnership Amount of Commitment __________ Funded Commitment __________ Value of Segregated Securities __________

$40,000,000

$36,000,000

$4,000,000

In the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. For additional information regarding the accounting policies of the Funds, refer to the most recent financial statements in the N-CSR filing at www.sec.gov.

33

BOARD OF TRUSTEES Jack W. Aber Marvin Moser David M. Barse Eric Rakowski William E. Chapman, II Martin Shubik Lucinda Franks Charles C. Walden Edward J. Kaier Martin J. Whitman OFFICERS Martin J. Whitman Chairman of the Board David M. Barse President, Chief Executive Officer Vincent J. Dugan Chief Financial Officer, Treasurer Michael A. Buono Controller W. James Hall General Counsel, Secretary Joseph J. Reardon Chief Compliance Officer Tara Dempsey Assistant Secretary TRANSFER AGENT BNY Mellon Investment Servicing (U.S.) Inc. P.O. Box 9802 Providence, RI 02940-8002 610-239-4600 800-443-1021 (toll-free) INVESTMENT ADVISER Third Avenue Management LLC 622 Third Avenue New York, NY 10017 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY 10017 CUSTODIAN JPMorgan Chase Bank, N.A. 14201 Dallas Parkway, 2nd Floor Dallas, TX 75254

Third Avenue Funds 622 Third Avenue New York, NY 10017 Phone 212-888-5222 Toll Free 800-443-1021 Fax 212-888-6757 www.thirdave.com

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