
[Federal Register Volume 80, Number 245 (Tuesday, December 22, 2015)]
[Notices]
[Pages 79638-79640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32079]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31943; 812-14593]


Third Avenue Trust and Third Avenue Management LLC; Notice of 
Application and Temporary Order

December 16, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application and a temporary order under Section 
22(e)(3) of the Investment Company Act of 1940 (the ``Act'').

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Summary of Application:  Applicants request a temporary order to permit 
Third Avenue Focused Credit Fund (the ``Fund''), a series of Third 
Avenue Trust (the ``Trust''), to suspend the right of redemption of its 
outstanding redeemable securities.

Applicants:  The Trust, on behalf of the Fund, and Third Avenue 
Management LLC (the ``Adviser,'' together with the Trust, the 
``Applicants'').

Filing Date:  The application was filed on December 16, 2015.

Hearing or Notification of Hearing:  Interested persons may request a 
hearing by writing to the Commission's Secretary and serving Applicants 
with a copy of the request, personally or by mail. Hearing requests 
should be received by the Commission by 5:30 p.m. on January 7, 2016, 
and should be accompanied by proof of service on Applicants, in the 
form of an affidavit or, for lawyers, a certificate of service. Hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants, c/o Third Avenue 
Management LLC 622 Third Avenue, 32nd Floor, New York, NY 10017.

FOR FURTHER INFORMATION CONTACT: David Joire, Senior Special Counsel, 
at (202) 551-6866 (Division of Investment Management, Chief Counsel's 
Office).

SUPPLEMENTARY INFORMATION: The complete application may be obtained via 
the Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Background

    1. The Adviser is the investment adviser to the Fund. The Adviser 
is a Delaware limited liability company that is registered as an 
investment adviser under the Investment Advisers Act of 1940. The 
Adviser managed assets of approximately $8 billion as of September 30, 
2015.
    2. The Trust is a Delaware statutory trust and is registered with 
the Commission under the 1940 Act as an open-end management investment 
company with five series. Each series of the Trust has a different 
investment objective and different investment policies. The Fund is one 
such series.
    3. The Fund is a non-diversified open-end investment company. Its 
investment objective is to seek long-term total return, which may 
include investment returns from a combination of sources including 
capital appreciation, fees and interest income.
    4. The Fund has been subject to a significant level of redemption 
requests by the Fund's investors over the past six months. For example, 
the Fund has experienced a total of $1.1 billion in estimated net 
outflows for the year to date through December 9, 2015, which was more 
than 145% of its remaining net asset value at that date. In November 
2015, the Fund experienced a total of $317 million in estimated net 
redemptions, and the Fund's Institutional Class net asset value per 
share fell from $7.81 to $7.08 and its Retail Class net asset value per 
share fell from $7.82 to $7.09.
    5. The ongoing reduction in liquidity in the Fund's portfolio 
securities is related to a number of factors, including an imbalance 
between selling interest and buying interest. The Fund increased its 
cash position to over $200 million by early December 2015 in 
anticipation of tax selling and other redemptions.
    6. During this period, Fund management also kept the Board of 
Trustees of the Trust (the ``Board'') informed and reevaluated 
contingency plans. On December 9, 2015, after considering the 
environment the Fund was in and the likelihood that incremental sales 
of portfolio securities to satisfy additional redemptions would have to 
be made at prices that would unfairly disadvantage all remaining 
shareholders, the Board determined that the fairest action on behalf of 
all shareholders would be to adopt a plan of liquidation. The Board 
determined to implement this plan by placing the remaining noncash 
assets in a liquidating trust for the benefit of all Fund shareholders 
and distributing available cash. Relief from the Commission in 
connection with the plan's implementation was not sought by the Fund 
and the Adviser.
    7. On December 9, 2015, the Board adopted a plan of liquidation for 
the Fund (the ``Plan of Liquidation''), pursuant to which the Board 
declared two distributions, one of the remaining net cash and one of 
the beneficial interests in a liquidating trust (``Liquidating 
Trust''). These distributions were scheduled to be paid on December 16, 
2015. Interests in the Liquidating Trust would not trade and would, in 
general, be transferable only by operation of law. The Adviser would 
manage the Liquidating Trust's assets without charge and there would be 
periodic distributions from the Liquidating Trust as income is received 
and assets are sold at fair prices. All redemption requests as of 
December 9, 2015, were met by the Fund and the sales of the shares of 
the Fund were suspended as of December 10, 2015.
    8. Upon announcement of the Plan of Liquidation, the Commission 
staff expressed concerns during discussions with the Fund and the 
Adviser. In

[[Page 79639]]

addition, the Fund received numerous inquiries from shareholders and 
intermediaries through which many shareholders hold their shares in the 
Fund. The Fund and the Adviser reviewed the pros and cons of 
alternatives with the Board at meetings held on December 12, 2015 and 
December 13, 2015, at which the Board authorized moving forward with an 
application for an order to suspend redemptions. On December 14, 2015, 
the Board met again and approved the cancellation and rescission of the 
distribution of beneficial interests in the Liquidating Trust and the 
reconveyance of the assets held in the Liquidating Trust to the Fund 
together with the assumption by the Fund of the liabilities previously 
assumed by the Liquidating Trust, conditioned upon receipt of the 
requested relief. The Board did not rescind the cash distribution, 
which will proceed on December 16, 2015, and also retained the Plan of 
Liquidation, pursuant to which the Fund will liquidate.
    9. Applicants state that approximately 65% of the value of the 
Fund's shares is held by shareholders in the Fund's Institutional 
Class, and the rest is held by investors in its Retail Class. If the 
relief is not granted, and the Fund is unable to suspend redemptions, 
the institutional investors would likely be best positioned to take 
advantage of any redemption opportunity, to the detriment of those 
investors--most likely, retail investors--who remain in the Fund. These 
remaining investors would suffer a rapidly declining net asset value 
and an even further diminished liquidity of the Fund's securities 
portfolio. The relief would help avoid such an outcome.
    10. Applicants also state that the Fund will not be engaged and 
does not propose to engage, in any business activities other than those 
necessary for the winding-up of its affairs. Applicants further state 
that relief permitting the Fund to suspend redemptions in connection 
with its liquidation would permit the Fund to liquidate its assets in 
an orderly manner and prevent the Fund from being forced to sell assets 
at unreasonably low prices to meet redemptions.

Applicants' Legal Analysis

    1. Section 22(e)(1) of the Act provides that a registered 
investment company may not suspend the right of redemption or postpone 
the date of payment or satisfaction upon redemption of any redeemable 
security in accordance with its terms for more than seven days after 
the tender of such security to the company or its designated agent 
except for any period during which the New York Stock Exchange 
(``NYSE'') is closed other than customary week-end and holiday 
closings, or during which trading on the NYSE is restricted.
    2. Section 22(e)(3) of the Act provides that redemptions may be 
suspended by a registered investment company for such other periods as 
the Commission may by order permit for the protection of security 
holders of the registered investment company.
    3. Applicants submit that granting the requested relief would be 
for the protection of the shareholders of the Fund, as provided in 
Section 22(e)(3) of the Act. Applicants assert that, in requesting an 
order by the Commission, the Board's goal is to ensure that the Fund's 
shareholders will be treated appropriately in view of the otherwise 
detrimental effect on the Fund of the ongoing reduction in the 
liquidity of the Fund's portfolio securities, the very recent extreme 
difficulty the Fund has encountered in selling portfolio securities at 
prices the Adviser deemed to be fair and the ongoing redemptions that 
the Fund expected. Applicants further state that the requested relief 
is intended to permit an orderly liquidation of the portfolio 
securities at what Applicants consider to be fair values and ensure 
that all of the shareholders of the Fund are protected in the process 
by allowing the realization of fair value for these investments.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    (1) Pending liquidating distributions, the Fund will invest 
proceeds of cash dispositions of portfolio securities solely in U.S. 
government securities, cash equivalents, securities eligible for 
purchase by a registered money market fund with legal maturities not in 
excess of 90 days and, if determined to be necessary to protect the 
value of a portfolio position in a rights offering or other dilutive 
transaction, additional securities of the affected issuer.
    (2) The Fund will make liquidating cash distributions pro rata at 
least quarterly in an amount not less than all cash proceeds from 
dispositions of portfolio securities during such quarter not required 
to provide for liabilities, reserves, and for so long as the Board 
determines that maintaining regulated investment company status under 
subchapter M of the Internal Revenue Code of 1986, as amended, is 
important for the protection of shareholders, the maintenance of 
diversification required for such tax status.
    (3) The Fund and the Adviser will make and keep true, accurate and 
current all appropriate records, including but not limited to those 
surrounding the events leading to the requested relief, the plan for 
the orderly liquidation of Fund assets, the sale of Fund portfolio 
securities, the distribution of Fund assets, and communications with 
shareholders (including any complaints from shareholders and responses 
thereto).
    (4) The Fund and the Adviser will promptly make available to staff 
of the Commission all files, books, records and personnel as requested, 
relating to the Fund and the Liquidating Trust.
    (5) The Fund and the Adviser will provide periodic reporting to 
Commission staff regarding the status of the liquidation and 
distributions.
    (6) Neither the Adviser nor any of its affiliates will receive any 
fee for managing the Fund.
    (7) The Fund is in liquidation and will not be engaged and does not 
propose to engage in any business activities other than those necessary 
for the protection of its assets, the protection of shareholders and 
the winding-up of its affairs.
    (8) The Adviser will appropriately convey accurate and timely 
information to shareholders of the Fund with regard to the status of 
the Fund and its liquidation on the Adviser's Web site, including 
without limitation information concerning the dates and amounts of 
distributions, press releases, and periodic reports, and will maintain 
a toll-free number to respond to shareholder inquiries.
    (9) The Fund and the Adviser shall consult with Commission staff 
prior to making any material amendments to the Plan of Liquidation.
    (10) The Fund will comply with the requirements of Section 30 of 
the Act and the rules thereunder and will file a report containing a 
liquidation audit, i.e., audited financial statements dated as of or 
near the final distribution date, promptly following the Fund's final 
liquidating distribution.
    (11) The Fund and the Adviser will comply with all provisions of 
the Federal securities laws.
    (12) The relief granted pursuant to the application shall be 
without prejudice to, and shall not limit the Commission's rights in 
any manner with respect to, any Commission investigation of, or legal 
proceedings involving or against the Applicants.

[[Page 79640]]

Commission Finding

    Based on the representations and conditions in the application, the 
Commission permits the temporary suspension of the right of redemption 
for the protection of the Fund's security holders. Under the 
circumstances described in the application, which require immediate 
action to protect the Fund's security holders, the Commission concludes 
that it is not practicable to give notice or an opportunity to request 
a hearing before issuing the order.
    IT IS ORDERED, pursuant to Section 22(e)(3) of the Act, that the 
requested relief from Section 22(e) of the Act is granted with respect 
to the Fund until it has liquidated, or until the Commission rescinds 
the order granted herein. This order shall be in effect as of December 
16, 2015, with suspension of redemption requests as requested by the 
Applicants to be effective as of December 10, 2015.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015-32079 Filed 12-21-15; 8:45 am]
BILLING CODE 8011-01-P


