<PAGE> 1
LONGLEAF PARTNERS FUND
April 2, 1996
TO OUR SHAREHOLDERS:
We are pleased to report that Longleaf Partners Fund began the year with an
auspicious first quarter in which your Fund's net asset value grew 6.3%. The S&P
500 with reinvested dividends increased 5.4% by comparison. Our performance
would have been better had we owned more of our existing holdings or found other
qualifying equity investments. Longleaf Partners Fund started the quarter with a
16.5% cash reserve and by the end of March our liquidity had built to 26.0% of
total assets. During this time we sold investments which reached our appraisal
of their fair business values and had difficulty finding suitable replacements
at appropriate discounts.
By George Bernard Shaw's definition, we would likely be considered "unreasonable
men." The Irish playwright and Nobel Prize recipient wrote, "The reasonable man
adapts himself to the world, the unreasonable one persists in trying to adapt
the world to himself. Therefore, all progress depends on the unreasonable man."
For Longleaf Partners Fund to maximize its future long-term progress, we must
become more productive in finding acceptable businesses managed by acceptable
people at acceptable prices, or we must wait patiently until the environment
adapts to us. Until one or both occur, we will remain "unreasonable."
The data below summarizes Longleaf's recent average annual and cumulative
returns for periods ending March 31, 1996:
AVERAGE ANNUAL TOTAL RETURNS*
<TABLE>
<CAPTION>
LONGLEAF PARTNERS FUND S&P 500 INDEX VALUE-LINE INDEX
---------------------- ------------- ----------------
<S> <C> <C> <C>
LAST FIVE YEARS 19.59% 14.66% 7.75%
LAST FOUR YEARS 19.50% 15.58% 7.61%
LAST THREE YEARS 18.60% 15.69% 7.20%
LAST TWO YEARS 19.39% 23.54% 10.05%
LAST YEAR 21.61% 32.09% 18.13%
</TABLE>
CUMULATIVE TOTAL RETURNS*
<TABLE>
<CAPTION>
LONGLEAF PARTNERS FUND S&P 500 INDEX VALUE-LINE INDEX
---------------------- ------------- ----------------
<S> <C> <C> <C>
LAST FIVE YEARS 144.65% 98.15% 45.22%
LAST FOUR YEARS 103.96% 78.44% 34.08%
LAST THREE YEARS 66.81% 54.85% 23.19%
LAST TWO YEARS 42.55% 52.62% 21.10%
LAST YEAR 21.61% 32.09% 18.13%
LAST QUARTER 6.34% 5.38% 4.20%
</TABLE>
Many of you have inquired about the Longleaf fund family's new addition,
Longleaf Partners Realty Fund. It began operations January 2, 1996, when
principals of Southeastern Asset Management, Inc. seeded the portfolio with an
initial $7.4 million capital investment. A very capable Southeastern partner and
member of our team for six years, C.T. Fitzpatrick is heading our effort and the
Fund is off to an excellent start. We believe strongly that there are many
compelling long-term investment opportunities in the diverse real estate arena,
and that over time this world will shift dramatically from private to public
ownership. By applying the same value disciplines that have served us well over
the past 20 years, we are highly confident that we can turn Longleaf Partners
Realty Fund into another successful vehicle for compounding our capital.
<PAGE> 2
For those of you who would like information on the new fund, please contact our
marketing center at (800) 445-9469. You will receive a first quarter report,
application and Prospectus which describes the new fund's investment objectives
and policies, fees and expenses. Please read the Prospectus carefully before
making an investment decision.
We invite each of you to join us at the Funds' annual meeting which will be held
Tuesday, May 7 at 5:30 p.m. at the Dixon Gallery and Gardens in Memphis. We will
do our best to answer any and all of your questions there. We look forward to
seeing our fellow shareholders.
Sincerely,
/s/ O. Mason Hawkins /s/ G. Staley Cates
- --------------------------- ----------------------------
O. Mason Hawkins, CFA G. Staley Cates, CFA
Co-Portfolio Manager Co-Portfolio Manager
- --------------------------------------------------------------------------------
* The average annual total returns of Longleaf Partners Fund for the one year
and five years ended March 31, 1996 and from its initial public offering on
April 8, 1987 through March 31, 1996 are 21.61%, 19.59% AND 15.58%,
respectively. Fund returns and those of the S&P 500 Stock Index are shown with
all dividends and distributions reinvested; the Value Line Index is not
available with reinvested dividends. The stock market indices shown are
unmanaged. Past investment performance is no guarantee of future investment
performance, and the value of an investment when redeemed may be more or less
than the purchase price.
- --------------------------------------------------------------------------------
PORTFOLIO CHANGES
(UNAUDITED)
JANUARY 1, 1996 THROUGH MARCH 31, 1996
<TABLE>
<CAPTION>
NEW HOLDINGS ELIMINATIONS
- ---------------------------------------- -----------------------------
<S> <C>
360 (degrees) Communications Company American Express Company
Hasbro Inc.
Health Systems International, Inc.
McKesson Corporation
Polaroid Corp.
</TABLE>
PUBLISHED DAILY PRICE QUOTATIONS
The daily net asset values per share of each series of Longleaf Partners Funds
Trust are reported in the Mutual Fund Quotations tables of major newspapers in
alphabetical sequence under the following symbols:
Longleaf Partners Fund -- "LonglfPF"
Longleaf Partners Small-Cap Fund -- "LonglfSC"
<PAGE> 3
<TABLE>
<S> <C>
- ---------------------------------------------------------------------
LONGLEAF PARTNERS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AT MARCH 31, 1996 (UNAUDITED)
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES COMMON STOCK (74.2%) MARKET VALUE
--------- ------------
<S> <C> <C> <C> <C> <C>
BEVERAGES (6.0%)
1,324,700 Coca-Cola Enterprises, Inc............................... $40,900,113
2,550,000 The Seagram Company Ltd. ................................ 82,556,250
------------
123,456,363
------------
BUSINESS SERVICES (1.2%)
600,000 Ecolab, Inc. ............................................ 18,000,000
47,300 Rollins, Inc............................................. 1,105,638
279,200 * The Union Corporation.................................... 4,920,900
------------
24,026,538
------------
ENTERTAINMENT (0.3%)
171,277 * Chris-Craft Industries, Inc.............................. 7,150,815
------------
ENVIRONMENTAL SERVICES (3.0%)
512,900 Safety-Kleen Corp........................................ 7,372,937
1,709,800 WMX Technologies, Inc.................................... 54,286,150
------------
61,659,087
------------
FINANCIAL SERVICES (5.6%)
1,170,000 Mellon Bank Corporation.................................. 64,496,250
2,363,300 PaineWebber Group, Inc................................... 51,992,600
------------
116,488,850
------------
FOOD (8.6%)
3,315,000 The Quaker Oats Company.................................. 110,638,125
478,333 * Ralcorp Holdings, Inc.................................... 12,257,283
846,500 Ralston Purina Group Common Stock........................ 56,609,687
------------
179,505,095
------------
HEALTH CARE (1.4%)
857,300 * WellPoint Health Networks Inc............................ 30,005,500
------------
INSURANCE BROKERAGE (3.6%)
3,770,142 Alexander & Alexander Services Inc....................... 71,161,430
42,500 Marsh & McLennan Companies, Inc.......................... 3,947,188
------------
75,108,618
------------
INVESTMENT MANAGEMENT COMPANIES (4.4%)
1,200,000 Franklin Resources, Inc. ................................ 68,400,000
778,000 The Pioneer Group, Inc. ................................. 22,562,000
------------
90,962,000
------------
LODGING (6.8%)
1,495,000 Hilton Hotels Corporation................................ 140,530,000
------------
MANUFACTURING (1.5%)
1,241,700 Louisiana-Pacific Corporation............................ 30,266,437
------------
MULTI-INDUSTRY (3.6%)
1,565,000 Alexander & Baldwin, Inc................................. 37,560,000
1,520,000 Whitman Corporation...................................... 36,860,000
------------
74,420,000
------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
- ---------------------------------------------------------------------
LONGLEAF PARTNERS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AT MARCH 31, 1996 (UNAUDITED)
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET VALUE
--------- --------------
<S> <C> <C> <C> <C> <C>
NATURAL RESOURCES (4.4%)
6,228,300 The Horsham Corporation.................................. $ 91,088,888
--------------
PROPERTY & CASUALTY INSURANCE (1.0%)
110,616 * Alleghany Corp........................................... 21,846,660
--------------
PUBLISHING (12.7%)
3,170,600 Knight-Ridder, Inc....................................... 215,997,125
158,300 The Washington Post Company - Class B.................... 47,193,187
--------------
263,190,312
--------------
REAL ESTATE (.7%)
788,000 Cousins Properties Incorporated.......................... 15,366,000
--------------
RETAIL (.9%)
520,000 American Stores Company.................................. 17,160,000
225,000 * Craig Corporation........................................ 2,559,375
--------------
19,719,375
--------------
TELECOMMUNICATIONS (.7%)
643,900 * 360 (degrees) Communications Company..................... 15,373,113
--------------
TRANSPORTATION (7.8%)
1,070,000 * Federal Express Corporation.............................. 74,766,250
1,859,100 Kansas City Southern Industries, Inc..................... 86,448,150
--------------
161,214,400
--------------
TOTAL COMMON STOCKS (COST $1,183,046,688)............................... 1,541,378,051
--------------
SHORT TERM OBLIGATIONS (26.0%)
Certificate of Deposit - due 8-19-96 at 4.25%........................... 45,000
Repurchase Agreement with State Street Bank and Trust Company, dated
3-29-96, due 4-1-96 at 4.75%, collateralized by $48,937,705 U.S.
Treasury Bond due 2-15-15 (Repurchase proceeds - $43,087,049) (Cost
$43,070,000)........................................................... 43,070,000
U.S. Treasury Bill, due 4-4-96, yield at date of purchase 5.1%..... 49,979,458
U.S. Treasury Bill, due 4-4-96, yield at date of purchase 4.7%..... 49,980,625
U.S. Treasury Bill, due 4-11-96, yield at date of purchase 5.1%.... 49,924,592
U.S. Treasury Bill, due 4-18-96, yield at date of purchase 5.1%.... 99,763,417
U.S. Treasury Bill, due 4-18-96, yield at date of purchase 5.0%.... 49,884,306
U.S. Treasury Bill, due 4-18-96, yield at date of purchase 4.9%.... 49,886,667
U.S. Treasury Bill, due 4-25-96, yield at date of purchase 5.2%.... 49,830,000
U.S. Treasury Bill, due 5-2-96, yield at date of purchase 5.3%..... 49,776,111
U.S. Treasury Bill, due 5-9-96, yield at date of purchase 4.9%..... 49,748,777
--------------
541,888,953
--------------
TOTAL INVESTMENTS (COST $1,724,935,641)* *................................. 100.2% 2,083,267,004
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................. (.2) (4,937,224)
----- --------------
NET ASSETS................................................................. 100.0% $2,078,329,780
===== ==============
NET ASSET VALUE PER SHARE (OFFERING AND REDEMPTION PRICE PER SHARE) BASED ON
92,410,817 SHARES OUTSTANDING AT MARCH 31, 1996................................. $ 22.49
==============
</TABLE>
* Non-income producing security
* * Also represents aggregate cost for Federal income tax purposes
<PAGE> 5
FIVE LARGEST HOLDINGS
(REPRESENTS 31.1% OF NET ASSETS AT 3/31/96)
KNIGHT-RIDDER, INC. (KRI) 10.4%
One of the largest newspaper publishers in the U.S. and a worldwide provider of
electronic information services.
HILTON HOTELS CORPORATION (HLT) 6.8%
Owner, operator and franchiser of worldwide hotels and gaming properties.
THE QUAKER OATS COMPANY (OAT) 5.3%
A producer of brand name packaged foods and beverages including numerous hot and
cold cereals, Gatorade, Snapple, and Aunt Jemima.
THE HORSHAM CORPORATION (HSM) 4.4%
A Canadian based company consisting of three primary businesses - refining and
marketing petroleum products in the U.S. through Clark Refining & Marketing,
owning and operating gold mines via American Barrick Resources Corp., and
developing real estate through ownership of Horsham Properties GmbH in Germany
and Trizec Corp. in Canada.
KANSAS CITY SOUTHERN INDUSTRIES, INC. (KSU) 4.2%
Large railroad operator throughout nine Southern and Midwestern states. Also
owns all or significant portions of companies in the mutual fund business
including Janus, Berger and DST.
<PAGE> 6
- ---------------------------------------------
TRUSTEES
O. MASON HAWKINS, CFA --
Chairman, Southeastern Asset
Management, Inc.
Memphis, Tennessee
CHADWICK H. CARPENTER, JR. --
Senior Executive Officer, Progress
Software Corporation
Bedford, Massachusetts
JOHN R. McCARROLL, JR. --
Chairman, McCarroll Newman LLC
Memphis, Tennessee
STEVEN N. MELNYK --
Chairman of the Executive
Committee and President,
Riverside Golf Group, Inc.
Jacksonville, Florida
C. BARHAM RAY -- Chairman of the
Board and Secretary, SSM Corp.
Memphis, Tennessee
W. REID SANDERS -- Executive
Vice President, Southeastern
Asset Management, Inc.
Memphis, Tennessee
- ---------------------------------------------
This report is submitted for the general informa-
tion of shareholders of the Fund. For more detailed
information about the Fund, its management, fees,
expenses and other pertinent information, please
see the prospectus.
This report is not authorized for distribution to
prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
LONGLEAF
[LFP LOGO] PARTNERS
FUNDS
MANAGED BY:
SOUTHEASTERN ASSET
MANAGEMENT, INC.
6075 POPLAR AVE.
SUITE 900
MEMPHIS, TN 38119
(901) 761-2474
(800) 488-4191
====================================================
[LFP LOGO]
QUARTERLY
REPORT
March 31, 1996
LONGLEAF
PARTNERS FUND
====================================================
MANAGED BY:
SOUTHEASTERN ASSET
MANAGEMENT, INC.
