<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
LONGLEAF PARTNERS FUND
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LONGLEAF PARTNERS FUNDS LOGO]
April 2, 1997
Dear Fellow Shareholder:
The enclosed proxy statement pertains to seeking shareholder
approval of several items which are currently in place. The Fund
requires a shareholder vote to re-elect the Board of Trustees and to
ratify the Board's selection of Coopers & Lybrand as the Fund's
accounting firm.
In addition, this proxy allows all public shareholders to
approve the investment advisory and administration agreements with
Southeastern Asset Management, Inc. These agreements have been in
place since the Fund began operations on January 2, 1996, and this
proxy contains no proposed changes.
We cannot overemphasize the importance of reviewing the enclosed
proxy statement and returning your proxy card immediately. If you
have any questions regarding the enclosed proxy or need any
assistance in voting your shares, please contact our proxy solicitor,
D.F. King & Co., Inc. at 1-800-859-8511.
Thank you for your prompt response.
Sincerely,
O. Mason Hawkins sig
O. Mason Hawkins, CFA
Chairman of the Board
<PAGE> 3
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
LONGLEAF PARTNERS REALTY FUND
TUESDAY, MAY 13, 1997
5:30 P.M. CENTRAL DAYLIGHT TIME
MEMPHIS BOTANIC GARDEN
Hardin Hall
750 CHERRY ROAD
MEMPHIS, TENNESSEE 38117
The 1997 Annual Meeting of Shareholders of Longleaf Partners Realty Fund
(the "Fund") will be held at 5:30 p.m. on Tuesday, May 13, 1997, in Hardin Hall
at the Memphis Botanic Garden, 750 Cherry Road, Memphis, Tennessee. The Fund is
a separate series or fund of Longleaf Partners Funds Trust, a series
Massachusetts business trust which is registered with the Securities & Exchange
Commission as an open-end management investment company.
Shareholders of the Fund will consider and vote upon the following
proposals, which are described in the accompanying Proxy Statement:
1. Re-election of the Board of Trustees, composed of six members, four
of whom are independent or non-affiliated.
2. To approve or disapprove a proposal to ratify adoption of the
Investment Counsel Agreement and the Fund Administration Agreement with
Southeastern Asset Management, Inc., and to extend the term for a one-year
period beginning August 1, 1997 and ending July 31, 1998.
3. Ratification of selection of Coopers & Lybrand, L.L.P. as the
independent certified public accountants authorized to sign or certify
financial statements to be filed with the Securities & Exchange Commission.
To transact such other business as may properly come before the Meeting.
The Board of Trustees of each Fund has fixed the close of business on March
14, 1997 as the record date for determining shareholders eligible to vote at the
Meeting.
By Order of the Board of Trustees
/s/ O. MASON HAWKINS, CFA
--------------------------------------
O. MASON HAWKINS, CFA
Chairman of the Board and Chief
Executive Officer
April 2, 1997
YOUR VOTE IS IMPORTANT
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, SIGN
AND DATE IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO SAVE THE FUND ANY ADDITIONAL EXPENSE
OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY PROMPTLY. IF YOU HAVE ANY
QUESTIONS REGARDING THE ENCLOSED PROXY MATERIAL OR NEED ASSISTANCE IN VOTING
YOUR SHARES, PLEASE CONTACT OUR PROXY SOLICITOR, D.F. KING & CO. AT
1-800-859-8511. YOUR INTEREST AND PARTICIPATION IN THE AFFAIRS OF YOUR FUND
ARE APPRECIATED.
<PAGE> 4
PROXY STATEMENT
LONGLEAF PARTNERS REALTY FUND
A SERIES OF LONGLEAF PARTNERS FUNDS TRUST
1997 ANNUAL MEETING OF SHAREHOLDERS
5:30 P.M., CENTRAL DAYLIGHT TIME; TUESDAY, MAY 13, 1997
MEMPHIS BOTANIC GARDEN -- HARDIN HALL
750 CHERRY ROAD; MEMPHIS, TENNESSEE
The enclosed Proxy is solicited by the Board of Trustees of Longleaf
Partners Realty Fund (the "Fund"), which is a separate series or Fund of
Longleaf Partners Funds Trust, in connection with the Annual Meeting of
Shareholders ("the Meeting") to be held on Tuesday, May 13, 1997, at 5:30 p.m.
Central Daylight Time, at the location shown above.
Each Proxy returned in time to be voted at the Meeting will be voted, and
if a specification is made with respect to any proposal the Proxy will be voted
accordingly. If no specification is made, the Proxy will be voted in favor of
the proposals. Anyone giving a Proxy may revoke it prior to its exercise by
filing with the Fund a written notice of revocation, by delivering a duly
executed proxy bearing a later date or by attending the Meeting and voting in
person.
Shares Entitled to Vote. At the close of business on March 14, 1997, the
record date for determination of shareholders entitled to notice of and to vote
at the Meeting, there were 22,082,925 shares of beneficial interest outstanding,
the only class of shares of capital stock. Each share is entitled to one vote
and there is no provision for cumulative voting.
As of the record date, management was aware of the following shareholders
who beneficially owned as much as 5% of the outstanding shares of capital stock
of the Realty Fund: clients of Charles Schwab & Company, a registered brokerage
firm, owned approximately 29.6% of the outstanding shares in an omnibus
brokerage account; clients of National Financial Services Corp., a registered
brokerage firm, owned approximately 11.9% in an omnibus brokerage account;
directors, trustees, officers and employees of Southeastern Asset Management,
Inc. and Southeastern's profit sharing plan, and members of their families owned
approximately 14.0%, but no individual in this group owned as much as 5% of the
outstanding shares.
Mailing Information. This Proxy Statement is being mailed to shareholders
on or about April 2, 1997. In the event that proxies representing a majority of
the shares outstanding on the record date have not been received by the Meeting
date, a person named as proxy may propose one or more adjournments of the
Meeting for a period or periods of not more than 30 days in the aggregate to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of the holders of a majority of the shares present at the
Meeting in person or by proxy.
Availability of Annual Report. The Annual Report of Longleaf Partners
Realty Fund for the fiscal year ended December 31, 1996, containing financial
statements examined by Coopers & Lybrand, L.L.P., certified public accountants,
was mailed to shareholders prior to March 1, 1997. THE FUND WILL FURNISH,
WITHOUT CHARGE, A COPY OF THE ANNUAL REPORT TO ANY SHAREHOLDER WHO SO REQUESTS
BY CALLING THE FUND AT (800) 761-2509.
<PAGE> 5
SUMMARY OF PROPOSALS
Detailed information on each proposal is included in the text of the Proxy
Statement and the following summary is subject to the more expanded discussion
of the text.
1. RE-ELECTION OF MEMBERS OF THE BOARD OF TRUSTEES.
Mr. O. Mason Hawkins, Chairman of the Board and Chief Executive Officer of
Southeastern Asset Management, Inc. ("Southeastern"), the Fund's Investment
Counsel, contributed the initial $100,000 in seed money to form the Fund. As the
sole shareholder on January 2, 1996, Mr. Hawkins elected a Board of Trustees of
six members, four of whom were independent of and non-affiliated with
Southeastern. One of the independent Trustees, Mr. John R. McCarroll, Jr., was
appointed by the Governor of the State of Tennessee as a state circuit court
judge on August 29, 1996, and he resigned as a member of the Board to accept
that appointment. The Board elected Mr. Daniel W. Connell, Jr., who is also an
independent Trustee, as Mr. McCarroll's successor at the meeting held on
December 16, 1996. The slate of six nominees proposed for re-election therefore
includes the five remaining Trustees originally elected and Mr. Connell as the
successor Trustee.
Detailed information on the backgrounds of the nominees is contained on
pages 3 through 5 of the text.
2. PROPOSAL TO RATIFY THE ADOPTION OF THE INVESTMENT COUNSEL AGREEMENT AND THE
FUND ADMINISTRATION AGREEMENT WITH SOUTHEASTERN ASSET MANAGEMENT, INC. AND TO
EXTEND THE TERM OF EACH AGREEMENT FOR A ONE YEAR PERIOD BEGINNING AUGUST 1,
1997 AND ENDING JULY 31, 1998.
The Investment Counsel Agreement and the Fund Administration Agreement were
approved by the Board of Trustees at the Fund's organizational meeting, and were
adopted by Mr. O. Mason Hawkins as the sole initial shareholder on January 2,
1996. Public shareholders of the Fund now have the opportunity of ratifying
these two operating agreements in the form originally adopted, and extending
their terms from August 1, 1997 to July 31, 1998. Detailed information on the
provisions of the Agreements and background information on Southeastern Asset
Management, Inc. is contained on pages 7 through 13 of the text.
3. RATIFICATION OF THE BOARD'S SELECTION OF COOPERS & LYBRAND, L.L.P. AS THE
FUNDS' INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
Coopers & Lybrand, L.L.P., served as the Fund's independent certified
public accountants for the year ended December 31, 1996. The Board of Trustees
has again selected the firm to serve in that capacity for the 1997 fiscal year.
Ratification of this selection is presented to shareholders as a routine issue.
More information is set forth on page 14 of the text.
2
<PAGE> 6
PROPOSAL 1.
RE-ELECTION OF THE BOARD OF TRUSTEES
Authority of the Board of Trustees. Each series of Longleaf Partners Funds
Trust elects a separate Board of Trustees, which acts only on matters affecting
that particular Fund. Each Board of Trustees has continuing oversight
responsibility which includes review of all issues required by the Investment
Company Act of 1940. The Board of Trustees of each Fund would, as a separate
board, consider matters which might affect the Master Trust as a whole, such as
the creation of additional series or matters involving amendment of the
Declaration of Trust and other issues which arise outside of the requirements of
the Investment Company Act of 1940. The Trustees (six for each series) conduct
concurrent meetings of their Boards.
Composition of the Boards of Trustees. Under the Investment Company Act of
1940, which governs mutual fund operations, an "interested" Trustee includes a
person having an interest in or an affiliation with the investment advisor, any
underwriter or securities broker, or a servicing agent such as a fund
administrator. Funds such as the Realty Fund having no principal underwriter or
affiliated broker, may have 60% of their directors or Trustees classified as
"interested" Trustees. Management believes, however, that having a majority of
each Board composed of independent or non "interested" Trustees having no
affiliation with the Investment Counsel or with any securities brokerage firm
constitutes good corporate governance and eliminates actual or perceived
conflicts of interest.
If shareholders should re-elect all of the nominees listed in the table
below, the membership of all of the Boards of Trustees of the three series or
Funds of Longleaf Partners Funds Trust will be identical, consisting of the same
six individuals. Four of these Trustees are independent of and not affiliated
with Southeastern Asset Management, Inc. and otherwise qualify as
"non-interested" Trustees as defined by the provisions of Sec. 2(a)(19) of the
Investment Company Act of 1940. All of these nominees have indicated a
willingness to serve as Trustees until the next annual or special in lieu of
annual meeting of shareholders if so elected.
NOMINEES FOR BOARD OF TRUSTEES
LONGLEAF PARTNERS REALTY FUND
<TABLE>
<CAPTION>
NOMINEES (AGE) SHARES OWNED
POSITION WITH FUND BENEFICIALLY ON
AND YEAR FIRST ELECTED MARCH 14,
AS TRUSTEE RECENT BUSINESS EXPERIENCE 1997
---------------------- -------------------------- ---------------
<S> <C> <C>
O. Mason Hawkins, CFA Southeastern Asset Management, Inc. since its 1,001,314
(49)* founding in 1975; presently Chairman and C.E.O.;
Chairman of the Board of previously employed as Director of Research, First
Trustees and Chief Tennessee Investment Management Company, Memphis,
Executive Officer; Tennessee, 1974-75; Director of Research, Atlantic
Trustee since January 1996 National Bank, Jacksonville, Florida, 1972-74.
Received B.S. B.A. degree in Finance (1970),
University of Florida; M.B.A. degree (1971),
University of Georgia. Director, Mid-America
Apartment Communities, Inc.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NOMINEES (AGE) SHARES OWNED
POSITION WITH FUND BENEFICIALLY ON
AND YEAR FIRST ELECTED MARCH 14,
AS TRUSTEE RECENT BUSINESS EXPERIENCE 1997
---------------------- -------------------------- ---------------
<S> <C> <C>
W. Reid Sanders (47)* Southeastern Asset Management, Inc. since its 190,114
Trustee and President founding in 1975; presently Executive Vice
Trustee since January 1996 President and a director; previously employed as
Investment Officer, First Tennessee Investment
Management Company, Memphis, Tennessee, 1973-75;
credit analyst and commercial lending official,
Union Planters National Bank, Memphis, Tennessee,
1972-73. Received B.A. degree in Economics (1971),
University of Virginia.
Chadwick H. Carpenter, Jr. Since 1993, Senior Executive Officer in charge of 32,269
(46) corporate development, Progress Software
Trustee since January 1996 Corporation, Bedford, Massachusetts, (a corporation
engaged in the development and marketing of
software products used by developers to build and
deploy commercial applications); previously, Senior
Vice President, Sales and Services, 1986 to 1993;
Vice President -- Product Services, 1983-1986;
previously manager of MIMS Systems Operation of
General Electric Information Services Company;
Senior Consultant for Touche Ross & Company.
Received B.S. degree (1971) and M.S. degree (1972)
in Electrical Engineering, Massachusetts Institute
of Technology.
Daniel W. Connell, Jr. Since 1994, Senior Vice President -- Marketing, 83
(48) Jacksonville Jaguars, Ltd., Jacksonville, Florida
Trustee since January 1997 (National Football League franchise); previously
Executive Vice President -- Corporate Banking Group
and other officer positions, First Union National
Bank of Florida, Jacksonville, FL (1970-94);
Chairman, Jacksonville Chamber of Commerce (1997);
Commissioner, Jacksonville Economic Development
Commission; Advisory Director, First Union National
Bank of Florida. Received B.S.B.A. (1970),
University of Florida.
Steven N. Melnyk (50) Chairman of the Executive Committee and President, 175
Trustee since January 1996 Riverside Golf Group, Inc., Jacksonville, Florida
(a company engaged in the design, construction, and
operation through ownership of golf courses), 1987
to present; golf commentator and sports marketing
executive, CBS Sports (1982-91) and ABC Sports
(since 1991); 1969 U.S. Amateur Golf Champion; 1971
British Amateur Golf Champion; Director and a
founder of First Coast Community Bank, Fernandina
Beach, Florida. Received B.S.B.A. degree in
Industrial Management (1969), University of
Florida.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NOMINEES (AGE) SHARES OWNED
POSITION WITH FUND BENEFICIALLY ON
AND YEAR FIRST ELECTED MARCH 14,
AS TRUSTEE RECENT BUSINESS EXPERIENCE 1997
---------------------- -------------------------- ---------------
<S> <C> <C>
C. Barham Ray (50) Chairman of the Board and Secretary, SSM Corp., 262
Trustee since January 1996 Memphis, Tennessee (a corporation which serves as a
financial advisor in the evaluation of private
businesses, in the negotiation and structuring of
purchase and sale transactions of private
businesses and as a venture capital investor), 1974
to the present; Director of Financial Federal
Savings Bank, Memphis, Tennessee. Received B.A.
degree (1968) Vanderbilt University; M.B.A. degree
(1973), University of Virginia.
</TABLE>
- ---------------
* Trustees who are considered "interested persons" of the Fund within the
meaning of the Investment Company Act of 1940, as amended, on the basis of
their affiliation with Southeastern Asset Management, Inc., the Investment
Counsel.
OTHER INFORMATION CONCERNING THE BOARD OF TRUSTEES
The Board of Trustees held four regular quarterly meetings and one special
telephone conference call Board meeting during 1996. All members attended all
regular meetings, and all participated in the meeting held by telephone
conference call.
The Board has established an Audit Committee, with Mr. Carpenter serving as
Chairman. The Audit Committee, composed of all independent or non "interested"
Trustees, reviews the audit plan and results of audits, and monitors the
performance of the independent certified public accountants. The Committee met
with representatives of the accounting firm in a formal meeting on March 5,
1997, after completion of the audit for the fiscal year ended December 31, 1996.
The Board has not established a nominating committee and the entire Board
considers nominees for members of the Board.
All independent or non-affiliated members of the Board of Trustees invest
an amount at least equal to their full Trustees' fees in shares of the mutual
funds. The schedule of Trustees fees paid during 1996 by each Series to each non
"interested" Trustee is as follows: Longleaf Partners Fund -- $15,000 per annum;
Longleaf Partners Small-Cap Fund -- $7,500 per annum; Longleaf Partners Realty
Fund -- $5,000 per annum. The following table shows the aggregate compensation
received from all of the Longleaf Funds during 1996 by the Trustees presently
standing for election:
5
<PAGE> 9
COMPENSATION TABLE
LONGLEAF PARTNERS FUND
LONGLEAF PARTNERS SMALL-CAP FUND
LONGLEAF PARTNERS REALTY FUND
<TABLE>
<CAPTION>
TOTAL
NAME OF PERSON; AGGREGATE COMPENSATION
POSITION COMPENSATION FROM
ADDRESS FROM FUNDS FUNDS**
--------------- ------------ ------------
<S> <C> <C>
O. Mason Hawkins*........................................... None None
Chairman of the Board and CEO
Chadwick H. Carpenter, Jr................................... $27,500 $27,500
Trustee
14 Oak Park
Bedford, MA 01730
Steven N. Melnyk............................................ $27,500 $27,500
Trustee
111 Riverside Ave.
Ste. 330
Jacksonville, FL 32202
C. Barham Ray............................................... $27,500 $27,500
Trustee
845 Crossover Lane
Ste. 140
Memphis, TN 38117
W. Reid Sanders*............................................ None None
Trustee and President
</TABLE>
- --------------------------------------------------------------------------------
* Trustee is an "interested" person because of employment by Southeastern Asset
Management, Inc., the Investment Counsel. The "interested" Trustees and all
executive officers of the Fund are officers or employees of the Investment
Counsel, which pays their salaries and other employee benefits. Its address
is 6075 Poplar Ave., Ste. 900, Memphis, TN 38119.
** The Funds have no pension or retirement plan for Trustees who are classified
as "non-interested" or non-affiliated.
Mr. John R. McCarroll, Jr., who resigned as a Trustee on August 29, 1996,
received aggregate Trustees fees of $18,234 through the date of his resignation.
Mr. Daniel W. Connell, Jr. became a Trustee effective January 1, 1997, and
accordingly did not receive any compensation during 1996.
- --------------------------------------------------------------------------------
Unless authority to vote for election of one or more trustees is withheld
by checking the appropriate block on the Proxy, the enclosed Proxy will be used
to vote in favor of the election of the six nominees. If any nominee should not
be available for election, the proxies named will vote for such other nominees
as the present Trustees who are not "interested persons" of the Fund may
approve. Each member of the Board of Trustees is to be elected by plurality
vote, provided a quorum, consisting of a majority of issued and outstanding
shares, is present at the Meeting in person or by proxy.
6
<PAGE> 10
THE BOARD OF TRUSTEES OF EACH FUND RECOMMENDS THAT THE NOMINEES NAMED ABOVE
BE RE-ELECTED TO SERVE AS TRUSTEES UNTIL THE NEXT ANNUAL OR SPECIAL IN LIEU OF
ANNUAL MEETING OF SHAREHOLDERS OR UNTIL A SUCCESSOR HAS BEEN DULY QUALIFIED.
PROPOSAL 2
APPROVAL OR DISAPPROVAL OF A PROPOSAL TO ADOPT THE INVESTMENT
COUNSEL AGREEMENT AND THE FUND ADMINISTRATION AGREEMENT WITH
SOUTHEASTERN ASSET MANAGEMENT, INC., AND TO EXTEND THE TERMS OF THE
AGREEMENTS FOR A ONE-YEAR PERIOD FROM AUGUST 1, 1997 TO JULY 31, 1998.
The existing Investment Counsel Agreement and Fund Administration Agreement
between the Fund and Southeastern Asset Management, Inc. ("Southeastern") were
initially approved by the Board of Trustees at the organizational meeting of the
Fund on September 5, 1995. On January 2, 1996, the initial seed capital of
$100,000 was provided by Mr. Mason Hawkins, Chairman of the Board of
Southeastern, and he became the Fund's sole initial shareholder. As sole
shareholder, he adopted these Agreements for a two year term, effective January
2, 1996.
The public shareholders of the Fund now have the opportunity to approve and
adopt these Agreements in the form originally adopted, and to establish a new
contract term for each Agreement, beginning on August 1, 1997 and terminating on
July 31, 1998. Thereafter, the Agreements will be subject to renewal from year
to year on the annual termination date of July 31. The Agreements between the
Realty Fund and Southeastern will then have the same beginning and ending dates
as the similar agreements between Southeastern and the other investment
companies which it manages -- Longleaf Partners Fund and Longleaf Partners
Small-Cap Fund. Future renewals of all of these Agreements can then be
considered and acted upon at the same time by the Boards of Trustees or by
shareholders.
SUMMARY OF CERTAIN PROVISIONS OF THE INVESTMENT COUNSEL AGREEMENT
Pertinent provisions of the Investment Counsel Agreement are summarized in
the following discussion, but shareholders are referred to Exhibit A, beginning
on page 15, for the full text of the Agreement, which takes precedence over the
summary.
Investment Counsel Fee. Under the Investment Counsel Agreement,
Southeastern manages the Fund's portfolio. The Investment Counsel receives from
the Fund an annual fee of 1% of average net assets for the investment advisory
function. Should normal operating expenses of the Fund (other than interest,
taxes, brokerage commissions, and extraordinary expenses, but including all
management fees) exceed 1.5% of average net assets per annum, the Investment
Counsel Agreement requires that Southeastern reduce its investment counsel fee
to the extent necessary to limit all such normal operating expenses to 1.5% per
annum.
For the fiscal year ended December 31, 1996, this provision limiting
operating expenses reduced the Investment Counsel fee paid by the Fund to the
extent necessary to lower total operating expenses of the Fund from 1.6% of
average net assets to 1.5%, the maximum allowed under the limitation. In the
absence of a fee reduction, the Investment Counsel fee would have been $438,484;
after the fee reduction, the fee paid for the year was $391,283.
7
<PAGE> 11
Other Operating Expenses. The Fund pays all of its expenses of operations,
as listed in Paragraph 7 of the Investment Counsel Agreement, as shown on page
18. These expenses include the following: professional fees, insurance and
bonding premiums, association dues, fees charged by Federal and state regulatory
authorities for registration of Fund shares, expenses of preparation, printing
and distributing prospectuses and financial reports to shareholders, costs of
obtaining daily prices for the securities held in the portfolio, costs of forms
and supplies, telephone and postage and any extraordinary expenses.
Southeastern is responsible for the compensation and employee benefits of
the executive officers of the Fund, all of whom are employees of Southeastern,
and for supplying office space and related facilities for conducting these
operations.
Limitation of Liability. Southeastern as Investment Counsel agrees to use
its best efforts in managing the investment portfolio of the Fund. The
Investment Counsel Agreement provides that there shall be no liability on the
part of Southeastern for any act or omission, including a mistake of judgement,
in the absence of a showing of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations.
Termination. The Investment Counsel Agreement may be terminated without
penalty upon sixty days prior written notice by the Board of Trustees or by vote
of a majority of the outstanding voting securities of the Fund, and may be
terminated by the Investment Counsel on like notice. There are provisions for
automatic termination without penalty in the event of assignment as defined by
the Investment Company Act of 1940.
SUMMARY OF CERTAIN PROVISIONS OF THE FUND ADMINISTRATION AGREEMENT
Pertinent provisions of the Fund Administration Agreement are summarized in
the following discussion, but shareholders are referred to Exhibit B, beginning
on page 22, for the full text of the Agreement, which takes precedence over the
summary.
Under the Fund Administration Agreement, Southeastern provides all services
required to carry on the Fund's general business and administrative affairs,
including supplying executive personnel, clerical staff and office space for
these functions. Southeastern conducts each Fund's business operations,
including organizing Board meetings, negotiating contracts with nonaffiliated
suppliers, preparing reports and documents required for Federal and state
regulatory compliance and performing the accounting, record keeping and pricing
functions. For these administrative services each Fund pays Southeastern a fee
computed at the rate of 0.10% per annum of average net assets, which is accrued
daily and paid monthly. For 1996, such fees were $43,848.
The Fund together with the related series also reimburses Southeastern for
the expenses of leasing or otherwise acquiring computer programs or software
used exclusively for processing Fund transactions, and for the salary of the
Fund's Executive Vice President and Treasurer, with the reimbursement for these
expenses being equitably allocated among the related Funds in a manner approved
by the Boards of Trustees. In 1996, such reimbursible expenses were $30,397 for
the Realty Fund.
Other Provisions. The provisions with respect to limitation of liability,
standard of care, indemnification, and term of the Fund Administration Agreement
are identical with those of the Investment Counsel Agreement.
8
<PAGE> 12
COMPARATIVE INFORMATION ON RELATED MUTUAL FUNDS
Southeastern also serves as Investment Counsel to and as Fund Administrator
for Longleaf Partners Fund, established in 1987, and Longleaf Partners Small-Cap
Fund, established in 1989. Both of these related funds have long-term capital
growth as their primary investment objective, and have no industry or sector
concentration. In many situations, the portfolios of these two mutual funds are
substantially similar to those of the private accounts managed by Southeastern.
The Realty Fund concentrates its investments in real estate oriented
companies, most of which are not appropriate investments for Southeastern's
other accounts. For this reason and consistent with the adoption by many new
funds of an investment advisory fee of 1% per annum, the Investment Counsel fee
of the Realty Fund was established at that level. All three related mutual funds
have an operating expense limitation agreement which is identical. This expense
limitation, presently 1.5% of average net assets, reduced the investment counsel
fee for Longleaf Partners Fund at the close of its first two fiscal periods
ended October 31, 1987 and 1988, and for Longleaf Partners Small-Cap Fund for
its first fiscal period ended October 31, 1989. As previously disclosed, this
limitation also reduced the Investment Counsel fee paid by the Realty Fund
during 1996.
The following table contains comparative information on contractual fees
and expense limitations as a percentage of average net assets of each fund:
<TABLE>
<CAPTION>
INVESTMENT TOTAL NET
COUNSEL ADMINISTRATION ASSETS EXPENSE
FEE FEE AT 3/14/97 LIMITATION
------------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Longleaf Partners Fund 1% on 1st 0.10% $2,409,575,136 1.5%
$400 million;
0.75% on
remainder
Longleaf Partners Small-Cap Fund 1% on 1st 0.10% $ 387,172,374 1.5%
$400 million;
0.75% on
remainder
Longleaf Partners Realty Fund 1% of average 0.10% $ 336,098,883 1.5%
net assets
</TABLE>
9
<PAGE> 13
INFORMATION ABOUT THE INVESTMENT COUNSEL
Southeastern Asset Management, Inc., ("Southeastern") founded in 1975, is
registered with the Securities and Exchange Commission as an investment advisor.
The firm manages securities portfolios for individuals, pension and profit
sharing plans, and other institutions. Southeastern presently manages more than
$7.7 billion in client assets. Included within this figure are $3.1 billion in
assets of the three Longleaf Partners Funds. The basic investment objectives,
policies, investment techniques, and methods of selecting portfolio securities
for the three funds are substantially the same as those for Southeastern's
managed accounts.
Southeastern, a Tennessee corporation, is owned and controlled by its
directors and executive officers. As of the date of this Proxy Statement, the
following persons own or have the right to vote 10% or more of the issued and
outstanding shares; Mr. O. Mason Hawkins -- 59.1%, Mr. G. Staley Cates -- 14.5%.
The remaining shares are held by other directors or officers, none of whom own
or have the right to vote as much as 10% of the issued and outstanding shares.
The directors of Southeastern reside in Memphis, Tennessee. Their ages and
principal occupations during the past five years are as follows:
O. Mason Hawkins,
CFA(49).................... Chairman of the Board and Chief Executive Officer;
Southeastern Asset Management, Inc.
G. Staley Cates, CFA(32)... Southeastern Asset Management, Inc.; President
since 1994; Previously Vice
President -- Investments.
W. Reid Sanders(47)........ Executive Vice President; Southeastern Asset
Management, Inc.
Frank N. Stanley, III,
CFA(55).................. Vice President -- Investments; Southeastern Asset
Management, Inc.
Mr. Hawkins is the chief executive officer of the Southeastern and is also
the chief executive officer of the Realty Fund and the two related investment
companies. Mr. Cates is President of Southeastern and co-portfolio manager of
the Fund. Mr. Sanders is Executive Vice President of Southeastern and is
President of the Realty Fund and the two related investment companies. Mr.
Stanley holds the same position with each of the related investment companies as
with Southeastern.
10
<PAGE> 14
OTHER EXECUTIVE OFFICERS
The following table lists the other executive officers of the Realty Fund,
who are also officers or employees of Southeastern. The salaries and employee
benefits of all Fund executive officers are paid by Southeastern. Mr.
Fitzpatrick is the lead co-portfolio manager of the Realty Fund; the other
co-portfolio managers are Mr. Hawkins and Mr. Cates. Mr. Reaves, Ms. Douglas,
and Ms. Harper are involved primarily with management and operations of the
three related mutual funds, including the Realty Fund.
<TABLE>
<CAPTION>
NAME, AGE, AND OFFICE WITH
OFFICE WITH FUND INVESTMENT COUNSEL PRINCIPAL OCCUPATION
---------------- ------------------ --------------------
<S> <C> <C>
C. T. Fitzpatrick, III, CFA (33) Vice President -- Southeastern Asset Management, Inc.
Co-Portfolio Manager and Vice Investments since 1990. Financial analyst,
President -- Investments Merrill Lynch Capital Markets,
1986-1988.
Charles D. Reaves (61) Vice President & Southeastern Asset Management, Inc.
Executive Vice President General Counsel since 1988; Porter, White & Yardley,
(General Counsel) Inc., Birmingham, AL (securities
broker/dealer) Vice President and
Principal, (1986-88); Saunders
Leasing System, Inc., Birmingham, AL
(truck transportation company) Senior
Vice President -- Finance and Vice
President & General Counsel
(1974-86).
Julie M. Douglas, CPA (35) Fund Accountant Southeastern Asset Management, Inc.
Executive Vice President -- since 1989; Coopers & Lybrand,
Operations & Treasurer certified public accountants,
Birmingham, AL and Pittsburgh, PA
(1984-89)
Lee B. Harper (33) Marketing Analyst Southeastern Asset Management, Inc.
Executive Vice President -- 1993- present; 1989-1993 -- IBM
Marketing Corp., Memphis, TN, Consultant;
1985-1987, McKinsey & Company,
Atlanta, GA, Business Analyst.
Randy D. Holt, CPA (42) Vice President & Southeastern Asset Management, Inc.
Vice President & Secretary Secretary since 1985; Ott, Baxter & Holt
(certified public accountants),
Memphis, TN, (1983-85)
</TABLE>
The following persons are officers of Southeastern but are not officers of
the Realty Fund; Mr. John B. Buford, CFA, (33), Vice President -- Investments
and Ms. Deborah L. Sullivan, CFA, (38), Vice President, who serves as
Southeastern's head trader. Both have been employed by Southeastern for more
than 5 years.
FACTORS CONSIDERED BY THE BOARD OF TRUSTEES IN RECOMMENDING APPROVAL OF THE
INVESTMENT COUNSEL AGREEMENT AND THE FUND ADMINISTRATION AGREEMENT WITH
SOUTHEASTERN ASSET MANAGEMENT, INC.
The Boards of Trustees considered a wide range of factors in their
conclusion to adopt the Investment Counsel Agreement and the Fund Administration
Agreement and to recommend ratification and extension
11
<PAGE> 15
of the terms of these Agreements by shareholders. These factors include: a
review of the investment strategy employed by Southeastern as Investment
Counsel; its investment reputation and success in implementing its philosophy in
the management of institutional and private accounts since its formation in
1975; its financial and employment stability; its support in building Fund
assets; the level of personal investment in the Funds by its principals; and the
separate investment performance of each Fund for recent periods and since
inception. The Board considered each of these factors to be equally important.
Under Southeastern's investment philosophy, superior long-term performance
can be achieved when positions in financially strong, well-managed companies are
acquired at prices significantly below their business value and are sold when
they approach their corporate worth. Using this approach, stocks are viewed as
ownership units in a business enterprise which has an unrecognized business or
"intrinsic" value subject to determination through careful securities analysis
and the use of established disciplines consistently applied over long periods of
time. Stocks which can be identified and purchased at a price significantly
discounted from this intrinsic worth not only protect investment capital from
significant loss but also facilitate major rewards when the true business value
is ultimately recognized.
Using these investment principles, Southeastern's management of the Fund's
portfolio produced a total return for the year and during each of the first
three quarters of 1996 which outpaced the total returns of the market indices
selected as the Fund's benchmarks. As a result, the Fund ranked No. 4 out of 46
real estate funds followed by Lipper Analytical Services, Inc. during its first
year of operations. Those investment results were as follows:
<TABLE>
<CAPTION>
WILSHIRE
LONGLEAF PARTNERS REAL ESTATE NAREIT
REALTY FUND* SECURITIES INDEX* INDEX*
----------------- ----------------- ------
<S> <C> <C> <C>
Year ended 12/31/96............................... 40.69% 37.02% 35.27%
Fourth quarter ended 12/31/96..................... 10.87% 18.39% 18.85%
Third quarter ended 9/30/96....................... 8.55% 5.90% 6.54%
Second quarter ended 6/30/96...................... 7.84% 4.78% 4.45%
First quarter ended 3/31/96....................... 8.40% 4.30% 2.27%
</TABLE>
- ---------------
* The Fund's inception date was January 2, 1996. Fund returns and those of the
Wilshire Real Estate Securities Index and the NAREIT Index are shown with all
dividends reinvested. The stock market indices shown are unmanaged. Past
performance is no guarantee of future performance, and the value of an
investment when redeemed may be more or less than the purchase price.
OTHER SUPPORT BY SOUTHEASTERN ASSET MANAGEMENT, INC.
In recommending ratification of the Agreement by shareholders, the Board
also considered other support provided by Southeastern which goes beyond
providing pure investment advice. Of the factors listed below the Board
considered the first to be the most significant.
Building of Fund Assets. Southeastern has been instrumental in building
the Fund's assets, particularly during the first several months of its life.
Substantial initial investments were made by Mr. Mason Hawkins, Chairman, Mr.
Reid Sanders, President, other Southeastern personnel, and Southeastern's profit
sharing plan. At the close of the year, Southeastern's directors, officers,
employees, their family members and Southeastern's profit sharing plan formed
the single largest related group of shareholders, constituting approximately
13.6% of assets or approximately $21.2 million. As a result, Southeastern's
officers and
12
<PAGE> 16
employees are personally investing as partners with other Fund shareholders, and
are subject to the same risks and rewards.
Additionally, a number of large accounts are the result of Southeastern's
institutional contacts. Consultants and fee paid investment advisers who have
long relationships with Southeastern and its other funds have recommended the
Realty Fund as an investment medium for individual or institutional clients. As
a result, many large shareholders of the Fund have a prior relationship of some
nature with Southeastern and have invested in the Realty Fund because of an
existing confidence level in Southeastern's investment management capabilities.
Possible Future Application of Expense Limitation. Should expenses of
operation exceed the expense limitation of 1.5% per annum in 1997, Southeastern
would be required to continue the fee reduction which occurred during the first
year of operations. In the future, a decrease in assets and/or an increase in
expenses could cause other reductions in management fees.
Expenses of Computer Equipment. The Fund currently reimburses Southeastern
for all specialized software lease expenses (software which can be used only for
Fund operations). The Fund also has an obligation to reimburse Southeastern for
costs of computer hardware equipment only if it becomes necessary to lease
computer equipment from an outside vendor which would be dedicated solely to the
use of any pooled accounts such as the Fund, subject to approval of the Board of
Trustees. No such dedicated equipment is presently being leased, and
Southeastern is supplying all computer hardware equipment and general computer
software programs without charge to the Fund.
Possible Assumption of Loss on Processing Errors. Under the Fund
Administration Agreement, Southeastern determines the daily per share net asset
value of the Funds, a price used by the Fund's transfer agent in processing
shareholder purchases and redemptions. The Fund Administration Agreement
contains normal language relieving Southeastern from monetary liability for
processing errors caused by factors other than gross negligence or reckless
disregard of its contractual responsibilities. However, it is possible that
Southeastern could be required to absorb losses for processing errors caused by
mistake or simple negligence. As a result, Southeastern might be required in the
future to assume financial responsibility for any pricing or other processing
losses which it might cause.
Minimum Vote Required. Under the requirements of the Investment Company
Act, the vote necessary for approval of Proposal 2 is the affirmative vote of a
majority of the outstanding securities, which is defined as the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares or (2) 67% of the
shares voting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE INVESTMENT COUNSEL AGREEMENT AND THE FUND ADMINISTRATION AGREEMENT WITH
SOUTHEASTERN ASSET MANAGEMENT, INC., AND EXTENSION OF THE TERMS OF SUCH
AGREEMENTS FOR A PERIOD BEGINNING AUGUST 1, 1997 AND ENDING JULY 31, 1998.
13
<PAGE> 17
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of Longleaf Partners Realty Fund for the fiscal
year ended December 31, 1996, were examined by Coopers & Lybrand, L.L.P.,
independent certified public accountants. In addition, the firm reviewed the
Fund's federal and state income tax returns.
The Board of Trustees has selected Coopers & Lybrand, L.L.P. as independent
certified public accountants for the current fiscal year ending December 31,
1997, and will thereafter consider the firm for service in this capacity in
future fiscal years. The firm is a large, international public accounting firm
and serves numerous other management investment companies and investment company
groups. The firm has informed the Board of Trustees that it has no material
direct or indirect financial interest in either fund. A representative of the
firm is expected to be present at the Annual Meeting to respond to questions.
The selection of the independent certified public accountants is to be
ratified or rejected by plurality vote, provided a quorum, consisting of a
majority of issued and outstanding shares, is present at the meeting in person
or by proxy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE SELECTION OF COOPERS & LYBRAND, L.L.P. AS THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR EACH FUND FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
EXPENSES OF ANNUAL MEETING
Costs and expenses of preparing, printing, assembling and mailing materials
in connection with the solicitation of proxies of each Fund will be paid by that
particular Fund. In addition to the use of the mails, certain Trustees or
officers of the Fund or of the Investment Counsel may solicit proxies by
telephone or in person, but no special payment will be made to those persons for
such services. The Fund will pay the expenses of D.F. King & Co., the Fund's
proxy solicitor.
Neither the persons named in the enclosed Proxy nor members of the Board of
Trustees are aware of any matters that will be presented for action at the
meeting other than matters set forth herein. Should any other matters requiring
a vote of shareholders properly arise, the proxy in the accompanying form will
confer upon the persons entitled to vote the shares represented by such proxy
discretionary authority to vote the shares in accordance with their best
judgement in the interests of the Fund.
ALL SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THE PROXY IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees:
/s/ O. MASON HAWKINS, CFA
O. MASON HAWKINS, CFA
Chairman of the Board of Trustees
and Chief Executive Officer
/s/ CHARLES D. REAVES
CHARLES D. REAVES
Executive Vice President
General Counsel
April 2, 1997
14
<PAGE> 18
EXHIBIT A
INVESTMENT COUNSEL AGREEMENT
AGREEMENT made as of the 29th day of December, 1995, between Longleaf
Partners Realty Fund (the "Fund") the third series of LONGLEAF PARTNERS FUNDS
TRUST, a Massachusetts business trust, ("the Master Trust"), and SOUTHEASTERN
ASSET MANAGEMENT, INC., a Tennessee corporation, (hereinafter referred to as
"the Investment Counsel").
In consideration of the mutual agreements herein made, the Fund and the
Investment Counsel understand and agree as follows:
1.(a) The Investment Counsel agrees, during the term of this
Agreement, to supervise the investment activities of the Fund and to
furnish the Fund with investment research and advice and continuously to
furnish the Fund with an investment program for its assets in a manner
consistent with the investment objectives and policies as adopted by the
Fund's Board of Trustees and shareholders. Such investment program shall
include the timing of the purchase and sales of portfolio securities and
the placing of orders for the purchase and sale of portfolio securities on
behalf of the Fund.
(b) The Investment Counsel shall be responsible for making
recommendations as to the selection of members of securities exchanges,
brokers and dealers (such members, brokers and dealers being hereinafter
referred to as "brokers") for the execution of the Fund's portfolio
transactions and, when applicable, the negotiation of commissions in
connection therewith. The Fund, through the Board of Trustees and pursuant
to such procedures as it shall adopt, shall be responsible for the final
decisions as to these matters. The Investment Counsel shall be responsible
for the actual placement of purchase and sale orders and its officers or
other personnel who place such orders shall be compensated by the
Investment Counsel for such services. The same individual, in his capacity
as an officer, employee or agent of the Investment Counsel, may make the
recommendations in question and, in his capacity as a Trustee or as an
officer of the Fund, make the decisions allocating the purchase or sale
order to a broker for execution on behalf of the Fund. The officer of the
Fund making such decisions and placements may be affiliated with brokers
who effect transactions for the Fund; provided, however, no such officer
may allocate any transactions to the broker with which he is affiliated
unless such allocation is authorized by the President or another officer of
the Fund.
2. All recommendations and decisions with respect to brokers in
connection with the placements of orders for the purchase and sale of
portfolio securities shall be made in accordance with the following
principles:
(a) Purchase and sale orders will usually be placed with brokers
which are recommended by the Investment Counsel and/or selected by the
Fund as able to achieve "best execution" of such orders. "Best
execution" shall mean prompt and reliable execution at the most
favorable security price. The determination of what may constitute best
execution and price in the execution of a securities transaction by a
broker involves a number of considerations, including, without
limitation, the overall direct net economic result to the Fund
(involving both price paid or received and any commissions and other
costs paid), the efficiency with which the transaction is effected, the
ability to effect the transaction where a large block is involved,
availability of the broker to stand ready to execute possibly difficult
transactions in the future, and the financial strength and stability of
the broker. Such considerations are judgmental and are weighed by the
Investment Counsel and the Fund in determining the overall
reasonableness of brokerage commissions.
15
<PAGE> 19
(b) In recommending brokers for portfolio transactions and in
selecting such brokers, the Investment Counsel and the Fund shall take
into account their past experience as to brokers qualified to achieve
"best execution."
(c) The Investment Counsel is authorized to recommend, and the Fund
is authorized to allocate, brokerage and principal business to brokers
who have provided brokerage and research services, (as such services are
defined in Section 28(e)(3) of the Securities Exchange Act of 1934 (the
"1934 Act"), for the Fund and/or other accounts, if any, for which from
time to time the Investment Counsel exercises investment discretion (as
defined in Section 3(a)(35) of the 1934 Act) and, as to transactions in
the United States as to which fixed minimum commission rates are not
applicable, to cause the Fund to pay a commission for effecting a
securities transaction in excess of the amount another broker would have
charged for effecting that transaction, if the Investment Counsel in
making the recommendation in question determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker, viewed in terms
of either that particular transaction or the Investment Counsel's
overall responsibilities with respect to the Fund and the other
accounts, if any, as to which it exercises investment discretion. In
reaching such determination, neither the Investment Counsel nor the
Officer or Officers of the Fund making the decision will be required to
place or attempt to place a specific dollar value on the research or
execution services of a broker or on the portion of any commission
reflecting either of said services. In demonstrating that such
determinations were made in good faith, the Investment Counsel and the
officer or officers of the Fund who have made the recommendations and
decisions in question shall be prepared to show that all commissions
were allocated and paid for purposes contemplated by the Fund's
brokerage policy, that commissions were not allocated or paid for
products or services which were readily and customarily available and
offered to the public on a commercial basis and that the commissions
paid were within a reasonable range. Whether commissions were within a
reasonable range shall be based on any available information as to the
level of commissions known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Fund's policies
that (i) obtaining a low commission is deemed secondary to obtaining a
favorable securities price since it is recognized that usually it is
more beneficial to the Fund to obtain a favorable price than to pay the
lowest commission; and (ii) the quality, comprehensiveness and frequency
of research studies that are provided for the Fund and the Investment
Counsel are useful to the Investment Counsel in performing its advisory
activities under this Agreement. Research services provided by brokers
to the Fund or the Investment Counsel are considered to be in addition
to, and not in lieu of, services required to be performed by the
Investment Counsel under this Agreement. In addition, to the extent not
otherwise prohibited under applicable securities laws and regulations,
the Investment Counsel may cause the Fund to pay a commission for
effecting a securities transaction in excess of the amount another
broker would have charged for effecting the transaction if the
Investment Counsel in making the recommendation in question determines
in good faith that such amount is reasonable in relation to the value of
other goods and services provided the Fund by such broker, subject to
the same principles applied in the payment of commissions paid for
brokerage and research services.
(d) Purchases and sales of portfolio securities other than on a
securities exchange shall be executed with primary market makers acting
as principal except where, in the judgement of the Investment Counsel,
better prices and execution may be obtained on a commission basis or
from other sources.
16
<PAGE> 20
(e) Sales of the Fund's shares made by a broker are one factor
among others to be taken into account in recommending and in deciding to
allocate portfolio transactions (including agency transactions,
principal transactions, purchase in underwritings or tenders in response
to tender offers) for the account of this Fund to that broker; provided
that the broker shall furnish "best execution", as defined in paragraph
2(a) above, and that such allocation shall be within the scope of the
Fund's other policies as stated above; provided further that in every
allocation made to a broker in which the sale of Fund shares is taken
into account there shall be no increase in the amount of the commissions
or other compensation paid to such broker beyond a reasonable amount of
commission or other compensation determined, as set forth in
subparagraph 2(c) hereof, on the basis of best execution plus research
services, without taking account of or placing any value upon such sale
of the Fund's shares.
(f) The Fund may purchase and/or sell securities which are also
purchased or sold by the Investment Counsel or its owners or their
affiliates or other investment advisory clients of the Investment
Counsel. When other clients of the Investment Counsel desire to purchase
or sell a security at the same time such security is purchased or sold
for the Fund, it is understood that such purchases and sales will be
made in a manner designed to be fair to all parties.
3. The Investment Counsel shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary or useful
to the performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, the staff and personnel of the
Investment Counsel shall be deemed to include persons employed or otherwise
retained by the Investment Counsel to furnish statistical and other factual
data, advice regarding economic factors and trends, information with
respect to technical and scientific developments, and such other
information, advice and assistance as the Investment Counsel may desire.
The Investment Counsel shall provide the Fund or any Administrator or other
entity having the responsibility of maintaining on behalf of the Fund such
records as are required under the Investment Company Act of 1940 with
prompt and timely information about all aspects of the purchases and sales
of the Fund's portfolio securities and with full information with respect
to brokers executing such securities so as to facilitate the proper
maintenance of all such records. The Investment Counsel shall maintain such
records as may be required to be maintained by an investment counsel under
the Investment Advisers Act of 1940, and all such records shall be made
available to the Trust, upon the request of its Board of Trustees or
President.
4. The Fund will require the Fund's Administrator, or other entity
having the responsibility for maintaining such records as are required by
the Investment Company Act of 1940, to make available to the Investment
Counsel from time to time such financial reports, proxy statements and
other information relating to the business and affairs of the Fund as the
Investment Counsel may reasonably require in order to discharge its duties
and obligations hereunder or to comply with any applicable law and
regulations.
5. The Investment Counsel shall bear the cost of rendering the
investment advisory services to be performed by it under this Agreement and
shall, at its own expense, pay the compensation of the directors, officers
and employees, if any, of the Fund who are also employed by the Investment
Counsel, and such clerical and bookkeeping services as the Investment
Counsel shall reasonably require in performing its duties hereunder, as
required by the Investment Advisers Act of 1940 (other than records
maintained by the Fund as required by the Investment Company Act of 1940).
17
<PAGE> 21
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Counsel, the Fund shall pay to the
Investment Counsel an Investment Counsel Fee which shall be accrued daily
and paid monthly in arrears equal to 1.00% per annum of the Fund's average
daily net assets. Such calculations shall be made by applying 1/365ths of
the annual rate to the Fund's net assets each day determined as of the time
the net asset value is determined on that day or if the net asset value is
not determined on the day, on the last previous business day it was so
determined. If this Agreement becomes effective subsequent to the first day
of a month or shall terminate before the last day of a month, compensation
for the part of the month this Agreement is in effect shall be prorated in
a manner consistent with the calculation of the fees as set forth above.
Subject to the provisions of paragraph 8 hereof, payment of the
compensation of the Investment Counsel for the preceding month shall be
made as promptly as possible after completion of the computations described
in paragraph 8 hereof.
7. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, but not being limited to the charges and
expenses of any Administrator, any transfer agent, and/or any dividend
disbursing agent; the charges and expenses of any registrar, any custodian,
sub-custodian or depository appointed by the Fund for the safekeeping of
its cash, portfolio securities and other assets and the settlement of its
portfolio securities transactions; all taxes, including securities issuance
and transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies or pursuant to any foreign laws; the cost and expense
of engraving or printing of any certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions or
pursuant to any foreign laws (including filing fees and legal fees and
disbursements of counsel); the cost and expense of printing, including
typesetting, and distributing prospectuses of the Fund and supplements
thereto the Fund's shareholders; all expenses of shareholders' and
Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not
employees of the Investment Counsel; all expenses incident to the payment
of any dividend, distribution, withdrawal or redemption whether in shares
or in cash; charges and expenses of any outside service used for pricing of
the Fund's shares; charges and expenses of legal counsel, including counsel
to the Trustees of the Fund who are not "interested persons" (as defined in
the Investment Company Act of 1940) of the Trust or the Investment Counsel,
and or independent accountants, in connection with any matter relating to
the Fund; membership dues of industry associations; interest payable on
Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Fund which inure to its benefit;
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto);
and all organizational costs and all other charges and costs of the Fund's
operations unless otherwise explicitly provided herein; provided, however,
that all such expenses to be paid by the Fund shall be subject to review
and approval by the Board of Trustees of the Fund as to the reasonableness
thereof.
8. In the event the operating expenses of the Fund, including amounts
payable to the Investment Counsel pursuant to paragraph 6 hereof but
excluding all extraordinary expenses, for any fiscal year ending on a date
on which this Agreement is in effect, exceed the expense limitations
applicable to the Fund imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time,
the Investment Counsel shall reduce its Investment Counsel Fee to the
extent of such excess and, if required pursuant to any such laws or
regulations, will reimburse the Fund for annual operating expenses in the
amount of such excess of any expense limitation that may be
18
<PAGE> 22
applicable; provided, however, there shall be excluded from such expenses
the amount of any interest, taxes, brokerage commissions, distribution fees
and extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto)
paid or payable by the Fund. Such reduction, if any, shall be based upon
the expense limitation, if any, applicable to the Fund at the end of the
last business day of the fiscal year of the Fund. Each such monthly
calculation shall be based on the Fund's average daily net assets and
expenses for the period beginning on the first day of the fiscal year of
the Fund (or, in its first year, the first day of the Fund's operations).
Should two or more such expense limitations be applicable at the end of the
last business day of the month, that expense limitation which results in
the largest reduction in the applicable fees or the largest expense
reimbursements shall be applicable. In the absence of any applicable
expense limitations under state laws or regulations which are more
favorable to the Fund than the following undertaking, the Investment
Counsel agrees that the Investment Counsel Fee shall be reduced and
reimbursement of the Fund shall be required to the extent necessary to
limit operating expenses (other than interest, taxes, brokerage
commissions, distribution fees, and extraordinary expenses) as defined
above, to a maximum during any fiscal year of 1.5% per annum of average net
assets of the Fund; provided, however, that the Investment Counsel shall
not be required pursuant to this undertaking to provide reimbursement to
the Fund for any fiscal year in excess of the amount of its Investment
Counsel Fee which would otherwise be earned for that fiscal year.
9. The Investment Counsel will use its best efforts in the supervision
and management of the investment advisory activities of the Trust. Except
as may otherwise be required by the Investment Company Act of 1940 or the
rules thereunder, neither the Investment Counsel nor its stockholders,
officers, directors, employees or agents shall be subject to any liability
for, or any damages, expenses or losses incurred in connection with, any
act or omission connected with or arising out of any services rendered
under this Agreement, including any mistake of judgement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of reckless disregard of its obligations and duties
under this Agreement. Notwithstanding the foregoing, the Investment Counsel
shall not be liable to the Fund for the acts and omissions of any party
engaged by it to execute purchases and sales of portfolio securities for or
on behalf of the Fund under this Agreement, except to the extent that such
party is liable to the Investment Counsel for such acts and omissions. Any
person, even though also employed by the Investment Counsel, who may be or
become an employee of and paid by the Fund shall be deemed, when acting
within the scope of his or her employment by the Fund, to be acting in such
employment solely for the Fund and not as the employee or agent of the
Investment Counsel.
10. Nothing contained in this Agreement shall prevent the Investment
Counsel or any affiliated person of the Investment Counsel from acting as
investment adviser or manager for any other person, firm, corporation
and/or other entity and nothing contained in this Agreement shall in any
way bind or restrict the Investment Counsel or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing
in this Agreement shall limit or restrict the right of any Trustee, or
officer or employee of the Investment Counsel to engage in any other
business or to devote his time and attention in part to the management or
other aspects of any other business whether of a similar or dissimilar
nature.
11. This Agreement shall remain in effect for a period of two (2)
years and from year to year thereafter, provided such continuance is
approved at least annually by the vote of holders of a majority, as defined
in the Investment Company Act of 1940, of the outstanding voting securities
of the Fund or
19
<PAGE> 23
by the Trustees of the Fund; provided, that in either event such
continuance is also approved annually by the vote of a majority of the
Trustees of the Fund who are not parties to this Agreement or who are not
otherwise "interested persons" (as defined in the Investment Company Act of
1940) of any such party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that
(a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon sixty days written notice to the Investment
Counsel, either by majority vote of the Trustees of the Fund or by the vote
of a majority of the outstanding voting securities of the Fund; (b) this
Agreement shall immediately terminate in the event of its assignment
(within the meaning of the Investment Company Act of 1940) unless such
automatic termination shall be prevented by an exemptive order of the
Securities and Exchange Commission; and (c) the Investment Counsel may
terminate this Agreement without payment of penalty on sixty days written
notice to the Fund. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed post-paid, to the other party
at the principal office of such party.
12. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to confirm this Agreement to the
requirements of applicable federal laws or regulations, but neither the
Fund nor the Investment Counsel shall be liable for failing to do so.
13. This Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable provisions of the
Investment Company Act of 1940. To the extent the applicable laws of the
Commonwealth of Massachusetts, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act of 1940, the
latter shall control.
14. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, or rule or otherwise, the remainder of the
Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
15. Nothing herein shall be construed as constituting the Investment
Counsel as an agent of the Fund.
16. The Declaration of Trust establishing the Fund, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name of the Trust refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, shareholder, officer, employee or agent of the Fund shall be held
to any personal liability, nor shall resort be had to their private
property (other than as specifically provided in the said Declaration of
Trust) for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Fund, but the Fund's assets and estate
only shall be liable.
20
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
29th day of December, 1995.
Longleaf Partners Funds Trust
(the Master Trust)
and
Longleaf Partners Realty Fund
(Third Series)
By: /s/ CHARLES D. REAVES
------------------------------------
Charles D. Reaves
Executive Vice President
Southeastern Asset Management, Inc.
(the Investment Counsel)
By: /s/ W. REID SANDERS
------------------------------------
W. Reid Sanders
Executive Vice President
21
<PAGE> 25
EXHIBIT B
FUND ADMINISTRATION AGREEMENT
AGREEMENT made as of the 29th day of December 1995, between Longleaf
Partners Realty Fund (the "Fund"), the third series of LONGLEAF PARTNERS FUNDS
TRUST, a Massachusetts business trust, ("the Master Trust") and SOUTHEASTERN
ASSET MANAGEMENT, INC., a Tennessee corporation, (hereinafter referred to as
"the Administrator"). In consideration of the mutual agreements herein made, the
Fund appoints the Administrator and the Administrator agrees to serve as the
Fund Administrator on the terms and conditions set forth herein.
I
GENERAL AUTHORITY AND FACILITIES
1.01 STANDARD OF SERVICE OF THE ADMINISTRATOR
The Administrator will use its best efforts to provide efficient,
effective, and accurate administrative services for the Fund, as defined in
Section II herein, and will seek innovative and continuing technological
improvements for the said functions for which it has assumed responsibilities.
The Administrator will not be liable or responsible for delays or errors by
reason of circumstances beyond its control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown
beyond its control, flood or catastrophe, acts of God, insurrection, war, riots
or failure beyond its control of transportation, communication or power supply.
The Administrator will provide services equal in quality to those
administration, accounting, and shareholder services performed for any other
management investment companies which the administrator may serve in a similar
capacity.
1.02. FACILITIES AND EMPLOYEES
(a) The Administrator shall, at its own expense, furnish directly or
through subsidiaries, office facilities, including space, furniture and
equipment and, to the extent that such services are not being provided by others
under contract with the Fund, personnel for managing the affairs of the Fund,
maintaining and servicing the records with respect to the investments and
shareholders of the Fund, and maintaining and servicing all other books and
records of the Fund, as required by the Investment Company Act of 1940, but not
including such duties, services, or records which are customarily performed or
maintained for an open-end management investment company by its custodian,
transfer agent, independent auditors, and/or outside legal counsel.
(b) The Administrator shall provide personnel satisfactory to the Board of
Trustees of the Fund to serve as officers of the Fund, including a President,
one or more Executive Vice Presidents or Vice Presidents, a Secretary, a
Treasurer, and such additional officers and employees as may reasonably be
necessary for the performance of its duties under this Agreement.
(c) The personnel and facilities provided by the Administrator shall be
subject to the control and direction of the Board of Trustees of the Fund,
notwithstanding that some or all of their compensation and expenses of their
employment may be paid by the Administrator. The Administrator is responsible
for the employment, control and conduct of its agents and employees and for
injury to such agents or employees or to others through its agents or employees.
The Administrator assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employment taxes thereunder. The
Administrator will maintain appropriate insurance at its own expense against
public liability in a reasonable amount.
22
<PAGE> 26
1.03. DOCUMENTS TO BE FURNISHED TO ADMINISTRATOR
The Fund shall from time to time provide the Administrator with: (1) a copy
of the Declaration of Trust of the Fund and all amendments thereto; (2) a copy
of the Bylaws of the Fund as amended from time to time; (3) certified copies of
votes of the Board of Trustees of the Fund relating to the issues of Shares of
the Fund; (4) any amended certificate for Shares of the Fund in the form adopted
by the Board; (5) specimen signatures of the officers of the Funds; (6) such
other documents as the Administrator may reasonably request.
1.04. PROTECTION OF ADMINISTRATOR; INDEMNIFICATION
(a) The Administrator may rely on certifications of the President, any
Executive Vice President or Vice President, the Secretary or the Treasurer of
the Fund as to proceedings, facts or other matters in connection with any action
taken by the shareholders or the Board of Trustees of the Fund, and upon
instructions not inconsistent with this Agreement, from the President or any
Executive Vice President or Vice President and the Treasurer or any Assistant
Treasurer. The Administrator may apply to counsel for the Fund or to its own
counsel for advice whenever it deems it expedient. With respect to any action
taken on the basis of such certifications or instructions or in accordance with
the advice of counsel for the Fund, the Fund will indemnify and hold harmless
the Administrator from any and all liability and expense.
(b) The Administrator shall be indemnified and held harmless by the Fund
against any loss or damage by reason of any act done by it in good faith and in
reliance upon any instrument or certificate for Shares believed by it (a) to be
genuine and (b) to be signed, countersigned or executed by any person or persons
authorized to sign, countersign, or execute such instrument or certificate;
provided, however, that the Administrator shall not be so indemnified in the
event of its failure to obtain a proper signature guarantee.
(c) If any officer of the Fund shall no longer be vested with authority to
sign for the Fund, written notice thereof shall forthwith be given to the
Administrator by the Fund and until receipt of such notice by it, the
Administrator shall be fully indemnified and held harmless by the Fund in
recognizing and acting upon certificates or other instruments bearing the
signatures or facsimile signatures of such officer.
(d) Except as may otherwise be required by the Investment Company Act of
1940 or the rules thereunder, neither the Administrator nor its stockholders,
officers, directors, employees or agents shall be subject to any liability for,
or any damages, expenses or losses incurred in connection with, any act or
omission connected with or arising out of any services rendered under this
Agreement, including any mistake of judgment, except by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement. Notwithstanding the foregoing, the Administrator shall not be liable
to the Fund for the acts and omissions of any party engaged by it to execute
purchases and sales of portfolio securities for or on behalf of the Fund under
this Agreement, except to the extent that such party is liable to the
Administrator for such acts and omissions. Any person, even though also employed
by the Administrator, who may be or become an employee of the Fund shall be
deemed, when acting within the scope of his or her employment by the Fund, to be
acting in such employment solely for the Fund and not as the employee or agent
of the Administrator.
(e) The Administrator shall for all purposes herein be deemed to be an
independent contractor. As such, the Administrator has no authority to act for
or represent the Fund in any way and is not an agent of the Fund.
23
<PAGE> 27
II
ACCOUNTING AND ADMINISTRATION FUNCTIONS
2.01. MAINTENANCE OF RECORDS
The Administrator will maintain records on behalf of the Fund in compliance
with the Rules and Regulations of the Securities and Exchange Commission,
including, but not limited to, any such records required to be maintained
pursuant to Section 31(a) of the Investment Company Act of 1940 and the Rules
and Regulations thereunder. Such records will at all times be available for
inspection and use by the Fund and upon termination of this Agreement be
transferred upon instructions of the Fund to any successor administrator or to
the Fund itself.
2.02. RESPONSIBILITIES AND FUNCTIONS
The Administrator shall have the responsibility of managing, performing, or
supervising the administrative and business operations of the Fund, other than
those related to the management of the Fund's portfolio of securities and the
distribution and sale of the Fund's shares. The duties and responsibilities to
be performed by the Administrator shall include the following:
(1) Preparation or supervision of the preparation of all registration
statements and prospectuses, and the filing thereof with the appropriate
regulatory authorities.
(2) Preparation or supervision of the preparation of all public
financial statements and financial reports, the filing thereof with the
appropriate regulatory authorities, and the distribution to shareholders of
the Fund.
(3) Preparation or the supervision of the preparation of all tax
returns and the filing thereof with the appropriate regulatory authorities.
(4) Preparation or the supervision of the preparation of any Proxy
Statements, assistance in the conduct of any meetings of shareholders,
tabulation of proxies and ballots of shareholders, and the maintenance of
minutes of such meetings.
(5) Daily valuation of the Fund's portfolio and the daily calculation
of the Fund's net asset value per share.
(6) Co-ordination and liaison between the Fund and its Investment
Counsel, its Custodian, its Transfer Agent and the reconciliation of all
accounts and records provided by such entities.
(7) Management and scheduling of regular quarterly meetings of the
Fund's Board of Trustees, and in connection therewith, providing all
necessary assistance in the conduct of such meetings, and the maintenance
of minutes of such meetings.
(8) Establishment of internal accounting controls and procedures and
the continuing monitoring thereof.
(9) Co-ordination with the Fund's independent certified public
accountants and outside legal counsel.
(10) Management of audits and inspections by the Fund's independent
certified public accountants and by all regulatory authorities.
24
<PAGE> 28
(11) Supplying or obtaining on behalf of the Fund such other advice or
assistance as may be necessary or desirable in the continuing
administration of the Fund's business affairs.
2.03. ADMINISTRATION FEES AND EXPENSES
(a) The Administrator shall be entitled to receive and the Fund shall be
obligated to pay to the Administrator for the services specified in this Section
II an Administration Fee, which shall be accrued daily and paid monthly in
arrears of 0.10% per annum of average daily net assets. The Fund shall also
reimburse the Administrator for the Fund's equitable and appropriate share of
the salary of the Fund's Treasurer, as allocated among the Fund and any other
Fund or series and any other commingled investment or insurance product served
by the Administrator and the Fund's Treasurer, subject to review of and approval
by the Board of Trustees, and shall pay or provide reimbursement for all other
operational expenses, as provided in Paragraphs 2.03(b) and 2.03(c) of this
Agreement.
2.03(b) The Fund shall pay all of its costs and expenses of operation,
except those specifically stated herein to be borne or payable by the
Administrator. The expenses payable by the Fund shall include, but shall not be
limited to: (i) the fees of the Fund's Investment Counsel, and Administrator;
(ii) the fees of any Custodian and Transfer Agent of the Fund; (iii)
compensation of the Fund's independent certified public accountants and any
legal counsel retained by the Fund, including compensation and costs relating to
litigation, and the fees, compensation and expenses of the "non-interested"
Trustees of the Fund; (iv) franchise, income, business license and original
issue taxes relating to the Fund and its securities; (v) fees and legal expenses
incurred in qualifying the shares of the Fund for sale with any state regulatory
agency in the several states, and the fees and expenses of maintaining,
renewing, increasing or amending such qualifications; (vi) insurance and bonding
premiums and association dues; (vii) fees and expenses involved in registering
and maintaining registrations of the Fund and of its shares with the Securities
and Exchange Commission, including the preparation and printing of prospectuses
for shareholders; (viii) costs of printing and mailing to shareholders
prospectuses, proxy statements, dividend notices, routine and special reports
and other communications to shareholders, as well as all expenses of
shareholders and Trustees meetings; (ix) costs of printing of any stock
certificates; (x) interest expense and brokers' commissions and issue and
transfer taxes chargeable to the Fund in connection with securities transactions
to which the Fund is a party; (xi) the costs of obtaining prices of the Fund's
portfolio securities; and (xii) any extraordinary expenses including
extraordinary legal expenses; provided, however, that all such expenses to be
paid by the Fund shall be subject to review and approval by the Board of
Trustees of the Fund as to the reasonableness thereof.
2.03(c) The Fund shall reimburse the Administrator for the Fund's equitable
and appropriate share of the costs and expenses of the following items, such
costs and expenses to be allocated among the Fund and any other Funds or series
and any other commingled investment or insurance products served by the
Administrator, subject to review of and approval by the Board of Trustees of the
Fund as to the method of allocation and the reasonableness of the costs and
expenses:
(1) Costs and expenses of leasing or acquiring specialized computer
programs or computer software and software support contracts used
exclusively by the Fund and any other Funds or commingled products.
(2) Costs and expenses of leasing or acquiring specialized computer
equipment or hardware and appropriate support contracts for computer
equipment purchased exclusively for and dedicated solely to processing of
transactions for the Fund and any other Funds or commingled products.
25
<PAGE> 29
(3) Organizational expenses amortized in a manner as permitted by
generally accepted accounting principles and the Securities & Exchange
Commission, limited to the particular series or Fund.
(4) Costs and expenses of stationery, appropriate forms, envelopes,
checks, postage, telephone, telegraph, and overnight or other courier
charges and other similar items, to the extent such costs and expenses have
not been paid directly by the Fund.
III
TERMINATION, AMENDMENTS, AND OTHER PROVISIONS
3.01. RENEWAL AND TERMINATION
This Agreement shall remain in effect for a period of two (2) years and
from year to year thereafter, provided such continuance is approved at least
annually by the vote of holders of a majority, as defined in the Investment
Company Act (the "Act"), of the outstanding voting securities of the Fund or by
the Trustees of the Fund; provided, that in either event such continuance is
also approved annually by the vote of a majority of the Trustees of the Fund who
are not parties to this Agreement or who are not otherwise "interested persons"
(as defined in the Investment Company Act of 1940) or any such party, which vote
must be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time and without the
payment of any penalty, terminate this Agreement upon sixty days written notice
to the Administrator, either by majority vote of the Trustees of the Fund or by
the vote of a majority of the outstanding voting securities of the Fund; (b)
this Agreement shall immediately terminate in the event of its assignment
(within the meaning of the Investment Company Act of 1940) unless such automatic
termination shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Administrator may terminate this Agreement
without penalty on sixty days written notice to the Fund. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed
post-paid, to the other party at the principal office of such party.
3.02. SUCCESSOR ADMINISTRATOR
In the event that a successor to any of the Administrator's duties or
responsibilities hereunder is designated by the Fund by written notice to the
Administrator, the Administrator will, promptly upon such termination and at the
expense of the Fund, transfer to such successor all other relevant books,
records, correspondence and other data established or maintained by the
Administrator under this Agreement in form reasonably acceptable to the Fund (if
such form differs from the form in which the Administrator has maintained the
same, the Fund shall pay any expenses associated with transferring the same to
such form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from the Administrator's
personnel in the establishment of books, records, and other data by such
successor.
3.03. AMENDMENT
This Agreement may be amended by the parties without the vote or consent of
the shareholders of the Fund to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or if they
deem it necessary to confirm this Agreement to the requirements of applicable
federal laws or regulations.
26
<PAGE> 30
3.04. FURTHER ASSURANCES
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes of this Agreement.
3.05. MISCELLANEOUS
(a) This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions of this
Agreement or otherwise affect their construction or effect. This Agreement may
be executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
(c) The Declaration of Trust establishing the Fund, a copy of which,
together will all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name of the Trust refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of the said Trust shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Trust, but the Trust assets and estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
29th day of December, 1995.
Longleaf Partners Funds Trust
(the Master Trust)
and
Longleaf Partners Realty Fund
(Third Series)
By: /s/ CHARLES D. REAVES
------------------------------------
Charles D. Reaves
Executive Vice President
Southeastern Asset Management, Inc.
(the Investment Counsel)
By: /s/ W. REID SANDERS
------------------------------------
W. Reid Sanders
Executive Vice President
27
<PAGE> 31
APPENDIX A
FORM OF PROXY
<TABLE>
<C> <S>
PROXY -- LONGLEAF PARTNERS THIS PROXY IS SOLICITED ON BEHALF
REALTY FUND OF THE BOARD OF TRUSTEES
</TABLE>
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, revoking any previous
proxies for such shares, hereby appoints O. Mason Hawkins, W. Reid Sanders, and
Charles D. Reaves or any one of them, attorneys of the undersigned with full
power of substitution, to vote all shares of LONGLEAF PARTNERS REALTY FUND (the
"Fund") which the undersigned is entitled to vote at the 1997 Annual Meeting of
Shareholders of the Fund, to be held at 5:30 p.m. on Tuesday, May 13, 1997, in
Hardin Hall at the Memphis Botanic Garden, 750 Cherry Road, Memphis, Tennessee,
and at any and all adjournments thereof. Receipt of the Notice and Proxy
Statement for said Meeting is hereby acknowledged.
This proxy must be returned in order for your shares to be voted. The shares
represented by this proxy will be voted on the following matters as specified
below by the undersigned. If no specification is made, this proxy will be voted
in favor of all such matters.
<TABLE>
<S> <C> <C>
1. Re-Election of Board of Trustees.
[ ] FOR the following nominees [ ] WITHHOLD AUTHORITY
(except those whose names are inserted on the line below) to vote for any of the nominees
</TABLE>
TRUSTEES: O. Mason Hawkins; W. Reid Sanders; Chadwick H. Carpenter, Jr.,
Daniel W. Connell, Jr.; Steven N. Melnyk;
C. Barham Ray
----------------------------------------------------------------------
2. To approve or disapprove a proposal to ratify adoption of the Investment
Counsel Agreement
and the Fund Administration Agreement with Southeastern Asset Management,
Inc.,
and to extend the term for a one-year period beginning August 1, 1997 and
ending July 31, 1998,
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Over)
3. To ratify the selection of Coopers & Lybrand, L.L.P. as Independent
Certified
Public Accountants for the Fund. FOR [ ] AGAINST [ ] ABSTAIN [ ]
As to any other matter upon which the Shareholders are permitted to vote, or if
any of the nominees named in the Proxy Statement are not available for election,
said attorneys shall vote in accordance with their judgment.
THE TRUSTEES RECOMMEND A "FOR"
VOTE ON ALL MATTERS.
--------------------------------
--------------------------------
Please sign exactly as your name
or names appear on left.
Dated: 1997
-------------------,
