<PAGE> 1
As filed with the Securities and Exchange Commission on August 10, 1998
Registration No. 33-10472
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
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Pre-Effective Amendment No. ( )
----- -----
Post-Effective Amendment No. 20 (X)
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 20 (X)
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(Check appropriate box or boxes)
LONGLEAF PARTNERS FUNDS TRUST
LONGLEAF PARTNERS INTERNATIONAL FUND
(This Post-Effective Amendment No. 20 applies only to
Longleaf Partners International Fund, a new fourth series of
Longleaf Partners Funds Trust, the Registrant)
(Exact name of registrant as specified in charter)
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c/o Southeastern Asset Management, Inc.
6410 Poplar Avenue; Suite 900
Memphis, TN 38119
(Address of principal executive offices)
----------------------------------------
Registrant's Telephone Number, Including Area Code - (901) 761-2474
<TABLE>
<S> <C>
CHARLES D. REAVES, ESQ. Copy to:
Executive Vice President ALAN ROSENBLAT, ESQ.
Longleaf Partners Funds Trust Dechert Price & Rhoads
c/o Southeastern Asset Mgmt., Inc. 1775 Eye Street, N.W.
6410 Poplar Ave., Ste. 900 Washington, D.C. 20006
Memphis, TN 38119
</TABLE>
(Name and address of agent for service)
---------------------------------------
Approximate Date of Proposed Public Offering October 26, 1998
-----------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2(a) under the Investment Company Act of 1940, the
Registrant hereby declares that an indefinite number or amount of shares of
beneficial interest is being registered under the Securities Act of 1933. The
$500 filing fee required by said Rule has been paid. The Notice required by
Rule 24f-2(b)(1) under the Investment Company Act of 1940 with respect to the
fiscal year ended December 31, 1997, was filed with the Securities & Exchange
Commission on March 10, 1998, together with a registration fee for net sales
for the period.
<PAGE> 2
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
__________
LONGLEAF PARTNERS INTERNATIONAL FUND
FORM N-1A CROSS REFERENCE SHEET
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<CAPTION>
PART A - ITEM NUMBER PROSPECTUS CAPTION
<S> <C> <C>
1. Cover Page Front Cover Page
2. Synopsis The Funds at a Glance
3. Condensed Financial "Condensed
Information Financial Information"
4. General Description of Front Cover Page;
Registrant The Funds in Detail
Information on Investment
Management
5. Management of the Fund Types of Investments
Investment Techniques
Investment Risk Factors
Diversification and
Portfolio Turnover
Information on Management
and Administration
6. Capital Stock and Other State of Organization
Securities Distributions and Taxes
7. Purchase of Securities How to Open an Account
Being Offered How to Purchase Shares
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Not Applicable
</TABLE>
<PAGE> 3
LONGLEAF PARTNERS INTERNATIONAL FUND
Post-Effective Amendment No. 20
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
PART B - ITEM NUMBER INFORMATION CAPTION
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents; Page 1
12. General Information Contained in Prospectus on
and History Face Page and under
Significance of Fund Names;
State of Organization
Provisions; In SAI under
Management of the Fund.
13. Investment Objectives and Additional Information About
Policies Investment Restrictions and
Policies; Additional
Information About Investment
Techniques
14. Management of the Fund Management of the Fund
15. Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. Investment Advisory and Investment Advisory Services;
Other Services Other Management Related Services
17. Brokerage Allocation and Brokerage Allocation
Other Practices
18. Capital Stock and Other Contained in Prospectus under
Securities caption "State of Organization"
19. Purchase, Redemption and Contained in Prospectus
Pricing of Securities under caption "How to
Purchase Shares"; "How to
Redeem Shares", and
"Computation of Net Asset
Value".
20. Tax Status Contained in Prospectus
under captions "Dividends
and Taxes"; In SAI under
caption "Additional Tax
Information"
21. Underwriters None; not applicable
22. Calculation of Performance Investment Performance and
Data Total Return
23. Financial Statements Financial Statements
</TABLE>
<PAGE> 4
LONGLEAF PARTNERS INTERNATIONAL FUND
====================================
PART A
INFORMATION REQUIRED IN THE PROSPECTUS
<PAGE> 5
LONGLEAF
PARTNERS
INTERNATIONAL
FUND
MANAGED BY:
SOUTHEASTERN ASSET MANAGEMENT, INC.
October 26, 1998
<PAGE> 6
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PROSPECTUS
October 26, 1998
LONGLEAF PARTNERS
INTERNATIONAL FUND
A Series of Longleaf
Partners Funds Trust
(LONGLEAF PARTNERS LOGO)
Longleaf Partners International Fund is a no-load, non-diversified, open-end,
management investment company which seeks long-term capital growth primarily
through investments in the equity securities of international or foreign
issuers.
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information, including how the Fund invests and
the services available to shareholders.
To learn more about the Fund, you can obtain a copy of the most recent financial
reports and portfolio listings, or a copy of the Statement of Additional
Information (SAI) dated October 26, 1998. The SAI has been filed with the
Securities and Exchange Commission (SEC) and is incorporated herein by reference
(legally forms a part of the prospectus). For a free copy of either document,
call 1-800-445-9469.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, the Federal Reserve
Board, or any other agency, and are subject to investment risk, including the
possible loss of principal.
LONGLEAF PARTNERS INTERNATIONAL FUND
MANAGED BY
SOUTHEASTERN ASSET MANAGEMENT, INC.
6410 Poplar Avenue; Suite 900
Memphis, TN 38119
(800) 445-9469 (901) 761-2474
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LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 7
CONTENTS
<TABLE>
<S> <C>
The International Fund at a Glance.......................... 3
Fund Expenses............................................... 5
The International Fund in Detail
Investment Objective...................................... 6
Investment Policies....................................... 6
Investment Philosophy..................................... 6
Concentration............................................. 7
Types of Equity Securities................................ 8
Other Investments......................................... 8
Investment Techniques
Managing Investment Exposure.............................. 8
Currency Exchange Transactions............................ 9
Options on Securities and Stock Indices................... 10
Futures Contracts and Related Options..................... 10
Risks of Options, Futures and Foreign Currency
Contracts............................................... 10
Swaps..................................................... 11
When-Issued and Forward Commitment Securities............. 11
Other Investments and Techniques
Borrowing................................................. 12
Short Sales............................................... 12
Loans of Portfolio Securities............................. 12
Restricted and Iliquid Securities......................... 12
Fixed Income Securities................................... 13
Cash Reserves............................................. 13
Other Risk Factors
Investor Suitability...................................... 13
Foreign Economic Risks.................................... 14
Foreign Political Risks................................... 14
Expenses of Foreign Investing............................. 14
Foreign Income Taxes...................................... 14
General Market Risks...................................... 15
Diversification............................................. 15
Portfolio Turnover.......................................... 15
Investment Management and Fund Administration
Investment Counsel........................................ 16
Co-Portfolio Managers..................................... 16
Investment Counsel Fees................................... 16
Fund Administrator........................................ 16
Board of Trustees........................................... 17
Other Executive Officers.................................... 18
How to Open an Account...................................... 19
How to Purchase Shares...................................... 19
How to Redeem Shares........................................ 21
Shareholder Servicing....................................... 23
How Shares Are Priced....................................... 23
Distributions and Taxes..................................... 24
Other Information
Significance of Fund Names................................ 25
Code of Ethics............................................ 25
Portfolio Brokerage....................................... 25
Investment Performance Information........................ 26
State of Organization..................................... 26
Exceptions to Investment Minimum.......................... 27
Year 2000 Issues.......................................... 27
Application Form............................ Inside Back Cover
</TABLE>
2
<PAGE> 8
THE INTERNATIONAL FUND AT A GLANCE
INVESTMENT PARTNERS
Longleaf Partners Funds represent what Southeastern Asset Management, Inc.
("Southeastern"), the Fund's Investment Counsel, views as an investment
partnership among all shareholders. Southeastern's employees and affiliates are
one of the largest group of shareholders in the four Longleaf Partners Funds.
Southeastern adheres to the following principles in managing Longleaf Partners
Funds:
- We will treat your investment in Longleaf as if it were our own.
- We will remain significant investors with you in Longleaf.
- We will invest for the long-term, while always striving to maximize
after-tax returns and to minimize business, financial, purchasing power,
regulatory and market risks.
- We will choose our common stock investments based on their discount from our
appraisal of their corporate intrinsic value, their financial strength,
their management, their competitive position, and our assessment of their
future earnings potential.
- We will comply with the diversification standards of the Internal Revenue
Code, but will not overdiversify our holdings.
- We will not impose loads, holding periods, exit fees or 12b-1 charges on our
investment partners.
- We will consider closing the Funds to new investors if our size begins to
restrict our ability to manage the portfolios or if closing would otherwise
benefit existing shareholders.
- We will discourage short-term speculators and market timers from joining us,
the long-term investors in Longleaf.
- We will continue our efforts to improve shareholder services.
- We will communicate with our investment partners as candidly as possible.
GENERAL STRATEGY
Under normal circumstances, Longleaf Partners International Fund (the
"International Fund" or the "Fund") will invest at least 65% of total assets in
the equity securities of a limited number of issuers organized or operating
primarily in at least three countries other than the United States. On occasion,
the Fund may invest a significant portion of its assets in a single country,
such as Japan. Investments may also be made in other countries, both developed
and emerging, and there are no restrictions on the percentage of assets which
may be invested in any particular geographic region or country.
3
<PAGE> 9
DIVERSIFICATION
The Fund is non-diversified under the federal securities laws, but expects to
comply with the diversification standards established by the Internal Revenue
code of 1986 for regulated investment companies.
WHO MAY WANT TO INVEST
The International Fund is suitable for long-term investors willing to hold their
shares through market fluctuations and who can accept international investment
risk. It is not appropriate for those seeking short-term price appreciation or
for "market timers".
MINIMUM INITIAL INVESTMENT -- NO SALES CHARGES
The minimum initial investment is $10,000. You may purchase shares directly from
the Fund without payment of any sales charges. There are no "12b-1" fees or
redemption fees. You may also purchase shares through an authorized brokerage
firm, which may charge a transaction fee.
GENERAL RISKS OF INVESTMENT
Market values of all types of securities fluctuate with the movement of the
securities markets, and the value of the Fund's portfolio and the price per
share will vary. Risks of specific types of securities in which the Fund may
invest and in the investment techniques which may be used are discussed in more
detail in the text of the Prospectus. There is no assurance that the Fund will
achieve its investment objective.
SHAREHOLDER INQUIRIES
Materials describing the Fund and application forms -- (800) 445-9469
Account status and redemption procedures -- (800) 488-4191
Inquiries about Fund operations -- (901) 761-2474
4
<PAGE> 10
FUND EXPENSES
Expenses are one of several factors to consider when investing in a mutual
fund. The purpose of the following fee table is to provide an understanding of
the various costs and expenses that shareholders of the International Fund will
bear directly or indirectly.
<TABLE>
<S> <C> <C>
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 1.50%
----
12b-1 Fees None
Administration Fee 0.10%
Shareholder Services - Transfer Agent 0.02%
All Other Operating Expenses 0.13%
----
Total 1.75%
====
EXAMPLE*
you would pay the following 1 Year $ 18
expenses on a $1,000 investment, 3 Years $ 55
assuming a 5% annual return and 5 Years $ 95
either redemption or no redemption 10 Years $206
at the end of each time period.
</TABLE>
*The investment Counsel Agreement provides that Southeastern Asset Management,
Inc. will reduce its Investment Counsel fees to the extent necessary to limit
total fund operating expenses (excluding brokerage commissions, taxes,
interest, and extraordinary expenses) to 1.75% per annum.
During the start-up period while the Fund is accumulating assets, total fund
operating expenses re expected to exceed 1.75% of net assets per annum, thereby
requiring Southeastern to reduce its advisory fees as agreed. After the first
full year of operations, it is expected that the expense levels shown in the
above table will approximate actual operating expenses.
The Example is based on the "Total Operating Expenses" described above,
assuming that maximum expenses under the expense limitation of 1.75% per annum
have been incurred. PLEASE REMEMBER THAT THE EXAMPLE SHOULD NOT BE CONSIDERED
AS REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND THAT ACTUAL EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN. The assumption in the Example of a 5%
annual return is required by regulations of the SEC applicable to all mutual
funds. The assumed 5% annual return is not a prediction of, and does not
represent, the projected or actual performance of the Fund's shares.
5
<PAGE> 11
THE INTERNATIONAL FUND IN DETAIL
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE. Longleaf Partners International Fund (the "International
Fund" or the "Fund") seeks long-term capital growth by investing primarily in
the equity securities of international or foreign issuers.
INVESTMENT POLICIES. Under normal circumstances, the International Fund will
invest at least 65% of total assets in the equity securities of issuers
domiciled or operating primarily in at least three countries other than the
United States. For example, the Fund may invest in issuers located in Canada,
Western Europe (such as the United Kingdom, the Netherlands, Germany, France,
Switzerland, and Italy), the Far East (such as Japan, Hong Kong, Singapore,
Malaysia, and Korea), Australia, and Latin America. The Fund may on occasion
invest a significant portion of its assets in a single country, such as Japan.
Investments may also be made in other countries, both developed and emerging,
and there are no restrictions on the percentage of assets which may be invested
in any particular geographic region or country. Performance will be measured
against the Morgan Stanley Capital Europe, Australia, Far East Index ("EAFE"), a
broad-based index of stocks that measures the performance of the equity markets
in Europe, Australia, and the Far East.
A company will be considered to be an international or foreign issuer if it is
organized or headquartered outside the United States. In addition, an issuer
will be considered to be international or foreign if, regardless of where
organized, its principal business activities are outside the United States. Such
an issuer must have at least 50% of its assets located outside the United States
or earn at least 50% of its gross income outside the United States.
Under normal market conditions, the Fund expects to be substantially fully
invested in the equity securities of such international or foreign issuers. To
the extent that investments meeting the Fund's criteria are not available or
when, in the discretion of Southeastern, market, business, or economic
conditions so indicate, all or a portion of the Fund's assets may be invested
temporarily in domestic securities consisting of obligations of the United
States government and its instrumentalities, commercial paper, and repurchase
agreements, or the Fund may hold cash in domestic or foreign currencies or
invest in other domestic or foreign bonds or money market instruments.
INVESTMENT PHILOSOPHY. Southeastern believes that 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,
Southeastern views stocks as ownership units in business enterprises. Corporate
intrinsic
6
<PAGE> 12
value is determined 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 prices substantially discounted from
their intrinsic worth not only protect investment capital from significant loss
but also facilitate major rewards when the true business value is ultimately
recognized. Seeking the largest margin of safety possible, Southeastern requires
at least a 40% market value discount from its appraisal of a company's intrinsic
value before purchasing a security.
Southeastern's investment analysts determine the appraised per share corporate
worth of potential investments using current, publicly available financial
statements. These are carefully scrutinized, using two primary methods of
appraisal. The first assesses what Southeastern believes to be the real economic
value of the company's net assets. The second examines the enterprise's ability
to generate free cash flow after required or maintenance capital expenditures
and working capital needs. Once free cash flow is determined, conservative
projections about its rate of future growth are made. The present value of that
stream of free cash flow plus its terminal value is then calculated using a
conservative discount rate. If Southeastern's projections are accurate, that
present value would be the price which buyers and sellers negotiating at arms
length would accept for the whole company. In a concluding analysis, the asset
value determination and/or the discounted free cash flow value are compared to
Southeastern's data bank of sales of comparable businesses.
Southeastern also considers the following in selecting potential investments:
- INDICATIONS OF SHAREHOLDER ORIENTED MANAGEMENT. In selecting portfolio
investments, Southeastern seeks companies with properly incented, ownership
vested managements. They must be honest, shareholder oriented, operationally
competent individuals capable of allocating corporate resources
intelligently. Southeastern is seeking exemplary long-term business
partners.
- EVIDENCE OF FINANCIAL STRENGTH. Southeastern requires companies in the
portfolio to have sound financial statements and the potential to generate
excess free cash flow from operations.
- POTENTIAL EARNINGS IMPROVEMENT. The company should be capable of producing
both a meaningful improvement in earnings within three to five years and an
adequate return on its invested capital.
A particular investment may not include all of the above factors, but
Southeastern must be convinced that significant unrealized intrinsic value is
present.
CONCENTRATION. Southeastern recognizes that there are relatively few
significantly undervalued companies available for purchase at any time. As a
central part of the general investment strategy, the Fund likely will
concentrate its investments in a limited number of companies and may acquire
relatively large holdings in particular companies. Southeastern believes that
this approach maximizes the
7
<PAGE> 13
potential for outperforming the market as a whole. The Fund will not invest more
than 25% of its total assets in any one industry, except that the Fund reserves
the right to invest more than 25% of its total assets in insurers primarily
engaged in underwriting property and casualty insurance risks.
TYPES OF EQUITY SECURITIES. The Fund will usually invest in marketable equity
securities of established companies listed on securities exchanges, but may also
invest in securities which are traded over-the-counter. It may also invest up to
15% of net assets in securities which are unregistered or are privately traded
and may have limited liquidity.
Equity securities in which the Fund may invest include common or ordinary
shares, preferred shares, convertible securities, and securities representing
the rights to acquire stock. The Fund may also invest in equity securities which
are in the form of depositary receipts, such as American Depositary Receipts
("ADR's"), European Depositary Receipts ("EDR's"), or Continental Depositary
Receipts ("CDR's"). Depositary receipts which are not sponsored by the issuing
company may be less liquid and there may be less public information available
about the issuer.
Consistent with the limitations of the Investment Company Act of 1940, the Fund
may invest in the securities of U.S. or foreign closed-end investment companies
which invest in the securities of a particular foreign country or region in
circumstances where, for example, a direct investment in that country or region
would not be possible or would be difficult, or the securities of the investment
company are more liquid than the underlying portfolio securities. The Fund would
bear its ratable share of any operating expenses of the closed-end investment
company, including the management fees.
OTHER INVESTMENTS. The International Fund may invest the remainder of its
portfolio in a wide variety of other securities, including equity securities of
domestic issuers, warrants, options on securities and indices, futures, options
on futures, forward foreign currency contracts and other foreign currency
exchange agreements, and in money market instruments, some or all of which may
be issued by U.S. institutions.
INVESTMENT TECHNIQUES
MANAGING INVESTMENT EXPOSURE. An investment in a foreign equity security should
offer the opportunity for capital appreciation exclusive of significant
fluctuations between the country's currency and U.S. currency. However, not all
foreign currencies can be hedged and, depending on the location of the company's
primary operations or the stability of the foreign currency, hedging may not be
necessary. As part of the investment process, Southeastern will determine
whether currency hedging would be desirable.
8
<PAGE> 14
Southeastern may use various techniques to hedge the Fund's exposure to the
effects of possible changes in currency exchange rates, market prices of
securities, or other factors that can affect the value of the portfolio. These
techniques, used primarily for risk management, include buying and selling
options, futures contracts, or options on futures contracts, and entering into
currency exchange contracts or swap agreements. When effectively employed, these
techniques can reduce the risk and increase the return characteristics of the
portfolio. However, if Southeastern employs a strategy that does not correlate
well with market factors, or if the counterparty to the transaction does not
perform as promised, hedging transactions may not be effective and could result
in a loss. Use of such techniques may also increase the volatility of the Fund's
portfolio.
CURRENCY EXCHANGE TRANSACTIONS. The Fund may engage in currency exchange
transactions either on a spot (cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through a forward
currency exchange contract ("forward contract"). A forward contract is an
agreement to purchase or sell a specified currency at a specified future date
(or within a specified time period) and at a price set at the time of the
contract.
Forward currency contracts are usually entered into with banks and broker-
dealers, are not exchange traded and usually have a term less than one year.
Such contracts may be renewed, or may have a term of more than one year. Forward
currency transactions may involve currencies of the different countries in which
the Fund may invest, and serve as hedges against possible variation in the
exchange rate between these currencies.
The Fund's forward currency transactions generally involve transaction hedging
and portfolio hedging for either specific transactions or actual or anticipated
portfolio positions. Transaction hedging is the purchase or sale of a forward
contract with respect to a specific Fund receivable or payable accruing in
connection with the purchase or sale of portfolio securities. Portfolio hedging
is the use of a forward contract with respect to an actual or anticipated
portfolio security position denominated or quoted in a particular currency.
The Fund may engage in transaction or portfolio hedging with respect to the
currency of a particular country in amounts approximating actual or anticipated
positions in securities denominated in such currency. When the Fund owns or
anticipates owning securities in countries whose currencies are linked,
Southeastern may aggregate such positions as to the currency hedged. Although
forward contracts may be used to protect the Fund from adverse currency
movements, the use of such hedges may reduce or eliminate the potentially
positive effect of currency revaluations on the Fund's total return.
When Southeastern believes that the currency of a particular foreign country may
sustain substantial movement against another currency, it may "cross hedge."
Cross hedging entails entering into a forward contract to sell or buy the amount
of the foreign currency (or another currency which acts as a proxy for that
currency) approximating that value of some or all of the portfolio securities
9
<PAGE> 15
denominated in that foreign currency. Forward transactions may call for the
delivery of one foreign currency in exchange for another foreign currency and
may at times involve currencies other than those in which its portfolio
securities are denominated.
OPTIONS ON SECURITIES AND STOCK INDICES. The Funds may write (i.e., sell) put
and call options and purchase put and call options on securities or stock
indices. An option on a security is a contract that gives the purchaser, in
return for the premium paid, the right to buy a specified security if it is a
call option, or to sell a specified security if it is a put option, from or to
the writer of the option at a designated price during the term of the option. An
option on a stock index gives the purchaser, in return for the premium paid, the
right to receive from the seller cash equal to the difference between the
closing price of the index and the exercise price of the option.
The Fund may write a call or put option only if the option is "covered." While
the Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the call, hold a call at the same or lower exercise price
or otherwise hold securities or segregate assets to cover the call. For the same
exercise period, and on the same securities as the written call, a put is
covered if the Fund maintains collateral consisting of cash, liquid money market
instruments, or U.S. government securities with a value equal to the exercise
price in a segregated account, or holds a put on the same underlying security at
an equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 25% of the total
assets of the Fund.
FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may enter into foreign
currency, interest rate, and stock index futures contracts and purchase and
write (sell) related options that are traded on an exchange designated by the
Commodity Futures Trading Commission (the "CTFC") or, if consistent with CFTC
regulations, on foreign exchanges. Aggregate initial margin and premiums
required to establish positions other than those considered by the CFTC to be
"bona fide" hedging, will not exceed 5% of the Fund's net assets, or such other
percentage as may be required by the CFTC, after taking into account unrealized
losses on any such contracts. Although the Fund is limited in the amount of
assets that may be invested in futures transactions other than bona fide
hedging, there is no overall limit on the percentage of the Fund's assets that
may be at risk in connection with futures transactions.
These futures contracts are standardized contracts for the future delivery of
foreign currency or an interest rate sensitive security or, in the case of a
stock index and certain futures contracts, are settled in cash with reference to
a specified multiplier times the change in the specified index, exchange rate or
interest rate. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract.
10
<PAGE> 16
RISKS OF OPTIONS, FUTURES AND FOREIGN CURRENCY CONTRACTS. Using puts and calls
in conjunction with each other for hedging purposes can reduce market risks.
However, when used separately, options and futures have risks. For example, the
price movements of the securities underlying the options and futures may not
follow the price movements of the portfolio securities subject to the hedge.
Gains on investments in options and futures depend on the ability to predict
correctly the direction of stock prices, interest rates, and other economic
factors. Where a liquid secondary market for options or futures does not exist,
the Fund may not be able to close their positions and in such an event, the loss
is theoretically unlimited.
SWAPS. The Fund may enter into swaps involving international equity interests,
indexes, and currencies without limit. An equity swap is an agreement to
exchange streams of payments computed by reference to a notional amount based on
the performance of a single stock or a basket of stocks. Index swaps involve the
exchange by the Fund with another party of the respective amounts payable with
respect to a notional principal amount related to one or more indices. Currency
swaps involve the exchange of cash flows on a notional amount of two or more
currencies based on their relative future values.
The Fund may enter into these transactions to preserve a return or spread on a
particular investment or portion of its assets, to protect against currency
fluctuations, as a duration management technique, or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. These transactions may also be used to obtain the price performance of a
security without actually purchasing the security in circumstances where, for
example, the subject security is illiquid, is unavailable for direct investment
or is available only on less attractive terms.
Swaps have risks associated with them, including possible default by the counter
party to the transaction, illiquidity and, where used for hedges, the risk that
the use of a swap could result in losses greater than if the swap had not been
employed.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund may purchase securities
on a "when issued" basis and may purchase or sell securities on a "forward
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. There is a risk that the securities may not be delivered or
that they may decline in value before the settlement date.
OTHER INVESTMENTS AND TECHNIQUES
BORROWING. The Fund may borrow up to one third of its total assets for purposes
of increasing its investments (leveraging) and may borrow up to 5% of its total
assets for temporary or emergency purposes, such as clearing portfolio purchases
or satisfying redemptions, provided that total borrowings at any one
11
<PAGE> 17
time may not exceed one third of total assets. Borrowings may be made from banks
and from any other sources allowable under applicable law.
SHORT SALES. The Funds may enter into short sales, provided the dollar amount
of short sales at any one time would not exceed 25% of net assets, and the value
of securities of any one issuer in which the Funds are short would not exceed 5%
of net assets. The Funds must maintain liquid collateral in a segregated account
equal to the current market value of the shorted securities, marked-to-market
daily. These restrictions do not apply to short sales against the box, where the
Fund owns an equal amount of the securities sold short or securities convertible
into or exchangeable into an equal amount of securities of the same issuer sold
short, without additional payment.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of total assets.
Such loans must be secured by liquid collateral in an amount at least equal to
the current market value of the securities loaned, marked-to-market daily. The
Fund may terminate the loans at any time and obtain the return of the securities
loaned within three business days. During the period of the loan, the Fund
continues to receive any interest or dividends paid on the loaned securities.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest a maximum of 15% of its
net assets in restricted securities (securities which are not registered or
which are not deemed to be readily marketable) and all other illiquid
securities, including repurchase agreements with maturities of more than seven
days. Securities that may be resold without registration under Rule 144A may be
treated as liquid for these purposes, in accordance with guidelines established
by the Board of Trustees.
Restricted or non-registered securities may be sold only in privately negotiated
transactions or in a public offering under an effective registration statement
or under Rules 144 and 144A. If registration is required, the Fund may be
obligated to pay all or part of the registration expense, and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If during such a period adverse market conditions develop, the Fund might obtain
a less favorable price. Restricted securities will be valued as the Board of
Trustees determines, in good faith, to reflect the fair market value.
FIXED INCOME SECURITIES. The Fund may invest a maximum of 25% of net assets in
investment grade and non-investment grade debt securities of companies and
preferred stock. Securities rated non-investment grade (lower than Baa by
Moody's Investor Services Inc. or lower than BBB by Standard and Poors
Corporation) are sometimes referred to as "high yield" or "junk" bonds. The
Statement of Additional Information contains a table summarizing these ratings.
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<PAGE> 18
The prices of high yield securities may be less sensitive to interest-rate
changes than more highly rated investments, but more sensitive to adverse
economic downturns or individual corporate developments. Yields on high yield
securities will fluctuate. If the issuer of high yield securities defaults, the
Fund may incur additional expenses to seek recovery.
CASH RESERVES. Cash reserves, held to provide flexibility to take advantage of
new investment opportunities and for other cash needs, will be invested in money
market instruments and generally will not exceed 15% of total assets. If
Southeastern has difficulty finding an adequate number of undervalued equity
securities, all or any portion of assets may also be invested temporarily in
money market instruments. Cash reserves in excess of 35% of total assets will be
held for defensive purposes only.
Money market instruments will generally consist of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
obligations subject to repurchase agreements for these instruments. A repurchase
agreement permits an investor to purchase a U.S. Government security from a
vendor, with an agreement by the vendor to repurchase the security at the same
price, plus interest.
Other acceptable money market instruments include commercial paper, certificates
of deposit, bankers' acceptances issued by domestic banks having total assets in
excess of $1 billion, and money market investment companies (each limited to a
maximum of 5% of total assets).
OTHER RISK FACTORS
INVESTOR SUITABILITY. The International Fund provides an investor with the
ability to take advantage of changes in foreign economies and market conditions.
Some foreign economies have, from time to time, grown faster than the U.S.
economy, and the returns on investments in these countries have exceeded those
of similar U.S. investments, although there can be no assurance that these
conditions will continue. All investments have risks, and no investment is
suitable for all investors.
The International Fund is designed for long-term investors who can accept
international investment risk, including currency risk, political and economic
risk, regulatory risk, and international market risk. Although world economies
are becoming increasingly integrated, economic conditions in particular
countries can lead to substantial differences in stock market valuations. The
Fund's share price will tend to reflect movements of the different securities
markets in which it is invested and, to the extent not hedged, the foreign
currencies of the countries where investments are made.
FOREIGN ECONOMIC RISKS. You should understand and consider the different risks
involved in investing internationally. Investing in the securities of foreign
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<PAGE> 19
issuers, positions which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts involve both
opportunities and risks not typically associated with investing in U.S.
securities. These include: fluctuations in exchange rates of foreign currencies;
possible imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the U.S.; less public information
about issuers of securities: less governmental supervision of stock exchanges,
securities brokers and issuers of securities; different accounting, auditing and
financial reporting standards; different settlement periods and trading
practices; less liquidity and frequently greater price volatility in some
foreign markets than in the U.S.; imposition of foreign taxes; and sometimes
less advantageous legal, operational, and financial protections applicable to
foreign sub-custodial arrangements.
FOREIGN POLITICAL RISKS. In addition, to the extent that the political
environment in a particular foreign country is not stable, there is the
possibility of increased rates of inflation, currency devaluation, expropriation
of assets, confiscatory taxation, seizure or nationalization of foreign bank
deposits, establishment of foreign governmental restrictions, or other adverse
political, social or diplomatic developments that could adversely affect the
economy and an investment in companies located in such countries.
EXPENSES OF FOREIGN INVESTING. The cost of investing in international
securities is higher than the cost of investing in U.S. securities, because,
among other reasons, custodial fees are higher, there are additional expenses
for currency hedging, and the Fund's advisory fees are higher than for a typical
domestic equity fund. However, as discussed on page 16, Southeastern limits
total operating expenses including its fees to a maximum of 1.75% per annum.
FOREIGN INCOME TAXES. Investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of tax or exemption from tax
on such income. It is not possible to determine the effective rate of foreign
tax in advance, because the amount of assets to be invested within various
countries is not known. To the extent that the Fund is liable for foreign income
taxes withheld at the source, the Fund intends to cooperate so as to meet the
requirements of the Internal Revenue Code to "pass through" to shareholders any
credits for foreign income taxes paid. There can be no assurance that the Fund
will be able to do so.
GENERAL MARKET RISKS. There is no assurance that the Fund will achieve its
investment objective. Market values of all types of securities fluctuate and the
value of the Fund's portfolio and the prices per share will vary, based on
general stock market conditions. Liquidity risks can limit the ability of the
Funds to sell portfolio securities at current market valuations. Fixed income
securities have interest rate risks, which cause a decline in their principal
values when interest
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<PAGE> 20
rates rise. For these and other reasons, the value of your investment as a
shareholder at redemption may be more or less than the purchase price.
DIVERSIFICATION
The Fund is classified as non-diversified under the Investment Company Act of
1940. As a result, the percentage of assets that may be invested in any one
issuer is not limited under the securities laws. However, the Fund intends to
comply with the investment company diversification standards of the Internal
Revenue Code of 1986. These standards require that at the close of each quarter,
at least 50% of the portfolio must be invested in issuers where the Fund's
investment does not exceed 5% of total assets and the Fund does not own more
than 10% of the company's voting stock. With respect to the other 50% of the
Fund's portfolio, there are no limits on the percentage of assets which may be
invested in a single issuer or the percentage of the company's voting stock
which may be acquired, except that the Fund may not invest more than 25% of
assets in a single issuer or in two or more issuers which the Fund controls and
which are engaged in the same or similar businesses.
Under these diversification requirements, the Fund must, when fully invested,
own at least twelve securities positions. Ten of the positions may not exceed 5%
of total assets each at the time of purchase; the remaining two positions could
each comprise 25% of total assets at the time of purchase. Generally,
Southeastern anticipates that the portfolios will consist of more than twelve
positions. To the extent that the Fund is less diversified, it may be more
susceptible to adverse economic, political, or regulatory developments affecting
a single investment than if there were broader diversification.
PORTFOLIO TURNOVER
The Fund may engage in short-term trading, but this strategy will not be used as
a primary means of achieving its investment objective. Although the Fund cannot
accurately predict portfolio turnover, generally it is expected to be less than
50%. There are no limits on the rate of portfolio turnover, and investments will
be sold without regard to the length of time held when investment considerations
support such action. Higher turnover rates, such as rates over 100%, involve
greater commissions and transaction costs.
INVESTMENT MANAGEMENT AND FUND ADMINISTRATION
INVESTMENT COUNSEL. Southeastern Asset Management, Inc., ("Southeastern"),
located in Memphis, Tennessee, is the Fund's Investment Counsel. Since 1975, the
firm has managed securities portfolios for ERISA and government retirement
plans, charitable foundations, educational endowments, and individuals. The firm
is owned and controlled by its principal officers, with Mr. O. Mason Hawkins,
Chairman of the Board and Chief Executive Officer, owning a majority
15
<PAGE> 21
of the outstanding shares. The firm presently manages more than $12 billion in
client assets.
CO-PORTFOLIO MANAGERS. Mr. O. Mason Hawkins, Chairman of the Board and Chief
Executive Officer of the Fund and Southeastern, and Mr. G. Staley Cates,
President of Southeastern, are co-portfolio managers of the International Fund.
Mr. Eugene Andrew McDermott, III, is Assistant Portfolio Manager. Collectively
they have primary responsibility for the management of the Fund's portfolio.
INVESTMENT COUNSEL FEES. The Fund pays Southeastern an investment counsel fee
which is accrued daily and paid monthly in arrears. The fee is 1.50% of average
daily net assets per annum. The Investment Counsel Agreement between the Fund
and Southeastern provides that Southeastern will reduce its Investment Counsel
fee to the extent necessary to limit normal operating expenses of the Fund to
1.75% per annum. The expense limitation does not apply to brokerage commissions,
interest, taxes, and any extraordinary expenses.
FUND ADMINISTRATOR. As Fund Administrator, Southeastern provides all business,
administrative and compliance services for the Fund. For these services, the
firm receives an Administration Fee of 0.10% of average net assets per annum,
accrued daily and paid monthly in arrears. The Fund pays all direct expenses of
its operations, such as professional fees, industry association fees, insurance
premiums, registration fees, and costs of printing, postage, and supplies. The
Fund also reimburses Southeastern for computer licensing fees for mutual fund
software programs and a portion of the compensation of the Fund's Treasurer.
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<PAGE> 22
BOARD OF TRUSTEES
O. MASON HAWKINS*, CFA, Chairman of the Board and Chief Executive Officer; Co-
Portfolio Manager.
Founder and Director, Southeastern Asset Management, Inc. (since 1975); Director
of Research, First Tennessee Investment Management Company, Memphis, TN (1974-
1975); Director of Research, Atlantic National Bank, Jacksonville, FL
(1972-1974); Director, Mid-America Apartment Communities, Inc. (since 1993).
Education: B.S.B.A., Finance, University of Florida, 1970; M.B.A., University of
Georgia, 1971.
W. REID SANDERS*, Trustee and President.
Founder and Director, Southeastern Asset Management, Inc. (since 1975);
Investment Officer, First Tennessee Investment Management Company, Memphis, TN
(1973-1975); Credit Analyst and Commercial Lending Official, Union Planters
National Bank, Memphis, TN (1972-1973).
Education: B.A., Economics, University of Virginia, 1971.
CHADWICK H. CARPENTER, JR., Trustee.
Private investor and consultant to several software startups. Currently a board
member of Indus River Networks and Call Technologies, which are developing
products for virtual private networks and telephony respectively. Previously
spent 14 years in senior executive officer positions at Progress Software
Corporation (a leading provider of software products used by developers to build
and deploy commercial applications worldwide). Prior to 1983, Manager of MIMS
Systems Operation, General Electric Information Services Company; Senior
Consultant, Touche Ross & Company.
Education: B.S., Electrical Engineering, Massachusetts Institute of Technology,
1971; M.S., Electrical Engineering, Massachusetts Institute of Technology, 1972.
DANIEL W. CONNELL, JR., Trustee.
Senior Vice President -- Marketing, Jacksonville Jaguars, Ltd., Jacksonville, FL
(since 1994) (National Football League franchise); 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.
Education: B.S.B.A., University of Florida, 1970.
STEVEN N. MELNYK, Trustee.
Vice President, The St. Joe Company, Jacksonville, Florida. Chairman of the
Executive Committee and President, Riverside Golf Group, Inc., (1987-97),
Jacksonville, FL (a corporation engaged in the design, construction and
operation through ownership of golf courses throughout the southeastern US);
Golf commentator and sports marketing executive, ABC Sports (since 1991) and CBS
Sports (1982-1991); Founding director and former Chairman, First Coast Community
Bank, Fernandina Beach, FL; Winner of U.S. Amateur Championship, 1969, and
British Amateur Championship, 1971.
Education: B.S.B.A., Industrial Management, University of Florida, 1969.
C. BARHAM RAY, Trustee.
Chairman of the Board and Secretary, SSM Corporation, Memphis, TN (since 1974)
(a venture capital investor); Director, Financial Federal Savings Bank, Memphis,
TN.
Education: B.A., Vanderbilt University, 1968; M.B.A., University of Virginia,
1973.
- ---------------
* Mr. Hawkins and Mr. Sanders are employed by the Investment Counsel and each is
deemed to be a Trustee who is an "interested person", as that term is defined
in Section 2(a)(19) of the Investment Company Act of 1940. Mr. Carpenter
serves as Chairman of the Audit Committee, which is composed of the four
Trustees who are not affiliated with Southeastern.
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<PAGE> 23
OTHER EXECUTIVE OFFICERS
INVESTMENT MANAGEMENT
G. STALEY CATES, CFA, Co-Portfolio Manager; Vice President -- Investments.
Professional Experience: President, Southeastern Asset Management, Inc. (since
1994); Vice President, Southeastern Asset Management, Inc. (1986-1994).
Education: B.B.A., Finance, University of Texas, 1986.
EUGENE ANDREW MCDERMOTT, III, Assistant Portfolio Manager
Professional Experience: Southeastern Asset Management, Inc. (since 1998); J.P.
Morgan & Co., San Francisco, Hong Kong, and Singapore; Associate and Analyst
(1994-1998); NEC Logistics, Tokyo (1992-1994).
Education: B.A., Princeton University, 1992.
JOHN B. BUFORD, CFA, Vice President -- Investments.
Professional Experience: Southeastern Asset Management, Inc. (since 1990); Vice
President, First Tennessee Bank (1989-90); Commercial Lending Officer/Credit
Analyst, Metropolitan National Bank (1985-88).
Education: B.B.A., Finance, University of Texas, 1985.
FRANK N. STANLEY, III, CFA, Vice President -- Investment.
Professional Experience: Vice President, Southeastern Asset Management, Inc.
(since 1984); Portfolio Manager and Analyst, Montag & Caldwell, Atlanta, GA
(1974-1984); Investment Officer, Atlantic National Bank, Jacksonville, FL
(1972-1974).
Education: B.S., Management, Georgia Institute of Technology, 1964; Graduate
study, Emory University, 1965; M.B.A., Marketing, University of Florida, 1970.
FUND OPERATIONS
CHARLES D. REAVES, Executive Vice-President.
Professional Experience: General Counsel, Southeastern Asset Management, Inc.
(since 1988); Vice President in corporate finance, Porter, White & Yardley,
Inc., Birmingham, AL (1986-1988); Senior Vice President -- Finance and Secretary
(1981-1986) and Vice President and General Counsel (1974-1981), Saunders System
Inc., Birmingham, AL; Director, ICI Mutual Insurance Company (1998).
Education: J.D., University of Alabama, 1961; L.L.M. (Taxation), Georgetown
University Law Center, 1966; M.B.A., Emory University, 1981.
JULIE M. DOUGLAS, CPA, Executive Vice President -- Operations & Treasurer.
Professional Experience: Southeastern Asset Management, Inc. (since 1989);
Audit Supervisor and Audit Senior, Coopers & Lybrand, Birmingham, AL and
Pittsburgh, PA (1984-1989).
Education: B.S., Accounting, Pennsylvania State University, 1984.
MARKETING AND ADMINISTRATION
LEE B. HARPER, Executive Vice President -- Marketing.
Professional Experience: Southeastern Asset Management, Inc. (since 1993);
Consultant, IBM Corporation, Memphis, TN (1989-1993); Business Analyst, McKinsey
& Company, Atlanta, GA (1985-1987).
Education: B.A., University of Virginia, 1985; M.B.A., Harvard University,
1989.
RANDY D. HOLT, CPA, Vice President -- Secretary.
Professional Experience: Vice President and Secretary, Southeastern Asset
Management, Inc. (since 1994); Secretary/Treasurer (1985-1994); Ott, Baxter,
Holt (1983-1985); A.M. Pullen & Co. (1982-1983); Harry M. Jay & Associates
(1978-1982).
Education: B.S., Accounting, University of Tennessee, 1976.
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<PAGE> 24
HOW TO OPEN AN ACCOUNT
REGULAR ACCOUNTS. To invest in Longleaf Partners International Fund, complete,
sign and mail the account application to the address below. If you are already
an investor in the Longleaf Partners Funds, your account may be modeled after
your existing account. THE MINIMUM INVESTMENT FOR THIS FUND IS $10,000.
Longleaf Partners Funds
P.O. Box 419929
Kansas City, MO 64141-6929
INDIVIDUAL RETIREMENT ACCOUNTS. You can open a regular or Roth IRA by
requesting the IRA Application kit. The kit contains an explanation of tax
considerations and information on the trustee, State Street Bank. After reading
the information, fill in the application and the transfer form and mail to the
above address. THE MINIMUM INITIAL INVESTMENT IS $10,000, WHICH MUST BE
SATISFIED PRIMARILY BY TRANSFERRING FUNDS FROM AN EXISTING IRA OR A QUALIFIED
RETIREMENT PLAN. YOU WILL BE CHARGED AN INITIAL SET-UP FEE OF $15 AND A $10
ANNUAL MAINTENANCE FEE.
HOW TO PURCHASE SHARES
You may obtain shares of the Fund by two different methods. (1) You may invest
directly with the Fund (using the following instructions) and you will not be
charged a transaction fee. (2) You may purchase shares through an authorized
broker of your choice and the broker may charge an additional transaction fee
for its services. All applications to purchase shares are subject to acceptance
by the Fund.
For all types of accounts, the minimum initial investment for a direct purchase
from the Fund is $10,000. There are no minimum requirements on subsequent
purchases. Authorized brokers may have a different minimum investment. The
public offering price is the net asset value per share at the next market close
after the transfer agent receives an order with all required documentation.
BY MAIL. To purchase shares for existing accounts by mail, send a check payable
to Longleaf Partners Funds along with the application or the remittance stub
from the bottom of your most recent transaction statement to:
Longleaf Partners Funds
P.O. Box 419612
Kansas City, MO 64141-6929
INCLUDE THE NAME OF THE FUND AND YOUR ACCOUNT NUMBER ON THE CHECK. THE FUND DOES
DO NOT ACCEPT THIRD PARTY CHECKS.
If your check is returned because of insufficient funds or because you have
stopped payment, you will be responsible for any losses sustained by the Fund
19
<PAGE> 25
from custodian or transfer agent fees or a decline in the net asset value when
the shares issued are cancelled. If you are an existing shareholder, the Fund
may collect losses by redeeming the appropriate amount from your account.
BY WIRE. You may purchase shares by bank wire transfer. To do so:
- - Call the transfer agent at (800) 488-4191 to establish an account. Be prepared
to provide all information requested on the application. Your account number
will be assigned.
- - Instruct your bank to wire funds as follows:
<TABLE>
<S> <C>
- State Street Bank, Boston, MA
- ABA routing number 011000028
- A/C# 9905-023-9
- Longleaf Partners International Fund (#136)
- Your account number and your name
</TABLE>
Amounts transferred by bank wire are considered received on the same day they
are deposited in the Fund account if received before the close of the New York
Stock Exchange, usually at 4:00 p.m. Eastern Time. If received later, shares
will be purchased at the following business day's closing price. Wire transfers
should be initiated as early in the day as possible to assure receipt before the
close of the Exchange. A completed application must be sent to the Fund as soon
as possible. No redemptions can be paid until the Fund receives a completed
application.
BY AUTOMATIC MONTHLY INVESTMENT. After you have opened an account, you can
arrange for automatic investments of $100 or more by filling in the Automatic
Monthly Investment Plan section of the application and sending a voided check
from your bank account. There is no charge for the Automatic Monthly Investment
Plan, but your bank or credit union may charge a service fee. Transfers will
occur on the business day on or about the 21st day of each month, as affected by
weekends and bank holidays. Cancellation of the plan or a change in the amount
of the withdrawal must be made in writing.
CERTIFICATES. To receive a stock certificate with your purchases, you must send
written instructions. Unless shares are purchased with wired funds, your
certificate will not be issued until 15 days after your purchase. Please note
that if you request certificates, you cannot redeem those shares without
returning the certificates. If you lose your certificates, you may incur a cost
to replace them.
PURCHASES AND REDEMPTIONS OF FUND SHARES THROUGH BROKERAGE FIRMS. You may
purchase and redeem shares through securities brokerage firms having agreements
with the Longleaf Funds. The brokerage firm may charge transaction fees.
Investors using brokerage firms to purchase and redeem Fund shares will follow
the brokerage firm's procedures. Those procedures take precedence over any
instructions for opening accounts directly with the Fund. The brokerage firm is
responsible for supplying its clients who are Fund shareholders with periodic
account statements, Prospectus and financial reports.
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<PAGE> 26
BROKER/DEALER AND INSTITUTIONAL INVESTMENTS. Upon execution of formal trading
agreements, the Fund will accept telephone trade orders under $100,000 from NASD
members or other institutional investors. Larger phone orders require special
approval. The Fund also offers automated trading through the transfer agent,
NFDS. In addition, institutional investors may establish pre-authorized fax
redemption privileges. Please contact the Fund directly to obtain more
information regarding these special processing options.
For ALL trading, full payment must be received within one day of the trade date.
The entity placing the order will be responsible for any loss resulting from
non-settlement. All purchase minimums and other requirements specified in
trading agreements must be followed to remain in good standing. The Fund may
withdraw trading privileges if it is in its best interests.
HOW TO REDEEM SHARES
PROCEDURES. At any time, you may withdraw any portion of your account in a
share or dollar amount. Redemption proceeds are mailed within one week of
receipt of the redemption request in Good Order. Good Order means that you have
a completed application on file and that the redemption request includes:
- Account number and fund name -- Longleaf Partners International Fund (#136).
- Amount of the transaction (specified in dollars or shares)
- Signatures of all owners exactly as they are registered on the account
- Signature guarantees if required and applicable (see below)
- Fund certificates if applicable
- Other supporting legal documents that may be required in cases of estates,
corporations, trusts and certain other accounts
If you have questions about these requirements, please call the transfer agent
at (800) 488-4191.
The Fund must have received payment for the shares being redeemed, and may delay
redemption payment (for up to 15 days from the date of purchase) until collected
payment for the initial share purchase has been received.
REDEMPTION PRICE AND FEES. The redemption price is the net asset value per
share at the next market close after receipt of a redemption request in good
order. The redemption price may be more or less than the shares' original cost.
The Funds charge no redemption fees. IRA accounts will remain subject to the
full $10 annual maintenance fee in the year of redemption.
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<PAGE> 27
BY MAIL. Mail your redemption requests and required documentation to:
Longleaf Partners Funds
P.O. Box 419929
Kansas City, MO 64141-6929
The Funds suggest that you send redemption requests by registered or certified
mail to the above address or by overnight courier to:
Longleaf Partners Funds
c/o NFDS, Transfer Agent;
333 W. 9th Street
Kansas City, MO 64105;
Telephone (800) 488-4191.
BY TELEPHONE. You may redeem up to $100,000 by telephone from your regular
account, if you have so elected on the application or by the change of status
form. Telephone redemptions may not be used for IRA's. Proceeds of telephone
redemptions will be sent only to the address of record or will be wired only to
the pre-determined commercial bank account. If you call before 4:00 p.m. Eastern
Time, you will receive that day's closing price; redemption requests made after
4:00 p.m. Eastern Time will receive the next day's closing price. Once
initiated, a telephone redemption request cannot be changed or cancelled. Any
changes in the instructions for your account must be made in writing, with a
signature guarantee. The transfer agent may verify these changes before a
redemption.
The transfer agent employs reasonable procedures to confirm that instructions
communicated by telephone are genuine. When these procedures are followed, the
Fund and the transfer agent are not liable for losses caused by following
telephone instructions which are reasonably believed to be genuine. The Fund
reserves the right to revise or terminate the telephone redemption privilege at
any time.
SIGNATURE GUARANTEE. Redemptions over $100,000 must be made in writing and
require a signature guarantee. The signatures must correspond to all names in
which the account is registered and all registered owners must sign the request
and have their signatures guaranteed. To obtain a signature guarantee, a member
firm of a domestic stock exchange, a U.S. commercial bank or other financial
institution that is an eligible guarantor institution through membership in a
medallion or similar program must witness the signature and stamp the document
with the appropriate certification. A notary public is NOT an eligible
guarantor.
OTHER INFORMATION. Longleaf Partners Funds may suspend redemption rights or
postpone payments at times when the New York Stock Exchange is closed for other
than weekends or holidays or under emergency circumstances permitted by the U.S.
Securities and Exchange Commission.
22
<PAGE> 28
SHAREHOLDER SERVICING
TRANSFER AGENT. National Financial Data Services ("NFDS"), an affiliate of
State Street Bank and Trust Company, serves as transfer agent and dividend
disbursing agent. NFDS maintains all shareholder accounts and records, processes
all transactions including purchases, redemptions, transfers and exchanges,
prepares and mails account confirmations and correspondence, issues stock
certificates, and handles all account inquiries. PLEASE DIRECT ALL QUESTIONS
REGARDING YOUR ACCOUNT TO NFDS AT (800) 488-4191. Southeastern Asset Management
does not process account transactions and will forward all correspondence to
NFDS in Kansas City, which will process the transaction when the materials are
received.
CONFIRMATION AND REPORTS. If you invest directly with the Fund, you will
receive a confirmation statement after each transaction and a statement of your
account status after the end of each calendar quarter. You will also receive all
tax documentation as required by the IRS. In addition, you will receive
quarterly, semi-annual and audited annual reports which provide information on
the Fund's portfolio of investments. If you invest through a brokerage firm,
shareholder materials will be sent by that firm.
HOW SHARES ARE PRICED
The net asset value per share is determined as of the close of trading on each
day that the New York Stock Exchange ("NYSE") is open for business. Net asset
value per share is computed by taking the value of all assets of the portfolio,
subtracting its liabilities as accrued daily, and dividing by the number of
shares outstanding. Presently, the NYSE closes at 4:00 p.m. Eastern Standard or
Eastern Daylight Time. In the calculation of net asset value:
(1) Portfolio securities listed or traded on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are
valued at the last sale price; if there were no sales that day, securities
listed on major exchanges are valued at the midpoint between the latest
available and representative bid and ask prices;
(2) All other portfolio securities for which over-the-counter market
quotations are readily available are valued at the midpoint between the
latest available and representative bid and ask prices;
(3) When market quotations are not readily available, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Funds' Trustees;
(4) Valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors;
23
<PAGE> 29
(5) The fair value of short term United States Government obligations and
other debt securities will be determined on an amortized cost basis; and
(6) The value of other assets, including restricted and not readily marketable
securities, will be determined in good faith at fair value under
procedures established by and under the general supervision of the
Trustees.
(7) Assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars using a method of determining a rate of
exchange in accordance with policies established by the Board of Trustees.
Trading in foreign securities may take place in various foreign markets at times
and on days (such as Saturday) when the NYSE is not open for business and the
Fund does not calculate its net asset value. Because of the different trading
hours in the various foreign markets, the calculation of net asset value may not
take place contemporaneously with the determination of the prices of some of the
Fund's foreign securities. Those timing differences may have a significant
effect on the Fund's net asset value.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Fund pays dividends from net investment income and
distributes realized capital gains, usually at the end of December. All
dividends and distributions are reinvested automatically in additional shares of
the Fund, unless you notify the transfer agent that you desire to receive cash
distributions. The reinvestment price is the net asset value on the ex-dividend
date.
The net asset value per share on the ex-dividend date is calculated by reducing
the normal net asset value by the amount of the distribution. Any distribution
paid shortly after a purchase of shares will be fully taxable. In mid-December,
you may request information on projected dividend amounts and the record and
payment dates by calling (800) 488-4191.
TAXES. The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Federal Internal Revenue Code of 1986, and will distribute
substantially all net investment income and net realized capital gains as
dividends. Management expects that the Fund will not incur any significant
Federal income tax liability. Should the Fund fail to distribute the required
minimum amounts, it would be subject to a non-deductible 4% excise tax on
certain undistributed taxable income and realized capital gains.
By January 31 of each year, the Fund will provide information on the proper
classification of any net investment income and capital gains distributions, and
the amounts of any returns of capital or other special reclassifications.
Shareholders subject to Federal income taxation must report all distributions as
income, even if reinvested, and states may also tax distributions.
24
<PAGE> 30
This discussion about taxes is an abbreviated summary of the provisions of the
Federal Internal Revenue Code and Regulations. For more information, see the
section entitled "Additional Tax Information" in the Statement of Additional
Information. These provisions are subject to change by legislative or
administrative action. Shareholders should consult their own tax advisors for
more detailed information concerning federal, state and local income taxation of
investment company distributions in their particular circumstances.
OTHER INFORMATION
SIGNIFICANCE OF FUND NAMES. The name "Longleaf", derived from the longleaf
pine, a majestic, sturdy tree indigenous to the southeastern United States,
represents the qualities of strength and endurance. A second element of the name
is the word "Partners." In selecting portfolio investments, Southeastern seeks
corporate managers who would make exemplary long-term business partners. They
should be properly incented, ownership vested, honest, shareholder oriented,
operationally competent individuals who are capable of allocating corporate
resources intelligently. The Longleaf Partners Funds endeavor to be supportive
long-term "partners" with management of the companies in the portfolios.
Correspondingly, Southeastern's own partners, other personnel, and relatives,
are major investors in the Funds. Management considers itself a "partner" with
Fund shareholders in seeking long-term capital growth. The Funds desire loyal,
long-term investors as shareholders who view themselves as "partners" with Fund
management.
CODE OF ETHICS. The Longleaf Partners Funds and Southeastern Asset Management,
Inc. have adopted a Code of Ethics which requires all employees to limit their
investments in publicly offered equity securities to shares of the Longleaf
Partners Funds unless prior clearance is granted for other personal securities
transactions. All employees must report their personal securities transactions
at the end of each quarter. Any material violation of the Code of Ethics is
reported to the Board of the Funds. The Board also reviews the administration of
the Code of Ethics on an annual basis.
Except for certain types of investments not appropriate for the Funds, the
independent Trustees of the Funds must also obtain clearance before making
personal securities investments to avoid conflicts of interest with purchases
and sales by the Funds. They have also adopted a policy requiring each
independent Trustee to invest in the Funds an amount at least equal to their
Trustees' fees.
PORTFOLIO BROKERAGE. Southeastern makes decisions to buy or sell investment
securities for all of the Longleaf Partners Funds under the supervision of the
Board of Trustees. Southeastern has authority to place orders with selected
brokerage firms for the Funds' investment portfolio transactions. Southeastern
uses its best efforts to obtain the most favorable price and execution, as more
fully described in the Statement of Additional Information. The Funds may pay
higher
25
<PAGE> 31
commissions to certain brokers for particular transactions than might be charged
by a different broker if Southeastern believes that the most favorable price and
execution may be obtained by doing so.
The Board of Trustees has authorized Southeastern to consider research and other
investment information provided by a brokerage firm, its sales of shares of the
Funds, and the supplying of other economic benefits which reduce the Funds'
expenses as factors in selecting brokerage firms qualified to execute portfolio
transactions for the Funds. The Funds may pay higher commissions to secure
research and investment services and other specific benefits, subject to review
by the Board of Trustees. Sales of Fund shares by a broker are one factor among
others that Southeastern considers in allocating portfolio transactions, but
higher commissions will not be paid solely for sales of Fund shares. The Funds
are not committed to execute portfolio transactions through any particular
brokerage firms which provide investment research information, or which sell
shares of the Funds or provide other benefits. The Board of Trustees monitors
executions of portfolio transactions at least quarterly.
INVESTMENT PERFORMANCE INFORMATION. The International Fund may publish its
total returns from time to time in advertisements and in communications to
shareholders. Performance is calculated using an industry standardized formula,
as more fully described in the Statement of Additional Information. Total return
information will include the average annual compounded rate of return for the
one, five, and ten year periods (or since inception) ended at the close of the
most recent calendar quarter. The Fund may also advertise or provide aggregate
and average total return information for different periods of time, such as the
latest calendar quarter or for the calendar year-to-date. Total return includes
changes in net assets value per share and reinvestment in additional shares of
any dividends from net investment income or other distributions.
Investment results will fluctuate over time, and an investment may be worth more
or less than the purchase price, depending on the timing of the investment and
stock market performance. Any presentation of total return for any prior periods
is not intended to represent future total returns.
The Fund may compare its performance to that of widely recognized unmanaged
stock market indices as well as other more specialized indices. The Fund may
also compare its performance with that of other mutual funds having similar
investment objectives and with the industry as a whole, as determined by outside
services such as Lipper Analytical Services, Inc., CDA Technologies,
Morningstar, Inc., and The Value Line Mutual Fund Survey. The Fund may also
provide information on relative rankings as published in such newspapers and
magazines as The Wall Street Journal, Barron's, Forbes, Business Week, Money,
Financial World, and other similar publications.
STATE OF ORGANIZATION. Longleaf Partners Funds Trust was organized as a
Massachusetts business trust on November 26, 1986. The International Fund is
26
<PAGE> 32
the fourth series. Each series may issue an unlimited number of shares of
beneficial interest, all of which are of one class and have equal rights as to
voting, redemption, dividends and liquidation. Upon receipt of payment for
shares, all shares issued and outstanding are fully paid and nonassessable and
are redeemable at the net asset value per share at the option of shareholders as
more fully described in the section entitled "How to Redeem Shares". Shares have
no preemptive or conversion rights. For information on limitation of liability
and indemnification of Shareholders, Trustees and other affiliated parties, see
the section in the Statement of Additional Information entitled "Limitation of
Liability of Shareholders, Trustees and Others". The registered address in the
Commonwealth of Massachusetts is Two Oliver Street, Boston, Massachusetts 02109.
A mutual fund which is a Massachusetts business trust is not required by state
law to hold annual meetings of shareholders. Accordingly, shareholders' meetings
must be held only when required by the Investment Company Act of 1940. The Board
of Trustees will determine whether annual meetings will be held in the future
when not specifically required.
EXCEPTIONS TO INVESTMENT MINIMUM. The minimum initial purchase requirement is
not applicable to Trustees or officers of the Fund or to directors, officers or
employees of the Investment Counsel. These persons and their relatives may open
an account with a minimum initial investment of $1,000. Members of the immediate
families of shareholders having invested at least $250,000 in one Fund may open
an account with a minimum initial investment of $5,000 in the same Fund.
Personnel of clients having private accounts of at least $2,000,000 may also
open Fund accounts with a minimum initial investment of $5,000. Any investor
seeking one of the above exceptions must obtain prior approval of Fund
management.
YEAR 2000 ISSUES. Southeastern has focused on the year 2000 computer conversion
issue and management believes that there should be a smooth transition on the
part of suppliers of services to the Longleaf Partners Funds. The portfolio
accounting system used by Southeastern for its advisory clients is supplied by a
publicly traded company, which has stated in a release that the year 2000
problem has been overcome by re-engineering its computer system to handle the
century date. The fund accounting software used by the Funds is supplied by an
outside vendor, and that system has been running on four-digit year information
since 1996. The Funds' custodian bank, transfer agent, and outside pricing
services, all of which have a significant presence in the mutual fund industry,
have reported that the necessary conversion process is in progress, and they
appear to have dedicated the appropriate level of resources to solve the
problem.
27
<PAGE> 33
- --------------------------------------------------------------------------------
(LONGLEAF PARTNERS LOGO)
LONGLEAF PARTNERS INTERNATIONAL FUND
Send completed application and check to:
Longleaf Partners Funds, P.O. Box 419929, Kansas City, MO 64141-6929
NEW ACCOUNT APPLICATION
DO NOT USE THIS FORM TO OPEN AN IRA. For an IRA application or for more
information, call (800) 488-4191. PLEASE PRINT. Remember to complete and sign
section 8 on the reverse of this application and retain a copy.
1. ACCOUNT REGISTRATION (CHECK ONE BOX ONLY)
[ ] I currently own shares in another Longleaf Fund and would like to open this
account with the same registration.
<TABLE>
<S> <C> <C>
------------------ --------------- ---------------
FUND ACCOUNT # TAXPAYER ID#
</TABLE>
Do you have automatic purchases or redemptions on your existing account?
YES NO
---- ----
IF YES, do you want these options to be replicated on your new account?
YES NO
---- ----
If you choose this option, please stop here, sign the application and return it
with your investment.
[ ] INDIVIDUAL
- --------------------------------------------------------------------------------
OWNER'S NAME (FIRST, INITIAL, LAST)
- --------------------------------------------------------------------------------
OWNER'S SOCIAL SECURITY BIRTHDAY (MO/DAY/YR)
[ ] JOINT
- --------------------------------------------------------------------------------
JOINT OWNER'S NAME (FIRST, INITIAL, LAST)
- --------------------------------------------------------------------------------
JOINT OWNER'S SOCIAL SECURITY BIRTHDAY (MO/DAY/YR)
[ ] GIFT TO MINOR
- --------------------------------------------------------------------------------
ADULT CUSTODIAN'S NAME (ONE NAME ONLY. FIRST, INITIAL, LAST)
- --------------------------------------------------------------------------------
MINOR'S NAME (ONE NAME ONLY. FIRST, INITIAL, LAST)
- --------------------------------------------------------------------------------
MINOR'S STATE OF RESIDENCE
- --------------------------------------------------------------------------------
MINOR'S SOCIAL SECURITY NUMBER MINOR'S BIRTHDAY (MO/DAY/YR)
[ ] TRUST [ ] CORPORATION [ ]401(K) [ ] OTHER
(check one)
- --------------------------------------------------------------------------------
NAME OF TRUST OR ENTITY
- --------------------------------------------------------------------------------
TRUSTEE NAME
- --------------------------------------------------------------------------------
ADDITIONAL TRUSTEE NAME, IF ANY
- --------------------------------------------------------------------------------
BENEFICIARY'S OR CLIENT'S NAME IF DIFFERENT THAN TRUST OR ENTITY NAME
- --------------------------------------------------------------------------------
DATE OF TRUST AGREEMENT (MO/DAY/YR) TAXPAYER ID NUMBER
2. MAILING ADDRESS
- --------------------------------------------------------------------------------
STREET OR P.O. BOX NUMBER
- --------------------------------------------------------------------------------
OTHER INFORMATION (SUITE, ATTENTION, ETC.)
- --------------------------------------------------------------------------------
CITY, STATE, ZIP
( ) ( )
- --------------------------------------------------------------------------------
DAYTIME PHONE EVENING PHONE
ARE YOU A U.S. CITIZEN? [ ] Yes [ ] No
If not a U.S. citizen, specify country of permanent residence:
- --------------------------------------------------------------------------------
<PAGE> 34
3. INITIAL INVESTMENT ($10,000 MINIMUM PER ACCOUNT)
NOTE: THE FUNDS DO NOT ACCEPT THIRD-PARTY CHECKS.
Longleaf Partners International Fund
(Fund #136) $
==============
[ ] Check Make payable to Longleaf Partners Funds and mail to the address at
the top of this form.
[ ] Wire Prior to wiring funds, call (800) 488-4191 to set up an account. Wire
as follows:
State Street Bank and Trust Company
Boston, Massachusetts
ABA #011000028
Account #9905-023-9
For Longleaf Partners International Fund # 136
For credit to: (your name as account is registered)
Shareholder account #: (your account number)
Note: You must send a completed application to the Fund. No redemption can occur
until the completed application has been received.
4. DIVIDENDS AND CAPITAL GAINS PAYMENTS
All distributions will be reinvested in additional shares unless you select one
or both options below:
[ ] Distribute all capital gains by check.
[ ] Distribute all dividends by check.
5. TELEPHONE REDEMPTION AND EXCHANGE PRIVILEGE
($100,000 MAXIMUM)
You may redeem or exchange up to $100,000 by phone unless you decline these
privileges.
Exchanges can be made only between Longleaf accounts that have the same
ownership.
Proceeds from a telephone redemption will be sent to the address of record; or,
if you want redemption proceeds wired to your bank, you must enclose a voided
check from your bank account and fill in the information below. One common name
must appear on your Longleaf and your bank accounts.
[ ] Please send redemption proceeds by wire to:
- --------------------------------------------------------------------------------
(NAME ON ACCOUNT)
- --------------------------------------------------------------------------------
(ACCOUNT #) (ABA ROUTING #)
- --------------------------------------------------------------------------------
(BANK NAME)
- --------------------------------------------------------------------------------
(BANK ADDRESS)
- --------------------------------------------------------------------------------
(CITY) (STATE) (ZIP)
[ ] I do NOT want the telephone exchange feature.
[ ] I do NOT want the telephone redemption feature.
6. AUTOMATIC INVESTMENT PLAN ($100 MONTHLY MINIMUM)
This service lets you automatically invest $100 or more per month from your bank
account to your Longleaf account. Changes must be in writing. Longleaf does not
charge a fee for this service, but your bank may.
To establish this feature, complete the information below and staple to the left
a voided check from your bank account. One common name must appear on your
Longleaf and bank accounts.
[ ] TRANSFER THE FOLLOWING AMOUNT AROUND THE 21ST OF EACH MONTH:
Longleaf Partners International Fund
(Fund #136) $
=============
[ ] BEGINNING DATE
------------------------
MO/YR
(Automatic Investment Plans normally become active 20 business days after
your application is processed.)
7. DUPLICATE SHAREHOLDER STATEMENTS
Complete only if you would like the person named below to receive copies of
your account statements.
------------------------------------------------------------------------------
NAME (FIRST, INITIAL, LAST)
------------------------------------------------------------------------------
COMPANY NAME
------------------------------------------------------------------------------
STREET OR P.O. BOX NUMBER
------------------------------------------------------------------------------
CITY, STATE, ZIP
<PAGE> 35
8. SIGNATURE
EACH OWNER MUST SIGN THIS SECTION.
By signing this application, I certify that:
- I have received and read the prospectus for the Fund and I agree to its
terms. I have the authority and legal capacity to purchase mutual fund
shares, am of legal age and believe each investment to be suitable for me.
- - I understand that this Fund is not a bank, and Fund shares are not backed or
guaranteed by any bank nor insured by the FDIC.
- - I ratify any instructions, including telephone instructions, given on this
account. I understand that the Fund or National Financial Data Services (NFDS)
will employ reasonable procedures to confirm the genuineness of my
instructions. I agree that neither the Fund nor NFDS will be liable for any
loss, cost, or expense for acting upon any instructions believed to be genuine
and in accordance with reasonable procedures designed to prevent unauthorized
transactions.
- - If I am a non-resident alien, as indicated above, I certify under penalties of
perjury that I am not a U.S. citizen or resident alien and that I am an
"exempt foreign person" as defined under IRS regulations.
- - IF I AM A U.S. CITIZEN OR RESIDENT ALIEN, AS INDICATED ABOVE, I CERTIFY UNDER
PENALTIES OF PERJURY THAT (1) THE SOCIAL SECURITY OR TAXPAYER IDENTIFICATION
NUMBER PROVIDED ABOVE IS CORRECT, AND (2) I AM NOT SUBJECT TO IRS BACKUP
WITHHOLDING BECAUSE (A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE NOT
BEEN NOTIFIED BY THE IRS THAT I AM SUBJECT TO BACKUP WITHHOLDING, OR (C)
BECAUSE I HAVE BEEN NOTIFIED BY THE IRS THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
[ ] CHECK HERE IF YOU ARE SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
[ ]Check if more than one authorized signature is
required to execute a transaction.
------------------------------------------
(number required)
X
- --------------------------------------------------------------------------------
SIGNATURE OF OWNER/AUTHORIZED SIGNER (DATE)
X
- --------------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER/AUTHORIZED SIGNER (DATE)
X
- --------------------------------------------------------------------------------
(ADDITIONAL INSTITUTIONAL SIGNATURE) (DATE)
X
- --------------------------------------------------------------------------------
(ADDITIONAL INSTITUTIONAL SIGNATURE) (DATE)
PROSPECT IDENTIFICATION NUMBER (For Internal Use Only)
<PAGE> 36
LOGO
<PAGE> 37
LOGO
<PAGE> 38
LOGO
<PAGE> 39
INVESTMENT COUNSEL
Southeastern Asset Management, Inc.
6410 Poplar Avenue, Suite 900
Memphis, TN 38119
TRANSFER AND DIVIDEND AGENT
National Financial Data Services ("NFDS")
P.O. Box 419929
Kansas City, MO 64141-6929
CUSTODIAN
State Street Bank & Trust Company, Boston, MA
SPECIAL LEGAL COUNSEL
Dechert Price & Rhoads, Washington, DC
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, Boston, MA
<PAGE> 40
LONGLEAF
PARTNERS
FUNDS
(LONGLEAF PARTNERS LOGO)
MANAGED BY:
SOUTHEASTERN ASSET MANAGEMENT, INC.
6410 POPLAR AVE.
SUITE 900
MEMPHIS, TN 38119
Fund Information Requests
(800) 445-9469
Shareholder Account Inquiries
(800) 488-4191
Inquiries About Fund Operations
(901) 761-2474
No person has been authorized to give any further information or make any
representations other than those contained in this Prospectus. If given or made,
such other information or representations must not be relied upon as having been
authorized by the Fund, Investment Counsel, or Administrator. This Prospectus
does not constitute an offering in any state where such an offering may not be
lawfully made.
<PAGE> 41
LONGLEAF PARTNERS INTERNATIONAL FUND
PART B
INFORMATION REQUIRED IN THE
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 42
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 26, 1998
---------------------
LONGLEAF PARTNERS INTERNATIONAL FUND
A Series of
LONGLEAF PARTNERS FUNDS TRUST
TABLE OF CONTENTS
(LONGLEAF PARTNERS LOGO)
<TABLE>
<S> <C>
- - Introduction.............................................. 2
- - Additional Information About Investment Objectives and
Policies
Investment Objective.................................... 2
General Investment Policy............................... 2
- - Diversification........................................... 3
- - Fundamental Investment Restrictions....................... 3
- - Non-Fundamental Investment Restrictions................... 4
- - Additional Information About Types of Investments and
Investment Techniques
Repurchase Agreements................................... 5
Warrants................................................ 5
Real Estate Investment Trusts........................... 5
Futures Contracts....................................... 6
Options on Securities and Stock Indices................. 6
Foreign Currency Contracts.............................. 7
Lending of Portfolio Securities......................... 8
- - Management of the Fund.................................... 9
- - Control Persons and Principal Holders of Securities....... 10
- - Investment Advisory Services.............................. 11
- - Investment Performance and Total Return................... 11
- - Other Management Related Services......................... 13
- - Terms of Agreements....................................... 14
- - Additional Tax Information................................ 14
- - Allocation of Brokerage Commissions....................... 15
- - Distribution of Fund Shares............................... 17
- - Redemption of Fund Shares................................. 17
- - Custodian of Fund Assets.................................. 17
- - Independent Certified Public Accountants.................. 17
- - Legal Counsel............................................. 18
- - Limitation of Liability................................... 18
- - Table of Bond and Preferred Stock Ratings................. 19
</TABLE>
MANAGED BY
SOUTHEASTERN ASSET MANAGEMENT, INC.
6410 POPLAR AVENUE; SUITE 900
MEMPHIS, TN 38119
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED OCTOBER 26, 1998, IS NOT A
PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF LONGLEAF
PARTNERS FUNDS TRUST, ALSO DATED OCTOBER 26, 1998, WHICH MAY BE OBTAINED WITHOUT
CHARGE UPON REQUEST MADE TO SOUTHEASTERN ASSET MANAGEMENT, INC.
TELEPHONE (800) 445-9469; (901) 761-2474.
<PAGE> 43
STATEMENT OF ADDITIONAL INFORMATION
---------------------
LONGLEAF PARTNERS INTERNATIONAL FUND
A Series of Longleaf Partners Funds Trust
---------------------
INTRODUCTION
Longleaf Partners International Fund (the "International Fund" or the "Fund") is
a series or portfolio of Longleaf Partners Funds Trust, a Massachusetts business
trust which has three other portfolios -- Longleaf Partners Fund, Longleaf
Partners Small-Cap Fund, and Longleaf Partners Realty Fund. Each of these
portfolios is operated as a separate mutual fund and each has its own particular
investment objective.
ADDITIONAL INFORMATION ABOUT INVESTMENT
OBJECTIVES AND POLICIES
Certain investment restrictions or policies must be adopted as "fundamental"
under the current requirements of the Securities and Exchange Commission. Those
investment objectives and restrictions classified as fundamental cannot be
changed without approval of a majority of the outstanding voting securities.
Under the Investment Company Act of 1940, "approval of a majority of the
outstanding voting securities" means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of the particular Fund or (2) 67% or
more of the shares present at a shareholders' meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy.
To the extent not designated as fundamental, the investment objective, other
investment policies and restrictions, the Funds' investment philosophy, the
discussion of types of securities in which the Funds may invest and the
investment techniques used by each Fund may be changed by approval of the Board
of Trustees.
INVESTMENT OBJECTIVE
The investment objective of the International Fund is to seek long-term capital
growth primarily through investments in the equity securities of international
or foreign issuers.
GENERAL INVESTMENT POLICY
Under normal circumstances, the International Fund will invest at least 65% of
total assets in the equity securities of issuers domiciled or operating
primarily in at least three countries other than the United States. A company
will be considered to be an international or foreign issuer if it is organized
or headquartered outside the United States. In addition, an issuer will be
considered to be international or foreign if, regardless of where organized, its
principal business activities are outside the United States. Such an issuer must
have at least 50% of its assets located outside the United States or earn at
least 50% of its gross income outside the United States.
Under the Investment Company Act of 1940, (the "Investment Company Act"), there
is no requirement that a fund's investment objective or general investment
policy be classified as fundamental. As a result, the International Fund's
investment objective and general investment policy are not fundamental and may
be changed by the Fund's Trustees without prior approval of shareholders.
2
<PAGE> 44
DIVERSIFICATION
The Fund is non-diversified under the provisions of the Investment Company Act
of 1940. Although the Fund expects to comply with the diversification standards
of the Internal Revenue Code of 1986, which are summarized in the Prospectus,
compliance with these standards is not a fundamental policy.
FUNDAMENTAL INVESTMENT RESTRICTIONS
The International Fund has adopted the following investment restrictions as
fundamental. The text of the fundamental restriction is set forth in quotation
marks and bold type; any comments following these fundamental restrictions are
explanatory only and are not fundamental.
- - INDUSTRY CONCENTRATION. "THE FUND MAY NOT PURCHASE ANY SECURITY WHICH WOULD
CAUSE THE FUND TO CONCENTRATE ITS INVESTMENTS IN THE SECURITIES OF ISSUERS
PRIMARILY ENGAGED IN ANY ONE INDUSTRY EXCEPT AS PERMITTED BY THE SECURITIES
AND EXCHANGE COMMISSION, AND EXCEPT THAT THE FUND RESERVES THE RIGHT TO INVEST
MORE THAN 25% OF ITS TOTAL ASSETS IN INSURERS PRIMARILY ENGAGED IN
UNDERWRITING PROPERTY AND CASUALTY (NON LIFE) INSURANCE RISKS."
Comment. The present position of the staff of the Division of Investment
Management of the Securities and Exchange Commission is that a mutual fund
will be deemed to have concentrated its investments in a particular industry
if it invests more than 25% of its total assets, exclusive of cash and U.S.
Government securities, in securities of any single industry. With the
exception noted above, the Fund will comply with this position but will be
able to use a different percentage of assets without seeking shareholder
approval if the SEC should subsequently change its position.
For purposes of defining what constitutes a single industry for purposes of this
restriction, the Fund will use the SIC Industry Code definitions for industries,
as set forth in the latest edition of the Securities & Exchange Commission
publication entitled "Directory of Companies Required to File Annual Reports
with the Securities & Exchange Commission" or other publicly available
information. Industry category groupings shown in the Funds' printed reports
sent quarterly to shareholders may contain more than one SIC Industry Code, and
these broader industry groupings are intended to be functionally descriptive
presentations rather than being limited to a single SIC industry category.
- - SENIOR SECURITIES. "THE FUND MAY NOT ISSUE SENIOR SECURITIES, EXCEPT AS
PERMITTED UNDER THE INVESTMENT COMPANY ACT OF 1940 OR ANY RULE, ORDER OR
INTERPRETATION UNDER THE ACT."
Comment. Generally, a senior security is an obligation of a Fund which takes
precedence over the claims of fund shareholders. The Investment Company Act
generally prohibits a fund from issuing senior securities, with limited
exceptions. Under SEC staff interpretations, funds may incur certain
obligations (for example, to deliver a foreign currency at a future date under
a forward foreign currency contract) which otherwise might be deemed to create
a senior security, provided the fund maintains a segregated account containing
liquid securities having a value equal to the future obligation.
- - BORROWING. "THE FUND MAY NOT BORROW MONEY, EXCEPT AS PERMITTED BY APPLICABLE
LAW."
Comment. In general, a fund may not borrow money, except that (i) a fund may
borrow from banks (as defined in the Investment Company Act) in amounts up to
33 1/3% of its total assets (including the amount borrowed) less liabilities
(other than borrowings), (ii) a fund may borrow up to 5% of its total assets
for temporary purposes, (iii) a fund may obtain such short-term credit as may
be necessary for the clearance of purchases and sales of portfolio securities,
and (iv) a fund may not pledge its assets other than to secure
3
<PAGE> 45
such borrowings or, to the extent permitted by the Fund's investment policies
as set forth in its current prospectus and statement of additional
information, in connection with hedging transactions, short sales, when-issued
and forward commitment transactions and similar investment strategies. Reverse
repurchase agreements that are covered are neither senior securities nor a
form of borrowing and may be entered into without limit.
- - UNDERWRITING. "THE FUND MAY NOT ACT AS AN UNDERWRITER OF SECURITIES ISSUED BY
OTHERS, EXCEPT INSOFAR AS THE FUND MAY BE DEEMED AN UNDERWRITER IN CONNECTION
WITH THE DISPOSITION OF PORTFOLIO SECURITIES."
Comment. Generally a mutual fund may not be an underwriter of securities
issued by others. However, the exception to this restriction enables the Fund
to sell securities held in its portfolio, usually securities which were
acquired in unregistered or "restricted" form, even though it otherwise might
technically be classified as an underwriter under the Federal securities laws
in making such sales.
- - COMMODITIES. "THE FUND MAY NOT PURCHASE OR SELL COMMODITIES OR COMMODITY
CONTRACTS UNLESS ACQUIRED AS A RESULT OF OWNERSHIP OF SECURITIES OR OTHER
INSTRUMENTS ISSUED BY PERSONS THAT PURCHASE OR SELL COMMODITIES OR COMMODITIES
CONTRACTS, BUT THIS SHALL NOT PREVENT THE FUND FROM PURCHASING, SELLING AND
ENTERING INTO FINANCIAL FUTURES CONTRACTS (INCLUDING FUTURES CONTRACTS ON
INDICES OF SECURITIES, INTEREST RATES AND CURRENCIES), OPTIONS ON FINANCIAL
FUTURES CONTRACTS, WARRANTS, SWAPS, FORWARD CONTRACTS, FOREIGN CURRENCY SPOT
AND FORWARD CONTRACTS, OR OTHER DERIVATIVE INSTRUMENTS THAT ARE NOT RELATED TO
PHYSICAL COMMODITIES."
Comment. Under this restriction, the Fund has the ability to purchase and
sell (write) put and call options and to enter into futures contracts and
options on futures contracts for risk management and other non-hedging
purposes. Examples of non-hedging risk management strategies include
increasing a Fund's exposure to the equity markets of particular countries by
purchasing futures contracts on the stock indices of those countries and
effectively increasing the duration of a bond portfolio by purchasing futures
contracts on fixed income securities. Such risk management techniques, unlike
other non-hedging derivative strategies, are not intended to be speculative
but, like all leveraged transactions, they involve the possibility of losses
as well as gains that are greater than the purchase and sale of the underlying
securities.
- - LENDING. "THE FUND MAY NOT MAKE LOANS TO OTHER PERSONS EXCEPT THROUGH THE
LENDING OF SECURITIES HELD BY IT AS PERMITTED BY APPLICABLE LAW, THROUGH THE
USE OF REPURCHASE AGREEMENTS, AND BY THE PURCHASE OF DEBT SECURITIES, ALL IN
ACCORDANCE WITH ITS INVESTMENT POLICIES."
- - REAL ESTATE. "THE FUND MAY NOT PURCHASE OR SELL REAL ESTATE, EXCEPT THAT THE
FUND MAY INVEST IN SECURITIES OF COMPANIES THAT DEAL IN REAL ESTATE OR ARE
ENGAGED IN THE REAL ESTATE BUSINESS, INCLUDING REAL ESTATE INVESTMENT TRUSTS,
AND SECURITIES SECURED BY REAL ESTATE OR INTERESTS THEREIN AND THE FUND MAY
HOLD AND SELL REAL ESTATE ACQUIRED THROUGH DEFAULT, LIQUIDATION, OR OTHER
DISTRIBUTIONS OF AN INTEREST IN REAL ESTATE AS A RESULT OF THE FUND'S
OWNERSHIP OF SUCH SECURITIES."
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS.
The following investment restrictions are non-fundamental, and may be changed at
the discretion of the Board of Trustees. Except as specifically authorized, the
Fund may not:
- - Purchase restricted or "illiquid" securities, including repurchase agreements
maturing in more than seven days, if as a result, more than 15% of the Fund's
net assets would then be invested in such securities
4
<PAGE> 46
(excluding securities which are eligible for resale pursuant to Rule 144A
under the Securities Act of 1933);
- - Acquire or retain securities of any investment company, except that the Fund
may (a) acquire securities of investment companies up to the limits permitted
by Sec. 12(d)(l) of the Investment Company Act of 1940, provided such
acquisitions are in the open market and there is no commission or profit to a
dealer or sponsor other than the customary broker's commission, and (b)
acquire securities of any investment company as part of a merger,
consolidation or similar transaction;
- - Make short sales whereby the dollar amount of short sales at any one time
would exceed 25% of the net assets of the Fund, and the value of securities of
any one issuer in which the Fund is short would exceed the lessor of 5% of the
value of the Fund's net assets or 5% of the securities of any class of any
issuer; provided that the Fund maintains collateral in a segregated account
consisting of cash or liquid securities with a value equal to the current
market value of the shorted securities, which is marked to market daily. If
the Fund owns an equal amount of such securities or securities convertible
into or exchangeable for, without payment of any further consideration,
securities of the same issuer as, and equal in amount to, the securities sold
short (which sales are commonly referred to as "short sales against the box"),
such restrictions shall not apply;
- - Invest in puts, calls, straddles, spreads or any combination thereof, except
that the Fund may (a) purchase and sell put and call options on securities and
securities indexes, and (b) write covered put and call options on securities
and securities indexes and combinations thereof; provided that the securities
underlying such options are within the investment policies of the Fund and the
value of the underlying securities on which options may be written at any one
time does not exceed 25% of total assets;
- - Invest in oil, gas or other mineral exploration programs, development programs
or leases, except that the Fund may purchase securities of companies engaging
in whole or in part in such activities;
- - Pledge, mortgage or hypothecate its assets except in connection with permitted
borrowings;
- - Purchase securities on margin, except short-term credits as are necessary for
the purchase and sale of securities, provided that the deposit or payment of
initial or variation margin in connection with futures contracts or related
options will not be deemed to be a purchase on margin.
ADDITIONAL INFORMATION ABOUT TYPES OF INVESTMENTS
AND INVESTMENT TECHNIQUES
Repurchase Agreements. An acceptable investment for cash reserves, a repurchase
agreement is an instrument under which an investor such as the Fund purchases
U.S. Government securities or other securities from a vendor, with an agreement
by the vendor to repurchase the security at the same price, plus interest at a
specified rate. In such a case, the security is held by the Fund, in effect, as
collateral for the repurchase obligation. Repurchase agreements may be entered
into with member banks of the Federal Reserve System or "primary dealers" (as
designated by the Federal Reserve Bank of New York) in United States Government
securities. Repurchase agreements usually have a short duration, often less than
one week. In entering into the repurchase agreement for the Fund, the Investment
Counsel will evaluate and monitor the credit worthiness of the vendor. In the
event that a vendor should default on its repurchase obligation, the Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. If the vendor becomes bankrupt, the Fund
might be delayed, or may incur costs or possible losses of principal and income,
in selling the collateral.
5
<PAGE> 47
Warrants. The Fund may invest in warrants for the purchase of equity securities
at a specific price for a stated period of time. Warrants may be considered more
speculative than other types of investments in that they do not entitle a holder
to dividends or voting rights for the securities which may be purchased nor do
they represent any rights in the assets of the issuing company. The value of a
warrant does not necessarily change with the value of the underlying securities
and a warrant ceases to have value if it is not exercised prior to the
expiration date.
Real Estate Investment Trusts. REITs are sometimes described as equity REITs,
mortgage REITs and hybrid REITs. An equity REIT invests primarily in the fee
ownership or leasehold ownership of land and buildings and derives its income
primarily from rental income. An equity REIT may also realize capital gains (or
losses) by selling real estate properties in its portfolio that have appreciated
(or depreciated) in value. A mortgage REIT invests primarily in mortgages on
real estate, which may secure construction, development or long-term loans. A
mortgage REIT generally derives its income primarily from interest payments on
the credit it has extended. A hybrid REIT combines the characteristics of equity
REITs and mortgage REITs, generally by holding both ownership interests and
mortgage interests in real estate.
Equity REITs may be further characterized as operating companies or financing
companies. To the extent that an equity REIT provides operational and management
expertise to the properties held in its portfolio, the REIT generally exercises
some degree of control over the number and identity of tenants, the terms of
their tenancies, the acquisition, construction, repair and maintenance of
properties and other operational issues. A mortgage REIT or an equity REIT that
provides financing rather than operational and management expertise to the
properties in its portfolio will generally not have control over the operations
that are conducted on the real estate in which the REIT has an interest.
Futures Contracts. Primarily for hedging purposes, the Fund may purchase and
sell financial futures contracts. Although some financial futures contracts call
for making or taking delivery of the underlying securities, in most cases these
obligations are closed out before the settlement date. The closing of a
contractual obligation is accomplished by purchasing or selling an identical
offsetting futures contract. Other financial futures contracts by their terms
call for cash settlements.
The Fund may also buy and sell index futures contracts with respect to any stock
or bond index traded on a recognized stock exchange or board of trade. An index
futures contract is a contract to buy or sell units of an index at a specified
future date at a price agreed upon when the contract is made. The stock index
futures contract specifies that no delivery of the actual stocks making up the
index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract.
At the time the Fund purchases a futures contract, an amount of liquid
securities equal to the market value of the futures contract will be deposited
in a segregated account with the Fund's Custodian. When writing a futures
contract, the Fund will maintain with the Custodian similar liquid assets that,
when added to the amounts deposited with a futures commission merchant or broker
as margin, are equal to the market value of the instruments underlying the
contract. Alternatively, the Fund may "cover" the position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based), or holding a call option
permitting the Fund to purchase the same futures contract at a price no higher
than the price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Custodian).
6
<PAGE> 48
Options on Securities and Stock Indices. The Fund may write covered put and
call options and purchase put and call options on securities or stock indices.
An option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option.
The Fund may write a call or put option only if the option is "covered." A call
option on a security written by the Fund is covered if the Fund owns the
underlying security subject to the call, has an absolute and immediate right to
acquire that security without additional cash consideration (or for additional
cash consideration held in a segregated account by its Custodian) upon
conversion or exchange of other securities held in its portfolio, or the call is
otherwise covered with assets held in a segregated account. A call option on a
security is also covered if the Fund holds a call on the same security and in
the same principal amount as the call written where the exercise price of the
call held (a) is equal to or less than the exercise price of the call written or
(b) is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, liquid securities or money market instruments in
a segregated account with its Custodian. A put option on a security written by
the Fund is covered if the Fund maintains similar liquid assets with a value
equal to the exercise price in a segregated account with its Custodian, or holds
a put on the same security and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written.
The Fund may cover call options on stock indices through a segregated account or
by owning securities whose price changes, in the opinion of the Investment
Counsel, are expected to be similar to those of the index, or in such other
manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. Nevertheless, where the
Fund covers a call option on a stock index through ownership of securities, such
securities may not match the composition of the index. In that event, the Fund
will not be fully covered and could be subject to risk of loss in the event of
adverse changes in the value of the index. The Fund may cover put options on
stock indices by segregating assets equal to the option's exercise price, or in
such other manner as may be in accordance with the rules of the exchange on
which the option is traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases its gross income in the event the option expires unexercised or is
closed out at a profit. If the value of a security or an index on which the Fund
has written a call option falls or remains the same, the Fund will realize a
profit in the form of the premium received (less transaction costs) that could
offset all or a portion of any decline in the value of the portfolio securities
being hedged. If the value of the underlying security or index rises, however,
the Fund will realize a loss in its call option position, which will reduce the
benefit of any unrealized appreciation in the Fund's stock investments. By
writing a put option, the Fund assumes the risk of a decline in the underlying
security or index. To the extent that the price changes of the portfolio
securities being hedged correlate with changes in the value of the underlying
security or index, writing covered put options on securities or indices will
increase the Fund's losses in the event of a market decline, although such
losses will be offset in part by the premium received for writing the option.
The Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, the Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option
7
<PAGE> 49
plus related transaction costs. The success of this strategy will depend, in
part, on the accuracy of the correlation between the changes in value of the
underlying security or index and the changes in value of the Fund's security
holdings being hedged.
The Fund may purchase call options on individual securities to hedge against an
increase in the price of securities that the Fund anticipates purchasing in the
future. Similarly, the Fund may purchase call options to attempt to reduce the
risk of missing a broad market advance, or an advance in an industry or market
segment, at a time when the Fund holds uninvested cash or short-term debt
securities awaiting investment. When purchasing call options, the Fund will bear
the risk of losing all or a portion of the premium paid if the value of the
underlying security or index does not rise.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers,
or the options exchange could suspend trading after the price has risen or
fallen more than the maximum specified by the exchange. Although the Fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, it may experience losses in some cases as a result of such
inability.
Foreign Currency Contracts. As a method of hedging against foreign currency
exchange rate risks, the Fund may enter into forward foreign currency exchange
contracts and foreign currency futures contracts, as well as purchase put or
call options on foreign currencies, as described below. The Fund may also
conduct foreign currency exchange transactions on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk from adverse changes in the
relationship between the U.S. dollar and foreign currencies. A forward contract
is an obligation to purchase or sell a specific currency for an agreed price at
a future date which is individually negotiated and privately traded by currency
traders and their customers. The Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar price of
the security. In addition, for example, when Southeastern believes that a
foreign currency may suffer or enjoy a substantial movement against another
currency, a Fund may enter into a forward contract to sell an amount of the
former foreign currency approximating the value of some or all of its portfolio
securities denominated in such foreign currency. This second investment practice
is generally referred to as "cross-hedging." Because an amount of the Fund's
assets equal to the amount of the purchase will be held aside or segregated to
be used to pay for the commitment, the Fund will always have cash, cash
equivalents or high quality liquid securities available sufficient to cover any
commitments under these contracts or to limit any potential risk. The segregated
account will be marked-to-market on a daily basis. While these contracts are not
presently regulated by the Commodity Future Trading Commission ("CFTC"), the
CFTC may in the future assert authority to regulate forward contracts. In such
event, the Fund's ability to utilize forward contracts in the manner set forth
above may be restricted. Forward contracts may limit potential gain from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As with other kinds of options, however, the writing
of an option on foreign currency will constitute only a partial hedge, up to the
amount of the premium received, and the
8
<PAGE> 50
Fund could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on foreign
currency may constitute an effective hedge against fluctuation in exchange rates
although, in the event of rate movements adverse to the Fund's position, the
Fund may forfeit the entire amount of the premium plus related transaction
costs.
The Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures"). This
investment technique may be used to hedge against anticipated future changes in
exchange rates which otherwise might adversely affect the value of the
particular Fund's portfolio securities or adversely affect the prices of
securities that the Fund intends to purchase at a later date. The successful use
of currency futures will usually depend on the Investment Counsel's ability to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, the Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
Lending of Portfolio Securities. The Funds may from time to time lend portfolio
securities to brokers or dealers, banks and other institutional investors and
receive collateral in the form of United States Government obligations or money
market funds. Under current practices, the loan collateral must be maintained at
all times in an amount equal to at least 100% of the current market value of the
loaned securities, and will not be used to leverage the portfolio. In
determining whether to lend securities to a particular broker/dealer or
financial institution, Southeastern will consider all relevant facts and
circumstances, including the credit-worthiness of the broker or financial
institution. If the borrower should fail to return the loaned securities, the
particular Fund could use the collateral to acquire replacement securities, but
could be deprived of immediate access to such assets for the period prior to
such replacement. The Fund may pay reasonable finders, administrative and
custodial fees in connection with such a loan of securities. The Fund will not
lend portfolio securities in excess of one-third of the value of total assets,
nor will the Fund lend portfolio securities to any officer, director, trustee,
employee of affiliate of the Funds or Southeastern.
MANAGEMENT OF THE FUND
The Fund is supervised by its Board of Trustees, which implements policies
through the Fund's principal executive officers. Day to day portfolio management
and fund administration is provided by Southeastern Asset Management, Inc.
("Southeastern") in its capacity as Investment Counsel and as Fund Administrator
under contracts which must be renewed at periodic intervals, as required by the
Investment Company Act of 1940. The names, principal occupations during at least
the past five years and other information about members of the Board of Trustees
and the Fund executive officers are set forth in the Prospectus on pages 17 and
18.
9
<PAGE> 51
The following table provides information on the schedule of Trustees' fees paid
by the other three series of Longleaf Partners Funds Trust for the fiscal year
ended December 31, 1997. Trustees fees for the International Fund will be $5,000
per annum during its first year of operations.
1997 COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
FROM EACH FUND TOTAL
NAME OF PERSON; ----------------------------- COMPENSATION
POSITION (AGE) PARTNERS REALTY SMALL-CAP FROM ALL
ADDRESS FUND FUND FUND FUNDS**
--------------- -------- ------ --------- ------------
<S> <C> <C> <C> <C>
O. Mason Hawkins*
Chairman of the Board and CEO (50)............ None None None None
Chadwick H. Carpenter, Jr.
Trustee (48)
14 Oak Park; Bedford, MA 01730
10660 East Tamarisk Way; Scottsdale, AZ
85262...................................... $15,000 $7,500 $7,500 $30,000
Daniel W. Connell, Jr.
Trustee (49)
One Stadium Place
Jacksonville, FL 32202........................ $15,000 $7,500 $7,500 $30,000
Steven N. Melnyk
Trustee (51)
111 Riverside Ave.
Ste. 330
Jacksonville, FL 32202........................ $15,000 $7,500 $7,500 $30,000
C. Barham Ray
Trustee (51)
845 Crossover Lane
Ste. 140
Memphis, TN 38117............................. $15,000 $7,500 $7,500 $30,000
W. Reid Sanders*
Trustee and President (49).................... None None None None
</TABLE>
- ---------------
* Trustee is an "interested" person because of employment by Southeastern as
Investment Counsel. The "interested" Trustees and all executive officers of
the Fund are officers or employees of Southeastern, which pays their salaries
and other employee benefits. Its address is 6410 Poplar Ave., Ste. 900,
Memphis, TN 38119.
** The Funds, including the International Fund, have no pension or retirement
plan for Trustees who are classified as independent or non-"interested".
10
<PAGE> 52
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The Fund is controlled by its Board of Trustees. The Board of Trustees consists
of six members, four of whom are independent of Southeastern and are not
"interested persons" as that term is defined in the Investment Company Act of
1940. The following persons or groups owned beneficially 5% or more of the
outstanding shares of the International Fund on the effective date of this
offering:
<TABLE>
<S> <C> <C> <C>
Trustees, officers, and affiliates of Southeastern
Asset Management, Inc................................ (To be supplied)
</TABLE>
INVESTMENT ADVISORY SERVICES
Southeastern Asset Management, Inc., an investment advisor registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940, is
the Fund's Investment Counsel. The firm is owned and controlled by its principal
officers, who are listed in the Prospectus as affiliated Trustees and Executive
Officers of the Fund. Mr. O. Mason Hawkins, Chairman of the Board and Chief
Executive Officer of Southeastern, owns a majority of its outstanding voting
stock.
Formed in 1975, Southeastern manages institutional and individual assets in
private or separate accounts as well as mutual funds, and is responsible for
managing more than $12 billion in client assets. It has served as investment
adviser to each of the Longleaf Partners Funds since their respective inception
dates. Additional information with respect to the investment advisory function
is contained in the Prospectus under the caption "Investment Management and Fund
Administration" beginning on page 15.
The annual Investment Counsel fee for the International Fund is 1.50% of average
daily net assets. The Investment Counsel Agreement limits the normal operating
expenses of the Fund, including all fees but excluding interest, taxes,
brokerage commissions, and extraordinary expenses, to a maximum of 1.75% of the
Fund's average net assets in any fiscal year through a reduction of the
Investment Counsel fees.
INVESTMENT PERFORMANCE AND TOTAL RETURN
Total Return Calculation. The average annual total return on an investment in
shares of each of the Funds for a particular period is calculated using a
specific formula required by the Securities & Exchange Commission. The formula
takes into account any appreciation or depreciation in the portfolio, assumes
reinvestment of all dividends and capital gains distributions, and then
mathematically averages the return over the length of time covered by the
calculation. The formula used for computing average annual total return, as
specified by regulation, is as follows:
"Average Annual Total Return" shall mean the average annual compounded
rate of return, computed according to the following formula:
p(1+T) to the nth power = ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years (or fractional portions thereof)
ERV = ending value of a hypothetical $1,000 investment made at the
beginning of the period (or fractional portion thereof).
</TABLE>
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<PAGE> 53
Use of Total Return Information. Average annual total return information may be
useful to investors in considering the Fund's past investment performance.
However, certain factors should be taken into account before basing an
investment decision on this information. First, in comparing the Fund's total
return with the total return of any market indices for the same period, the
investor should be aware that market indices are unmanaged and contain different
and generally more numerous securities than the Fund's portfolios. Some market
indices are not adjusted for reinvested dividends. Further, no adjustment is
made in the Funds' total returns or the total returns of any market indices for
taxes payable on distributions.
An investment in the Fund is an equity investment. As a result, total returns
will fluctuate over time, and total return for the past period is not an
indication or representation as to future rates of total return. When comparing
each Fund's total returns with those of other alternatives such as fixed income
investments, investors should understand that an equity fund may be subject to
greater market risks than are money market or fixed income investments, and that
the Fund is designed for investors who are willing to accept such greater market
risks for the possibility of realizing greater long-term gains. There is no
assurance that the Fund's investment objective will be achieved.
OTHER MANAGEMENT RELATED SERVICES
The Fund pays an Administration Fee equal to 0.10% per annum of the average
daily net assets, which is accrued daily and paid monthly in arrears.
As the Fund Administrator, Southeastern manages and performs all business and
administrative operations of each Fund, including the following:
- - Preparation and maintenance of all accounting records
- - Preparation and filing of all required financial reports and tax returns
- - Securities registrations and reports of sales of shares
- - Calculation of the daily net asset value per share
- - Preparation and mailing of prospectuses, proxy statements, and other required
reports to shareholders
- - General coordination and liaison among the Investment Counsel, authorized
dealers, the custodian bank, the transfer agent, and regulatory authorities
- - Supplying office space and administrative support for the above functions.
The Fund also reimburses the Administrator for the charges for computer programs
and hardware solely used to process Fund transactions and for a portion of the
compensation of the Fund's Treasurer. These reimbursable expenses are allocated
among the portfolios taking into account their respective assets and number of
shareholders. The Administrator has not been leasing computer hardware equipment
for dedicated use by the Fund and has not requested reimbursement for costs or
charges related to computer hardware.
All other direct Fund operating expenses are paid by the Fund. Such expenses
include but are not limited to the following: (i) the fees of the Custodian and
Transfer Agent; (ii) compensation of the independent certified public
accountants, outside legal counsel, and fees and travel expenses of the Trustees
who are not officers or employees of Southeastern; (iii) all franchise, income
and other taxes relating to the Funds or their securities; (iv) all filing fees
and legal expenses incurred in qualifying and continuing the registrations of
the shares for sale with the Securities and Exchange Commission and with any
regulatory agency in the several states; (v) insurance premiums and trade
association dues; (vi) the costs of typesetting, printing and
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<PAGE> 54
mailing to shareholders such documents as prospectuses, proxy statements,
dividend notices and all other communications; (vii) expenses of meetings of
shareholders and the Boards of Trustees; (viii) external expenses related to
pricing portfolio securities; and (ix) any extraordinary expenses such as
expenses of litigation. The Fund also pays the expenses of stationery,
appropriate forms, envelopes, checks, postage, overnight air courier charges,
telephone charges, and printing and mailing charges for shareholder
communications and similar items.
TERMS OF AGREEMENTS
The Fund has entered into agreements with Southeastern Asset Management, Inc.,
as the Investment Counsel and separately as the Fund Administrator, initially
effective for a period of two years. Each agreement must be renewed each year
thereafter by the affirmative vote of a majority of the outstanding voting
securities of the Fund or by a majority of members of the Board of Trustees,
including a majority of the Trustees who are not "interested" Trustees. Such
Agreements will automatically terminate in the event of assignment as defined in
the Investment Company Act of 1940. The Fund may terminate such Agreements,
without penalty, upon 60 days' written notice by a majority vote of the Board of
Trustees or by a majority of the outstanding voting securities of the Fund.
ADDITIONAL TAX INFORMATION
The Fund intends to qualify for favorable tax treatment applicable to regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended. Qualification does not involve supervision of management or investment
practices or policies by the Internal Revenue Service. In order to qualify as a
regulated investment company, a Fund must, among other things, derive at least
90% of its gross income from dividends, interest, payments with respect to
proceeds from securities loans, gains from the sale or other disposition of
securities and other income (including gains from options future and forward
foreign currency contracts) derived with respect to its business of investing in
such securities. Each Fund must also diversify its holdings so that, at the end
of each quarter of its taxable year, (i) at least 50% of the market value of
total assets is represented by cash, U.S. Government securities and other
securities limited in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities). Further, a regulated investment company may not invest more than 25
percent of the value of its total assets in the securities of two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses or related trades or businesses. By so qualifying, a Fund
is not subject to Federal income tax if it timely distributes its investment
company taxable income and any net realized capital gains.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax. To
prevent application of the tax, each Fund must distribute or be deemed to have
distributed with respect to each calendar year an amount equal to the sum of:
(1) at least 98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its capital gains in
excess of its capital losses (adjusted for certain ordinary losses) for the
calendar year; and (3) all taxable ordinary income and capital gains for
previous years that were not distributed during such years. A distribution will
be treated as paid on December 31 of the calendar year if it is declared by the
Fund in October, November, or December of that year to shareholders of record on
a date in such a month and paid by the Fund during January of the following
calendar year. Such distributions will
13
<PAGE> 55
be treated as received by shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Certain of the debt securities which may be acquired may be secured in whole or
in part by interests in real estate. If a Fund were to acquire real estate by
foreclosure, income generated by that real estate (including rental income and
gain on its disposition) may not be regarded as qualifying income. If the Fund's
non-qualifying income for a taxable year exceeded 10% of its gross income, it
would fail to qualify as a regulated investment company and it would be taxed in
the same manner as an ordinary corporation. In that case, the Fund would be
ineligible to deduct its distributions to its Shareholders and those
distributions, to the extent derived from the Fund's current and accumulated
earnings and profits, would constitute dividends (which may be eligible for the
corporate dividends-received deduction) which are taxable to Shareholders as
ordinary income, even though those distributions might otherwise, at least in
part, have been treated in the Shareholder's hands as long-term capital gain. If
the Fund fails to qualify as a regulated investment company in a given taxable
year, it must distribute its earnings and profits accumulated in that year in
order to qualify again as a regulated investment company.
ALLOCATION OF BROKERAGE COMMISSIONS
Southeastern, in its capacity as Investment Counsel, is responsible under the
supervision of the Board of Trustees for the selection of members of securities
exchanges, brokers and dealers (referred to as "brokers") for the execution of
portfolio transactions and, when applicable, the negotiation of brokerage
commissions. On behalf of the Fund, Southeastern is also responsible for
investment decisions and for the placement and execution through selected
brokers of purchase and sale orders. All investment decisions and placements of
trades for the purchase and sale of portfolio securities are made in accordance
with the following principles:
1. Purchase and sale orders are usually placed with brokers who are
recommended by Southeastern and/or selected by management of the Fund as
able to achieve "best execution" of such orders. "Best execution" means
prompt and reliable execution at the most favorable security price, taking
into account the following provisions. 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,
among others, 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 in the future, the financial strength and stability of the
broker, and the ability of the broker to commit resources to the execution
of the trade. Such considerations are judgemental and are weighed by
Southeastern and the Board of Trustees in determining the overall
reasonableness of brokerage commissions.
2. In recommending or selecting brokers for portfolio transactions,
Southeastern takes into account its past experience in determining those
qualified to achieve "best execution".
3. Southeastern is authorized to recommend and the Fund is authorized
to allocate brokerage and principal purchase and sales transactions to
brokers who have provided brokerage and research services, as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934 (the
"1934 Act"), and for other services which benefit the Fund directly through
reduction of the Fund's expense obligations, such as a reduction in the
Fund's share of the lease charges for computer expenses. Southeastern could
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 Southeastern in making the recommendation in question
determines in good faith that the commission is reasonable in relation
14
<PAGE> 56
to the value of the brokerage and research services or other benefits
provided the Fund by such broker. In reaching such determination, neither
Southeastern nor the officer of the Fund making the decision is required to
place a specific dollar value on the research or execution services of a
broker. In demonstrating that such determinations were made in good faith,
Southeastern and the officer of the Fund shall be prepared to show that all
commissions were allocated and paid for purposes contemplated by the Fund's
brokerage policy; that any other benefits or services provided the Fund
were in furtherance of lawful and appropriate obligations of the Fund; and
that the commissions paid were within a reasonable range. Such
determination shall be based on 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 (i)
that paying the lowest commission is deemed secondary to obtaining a
favorable price and (ii) that the quality, comprehensiveness and frequency
of research studies which are provided for the Fund and Southeastern may be
useful to Southeastern in performing its services under its Agreement with
the Fund but are not subject to precise evaluation. Research services
provided by brokers to the Fund or to Southeastern are considered to be
supplementary to, and not in lieu of services required to be performed by
Southeastern.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange are executed with primary market
makers acting as principal, except where, in the judgment of Southeastern,
better prices and execution may be obtained on a commission basis or from
other sources.
5. Sales of a Fund's shares 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,
purchases in underwritings or tenders in response to tender offers) for the
account of the Fund to a broker, provided that the broker shall furnish
"best execution", as defined in paragraph 1 above, and that such allocation
shall be within the scope of the Fund's other policies as stated above; and
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 determined, as set forth in paragraph 3 above, on the basis of
best execution plus research services, without taking account of or placing
any value upon such sales of Fund shares.
Investment decisions for the Fund are made independently from those of the other
Funds or accounts of other clients advised by Southeastern, but the same
security may be held in the portfolios of more than one Fund or one account.
When several accounts and the Funds' portfolios simultaneously purchase or sell
the same security, the prices and amounts will be equitably allocated among all
such accounts. In some situations this procedure could adversely affect the
price or quantity of the security available to one or more of the Funds, but in
other situations the ability to participate in larger volume transactions may
enable a Fund to realize better executions, prices, and lower commissions.
Southeastern does not own an interest in any brokerage firm and places trades
for the Funds through independent brokerage firms.
15
<PAGE> 57
DISTRIBUTION OF FUND SHARES
Shareholders are referred to the Prospectus for information on the methods of
purchasing shares and computation of net asset value per share. Shares are
available directly from the Fund at net asset value without payment of any sales
charge. Shares are also available through authorized brokerage firms upon
payment of transaction fees, all of which are retained by the particular broker
or dealer.
Shares of the Fund are continuously issued and redeemed. The transfer agent and
shareholder servicing agent functions are performed by National Financial Data
Services ("NFDS") of Kansas City, Missouri, an affiliate of State Street Bank
and Trust Company, the custodian bank.
REDEMPTION OF FUND SHARES
Shareholders are referred to the Prospectus for procedures for redeeming shares.
The Fund has filed an election with the Securities & Exchange Commission in the
manner authorized by Rule 18f-1 under the Investment Company Act of 1940, in
which the Fund has committed to pay in cash all requests for redemption by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of the period. This election is irrevocable while Rule
18f-1 is in effect, unless the Securities & Exchange Commission by order upon
application permits the withdrawal of such notification of election as being
appropriate in the public interest and consistent with the protection of
investors. In connection with omnibus accounts, this election applies separately
to each beneficial owner rather than to the omnibus account in the aggregate.
The purpose of this election is to assure that at least $250,000 of a redemption
will be paid in cash.
Should a Fund elect to limit its cash payments on redemption to $250,000, the
balance of a redemption request in excess of that amount would be paid through a
distribution of portfolio securities. A shareholder liquidating portfolio
securities received in such a distribution would incur brokerage commissions and
be subject to prevailing market prices.
CUSTODIAN OF FUND ASSETS
State Street Bank and Trust Company, Boston, Massachusetts, serves as Custodian
of the assets of each Fund. Where possible, the Custodian utilizes book entry
records with securities depositories, which in turn may have book entry records
with transfer agents of the issuers of the securities. With respect to U.S.
Government issues the Custodian may utilize the book entry system of the Federal
Reserve System. The Custodian also has the responsibility of collection of the
proceeds of securities sold and disbursement of the cost of securities purchased
by the Funds. State Street Bank maintains a global custody system with sub-
custodians in numerous foreign countries, and the Bank has been appointed by the
Board of Trustees as the Fund's Foreign Custody Manager.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, an international public accounting firm, serves as
the Fund's independent accountants.
16
<PAGE> 58
LEGAL COUNSEL
Dechert Price & Rhoads, a law firm with offices in several major cities
including Washington, D.C., Philadelphia, and Boston, serves as special legal
counsel to the Funds. Charles D. Reaves, Esq., Executive Vice President of the
Fund and Vice President & General Counsel of Southeastern Asset Management,
Inc., serves as general counsel to the Funds.
LIMITATION OF LIABILITY
Longleaf Partners Funds Trust is a Massachusetts business trust organized on
November 26, 1986. The International Fund is the fourth series. The Declaration
of Trust and By-Laws provide that no Trustee, officer, employee, or agent of any
Fund shall be subject to any personal liability to the Fund or its shareholders
for any action or failure to act, except for such person's willful misfeasance,
bad faith, gross negligence, or reckless disregard of the person's duties. The
Trust indemnifies each such person against all such losses other than the
excepted losses. The agreements between the Trust and, respectively, the
Investment Counsel and the Fund Administrator provide for indemnification and
relieve each such entity of liability for any act or omission in the course of
its performance under the particular agreement, including any mistake of
judgment, in the absence of willful misfeasance, bad faith or gross negligence.
Information on the contractual term and rights of cancellation of each such
agreement is contained in the section entitled "Terms of Agreements."
Under Massachusetts law, shareholders of a mutual fund which is a series of a
Massachusetts business trust could, in theory, be held personally liable for
certain obligations of the particular series. The Declaration of Trust contains
an express disclaimer of shareholder liability for such acts or obligations of
each series, and this disclaimer is included in contracts between the Funds and
third parties. The Declaration of Trust also provides for indemnification from
the assets of each series for any shareholder liability for applicable acts or
obligations should any shareholder be held liable under these provisions for
having been a shareholder.
17
<PAGE> 59
TABLE OF BOND AND PREFERRED STOCK RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. PREFERRED STOCK RATINGS:
aaa -- An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of convertible preferred stocks.
18
<PAGE> 60
aa -- An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a -- An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than the aaa and
aa classifications, earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
baa -- An issue which is rated baa is considered to be a medium-grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba -- An issue which is rated ba is considered to have speculative elements, and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
b -- An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -- An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
DESCRIPTION OF STANDARD & POOR'S CORPORATION CORPORATE BOND AND PREFERRED STOCK
RATINGS:
AAA -- Securities rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA -- Securities rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A -- Securities rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than securities in higher rated
categories.
BBB -- Securities rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
securities in this category than for securities in higher rated categories.
BB, B and CCC -- Securities rated BB, B and CCC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents the
lowest degree of speculation and CCC the highest degree of speculation. While
such securities will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
BB -- Securities rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B -- Securities rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair
19
<PAGE> 61
capacity or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or BB rating.
CCC -- Securities rated CCC have a currently identifiable vulnerability to
default, and are dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
Plus (+) or Minus (-): The ratings from A to CCC may be modified by the addition
of a plus or minus sign to show relative standing within major rating
categories.
20
<PAGE> 62
INVESTMENT COUNSEL
Southeastern Asset Management, Inc.
6410 Poplar Avenue, Suite 900
Memphis, TN 38119
(901) 761-2474
TRANSFER AND DIVIDEND AGENT
National Financial Data Services ("NFDS")
P.O. Box 419929
Kansas City, MO 64141-6929
For Information about your account,
call (800) 488-4191
CUSTODIAN
State Street Bank & Trust Company, Boston, MA
SPECIAL LEGAL COUNSEL
Dechert Price & Rhoads, Washington, DC
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, Boston, MA
No person has been authorized to give any further information or make
any representations other than those contained in this Prospectus. If
given or made, such other information or representations must not be
relied upon as having been authorized by the Fund, Investment Counsel,
or Administrator. This Prospectus does not constitute an offering in
any state where such an offering may not be lawfully made.
LONGLEAF
PARTNERS
FUNDS TRUST
(LONGLEAF PARTNERS LOGO)
MANAGED BY:
SOUTHEASTERN ASSET
MANAGEMENT, INC.
6410 POPLAR AVE.
SUITE 900
MEMPHIS, TN 38119
(901) 761-2474
(800) 445-9469
LONGLEAF
PARTNERS
FUNDS
(LONGLEAF PARTNERS LOGO)
STATEMENT OF
ADDITIONAL INFORMATION
OCTOBER 26, 1998
---------------------
LONGLEAF PARTNERS
INTERNATIONAL FUND
---------------------
MANAGED BY
SOUTHEASTERN ASSET MANAGEMENT, INC.
6410 POPLAR AVENUE; SUITE 900
MEMPHIS, TN 38119
---------------------
TELEPHONE (800) 445-9469;
(901) 761-2474.
<PAGE> 63
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
PART C. OTHER INFORMATION
Item 24 Financial Statement and Exhibits
(a) Financial Statements. None.
(b) Exhibits:
(1) Declaration of Trust and Amendments; previously
filed (1), (3), (5); amendment filed herewith
(2) By-laws - previously filed. (1)
(3) Voting Trust Agreement - None
(4) Specimen Security; to be filed
(5) Form of Investment Counsel Agreement with Southeastern
Asset Management, Inc.; filed herewith
(6)(a) Form of Agreement with Principal Underwriter - None
(6)(b) Sample Dealer Agreement - None
(7) Bonus, profit sharing or pension plans - None
(8)(a) Custodian Agreement with State Street Bank and Trust
Company; previously filed (4), (5);
(b) Transfer Agent Agreement with National Financial Data
Services; previously filed (4), (5);
(9) Administration Agreement - Agreement with Southeastern
Asset Management, Inc. Previously filed (4), (5); amendment
filed herewith
(10) Opinion and consent of counsel; filed herewith
(11) Other opinions, appraisals, rulings and consents:
Accountants' Consent; filed herewith
(12) Financial Statements omitted from Prospectus - None
(13) Letters of investment intent - None
(14) Prototype Retirement Plan - Individual Retirement Account
("IRA")(6)
(15) Plan pursuant to Rule 12b-1 - None
(16) Schedule of Performance Calculations. See page 11 of the
Statement of Additional Information.
(17) Financial Data Schedule - None
(18) Rule 18f-3 Plan - Not applicable
____________________________________________________________
(1) Incorporated by reference from the Initial Registration
Statement and Pre-Effective Amendments Numbers 1 and 2.
(2) Incorporated by reference from Post-Effective Amendment 1
(3) Incorporated by reference from Post-Effective Amendment 3
(4) Incorporated by reference from Post-Effective Amendment 10.
(5) Incorporated by reference from Post-Effective Amendment 12
(6) Incorporated by reference from Post-Effective Amendment 18
<PAGE> 64
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
Item 25 Persons Under Common Control With Registrant
Longleaf Partners Funds Trust, a Massachusetts business trust
registered under the Investment Company Act of 1940 as an open-end
management investment company, now has four series. The first series is
Longleaf Partners Fund, the second series is Longleaf Partners Small-Cap
Fund, the third series is Longleaf Partners Realty Fund; and the fourth
series is Longleaf Partners International Fund. Each series has a
separate Board of Trustees composed of the same six individuals. Four
of the six Trustees are classified as Trustees who are not "interested"
as defined by Sec. 2 (a)(19) of the Investment Company Act of 1940. Each
series is controlled by its particular Board of Trustees, and each
series has entered into an Investment Counsel Agreement with
Southeastern Asset Management, an adviser registered under the Investment
Advisers Act of 1940. Each series is treated for accounting purposes as
a separate entity, and each series has separate financial statements.
Item 26 Number of Holders of Securities - None
Item 27 Indemnification
Section 4.8 of the By-Laws of the Registrant provides as follows:
"Section 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent of
the Trust. The indemnification shall be against expenses, including attorneys'
fees, judgements, fines, and amounts paid in settlement, actually and
reasonably incurred by him in connection with the action, suit, or proceeding,
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendre or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust to obtain a judgment or decree in its favor
by reason of the fact that he is or was a Trustee, officer, employee, or agent
of the trust. The indemnification shall be against expenses, including
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Trust, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which the person has been adjudged to be
<PAGE> 65
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
liable for negligence or misconduct in the performance of his duty to the
Trust, except to the extent that the court in which the action or suit was
brought, or a court of equity in the county in which the Trust has its
principal office, determines upon application that, despite the adjudicate of
liability but in view of all circumstances of the case, the person is fairly
and reasonably entitled to indemnity for these expenses which the court shall
deem proper, provided such Trustee, officer, employee or agent is not adjudged
to be liable by reason of his willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the
Trust has been successful on the merits or otherwise in defense of any action
suit or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which
consists of Trustees who were not parties to the action,
suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum
of disinterested Trustees so directs, by independent legal
counsel in a written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether
or not there is an adjudication of liability, arising by reason
of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duties as described in Section 17(h) and (i) of the
Investment Company Act of 1940 ("disabling Conduct"). A person
shall be deemed not liable by reason by disabling conduct if,
either:
(i) A final decision on the merits is made by a court or other
body before whom the proceeding
<PAGE> 66
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling
conduct; or
(ii) In the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the
indemnitee was not liable by reason of disabling conduct,
is made by either-
(A) A majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in
Section 2(a)(19) of the Investment Company Act of
1940, nor parties to the action, suit or proceeding,
or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition thereof
if:
(1) Authorized in the specific case by the Trustees; and
(2) The Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the
advance if it is not ultimately determined that such person is
entitled to be indemnified by the Trust; and
(3) either,
(i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any
lawful advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person
ultimately will be found entitled to indemnification, is
made by either-
(A) a majority of a quorum which consists of Trustees who
are neither "interested persons" of the Trust, as
defined in Section 2(a)(19) of the Investment Company
Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not
<PAGE> 67
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
be deemed exclusive of any other rights to which a person may be entitled under
any by-law, agreement, vote of Shareholders or disinterested trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to person who
has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
lability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office."
________________________________________________________________
Paragraph 9 of the Investment Counsel Agreement, provides that, 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 incurred in
connection with any act or omission connected with or arising out of any
services rendered under the 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 the Agreement. Similar provisions are contained in Paragraph
1.04(d) of the Fund Administration Agreement. Reference is made to such
agreements for the full text.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant
<PAGE> 68
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed by the Act and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that is will apply the indemnification
provisions of its By-Laws in a manner consistent with Investment Company Act
Release No. 11330 so long as the interpretation of Section 17(h) and 17(i)
therein remains in effect.
Item 28 Business and Other Connections of Investment Counsel
Southeastern Asset Management, Inc., a Tennessee corporation, offers
investment management services to corporations, retirement and pension plans
and individual investors. The primary occupations for at least the past five
years of its directors, officers or employees who are also either Trustees or
officers of the two series included in Post-Effective Amendment No. 20 are as
follows:
<TABLE>
<CAPTION>
Name of Company,
Name and position Principal Business Capacity With
With Registrant and Address Investment Counsel
---------------------- ------------------ ------------------
<S> <C> <C>
O. Mason Hawkins, CFA 1975-Present; Chairman of the
Chairman of the Board Southeastern Asset Board and CEO
and Co-Portfolio Management, Inc.
Manager
W. Reid Sanders 1975-Present; Executive
Trustee and President Southeastern Asset Vice President
Chief Operating Management, Inc.
Officer
G. Staley Cates, CFA 1985 - Present; President (1994)
Co-Portfolio Manger Southeastern Asset Vice President
and Vice President- Management, Inc. 1985-94
Investments
</TABLE>
<PAGE> 69
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 18
<TABLE>
<S> <C> <C>
John B. Buford, CPA 1990 - Present Vice President
Vice President - Investments Southeastern Asset
Management, Inc.;
1989-90 - First
Tennessee Bank,
Memphis, TN,
Vice President;
1985-1988,
Metropolitan
National Bank
Commercial Lending
Officer/Credit
Analyst.
Eugene Andrew McDermott, III 1998 - Southeastern Securities Analyst
Assistant Portfolio Manager Asset Management, Inc.;
1994 - 1998, J.P. Morgan & Co.,
San Francisco, Hong Kong,
and Singapore; 1992 - 1994,
NEC Logistics, Tokyo
Frank N. Stanley, CFA 1985 - Present; Vice President
Vice President - Southeastern Asset
Investments Management, Inc.;
1984-1985; Montag &
Caldwell, Inc.
Atlanta, Georgia
Charles D. Reaves 1988 - Present; Vice President &
Executive Vice President Southeastern Asset General Counsel
General Counsel Management, Inc.
1986-1988; Porter
White & Yardley, Inc.
Birmingham, AL
(Vice Prescient and
Principal); Prior to
1986; Saunders System,
Inc., Birmingham, AL.
(Senior Vice President
and Chief Financial
Officer)
Julie M. Douglas, CPA 1989 - Present; Fund Accountant
Executive Vice Southeastern Asset
President- Operations Management, Inc.
and Treasurer 1984-1989; Coopers &
Lybrand, Certified
Public Accountants,
Pittsburgh, PA &
Birmingham, AL
Lee B. Harper 1993 - Present Marketing
Executive Vice Southeastern Asset Analyst
President - Marketing Management, Inc.
1989-1993 - IBM Corp.,
Memphis, TN, Consultant;
McKinsey & Company, Atlanta,
GA, Business Analyst
Randy D. Holt, CPA 1985 - Present; Vice President
Vice President Southeastern Asset & Secretary
and Secretary Management, Inc.
</TABLE>
The address of Southeastern Asset Management, Inc. is 6410 Poplar Avenue
Suite 900; Memphis, TN 38119.
<PAGE> 70
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
Item 29 Principal Underwriters
(a) The Fund is a no-load fund selling its shares directly to the
public and serves as its own distributor.
(b) Not Applicable.
(c) Not Applicable.
ITEM 30 Location of Accounts and Records
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 (other than those required to be maintained by
the custodian and transfer agent) are maintained in the physical possession of
Registrant's Fund Administrator, which is Southeastern Asset Management, Inc.,
Suite 900, 6410 Poplar Avenue; Memphis, TN 38119. Transfer Agent records are
maintained in the possession of National Financial Data Services, Inc., 1004
Baltimore, 5th Floor, Kansas City, MO 64105.
ITEM 31 Management Services
Not applicable. (See section in the Prospectus entitled "Fund
Administrator").
ITEM 32 Undertakings
(a) Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary and
periodic information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section, including an annual updating of the
registration statement within four months of the end of each fiscal year,
containing audited financial statements for the most recent fiscal year.
(b) Registrant undertakes to file audited financial statements for
Longleaf Partners International Fund (Series Four) for the fiscal period ending
on December 31, 1998, the close of the first fiscal year of this Series.
(c) The information required by Item 5A of Form N-1A will be set
forth in the audited annual reports to shareholders for each fiscal year, which
is the calendar year. Registrant hereby undertakes to furnish each person to
whom a Prospectus is delivered with a copy of the then current Annual Report
upon request and without charge.
<PAGE> 71
SIGNATURES*
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Longleaf Partners Funds Trust, a
Massachusetts business trust (the Master Trust) having four series or
portfolios, Longleaf Partners Fund (Series One), Longleaf Partners Small-Cap
Fund (Series Two), Longleaf Partners Realty Fund (Series Three), and
Longleaf Partners International Fund (Series Four) have duly caused this
Post-Effective Amendment No. 20 to the Registration Statement to be signed on
their behalf by the undersigned, thereunto duly authorized, in the City of
Memphis and State of Tennessee, on the 7th day of August, 1998.
LONGLEAF PARTNERS FUNDS TRUST (THE MASTER TRUST)
LONGLEAF PARTNERS INTERNATIONAL FUND (SERIES FOUR)
By /s/ Charles D. Reaves
-------------------------------
Charles D. Reaves
Executive Vice President
<PAGE> 72
LONGLEAF PARTNERS FUNDS TRUST
Post-Effective Amendment No. 20
SIGNATURES (Continued)*
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 20 to the Registration Statement of Longleaf Partners Funds Trust
on Form N-1A has been signed below by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ O. Mason Hawkins
- --------------------------
O. Mason Hawkins Trustee; Chairman of the August 7, 1998
Board and Chief Executive
Officer
/s/ W. Reid Sanders
- --------------------------
W. Reid Sanders Trustee and President August 7, 1998
(Chief Operating Officer)
/s/ Chadwick H. Carpenter, Jr.
- ------------------------------
Chadwick H. Carpenter, Jr. Trustee August 7, 1998
/s/ Daniel W. Connell, Jr.
- --------------------------
Daniel W. Connell, Jr. Trustee August 7, 1998
/s/ Steven N. Melnyk
- --------------------------
Steven N. Melnyk Trustee August 7, 1998
/s/ C. Barham Ray
- --------------------------
C. Barham Ray Trustee August 7, 1998
</TABLE>
(*) As of the date of this Post-Effective Amendment No. 20, the Board of
Trustees of each Series of Longleaf Partners Funds Trust consists of six
individuals, as shown above. Each Trustee and each officer is a Trustee and/or
officer of each Series; each is signing this Post-Effective Amendment on behalf
of Longleaf Partners International Fund (Series Four).
NOTICE
A Copy of the Declaration of Trust of Longleaf Partners Funds Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that this instrument is executed on behalf of the Registrant by the above
Trustees or officers of the Registrant in their capacities as Trustees or as
officers and not individually, and any obligations arising out of this
instrument are not binding upon any of the Trustees, officers or shareholders
individually, but instead are binding only upon the assets and property of the
Registrant.
<PAGE> 1
EXHIBIT (1)
AMENDMENT TO DECLARATION OF TRUST
LONGLEAF PARTNERS FUNDS TRUST
A Massachusetts Business Trust
DESIGNATION OF FOURTH SERIES
W I T N E S S E T H
This amendment relates to the Declaration of Trust of Longleaf Partners Funds
Trust (the "Trust"), originally filed in the office of the Secretary of the
Commonwealth of Massachusetts on November 28, 1986 under the name "Southeastern
Asset Management Value Trust". The Trust is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as an open-end
management investment company. Presently, it has three Series, Longleaf Partners
Fund, Longleaf Partners Small-Cap Fund, and Longleaf Partners Realty Fund.
The Declaration of Trust of Longleaf Partners Funds Trust is hereby amended by
the Board of Trustees pursuant to a resolution adopted by the Trustees at a
meeting held by conference telephone call on August 7, 1998, in which a majority
of the Trustees participated throughout, by deleting in its entirety the
existing Section 1.1(b) of Article I and substituting in its place the following
restated Section 1.1(b) of Article I:
"Section 1.1(b). Designation of Separate Series. As authorized by Section
6.9 of Article VI, the Trust shall be comprised of four (4) series of
shares of beneficial interest, each series being a separate portfolio of
investments, until further action by the Trustees as authorized by Section
6.1 of Article VI. Each such series is subject to the provisions of Article
6.9 of Article VI, and to all other applicable provisions of the
Declaration of Trust.
Effective on and after August 2, 1994, the name of the first series, a
separate, independently managed portfolio of securities, is "Longleaf
Partners Fund" (in substitution of the name Southeastern Asset Management
Value Trust, as previously established by the Amendment filed with the
office of the Secretary of the Commonwealth of Massachusetts on December
21, 1988).
Effective on and after August 2, 1994, the name of the second series, a
separate, independently managed portfolio of securities, is "Longleaf
Partners Small-Cap Fund" (in substitution of the name Southeastern Asset
Management Small-Cap Fund, as previously established by the Amendment filed
with the office of the Secretary of the Commonwealth of Massachusetts on
December 21, 1988).
Page 1
<PAGE> 2
AMENDMENT TO DECLARATION OF TRUST
LONGLEAF PARTNERS FUNDS TRUST
Effective on and after September 12, 1995, the third series, a separate,
independently managed portfolio of securities, is "Longleaf Partners Realty
Fund", as established by the Amendment filed with the office of the
Secretary of the Commonwealth of Massachusetts on that date.
Effective herewith, a new, fourth series of this Trust is created, which
shall be a separate, independently managed portfolio of securities,
having the name "Longleaf Partners International Fund."
Each of the four (4) series shall have one class of shares of beneficial
interest and each such share shall have one vote on all matters on which
the shareholders of each such series are entitled to take action. Upon
issuance of each share of beneficial interest in consideration of payment
in cash or other property of the then current net asset value per share,
each such share of beneficial interest shall be fully paid and
non-assessable, subject to all of the provisions of the Trust, and there
shall be no pre-emptive rights.
The assets of each such series and the shares of beneficial interest
thereof shall be in all respects separate and independent of the assets and
shares of beneficial interest of each of the other series, and no series or
any shareholders of any series shall have any claim of any nature against
the assets of or shareholders of any other series of the Trust.
Each such Series shall hold its property and conduct its activities under
its respective designated name, and the Trustees shall conduct the
activities of each such series and execute all documents under that name,
and each such series shall sue or be sued under its respective designated
name, which name (and the word "Trust" or "series" whenever herein used)
when referring to the Trustees shall refer to them in their official
capacities as Trustees, and not as individuals or personally, and shall not
be deemed to refer to the officers, agents, employees or shareholders of
the Trust. Should the Trustees through appropriate action determine to
change the name of any or all of the respective series of the Trust, as
they should deem to be proper, each or any such series of the Trust may
hold its property and conduct its activities under such other name upon the
filing of an appropriate amendment to the Declaration of Trust with the
Secretary of the Commonwealth of Massachusetts."
IN WITNESS WHEREOF, the undersigned Trustees have executed this Amendment to the
Declaration of Trust on behalf of the Trust and its four Series, on the dates
indicated, in their official capacities as Trustees of the Trust, and not as
individuals or in their individual capacities:
Page 2
<PAGE> 3
AMENDMENT TO DECLARATION OF TRUST
LONGLEAF PARTNERS FUNDS TRUST
LONGLEAF PARTNERS FUNDS TRUST (the Master Trust)
Longleaf Partners Fund (First Series)
Longleaf Partners Small-Cap Fund (Second Series)
Longleaf Partners Realty Fund (Third Series)
Longleaf Partners International Fund (Fourth Series)
- -------------------------------------------
O. Mason Hawkins; Chairman of the Board and
Chief Executive Officer
- -------------------------------------------
W. Reid Sanders; President and Trustee
- -------------------------------------------
Chadwick H. Carpenter, Jr.
Trustee
- -------------------------------------------
Daniel W. Connell, Jr.
Trustee
- -------------------------------------------
Steven N. Melnyk.
Trustee
- -------------------------------------------
C. Barham Ray
Trustee
State
-------------------------------------
County of
---------------------------------
On this the 7th day of August, 1998, _________________________________________,
known to me, personally appeared before me and acknowledged that he voluntarily
executed the foregoing instrument in his capacity as Trustee of Longleaf
Partners Funds Trust and its several Series.
- ------------------------------------------
Notary Public
My Commission Expires
--------------------
Page 3
<PAGE> 1
EXHIBIT 5
INVESTMENT COUNSEL AGREEMENT
AGREEMENT made as of the______ day of ________, 1998, between Longleaf
Partners International Fund (the "Fund") the fourth 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.
1
<PAGE> 2
(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.
2
<PAGE> 3
(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).
3
<PAGE> 4
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 1.50% 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,
fees and expenses of the Fund's 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
4
<PAGE> 5
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 1.75% 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
5
<PAGE> 6
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.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
____ day of _________, 1998.
Longleaf Partners Funds Trust
(the Master Trust)
and
Longleaf Partners International Fund
(Fourth Series)
By:
------------------------------------
Southeastern Asset Management, Inc.
(the Investment Counsel)
By:
------------------------------------
7
<PAGE> 1
EXHIBIT 9
FUND ADMINISTRATION AGREEMENT
AGREEMENT made as of the ____ day of ____________ 1998, between Longleaf
Partners International Fund (the "Fund"), the fourth 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.
1
<PAGE> 2
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.
2
<PAGE> 3
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.
3
<PAGE> 4
(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 industry 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.
4
<PAGE> 5
(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.
5
<PAGE> 6
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
____ day of _________, 1998.
Longleaf Partners Funds Trust
(the Master Trust)
and
Longleaf Partners International Fund
(Fourth Series)
By:
------------------------------------
Southeastern Asset Management, Inc.
(the Investment Counsel)
By:
------------------------------------
6
<PAGE> 1
EXHIBIT (10)
LONGLEAF PARTNERS INTERNATIONAL FUND
c/o Southeastern Asset Management, Inc.
6410 Poplar Avenue; Suite 900
Memphis, TN 38119
August 7, 1998
Securities and Exchange Commission and
Boards of Trustees
Longleaf Partners Funds Trust (the master trust)
Longleaf Partners International Fund (Series Four)
Gentlemen:
This letter is written with respect to Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A (File No. 33-10472), (the "Registration
Statement") of Longleaf Partners Funds Trust, a Massachusetts business trust
("the Trust"), with the Securities and Exchange Commission for the purpose of
registering under the Securities Act of 1933, as amended, an indefinite number
of shares of beneficial interest of no par value (the "Shares") of Longleaf
Partners International Fund, which is a separate series of the Trust.
As General Counsel of the Master Trust and its four series, I am familiar with
and have examined such records, certificates and other documents and reviewed
such questions of law as deemed necessary or appropriate for the purposes of
this opinion. On the basis of such examination and review, you are advised
that, in my opinion, proper trust proceedings have been taken by the Trust so
that the shares have been validly authorized and, when the shares have been
issued and sold in accordance with the terms of the Prospectus included in the
Registration Statement, (with the Trust receiving consideration for the net
asset value per share prior to issuance of the shares), the Shares will be
validly issued, fully paid and non-assessable when issued.
I hereby consent to the filing of this opinion as an exhibit to the said Post
Effective Amendment No. 20 to the Registration Statement and the reference to
my name as General Counsel in the Statement of Additional Information under the
heading "The Fund's Legal Counsel".
Very truly yours,
/s/ Charles D. Reaves
Charles D. Reaves
General Counsel
LONGLEAF PARTNERS FUNDS TRUST
LONGLEAF PARTNERS INTERNATIONAL FUND (SERIES FOUR)
<PAGE> 1
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our Firm under the heading, "Independent
Accountants" in Part B of the Registration Statement.
Boston, Massachusetts
August 7, 1998
