<PAGE> 1
LOGO
================================================================================
LONGLEAF PARTNERS FUNDSSM
QUARTERLY REPORT
at March 31, 1999
PARTNERS FUND
INTERNATIONAL FUND
REALTY FUND
SMALL-CAP FUND
================================================================================
MANAGED BY:
SOUTHEASTERN ASSET MANAGEMENT, INC.
Memphis, TN
<PAGE> 2
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders..................................... 1
Longleaf Partners Fund (Partners Fund)
Management Discussion.................................... 4
Performance History* and Portfolio Summary............... 5
Portfolio of Investments................................. 6
Longleaf Partners International Fund (International Fund)
Management Discussion.................................... 9
Performance History* and Portfolio Summary............... 11
Portfolio of Investments................................. 12
Longleaf Partners Realty Fund (Realty Fund)
Management Discussion.................................... 15
Performance History* and Portfolio Summary............... 17
Portfolio of Investments................................. 18
Longleaf Partners Small-Cap Fund (Small-Cap Fund)
Management Discussion.................................... 21
Performance History* and Portfolio Summary............... 23
Portfolio of Investments................................. 24
Service Directory.......................................... 26
Trustees and Officers...................................... 27
</TABLE>
* Average annual returns for all Funds and all indices except the Value-Line
Index are shown with all dividends and distributions reinvested; the
Value-Line Index is not available with reinvested dividends. The indices shown
are unmanaged. Past performance is no guarantee of future performance, and the
value of an investment when redeemed may be more or less than the purchase
price.
<PAGE> 3
LONGLEAF PARTNERS FUNDS
LETTER TO SHAREHOLDERS
TO OUR INVESTMENT PARTNERS: April 7, 1999
The Dichotomy - Equities are Expensive/Equities are Undervalued
As the Dow Jones Industrial Average dances around the 10000 level, there is a
pronounced dichotomy between the performance of the few large growth and
technology companies dominating the S&P 500, and everything else. The market
indices shown below reflect the large divergences:
<TABLE>
<CAPTION>
1ST QUARTER
1999 1998
RETURN RETURN
----------- ------
<S> <C> <C>
S&P 500 Index -- 500 most widely held public 5.0% 28.6%
companies, market weighted
Largest 50 companies in S&P 500 6.6% 50.3%
Index -- market weighted
S&P 500 Index EQUALLY WEIGHTED -- 500 most (0.9)% 7.1%
widely held public companies, equally
weighted
Russell 2000 Index -- Smallest 2000 of the (5.4)% (2.6)%
3000 largest public companies, market
weighted
Value Line Index -- 1650 large and mid-cap (6.4)% (3.8)%
public companies, equally weighted
</TABLE>
The disparate performance between the fifty largest companies and the rest of
the market has pushed valuation levels of the two groups in opposite directions.
The opening quote in the first edition of Ben Graham's Security Analysis is
particularly fitting today:
"Many shall be restored that are now fallen, and many shall fall that now are in
honor." Horace - Ars Poetica.
Think, Don't Follow
The 17th century British philosopher and scholar John Locke wrote, "It is
thinking which makes us who we are." This is a time for all investors to think.
Too often in investing, thinking becomes subordinated to following - mindlessly
buying stocks solely because of other investors' prior success. Increased share
price begets additional market participants, and soon price levels rise to
exceed any reasonable valuation relative to earnings potential. Greed, not
thought, is driving the prices of the companies dominating today's market.
As our Scout leaders may have admonished, this market environment implores all
investors to be prepared. Be prepared for the current market leaders' almost
surreal valuations to decline dramatically, and for many currently ignored
equities to rise appreciably.
1
<PAGE> 4
Foregone opportunities will not change your economic status, but lost capital
might. Longleaf requires new investments, as well as current holdings, to have
appraisals that materially exceed each company's stock price. In these heady
times, one should be as concerned for the return OF principal as for the return
ON principal, and not concerned at all with whether, in the short run, he or she
matches an overvalued index.
The margin of safety requirement guides our research effort. Although the
Partners Fund's price-to-value ratio remains attractive, we are having
difficulty finding new qualifying investments in the large cap world. Our other
three Funds - International, Realty, and Small-Cap - have compelling investment
opportunities. The price-to-value ratios of these three funds are at or near
their all-time lows; their implied returns from this level are significant. Your
management team and Southeastern's retirement plan have recently added
substantial capital to both the International and Realty Funds. Our partners
should consider doing the same.
Volatility - Friend of the Disciplined Investor
Volatility is the best friend of the long-term investor, and is terrifying for
the speculator with a short-term horizon or with leverage. As long-term owners
who know what our companies are worth, we benefit when market fear offers
undervalued investment opportunities. In buoyant times, we benefit by selling
businesses at prices equal to, or even higher than, our appraisal of their
intrinsic values.
The Partners Fund's two largest holdings, FDX (parent of Federal Express), and
Marriott International (ticker MAR), provide examples of volatility's rewards.
Last summer FDX plunged from the mid-$80's to the low $50's on short-term
concerns about Asia and the U.S. economy. This decline heavily impacted the
Partners Funds' third quarter performance, but did not change the company's
long-term value. We used the price weakness to invest another $84 million in FDX
at an average cost of under $53. Today the market values those shares at $164
million. After almost reaching $40 per share, MAR dove into the low $20's in
September while our appraisal was unaffected. We purchased an additional $94
million worth of MAR at an average cost of under $23 per share. Today that
commitment is selling for $146 million. Without the third quarter swoon, we
would have foregone $130 million of profit from adding to FDX and MAR. Not only
did the market value of our original stakes end up higher after the roller
coaster dip, but the volatility enabled us to make more money than if the plunge
and bounce back never had occurred.
All the Funds took advantage of the opportunities in the third quarter of 1998.
In the current buoyancy of the Partners Fund's universe, we have recently sold
stocks at excellent prices and temporarily have cash. The other three Funds are
continuing to take advantage of the price weakness in their respective arenas.
Volatility works both ways, and opportunities will continue to be offered on our
terms if we are patient. Our main message to our partners is this: instead of
focusing on performance during "down" periods, or on cash positions in "up"
periods, remember that price volatility constantly lays the groundwork for
HIGHER
2
<PAGE> 5
returns than we would receive if equity prices moved up in a straight line. The
key to taking advantage of volatility is knowing the intrinsic value of each
company we own and the ability of our management partners.
Year 2000 Update
Many of you have expressed interest in staying current on our Y2K compliance.
Our Annual Report summarized our overall effort. We will continue testing
internal systems. We are also monitoring our vendors who report being on track
for 2000 readiness. The readiness of the companies in our portfolios is also a
factor in our investment appraisals. We remain vigilant and will report our
status throughout the year.
Web Site and Other Technology Update
Thanks to many of you who responded to our question in the Annual Report
regarding a Longleaf Web Site. We appreciate the thought you gave not only to
whether a site would benefit you personally, but also how it would impact the
Funds. We are taking a deliberate approach. The site should be a useful and cost
effective communication tool. It should not compromise our focus on research and
portfolio management. We will keep you posted.
We are consolidating our phone lines into a single number. We currently have
separate toll free numbers for ordering fund materials, processing transactions,
and accessing the automated phone line. You can still reach these different
areas by dialing the same numbers you use now, but if you want to remember a
single number for all Longleaf interaction, use (800) 445-9469. This
consolidated system should take effect in mid-May.
Annual Meeting
We hope you will join us for our Annual Meeting. Last year we had over 400
participants. The meeting is Tuesday, May 4, 1999, at 5:30 p.m. at the Memphis
Botanic Garden, located at 750 Cherry Road. If you are coming from out of town
and need directions or other information, please call us at (901) 761-2474.
Please review the discussion on each Fund that follows. We have tried to
communicate our enthusiasm and conviction for the companies we own and for our
substantial return opportunity.
Sincerely,
<TABLE>
<S> <C>
/s/ O. Mason Hawkins, CFA /s/ G. Staley Cates, CFA
O. Mason Hawkins, CFA G. Staley Cates, CFA
Chairman & CEO President
Southeastern Asset Management, Inc. Southeastern Asset Management, Inc.
</TABLE>
3
<PAGE> 6
PARTNERS FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford
The Partners Fund posted strong absolute and relative performance in the first
quarter - up 6.2% versus 5.0% for the S&P 500. In a period when most value
managers had difficulty, Longleaf Partners was fortunate to post solid returns.
The concentration of our assets into qualified companies with capable management
partners continued to drive the Fund's success. Appreciation in Seagram,
Philips, Marriott International, United Health Care, MediaOne, FDX, News Corp.,
and Hilton accounted for all of the first quarter's return. These eight
companies comprised over half of the Fund's assets at the beginning of the year.
We sold our large and successful MediaOne position when its price reached, and
rapidly surpassed, our appraisal. Our MediaOne experience is illustrative of
much that we seek:
- - a bright, capable, shareholder-oriented CEO in Chuck Lillis,
- - a competitively entrenched, good business with growing free cash flow, and
- - an entry price that reflected neither of the above qualities.
We established a double position (10% of assets) in late 1997 when MediaOne's
stock was in the high teens and low twenties. Less than two years later, the
price rose beyond our $56 appraisal.
We have begun liquidating several other holdings which have reached their
values. Proceeds have increased cash to 21% of assets, and at current price
levels, we have more to sell then we have to buy. Two companies currently
qualify as investments and our trading desk is working hard to purchase
meaningful stakes. We are challenged to find good, large cap businesses run by
management teams we want as partners, and priced with the requisite margin of
safety.
The irony is that the portfolio's composite price-to-value ratio is relatively
low, and the Fund offers a good return opportunity. While a few holdings are
approaching their values, several companies that we own are selling below 60% of
our appraisal. We are buying more of those shares where we can.
We do not know when the market will offer more investment opportunities, but we
will remain patient until we find qualifiers. If cash levels continue to rise,
we will consider closing the Fund again.
4
<PAGE> 7
PARTNERS FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY
AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Partners S&P 500 Value-Line
Fund Index Index
-------- ------- ----------
<S> <C> <C> <C>
Year-to-Date 6.23% 4.97% (6.38)%
One Year 6.88 18.44 (18.13)
Five Years 20.36 26.23 7.52
Ten Years 17.96 18.96 5.23
Since Public Offering 4/8/87 16.91 16.16 3.49
</TABLE>
FIVE LARGEST HOLDINGS
(REPRESENT 37.4% OF NET ASSETS)
FDX CORPORATION (FDX) 10.4%
Integrated air-ground transportation company providing time-definite delivery of
packages and documents worldwide.
MARRIOTT INTERNATIONAL, INC. (MAR) 8.3%
Owner of many of the strongest brand names in the lodging industry. Operates and
franchises over 300,000 rooms in hotels and resorts under the Marriott,
Courtyard, Residence Inn, Ritz-Carlton, and Renaissance names.
KONINKLIJKE PHILIPS ELECTRONICS N.V. (PHG) 7.3%
A leading manufacturer of lighting systems and electronics products, including
television and stereo equipment, appliances, and semiconductors.
UNITED HEALTHCARE CORPORATION (UNH) 6.2%
A national leader in health care management offering numerous managed care plans
and services.
THE SEAGRAM COMPANY LTD. (VO) 5.2%
A major producer of distilled spirits and owner of entertainment businesses
including Universal Studios and the Polygram music company.
PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH MARCH 31, 1999
<TABLE>
<CAPTION>
NEW HOLDINGS ELIMINATIONS
------------ ------------
<S> <C>
Allied Waste Industries, Inc. MediaOne Group, Inc.
Park Place Entertainment Corp.* (HLT)
</TABLE>
* Acquired through merger/spin-off of existing position (ticker of original
holding).
5
<PAGE> 8
PARTNERS FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- --------------
<S> <C> <C> <C> <C> <C>
Common Stock 78.5%
Beverages 5.2%
4,250,000 The Seagram Company Ltd. (Foreign) ........... $ 212,500,000
Broadcasting 2.9%
4,012,350 The News Corporation Limited (Foreign)........ 118,364,325
Environmental Services 5.8%
1,901,100 * Allied Waste Industries, Inc.................. 27,447,131
4,748,750 Waste Management, Inc......................... 210,725,781
--------------
238,172,912
--------------
Gaming 1.6%
8,500,000 * Park Place Entertainment Corp................. 64,281,250
Health Care 6.2%
4,840,000 United Healthcare Corporation................. 254,705,000
Investment Management 0.5%
1,237,700 * The Pioneer Group, Inc........................ 18,333,431
Lodging 14.8%
1,076,380 * Crestline Capital Corporation................. 16,549,343
8,500,000 Hilton Hotels Corporation..................... 119,531,250
11,700,250 Host Marriott Corporation..................... 130,165,281
10,103,600 Marriott International, Inc................... 339,733,550
--------------
605,979,424
--------------
Manufacturing 1.5%
4,450,000 * UCAR International, Inc....................... 62,856,250
Multi-Industry 8.0%
1,565,000 Alexander & Baldwin, Inc...................... 30,713,125
3,605,000 Koninklijke Philips Electronics N.V.
(Foreign)................................... 297,187,188
--------------
327,900,313
--------------
Natural Resources 5.0%
11,201,032 * Pioneer Natural Resources Company............. 86,807,998
2,900,000 Rayonier Inc.................................. 116,181,250
--------------
202,989,248
--------------
Property & Casualty Insurance 3.7%
8,230,000 Mitsui Marine and Fire Insurance Company, Ltd.
(Foreign)................................... 41,691,534
8,673,000 The Nippon Fire & Marine Insurance Company,
Ltd. (Foreign).............................. 27,533,028
16,245,000 The Yasuda Fire & Marine Insurance Company,
Ltd. (Foreign).............................. 82,019,608
--------------
151,244,170
--------------
Publishing 3.8%
3,150,000 Knight Ridder, Inc............................ 157,500,000
</TABLE>
6
<PAGE> 9
PARTNERS FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- --------------
<S> <C> <C> <C> <C> <C>
Real Estate 4.2%
1,998,400 Boston Properties Inc......................... $ 63,199,400
6,038,591 TrizecHahn Corporation (Foreign).............. 110,959,110
--------------
174,158,510
--------------
Transportation 15.3%
10,175,000 Canadian Pacific Limited (Foreign)............ 197,776,563
4,608,100 * FDX Corporation............................... 427,689,281
--------------
625,465,844
--------------
TOTAL COMMON STOCKS (COST $2,736,492,881)..... 3,214,450,677
--------------
Short-Term Obligations 20.9%
Repurchase Agreement with State Street Bank, 4.00% due 4-1-99...... 111,030,000
Federal Home Loan Mortgage Corporation, 4.83% due 4-6-99........... 99,934,028
Federal Home Loan Mortgage Corporation, 4.83% due 4-14-99.......... 49,914,236
Commercial Paper - Clipper Receivables Corp., 4.87% due 4-21-99.... 99,730,555
Federal Home Loan Mortgage Corporation, 4.78% due 4-23-99.......... 99,712,778
Federal Home Loan Mortgage Corporation, 4.82% due 4-30-99.......... 99,619,778
Federal Home Loan Bank Discount Note, 4.82% due 5-14-99............ 99,435,028
Federal Home Loan Mortgage Corporation, 4.83% due 5-17-99.......... 99,395,611
Federal Home Loan Mortgage Corporation, 4.86% due 5-18-99.......... 99,379,861
--------------
858,151,875
--------------
TOTAL INVESTMENTS (COST $3,594,644,756)(a).................. 99.4% 4,072,602,552
OTHER ASSETS AND LIABILITIES, NET........................... 0.6% 24,849,146
----- --------------
NET ASSETS.................................................. 100.0% $4,097,451,698
===== ==============
NET ASSET VALUE PER SHARE.......................................... $25.91
==============
</TABLE>
* Non-income producing security
(a) Also represents aggregate cost for federal income tax purposes.
Note: Companies designated as "Foreign" are headquartered outside the U.S. and
represent 27% of Net Assets.
OPEN FORWARD CURRENCY CONTRACTS
<TABLE>
<CAPTION>
Currency
Currency Currency Sold and Market Unrealized
Units Sold Settlement Date Value Loss
- -------------- --------------------------------- ------------ ------------
<C> <S> <C> <C>
18,250,000,000 Japanese Yen 4-30-99............. $154,778,250 $ (2,020,235)
823,095,843 Japanese Yen 7-21-99............. 7,055,084 (864,392)
------------ ------------
Total Forward Contracts.......... $161,833,334 $ (2,884,627)
============ ============
</TABLE>
7
<PAGE> 10
(Intentionally Left Blank)
8
<PAGE> 11
INTERNATIONAL FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and Andrew McDermott
Longleaf Partners International Fund gained 5.9% this quarter against a 1.0%
return for the EAFE Index. We are pleased with this performance and with the
continued growth of the Fund from $76 million in assets at year-end to $160
million today. We welcome our new partners.
International markets have continued to underperform most U.S. indices,
especially when adjusted for the impact of a strengthening U.S. dollar against
major world currencies. Our policy of hedging foreign currency exposure is
designed to insulate us from the vagaries of the foreign exchange market and
allows us to concentrate exclusively on company fundamentals.
In the first quarter, Japan was a notable exception to international
underperformance; the Nikkei rose nearly 2000 points, or about 15%. Most of our
Japanese holdings benefited from improved sentiment, and they contributed over
$3 million to the Fund's first quarter performance. Japanese restructuring
announcements increased foreign investors' confidence. We do not make macro
calls on market levels, and we have seen few examples of real restructuring in
our bottom-up analysis of Japanese companies, including the banks that have
attracted much attention. Our Japanese holdings will benefit for a different
reason -- tax reform.
Japan lowered corporate taxes by 15% and personal income taxes by 20%. These
changes help our Japanese investments in two ways. First, corporate values in
Japan basically increased by 15% because of the tax savings, thus making our
price-to-value ratios more attractive. Second, the lower tax rates should
significantly improve aggregate demand at our Japanese businesses.
The dramatic increase in oil prices augurs well for several of our Canadian
companies with significant oil and gas assets. During the quarter oil moved from
around $12 to almost $17 per barrel. If prices remain at these higher levels,
our investments should appreciate, as will our appraisals.
The U.K. market also turned in a strong first quarter performance, though the
FTSE's rise masks continued underperformance by small cap stocks. This two-
tiered market resembles that of the U.S. and has created a number of
opportunities for the Fund. We increased our existing positions in Wassall and
Highland as their prices declined. We also added two new UK positions: Bemrose,
a leading producer and distributor of corporate give-away items; and, Premier
Farnell, the world's largest maintenance and repair electronics distributor.
Premier Farnell quickly rose to our appraisal and we sold our stake.
9
<PAGE> 12
INTERNATIONAL FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and Andrew McDermott
In addition to Premier Farnell, we sold three other businesses because they
reached our appraisals. Shaw Communications benefited from renewed market
confidence in cable companies' ability to generate substantial cash flows from
selling multiple services over their cable networks. Haw Par and Swire Pacific
both bounced back quickly from their lows as investors realized the strength of
their dominant brands even in slower economic periods. We sold our stake in FDX
as we found foreign businesses which were even more undervalued and which had a
higher portion of their values overseas. We also sold Seagram which we purchased
when the Fund's assets were only $25 million. As assets grew, Seagram became a
smaller portion of the portfolio because its price had appreciated far above our
buying level. We sold Seagram when we found significantly undervalued companies
where we could own a meaningful stake. The combined appreciation of these
liquidated companies added $2 million to the Fund's first quarter performance.
Philips also contributed substantially to our first quarter results, adding $1.7
million to our return. Under the leadership of Cor Boonstra, this worldwide
manufacturer continues to build shareholder value by improving operations in its
successful businesses, eliminating unprofitable divisions, and wisely
reallocating capital. Since Philip's value has grown along with its stock price,
a material gap remains between the price and our appraisal.
We used proceeds from our sales as well as cash inflows to add to existing
holdings and to buy several new companies. In addition to the businesses
mentioned above, we bought De Beers, the South African diamond company, and
Wisconsin Central, a U.S. based company whose primary assets are overseas
railroads in the United Kingdom, New Zealand, and Australia.
We continue to identify exciting overseas opportunities for long-term
appreciation, and cash inflows are being invested. Our new partners should have
a minimum commitment to the Fund of five years and expect volatility. We will
focus on keeping the portfolio concentrated in our best ideas, and removing or
minimizing the risks of owning foreign businesses. We have substantially added
to our International Fund stake.
10
<PAGE> 13
INTERNATIONAL FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY
RETURNS
FOR THE PERIODS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
International EAFE
Fund Index
------------- ------
<S> <C> <C>
Year-to-date 5.92% 1.03%
Since Public Offering 10/26/98 15.47 11.99
</TABLE>
FIVE LARGEST HOLDINGS
(REPRESENT 30.4% OF NET ASSETS)
BRIERLEY INVESTMENTS LIMITED (BRY) 7.0%
A New Zealand based holding company which owns controlling stakes in U.K. based
Thistle hotels, Air New Zealand, and Australian building materials maker, James
Hardie.
GULF CANADA RESOURCES LIMITED (GOU) 6.8%
Canadian based exploration and production company with oil and natural gas
assets across the world.
KONINKLIJKE PHILIPS ELECTRONICS N.V. (PHG) 6.1%
A leading manufacturer of lighting systems and electronics products, including
television and stereo equipment, appliances, and semiconductors.
DE BEERS CONSOLIDATED MINES LTD. (DBRSY) 5.6%
The world's largest producer of diamonds. Also has a controlling stake in Anglo
American Corp. which mines platinum, gold and coal.
NIPPON BROADCASTING SYSTEM 4.9%
The largest owner of Japan's #2 television broadcaster, Fuji Television, and a
dominant radio broadcaster in the Tokyo market.
PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH MARCH 31, 1999
<TABLE>
<CAPTION>
NEW HOLDINGS ELIMINATIONS
------------ ------------
<S> <C>
Bemrose Corporation plc FDX Corporation
De Beers Consolidated Mines Ltd. Haw Par Corporation Limited
Premier Farnell plc Premier Farnell plc
The Seagram Company Ltd.
Shaw Communications, Inc.--Class B
Swire Pacific Limited
</TABLE>
11
<PAGE> 14
INTERNATIONAL FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- ------------
<S> <C> <C> <C> <C> <C>
Common Stock 77.3%
Agriculture 3.3%
164,200 * Agribrands International, Inc. (United States)... $ 5,398,075
Beverages 4.2%
1,855,000 The Highland Distillers plc (United Kingdom)..... 6,962,273
Broadcasting 4.9%
197,000 Nippon Broadcasting System (Japan)............... 8,000,333
Multi-Industry 17.8%
46,800,000 Brierley Investments Limited (New Zealand)....... 11,480,882
122,000 Koninklijke Philips Electronics N.V.
(Netherlands).................................. 10,057,375
2,240,000 Wassall PLC (United Kingdom)..................... 7,792,549
------------
29,330,806
------------
Natural Resources 17.1%
815,000 * Anderson Exploration Limited (Canada)............ 7,784,773
482,000 De Beers Consolidated Mines Ltd. (South
Africa)........................................ 9,127,875
4,147,000 * Gulf Canada Resources Limited (Canada)........... 11,145,062
------------
28,057,710
------------
Printing 1.4%
407,000 Bemrose Corporation plc (United Kingdom)......... 2,260,149
Property & Casualty Insurance 16.6%
1,400,000 The Dai-Tokyo Fire and Marine Insurance Company,
Ltd. (Japan)................................... 4,999,945
1,400,000 The Dowa Fire and Marine Insurance Company, Ltd.
(Japan)........................................ 4,787,180
1,525,000 The Nippon Fire & Marine Insurance Company, Ltd.
(Japan)........................................ 4,841,214
1,650,000 The Nissan Fire & Marine Insurance Company, Ltd.
(Japan)........................................ 4,764,385
1,571,000 The Yasuda Fire & Marine Insurance Company, Ltd.
(Japan)........................................ 7,931,844
------------
27,324,568
------------
Restaurants 2.8%
416,000 Kentucky Fried Chicken Japan (Japan)............. 4,601,097
Transportation 9.2%
385,000 Canadian Pacific Limited (Canada)................ 7,483,438
575,100 * Wisconsin Central Transportation Corporation
(United States)................................ 7,620,075
------------
15,103,513
------------
TOTAL COMMON STOCKS (COST $125,743,014)...................... 127,038,524
------------
</TABLE>
12
<PAGE> 15
INTERNATIONAL FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET VALUE
------------
<S> <C> <C> <C> <C> <C>
Short-Term Obligations 21.0%
Repurchase Agreement with State Street Bank, 4.00% due 4-1-99........ $ 6,637,000
Federal Home Loan Mortgage Corporation, 4.77% due 4-6-99............. 19,986,944
Federal Home Loan Mortgage Corporation, 4.80% due 4-8-99............. 4,995,401
Federal Home Loan Bank Discount Note, 4.82% due 5-14-99.............. 2,983,051
------------
34,602,396
------------
TOTAL INVESTMENTS (COST $160,345,410)(a)...................... 98.3% 161,640,920
OTHER ASSETS AND LIABILITIES, NET............................. 1.7 2,797,208
----- ------------
NET ASSETS.................................................... 100.0% $164,438,128
===== ============
NET ASSET VALUE PER SHARE............................................ $10.56
============
</TABLE>
* Non-income producing security
(a) Aggregate cost for federal income tax purposes.
Note: Country listed in parenthesis after each company indicates location of
headquarters.
OPEN FORWARD CURRENCY CONTRACTS
<TABLE>
<CAPTION>
Currency Currency Sold and Currency Unrealized
Units Sold Settlement Date Market Value Gain (Loss)
- ------------- --------------------------------- ------------ -----------
<C> <S> <C> <C>
3,178,628 British Pound 9-8-99............. $ 5,193,847 $ 33,218
5,285,465 British Pound 12-30-99........... 8,485,460 69,831
2,003,546,192 Japanese Yen 8-18-99............. 17,240,515 (1,271,006)
2,374,317,354 Japanese Yen 12-30-99............ 20,351,198 966,914
6,339,814 New Zealand Dollar 9-3-99........ 3,386,442 (105,101)
15,024,523 New Zealand Dollar 12-30-99...... 8,033,343 81,032
----------- -----------
$62,690,805 $ (225,112)
=========== ===========
</TABLE>
COUNTRY ALLOCATION OF EQUITIES
<TABLE>
<S> <C>
Japan..................................... 31.2%
Canada.................................... 20.8
United Kingdom............................ 13.5
United States............................. 10.3
New Zealand............................... 9.0
Netherlands............................... 8.0
South Africa.............................. 7.2
-----
100.0%
=====
</TABLE>
13
<PAGE> 16
(Intentionally Left Blank)
14
<PAGE> 17
REALTY FUND - MANAGEMENT DISCUSSION
by C.T. Fitzpatrick, Mason Hawkins, and Staley Cates
The general investing public's continuing disdain for real estate equities
negatively impacted our results in the first quarter of 1999. Longleaf Partners
Realty Fund's net asset value declined 7.5% in the quarter compared to a drop of
3.5% for the Wilshire Real Estate Securities Index and of 5.9% for the NAREIT
Index. The Fund's long-term results compare favorably to the indices.
Spouses, in-laws, and friends have inquired about the recent performance of
Longleaf Partners Realty Fund. We offer these observations:
- - The Realty Fund's composite price-to-value ratio is at an historic low.
Because the share prices of the companies owned by the Fund have declined
while their business values have grown, the Fund has high implied future
returns and less risk.
- - Insider buying of real estate stocks is higher than in any other industry
group. Investors who understand the value of real estate companies' underlying
properties are purchasing those businesses' shares.
- - We are adding aggressively to our stake in Longleaf Partners Realty Fund.
- - Other real estate mutual funds have been significant sellers of real estate
companies' shares. Redemptions have shrunk many funds' assets by more than
half, and have forced their fund managers to liquidate holdings. This
nondiscretionary selling has exacerbated real estate share price declines and
provided more attractive opportunities for investors such as Longleaf Partners
Realty Fund.
- - Investors focused on prospective returns have sound, fundamental reasons to
buy. Leveraged shareholders and traders focused on recent short-term returns
have been responsible for much of the selling. These speculators never should
have become owners.
- - Sellers have turned temporary paper losses into permanent capital losses, and
have sacrificed a large return opportunity.
During the first quarter the Fund's portfolio had little change. We increased
our stakes in Forest City and Prime Group. Each company announced several
projects and results that increased our values; meanwhile, their stock prices
declined.
In the third quarter of 1998 we bought several very undervalued hotel operators.
Hilton, Promus, and Marriott International added over $10 million to the Realty
Fund's first quarter results as fears of oversupply subsided and investors began
to understand the value of fee streams derived from dominant hotel brands. This
15
<PAGE> 18
REALTY FUND - MANAGEMENT DISCUSSION
by C.T. Fitzpatrick, Mason Hawkins, and Staley Cates
gain was offset by the decline at Host Marriott, which hurt our results by $14
million. Virtually all of Host Marriott's properties are posting strong results.
Converting to a REIT caused the company to incur a number of expenses that will
penalize 1999 results, but we still expect Host Marriott's bottom line to
improve by 15%.
Two other holdings materially detracted from our results. Our largest position,
Excel Legacy, which specializes in development and re-development, made steady
progress moving projects forward. Wall Street penalized development companies in
general because of the tightened credit market. Beacon Capital Partners, a
private REIT with office and mixed use properties, announced an extremely
promising partnership with Apollo Real Estate Advisors, Thomas H. Lee Company,
and Rosen Consulting Group, to take a substantial ownership stake in Patriot
American on exceptionally advantageous terms, while simultaneously solving
Patriot's liquidity problems. Despite this materially positive development, the
stock traded below our cost.
16
<PAGE> 19
REALTY FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY
AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Wilshire
Realty Real Estate NAREIT
Fund Securities Index Index
------ ---------------- ------
<S> <C> <C> <C>
Year-to-Date (7.49)% (3.46)% (5.92)%
One Year (20.60) (19.69) (22.39)
Three Years 10.67 7.87 6.97
Since Public Offering 1/2/96 12.59 8.66 7.31
</TABLE>
FIVE LARGEST HOLDINGS
(REPRESENT 35.5% OF NET ASSETS)
EXCEL LEGACY CORPORATION (XELC) 8.6%
A C-corp. focused on development, re-development, and ownership of unique real
estate projects throughout North America. Excel Legacy has numerous urban,
mixed-use retail/ entertainment developments primarily located in the western
U.S. including San Diego, Palm Springs, Salt Lake City, Scottsdale, Denver, and
Newport, KY across the river from Cincinnati.
CATELLUS DEVELOPMENT CORPORATION (CDX) 8.0%
A diversified real estate company that owns, manages and develops industrial
warehouses, offices, apartments and residential communities. CDX has substantial
land holdings throughout the U.S. with a concentration of high profile projects
in California. Catellus' most significant project is a 313 acre mixed use
development at Mission Bay on the waterfront in downtown San Francisco.
HOST MARRIOTT CORPORATION (HMT) 6.4%
Owner of 125 upscale and luxury full-service Marriott, Ritz Carlton, and other
luxury hotel brands, most of which are operated by Marriott International.
FOREST CITY ENTERPRISES, INC. (FCE) 6.4%
A diversified, national real estate business that owns and operates retail and
office properties, as well as residential units. Forest City is developing
several hundred $ million (cost) of high profile urban in-fill projects
including the Denver Stapletion Airport re-development, mixed use projects in
Times Square (NYC) and San Francisco, and numerous other developments throughout
the United States.
TIMBERWEST FOREST CORP. (TWF) 6.1%
Largest private land owner in Western Canada with 334,000 hectacres of private
timberlands located on Vancouver Island in British Columbia.
PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH MARCH 31, 1999
<TABLE>
<CAPTION>
NEW HOLDINGS ELIMINATIONS
------------ ------------
<S> <C>
Park Place Entertainment Corp.*(HLT) Castle & Cooke, Inc.
</TABLE>
* Acquired through merger/spin-off of existing position (ticker of original
holding).
17
<PAGE> 20
REALTY FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- ------------
<S> <C> <C> <C> <C> <C>
Common Stock - 88.0%
Diversified Realty 16.7%
4,209,800 * Catellus Development Corporation................ $ 56,306,075
2,280,000 * Excel Legacy Corporation........................ 7,837,500
1,726,700 Forest City Enterprises, Inc. - Class A......... 41,764,556
135,300 Forest City Enterprises, Inc. - Class B......... 3,230,288
440,600 TrizecHahn Corporation (Foreign)................ 8,096,025
------------
117,234,444
------------
Gaming 2.0%
1,895,000 * Park Place Entertainment Corp................... 14,330,937
Lodging 23.7%
547,020 * Crestline Capital Corporation................... 8,410,433
1,895,000 Hilton Hotels Corporation....................... 26,648,437
4,057,308 Host Marriott Corporation (REIT)................ 45,137,552
286,200 Marriott International, Inc..................... 9,623,475
1,060,000 * Promus Hotel Corporation........................ 38,557,500
2,153,400 * Red Roof Inns, Inc.............................. 33,916,050
396,246 * Supertel Hospitality, Inc....................... 3,863,398
------------
166,156,845
------------
Mortgage Financing 2.9%
1,088,000 Bay View Capital Corp........................... 20,536,000
Natural Resources/Land 9.8%
650,000 Deltic Timber Corporation....................... 15,437,500
261,000 Rayonier Inc.................................... 10,456,312
6,950,000 TimberWest Forest Corp. (Foreign)............... 42,725,609
------------
68,619,421
------------
Office 20.5%
447,300 Alexandria Real Estate Equities, Inc. (REIT).... 11,825,494
2,075,000 Beacon Capital Partners, Inc.(b)(REIT).......... 31,514,063
1,070,000 Boston Properties Inc. (REIT)................... 33,838,750
1,090,900 Cousins Properties Incorporated (REIT).......... 31,567,919
2,681,600 Prime Group Realty Trust (REIT)................. 35,531,200
------------
144,277,426
------------
Retail 11.0%
1,223,800 Getty Realty Corp............................... 15,297,500
825,000 * IHOP Corp....................................... 32,381,250
3,371,400 Prime Retail, Inc. (REIT)....................... 29,499,750
------------
77,178,500
------------
</TABLE>
18
<PAGE> 21
REALTY FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- ------------
<S> <C> <C> <C> <C> <C>
Non-realty 1.4%
650,000 * The Pioneer Group, Inc.......................... $ 9,628,125
------------
TOTAL COMMON STOCKS (COST $676,379,452)......... 617,961,698
------------
Preferred Stock - 7.5%
Diversified Realty 7.5%
14,600,000 * Excel Legacy Corporation - Series A Liquidating
Preference Convertible(b)..................... $ 52,395,020
------------
TOTAL PREFERRED STOCK (COST $73,000,000)........ 52,395,020
------------
Options - 0.4%
CONTRACTS
----------
Natural Resources/Land 0.4%
Put Options Written
5,494 Newhall Land and Farming Company, expiring
April '99 @ $20 (Premiums received
$1,076,268)..................................... --
2,967 Newhall Land and Farming Company, expiring
October '99 @ $25 (Premiums received
$709,919)....................................... (587,466)
Call Options Purchased
5,494 Newhall Land and Farming Company, expiring
April '99 @ $20 (Cost $1,761,493)............... 2,708,542
2,967 Newhall Land and Farming Company, expiring
October '99 @ $25 (Cost $1,225,243)............. 706,146
------------
2,827,222
------------
Short-Term Obligations 2.8%
Repurchase Agreement with State Street Bank, 4.00% due 4-1-99.... 19,900,000
------------
TOTAL INVESTMENTS (COST $770,480,001)(a)...................... 98.7% 693,083,940
OTHER ASSETS AND LIABILITIES, NET............................. 1.3 9,438,704
----- ------------
NET ASSETS.................................................... 100.0% $702,522,644
===== ============
NET ASSET VALUE PER SHARE............................................ $13.46
</TABLE>
* Non-income producing security
(a) Also represents aggregate cost for federal income tax purposes.
(b) Illiquid, board valued security.
Note: Companies designated as "Foreign" are headquartered outside the U.S. and
represent 7% of Net Assets. REITs comprise 31% of Net Assets.
19
<PAGE> 22
(Intentionally Left Blank)
20
<PAGE> 23
SMALL-CAP FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford
Those who track relative returns should continue to be pleased with the Small-
Cap Fund's results. During the first quarter of 1999 the Fund again outperformed
the Russell 2000 Index. Small-Cap was down 2.8% while the Russell fell 5.4%. The
Fund's long-term relative returns are equally impressive.
As significant Small-Cap owners, however, we view absolute, after-tax, real
return as the only appropriate measure of compounding. Our long-term partners
have enjoyed successful results, but the recent quarter detracted from this
record. Of our largest holdings, Promus and Midas rose and positively impacted
the Fund. Price declines at Orion Capital, Perrigo, AMETEK, and U.S. Industries
were predominantly responsible for Small-Cap's negative first quarter return.
Lower stock prices did not impact our appraisals. Each company that declined,
consequently, has become more attractive and should materially contribute to the
Fund's future results.
Small-Cap's composition changed during the first quarter as we continued to
concentrate assets in our best domestic ideas. The Fund's holdings dropped from
35 to 32 companies, and foreign businesses represent 13% of assets versus 27% at
year-end. The most dramatic change to the portfolio was the sale of our largest
holding, Shaw Communications, which was 11.7% of assets at year-end. We began
buying Shaw, Canada's leading cable system operator, at $10/share in the fourth
quarter of 1997 when cable companies were generally out of favor. Shaw is
extremely well operated, dominates its markets, and has the highest margins in
the industry, a testament to the discipline, operating skills and vision of the
vested management team. Shaw's business is also growing rapidly due to Internet
access, telephony, and new programming tiers. We sold our position at our
appraisal of approximately $30/share. Shaw was the single largest contributor to
the Fund's first quarter return.
We also sold our stake in Pinkerton's, which rose quickly when it was purchased
by Securitas AB, a Swedish security company. Securitas paid $29/share versus our
appraisal of $30, and an average cost of $16.58/share. In addition, we
liquidated our holdings in Chiyoda, Dai-Tokyo, and Fuji, three Japanese non-life
insurance companies we bought in late 1997 when undervalued domestic small
companies were elusive. At year-end these three companies represented 1.6% of
the Fund's assets. We sold these Japanese businesses from Small-Cap because we
had equally undervalued U.S. opportunities where we could acquire a position
meaningful to the portfolio. Longleaf Partners International Fund's introduction
last Fall provides a vehicle for the foreign companies we want to own.
21
<PAGE> 24
SMALL-CAP FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford
We used the proceeds from the above sales to add to a number of our most
undervalued businesses. Wisconsin Central newly appears in our top ten holdings.
This railroad company operates in the Midwest U.S. and owns monopoly rails in
the United Kingdom, New Zealand, and Australia. The WCLX management team is the
company's largest shareholder, and has a proven history of successfully buying
and operating privatized railroad assets. The largest non-U.S. rail asset is the
U.K.-based EW&S line, which dominates freight transport in that country.
Bringing this business to acceptable service and profitability standards has
taken longer than anticipated by the market, hence the large discount to
appraised value. Because we accumulated our position as the price was falling,
our purchase of Wisconsin Central hurt the Fund's first quarter return.
We have numerous investment opportunities in the Small-Cap Fund, and the trading
desk has orders pending for the Fund's remaining cash. We are not interested in
growing the size of the Fund; it remains closed to new investors. Our existing
partners should know, however, that Small-Cap's very low price-to-value ratio
implies a compelling return.
22
<PAGE> 25
SMALL-CAP FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY
AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Small-Cap Russell 2000 Value-Line
Fund Index Index
--------- ------------ ----------
<S> <C> <C> <C>
Year-to-Date (2.82)% (5.42)% (6.38)%
One Year (2.56) (16.26) (18.13)
Three Years 19.46 7.72 5.86
Five Years 17.48 11.22 7.52
Ten Years* 11.62 11.46 5.23
Since Public Offering 2/21/89* 11.91 11.45 5.13
</TABLE>
* From public offering through 3/31/91, the Fund was managed by a different
portfolio manager.
FIVE LARGEST HOLDINGS
(REPRESENT 30.5% OF NET ASSETS)
PROMUS HOTEL CORPORATION (PRH) 9.5%
Franchisor and/or manager of over 1100 hotels under the Doubletree, Embassy
Suites, Hampton Inn, and Homewood Suites brand names.
GULF CANADA RESOURCES LIMITED (GOU) 5.7%
Canadian based exploration and production company with oil and natural gas
assets across the world.
ORION CAPITAL CORPORATION (OC) 5.4%
A property/casualty insurer with business lines focusing on workers'
compensation, nonstandard auto, professional liability, and unique or highly
specialized situations.
MIDAS INC. (MDS) 5.1%
One of the world's largest automotive service providers with over 1900
franchises in the U.S. and 800 locations overseas.
WISCONSIN CENTRAL TRANSPORTATION CORPORATION (WCLX) 4.8%
A railroad holding company that owns lines in the midwest U.S., Ontario, the
United Kingdom, New Zealand, and Australia.
PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH MARCH 31, 1999
<TABLE>
<CAPTION>
NEW HOLDINGS ELIMINATIONS
------------ ------------
<S> <C>
First Health Group Corp. The Chiyoda Fire and Marine
The MONY Group Inc. Insurance Company, Ltd.
Premier Farnell plc The Dai-Tokyo Fire and Marine
Insurance Company, Ltd.
Fuji Fire and Marine Insurance
Company, Limited
Pinkerton's Inc.
Premier Farnell plc
Shaw Communications Inc. - Class
A
Shaw Communications Inc. - Class
B
</TABLE>
23
<PAGE> 26
SMALL-CAP FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- --------------
<S> <C> <C> <C> <C> <C>
Common Stock 87.0%
Agriculture 2.6%
1,015,400 * Agribrands International, Inc.................. $ 33,381,275
Broadcasting 1.1%
343,000 Nippon Broadcasting System (Foreign)........... 13,929,515
Building Materials 0.3%
268,000 Sangetsu Co., Ltd (Foreign).................... 4,299,176
Commercial Lighting 3.2%
2,057,000 * Genlyte Group Incorporated..................... 32,912,000
442,750 Thomas Industries, Inc......................... 8,301,563
--------------
41,213,563
--------------
Entertainment 2.0%
1,470,000 * Carmike Cinemas, Inc. -- Class A............... 26,551,875
Health Care 1.1%
910,900 * First Health Group Corp........................ 14,631,331
Insurance 0.5%
250,600 The MONY Group Inc............................. 6,233,675
Investment Management 1.0%
865,000 * The Pioneer Group, Inc......................... 12,812,813
Lodging 9.5%
3,417,900 * Promus Hotel Corporation....................... 124,326,113
Manufacturing 13.4%
2,938,340 AMETEK, Inc.................................... 53,624,705
1,740,000 * The Carbide/Graphite Group, Inc................ 18,922,500
601,100 Robbins & Myers, Inc........................... 10,368,975
1,823,000 * Scott Technologies, Inc........................ 31,674,625
3,729,600 U.S. Industries, Inc........................... 61,305,300
--------------
175,896,105
--------------
Mortgage Financing 2.9%
2,006,100 Bay View Capital Corp.......................... 37,865,137
Natural Resources 11.1%
845,000 Deltic Timber Corporation...................... 20,068,750
3,349,996 Gendis Inc. - Class A(b) (Foreign)............. 8,525,611
27,863,860 * Gulf Canada Resources Limited(Foreign)......... 74,884,124
6,950,000 TimberWest Forest Corp.(Foreign)............... 42,725,609
--------------
146,204,094
--------------
Pharmaceuticals 4.0%
7,259,000 * Perrigo Company................................ 52,627,750
</TABLE>
24
<PAGE> 27
SMALL-CAP FUND - PORTFOLIO OF INVESTMENTS
AT MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
---------- --------------
<S> <C> <C> <C> <C> <C>
Property & Casualty Insurance 11.6%
243,883 * Alleghany Corporation.......................... $ 44,843,987
1,777,400 Hilb, Rogal and Hamilton Company............... 30,104,712
1,804,000 The Nissan Fire & Marine Insurance Company,
Ltd. (Foreign)............................... 5,209,061
2,276,800 Orion Capital Corporation...................... 71,150,000
--------------
151,307,760
--------------
Real Estate 11.6%
4,680,000 * Catellus Development Corporation............... 62,595,000
1,135,400 Cousins Properties Incorporated................ 32,855,638
721,700 * IHOP Corp...................................... 28,326,725
1,520,000 TrizecHahn Corporation (Foreign)............... 27,930,000
--------------
151,707,363
--------------
Restaurants 1.2%
982,400 * VICORP Restaurants, Inc........................ 15,718,400
Retail 5.1%
1,994,600 Midas Inc...................................... 66,569,775
Transportation 4.8%
4,746,500 * Wisconsin Central Transportation Corporation... 62,891,125
--------------
TOTAL COMMON STOCKS (COST $1,166,998,505).................. 1,138,166,845
--------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Short-Term Obligations 13.2%
Repurchase Agreement with State Street Bank, 4.00% due 4-1-99....... 23,808,000
Federal Home Loan Bank Discount Note, 4.84% due 4-20-99............. 49,874,653
U.S. Treasury Bill, 4.77% due 4-22-99............................... 99,726,708
--------------
173,409,361
--------------
TOTAL INVESTMENTS (COST $1,340,407,866)(a)................... 100.2% 1,311,576,206
OTHER ASSETS AND LIABILITIES, NET............................ (0.2) (2,984,386)
----- --------------
NET ASSETS................................................... 100.0% $1,308,591,820
===== ==============
NET ASSET VALUE PER SHARE........................................... $21.33
======
</TABLE>
* Non-income producing security
(a) Also represents aggregate cost for federal income tax purposes.
(b) Illiquid security.
Note: Companies designated as "Foreign" are headquartered outside the U.S. and
represent 14% of Net Assets.
OPEN FORWARD CURRENCY CONTRACTS
<TABLE>
<CAPTION>
Currency Currency Sold and Currency Unrealized
Units Sold Settlement Date Market Value Loss
- ------------- ---------------------------------- ------------ -----------
<C> <S> <C> <C>
2,800,000,000 Japanese Yen 5-13-99.............. $23,785,627 $(2,181,472)
</TABLE>
25
<PAGE> 28
SERVICE DIRECTORY
24-HOUR AUTOMATED INFORMATION (800) 378-3788
For automated reporting of daily prices, account balances and transaction
activity call (800) 378-3788, 24-hours a day, seven days a week. Please have
your Fund number (see below) and account number ready to access your investment
information.
FUND INFORMATION (800) 445-9469
To request a prospectus, financial report, application or other Fund information
call (800) 445-9469 from 8:00 a.m. to 8:00 p.m. Eastern time, seven days a week.
EXISTING SHAREHOLDER INQUIRIES (800) 488-4191
To request action on your existing account contact the transfer agent, NFDS, at
(800) 488-4191 from 9:00 a.m. to 6:00 p.m. Eastern time, Monday through Friday.
<TABLE>
<S> <C>
Mail correspondence to: Overnight address:
Longleaf Partners Funds Longleaf Partners Funds
c/o NFDS c/o NFDS
P.O. Box 419929 330 W. 9th Street
Kansas City, MO 64141-6929 Kansas City, MO 64105
(816) 843-8468
</TABLE>
SERVICES FOR FINANCIAL ADVISORS (800) 761-2509
Please contact Mary Williamson or Lee Harper for additional information.
PUBLISHED DAILY PRICE QUOTATIONS
Daily net asset value per share of each Fund is reported in mutual fund
quotations tables of major newspapers in alphabetical order under the bold
heading LONGLEAF PARTNERS as follows:
<TABLE>
<CAPTION>
TRANSFER AGENT
ABBREVIATION SYMBOL CUSIP FUND NUMBER
- ------------- ------ --------- --------------
<C> <S> <C> <C>
Partners LLPFX 543069108 133
International LLINX 543069405 136
Realty LLREX 543069306 135
Sm-Cap LLSCX 543069207 134
</TABLE>
26
<PAGE> 29
TRUSTEES AND OFFICERS
Trustees
O. Mason Hawkins, Chairman
Chadwick H. Carpenter, Jr.
Daniel W. Connell, Jr.
Steven N. Melnyk
C. Barham Ray
W. Reid Sanders
Officers
O. Mason Hawkins, Co-Portfolio Manager and Chief Executive Officer
W. Reid Sanders, President
John B. Buford, Co-Portfolio Manager of the Partners and Small-Cap Funds
and Vice President - Investments
G. Staley Cates, Co-Portfolio Manager and Vice President - Investments
C. T. Fitzpatrick, Co-Portfolio Manager of the Realty Fund
and Vice-President - Investments
E. Andrew McDermott, Assistant Portfolio Manager of the International Fund
and Vice President - Investments
Charles D. Reaves, Executive Vice President and General Counsel
Julie M. Douglas, Executive Vice President - Operations and Treasurer
Lee B. Harper, Executive Vice President - Marketing
Frank N. Stanley III, Vice President - Investments
Randy D. Holt, Vice President and Secretary
Andrew R. McCarroll, Vice President and Assistant General Counsel
Transfer Agent
National Financial Data Services
Kansas City, Missouri
Custodian
State Street Bank & Trust Company
Boston, Massachusetts
Special Legal Counsel
Dechert Price & Rhodes
Washington D.C.
Independent Public Accountants
PricewaterhouseCoopers LLP
Baltimore, Maryland
27
<PAGE> 30
Longleaf Partners Funds SM
c/o NFDS
P.O. Box 419929
Kansas City, MO 64141-6929
(800) 445-9469
