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0000950123-10-034400.txt : 201004130000950123-10-034400.hdr.sgml : 2010041320100413162139ACCESSION NUMBER:0000950123-10-034400CONFORMED SUBMISSION TYPE:40-24B2PUBLIC DOCUMENT COUNT:17FILED AS OF DATE:20100413DATE AS OF CHANGE:20100413

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:LONGLEAF PARTNERS FUNDS TRUSTCENTRAL INDEX KEY:0000806636IRS NUMBER:000000000STATE OF INCORPORATION:TNFISCAL YEAR END:1231

FILING VALUES:FORM TYPE:40-24B2SEC ACT:1940 ActSEC FILE NUMBER:811-04923FILM NUMBER:10747346

BUSINESS ADDRESS:STREET 1:C/O SOUTHEASTERN ASSET MANAGEMENTSTREET 2:6410 POPLAR AVE, SUITE 900CITY:MEMPHISSTATE:TNZIP:38119BUSINESS PHONE:9017612474

MAIL ADDRESS:STREET 1:C/O SOUTHEASTERN ASSET MANAGEMENTSTREET 2:6410 POPLAR AVE, SUITE 900CITY:MEMPHISSTATE:TNZIP:38119

FORMER COMPANY:FORMER CONFORMED NAME:SOUTHEASTERN ASSET MANAGEMENT FUNDS TRUSTDATE OF NAME CHANGE:19920703

FORMER COMPANY:FORMER CONFORMED NAME:SOUTHEASTERN ASSET MANAGEMENT VALUE TRUSTDATE OF NAME CHANGE:19881220

40-24B21c99159e40v24b2.htmFORM 40-24B-2

FORM 40-24B-2

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

40-24B-2

SALES LITERATURE OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-4923

LONGLEAF PARTNERS FUNDS TRUST
(Exact name of registrant as specified in charter)

c/o Southeastern Asset Management, Inc.
6410 Poplar Avenue; Suite900
Memphis, TN 38119
(Address of principal executive offices) (Zip code)

Registrants Telephone Number,Including Area Code - (901)761-2474

jk, XTr>T c A c Quarterly Performance Supplement 111 PARTNERS Required for ArticleReprints11FUNDS Rates of Return at 3-31 -10 Partners S&P 500 Small-Cap Russell International EAFE FundIndex Fund 2000 Index Fund Index One Year 67.71% 49.77% 79.29% 62.76% 48.30% 54.44% Five Years0.57% 1.92% 4.84% 3.36% 2.49% 3.75% Ten Years 6.60% -0.65% 9.92% 3.68% 7.46% 1.27% Inception 11.10%8.69% 10.47% 8.77% 9.57% 4.05% Inception date 4/8/87 2/21/89 10/26/98 These returns do not reflectthe deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fundshares. Current performance may be lower or higher than the performance quoted. Please call800-445-9469 or view Longleafs website, www.longleafpartners.com, for the most recent performanceinformation or for a current copy of the Funds Prospectus, which should be read carefully beforeinvesting for a discussion of investment objectives, management fees, expenses, and risks. Fundreturns and those of the unmanaged and unhedged indices referenced above include reinvesteddividends and distributions. Historic numbers include periods in which the Funds used currencyhedging as an investment strategy. Beginning in the third quarter 2009, and following a transitionperiod ending in early 2010, hedging as an investment strategy ended. Past performance is noguarantee of future performance, fund prices fluctuate and the value of an investment at redemptionmay be more or less than the purchase price. This material should be preceded or accompanied by aProspectus. Under SEC Rule34b-1, this quarterly performance supplement must appear as the firstitem in any collection of articles containing performance data of the Longleaf Partners Funds.

BETTING THEIR OWN MONEY By Lewis Braham Bruce Berkowitz believes in treating his shareholders as hewould treat himself. You can see why Berkowitz and his 30 employees have $150million of their ownmoney invested in the $11billion Fairholme Fund. The bulk of that $150million belongs toBerkowitz.9 According to a July2009 study by fund tracker Morningstar, managers with more than a$1million stake in their own funds beat 58% of peers, on average, over the past five years. Fundswith no manager investment beat 46% of peers. Fairholmes 13.2% annualized return has outperformed9 9 %of peers over 10years. On Jan. 12, Morningstar named Berkowitz one of three Fund Managers of theDecade. Funds began to disclose manager investments only in 2005, after the Securities & ExchangeCommission changed disclosure rules. So the research is preliminary. And the level of disclosure ispoormanagers need only report their holdings in broad bands that start at $0 to $10,000 and stopat over $1million. Beyond that it could be $1.1million or $150million. (For trustees on fundboards of directors, the disclosure cap is $100,000.) More than half of the 4,383 U.S.-based fundsin the 2009 study had no manager investment; 413 had investments of over $1million. It can behard for younger managers whove just been promoted to invest more than $1million in their funds,says Laura Lutton, Morningstars editorial director of fund research. But I have a hard timeunderstanding why so many managers would not invest anything at all. Some fund companies usecompensation to try to ensure that the interests of managers match up with those of share -holders.A Fidelity spokesperson says that while fund managers are encouraged to invest in at least one fundthey manage, compensation is largely driven by fund performance, which ... aligns their interestswith the interests of our shareholders. That performance-based compensation is measured againstan appropriate benchmark index and peer group over multiple periods as long as five years. Fouryears ago, Royce & Associates, a New York-based fund firm with $28billion in assets, created apolicy requiring lead portfolio managers to invest at least $1million in their funds. Co-portfoliomanagers must invest $500,000 and assistant managers $250,000. If youre young and dont haveenough money, we will defer your quarterly bonus into the fund, says Jack Fockler, Roycesmanaging director. As a result, the firms
100 employees have $100million invested in its funds. Then theres Southeastern Asset Management,parent of the three Longleaf Partners Funds. If you work for Southeastern or your spouse works forSoutheastern, you cannot own individual stocks or other non-Longleaf mutual funds, says LeeHarper, a Southeastern spokesperson. Spouses of Southeastern employees who dont have Longleaffunds in their companies 40i(k) plans must get approval from an exception committee beforeparticipating. The firms 55 employees and its charitable foundation are the funds largestshareholders, collectively owning $1billion in fund shares. The Longleaf Partners Fund has beaten96% of its peers over the past 10years. Fund companies with heavy manager investment tend to beboutique firms. Yet at some big fund companies, including Janus, T. Rowe Price and Dodge & Cox,manager ownership is also part of the corporate culture. Janus in particular has long had a cultureof ownership. Its 54 analysts and money managers have $113million invested in its funds. Since2005 the firm has paid half of fund manager/analyst bonuses in fund shares, and shares vest overfour years. The day I became manager of Janus Fund, I invested in excess of $1 million in it,says Jonathan Coleman, Janus co-chief investment officer and co-manager of the firms $9billionflagship Janus Fund. We have a saying: You dont wash a rental car. We dont treat portfolios asrental cars. We treat them as owners. There is evidence of improvement in ownership among fundboards of directors. According to a study of 7,690 funds by fund trade group Investment CompanyInstitute, 28% of funds required directors to own fund shares in 2008, up from 6% in 1996. Longleafdirectors, for instance, must own fund shares at least equal in value to their annual directorssalaries. One of the most important responsibilities of

fund boards is to negotiate fees and expense ratios with fund management companies, saysMorningstars Lutton. When directors are paying some of those fees as shareholders, they have agood incentive to lower those fees for themselves. A handful of fund companies lead the way inthis area. One that makes a big point of employee investment is Davis Advisors. It touts the sizeof its ownershipabout $1.5billionat the top of the Davis funds home page. (Much of that moneyis from the Davis family, whose patriarch, Shelby Davis, and his son, Chris, built the firm.)Davis, which manages $45billion in mutual fund assets, has director stock ownership guidelinesthat require directors of its Selected Funds to own in fund
PERSONAL BUSINESS shares at least three times the annual amount they are paid to be directors. Forindependent directors, those annual amounts ranged from $67,500 to $130,000 in20o8. Selected Fundsmutual fund fees are among the lowest in the business. To find out what a funds manager ownershiplevels and policies are, check its Statement of Additional Information, which accompanies itsprospectus and can be found at fund Web sites and at Morningstar.com. Morningstar also hasstewardship grades that analyze manager incentives and pay structure. (Not all funds are ratedyet.) Managers with big investments in their own funds receive an A for the incentive part oftheir stewardship grade. 1 bw 1MAKING THE GRADE These funds received A stewardship grades from Morningstar because of strongcorporate cultures, low fees, and heavy manager investment in their funds. 10-YEAR RETURN % OFPEERS THE FUND/TICKER (ANNUALIZED)FUND BEATS American Funds Funda- 0 Cf|, Qfl , mental Invs.A/ANCFX dbU% SU% Dodge & Cox Stock/ CCC CM DODGX D-D0 34 Oakmark Equity & Q flfl QQ Income/OAKBXa,0U a Royce Special Equity/ 19 (19 Q7 RYSEX XCMC a Selected American O AO QO (ClassD)/SLADXeHC aQ T. Rowe Price Mid-Cap C C7 on Growth/RPMGX J0 Vanguard Wellington/ R IK 07 VWELX -103/ *Annualized returns as of Dec. 31, 2009. Includes capital appreciation plus reinvestment ofdividends. Data: Morningstar Reprinted from Bloomberg BusinessWeek, January25,2010, copyright byBloomberg L.P. with all rights reserved. This reprint implies no endorsement, either tacit orexpressed, of any company, product, service or investment opportunity. #1-27479514 Reprinted by TheY6S Group, 717.505.9701. For more information visit www.theYGSgroup.com/reprints. Average annualtotal returns for the Longleaf Partners Fund and its benchmark for the one, five and ten yearperiods ended December31,2009 are as follows: Longleaf Partners Fund, 53.60%, -0.98% and 5.31%;S&P 500 Index, 26.46%, 0.42%) and -0.95%, . Fund returns and those of the unmanaged and unhedgedindex include reinvested dividends and distributions, but do not reflect the deduction of taxes.Current performance may be lower or higher than the performance quoted herein. Past performancedoes not guarantee future results, fund prices fluctuate, and the value of an investment atredemption may be worth more or less than the purchase price. Please call 1-800-445-9469 or viewLongleafs website (www.longleafpartners.com) for more current performance information, or for acurrent copy of the Prospectus, which should be read carefully before investing to learn about theinvestment objectives, risks, charges and expenses of the Longleaf Partners Fund. Employees ofSoutheastern Asset Management are required to restrict publicly-traded equity investments to theLongleaf Partners Funds, unless prior approval has been obtained. Although at one time required,spouses of employees of Southeastern Asset Management who do not have the Longleaf Partners Fundsas an option in an employer provided retirement plan are no longer required to obtainapproval toparticipate. The Longleaf Partners Fund is designated as a Large Blend fund by Morningstar. As ofDecember31,2009, Longleaf Partners Funds was ranked among 314 Large Blend funds in the 10 -Yearcategory.

iSttL9 Graham&DdWville OGrlQQf An investment newsletter fromejjdEMtf Columbia Busi iu-sn Siliool Inside this issue:_____.. ._____... ,, . 1 Parsimony is Extremely Profitable Mason HawkinsGraham & Doddsville is the : J J student-run investment mh ! ,-...,. MqcnnHawkins founded nies selling below net-net, H [newsletter of Columbia Bust- rasonnawKins lounaea s . HPSISHH ness c oo e news etter , . |97J rf |ow their net-cash andEhPIH builds on Columbia s proud ; 6 , , , ,, , . HEiB&JsiH ... . today the firmmanages bought a few, literally buying KMPMJH heritage in value investing . ,, cc- Tl .HbEHBShHH and focuses on promotm a * OVer $30 bi"'n Va,Ue S y HliBSiilH soundinvestment philosophy ... _,, ,,,,,,,,,. -ru,,..,, ,.,,,,, ,, BHKKlllll h h on tremendous mycareer. There were no hH worlds leading investment : _____ HiJ&feHH with itsLongleaf Part- point. BinH| practitioners. The following r , VHH ners Fund posting itsMBHi interview with Mason Haw- > be$t abso|ute annua, re. G&D: That sounds s|mllarB|H kins is an excerpt from Issue turn of nearly 54%. to what John Templeton HHf VIIIof Graham & Doddsville. talked about doing in some , G&D: Could you tell us a emergingmarkets. Were Mason Hawkins, Portfolio Editors. ! little bit about how you de- there any otherinfluences Manager Southeastern Asset ~ veloped an interest in invest- on your investing style,in Management Matthew Martinek -*] jng? addition to Ben Graham? MBA 2010 | disagrees with you. Andyou Clayton Williams MH: When I was in high MH: Chronologically, my do eliminate a lot ofinterfer- MBA 2010 ; school, my dad gave me the Dad, Ben Graham, John ence by beinS in MemPhis asJames Dunavant \ first edition of the Intelligent Templeton, Warren Buffett opposed to Manhattan.MBA 2011 Investor and the second edi- and my partner, Staley Cates -C ] tion of Security Analysis.Like shaped my investment think- G&D: Thats a very inde- tvtra ?ni l most teenagers, investingjng. pendent approach, sticking was not my primary focus, to your facts and reasoning 2! ffkawlts s, but did read the Intelligent G&D. when Buffett moved and not being swayed by MBA U :Investor and much of Ben back to Omaha he said that outside factors. One thing Grahams three maintenets escapjng the hectic New tnat sways a ot f managers ) resonated with me. After Yorkatmosphere allowed is a desire to minimize ca- newsletteSrahamanddoddcoW] hiSh *cno1 asuckyhim to think more clearly, reer risk by hugging a bench- ,. enough to have Security Do you thinkthat has been a mark- Your firm takes a Visit us at: Analysis as the core text- factor atSoutheastern in completely different view on www.grahamanddodd.com j book jn an undergraduateMemphis? tnat- Could you talk about wwwO.gsb.columbia edu/students/ course, in an MBA program thebenchmark you use and organizations/cima/ < |aten we|| as in tne tnree MH. y Wg dg end a(_your attempts to track that CFA courses. Im grateful mos; usively onour ap- benchmark?HeilbrunnCcnter that the proper foundation and our assessment for Graham (CDodd W3S CStaTbH my.feaHy of our management partners H: We try to hug good , h v ,, rfo yearS Ihe mStslSn,ficant and thejr cQm , cQm_____investments not benchmarks. catalyst for me occurred in tjtjvep0sitions We Weve established inflation jmmmm the bear market of 1970. dear|y remind ourassociates Plus l0% our absolute &tmH% During my rS,morj y?ar at that youre right because ofinvestment goal and thats Mjl throuhThe entire S&Pstock yur facts and reasonin& not been thecase for our his because someone agrees or COLUMBIA INVISTMENT guide and recorded COmpa-(Continued on page 2) MANAQEMEKTJVSSOCiATION Average annual total returns for the LongleafPartners Fund and its benchmark for the one, five and ten year periods ended December31, 2009 areas follows: Longleaf Partners Fund, 53.60%, -0.98% and 5.31 %; S&P 500 Index, 26.46%, 0.42% and- -0.95%. Fund returns and \ those of the unmanaged and unhedged index include reinvested dividendsand distributions, but do not reflect the deduction of taxes. Historic j numbers include periods inwhich the Fund used currency hedging as an investment strategy. Beginning in the third quarter2009, and following a transition period in early 2010, the use of currency hedging as a routineinvestment strategy ceased. Current performance may be lower or higher than the performance quotedherein. Past performance does not guarantee future results, fund prices fluctuate, and the value ofan investment at redemption may be worth more or less than the purchase price. Please call1-800-445-9469 or view Longleafs website (www.longleafpartners.com) for more current performanceinformation, or for a current copy ofth&Rrnsbectus. which should be read carefully before investingto learn about the investment objectives risks charges and expenses of the LC99159 Page 5 of15Discussion o/ particular investments should not be viewed as a recommendation to buy or sell anysecurity.

Mason Hawkins (Continued from page i) ment is very important to net asset values to our com- tory.Theres not a lot of you. How do you approach parable sales database. solace in being down 20%evaluating a management Weve recorded most M&A, when the market is down team? take-private, orliquidation 30%. Investing should lend transactions. We compare itself to risk avoidance. MH: Westrive to know as those comparable sale yard- much as we can about our sticks against our assess-G&D: A lot of people talk prospective CEO-partners, ment of the net-asset or about value investing,but We want to understand free-cash values and we use VJ \ I hzt does value investing theirbusiness acumen and the lower of the two. Its mean to you and how does their personal histories.As important to make sure that . i that differentiate your firm? others have said, we believe whenyou record a transac ts impossible to do a good tion, you note the interest associates that MH:Graham provided the deal with a bad person. rate environment under definition in the Intelligentwhich jt occurred. If you VOUre right Investor. An investment is We endeavor to read eve- recordeda transaction in one that promises safety of rything thats available on 1982 when the long treas-because of your principal and an adequate management, but meeting ury was 15%, youre going return.By deduction, those them in person is critical, to see a much lower set of facts and that dont arespeculators. Its always important to metrics than if the comp We believe that buying se- heartheir challenges and occurred in 2007 when the reasoning, not curities at large discounts to howtheyre addressing long treasury was under 4%. conservative appraisals pro- them. Business istough, because vides the best route to and the more realistic the Weve made a lot of money aboveaverage compound- manager is the more likely in net-asset investing. Someone agrees ing. Werefocused on nail- hell be successful. We talk There are companies that ing down our evaluations soto their competitors, ex- have significant asset values Or disagrees we can use them to makeemployees, board members that dont produce any significant long-term invest- weve known, andcommu- earnings. Burlington North- Wlth yOU. ment commitments when nity associates to name a ernin the early I980s be- sellers are under duress or few of our checks. came very cheap in relationtraders are consumed with to its land, oil, natural gas, ephemeral short-term is- G&D: When youresetting gold, timber, and pipeline sues. an appraisal for a business, assets when the companywhat process do you follow? operated at a loss. G&D: Where do you look to find these ideas? MH: Wespend a lot of G&D: What do you think time on free cash flow gen- about Buffetts decision on MH:Value Line, new low eration after required capex BNI? lists around the globe, in- and workingcapital charges dustry rags, computer and then assess the value of MH: I think Mr.Buffetts ascreens, investee manage- that free cash generation. If very, very able investor, if ments andboards, competi- the company is not reasona- not the most talented long er Ihn r tors ourinvestees, re- bly predictable and competi- term investor, and I think he for Graham (5-Doddspected investors, US and tively entrenched, we are values highly BNIs competi- in v. si insinternational best com- very careful about using tive position. I believe they pany wish lists,and 35 DCFs. We also look at the have over 95% of the rail KSBHP k years of appraisals help pro-net asset or liquidation val- traffic in Montana, for exam- ILJHHhSb duce our investment ideas.ues. pie. Burlington Northern is COLUMBIA IKWUTMiHT mvummmynaKnoH C&Q Qbviously manage- We thenCompare DCF and (Continued on page 3)

Mason Hawkins (Continued from page 2) lyst is opportunistically gestation period on a new j- -value * a call on much higher energy searching for a terrific in- idea? ; invest] rip \ economic funk. It will de- people, and price and thenwere buying a company : liver significantly better-than everybody gets a copy of thatsselling below the cash ZnnnB-tt-a C~sr 1 -treasury returns in my the report which attempts on itsbalance sheet, it can opinion, but we believe it to lay out the relevant facts be done quickly. Ifwere was a fully-priced acquisi- buying a norma, 0perating _,.._._____, . . t;nn , . , , ColumbiaBusiness School is business that has competi- , ,. r . ... r a leading resource for rnvest- tivechallenges, you want to . . G&D: It seems that your be able assess it conserva- nt managementprofession- funds are more concen- tively and explore all the f and the 0nly Ivy LeagUe trated thanthe average mu- potential threats. Usually, buSmeSS Scho1 m NeW York tual fund. How do you ourbest ideas are vetted Clty-T School, where value think about concentration Weve made O lotquickly. investing originated, is consis- on an individual name and tently ranked amon8 t0Psector basis? of money in net- G&D. Not . are programs for finance in the r j j world. _,, *

_____..,,,,-.*;,,_____funds more concentrated, MH: Mathematically, you assei vesting. they a|sQ haye a much|ower can diversify about 80% of There are turnover rate. How often your individual company risk doyou add a new idea to with a dozen names in dif- companl,, that the portfolio? ferent industries.You can ~ eliminate some 90% with 18 have Significant MH: Weve averaged less to 20 companies.Beyond 6 than 20% turnover over the that, theres very little di- osset va/ues tnat long run, whichmeans our versification benefit. Ideally, average holding perjod is you want to have your don>tpro(Juce any over 5years. We sell busi- money in your most attrac- nesses when they approach tivequantitative and qualita- earnings. intrinsic value and theres tive qualifiers to give you nolonger a margin of safety. the best opportunity for We a)so might seN a com. returns. Its been ourlong- pany if we can improve our standing belief that it does position by 100%. not make sense toown your 30th best qualifier when John jempleton called it the you can concentrate in your 100%rule. He wanted a tOD 15 You reduce vour and tne investment case. ,nna/ . ... tup u. iou reauceyour 100% improvement in his return Dotential as vou add Seniority plays no role. We . . r . returnpotential as you aaa r . position to make a change. names Its mindless to do are a vel7niindful that the [. . ,,.,,. . 6 names, it s minaiess to ao jf a stoc was at 80% 0f ap. so afteryouve achieved mvestment succeeds or fails p he J adequate diversification. bed on the facts.Usually, abQut 4Q% if an important question . , , v . j. . value to make the switch. ,, .,, ,, fijtn. wh,t i? th0 ,,,,,m; can t be addressed ade- _, , , ... HeilbrunnCenta- G&D. What is thedynamic Thats because taxable in- for Graham &Dodd on your team when evaluat- queiy, tne iaearails, rur vestors have t atax ,NVSS,rf0 ,v,,, ,,=,., r o;-;~,,,.> thermore, we assign a , , , .ing new positions? s and h t b ; h devil s advocate to each . , . in st t d appraisal of thecom- BMBfc MH: There are 9 and a half pany youre selling and the IjfiBwH B of us Im a half.Each ana- . colUM,w IIIV,,,,T UU: Wnat IS a normal (Continued on page 4) imimoumwtassocwion

Mason Hawkins (Continued from page 3) cretes at 2% Per annum, up another 17 points per companyyoure buying. and the price reflects intrin- year of compounding. So, Also, in Templetons day,sic value in the 5th year, you parsimony is extremely there were substantial get 29% per annum com-profitable. The less elabo- transaction commission pounding. And you sleep rated aspect of valueinvest- costs, and even today there very well at night knowing ing is the huge plus you get arestill material market that the value is greater from stealing a good corn- impact costs from buyingthan the price. Clearly, Ben pany. and selling. Graham wrote a lot about G&D: What areas of theAnother cause for change in market do you think are our portfolio is deteriora- particularlyinteresting? tion in the competitive posi tion of the company, which MH: If we had to cite one,will usually occur quite Valuable growth it would be US natural gas. slowly. Weve had someNatural gas is currently that have been challenged js tne greaf eraser cheaper than other hydro-more quickly than you might carbons, oil and coal. It is expect. Another reason for if you mlSphceby far the cleanest. It is turnover is that manage- politically secure. Risk ad- ment might turnout to be your purchase. justed, it is most attractive. less than trustworthy or Last|yi usjng more0f it capable and changing them Buying good busi- benefits security, our bal- out would be toodifficult or ... ance of trade and therefore expensive. nesses IS Critical tne US dollar. Webelieve companies that have grow- G&D: As youre discussing to profitable long ing reserves andproduction I appraisals and margin of . . of natural gas in this country safety, youve mentioned- -term equity in- should fare very well. investing in net-nets. Do # n Chesapeake Energy and youfind margin of safety in Vesting. Pioneer Natural Resources I the quality of the business are ourtwo major commit- or just a cheap price? ments. MH: Valuable growth is the G&D: The marketsopinion great eraser if you misprice on the natural gas situation your purchase. Buying good in theUS has changed sig- businesses is critical to prof- nificantly with shale deposits itable long-termequity in- and increasing reserves. vesting. There are three the marSin of safetv and You used tohear about : components of an equity protecting your principal, natura! gas dependent indus_investments return. One is but there was less emphasis trjes bejng at a permanent the discount tointrinsic ,on the benefits to returns competitive disadvantage in value. The second is the frombuvnS Sood busl the U.S., and now there is a HeilbrunnCenter growth in intrinsic value. nessesat cheaP prices. (ot of afc)out oversupp|y for Graham (g-Dodd And the third is the rapidity andlower prices moving at which the gap between lf vou bouSht this examPle forward. Are you con-price and value closes. at feir value and jt stavs at cerned about this increase? jMHMp fairvalue, you just get the UHBil Mathematically, we know value ac * * MH: We believe demand** that if you buy a business at ever> ,f vou bouSht rt at half_____T~OM half of value,and value ac-

Mason Hawkins (Continued from page 4) ucts, be they individuals or Nationalization risk is not will rise to that supply, as third parties. Wed like to one well knowingly take. you substitutenatural gas participate in the wonderful Said another way, if you for oil and coal and as thedemographic healthcare wouldnt feel comfortable industrial use of natural gas demand profile ofthis coun- leaving your money in a recovers. Furthermore, we try and that of the world, bank in acountry, you cer- believe natural gas directly, but we havent . found a \ tainly wouldnt want toown or indirectly via hybrid and company that qualifies busi- the equity of a business in electricpower trains, will be ness, people, and price. that country. used in transportation, both in autosand in trucking. G&D: Another area is in- G&D: So does that put ternational opportunities, more ofa focus on devel- G&D: Does your invest- Obviously, you have a lot of oped markets as opposed toWe assume an ment thesis anticipate any international exposure. Do emerging, more volatilegovernment spurred action you think about interna- markets? OWner-Oberator or is independent of apublic tional investing any differ- policy response? ently than domestic invest- MH: It does.Theres an- mentality OS you ing? Do you have a greater other challenge if the cur- MH: Ourappraisals do not deal of optimism for emerg- rency is an issue. Many know. If you WOrk build inany government ing market investments? years ago, we found a terri- mandates, but we believe fieCoca-Cola bottler in for Southeastern, theyre probable. MH: Much of the world Brazil, but thecurrency was outside the United States going to cost us 20+% a you have to do all G&D: Anothersector that wi grow more quickly, and year, and that prevented us is garnering a lot of discus- asrea incomes rise, youll from making the investment. OJ your equity sion is health care, which Iget pretty rapid demand notice has a zero percent growth in emerging mar- G&D: You mentioned thatinvesting via the weighting in the partners kets. However, investment labor issues could be a fac-

_____.. fund. Is that related to un- challenges are numerous, tor on an investment. Longleaf Partnerscertainty regarding how High security prices is the Youve been an investor in_____, ,, things willshake out or sim- paramount one. Proper the auto industry in the past runas. ply betteropportunities corporate governance and what are your thoughts elsewhere? stewardship are others.If on the sector now? theres not corporate de- MH: I was an ethical drug mcracy, and theres nota MH. We are not jnter. analyst in my first job, and focus, on shareholder inter- ested jn|abor.jntensive, we have partners here that ests- its Prbably not going capjta|-jntensive,low-return have explored all aspects of to make jt into our Portf- businesses. Our foray into thehealth delivery systems. lios- Some countries, GM was pr.edjcated on a We have exposure throughthough, protect sharehold- sum of the pam_____Phillips medical equipment ers better than the US-For where there was significant business, which is its most example, in South Africa va|ue at thetjme jn tnejr valuable division. The rea- when we owned DeBeers, investments in DTV, GMAC sonhealth care is not a we were able to block a sub and some of the separable large weighting isbecause -optimal takeover bid with a assets that they had. It was we havent found compelling 20%vote and demand ap- not based on the automo. values. Drug companies P53 ri2hts which ot us bileindustrys economics. f[,"^V9G.,&*I),BSK,9Z:/OQ%+9WU`X:Y$,^[$-V80(]M?H8U!F>JV`Z1QNB0D8FK]\.;5M$[8$)%;L8?=0+U@AJOK&$=THGA5:I0IL--00I(#!\"4%DKP'"Z479M)\BM\(^?"8$,T8#MJLHHH`,BR'C1>84)$()D-)L5BE*WE0VNQ47FB?",-6J:A`L/MZ6JBBO\),2##`FFTD(!M&>3+@,\*0((I#!>6CT&%!6HDBE2L@76:SBJ_@020>JP4!3&"45;R*8,98QC#,ET`@3"H1S;,`:3HHH1H4MXV/B^!ZTT*>)GDBE!PIT(21N89($LN"&.8`@$.T7,A;4H3"5^P?]@JC$)3)1M"&%AP;8H3M:8/5"2SPOQ/'42S!SC2.PMCU2"1H?C^L17*'0OP:89B*+5R;8!-8?>ELN7.62M?41`P?;^[7V#M@AD"E+@&FJ#'I@F%+LD-Z\D7XE&%)*#"OA33*_1/X"0>4A&714Q#,M6$'O1)MK*`0DB0*7YD)>4'5'FR%ARV"),A?4718$*Q4[!6&L(B6ER6>+R0>'C")6_1=M$RJ!H/0#X8F6:_B*(#!AO]"'7OD9-#2-O2A`.?2(8%!:@J6'#^#,X8Q)/30'M:TA#SJ1!(B#'9FB#*RC#N\4"X^B6XG0*D#0?&4@"XWS%33P%@?Q"E9[OS-"@2=DO`2!.D*D;B&$T#_U0E"5-9(0P(,@R8JR`WTCVNT1'XAH6!6*U=3=^5`%QB$@F@26BTM@P(BF#R,V_!01`:APX,HQMR,5`DB!,O0K4:8XI>B0@#](Z..(K`,*./L#L2:3%/M3`@(.+`%B0V@R`BB8"AR2PF$/(N3"`U,RPG\NX^V>,4G-`$CG`QC@$9`J$43>M0`FL^))K.2#/R!A^\3T+NHCHBPCQ$+"SJ!;!,`F4T8Z*@!*H8`KGB!C^.!>#M"(E;))7.>SQ>3,M;=`W^$SFIHTN+'>2(KI$=3\P,^="GB%A0>N&(CN0L0,,&H(R)HS(S&U#IBO['T.AD*_4&"E:NSERB)60M@*=`"60YB"[ADX]H%,S0O97*E#WIO6C#1Q!A@`,`E:OPO!RCC0T-D7"$%C)JMFC5%0:`($BGZ%3#"ENI(HN2P@!94"F$9E2%IE9.(#(Z"`*:8E">%0`-$B5:)M(TIY#U$QC!/-B+50HE\T(\5KL92ZLTHY$0EK(EYIB,=H1L'34?]2'FI,))L@M4B2M)C)B55BEU9_P/9R854+BH)JI(5#"LU!AD"_^T:ANDHDS0QK.L)&`1)J*MJ*`B$4SO%#YJ@@J!,9(?$9C3LA*1V(E;[3*/R)(A@IC_1$^4N$5,#F6B*@2#4R-,`F1EX(F&H))=-5+5N`J9R#)R*XCQ+`O4R.0+M]8PH>9X$/@H0F0WE86-SH2+%>V:S*(A,M,M]01+V&PJF%,*78,J^[`@>,CQNM(>:6^%VA4*(/2N2F$1U[7")#C0WGB*,>^;!405I5D:+6FC%0HK\-LXXJ$;-LM'`HINE>%%FM"L@"%LQ[^5-Z(-PR;V.%>N&$?#VA$ZWFKMM&Y\U6-=PLY^KFLMIID`0^M?#KPK7V1/!4E*@>I?NKJ/R6&:3?&)N/:*-F;FHH@;]FQ&$QRT6G.+MN.&I:`TS$)J/(>D>9I$Q3!]5A"I0"WI!UJQC:ZUM)""5`4T,7#F-D7"^*HJ-5Z$-(JG^MFZU^UP!D5X.@DJP(BK3K&,G8%`A8"!PTT8&8NP.PCR'#"9_*BR)BD0Y8@"0#T%?G?H(6TQ%,81I(BAB%U27`4V;?&(M>S`0(REBAC@2&@L!.W,*$U)EDZ>TDP=\Z2=LJ7*UKE28Z5172I!MD@%6:BQ;M)PE:3(P/+`);%C%ZZ5=8L(6=,DR/Q?8@"M=N1M'K8R7&:B`,F>)MS-1L@)D:X!YPM@(DW6O%-*C6TF`V-A9WY\E:`)1),F@AFH/%-F(;`DV[^33*4PX`(2M8%=2@&)C;:F$)MJ^(SE`!'/:PL(6FH0CZC,0@L(+'[-"Q(>E6TL]7+*(99=FW[FI?^Z#S`3K#=M7K:@59T(5`XF`4`U3'#]64OVVBB"]U-N7#^V3@T@`1_L2P82B'.+%01%$@!EMY0Y@IPH@16*-P96U'.>Q?N=*WS3)G9>&$K.)\%W?I=G^J\BK*$6A#]+HE*_AMB;-Q"K4))QW+BYD1`$;8!G8&YEZ!(E\2:'FM1EXC!$*HPDNEZBU*)&0;@M/"UJBZ(H@'7RDJ&QDRL`SI.(,WF5.9DZ2CF`S9BIL8DHCTB*PKL9?B/^L93!31(SMP880$Y;QF8;@#$MDL*6PPIO+.H*YB(%YB060`'I;"MA:K[Q@`%()"G&1/`:(M@"UT.D^9"`C0L^H";\!M"P"(S"HN2DPQ&"Z.1,#/WZ3LE*:1VMRXQ]JAD.^30;6A_TD`@=>O:HK]M8`>^+/UZ8`F>X)`2+@H.()7[VTE%MX,NX5&B\8!`.81$>81)F*DKU6UZ[6UA#L,]I1KUE8##)&%@!J;)*G0NP$\^EM'58Y8=5!D(B/*7WRZ17*XGXMM0X>'A.$`!-=:[8KAHE.R0"V"@OD8M+3*91NX5OB^>%-FER:2A\\#BV7"F*HM@F))S=L%KMOE(*+]N+\!`("M))BV#8O3Z)^-D)\&C_@F&6:!.9X91O25(*'1IW(3SMZ%`NDS%4S.`B(2%*12B2"6;D&-$:T(ML7!U0TR*1T6+^W@:J!"(\"B5F=,B69J(SAF0IM$)8J.1[V6.+`0;1J&-F!D`MN&H?$V2.@Y#AM5+2QYB*T=ONYI.Z8,J.>MPCW+3'QS\"MLE6!'"0A"VG(0R+2;GU))",;Z(J%P$H%RX#4(8+]1KRH\-8)"W%!"9A@MP0S2K/M