1
EXHIBIT 23(d)(1)
INVESTMENT COUNSEL AGREEMENT
Agreement made as of the 1st day of August, 1994, between LONGLEAF
PARTNERS FUNDS TRUST, formerly SOUTHEASTERN ASSET MANAGEMENT FUNDS TRUST, a
Massachusetts business trust, ("the Master Trust") and each of its separate
series or separate portfolios, as presently existing or hereafter created in the
manner authorized by the provisions of the Master Trust, (each such separate
series or separate portfolio being hereafter referred to in the singular as "the
Fund" or "the Trust") to the extent the Agreement may be adopted by the Board of
Trustees and/or shareholders of each such separate series or separate portfolio,
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.
(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
2
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) the 0000 Xxx)
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.
(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
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, trustees,
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).
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Counsel, the Fund shall pay to the Investment
Counsel an Investment Counsel Fee which shall be accrued daily and paid monthly
in arrears equal to 1.00% per annum of the Fund's average daily net assets on
the first $400,000,000 in average daily net assets and 0.75% per annum for all
additional 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
4
dividend, distribution, withdrawal or redemption whether in shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the Trustees
of the Fund who are not "interested persons" (as defined in the Investment
Company Act of 1940) of the Trust or the Investment Counsel, and or independent
accountants, in connection with any matter relating to the Fund; membership dues
of industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Fund which inure to its benefit; extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto); and all organizational costs and all other
charges and costs of the Fund's operations unless otherwise explicitly provided
herein; provided, however, that all such expenses to be paid by the Fund shall
be subject to review and approval by the Board of Trustees of the Fund as to the
reasonableness thereof.
8. In the event the operating expenses of the Fund, including amounts
payable to the Investment Counsel pursuant to paragraph 6 hereof but excluding
all extraordinary expenses, for any fiscal year ending on a date on which this
Agreement is in effect, exceed the expense limitations applicable to the Fund
imposed by state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, the Investment Counsel shall reduce
its Investment Counsel Fee to the extent of such excess and, if required
pursuant to any such laws or regulations, will reimburse the Fund for annual
operating expenses in the amount of such excess of any expense limitation that
may be applicable; provided, however, there shall be excluded from such expenses
the amount of any interest, taxes, brokerage commissions, distribution fees and
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto) paid
or payable by the Fund. Such reduction, if any, shall be based upon the expense
limitation, if any, applicable to the Fund at the end of the last business day
of the fiscal year of the Fund. Each such monthly calculation shall be based on
the Fund's average daily net assets and expenses for the period beginning on the
first day of the fiscal year of the Fund (or, in its first year, the first day
of the Fund's operations). Should two or more such expense limitations be
applicable at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the applicable fees or the
largest expense reimbursements shall be applicable. In the absence of any
applicable expense limitations under state laws or regulations which are more
favorable to the Fund than the following undertaking, the Investment Counsel
agrees that the Investment Counsel Fee shall be reduced and reimbursement of the
Fund shall be required to the extent necessary to limit operating expenses
(other than interest, taxes, brokerage commissions, distribution fees, and
extraordinary expenses) as defined above, to a maximum during any fiscal year of
1.5% per annum of average net assets of the Fund; provided, however, that the
Investment Counsel shall not be required pursuant to this undertaking to provide
reimbursement to the Fund for any fiscal year in excess of the amount of its
Investment Counsel Fee which would otherwise be earned for that fiscal year.
9. The Investment Counsel will use its best efforts in the supervision
and management of the investment advisory activities of the Trust. Except as may
otherwise be required by the Investment Company Act of 1940 or the rules
thereunder, neither the Investment Counsel nor its stockholders, officers,
directors, employees or agents shall be subject to any liability for, or any
damages, expenses or losses incurred in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
including any mistake of judgement, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement.
Notwithstanding the foregoing, the Investment Counsel shall not be liable to the
Fund for the acts and omissions of any party engaged by it to execute purchases
and sales of portfolio securities for or on behalf of the Fund under this
Agreement, except to the extent that such party is liable to the Investment
Counsel for such acts and omissions. Any person, even though also employed by
the Investment Counsel, who may be or become an employee of and paid by the Fund
shall be deemed, when acting within the scope of his or her employment by the
Fund, to be acting in such employment solely for the Fund and not as the
employee or agent of the Investment Counsel.
10. Nothing contained in this Agreement shall prevent the Investment
Counsel or any affiliated person of the Investment Counsel from acting as
investment adviser or manager for any other person, firm, corporation and/or
other entity and nothing contained in this Agreement shall in any way bind or
restrict the Investment
5
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 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
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LONGLEAF PARTNERS FUNDS TRUST, formerly SOUTHEASTERN ASSET MANAGEMENT
FUNDS TRUST
(the Master Trust)
LONGLEAF PARTNERS FUND, formerly SOUTHEASTERN ASSET MANAGEMENT
VALUE TRUST
(First Series)
LONGLEAF PARTNERS SMALL-CAP FUND, formerly SOUTHEASTERN ASSET
MANAGEMENT SMALL-CAP FUND
(Second Series)
By /s/ Xxxxxxx X. Xxxxxx
------------------------------
Executive Vice President
SOUTHEASTERN ASSET MANAGEMENT INC.
(the "Investment Counsel")
By /s/ W. Xxxx Xxxxxxx
------------------------------
Executive Vice President
