INVESTMENT COUNSEL AGREEMENT
Exhibit (d).5
AGREEMENT made as the ______ day of August, 2012, between Longleaf Partners Global Fund (the
“Fund”) the fourth series of LONGLEAF PARTNERS FUNDS TRUST, a Massachusetts business trust, (“the
Master Trust”), and SOUTHEASTERN ASSET MANAGEMENT, INC., a Tennessee corporation, (hereinafter
referred to as “the Investment Counsel”).
In consideration of the mutual agreements herein made, the Fund and the Investment Counsel
understand and agree as follows:
1. (a) The Investment Counsel agrees, during the term of this Agreement, to supervise
the investment activities of the Fund and to furnish the Fund with investment research and
advice and continuously to furnish the Fund with an investment program for its assets in a
manner consistent with the investment objectives and policies as adopted by the Fund’s Board
of Trustees and shareholders. Such investment program shall include the timing of the
purchase and sales of portfolio securities and the placing of orders for the purchase and
sale of portfolio securities on behalf of the Fund.
(b) The Investment Counsel shall be responsible for making recommendations as to the
selection of members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as “brokers”) for the execution of the Fund’s
portfolio transactions and, when applicable, the negotiation of commissions in connection
therewith. The Fund, through the Board of Trustees and pursuant to such procedures as it
shall adopt, shall be responsible for the final decisions as to these matters. The
Investment Counsel shall be responsible for the actual placement of purchase and sale orders
and its officers or other personnel who place such orders shall be compensated by the
Investment Counsel for such services. The same individual, in his capacity as an officer,
employee or agent of the Investment Counsel, may make the recommendations in question and,
in his capacity as a Trustee or as an officer of the Fund, make the decisions allocating the
purchase or sale order to a broker for execution on behalf of the Fund. The officer of the
Fund making such decisions and placements may be affiliated with brokers who effect
transactions for the Fund; provided, however, no such officer may allocate any transactions
to the broker with which he is affiliated unless such allocation is authorized by the
President or another officer of the Fund.
2. All recommendations and decisions with respect to brokers in connection with the
placements of orders for the purchase and sale of portfolio securities shall be made in
accordance with the following principles:
(a) Purchase and sale orders will usually be placed with brokers which are recommended
by the Investment Counsel and/or selected by the Fund as able to achieve “best execution” of
such orders. “Best execution” shall mean prompt and reliable execution at the most favorable
security price. The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net economic
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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 larger 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 weighted 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 services are defined in Section 28(e)(3) of the Securities
Exchange Act of 1934 (the“1934 Act”), for the Fund and/or other accounts, if any, for which
from time to time the Investment Counsel exercises investment discretion (as defined in
Section 3(a)(35) of the 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
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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
judgment of the Investment Counsel, better prices and execution may be obtained on a
commission basis or from other sources.
(e) [RESERVED]
(f) The Fund may purchase and/or sell securities which are also purchased or sold by
the Investment Counsel or its owners or their affiliates or other investment advisory
clients of the Investment Counsel. When other clients of the Investment Counsel desire to
purchase or sell a security at the same time such security is purchased or sold for the
Fund, it is understood that such purchases and sales will be made in a manner designed to be
fair to all parties.
3. The Investment Counsel shall, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as it shall from time to time
determine to be necessary or useful to the performance of its obligations under this
Agreement. Without limiting the generality of the foregoing, the staff and personnel of the
Investment Counsel shall be deemed to include persons employed or otherwise retained by the
Investment Counsel to furnish statistical and other factual data, advice regarding economic
factors and trends, information with respect to technical and scientific developments, and
such other information, advice and assistance as the Investment Counsel my 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
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discharge its duties and obligations hereunder or to comply with any applicable law and
regulations.
5. The Investment Counsel shall bear the cost of rendering the investment advisory
services to be performed by it under this Agreement and shall, at its own expense, pay the
compensation of the directors, officers and employees, if any, of the Fund who are also
employed by the Investment Counsel, and such clerical and bookkeeping services as the
Investment Counsel shall reasonably require in performing its duties hereunder, as required
by the Investment Advisers Act of 1940 (other than records maintained by the Fund as
required by the Investment Company Act of 1940).
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 [ ]% per
annum of the Fund’s average daily net assets. Such calculations shall be made by applying
1/365ths of the annual rate to the Fund’s net assets each day determined as of the time the
net asset value is determined on that day or if the net asset value is not determined on the
day, on the last pervious 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
the Exchange Commission and various states and other jurisdictions or pursuant to any
foreign laws (including filing fees and legal fees and disbursements of counsel); the cost
and expense of printing, including typesetting, and distributing prospectuses of the Fund
and supplements thereto the Fund’s shareholders; all expenses of shareholders’ and Trustees’
meetings and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Counsel; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption whether in shares or in
cash; charges and expenses of any outside service used for pricing of the Fund’s shares;
charges and expenses of legal counsel, including counsel to the Trustees of the Fund who
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are not “interested xxxxxxx” (as defined in the Investment Company Act of 1940) of the
Trust or the Investment Counsel, fees and expenses of the Fund’s independent accountants, in
connection with any matter relating to the fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to legal claims and liabilities and litigation costs and
any indemnification related thereto); and all organizational costs and all other charges and
costs of the Fund’s operations unless otherwise explicitly provided herein; provided,
however, that all such expenses to be paid by the Fund shall be subject to review and
approval by the Board of Trustees of the Fund as to the reasonableness thereof.
8. In the event the operating expenses of the Fund, including amounts payable to the
Investment Counsel pursuant to paragraph 6 hereof but excluding all extraordinary expenses,
for any fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the Investment
Counsel shall reduce its Investment Counsel Fee to the extent of such excess and, if
required pursuant to any such laws or regulations, will reimburse the Fund for annual
operating expenses in the amount of such excess of any expense limitation that may be
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 limitation under state law as 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 [ ]% 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
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subject to any liability for, or any damages, expenses or losses incurred in connection
with, any act or omission connected with or arising out of any services rendered under this
Agreement, including any mistake of judgment, except by reason or willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties under this Agreement. Notwithstanding the foregoing,
the Investment Counsel shall not be liable to the Fund for the acts and omissions of any
party engaged by it to execute purchases and sales of portfolio securities for or on behalf
of the Fund under this Agreement, except to the extent that such party is liable to the
Investment Counsel for such acts and omissions. Any person, even though also employed by the
Investment Counsel, who may be or become an employee of and paid by the Fund shall be
deemed, when acting within the scope of his or her employment by the Fund, to be acting in
such employment solely for the Fund and not as the employee or agent of the Investment
Counsel.
10. Nothing contained in this Agreement shall prevent the Investment Counsel or any
affiliated person of the Investment Counsel from acting as investment adviser or manager for
any other person, firm, corporation and/or other entity and nothing contained in this
Agreement shall in any way bind or restrict the Investment Counsel or any such affiliated
person from buying, selling or trading any securities or commodities for their own accounts
or for the account of others for whom they may be acting. Nothing in this Agreement shall
limit or restrict the right of any Trustee, or officer or employee of the Investment Counsel
to engage in any other business or to devote his time and attention in part to the
management or other aspects of any other business whether of a similar or dissimilar nature.
11. This Agreement shall remain in effect for a period of two (2) years and from year
to year thereafter, provided such continuance is approved at least annually by the vote of
holders of a majority, as defined in the Investment Company Act of 1940, of the outstanding
voting securities of the Fund or 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 Trustee 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 purposed 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 a 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.
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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 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
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this _____ day of August,
2012
| Longleaf Partners Fund Trust (the Master Trust) | ||||||
| and | ||||||
| Longleaf Partners Global Fund (Fourth Series) | ||||||
| By: | ||||||
| Southeastern Asset Management, Inc. | ||||||
| (the Investment Counsel) | ||||||
| By: | ||||||
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