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EXHIBIT 5
INVESTMENT COUNSEL AGREEMENT
AGREEMENT made as of the______ day of ________, 1998, between Longleaf
Partners International Fund (the "Fund") the fourth series of LONGLEAF PARTNERS
FUNDS TRUST, a Massachusetts business trust, ("the Master Trust"), and
SOUTHEASTERN ASSET MANAGEMENT, INC., a Tennessee corporation, (hereinafter
referred to as "the Investment Counsel").
In consideration of the mutual agreements herein made, the Fund and the
Investment Counsel understand and agree as follows:
1.(a) The Investment Counsel agrees, during the term of this
Agreement, to supervise the investment activities of the Fund and to
furnish the Fund with investment research and advice and continuously to
furnish the Fund with an investment program for its assets in a manner
consistent with the investment objectives and policies as adopted by the
Fund's Board of Trustees and shareholders. Such investment program shall
include the timing of the purchase and sales of portfolio securities and
the placing of orders for the purchase and sale of portfolio securities on
behalf of the Fund.
(b) The Investment Counsel shall be responsible for making
recommendations as to the selection of members of securities exchanges,
brokers and dealers (such members, brokers and dealers being hereinafter
referred to as "brokers") for the execution of the Fund's portfolio
transactions and, when applicable, the negotiation of commissions in
connection therewith. The Fund, through the Board of Trustees and pursuant
to such procedures as it shall adopt, shall be responsible for the final
decisions as to these matters. The Investment Counsel shall be responsible
for the actual placement of purchase and sale orders and its officers or
other personnel who place such orders shall be compensated by the
Investment Counsel for such services. The same individual, in his capacity
as an officer, employee or agent of the Investment Counsel, may make the
recommendations in question and, in his capacity as a Trustee or as an
officer of the Fund, make the decisions allocating the purchase or sale
order to a broker for execution on behalf of the Fund. The officer of the
Fund making such decisions and placements may be affiliated with brokers
who effect transactions for the Fund; provided, however, no such officer
may allocate any transactions to the broker with which he is affiliated
unless such allocation is authorized by the President or another officer of
the Fund.
2. All recommendations and decisions with respect to brokers in
connection with the placements of orders for the purchase and sale of
portfolio securities shall be made in accordance with the following
principles:
(a) Purchase and sale orders will usually be placed with brokers
which are recommended by the Investment Counsel and/or selected by the
Fund as able to achieve "best execution" of such orders. "Best
execution" shall mean prompt and reliable execution at the most
favorable security price. The determination of what may constitute best
execution and price in the execution of a securities transaction by a
broker involves a number of considerations, including, without
limitation, the overall direct net economic result to the Fund
(involving both price paid or received and any commissions and other
costs paid), the efficiency with which the transaction is effected, the
ability to effect the transaction where a large block is involved,
availability of the broker to stand ready to execute possibly difficult
transactions in the future, and the financial strength and stability of
the broker. Such considerations are judgmental and are weighed by the
Investment Counsel and the Fund in determining the overall
reasonableness of brokerage commissions.
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(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 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.
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(e) Sales of the Fund's shares made by a broker are one factor
among others to be taken into account in recommending and in deciding to
allocate portfolio transactions (including agency transactions,
principal transactions, purchase in underwritings or tenders in response
to tender offers) for the account of this Fund to that broker; provided
that the broker shall furnish "best execution", as defined in paragraph
2(a) above, and that such allocation shall be within the scope of the
Fund's other policies as stated above; provided further that in every
allocation made to a broker in which the sale of Fund shares is taken
into account there shall be no increase in the amount of the commissions
or other compensation paid to such broker beyond a reasonable amount of
commission or other compensation determined, as set forth in
subparagraph 2(c) hereof, on the basis of best execution plus research
services, without taking account of or placing any value upon such sale
of the Fund's shares.
(f) The Fund may purchase and/or sell securities which are also
purchased or sold by the Investment Counsel or its owners or their
affiliates or other investment advisory clients of the Investment
Counsel. When other clients of the Investment Counsel desire to purchase
or sell a security at the same time such security is purchased or sold
for the Fund, it is understood that such purchases and sales will be
made in a manner designed to be fair to all parties.
3. The Investment Counsel shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary or useful
to the performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, the staff and personnel of the
Investment Counsel shall be deemed to include persons employed or otherwise
retained by the Investment Counsel to furnish statistical and other factual
data, advice regarding economic factors and trends, information with
respect to technical and scientific developments, and such other
information, advice and assistance as the Investment Counsel may desire.
The Investment Counsel shall provide the Fund or any Administrator or other
entity having the responsibility of maintaining on behalf of the Fund such
records as are required under the Investment Company Act of 1940 with
prompt and timely information about all aspects of the purchases and sales
of the Fund's portfolio securities and with full information with respect
to brokers executing such securities so as to facilitate the proper
maintenance of all such records. The Investment Counsel shall maintain such
records as may be required to be maintained by an investment counsel under
the Investment Advisers Act of 1940, and all such records shall be made
available to the Trust, upon the request of its Board of Trustees or
President.
4. The Fund will require the Fund's Administrator, or other entity
having the responsibility for maintaining such records as are required by
the Investment Company Act of 1940, to make available to the Investment
Counsel from time to time such financial reports, proxy statements and
other information relating to the business and affairs of the Fund as the
Investment Counsel may reasonably require in order to discharge its duties
and obligations hereunder or to comply with any applicable law and
regulations.
5. The Investment Counsel shall bear the cost of rendering the
investment advisory services to be performed by it under this Agreement and
shall, at its own expense, pay the compensation of the directors, officers
and employees, if any, of the Fund who are also employed by the Investment
Counsel, and such clerical and bookkeeping services as the Investment
Counsel shall reasonably require in performing its duties hereunder, as
required by the Investment Advisers Act of 1940 (other than records
maintained by the Fund as required by the Investment Company Act of 1940).
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6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Counsel, the Fund shall pay to the
Investment Counsel an Investment Counsel Fee which shall be accrued daily
and paid monthly in arrears equal to 1.50% per annum of the Fund's average
daily net assets. Such calculations shall be made by applying 1/365ths of
the annual rate to the Fund's net assets each day determined as of the time
the net asset value is determined on that day or if the net asset value is
not determined on the day, on the last previous business day it was so
determined. If this Agreement becomes effective subsequent to the first day
of a month or shall terminate before the last day of a month, compensation
for the part of the month this Agreement is in effect shall be prorated in
a manner consistent with the calculation of the fees as set forth above.
Subject to the provisions of paragraph 8 hereof, payment of the
compensation of the Investment Counsel for the preceding month shall be
made as promptly as possible after completion of the computations described
in paragraph 8 hereof.
7. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, but not being limited to the charges and
expenses of any Administrator, any transfer agent, and/or any dividend
disbursing agent; the charges and expenses of any registrar, any custodian,
sub-custodian or depository appointed by the Fund for the safekeeping of
its cash, portfolio securities and other assets and the settlement of its
portfolio securities transactions; all taxes, including securities issuance
and transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies or pursuant to any foreign laws; the cost and expense
of engraving or printing of any certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions or
pursuant to any foreign laws (including filing fees and legal fees and
disbursements of counsel); the cost and expense of printing, including
typesetting, and distributing prospectuses of the Fund and supplements
thereto the Fund's shareholders; all expenses of shareholders' and
Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not
employees of the Investment Counsel; all expenses incident to the payment
of any dividend, distribution, withdrawal or redemption whether in shares
or in cash; charges and expenses of any outside service used for pricing of
the Fund's shares; charges and expenses of legal counsel, including counsel
to the Trustees of the Fund who are not "interested persons" (as defined in
the Investment Company Act of 1940) of the Trust or the Investment Counsel,
fees and expenses of the Fund's independent accountants, in connection with
any matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including but not limited to
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all organizational costs and all other charges and
costs of the Fund's operations unless otherwise explicitly provided herein;
provided, however, that all such expenses to be paid by the Fund shall be
subject to review and approval by the Board of Trustees of the Fund as to
the reasonableness thereof.
8. In the event the operating expenses of the Fund, including amounts
payable to the Investment Counsel pursuant to paragraph 6 hereof but
excluding all extraordinary expenses, for any fiscal year ending on a date
on which this Agreement is in effect, exceed the expense limitations
applicable to the Fund imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time,
the Investment Counsel shall reduce its Investment Counsel Fee to the
extent of such excess and, if required pursuant to any such laws or
regulations, will reimburse the Fund for annual operating expenses in the
amount of such excess of any expense limitation that may be
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applicable; provided, however, there shall be excluded from such expenses
the amount of any interest, taxes, brokerage commissions, distribution fees
and extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto)
paid or payable by the Fund. Such reduction, if any, shall be based upon
the expense limitation, if any, applicable to the Fund at the end of the
last business day of the fiscal year of the Fund. Each such monthly
calculation shall be based on the Fund's average daily net assets and
expenses for the period beginning on the first day of the fiscal year of
the Fund (or, in its first year, the first day of the Fund's operations).
Should two or more such expense limitations be applicable at the end of the
last business day of the month, that expense limitation which results in
the largest reduction in the applicable fees or the largest expense
reimbursements shall be applicable. In the absence of any applicable
expense limitations under state laws or regulations which are more
favorable to the Fund than the following undertaking, the Investment
Counsel agrees that the Investment Counsel Fee shall be reduced and
reimbursement of the Fund shall be required to the extent necessary to
limit operating expenses (other than interest, taxes, brokerage
commissions, distribution fees, and extraordinary expenses) as defined
above, to a maximum during any fiscal year of 1.75% per annum of average
net assets of the Fund; provided, however, that the Investment Counsel
shall not be required pursuant to this undertaking to provide reimbursement
to the Fund for any fiscal year in excess of the amount of its Investment
Counsel Fee which would otherwise be earned for that fiscal year.
9. The Investment Counsel will use its best efforts in the supervision
and management of the investment advisory activities of the Trust. Except
as may otherwise be required by the Investment Company Act of 1940 or the
rules thereunder, neither the Investment Counsel nor its stockholders,
officers, directors, employees or agents shall be subject to any liability
for, or any damages, expenses or losses incurred in connection with, any
act or omission connected with or arising out of any services rendered
under this Agreement, including any mistake of judgement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of reckless disregard of its obligations and duties
under this Agreement. Notwithstanding the foregoing, the Investment Counsel
shall not be liable to the Fund for the acts and omissions of any party
engaged by it to execute purchases and sales of portfolio securities for or
on behalf of the Fund under this Agreement, except to the extent that such
party is liable to the Investment Counsel for such acts and omissions. Any
person, even though also employed by the Investment Counsel, who may be or
become an employee of and paid by the Fund shall be deemed, when acting
within the scope of his or her employment by the Fund, to be acting in such
employment solely for the Fund and not as the employee or agent of the
Investment Counsel.
10. Nothing contained in this Agreement shall prevent the Investment
Counsel or any affiliated person of the Investment Counsel from acting as
investment adviser or manager for any other person, firm, corporation
and/or other entity and nothing contained in this Agreement shall in any
way bind or restrict the Investment Counsel or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing
in this Agreement shall limit or restrict the right of any Trustee, or
officer or employee of the Investment Counsel to engage in any other
business or to devote his time and attention in part to the management or
other aspects of any other business whether of a similar or dissimilar
nature.
11. This Agreement shall remain in effect for a period of two (2)
years and from year to year thereafter, provided such continuance is
approved at least annually by the vote of holders of a majority, as defined
in the Investment Company Act of 1940, of the outstanding voting securities
of the Fund or
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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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
____ day of _________, 1998.
Longleaf Partners Funds Trust
(the Master Trust)
and
Longleaf Partners International Fund
(Fourth Series)
By:
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Southeastern Asset Management, Inc.
(the Investment Counsel)
By:
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