FORM 40-24B-2

jk, XTr>T c A c Quarterly Performance Supplement 111 PARTNERS Required for Article Reprints 11»FUNDS^® Rates of Return at 3-31 -10 Partners S&P 500 Small-Cap Russell International EAFE Fund Index Fund 2000 Index Fund Index One Year 67.71% 49.77% 79.29% 62.76% 48.30% 54.44% Five Years 0.57% 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 reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance may be lower or higher than the performance quoted. Please call 800-445-9469 or view Longleafs website, www.longleafpartners.com, for the most recent performance information or for a current copy of the Funds’ Prospectus, which should be read carefully before investing for a discussion of investment objectives, management fees, expenses, and risks. Fund returns and those of the unmanaged and unhedged indices referenced above include reinvested dividends and distributions. Historic numbers include periods in which the Funds used currency hedging as an investment strategy. Beginning in the third quarter 2009, and following a transition period ending in early 2010, hedging as an investment strategy ended. Past performance is no guarantee of future performance, fund prices fluctuate and the value of an investment at redemption may be more or less than the purchase price. This material should be preceded or accompanied by a Prospectus. Under SEC Rule 34b-1, this quarterly performance supplement must appear as the first item 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 he would treat himself. You can see why— Berkowitz and his 30 employees have $150 million of their own money invested in the $11 billion Fairholme Fund. The bulk of that $150 million belongs to Berkowitz.9 According to a July 2009 study by fund tracker Morningstar, managers with more than a $1 million stake in their own funds beat 58% of peers, on average, over the past five years. Funds with no manager investment beat 46% of peers. Fairholme’s 13.2% annualized return has outperformed 9 9 % of peers over 10 years. On Jan. 12, Morningstar named Berkowitz one of three “Fund Managers of the Decade.” Funds began to disclose manager investments only in 2005, after the Securities & Exchange Commission changed disclosure rules. So the research is preliminary. And the level of disclosure is poor—managers need only report their holdings in broad bands that start at $0 to $10,000 and stop at “over $1 million.” Beyond that it could be $1.1 million or $150 million. (For trustees on fund boards of directors, the disclosure cap is $100,000.) More than half of the 4,383 U.S.-based funds in the 2009 study had no manager investment; 413 had investments of over $1 million. “It can be hard for younger managers who’ve just been promoted to invest more than $1 million in their funds,” says Laura Lutton, Morningstar’s editorial director of fund research. “But I have a hard time understanding why so many managers would not invest anything at all.” Some fund companies use compensation 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 fund they manage, compensation “is largely driven by fund performance, which ... aligns their interests with the interests of our shareholders.” That performance-based compensation “is measured against an appropriate benchmark index and peer group over multiple periods as long as five years.” Four years ago, Royce & Associates, a New York-based fund firm with $28 billion in assets, created a policy requiring lead portfolio managers to invest at least $1 million in their funds. Co-portfolio managers must invest $500,000 and assistant managers $250,000. “If you’re young and don’t have enough money, we will defer your quarterly bonus into the fund,” says Jack Fockler, Royce’s managing director. As a result, the firm’s
100 employees have $100 million invested in its funds. Then there’s Southeastern Asset Management, parent of the three Longleaf Partners Funds. “If you work for Southeastern or your spouse works for Southeastern, you cannot own individual stocks or other non-Longleaf mutual funds,” says Lee Harper, a Southeastern spokesperson. Spouses of Southeastern employees who don’t have Longleaf funds in their companies’ 40i(k) plans must get approval from an “exception committee” before participating. The firm’s 55 employees and its charitable foundation are the funds’ largest shareholders, collectively owning $1 billion in fund shares. The Longleaf Partners Fund has beaten 96% of its peers over the past 10 years. Fund companies with heavy manager investment tend to be boutique 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 culture of ownership. Its 54 analysts and money managers have $113 million invested in its funds. Since 2005 the firm has paid half of fund manager/analyst bonuses in fund shares, and shares vest over four 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 firm’s $9 billion flagship Janus Fund. “We have a saying: ‘You don’t wash a rental car.’ We don’t treat portfolios as rental cars. We treat them as owners.” There is evidence of improvement in ownership among fund boards of directors. According to a study of 7,690 funds by fund trade group Investment Company Institute, 28% of funds required directors to own fund shares in 2008, up from 6% in 1996. Longleaf directors, for instance, must own fund shares at least equal in value to their annual directors’ salaries. “One of the most important responsibilities of

fund boards is to negotiate fees and expense ratios with fund management companies,” says Morningstar’s Lutton. “When directors are paying some of those fees as shareholders, they have a good incentive to lower those fees for themselves.” A handful of fund companies lead the way in this area. One that makes a big point of employee investment is Davis Advisors. It touts the size of its ownership—about $1.5 billion—at the top of the Davis funds’ home page. (Much of that money is from the Davis family, whose patriarch, Shelby Davis, and his son, Chris, built the firm.) Davis, which manages $45 billion in mutual fund assets, has “director stock ownership guidelines” that 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. For independent directors, those annual amounts ranged from $67,500 to $130,000 in20o8. Selected Funds’ mutual fund fees are among the lowest in the business. To find out what a fund’s manager ownership levels and policies are, check its Statement of Additional Information, which accompanies its prospectus and can be found at fund Web sites and at Morningstar.com. Morningstar also has stewardship grades that analyze manager incentives and pay structure. (Not all funds are rated yet.) Managers with big investments in their own funds receive an “A” for the incentive part of their stewardship grade. 1 bw 1 MAKING THE GRADE These funds received “A” stewardship grades from Morningstar because of strong corporate cultures, low fees, and heavy manager investment in their funds. 10-YEAR RETURN % OF PEERS THE FUND/TICKER (ANNUALIZED) FUND BEATS American Funds Funda- 0 Cf|, Qfl , mental Invs. A/ANCFX d’bU% SU% Dodge & Cox Stock/ CCC CM DODGX D-D0 34 Oakmark Equity & Q flfl QQ Income/OAKBX a,0U a° Royce Special Equity/ 19 (19 Q7 RYSEX XCMC a’ Selected American O AO QO (Class D)/SLADX e“HC aQ T. Rowe Price Mid-Cap C C“7 on Growth/RPMGX J“0’ °° Vanguard Wellington/ R IK 07 VWELX °-10 3/ *Annualized returns as of Dec. 31, 2009. Includes capital appreciation plus reinvestment of dividends. Data: Morningstar Reprinted from Bloomberg BusinessWeek, January 25,2010, copyright by Bloomberg L.P. with all rights reserved. This reprint implies no endorsement, either tacit or expressed, of any company, product, service or investment opportunity. #1-27479514 Reprinted by The Y6S Group, 717.505.9701. For more information visit www.theYGSgroup.com/reprints. Average annual total returns for the Longleaf Partners Fund and its benchmark for the one, five and ten year periods ended December 31,2009 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 unhedged index 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 performance does not guarantee future results, fund prices fluctuate, and the value of an investment at redemption may be worth more or less than the purchase price. Please call 1-800-445-9469 or view Longleaf’s website (www.longleafpartners.com) for more current performance information, or for a current copy of the Prospectus, which should be read carefully before investing to learn about the investment objectives, risks, charges and expenses of the Longleaf Partners Fund. Employees of Southeastern Asset Management are required to restrict publicly-traded equity investments to the Longleaf 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 Funds as an option in an employer provided retirement plan are no longer required to obtain approval to participate. The Longleaf Partners Fund is designated as a Large Blend fund by Morningstar. As of December 31,2009, Longleaf Partners Funds was ranked among 314 Large Blend funds in the 10 -Year category.

iSttL9 Graham&Dd^®Wville OGrlQQf An investment newsletter fromejjdEMtf Columbia Busi iu-sn Si liool Inside this issue: _____ . . _____ .. ,, . “1 “Parsimony is Extremely Profitable” — Mason Hawkins Graham & Doddsville is the : J J ¦student-run investment mh ! ,-...,. Mqcnn Hawkins founded nies selling below net-net, H [newsletter of Columbia Bust- r»ason nawKins lounaea s . HPSISHH ness c oo e news etter , . |97J rf |ow their net-cash and EhPIH builds on Columbia s proud ; 6 , , , ,, , . HEiB&JsiH ... . today the firm manages bought a few, literally buying KMPMJH heritage in value investing ‘ “ . ,, cc- Tl . HbEHBShHH and focuses on promotm a * OVer $30 bi"'°n ‘” Va,Ue S y HliBSiilH sound investment philosophy ... _,, ,,,,,,,,,. -ru,,..,, ,.,,,,, ,, ¦BHKKlllll • • h h on tremendous my career. There were no ¦¦hH world’s leading investment : — _____ ‘ HiJ&feHH with its Longleaf Part- point. BinH| practitioners. The following r , VHH ners Fund posting its MBHi interview with Mason Haw- > be$t abso|ute annua, re. G&D: That sounds s|mllar ¦B|H kins is an excerpt from Issue turn of nearly 54%. to what John Templeton HHf VIII of Graham & Doddsville. talked about doing in some “™ , G&D: Could you tell us a emerging markets. Were Mason Hawkins, Portfolio Editors. ! little bit about how you de- there any other influences 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. And you Clayton Williams ¦ MH: When I was in high MH: Chronologically, my do eliminate a lot of interfer- MBA 2010 “; school, my dad gave me the Dad, Ben Graham, John ence by beinS in MemPhis as James 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: That’s a very inde- tvtra ?ni l ‘ most teenagers, investing jng. pendent approach, sticking ‘ • was not my primary focus, to your facts and reasoning 2”! f fkawlts 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 Graham’s three main tenets escapjng the hectic New tnat sways a ‘ot °f managers ) resonated with me. After York atmosphere allowed is a desire to minimize ca- newsletteSrahamanddoddcoW] hiSh *cn°o1’ ‘ “as’ucky him to think more clearly, reer risk by hugging a bench- ,. enough to have Security Do you think that has been a mark- Your firm takes a Visit us at: — Analysis as the core text- factor at Southeastern in completely different view on www.grahamanddodd.com j book jn an undergraduate Memphis? tnat- Could you talk about wwwO.gsb.columbia edu/students/ course, in an MBA program the benchmark you use and organizations/cima/ < |aten we|| as in tne tnree MH. y Wg dg end a(_ your attempts to track that — CFA courses. I’m 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 m°St slSn,ficant and thejr cQm , cQm _____ investments not benchmarks. catalyst for me occurred in tjtjve p0sitions We We’ve established inflation jmmmm the bear market of 1970. dear|y remind our associates Plus l0% » our absolute &tmH% During my rS,morj y?ar at that you’re right because of investment goal and that’s Mjl throu’hThe entire S&P’stock y°ur facts and reasonin& not been the case for our his” ° because someone agrees or COLUMBIA INVISTMENT guide and recorded COmpa- (Continued on page 2) MANAQEMEKTJVSSOCiATION ° Average annual total returns for the Longleaf Partners Fund and its benchmark for the one, five and ten year periods ended December 31, 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 unhedged index include reinvested dividends and distributions, but do not reflect the deduction of taxes. Historic j numbers include periods in which the Fund used currency hedging as an investment strategy. Beginning in the third quarter 2009, and following a transition period in early 2010, the use of currency hedging as a routine investment strategy ceased. Current performance may be lower or higher than the performance quoted herein. Past performance does not guarantee future results, fund prices fluctuate, and the value of an investment at redemption may be worth more or less than the purchase price. Please call 1-800-445-9469 or view Longleaf’s website (www.longleafpartners.com) for more current performance information, or for a current copy ofth&Rrnsbectus. which should be read carefully before investing to learn about the investment objectives risks charges and expenses of the LC99159 Page 5 of 15Discussion o/ particular investments should not be viewed as a recommendation to buy or sell any security.

Mason Hawkins (Continued from page i) ment is very important to net asset values to our com- tory. There’s not a lot of you. How do you approach parable sales database. solace in being down 20% evaluating a management We’ve recorded most M&A, when the market is down team? take-private, or liquidation 30%. Investing should lend transactions. We compare itself to risk avoidance. MH: We strive 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 their business acumen and the lower of the two. It’s ‘ 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 when you 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 Intelligent which jt occurred. If you VOU’re right Investor. An investment is We endeavor to read eve- recorded a transaction in one that promises safety of rything that’s available on 1982 when the long treas- because of your principal and an adequate management, but meeting ury was 15%, you’re going return. By deduction, those them in person is critical, to see a much lower set of facts and that don’t are speculators. It’s always important to metrics than if the comp We believe that buying se- hear their challenges and occurred in 2007 when the reasoning, not curities at large discounts to how they’re addressing long treasury was under 4%. conservative appraisals pro- them. Business is tough, because vides the best route to and the more realistic the We’ve made a lot of money above average compound- manager is the more likely in net-asset investing. Someone agrees ing. We’re focused on nail- he’ll be successful. We talk There are companies that ing down our evaluations so to their competitors, ex- have significant asset values Or disagrees we can use them to make employees, board members that don’t produce any significant long-term invest- we’ve known, and commu- earnings. Burlington North- Wlth yOU.” ment commitments when nity associates — to name a ern in the early I980’s be- sellers are under duress or few of our checks. came very cheap in relation traders are consumed with to its land, oil, natural gas, ephemeral short-term is- G&D: When you’re setting gold, timber, and pipeline — sues. an appraisal for a business, assets when the company what process do you follow? operated at a loss. G&D: Where do you look to find these ideas? MH: We spend a lot of G&D: What do you think time on free cash flow gen- about Buffett’s decision on MH: Value Line, new low eration after required capex BNI? lists around the globe, in- and working capital charges dustry rags, computer and then assess the value of MH: I think Mr. Buffett’s a screens, investee manage- that free cash generation. If very, very able investor, if ments and boards, competi- ‘• the company is not reasona- not the most talented long er ‘Ihn r tors ° our investees, re- bly predictable and competi- term investor, and I think he for Graham (“5-Dodd spected investors, US and tively entrenched, we are values highly BNI’s competi- • in v. si ins international “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 then Compare 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 < prices. It is understandable. vestment. When somebody «• “ * »’ » It has significant operating finds an idea, they write it MH: It can be 5 minutes, *| leverage coming out of our up. They assess business, Qr it can be 5 months. If -> \ economic funk. It will de- people, and price and then we’re buying a company “‘ — : liver significantly better-than everybody gets a copy of that’s selling below the cash ZnnnB-tt-a C~sr 1 -treasury returns in my the report which attempts on its balance sheet, it can opinion, but we believe it to lay out the relevant facts be done quickly. If we’re was a fully-priced acquisi- buying a norma, 0perating _,.._. _____ , . . t;nn , . , , Columbia Business School is business that has competi- , ,. r . ... r a leading resource for rnvest- tive challenges, you want to . . G&D: It seems that your be able assess it conserva- nt management profession- funds are more concen- tively and explore all the f and the 0nly Ivy LeagUe trated than the average mu- potential threats. Usually, buSmeSS Sch°o1 m NeW York tual fund. How do you our best ideas are vetted Clty-T School, where value think about concentration “We’ve made O lot quickly. investing originated, is consis- on an individual name and tently ranked amon8 t0P sector 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 do you 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: We’ve averaged less to 20 companies. Beyond 6 than 20% turnover over the that, there’s very little di- osset va/ues tnat long run, which means our versification benefit. Ideally, average holding perjod is you want to have your don>t pro(Juce any over 5 years. We sell busi- money in your most attrac- nesses when they approach tive quantitative and qualita- earnings.” intrinsic value and there’s tive qualifiers to give you no longer a margin of safety. the best opportunity for We a)so might seN a com. returns. It’s been our long- pany if we can improve our standing belief that it does position by 100%. not make sense to own 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 reauce your 100% improvement in his return Dotential as vou add Seniority plays no role. We . . r . return potential as you aaa ‘ r ‘ . position to make a change. names It’s mindless to do are a” vel7 niindful that the [. . ,,.,,. . 6 names, it s minaiess to ao ‘ jf a stoc was at 80% 0f ap. so after you’ve achieved mvestment succeeds or fails p he J adequate diversification. b»ed 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 the dynamic That’s because taxable in- for Graham &Dodd on your team when evaluat- qu«eiy, tne iaea rails, 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 the com- BMBfc MH: There are 9 and a half pany you’re selling and the IjfiBwH B of us — I’m a half. Each ana- . colUM,w IIIV,,™,,T U«U: Wnat IS a normal (Continued on p age 4) imimoumwtassocwion

Mason Hawkins (Continued from page 3) cretes at ‘2% Per annum, up another 17 points per company you’re buying. and the price reflects intrin- year of compounding. So, Also, in Templeton’s 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 value invest- costs, and even today there very well at night knowing ing is the huge plus you get are still material market that the value is greater from stealing a good corn- impact costs from buying than the price. Clearly, Ben pany. and selling. Graham wrote a lot about G&D: What areas of the Another cause for change in market do you think are our portfolio is deteriora- particularly interesting? 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. We’ve had some Natural 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 m’lSphce by far the cleanest. It is turnover is that manage- politically secure. Risk ad- ment might turn out to be your purchase. justed, it is most attractive. less than trustworthy or Last|yi usjng more 0f it capable and changing them Buying good busi- benefits security, our bal- out would be too difficult or ... ance of trade and therefore expensive. nesses IS Critical tne US dollar. We believe companies that have grow- G&D: As you’re discussing to profitable long ing reserves and production I appraisals and margin of . . of natural gas in this country safety, you’ve mentioned -term equity in- should fare very well. ‘ investing in net-nets. Do # n Chesapeake Energy and you find margin of safety in Vesting. Pioneer Natural Resources I the quality of the business are our two major commit- or just a cheap price? ments. MH: Valuable growth is the G&D: The market’s opinion great eraser if you misprice on the natural gas situation your purchase. Buying good in the US has changed sig- businesses is critical to prof- nificantly with shale deposits itable long-term equity in- and increasing reserves. vesting. There are three the marSin of safetv and You used to hear about : components of an equity protecting your principal, natura! gas dependent indus_ investment’s return. One is but there was less emphasis trjes bejng at a permanent the discount to intrinsic ,on the benefits to returns competitive disadvantage in value. The second is the from buv’nS Sood busl” the U.S., and now there is a — HeilbrunnCenter growth in intrinsic value. nesses at cheaP prices. (ot of afc)out oversupp|y for Graham (g-Dodd And the third is the rapidity and lower 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 fair value, 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- <* rinsic value, you pick (Continued on pag. 5)

Mason Hawkins (Continued from page 4) ucts, be they individuals or Nationalization risk is not ¦ will rise to that supply, as third parties. We’d like to one we’ll knowingly take. you substitute natural gas participate in the wonderful Said another way, if you for oil and coal and as the demographic healthcare wouldn’t feel comfortable industrial use of natural gas demand profile of this coun- leaving your money in a recovers. Furthermore, we try and that of the world, bank in a country, you cer- believe natural gas directly, but we haven’t . found a \ tainly wouldn’t want to own or indirectly via hybrid and company that qualifies busi- the equity of a business in electric power trains, will be ness, people, and price. that country. used in transportation, both in autos and in trucking. G&D: Another area is in- G&D: So does that put ternational opportunities, more of a focus on devel- G&D: Does your invest- Obviously, you have a lot of oped markets as opposed to “We assume an ment thesis anticipate any international exposure. Do emerging, more volatile government spurred action you think about interna- markets? OWner-Oberator or is independent of a public tional investing any differ- policy response? ently than domestic invest- MH: It does. There’s an- mentality OS you ing? Do you have a greater other challenge if the cur- MH: Our appraisals do not deal of optimism for emerg- rency is an issue. Many know. If you WOrk build in any government ing market investments? years ago, we found a terri- mandates, but we believe fie Coca-Cola bottler in for Southeastern, they’re probable. MH: Much of the world Brazil, but the currency was outside the United States going to cost us 20+% a you have to do all G&D: Another sector that wi” grow more quickly, and year, and that prevented us is garnering a lot of discus- as rea’ incomes rise, you’ll from making the investment. OJ your equity sion is health care, which I get pretty rapid demand notice has a zero percent growth in emerging mar- G&D: You mentioned that investing via the weighting in the partner’s kets. However, investment labor issues could be a fac- _____ . fund. Is that related to un- challenges are numerous, tor on an investment. Longleaf Partners certainty regarding how High security prices is the You’ve been an investor in _____ , ,, things will shake out or sim- paramount one. Proper the auto industry in the past runas. ply better opportunities corporate governance and — what are your thoughts elsewhere? stewardship are others. If on the sector now? there’s not corporate de- MH: I was an ethical drug m°cracy, and there’s not a 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 Pr°bably not going capjta|-jntensive, low-return have explored all aspects of to make jt into our Portf°- businesses. Our foray into the health delivery systems. lios- Some countries, GM was pr.edjcated on a We have exposure through though, 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 the tjme jn tnejr valuable division. The rea- when we owned DeBeers, investments in DTV, GMAC son health care is not a we were able to block a sub and some of the separable large weighting is because -optimal takeover bid with a assets that they had. It was we haven’t found compelling 20% vote and demand ap- not based on the automo. values. Drug companies P™53’ ri2hts which §ot us bile industry’s economics. f<?GnS/ Sd have depleting revenue intrinsic value. Thus, we ,,,,,,, rf. sources that you have to sPend time look]ng at gov” G&D: In that case, you replenish and there are ernance rules We want to transjtjoned jnto convertj. ******* price pressures from the be treated fairly, and we b|es Hqw do thjnk I—gSl , purchasers of those prod- believe in corporate democ- mmmmtmam racy and accountability. (Continued on page 6) i»»ii*aiiMirrASSoci*TiON -<” r

Mason Hawkins (Continued from page 5) tages the Longleaf Partners about investments in other If you work for Southeast- Funds is our long-term time areas of the capital struc- ern, you have to do all of horizon. It’s very difficult to ture? your equity investing via the find a long-term investor Longleaf Partners Funds. I today, and we believe that’s MH: Yes, we bought con- believe that benefits us in beneficial to us. The aver- vertible senior debt, but the two ways. It removes con- age holding period on the rules for the debt-holder ficts of interest, and it fo- New York Stock Exchange changed in that particular cuses everyone’s attention has dropped to 6-months incident. The rule of law on the companies in the from 5 years, 30 years ago. was threatened. Indentures portfolio. When you see So, there’s a lot of “moving and contracts were jeopard- vour boss in the mirror in about” in the industry and jzed. that average NYSE holding period dropping is an indica- G&D: In some ways the tion of )ust how short-term auto industry is represents- everybody has become in tive of the broader U.S. their thinking. manufacturing industry. Do you think the U.S. can be ,,.- . More participants are trad- competitive in those indus- '' PeoP,e ore ers, believing that investing tries longer-term? , , . for long-term returns is not Very tearful, you a worthwhile pursuit. We MU TU know it is. Growth in cor- r ,! • 7 I , ¦ normally can buy porate intrinsic value is of. headwinds, but it is com- r pany specific and hard to /n ffreQt ouontlty ten obfuscated b/ st°<* i- d * -c u • greui i/uuriwiy. pr|ce movement, which generalize. But if a business \ is highly capital and labor And if people are does notaPPropriately track intensive, they’ll have trou- ‘ People are th bus|ness ,, . value. That s good for all of ble” very greedy, you us who are appraisers of _. w , , , ,, ,, businesses, because it means G&D: You’ve had a bng normally can sell _____ , .... 6 ‘ you get more mispncing and career in investment man- , ,, _•._.* _¦ L • _i ;~ ,,-~,,+ ,,..*,,,+;+., >> better opportunity to get a ; agement and seen the indus- in great quantity. _____ , ,. \ _____ , ° ° ~ ‘ franchise at a cheap price. try change over your ca reer. What’s your outlook _«,»» ,, , ,,. . , c G&D: You re also willing to on the industry going for- , ° ., n. ¦ cose the funds when they ward? Do you have any , , ‘ *u u* u »u • j get too big. Has size been a thoughts on how the indus- , , u ¦ . . , major detractor as the try should be changing? _____ ‘, , firm s gotten bigger? the morning, you can assess MH: We’ve never thought your career rjsk so|e|y on MH; Qur of our business as an indus- , your investment resuits and so|ute and try. We think more about nof nn nolitir« or rplarivp -,,,,« , ..... 1 . . not on politics or relative 2009 when our AUM was HeilbrunnCenter our ex,stence as investors. returns Qur owner. . w , , . forGlS <f;DOdd Te bdi7 ?at >h Ide” °Perat°r CU’tUre he’PS US o5r funds when the oppor- hver good returns with low focus on the investments tunity set was small and we _____ !T , Tl P f > I” and d°ing the Pight thing for believed that the investment #BM|% the rest takes care of itself. our Dartners QBP We assume an owner- P prospects were not attrac- columsiaikvistmht operator mentality as you A .. ,,, . ,,f .. , m»k*««imhtassoci*tio>i , ‘ ‘ Another thing that advan- (Continued on page 7) j know.

Mason Hawkins (Continued fmm page 6) been around 68% over our pare them to the extreme ¦ ¦¦ HB Hj tive. We don’t need to hold funds’ histories and cur- discounts that stocks got to HhHHHH HBHB excessive amounts of cash rently they are still meaning- in the fourth quarter of HhHh EIBH and people don’t need to fully below that average, and 2008 and the first quarter of ¦ |9He1 hB ‘ pay us to buy treasury bills. we’ve delivered good re: 2009 would they seem less SE HhJ i So if our cash is building turns from the average. So’ compelling. £A’r’- .- Bviu HBl 1 rapidly and our prospect of if the individual companies S Bii Hh f finding good investments is are selling at prices of 62- G&D: One final question, HH H ‘ the funds and wait patiently. L ney’school011 stutente , ‘ interested in a career in Professor Bruce Secondly, the question “You want to investing? Greenwald at the 2009 ; should be how big is the G&D Breakfast qualifying investment uni- pursue it for the MH: You want to pursue it verse vis-a-vis the pool of # for the intellectual challenge, Bruce C. N. Greenwald i capital. In a vacuum, the intellectual for the reward of being cor- holds the Robert Heil” ‘ larger the pool of capital, rect about your investment brunn Professorship of the more difficult it is to Challenge, for the decisions, and for the op- Finance and Asset Man” manage. But, an intelligent portunity to help others. agement at Columbia Busi- investor knows there is reward of being Those would be the three ness Schod and is the great liquidity at each end of ¦ reasons , wou|d academic Director of the . the psychological barbell. If Correct about your councJ| you tQ pursue a ca _____ Heilbrunn Center for Gra- people are very fearful, you . reer in investin ,f ham & Dodd Investing. • normally can buy in great investment start Qut . dojng jt bg _____ Described by the New qUa“tity” W« ici«,,c nnA t,, cause X°u wan< to make a York Times as “a §uru to s decisions, and for ,ot ofXmoney, I doubt that Wa” Street’s &»™” And if people are very nrt,,n!txt tn you’ll be as successful. Greenwald is an authority greedy, you normally can *,f,c pponunny zo on value investing with t sell in great quantity. It’s in , , , _, #-pp» m . additional expertise in between the two extremes nelP othe«- Those *«? ™ot ™“Y pagers productivity and the eco- I ,,¦ ».. ...«. • u n i teik about investing in terms ‘ mth nteZrth ™uld be the of helping others, but that’s “«*» * Inlbrm-on. “ quarter of 2008 to the first . . an interesting perspective to quarter of 2009, we proba- three P”*nary have. bly could have put I Ox the _____ amount of assets that we “»«<>"*•••*> pursue MH: Most of our partners had to work effectively. In . at Southeastern come in today’s environment, it’s a ° COreer ln dailv for altruistic reasons, challenge getting smaller jnve5ti,,<, » “ °f * T “ sums invested appropriately. investing. and college students, but to produce the free cash flow G&D: That’s interesting, coupon at Southeastern that because in some ways you 63% of conservative apprais- can be reinvested to help ,, ,,•••.. ak thpv’re> still attr rfiwoiv those who are less fortu- seem very optimistic, with als’ lne/’e s"» attractively your portfolio price to value offered. If you had landed nate- Heilbrunn Center below your long-term aver- on this Planet today and vou for Graham (g-Dodd age. were reviewing our long- G&D: That’s a great note ‘»’»’«» term price to value relation- to end on. Thank you Mr. MH: If you read our annual shiPs’ y°u would saX that Hawkins. #3HE% report, you’ll see that our they’re adequately dis- IflHKJ average price to values have COunted °n|y if V°u com” J222S2SSL

Reprinted by permission of Morningstar. March 11. 2010 • OPP-UAT74 At Longleaf, ‘Partners’ Is More Than a Name Fund Spy I 03-11-10 I By Gregg Wolper One of the more discouraging aspects of the recent financial crisis was the exposure of misbehavior among certain members of the corporate and investment worlds. In afew cases, these actions are alleged to have been illegal, while in many other cases, they were simply distasteful or showed a lack of respect for shareholders. Mutual fund firms mostly have steered clear of ethical problems this time, but they’re not immune from scandal. Headline-grabbing misdeeds can occur. Perhaps what’s more informative, though, is the way that shareholders are regarded on a mundane day-to-day basis. Fund companies vary greatly in the manner in which they treat fund shareholders. For this reason, Morningstar’s fund analysts focus attention on stewardship of capital. In recent months, we have published a series of columns providing new reviews of the stewardship practices of a number of families. Lately, we’ve taken a look at Federated, Janus, and Putnam. Today we examine afirm whose stewardship practices rise well above the levels of those three competitors: Southeastern Asset Management, advisor to the Longleaf Partners funds. Consistent Approach, Impressive Results In nearly all respects, Southeastern Asset Management acts in a shareholder-friendly manner. Unlike many rivals, the firm has not created a broad lineup of funds in order to gather as many assets as possible or to increase the chances that at least one of its funds would be performing well at all times. Instead, the firm relies on a single investment approach, in which its managers have specialized for decades: avalue-oriented, low-turnover, contrarian style targeting superior results over the long term. As a result, Southeastern has only three funds. It hasn’t come out with a new one since 1998, when Longleaf Partners International (LLlNX) arrived on the scene. Southeastern also closes funds to new investors when the managers think they’ve run out of ideas for putting money to work. In fact, all three Longleaf funds were closed to new investors for ayear and a half until mid-2006, when the International fund reopened. The firm’s flagship offering, Longleaf Partners Fund (LLPFX), reopened only after the sharp decline of stock prices in 2008 provided more investment opportunities for the managers. Longleaf Partners Small-Cap (LLSCX) remains closed. The firm’s dedication to its investment style, and to its core beliefs, has served its funds well over time. To be sure, there have been some painful stretches of underperformance (most notably in 2008). But over the 23 years from its April 1987 inception through early March 2010, Longleaf Partners Fund has beaten the S&P 500 Index by more than 2.5 percentage points on an annualized basis, a hefty margin. The other Longleaf funds also have outstanding records over the long term versus their benchmarks and peers. And while a couple of managers have left in recent years (neither went to another fund firm), Mason Hawkins, who founded Southeastern in 1975, and Staley Cates, who joined in 1986 and became a manager afew years later, have stayed in place-and have continued to set the tone. You Know Where They Stand Meanwhile, Southeastern is a model of clear and detailed disclosure. The Longleaf Partners web site provides a statement of “governing principles” as well as additional documents that collectively make Southeastern’s style of investing, its ethics policies, and its core beliefs as clear as possible to prospective and current shareholders. As one example, the literature for the flagship Longleaf Partners Fund actively discourages investments from anyone who has atime frame of less than five years. The communication doesn’t stop there. For many years, the Longleaf funds have published lengthy and detailed quarterly letters that list every purchase and sale during the period and usually discuss the reasoning behind each of these decisions. The reports also provide the managers’ thoughts about other long-term holdings, as well as broader issues in the economy or stock market, if the managers think those are relevant at the time. These reports, going back to the mid-1990s, are available in an easy-to-access archive on the Longleaf web site. Moreover, at the most alarming point of the financial meltdown, in late 2008, the managers issued a special report on the situation-

with firm and strong opinions, not just a review of the news. They also held aconference call for fund shareholders in which they stated their opinions and took questions from advisors and other shareholders. Those actions weren’t unique during that dismal period, but relatively few managers engaged in those actions to such a deep level. Such candor and clarity increases the likelihood that Longleaf share- holders will understand their funds’ unusual strategies and stick with them when they hit the inevitable hard times. In fact, in 2008, when Longleaf Partners Fund’s performance was awful. the outflows were not nearly as severe as one might have expected, judging from the experience of many other funds that have hit such turbulence. It’s also reassuring that the firm requires all of its employees to keep all of their equity investments in Longleaf Partners funds unless granted special clearance by a compliance committee. It also requires all trustees to have investments in the funds at least equal to the compensation they receive from the funds. Such practices ensure that the interests of the firm’s employees and the fund’s trustees are aligned with those of fund shareholders. A Mixed Record on Fees The one strike against Southeastern is that it has amixed record when it comes to fund fees. On the positive side, Southeastern pulled its funds out of Schwab’s fund supermarket years ago rather than pay the extra fees charged by Schwab. That decision kept the fund out of a popular sales channel, but the managers said, with justification, that the added fees would have harmed fund shareholders who did not hold their shares through Schwab. However, when it comes to the steep management fee charged by the International fund, Southeastern hasn’t been as shareholder-focused. For more than adecade after its 1998 inception, that fund’s expense ratio was one of the very highest of any broad-based (that is, not limited by region or sector) international fund with more than $500 million in assets. The managers have said that the International fund was expensive to run because it maintained foreign offices to conduct research and noted that alternative investments such as hedge funds were even more expensive. Only in late 2009 did the management fee on Longleaf International come down, and even then the fund remained relatively expensive. The other Longleaf funds do not have such steep management fees, but even so, their expense ratios can’t be called inexpensive consid- ering the size of their asset bases, particularly Longleaf Partners Fund. Meanwhile, in the advisor’s otherwise extremely detailed and forthright shareholder communications, which sometimes refer to shareholders as “investment partners,” only very rarely has there been any mention of the issue of cost or any discussion of efforts to bring the expense ratios down in order to put more money in the pockets of those investment partners. It’s important to note, however, that a fund’s directors are the ones specifically assigned to look out for the interests of fund shareholders, with fees being a key area. The board would have better-served share- holders by negotiating a lower management fee. Conclusion Southeastern Asset Management, therefore, is not perfect. However, when every aspect of the firm’s corporate culture is taken into consid- eration, and its actions, beliefs, and behavior are compared with those of its many competitors in the mutual fund arena, it’s clear that the firm stands well above the norm when it comes to stewardship. Gregg Wolper is asenior mutual-fund analyst with Morningstar.com. Important Disclosure Information Average annual total returns for the LongleafPartners Funds and their respective benchmarks for the one, five and ten year periods ended December 31,2009 are as follows: LongleafPartners Fund, 53.6%, (0.98)% and 5.31 %; S&f’ 500 I ndex, 26.46%, 0.42% and (0. 95}%; Longleaf Partners Small-Cap Fund, 49.31 %, 3.13% and 8.23%; Russell 2000 Index, 27.17%, 0.51 %and 3.51 %; LongleafPartners International Fund, 23.17%,2.54% and 7.46%; EAFE Index, 31.78%, 3.54% and 1.17%. Fund returns and those of the unmanaged and unhedged indices 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. Historic numbers include periods in which the Funds used currency hedging as an investment strategy. Beginning in the third quarter 2009, and following a transition period ending in early 2010, the use ofcurrency hedging as aroutine investment strategy was ceased. 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 prices. Please call 1-800-445-9469 or view Longleaf’s website (www./ongleafpartners.com) for more current performance information, or for a current copy of the Prospectus, which should be read carefully before investing to learn about the investment objectives, risks, charges and expenses of the LongleafPartners Funds.

M /’"¦¦ niHUnPTAn^® Reprinted by permission of Morningstar, March 10, 2010 • 0PP-LHYR4 l¥l( jKNINbolAn Longleaf: Margin of Safety Is Critical Longleaf Partners’ Mason Hawkins, Staley Cates, and team discuss the keys to capital preservation, the outlook for their portfolios’, opportunities in Japan, and more. Fund Manager Q&A | 03-10-10 | ByMorningstar.com The team behind Longleaf Partners (LLPFX) and Longleaf Partners be altered quarterly. Seeing the team’s collective conviction helps International Fund (LLINX) —Mason Hawkins and Staley Cates, along generate meaningful discussions about the portfolio. with Scott Cobb and Ken Siazon—recently answered our questions on the takeaways from the market swoon and subsequent rally, valuations At points of maximum stress, corporate leaders earn their stripes. of the portfolios, Japan’s fundamentals, and more. Those management partners who were focused on building and preserving shareholder value positioned their companies to withstand 1. In your recent quarterly report, you commented about the the terrible environment, and in many cases, emerge in a stronger lessons from 2009, both of which were strong endorsements of position. Seeing the difference in action and decision-making at your long-term, value-based investing approach. On a similar companies where boards and management are engaged owners versus note, were there any takeaways that have affected or altered hired representatives renewed the emphasis we place on properly the way you manage the portfolios? aligned incentives. We have begun an effort to persuade the boards As you know, the employees and affiliates of Southeastern Asset at all of our holdings to have minimum stock ownership requirements Management are the largest shareholder group in the Longleaf Funds including buying shares in the amount equal to their board compen- and can purchase no other equities or equity funds. With all of our net sation and holding those shares for their full tenure. worth at stake, we are constantly reassessing our process. We try to understand what went right in the names that do well so that we can 2. When you look at the relative valuation of the Partners fund replicate the success, and we do post-mortem analysis on mistakes to and the International fund, as well as your “on deck” list for help avoid making similar ones. both offerings, which one appears to have the greater level of undervaluation today? One significant takeaway was seeing proof that having a large margin The Longleaf International and Longleaf Partners (LLPFX) funds of safety between what we pay and a company’s intrinsic value are both attractively undervalued. The International fund is slightly is critical to capital preservation. As the deep recession brought cheaper, has a few more “on deck” names, and is more fully invested appraisals down, in most cases our original cost remained below the than the Partners fund. After strong 2009 absolute returns, investors lowered appraisal, meaning that we had not lost principal (though might assume that the funds have run their course and have little prices certainly took a hit.) Had we paid 80% of our original appraisal, upside opportunity. This could not be further from the truth. Because we would be permanently under water in a number of cases. Principal the portfolios had become so dramatically underpriced, and because preservation also requires a long-term time horizon and an ability to some values have increased in the last few quarters, the funds’ price/ hold and/or buy businesses with a margin of safety in periods of stock value ratios are in the low 60% range, below the long-term average market declines. p/V of about 68%. (P/V represents the prices of the stocks we own versus our appraisals of corporate worth and is a helpful measure of We have further formalized several processes for vetting ideas. both the margin of safety in the po rtfolio as well as the quantitative Specifically, a “devil’s advocate” either volunteers or is assigned to upside opportunity.) every investment. The DA provides reasonable arguments against the case and helps synthesize the questions of the research team. On a qualitative basis the two funds are also compelling. The holdings Additionally, we are in the second year of an annual contest where in both portfolios reflect some of the most competitively entrenched each analyst uses fund holdings to build a phantom portfolio that can businesses we ever have owned along with some of the most capable

II — nLIILinnTAn@ Reprinted by permission of Morningstar, March 10,2010 • 0PP-LHYR4 NIC )KNINbolAK management partners. As you review our investments, you will find 4. The fund owned Cemex prior to and through the financial businesses that are leaders in their industries (for example, Aon crisis, a time through which the company has had to readjust (AON), Accor (AC), Cemex (CX), Chesapeake (CHK), Cheung Kong its strategy and capital structure. Can you speak specifically to (CHEUY), Linde, and Olympus (OCPNY), have gained share in the whether your initial thesis still holds and if not, what the adjust- recession (Disney (DIS), DirecTV (DTV), FedEx (FDX), Genting (G1GNY), ments have been and how that’s affected your assessment of the Marriott (MAR), and Yum Brands (YUM)), and have financial flexibility firm’s prospects and value? to take advantage of a challenging environment (ACS, Berkshire Cemex (CX) qualified on all three of our investment criteria— Hathaway (BRK.A) (BRK.B), Dell (DELL), Diageo (DEO), Fairfax, and business, people, and price. Cemex is the best-run of three global Philips). While these businesses will benefit in an economic recovery, cement businesses that constitute an oligopoly and therefore have our appraisals don’t assume a cyclical bounce, and the values of pricing power. Cement demand, though cyclical, should grow with these businesses will grow even if top lines remain at 2009 levels gross domestic product over the long run. Lorenzo Zambrano is an for a while. owner-operator who built the company, holds substantial shares, and has an operating and capital-allocation track record that has added In the International fund we have the additional opportunity to benefit substantial value for owners. We originally purchased Cemex when from growth in emerging markets without taking the geopolitical, the company took on debt to acquire RMC in the United Kingdom, and governance, or price risk that many direct investments in those the stock fell to below 60% of our appraisal. The company’s return on markets face. Philips, Yum Brands, Cheung Kong, and to a lesser but RMC was larger than we anticipated causing Cemex’s value to rise. meaningful extent, Accor, Dell, Diageo, and Linde, are all dominant global businesses each with shareholder-oriented management, Between 2008 and summer of 2009 two events lowered our Westernized governance standards, and exposure to the growth appraisal. First, at what turned out to be the peak of the cycle in late opportunity in less-developed locations. 2007, Cemex used bank debt to acquire Rinker. Second, the severe worldwide recession lowered units by nearly 50%, with two of the 3. When investors speak about Japan, it’s inevitable that the worst-hit countries, the United States and Spain, being two of Cemex’s discussion veers to a more macroeconomic level. Given the biggest markets. As worldwide demand evaporated, the value impact International fund’s relatively large stake (30%) in that country, was magnified by Cemex’s leverage. By mid-2009, the company had to is this something you pay attention to or do you feel that it’s refinance its debt and issue equity which further lowered our appraisal. enough to focus on company-specific analysis? We do keep track of the macroeconomic fundamentals in Japan. We held our Cemex stake in spite of the value decline because the Deflation, yen strengthening, unemployment, and weak domestic price fell much further and the long-term case was intact. Although the demand, for example, are factored into our valuation of Japanese stock has rebounded 2.5 times from its lows, the company still sells companies. Despite the weak economic fundamentals, we are still for half of our materially reduced appraisal. The competitive strengths able to find world-class companies with sustainable competitive of the business have not changed as demonstrated by the fact that, advantages at significant discounts to our conservative appraisals outside of its two weakest markets, Cemex raised or maintained that can grow in a no-growth macro environment. prices even in the recession. Interest coverage is 3 times, and the free cash-flow yield is 15%. Our extremely conservative appraisal indicates There has recently been a lot of attention paid to the significant we have the opportunity to more than double our money from here by indebtedness of the Japanese government. In stark contrast to the ‘ owning this best-in-industry business led by an able partner. situation in the public sector, the Japanese companies we invest in are very strongly capitalized and in most cases have significant excess 5. Has Longleaf ever considered launching a global fund capital. For example, our two non-life-insurance investments in Japan, that would serve as a one-stop option for investors who NipponKoa and Sompo Japan, have solvency margins of 773% and don’t want to allocate between the Partners and International 794% respectively, significantly exceeding the minimum required level funds themselves? of 200%. Quite a few companies in Japan trade at net cash. Each Longleaf fund began as a vehicle for Southeastern employees to Our margin of safety is probably larger in Japan than it is in invest our capital in compelling long-term opportunities. The Partners other countries. fund started in 1987 and owned U.S. and global businesses. We added

Reprinted by permission of Morningstar, March 10,2010 • 0PP-LHYR4 the International fund in 1998 when Partners had reached the 30% maximum foreign holdings limit, and we were still finding companies we wanted to own overseas. The way we think about our own “global exposure” is by splitting our assets among the three Longleaf funds (which also include Longleaf Partners Small-Cap (LLSCX)). If we were starting from scratch today, we would probably have two funds, a global and a global small-cap, to allow the broadest universe of opportunity while concentrating in our 20 most qualified holdings. We do manage separate accounts with a global mandate, and the names in these portfolios reflect a subset of what the three Longleaf funds own. The challenge in creating a Longleaf Partners Global mutual fund is assessing whether its creation would benefit the shareholders of our existing funds to whom we owe our first obligation. If creating such a fund caused significant outflows from any of the existing Longleaf funds by investors transferring assets, this could harm the remaining shareholders. Likewise, merging the Partners and International funds into a single global fund might cause those shareholders who want separate geographies to leave. Important Disclosure Information Average annual total returns for the Longleaf Partners and International Funds and their respective benchmarks for the one, five and ten year periods ended December 31,2009 are as follows: Longleaf Partners Fund, 53.6%, (0.98)% and 5.31%; S&P 500 Index, 26.46%, 0.42% and (0.95)%; Longleaf Partners International Fund, 23.17%, 2.54% and 7.46%; FAFF Index, 31.78%, 3.54% and 1.17%. Fund returns and those of the unmanaged and unhedged indices 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. Historic numbers include periods in which the Funds used currency hedging as an investment strategy. Beginning in the third quarter 2009, and following a transition period ending in early 2010, the use of currency hedging as a routine investment strategy was ceased. Past performance does not guarantee future results, fund prices fluctuate, and the value of an investment at redemption may be worth more or less than the purchase prices. Please call 1-800-445-9469 or view Longleaf’s website (www.longleafpartners.com) for more current performance information, or for a current copy of the Prospectus, which should be read carefully before investing to learn about the investment objectives, risks, charges and expenses of the Longleaf Partners Funds. Discussion of portfolio holdings should not be viewed as a recommendation to buy or sell any particular security.

Take a peek at these managers Money managers Mason Hawkins and Staley Cates at Southeastern Asset Management may not be household names along the lines of Warren Buffett or Peter Lynch. But their relative obscurity, combined with outstanding long-term performance, makes them must-watch pros. Their fourth-quarter reports were released in mid-Feb- ruary (sorry for the delay here; somehow they escaped my attention), and the management discussions and portfolio shifts are well worth a read. You do get a sense that they’re breathing a sigh of relief after a disastrous 2008 for global stock markets. One of the lessons learned from that year, they say, was that you can’t ignore the big picture that drives stocks, other- wise known as the macro-environment. “For those doing solid bottoms-up corporate analysis, the credit crisis overwhelmed individual company ana- lytical conclusions,” the money managers said. But already they have come up with a key lesson from 2009: The previous year was a bit of an anomaly, and bottom-up stock picking, in which investors focus on the underlying fundamentals of individual companies, still matters — a lot. Hey, they can back up that claim with a boast: Their Partners Fund, which focuses on U.S. com- panies, scored gains of 53.6 per cent in 2009, walloping the 26.5 per cent return of the S&P 500. “A macro-oriented investor could have logically decided on Jan. 1, 2009 (or in March when stocks were mean- ingfully lower) that with the horrible global economy, the teetering banking systems across multiple countries, and the extremely weak stock markets, it was a good time to sit on the sidelines until some economic clarity emerged,” the . managers said. “By contrast, an intrinsic value investor who focused on the free cash flow that certain well-run, competitively advantaged companies generated — even in a severe recession — would have purchased those cash flow streams at incredibly low multiples, i.e., high cash flow yields. Those who chose the macro route and parked in cash missed what was the best purchase point for equities in our lifetime and earned virtually nothing on their liquidity.” If the big-picture stuff doesn’t amuse, then zero in on their portfolio changes, where these oft-contrarian types have made some significant shifts. One that will jump out at Canadian investors: They’ve dumped their EnCana Corp. (ECA-T31.37-0.75-2.33%) holdings from _____ their Longleaf Partners International Fund. “EnCana rose to our value in the quarter as manage- ment followed through with its announcement to split the business into an integrated oil company and a pure-play natural gas producer,” they said. They used these proceeds to buy three stocks: Benesse Holdings Inc., a Japanese supplementary education company, Japanese-based Seven Bank Ltd., and Hoch- tief AG, a German infrastructure construction company. (Unfortunately, these stocks only trade overseas, mak- ing them a little more difficult for North American inves- tors to buy.) Also notable is the fact that Canada’s Fairfax Financial Holdings Ltd. remains the top holding at the International Fund, suggesting that Mr. Hawkins and Mr. Cates still see good things ahead for the insurance holding com- pany steered by Prem Watsa. Copyright 2010. CTVglobemedia Publishing Inc. All rights reserved. Posting license for 500 B&W Prints. License 18124. Reprinting or redistribution in any form is prohibited. http://www.theglobeandmail.comfblogsfmarketsftake-a-peek-at-these-managersfarticle1488419f The Following provided by Southeastern Asset Management Average annual total returns for the Longleaf Partners Funds and their respective benchmarks for the one, five and ten year periods ended December 31, 2009 are as follows: Longleaf Partners Fund, 53.6%, (0.98)% and 5.31%; S&P 500 Index, 26.46%, 0.42% and (0.95)%; LongleafPartners Small-Cap Fund, 49.31%, 3.13% and 8.23%; Russell 2000 Index, 27.17%, 0.51% and 3.51%; LongleafPartners Interna- tional Fund, 23.17%, 2.54% and 7.46%; EAFE Index, 31.78%, 3.54% and 1.17%. Fund returns and those ofthe unmanaged and unhedged indices 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. Historic numbers include periods in which the Funds used currency hedging as an investment strategy Beginning in the third quarter 2009, and following a transition period ending in early 2010, the use of currency hedging as a routine investment strategy was ceased. Past performance does not guarantee future results, fund prices fluctuate, and the value of an investment at redemption may be worth more or less than the purchase prices. Please call 1-800-445-9469 or view Longleaf’s website (www.longleaf- partners.com) for more current performance information, or for a current copy of the Prospectus, which should be read carefully before investing to learn about the investment objectives, risks, charges and expenses of the Longleaf Partners Funds .Discussion of portfolio holdings should not be viewed as a recommendation to buy or sell any particular security Southeastern Asset Management, Inc. is not reg- istered as an advisor in Canada or in any province or territory of Canada, and relies on available exemptions from registration with respect to its advisory activities in Canada. This document does not constitute an offering, or solicitation for the offering of, securities in Canada. The document is not, and under no circumstances is to be construed as, an advertisement or a public offering of any securities referred to in this document. No prospectus has been or will be filed in Canada with respect to any of the securities described this document.