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Longleaf Partners Funds Trust – ‘N-30B-2’ for 9/30/99

On: Thursday, 10/21/99 · For: 9/30/99 · Accession #: 950144-99-12019 · File #: 811-04923

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/21/99  Longleaf Partners Funds Trust     N-30B-2     9/30/99    1:63K                                    Bowne of Atlanta Inc/FA

Periodic or Interim Report Mailed to Shareholders — Rule 30b-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30B-2     Longleaf Partners Funds                               36    108K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Service Directory Trustees and Officers
1	1st Page - Filing Submission
34	Service Directory
35	Trustees and Officers

N-30B-2 1st Page of 36 TOC ↑Top Previous Next ↓Bottom Just 1st

LOGO

LONGLEAF PARTNERS FUNDS(SM)

QUARTERLY REPORT
at September 30, 1999

PARTNERS FUND

INTERNATIONAL FUND

REALTY FUND

SMALL-CAP FUND

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

MANAGED BY:
SOUTHEASTERN ASSET MANAGEMENT, INC.
Memphis, TN

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CONTENTS

[Download Table]

Letter to Shareholders..................................... 1
Y2K Readiness.............................................. 4
Longleaf Partners Fund (Partners Fund)
Management Discussion.................................... 7
Performance History* and Portfolio Summary............... 10
Portfolio of Investments................................. 12
Longleaf Partners International Fund (International Fund)
Management Discussion.................................... 14
Performance History* and Portfolio Summary............... 16
Portfolio of Investments................................. 18
Longleaf Partners Realty Fund (Realty Fund)
Management Discussion.................................... 20
Performance History* and Portfolio Summary............... 22
Portfolio of Investments................................. 24
Longleaf Partners Small-Cap Fund (Small-Cap Fund)
Management Discussion.................................... 26
Performance History* and Portfolio Summary............... 28
Portfolio of Investments................................. 30
Service Directory.......................................... 32
Trustees and Officers...................................... 33

* Average annual returns for all Funds and all indices except the Value-Line
Index are shown with all dividends and distributions reinvested; the
Value-Line Index is not available with reinvested dividends. The indices shown
are unmanaged. Past performance is no guarantee of future performance, and the
value of an investment when redeemed may be more or less than the purchase
price.

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LONGLEAF PARTNERS FUNDS
LETTER TO SHAREHOLDERS

TO OUR SHAREHOLDERS:

Benefits of Price Declines and Volatility
In the third quarter of 1999 the International Fund rose slightly while the
three domestic Longleaf Partners Funds suffered disappointing price declines
which eroded much of the performance delivered in the second quarter. The
Longleaf Funds are fortunate to have perspicacious long-term partners who
understand that increased price volatility produces salutary benefits for
patient, disciplined, value-driven investors.

Ben Graham described these benefits in Chapter 8 of The Intelligent Investor.

As long as the earnings power of his holdings remains satisfactory, he
(the investor) can give as little attention as he pleases to the
vagaries of the stock market. More than that, at times he can use
these vagaries to play the master game of buying low and selling
high. . . . The investor who permits himself to be stampeded or unduly
worried by the unjustified market declines in his holdings is
perversely transforming his basic advantage into a basic
disadvantage. . . . Price fluctuations have only one significant
meaning for the true investor. They provide him with an opportunity to
buy wisely when prices fall sharply and to sell wisely when they
advance a great deal.

Recent bouts of market fear coupled with specific company shortfalls from
consensus quarterly earnings estimates have enabled us to "buy wisely" in
compelling investment opportunities. We made significant progress in our
domestic portfolios.
- We added to existing holdings that we know well at very attractive prices.
- We acquired several new positions at prices below 60% of our conservative
appraisals.
- These investments have decreased the levels of low yielding cash in each Fund.
- Our corporate values per share, as well as our ownership in certain
businesses, increased as many of our corporate partners moved to repurchase
shares aggressively.

This progress has lowered the Funds' composite price-to-value ratios and
increased implied future returns. We recently have added materially to our
personal commitments in each of the four Longleaf Funds.

When do we sell a stock?
We sell a stock for one of four reasons:
1) The price reaches our appraisal and no margin of safety remains.

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LONGLEAF PARTNERS FUNDS
LETTER TO SHAREHOLDERS

2) We can improve our risk/return profile substantially, e.g. we can replace a
business selling at 80% of worth with an equally attractive company at 40% of
value.
3) The future earnings power of the company becomes severely impaired by threats
to the business, poor capital allocation, or other reasons.
4) We no longer believe management can build shareholder value and efforts to
find new corporate leadership would be unsuccessful or too costly.

Some have asked how long we will wait for a stock's price to rise before we
decide to exit an investment. A stock's price tells NOTHING about its value, nor
does it indicate over a short period how well we are executing. Asset values and
the free cash flow streams produced from those assets determine a company's
intrinsic value and our eventual outcome. Our horizon is opportunity driven, not
time driven. If the return opportunity remains significant based on the quality
of the business, the actions of management and the board, and the price of the
stock, we are patient. Additionally, we will always encourage managements to
build their long-term competitive advantage, even if it means sacrificing
short-term results.

A Twelve Month Perspective
Having a solid understanding of a business' value rewards us when its stock
price rises and when it falls. In the third quarter of 1998, all three domestic
Longleaf Funds declined MORE than they did in the third quarter of 1999. Armed
with our appraisals, we were buyers. We noted in the September 1998 report that:

For the first time since the Partners Fund closed in September 1995,
all three Longleaf Funds have sufficient undervalued and qualified
investment opportunities to become fully invested. This is a
significant change from our June report when cash reserves in the
Small-Cap and Partners Funds were 27% and 15%, respectively. Secondly,
lower share prices and our commitment of cash reserves to a number of
very undervalued businesses have reduced the composite price-to-value
ratios for each Longleaf Fund to historically low levels. Our partners
today have larger margins of safety and higher implied future returns
than at any point since 1990.

Following these comments, the twelve month returns, including the declines in
the third quarter of 1999, are 21.7% for the Partners Fund and 19.6% for the
Small-Cap Fund. The Realty Fund's 1.7% return is also satisfactory given its
universe, where the NAREIT Index is down 8.5% and the Wilshire Real Estate Index
has declined 4.3%.

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LONGLEAF PARTNERS FUNDS
LETTER TO SHAREHOLDERS

We and our partners benefited by acquiring what we knew were steeply discounted
companies. We reaped the rewards when fear subsided and the market began to
properly weigh the values of some of our holdings. Our prospects today are as
compelling as they were twelve months ago.

Distribution Information
Our capital gains distribution will be in early November, around the 10th. We
will not know the final amounts until then, but the Partners Fund and Small-Cap
Fund each have booked meaningful realized gains, primarily long-term, from
selling businesses that reached appraisal. The International Fund currently has
a small book gain, and we do not anticipate a capital gain distribution in the
Realty Fund.

Web Site
We have determined that a web site for Longleaf will strengthen our partnership
with you by making information more accessible. We are in the process of
designing the site, and our goal is to introduce it early in 2000. (This timing
saves addressing Y2K concerns and should help minimize the cost of the project.)
Expect to read more about our site in our Annual Report.

Y2K Update
Our direct shareholders received our Y2K Readiness document with their account
statements. For your convenience, it is reprinted on the following pages.

Sincerely,

[Download Table]

/s/ O. Mason Hawkins, CFA /s/ G. Staley Cates, CFA
O. Mason Hawkins, CFA G. Staley Cates, CFA
Chairman & CEO President

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LONGLEAF PARTNERS FUNDS
Y2K READINESS

The goal of Longleaf Partners Funds is to provide today's level of service and
accuracy to our investment partners after December 31, 1999. Below we summarize
our Y2K preparation efforts and ask for your cooperation. Working together, we
can ensure that the transition to Year 2000 goes smoothly.

Longleaf's Readiness
- All Longleaf internal systems have been tested and are Y2K compliant.

- Our third party systems providers have assured us of their systems' readiness.
We will continue to monitor and test these systems and interfaces.

- The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories and third
party service providers are ready. Such testing has been considered successful
and the industry as a whole appears to be on track.

- Because there is no guarantee that all systems affecting the Longleaf Funds
will be free of operational difficulty, we have enhanced our contingency plan.
Our backup procedures have been implemented successfully in response to
challenges caused by power outages, system updates, and vendor difficulties.

- Our vendors and we routinely maintain back-up records of our data. In the
unlikely event of system difficulties now, at year-end, or beyond, we can
reconstruct shareholder balances and accounting records.

- Key operations personnel will be on site monitoring our systems throughout the
New Year's weekend to assure the best possible transition.

- Our values of the Funds' portfolio holdings have taken into account the cost
of Y2K preparation and the risks each company faces.

Readiness of Longleaf's Partners
Your account is ready. No action is required on your part. Please use the
information below to help us manage one of the greatest Y2K risks we face -
human overreaction.

- In mid November all direct Longleaf shareholders will receive a year-to-date
account statement, coinciding with the capital gains distribution. This will
serve as an official copy of your account shares and balance. Save this
statement for your own reassurance.

- When you receive your year-end statement in mid January, you may compare the
account information against the November statement to set your mind at

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LONGLEAF PARTNERS FUNDS
Y2K READINESS

ease that your shares are properly accounted for. (Your year-end statement
will reflect any shares you receive from our December net income distribution,
and any transactions in your account since the November statement.)

- If you feel the need to check your account balance between December 31 and
receiving the year-end statement, call our automated account line at (800)
445-9469, option 1. Your year-end balance can be verified over the weekend. If
you have questions about the information on the automated line, account
representatives will be available during normal business hours Monday, January
3, by calling the toll free number and choosing option 3.

- As a long-term investor, panic could be your worst enemy. For example, the
idea of redeeming your shares before year-end and re-investing after the
calendar turns could be very risky:

a) Temporarily redeeming is a reaction to a transitory event. This short-
term decision compromises your long-term investment program.

b) Unless your account is tax-exempt, redeeming shares is a taxable event.
An important component to long-term compounding is deferring your tax
liability as long as possible. Disruption to your account from Y2K is
unlikely; owing taxes is certain.

c) If you temporarily redeem shares, the Fund's NAV could rise before you
reinvest, and you will have paid a high opportunity cost for being out
of the Fund.

d) If your goal is to have your money in a "safe" place, consider that
Longleaf is safer than many alternative locations, given our Y2K
commitment and level of readiness.

This information is a Year 2000 readiness disclosure as defined by the federal
Year 2000 Information and Readiness Disclosure Act. It is believed to be
accurate, but does not constitute a representation, warranty or guaranty.

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(LOGO)
(Intentionally Left Blank)

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PARTNERS FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford

Longleaf Partners Fund is up 2.7% in 1999 following a 15.3% decline in the third
quarter. As one of the largest shareholder groups in the Fund, we would have
preferred to avoid the short-term hit to our net asset value. Occasional
volatility must be endured, however, to succeed as long-term investors. The
trick is to turn episodes of market mispricing to our advantage using soundly
based appraisals.

Along with a number of our corporate management partners, we used the quarter's
price declines to make attractive purchases. As investors, we added
substantially to our stakes in the Partners Fund. As portfolio managers, we
increased a number of existing holdings and purchased a new core position,
General Motors. Management at FDX, Marriott International, and Host Marriott
announced and began major new share repurchase initiatives. Because these
companies are selling at large discounts to their corporate intrinsic values,
the stock buybacks will enhance earnings per share and value per share
materially.

The Fund is extremely well positioned today.
- We have one of the lowest composite price-to-value ratios ever seen in the
Partners Fund.
- We own businesses with excellent competitive positions.
- Many of our corporate partners have begun buying back their undervalued stock.
- We have a meaningful stake in some of our best ideas.
- We are fully invested.

Half of our decline in the quarter was attributable to Waste Management, Inc. At
June 30, WMI was our fifth largest holding, comprising 5.2% of assets, and was
trading at just under $54. Today, at one-third its former high and less than
half of our appraisal, Waste Management is the Partners Fund's largest holding.
A company usually gets this cheap only when it faces either insurmountable debt
or extinction risk to its fundamental business. WMI has neither problem.

We have committed a meaningful amount of our capital to Waste Management based
on the following:
- The company has the best landfill and collection assets in the industry.
- Its assets are impossible to duplicate in today's environmentally conscious
society.
- Waste Management is a dominant operator in all of its regional markets.
- The industry's economics are good and improving with limited supply and
growing demand.
- The industry has become an oligopoly with most markets having only one primary
competitor, creating an environment for firm pricing.

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PARTNERS FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford

- Significant cost savings and revenue opportunities remain from the merger of
the old Waste Management and USA Waste.
- The net cash earnings over the next twelve months should be over $2.50 per
share; and, in three years, after-tax free cash flow should exceed $4.50.
- The Board of Directors will find a capable CEO to capture the cost and revenue
opportunities, install adequate MIS systems, and lead and motivate a good
field organization.

Hiring a CEO and establishing an adequate computer management and accounting
system are fixable and evanescent problems.

FDX also contributed to the portfolio's decline. FDX has outstanding business
prospects and substantial cash flows. Fred Smith, one of the most capable and
vested partners we have teamed with in 25 years, leads the company. When FDX
announced earnings, they were two cents short of Wall Street's expectations, and
the stock dropped over 12% in a day. The company's discussion of the quarter
neither surprised us, nor impacted our value. Both the company and we have taken
advantage of the irrational reaction by purchasing shares.

The third negative impact to the Fund's performance was our combined lodging
holdings: Marriott International, Host Marriott, and Hilton. The investment
world continues to abhor anything related to real estate. These three companies
have reported better than expected results. They either own, franchise and/or
manage some of the strongest brands in the industry. Their hotel properties are
among the best in the country. Hilton announced the purchase of Promus (which we
own in the Small-Cap and Realty Funds). The company will be stronger and more
valuable, yet the price has declined since the announcement. We cannot explain
the tremendous discount that others have placed on this industry, but we know we
are teamed with stars such as Bill Marriott and Steve Bollenbach, who repeatedly
have proven their ability to build value per share.

A case in point is Hilton's spin off earlier this year of its gambling
operations into Park Place Entertainment. Bollenbach's move generated Wall
Street approval, and the stock quickly rose to its value. We were paid our
appraisal when we sold most of our stake in Park Place during the quarter.

Our cash position has declined from 30% to 5% in the last three months. In
addition to adding substantially to some of our existing holdings, we acquired a
full position in General Motors. We never thought we would own an auto company,
and think of this more as a high-quality conglomerate. The jewel is GM's
controlling position in Hughes Electronics, whose largest asset is DirecTV. GM
also owns GMAC, the profitable leasing and finance company. GM has made

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PARTNERS FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford

major strides in improving the margins at its car company. The Board consists of
some of the smartest shareholder stewards in America. Together with management,
they have allocated capital intelligently, spinning off non-core businesses and
aggressively buying in undervalued shares. We are excited about the long-term
prospects for this investment.

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PARTNERS FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED SEPTEMBER 30, 1999

[Download Table]

Value-Line
Partners S&P 500 (Geometric)
Fund Index Index
-------- ------- -----------

Year-to-Date 2.71% 5.32% (4.46)%
One Year 21.73 27.75 8.98
Five Years 17.16 25.01 7.73
Ten Years 15.28 16.80 4.26
Since Public Offering 4/8/87 15.87 15.49 3.52

FIVE LARGEST HOLDINGS
(REPRESENT 44.0% OF NET ASSETS)

WASTE MANAGEMENT, INC. (WMI) 14.6%
The world's largest solid waste collection and disposal company with
residential, commercial, and industrial customers throughout North America.

KONINKLIJKE PHILIPS ELECTRONICS N.V. (PHG) 8.2%
A leading manufacturer of lighting systems and electronics products, including
television and stereo equipment, appliances, and semiconductors.

MARRIOTT INTERNATIONAL, INC. (MAR) 8.0%
Owner of many of the strongest brand names in the lodging industry. Operates and
franchises over 300,000 rooms in hotels and resorts under the Marriott, Ritz-
Carlton, Renaissance, Courtyard, and Residence Inn names.

FDX CORPORATION (FDX) 7.5%
Integrated air-ground transportation company providing time-definite delivery of
packages and documents worldwide.

CANADIAN PACIFIC LIMITED (CP) 5.7%
Canadian company with a significant transportation (rail and shipping) business,
resort hotels, and valuable natural resources including oil, gas, and coal.

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PARTNERS FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999

[Download Table]

NEW HOLDINGS ELIMINATIONS
------------ ------------

Allied Waste Industries, Inc. MediaOne Group, Inc.
General Motors Corporation Mitsui Marine and Fire
Georgia-Pacific Corporation -- Timber Group Insurance Company, Ltd.
Park Place Entertainment Corp.* (HLT) The News Corporation Limited
Tricon Global Restaurants, Inc. The Seagram Company Ltd.

* Acquired through merger/spin-off of existing position (ticker of original
holding).

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PARTNERS FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Download Table]

SHARES MARKET VALUE
---------- --------------

Common Stock 93.3%

Environmental Services 15.4%
2,890,900 * Allied Waste Industries, Inc................... $ 33,787,394
31,101,214 Waste Management, Inc.......................... 598,698,369
--------------
632,485,763
--------------
Gaming 0.5%
1,758,300 * Park Place Entertainment Corp.................. 21,978,750

Health Care 2.8%
2,319,400 United Healthcare Corporation.................. 112,925,788

Investment Management 0.5%
1,237,700 * The Pioneer Group, Inc......................... 18,565,500

Lodging 15.9%
1,076,380 * Crestline Capital Corporation.................. 22,133,064
19,200,000 Hilton Hotels Corporation...................... 189,600,000
11,700,250 Host Marriott Corporation...................... 111,152,375
10,103,600 Marriott International, Inc.................... 330,261,425
--------------
653,146,864
--------------
Manufacturing 2.5%
4,450,000 * UCAR International, Inc........................ 101,515,625

Multi-Industry 14.1%
1,565,000 Alexander & Baldwin, Inc....................... 37,364,375
3,273,000 General Motors Corporation..................... 205,994,437
3,316,600 Koninklijke Philips Electronics N.V.
(Foreign).................................... 334,976,600
--------------
578,335,412
--------------
Natural Resources 9.5%
6,441,500 Georgia-Pacific Corporation - Timber Group..... 147,349,312
11,201,032 * Pioneer Natural Resources Company.............. 119,010,965
2,900,000 Rayonier Inc................................... 121,800,000
--------------
388,160,277
--------------
Property & Casualty Insurance 6.7%
30,534,000 The Nippon Fire & Marine Insurance Company,
Ltd. (Foreign)............................... 101,521,817
27,460,000 The Yasuda Fire & Marine Insurance Company,
Ltd. (Foreign)............................... 175,122,813
--------------
276,644,630
--------------
Publishing 4.2%
3,150,000 Knight Ridder, Inc............................. 172,856,250

Real Estate 5.6%
1,998,400 Boston Properties Inc.......................... 61,325,900
9,001,791 TrizecHahn Corporation (Foreign)............... 170,471,417
--------------
231,797,317
--------------

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PARTNERS FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Download Table]

SHARES MARKET VALUE
---------- --------------

Restaurants 2.4%
2,430,400 * Tricon Global Restaurants, Inc................. $ 99,494,500

Transportation 13.2%
10,175,000 Canadian Pacific Limited (Foreign)............. 232,117,188
7,934,800 * FDX Corporation................................ 307,473,500
--------------
539,590,688
--------------
TOTAL COMMON STOCKS (COST $3,909,212,520)...... 3,827,497,364
--------------

[Enlarge/Download Table]

PAR
----------

Short-Term Obligations 5.9%
40,895,000 Repurchase Agreement with State Street Bank,
4.60% due 10-1-99............................ 40,895,000
100,000,000 Commercial Paper - Clipper Receivables Corp.,
5.34% due 10-6-99............................ 99,926,250
100,000,000 Federal Home Loan Mortgage Corporation, 5.30%
due 10-13-99................................. 99,826,667
--------------
240,647,917
--------------
TOTAL INVESTMENTS (COST $4,149,860,437)(a)................... 99.2% 4,068,145,281
OTHER ASSETS AND LIABILITIES, NET............................ 0.8 34,757,174
----- --------------
NET ASSETS................................................... 100.0% $4,102,902,455
===== ==============
NET ASSET VALUE PER SHARE........................................... $25.05
==============

* Non-income producing security
(a) Also represents aggregate cost for federal income tax purposes.

Note: Companies designated as "Foreign" are headquartered outside the U.S. and
represent 25% of net assets.

OPEN FORWARD CURRENCY CONTRACTS

[Download Table]

Currency Currency Sold and Currency Unrealized
Units Sold Settlement Date Market Value Gain (Loss)
------------- --------------------------------- ------------ ------------

9,700,000,000 Japanese Yen 12-30-99............ $ 92,484,542 $ (8,516,398)
8,759,000,000 Japanese Yen 3-30-00............. 84,700,893 (9,903,687)
5,565,000,000 Japanese Yen 6-30-00............. 54,622,206 (3,454,598)
------------ ------------
Total Forward Contracts......... $231,807,641 $(21,874,683)
============ ============

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INTERNATIONAL FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and Andrew McDermott

Longleaf Partners International Fund gained 1.8% in the third quarter versus the
EAFE Index's 4.0% return. In 1999 the Fund is up 24.8% versus 7.4% for the EAFE
Index.

The quarter's slight gain masked several significant portfolio successes that
demonstrate the advantages of a disciplined, long-term approach to appraising
businesses. Highland Distilleries and Nippon Broadcasting rose 33% and 51%,
respectively, during the quarter. Highland rose upon a cash takeover bid that
valued the company at 425p per share compared to our cost of 247p. Nippon
Broadcasting's rise reflects the market's partial recognition of the value
contained in Nippon's large ownership of Fuji Television, one of Japan's three
primary television networks. When we bought our positions, many analysts
recognized the companies were undervalued. Most analysts avoided the shares
because they could not identify a "near term catalyst" that would force
recognition of intrinsic value. Longleaf's approach allows us to benefit from
the market's short-term focus while protecting ourselves from overpaying.

The Fund's gains were tempered by declines in four positions: Wisconsin Central,
our Japanese non-lifes excluding Yasuda Fire and Marine, Brierley, and Safeway
PLC, a U.K. grocer added during the quarter. Wisconsin Central, the
international rail operator gave up earlier gains as Wall Street took a bearish
view of transportation stocks in general, and rails specifically. Our appraisal
of WCLX has remained steady. Wisconsin Central's managers own a significant
amount of the company, have been successful rail operators, and have a track
record of maximizing shareholder value. The performance of Japan's non-life
sector has stabilized since the end of the quarter, and we have seen increased
consideration of shareholders, including the initiation of share buybacks by two
companies. Brierley continues to sell for a substantial discount to the sum of
its parts. Speculators hoping for an asset fire sale have been disappointed and
sold shares. Chairman Selwyn Cushing continues to build value for shareholders
and has capitalized on this sell-off by initiating a buyback of 13% of shares
outstanding. Safeway declined in part because of competitive pricing fears
related to Wal-Mart's purchase of Asda. Safeway has locations that cannot be
replicated in supply constrained markets and has hired Carlos Criado-Perez, a
former Wal-Mart international retail expert, to improve cash flow from
operations.

In addition to Safeway, we added Sampo Insurance Company to the portfolio. Sampo
is a Finnish non-life insurance company with significant exposure to equities
and rapidly improving underwriting results. The company has undergone a
corporate restructuring which will enable operations and margins to improve.
Management is shareholder oriented and incentives are tied to the performance

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INTERNATIONAL FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and Andrew McDermott

of the stock. Sampo contributed positively to the quarter's result, and remains
well below our appraisal.

We used cash inflows (the Fund now has $306 million in assets) and proceeds from
two sales to purchase our new positions and increase ownership in existing
holdings. During the quarter we sold the Canadian oil and gas company Anderson
Exploration as it approached our appraisal. This investment appreciated over 38%
in the year that we owned it. We also sold our stake in Dowa Fire and Marine
after management grossly misallocated capital by issuing shares to Nippon Life
at a steep discount to fair value. Subsequent to our sale, the stock has
declined 21%.

The dramatic moves in the foreign exchange market over the past quarter have not
impacted Longleaf Partners International Fund. Because we hedge currency to
minimize foreign exchange risk, foreign exchange moves do not significantly help
or hurt our performance. In the last three months, the yen has strengthened 12%
and both the Euro and Pound have strengthened 4%. This weakening of the dollar
partially accounts for the International Fund's underperformance during the
quarter relative to the unhedged EAFE Index and to unhedged international funds.
We add value by appraising businesses and assessing managements, not by
predicting currency movements. Our long-term results will reflect our abilities.

The Fund's successful first year has not diminished our opportunity. Although
many investments have appreciated, we have been able to rebalance the portfolio
into our most undervalued holdings and add qualifying new names. The total
portfolio is priced at less than 60% of our appraisal, and we are continuing to
add to our personal stakes.

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INTERNATIONAL FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

RETURNS
FOR THE PERIODS ENDED SEPTEMBER 30, 1999

[Download Table]

International EAFE
Fund Index
------------- ------

Year-to-date 24.77% 7.40%
Since Public Offering 10/26/98 36.03 19.05

FIVE LARGEST HOLDINGS
(REPRESENT 28.7% OF NET ASSETS)

GULF CANADA RESOURCES LIMITED (GOU) 6.4%
Canadian based exploration and production company with oil and natural gas
assets across the world.

BRIERLEY INVESTMENTS LIMITED 6.4%
A New Zealand based holding company which owns controlling stakes in U.K. based
Thistle hotels, Air New Zealand, and Australian building materials maker, James
Hardie.

NIPPON BROADCASTING SYSTEM 5.4%
The largest owner of Japan's #2 television broadcaster, Fuji Television, and a
dominant broadcaster in the Tokyo market.

SAMPO INSURANCE COMPANY LTD. 5.3%
The largest non-life insurance company in Finland. The company holds a
significant equity portfolio and is expanding into the domestic life business
and into other European non-life markets.

THE YASUDA FIRE & MARINE INSURANCE COMPANY, LTD. 5.2%
A Japanese non-life insurance company with over half its business in voluntary
auto policies, and the best combined ratio in Japan.

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INTERNATIONAL FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999

[Download Table]

NEW HOLDINGS ELIMINATIONS
------------ ------------

Anglovaal Mining Limited Anderson Exploration Limited
Banco Hipotecario The Dowa Fire and Marine Insurance
Bemrose Corporation plc Company Ltd.
De Beers Consolidated Mines Ltd. FDX Corporation
MOS Food Service, Inc. Haw Par Corporation Limited
O&Y Properties Corporation Premier Farnell plc
Premier Farnell plc The Seagram Company Ltd.
Safeway plc Shaw Communications, Inc.--Class B
Sampo Insurance Company Ltd. Swire Pacific Limited
Toyoda Automatic Loom Works, Ltd. Toyoda Automatic Loom Works, Ltd.
Weetabix Limited

COUNTRY ALLOCATION OF PORTFOLIO
(Stocks, Bonds and Forwards)

[Download Table]

Japan................................. 26.9%
United Kingdom........................ 20.5
Canada................................ 16.2
United States......................... 7.5
New Zealand........................... 6.9
South Africa.......................... 6.8
Argentina............................. 6.1
Finland............................... 5.3
Netherlands........................... 3.8
-----
100.0%
=====

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INTERNATIONAL FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Enlarge/Download Table]

SHARES MARKET VALUE
---------- ------------

Common Stock 94.2%
Agriculture 2.6%
164,200 * Agribrands International, Inc. (United States)....... $ 8,148,425

Banks 0.8%
219,672 Banco Hipotecario (Argentina)........................ 2,416,875

Beverages 4.1%
1,845,000 The Highland Distillers plc (United Kingdom)......... 12,594,709

Broadcasting 5.4%
220,000 Nippon Broadcasting System (Japan)................... 16,530,466

Food 6.2%
3,990,000 Safeway plc (United Kingdom)......................... 14,538,627
70,100 Weetabix Limited (United Kingdom).................... 4,329,288
------------
18,867,915
------------
Multi-Industry 14.9%
83,750,000 * Brierley Investments Limited (New Zealand)........... 19,461,825
112,240 Koninklijke Philips Electronics N.V. (Netherlands)... 11,336,240
3,765,000 Wassall PLC (United Kingdom)......................... 14,726,374
------------
45,524,439
------------
Natural Resources 13.0%
545,000 * Anglovaal Mining Limited (South Africa).............. 4,541,666
582,000 De Beers Consolidated Mines Ltd. (South Africa)...... 15,714,000
4,650,000 * Gulf Canada Resources Limited (Canada)............... 19,471,875
------------
39,727,541
------------
Printing 5.1%
2,853,600 Bemrose Corporation plc (United Kingdom)............. 15,555,656

Property & Casualty Insurance 21.8%
2,670,000 The Dai-Tokyo Fire and Marine Insurance Company, Ltd.
(Japan)............................................ 9,780,212
4,665,000 The Nippon Fire & Marine Insurance Company, Ltd.
(Japan)............................................ 15,510,555
3,195,000 The Nissan Fire & Marine Insurance Company, Ltd.
(Japan)............................................ 9,302,614
490,000 Sampo Insurance Company Ltd. (Finland)............... 16,281,720
2,503,000 The Yasuda Fire & Marine Insurance Company, Ltd.
(Japan)............................................ 15,962,578
------------
66,837,679
------------
Real Estate 4.4%
3,548,800 * O&Y Properties Corporation (Canada).................. 13,523,838

Restaurants 6.3%
431,000 Kentucky Fried Chicken Japan (Japan)................. 5,910,205
880,000 MOS Food Service, Inc. (Japan)....................... 13,224,373
------------
19,134,578
------------

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INTERNATIONAL FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Download Table]

SHARES MARKET VALUE
---------- ------------

Transportation 9.6%
670,000 Canadian Pacific Limited (Canada).................... $ 15,284,375
1,033,500 * Wisconsin Central Transportation Corporation (United
States)............................................ 14,146,031
------------
29,430,406
------------
TOTAL COMMON STOCKS (COST $254,261,077).............. 288,292,527
------------

[Enlarge/Download Table]

PAR
----------

Foreign Government Bonds 5.2%
16,800,000 The Republic of Argentina, 11.375% due 1-30-17 (Cost
$14,515,000)....................................... 15,834,000
------------

Short-Term Obligations 4.0%
12,287,000 Repurchase Agreement with State Street Bank, 4.60%
due 10-1-99........................................ 12,287,000
------------
TOTAL INVESTMENTS (COST $282,382,077)(a)........................... 103.4% 316,413,527
OTHER ASSETS AND LIABILITIES, NET.................................. (3.4) (10,495,486)
----- ------------
NET ASSETS......................................................... 100.0% $305,918,041
===== ============
NET ASSET VALUE PER SHARE................................................. $12.44
============

* Non-income producing security
(a) Aggregate cost for federal income tax purposes.
Note: Country listed in parenthesis after each company indicates location of
headquarters.

OPEN FORWARD CURRENCY CONTRACTS

[Download Table]

Currency Currency Sold and Currency Unrealized
Units Sold Settlement Date Market Value Gain (Loss)
------------- --------------------------------- ------------ -----------

5,285,465 British Pound 12-30-99........... $ 8,709,755 $ (38,216)
6,688,166 British Pound 3-30-00............ 11,017,483 (293,817)
17,765,000 British Pound 6-30-00............ 29,231,774 (621,850)
1,500,000 Canadian Dollar 3-30-00.......... 1,025,150 5,707
18,500,000 Canadian Dollar 6-30-00.......... 12,662,551 (189,001)
15,400,000 European Currency Unit 6-30-00... 16,734,607 (429,757)
2,374,317,354 Japanese Yen 12-30-99............ 22,637,902 (837,368)
4,938,726,087 Japanese Yen 3-30-00............. 47,758,250 (4,746,980)
1,669,000,000 Japanese Yen 6-30-00............. 16,381,754 (917,257)
15,024,523 New Zealand Dollar 12-30-99...... 7,782,525 331,851
23,650,000 New Zealand Dollar 3-30-00....... 12,267,737 571,428
6,400,000 New Zealand Dollar 9-29-00....... 3,322,880 (28,160)
------------ -----------
$189,532,368 $(7,193,420)
============ ===========

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REALTY FUND - MANAGEMENT DISCUSSION
by C.T. Fitzpatrick, Mason Hawkins, and Staley Cates

Longleaf Partners Realty Fund is down 7.3% in 1999 after a 12.5% decline in the
third quarter. Our June report proved prophetic when we said, "This wide margin
of safety (between the Fund's price and its value) does not imply that
short-term volatility is over. When price fluctuations occur, we will take
advantage of them." We are disappointed by the third quarter decline and
perplexed by the market's disdain for real estate over the last eighteen months.
Investors looking in the rear-view mirror may be disheartened. Our long-term
partners and we, by contrast, are enthusiastically and confidently focused on
the future return prospects created by the portfolio's significant
undervaluation.

The portfolio's biggest progress during the third quarter was investing the
proceeds from our sale of Red Roof Inns into Waste Management. Red Roof
announced its sale to Accor. The price rose, benefiting short-term performance,
and enabling us to sell the stock with a successful long-term gain.
Concurrently, Waste Management saw its stock price cut in half. Because the
majority of WMI's value is in the real estate it owns and operates, i.e., its
landfills, the Realty Fund had the opportunity to put its cash proceeds from Red
Roof into one of the most compelling investments Southeastern has seen in some
time. (Please see the Partners Fund discussion of Waste Management on page 7 of
this report.) The further decline in WMI's stock after we began purchasing
provided us with a lower average cost, but hurt the Fund's third quarter
performance.

We also sold Crestline Capital and Supertel Hospitality, which totaled were less
than 1.4% of assets. We used the proceeds from these small positions to add to
WMI and other holdings that were more attractive and large enough to impact the
Fund's results.

Our other lodging companies also contributed to our third quarter results.
Hilton announced its purchase of Promus, our largest holding. The rise in
Promus' stock was offset by the decline in Hilton's price. As owners of both
companies, we view the merger as beneficial. We will receive our appraised value
for Promus with part of our proceeds in the tax-free form of very undervalued
Hilton stock. The combined company will be a stronger, more dominant industry
leader. Host Marriott continued to outperform the hotel industry reflecting the
superior quality of its assets, and the company announced and began a share
repurchase program. The market has yet to recognize the resulting increase in
value per share, and the decline in Host Marriott's stock hurt our recent
results.

The three other companies that comprised much of the quarter's decline,
Catellus, Forest City, and Excel Legacy, have several common characteristics.
They have successful and valuable major development projects in supply-con-

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REALTY FUND - MANAGEMENT DISCUSSION
by C.T. Fitzpatrick, Mason Hawkins, and Staley Cates

strained, high-demand markets such as Mission Bay in San Francisco, Times Square
in New York, and the Disneyland entrance area in Anaheim. They are run by Nelson
Rising, the Ratner family, and Gary Sabin, respectively, who are focused on
shareholder value and are some of the smartest, most capable, and vested real
estate managers we know. Good news at Excel Legacy's Anaheim project was offset
by the termination of a project in Scottsdale. Catellus and Forest City reported
strong earnings growth. All three companies are grossly undervalued by the stock
market.

History has proven that the short-term vagaries of the market discussed in the
Shareholder Letter on page 1 will eventually be overcome by rational pricing. We
do not know when investors will recognize the extreme undervaluations in
publicly traded real estate, but we find the following encouraging:
- The results at real estate companies continue to exceed expectations. The
outlook over the next several years remains good.
- The average REIT yields 8% and many REITs have double-digit yields. These
levels look very attractive relative to the long bond's 6.2% and the S&P 500
Index's 1% yield.
- Real estate managements are beginning to assess share repurchases as a greater
return to shareholders than new property acquisitions or new development
projects. The resulting stock buybacks increase both our value per share and
the companies' reported earnings or FFO per share.
- Private real estate transactions are trading at valuation parameters higher
than those we are using in our conservative appraisals of publicly traded real
estate.
- Smart buyers are capitalizing on the disparity between price and value in
publicly traded real estate. We have begun to see acquisitions and buyouts led
by management and LBO firms.

The real estate fundamentals, the results at the companies we own, and the
comparable transactions within the industry all imply that our appraisals are
low. The falling stock prices combined with our portfolio changes have decreased
our price-to-value ratio, thereby increasing our return opportunity. We are
confident that your patience, which is allowing us to steal businesses in the
short run, will be rewarded in the long run. We continue to add substantially to
our personal stakes in the Realty Fund.

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REALTY FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED SEPTEMBER 30, 1999

[Download Table]

Wilshire
Realty Real Estate NAREIT
Fund Securities Index Index
------ ---------------- ------

Year-to-Date (7.29)% (3.39)% (4.80)%
One Year 1.73 (4.32) (8.54)
Three Years 5.08 4.22 2.91
Since Public Offering 1/2/96 10.89 7.34 6.07

FIVE LARGEST HOLDINGS
(REPRESENT 39.8% OF NET ASSETS)

PROMUS HOTEL CORPORATION (PRH) 10.8%
Franchisor and/or manager of over 1,100 hotels under the Doubletree, Embassy
Suites, Hampton Inn, and Homewood Suites brand names. Promus is in the process
of merging with Hilton Corp.

EXCEL LEGACY CORPORATION (XLG) 8.9%
A C-corp. focused on development, re-development, and ownership of unique real
estate projects throughout North America. Excel Legacy has numerous urban,
mixed-use retail/entertainment developments primarily located in the western
U.S. including San Diego, Palm Springs, Salt Lake City, Anaheim, Denver, and
Newport, KY across the river from Cincinnati.

TIMBERWEST FOREST CORP. (TWF) 7.0%
Largest private land owner in Western Canada with 334,000 hectares of private
timberlands located on Vancouver Island in British Columbia.

CATELLUS DEVELOPMENT CORPORATION (CDX) 6.8%
A diversified real estate company that owns, manages and develops industrial
warehouses, offices, apartments and residential communities. CDX has substantial
land holdings throughout the U.S. with a concentration of high profile projects
in California. Catellus' most significant project is a 313 acre mixed use
development at Mission Bay on the waterfront in downtown San Francisco.

FOREST CITY ENTERPRISES, INC. (FCE) 6.3%
A diversified, national real estate owner and operator of retail and office
properties, as well as residential units. Forest City is developing several high
profile urban in-fill projects including the Denver Stapleton Airport
re-development, and mixed use projects in both New York's Times Square and San
Francisco. The company also owns over 5,000 acres of land for future
development.

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REALTY FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999

[Download Table]

NEW HOLDINGS ELIMINATIONS
------------ ------------

Beacon Voting Trust* (Beacon Capital Alexandria Real Estate
Partners, Inc.) Equities, Inc.
Franchise Mortgage Acceptance Company Castle & Cooke, Inc.
Park Place Entertainment Corp.*(HLT) Crestline Capital Corporation
Waste Management, Inc. Park Place Entertainment
Corp.*(HLT)
Red Roof Inns, Inc.
Supertel Hospitality, Inc.

* Acquired through merger/spin-off of existing position (ticker of original
holding).

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REALTY FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Download Table]

SHARES MARKET VALUE
---------- ------------

Common Stock - 89.2%
Realty 87.9%
Diversified Realty 17.4%
4,209,800 * Catellus Development Corporation................ $ 49,465,150
2,280,000 * Excel Legacy Corporation........................ 9,547,500
1,864,050 Forest City Enterprises, Inc. - Class A......... 41,591,615
148,600 Forest City Enterprises, Inc. - Class B......... 3,752,150
1,123,600 TrizecHahn Corporation (Foreign)................ 21,278,175
------------
125,634,590
------------
Lodging 22.5%
2,900,000 Hilton Hotels Corporation....................... 28,637,500
3,434,408 Host Marriott Corporation (REIT)................ 32,626,876
719,500 Marriott International, Inc..................... 23,518,656
2,400,900 * Promus Hotel Corporation........................ 78,179,306
------------
162,962,338
------------
Mortgage Financing 4.4%
932,000 Bay View Capital Corp........................... 12,349,000
2,695,900 * Franchise Mortgage Acceptance Company........... 19,208,288
------------
31,557,288
------------
Natural Resources/Land 14.8%
650,000 Deltic Timber Corporation....................... 14,787,500
261,000 Rayonier Inc.................................... 10,962,000
6,950,000 TimberWest Forest Corp. (Foreign)............... 50,369,173
1,600,000 Waste Management, Inc........................... 30,800,000
------------
106,918,673
------------
Office 18.6%
2,075,000 Beacon Capital Partners, Inc.(b) (REIT)......... 27,623,438
970,000 Boston Properties Inc. (REIT)................... 29,766,875
1,033,200 Cousins Properties Incorporated (REIT).......... 35,064,225
2,810,700 Prime Group Realty Trust (REIT)................. 42,160,500
------------
134,615,038
------------
Retail 10.2%
1,223,800 Getty Realty Corp............................... 16,521,300
1,622,100 * IHOP Corp....................................... 32,847,525
3,371,400 Prime Retail, Inc. (REIT)....................... 24,864,075
------------
74,232,900
------------
Non-Realty 1.3%
650,000 * The Pioneer Group, Inc.......................... 9,750,000
------------
TOTAL COMMON STOCKS (COST $728,104,803)......... 645,670,827
------------

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REALTY FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Enlarge/Download Table]

SHARES MARKET VALUE
---------- ------------

Preferred Stock - 7.6%
Diversified Realty 7.6%
14,600,000 * Excel Legacy Corporation - Series A Liquidating
Preference Convertible(b) (Cost
$73,000,000).................................. $ 55,024,480
------------
UNITS
----------
Trust Units - 1.0%
Lodging 1.0%
91,994 Beacon Voting Trust(b)(Cost $9,013,144)......... 7,359,520
------------
CONTRACTS
----------
Options - 0.2%
Natural Resources/Land 0.2%
Put Options Written
2,967 Newhall Land and Farming Company, expiring
October '99 @ $25 (Premiums received
$709,919)....................................... (109,779)
5,494 Newhall Land and Farming Company, expiring
April '01 @ $25 (Premiums received
$1,818,514)..................................... (1,411,958)
Call Options Purchased
2,967 Newhall Land and Farming Company, expiring
October '99 @ $25 (Cost $1,225,243)............. 326,370
5,494 Newhall Land and Farming Company, expiring
April '01 @ $25 (Cost $2,423,953)............... 2,516,252
------------
1,320,885
------------
PAR
----------
Short-Term Obligations 1.5%
10,724,000 Repurchase Agreement with State Street Bank,
4.60% due 10-1-99............................... 10,724,000
------------
TOTAL INVESTMENTS (COST $821,962,710)(a)...................... 99.5% 720,099,712
OTHER ASSETS AND LIABILITIES, NET............................. 0.5 3,709,040
----- ------------
NET ASSETS.................................................... 100.0% $723,808,752
===== ============
NET ASSET VALUE PER SHARE............................................ $13.49
============

* Non-income producing security
(a) Also represents aggregate cost for federal income tax purposes.
(b) Illiquid, board valued security.

Note: REITs comprise 27% of net assets. Companies designated as "Foreign" are
headquartered outside the U.S. and represent 10% of net assets.

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SMALL-CAP FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford

Longleaf Partners Small-Cap Fund is up 4.5% in 1999 after a 5.6% decline during
the third quarter. Small-Cap continues to outperform the Russell 2000 Index.
While we are disappointed in the short-term results, we are most sanguine about
the Fund's long-term opportunities.

During the quarter, price declines at several holdings accounted for much of the
Fund's loss. Wisconsin Central, the rail operator in the Midwestern U.S., the
UK, Australia, and New Zealand, gave up earlier gains as Wall Street took a
bearish view of transportation stocks in general, and rails specifically. Our
appraisal of WCLX has remained steady. Wisconsin Central's managers own a
significant amount of the company, have been successful rail operators and have
a track record of maximizing shareholder value. We took advantage of the recent
weakness by adding to our stake.

Catellus has made excellent progress on its development of Mission Bay in San
Francisco, and the company's other properties have reported positive results.
Nelson Rising and his team are some of the most capable real estate developers
we have seen. These attributes carry no weight with investors who have fled from
all businesses related to real estate.

Bay View, a leading San Francisco area thrift, has superb management, compelling
future prospects, and sells at a huge discount to its value. Bay View's purchase
of Franchise Mortgage Acceptance Company will strengthen both the balance sheet
and loan origination capability. The company's deposit mix is stronger than it
was a year ago. In the face of these attractive fundamentals, the market has
sold off Bay View on fears of interest rate increases.

Three companies in the Small-Cap Fund had a significant positive impact on our
performance this quarter. Royal & Son Alliance Insurance Group PLC announced its
purchase of Orion Capital at a price close to our appraisal. Promus Hotel
Corporation, the Fund's largest position, is being bought by Hilton. This cash
and stock transaction, given Hilton's extreme undervaluation in the market,
equals our value for Promus. Agribrands also rose substantially as its animal
feed operations delivered improving profitability.

The portfolio changed slightly during the quarter. We sold two holdings. Vail
Resorts, less than 0.5% of the portfolio, was liquidated after its price rose.
We could not add to TrizecHahn which was less than a 2% position because of
Canadian ownership limits. TrizecHahn became a big cap company after Horsham
purchased Trizec several years ago. We sold our stake and used the proceeds to
buy equally attractive, smaller companies which could be full positions.

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SMALL-CAP FUND - MANAGEMENT DISCUSSION
by Mason Hawkins, Staley Cates, and John Buford

The proceeds from these two sales plus those from Orion Capital enabled us to
add to several of our most undervalued holdings, and to acquire stakes in three
new businesses. The Fund has less than 10% of assets in cash, and the trading
desk has orders in place for that. The prospects for the Small-Cap Fund are
bright with the composite portfolio priced at about half of our appraisal. For
the first time in years, we must select among numerous choices in deciding where
to concentrate our resources.

N-30B-2 30th Page of 36 TOC 1st Previous Next ↓Bottom Just 30th

SMALL-CAP FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

AVERAGE ANNUAL RETURNS
FOR THE PERIODS ENDED SEPTEMBER 30, 1999

[Download Table]

Value-Line
Small-Cap Russell 2000 (Geometric)
Fund Index Index
--------- ------------ -----------

Year-to-Date 4.46% 2.37% (4.46)%
One Year 19.57 19.07 8.98
Five Years 18.14 12.39 7.73
Ten Years* 10.71 10.93 4.26
Since Public Offering 2/21/89* 12.08 11.71 5.09

* From public offering through 3/31/91, the Fund was managed by a different
portfolio manager.

FIVE LARGEST HOLDINGS
(REPRESENT 29.1% OF NET ASSETS)

PROMUS HOTEL CORPORATION (PRH) 8.6%
Franchisor and/or manager of over 1100 hotels under the Doubletree, Embassy
Suites, Hampton Inn, and Homewood Suites brand names. Promus is in the process
of merging with Hilton Corp.

GULF CANADA RESOURCES LIMITED (GOU) 7.6%
Canadian based exploration and production company with oil and natural gas
assets across the world.

WISCONSIN CENTRAL TRANSPORTATION CORPORATION (WCLX) 4.6%
A railroad holding company that owns lines in the midwest U.S., Ontario, the
United Kingdom, New Zealand, and Australia.

AMETEK, INC. (AME) 4.2%
Leading worldwide manufacturer of small electric motors and instrument panels.

U.S. INDUSTRIES, INC. (USI) 4.1%
Manufacturer of bath and plumbing (Zurn, Jacuzzi, Eljer) products, indoor
lighting (Lighting Corp. of America), and hardware (True Temper, Ames).

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SMALL-CAP FUND - PERFORMANCE HISTORY
AND PORTFOLIO SUMMARY

PORTFOLIO CHANGES
JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999

[Download Table]

NEW HOLDINGS ELIMINATIONS
------------ ------------

First Health Group Corp. The Chiyoda Fire and Marine
Fleming Companies, Inc. Insurance Company, Ltd.
The MONY Group Inc. The Dai-Tokyo Fire and Marine
Pediatrix Medical Group, Inc. Insurance Company, Ltd.
Premier Farnell plc Fuji Fire and Marine Insurance
Romac International, Inc. Company, Limited
Safety-Kleen Corp. Nippon Broadcasting System
Vail Resorts, Inc. The Nissan Fire & Marine
Insurance Company, Ltd.
Pinkerton's Inc.
Premier Farnell plc
Robbins & Myers, Inc.
Sangetsu Co., Ltd.
Shaw Communications Inc. - Class A
Shaw Communications Inc. - Class B
TrizecHahn Corporation
Vail Resorts, Inc.

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SMALL-CAP FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Download Table]

SHARES MARKET VALUE
---------- --------------

Common Stock 90.3%
Agriculture 3.3%
1,015,400 * Agribrands International, Inc. ................ $ 50,389,225
Business Services 2.6%
4,882,400 * Romac International, Inc....................... 40,432,619
Commercial Lighting 4.4%
2,169,700 * Genlyte Group Incorporated..................... 51,530,375
883,350 Thomas Industries, Inc......................... 16,507,603
--------------
68,037,978
--------------
Entertainment 1.2%
1,470,000 * Carmike Cinemas, Inc. -- Class A............... 19,293,750
Environmental Services 3.0%
3,745,700 * Safety-Kleen Corp.............................. 45,182,506
Food -- Wholesale 3.1%
4,823,900 Fleming Companies, Inc......................... 47,334,519
Health Care 3.3%
984,300 * First Health Group Corp........................ 22,085,231
2,056,500 * Pediatrix Medical Group, Inc................... 28,533,938
--------------
50,619,169
--------------
Investment Management 0.8%
865,000 * The Pioneer Group, Inc......................... 12,975,000
Life Insurance 3.9%
2,058,500 The MONY Group Inc............................. 59,439,187
Lodging 8.6%
4,020,000 * Promus Hotel Corporation....................... 130,901,250
Manufacturing 12.3%
3,210,340 AMETEK, Inc.................................... 63,604,861
1,740,000 * The Carbide/Graphite Group, Inc................ 15,007,500
2,363,900 * Scott Technologies, Inc........................ 46,687,025
3,952,100 U.S. Industries, Inc........................... 62,245,575
--------------
187,544,961
--------------
Mortgage Financing 2.0%
2,330,900 Bay View Capital Corp.......................... 30,884,425
Natural Resources 12.9%
845,000 Deltic Timber Corporation...................... 19,223,750
3,349,996 Gendis Inc.(b) (Foreign)....................... 11,113,461
27,863,860 * Gulf Canada Resources Limited(Foreign)......... 116,679,914
6,950,000 TimberWest Forest Corp.(Foreign)............... 50,369,173
--------------
197,386,298
--------------
Pharmaceuticals 3.7%
7,268,800 * Perrigo Company................................ 57,241,800

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SMALL-CAP FUND - PORTFOLIO OF INVESTMENTS
AT SEPTEMBER 30, 1999 (UNAUDITED)

[Download Table]

SHARES MARKET VALUE
---------- --------------

Property & Casualty Insurance 9.1%
243,883 * Alleghany Corporation.......................... $ 43,167,291
1,777,400 Hilb, Rogal and Hamilton Company............... 44,546,087
1,086,600 Orion Capital Corporation...................... 51,477,675
--------------
139,191,053
--------------
Real Estate 8.0%
4,680,000 * Catellus Development Corporation............... 54,990,000
1,135,400 Cousins Properties Incorporated................ 38,532,638
1,443,400 * IHOP Corp...................................... 29,228,850
--------------
122,751,488
--------------
Restaurants 1.1%
982,400 * VICORP Restaurants, Inc........................ 16,209,600

Retail 2.4%
1,767,600 Midas Inc...................................... 36,456,750

Transportation 4.6%
5,097,900 * Wisconsin Central Transportation Corporation... 69,777,506
--------------
TOTAL COMMON STOCKS (COST $1,343,325,488).................. 1,382,049,084
--------------

[Enlarge/Download Table]

PAR
----------

Short-Term Obligations 9.7%
58,380,000 Repurchase Agreement with State Street Bank,
4.60% due 10-1-99............................ 58,380,000
40,000,000 Federal Home Loan Bank Discount Note, 5.19% due
10-4-99...................................... 39,982,934
50,000,000 Federal Home Loan Mortgage Corporation, 5.30%
due 10-13-99................................. 49,913,333
--------------
148,276,267
--------------
TOTAL INVESTMENTS (COST $1,491,601,755)(a).................. 100.0% 1,530,325,351
OTHER ASSETS AND LIABILITIES, NET........................... -- (320,193)
------ --------------
NET ASSETS.................................................. 100.0% $1,530,005,158
====== ==============
NET ASSET VALUE PER SHARE........................................... $22.93
==============

* Non-income producing security
(a) Also represents aggregate cost for federal income tax purposes.
(b) Illiquid.
Note: Companies designated as "Foreign" are headquartered outside the U.S. and
represent 12% of net assets.

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SERVICE DIRECTORY

CALL (800) 445-9469

24-HOUR AUTOMATED INFORMATION OPTION 1
For automated reporting of daily prices, account balances and transaction
activity, 24-hours a day, seven days a week. Please have your Fund number (see
below) and account number ready to access your investment information.

FUND INFORMATION OPTION 2
To request a prospectus, financial report, application or other Fund information
from 7:00 a.m. to 7:00 p.m. Eastern time, Monday through Friday.

SHAREHOLDER INQUIRIES OPTION 3
To request action on your existing account contact the transfer agent, NFDS,
from 9:00 a.m. to 6:00 p.m. Eastern time, Monday through Friday.

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Mail correspondence to: Overnight address:
Longleaf Partners Funds Longleaf Partners Funds
c/o NFDS c/o NFDS
P.O. Box 219929 330 W. 9th Street
Kansas City, MO 64121-9929 Kansas City, MO 64105

SERVICES FOR FINANCIAL ADVISORS (800) 761-2509
Please contact Mary Williamson or Lee Harper for additional information.

PUBLISHED DAILY PRICE QUOTATIONS
Daily net asset value per share of each Fund is reported in mutual fund
quotations tables of major newspapers in alphabetical order under the bold
heading LONGLEAF PARTNERS as follows:

[Download Table]

TRANSFER AGENT
ABBREVIATION SYMBOL CUSIP FUND NUMBER
------------- ------ --------- --------------

Partners LLPFX 543069108 133
Intl LLINX 543069405 136
Realty LLREX 543069306 135
Sm-Cap LLSCX 543069207 134

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TRUSTEES AND OFFICERS

Trustees
O. Mason Hawkins, Chairman
Chadwick H. Carpenter, Jr.
G. Staley Cates
Daniel W. Connell, Jr.
Steven N. Melnyk
C. Barham Ray

Officers
O. Mason Hawkins, Co-Portfolio Manager and Chief Executive Officer

G. Staley Cates, Co-Portfolio Manager and President

John B. Buford, Co-Portfolio Manager of the Partners and Small-Cap Funds
and Vice President - Investments

C. T. Fitzpatrick, Co-Portfolio Manager of the Realty Fund
and Vice-President - Investments
E. Andrew McDermott, Assistant Portfolio Manager of the International Fund
and Vice President - Investments

Charles D. Reaves, Executive Vice President and General Counsel

Julie M. Douglas, Executive Vice President - Operations, Chief Financial
Officer and Treasurer

Lee B. Harper, Executive Vice President - Marketing

Frank N. Stanley III, Vice President - Investments

Randy D. Holt, Vice President and Secretary

Andrew R. McCarroll, Vice President and Assistant General Counsel

Transfer Agent
National Financial Data Services
Kansas City, Missouri

Custodian
State Street Bank & Trust Company
Boston, Massachusetts

Special Legal Counsel
Dechert Price & Rhodes
Washington D.C.

Independent Public Accountants
PricewaterhouseCoopers LLP
Baltimore, Maryland

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Longleaf Partners Funds(SM)
c/o NFDS
P.O. Box 219929
Kansas City, MO 64121-9929
(800) 445-9469

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘N-30B-2’ Filing	Date	First	Last	Other Filings

	12/31/99	6		24F-2NT, N-30D, NSAR-B
Filed on:	10/21/99
For Period End:	9/30/99	1	33
	1/1/99	13	31
				List all Filings

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Filing Submission 0000950144-99-012019 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Longleaf Partners Funds Trust – ‘N-30B-2’ for 9/30/99

On: Thursday, 10/21/99 · For: 9/30/99 · Accession #: 950144-99-12019 · File #: 811-04923

Previous ‘N-30B-2’: ‘N-30B-2’ on 4/27/99 for 3/31/99 · Next: ‘N-30B-2’ on 4/25/00 for 3/31/00 · Latest: ‘N-30B-2’ on 11/20/06 for 9/30/06

Periodic or Interim Report Mailed to Shareholders — Rule 30b-2Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Periodic or Interim Report Mailed to Shareholders — Rule 30b-2
Filing Table of Contents