N-Q 1 g28126nvq.htm FORM N-Q nvq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number      811-04923     

Longleaf Partners Funds Trust

(Exact name of registrant as specified in charter)

c/o Southeastern Asset Management, Inc.
6410 Poplar Avenue, Suite 900, Memphis, TN 38119

(Address of principal executive offices)          (Zip code)

Andrew R. McCarroll, Esq.
Southeastern Asset Management, Inc.
6410 Poplar Avenue, Suite 900, Memphis, TN 38119

(Name and address of agent for service)

Registrant’s telephone number, including area code:          (901) 761-2474         

Date of fiscal year end:          December 31         

Date of reporting period:          September 30, 2011         

 

Item 1. — Schedule of Investments

Longleaf Partners Fund
Schedule of Investments
September 30, 2011
(Unaudited)
Common Stock
 
                       
    Share Quantity   Market Value   Net Assets      
 
Air Freight & Logistics
                     
                       
FedEx Corporation
  4,723,000   $ 319,652,640     4.3 %    
                       
Capital Markets
                     
                       
The Bank of New York Mellon Corporation
  17,879,895     332,387,248     4.5      
                       
Computers & Peripherals
                     
                       
Dell Inc.*(d)
  33,804,000     478,326,600     6.5      
                       
Construction Materials
                     
                       
Cemex S.A.B. de C.V. ADS*
  51,950,307     164,162,970     2.2      
Vulcan Materials Company(a)
  10,704,110     295,005,272     4.0      
                       
          459,168,242     6.2      
                       
Diversified Telecommunication Services
                     
                       
Global Crossing Limited*
  105,300     2,517,723     —      
Level(3) Communications, Inc.*(a)
  142,006,754     211,590,063     2.9      
                       
          214,107,786     2.9      
                       
Hotels, Restaurants & Leisure
                     
                       
InterContinental Hotels Group PLC(a)
  19,147,000     310,482,666     4.2      
InterContinental Hotels Group PLC ADR(a)
  1,331,245     21,406,420     0.3      
Yum! Brands, Inc. 
  6,411,170     316,647,686     4.3      
                       
          648,536,772     8.8      
                       
Industrial Conglomerates
                     
                       
Koninklijke Philips Electronics N.V.
  16,789,000     301,226,771     4.1      
Koninklijke Philips Electronics N.V. ADR
  3,667,831     65,800,888     0.9      
                       
          367,027,659     5.0      
                       
Insurance
                     
                       
Aon Corporation(c)
  10,442,812     438,389,248     5.9      
Loews Corporation(c)
  13,853,000     478,621,150     6.5      
NKSJ Holdings, Inc.
  7,280,650     161,625,829     2.2      
The Travelers Companies, Inc.(c)
  7,588,400     369,782,732     5.0      
Willis Group Holdings Public Limited Company
  2,800,000     96,236,000     1.3      
                       
          1,544,654,959     20.9      
                       
Internet & Catalog Retail
                     
                       
Liberty Interactive Corporation — Series A* (Formerly Liberty Media Holding Corporation — Interactive Series A)
  21,431,321     316,540,611     4.3      
                       
Media
                     
                       
DIRECTV — Class A*
  10,668,141     450,728,957     6.1      
News Corporation — Class A
  22,352,305     345,790,158     4.7      
The Walt Disney Company(c)
  11,563,000     348,740,080     4.7      
                       
          1,145,259,195     15.5      
                       
Oil, Gas & Consumable Fuels
                     
                       
Chesapeake Energy Corporation(c)
  27,410,576     700,340,217     9.5      
                       
Pharmaceuticals
                     
                       
Abbott Laboratories
  7,392,000     378,026,880     5.1      
                       

2

 

 
                       
Common Stock
 
   
Share Quantity 		  Market Value   Net Assets      
 
Wireless Telecommunication Services
                     
                       
Telephone and Data Systems, Inc. — Special
  1,184,171   $ 23,411,061     0.3 %    
                       
Total Common Stocks (Cost $7,211,503,947)
        6,927,439,870     93.8      
                       
                       
Corporate Bonds
                     
                       
    Principal Amount              
 
Diversified Telecommunication Services
                     
                       
Level(3) Communications, Inc., 15% Convertible
Senior Notes due 1/15/13 (a)(b)
(Cost $100,062,000)
  100,062,000     128,454,593     1.7      
                       
                       
Options Purchased
                     
                       
    Share Equivalents            
 
Computers & Peripherals
                     
                       
Dell Inc. Call, 12/14/15, with Deutsche Bank, Strike Price $7
  12,500,000     105,900,000     1.4      
Dell Inc. Call, 12/14/15, with Morgan Stanley, Strike Price $7
  12,500,000     103,375,000     1.4      
                       
          209,275,000     2.8      
                       
Household Products
                     
                       
Colgate-Palmolive Company Call, 1/29/16, with J.P. Morgan, Strike Price $80
  5,100,000     85,323,000     1.2      
                       
Total Options Purchased (Cost $274,350,086)
        294,598,000     4.0      
                       
                       
Short-Term Obligations
                     
                       
    Principal Amount            
 
Repurchase Agreement with State Street Bank,
0.01% due 10/3/11, Repurchase price $136,290,114
(Collateral: $106,020,000 U.S. Treasury Bonds, 2.66% — 2.72% due 2/15/36 to 2/15/40, Value $139,016,857)
  136,290,000     136,290,000     1.8      
                       
Total Investments (Cost $7,722,206,033)
        7,486,782,463     101.3      
                       
Other Assets and Liabilities, Net
        (95,613,190)     (1.3 )    
                       
Net Assets
      $ 7,391,169,273     100.0 %    
                       
Net asset value per share
      $ 24.84            
                       
 
* Non-income producing security.
(a) Affiliated issuer, as defined under Section 2(a)(3) of the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of the issuer during the period).
(b) Illiquid.
(c) A portion designated as collateral for option and swap contracts.
See footnotes on page 9.

3

 

Options Written
 
                                     
              Unrealized
             
    Share Equivalents   Market Value     Gain(Loss)       Net Assets      
 
Household Products
                                   
                                     
Colgate-Palmolive Company Put,
1/29/16, with J.P. Morgan,
Strike Price $65
  (5,100,000)     $(35,037,000)       $8,549,993         (0.5 )%    
                                     
 
Swap Contract
 
Underlying Asset   Principal Amount                
 
Construction Materials
                                   
                                     
Cemex S.A.B. de C.V. ADS 3.25% Convertible Subordinated Notes due 3/15/16 (Foreign)
  75,000,000     35,437,500         (18,168,648 )       (0.2 )    
Cemex S.A.B. de C.V. ADS 3.75% Convertible Subordinated Notes due 3/15/18 (Foreign)
  70,000,000     32,987,500         (16,235,825 )       (0.2 )    
                                     
Total Swap Contract with Deutsche Bank
  145,000,000     $68,425,000         $(34,404,473 )(a)       (0.4 )%    
                                     
 
(a) Unrealized loss is the sum of the following factors:
                                     
                                     
        3.25% Notes       3.75% Notes       Total Swap      
Unrealized depreciation on notes
    $(17,308,148 )       $(15,261,975 )       $(32,570,123 )    
Purchased interest payable
        (1,176,897 )       (1,285,938 )       (2,462,835 )    
Accrued interest on notes
        135,417         145,833         281,250      
Fixed financing fee to Deutsche Bank
    (44,353 )       (40,745 )       (85,098 )    
Benefit of interest rate moves if terminated before expiration  
  225,333         207,000         432,333      
                                     
          $(18,168,648 )       $(16,235,825 )       $(34,404,473 )    
                                     
 
                                     

4

 

Longleaf Partners Small-Cap Fund

Schedule of Investments
September 30, 2011
(Unaudited)
 
 
Common Stock
 
                       
    Share Quantity   Market Value   Net Assets
 
Construction Materials
                     
                       
Martin Marietta Materials, Inc. 
    1,971,000     $ 124,606,620     4 .5%
Texas Industries, Inc.(a)
    7,105,000       225,512,700     8 .1
                       
              350,119,320     12 .6
                       
Diversified Consumer Services
                     
                       
Service Corporation International(a)
    17,451,523       159,855,951     5 .8
                       
Diversified Telecommunication Services
                     
                       
Global Crossing Limited*
    89,000       2,127,990     0 .1
Level(3) Communications, Inc.*
    72,882,000       108,594,180     3 .9
tw telecom inc.*(a)
    11,150,100       184,199,652     6 .7
                       
              294,921,822     10 .7
                       
Health Care Equipment & Supplies
                     
                       
Olympus Corporation
    3,408,000       105,183,944     3 .8
                       
Hotels, Restaurants & Leisure
                     
                       
DineEquity, Inc.*(a)
    2,978,100       114,627,069     4 .1
Vail Resorts, Inc.(a)
    3,404,000       128,637,160     4 .7
The Wendy’s Company(a) (Formerly Wendy’s/Arby’s Group, Inc.)
    29,705,000       136,345,950     4 .9
                       
              379,610,179     13 .7
                       
Insurance
                     
                       
Everest Re Group, Ltd.
    1,335,000       105,972,300     3 .8
Fairfax Financial Holdings Limited
    472,784       181,276,728     6 .5
Markel Corporation*
    351,642       125,581,908     4 .5
Willis Group Holdings Public Limited Company
    3,398,000       116,789,260     4 .2
                       
              529,620,196     19 .0
                       
Media
                     
                       
Lamar Advertising Company — Class A*
    6,491,000       110,541,730     4 .0
The Madison Square Garden Company — Class A*
    5,405,000       123,234,000     4 .5
Scripps Networks Interactive, Inc. — Class A
    2,866,000       106,529,220     3 .8
The Washington Post Company — Class B
    289,000       94,494,330     3 .4
                       
              434,799,280     15 .7
                       
Multiline Retail
                     
                       
Dillard’s, Inc. — Class A(a)
    3,679,180       159,970,746     5 .8
Saks Incorporated*(a)
    13,281,000       116,208,750     4 .2
                       
              276,179,496     10 .0
                       
Oil, Gas & Consumable Fuels
                     
                       
Quicksilver Resources Inc.*(a)
    14,838,952       112,479,256     4 .1
                       
Real Estate Investment Trusts
                     
                       
Potlatch Corporation(a)
    2,688,952       84,755,767     3 .1
                       

5

 

                       
Common Stock
    Share Quantity   Market Value   Net Assets
 
Software
                     
                       
Fair Isaac Corporation(a)
    376,400     $ 8,216,812     0 .3%
                       
Total Common Stocks (Cost $2,832,111,580)
            2,735,742,023     98 .8
                       
                       
Short-Term Obligations
                     
                       
    Principal Amount        
 
Repurchase Agreement with State Street Bank,
0.01% due 10/3/11, Repurchase price $40,671,035
(Collateral: $35,405,000 U.S. Treasury Bonds,
1.66% — 2.66% due 11/15/20 to 2/15/36, Value $41,487,563)
    40,671,000       40,671,000     1 .5
                       
Total Investments (Cost $2,872,782,580)
            2,776,413,023     100 .3
                       
Other Assets and Liabilities, Net
            (7,126,176)     (0 .3)
                       
Net Assets
          $ 2,769,286,847     100 .0%
                       
Net asset value per share
          $ 24.74        
                       
* Non-income producing security.
(a) Affiliated issuer, as defined under Section 2(a)(3) of the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of the issuer during the period).
 
See footnotes on page 9.

6

 

Longleaf Partners International Fund
Schedule of Investments
September 30, 2011
(Unaudited)
Common Stock
 
                         
    Share Quantity   Market Value     Net Assets
 
Beverages
                       
                         
C&C Group plc
    15,160,272     $ 57,116,941       3 .4%
                         
Capital Markets
                       
                         
Julius Baer Group Ltd
    1,326,381       44,325,225       2 .7
                         
Commercial Banks
                       
                         
Seven Bank, Ltd.
    38,602       75,342,356       4 .5
                         
Construction & Engineering
                       
                         
ACS, Actividades de Construccion Y Servicios, S.A.
    4,500,932       158,614,747       9 .5
Ferrovial S.A.(c)
    8,323,428       94,884,704       5 .7
Hochtief AG
    783,500       48,937,873       2 .9
                         
              302,437,324       18 .1
                         
Construction Materials
                       
                         
Cemex S.A.B. de C.V. ADS*(c)
    14,264,200       45,074,872       2 .7
Lafarge S.A.
    2,482,662       85,326,516       5 .1
                         
              130,401,388       7 .8
                         
Electronic Equipment, Instruments & Components
                       
                         
Hirose Electric Co., Ltd.(c)
    240,234       22,332,914       1 .3
                         
Food & Staples Retailing
                       
                         
Carrefour S.A.
    4,113,000       93,660,946       5 .6
                         
Health Care Equipment & Supplies
                       
                         
Olympus Corporation(c)
    1,919,900       59,255,474       3 .5
                         
Hotels, Restaurants & Leisure
                       
                         
Accor S.A.
    1,982,228       52,782,843       3 .1
Genting Berhad
    7,043,000       19,918,740       1 .2
                         
              72,701,583       4 .3
                         
Industrial Conglomerates
                       
                         
Koninklijke Philips Electronics N.V.(c)
    4,713,000       84,560,234       5 .1
                         
Insurance
                       
                         
Fairfax Financial Holdings Limited
    360,000       138,032,637       8 .2
NKSJ Holdings, Inc.
     2,976,800       66,083,079       3 .9
Willis Group Holdings Public Limited Company(c)
    1,925,000       66,162,250       4 .0
                         
              270,277,966       16 .1
                         
Machinery
                       
                         
Ingersoll-Rand plc
    2,568,711       72,155,092       4 .3
                         
Metals & Mining
                       
                         
IronCo LLC*(a)(b)
    91,000       68,647,467       4 .1
                         
Oil, Gas & Consumable Fuels
                       
                         
HRT Participacoes em Petroleo S.A.*
    153,311       61,967,731       3 .7
                         
Real Estate Management & Development
                       
                         
Cheung Kong Holdings Limited
    7,637,000       82,789,865       4 .9
                         

7

 

 
                         
Common Stock
    Share Quantity   Market Value     Net Assets
 
Specialty Retail
                       
                         
Nitori Holdings Co., Ltd.(c)
    772,800     $ 77,789,607       4 .6%
                         
Wireless Telecommunication Services
                       
                         
Vodafone Group plc ADR
    1,645,235       42,200,278       2 .5
                         
Total Common Stocks (Cost $1,856,446,078)
            1,617,962,391       96 .5
                         
                         
                         
Options Purchased
                       
                         
    Share Equivalents        
 
Computers & Peripherals
                       
                         
Dell Inc. Call, 8/15/16, with Bank of America Merrill Lynch Strike Price $15.50
    6,476,800       29,205,187       1 .7
                         
Household Products
                       
                         
Colgate-Palmolive Company Call, 1/29/16, with J.P. Morgan, Strike Price $80
    1,200,000       20,076,000       1 .2
                         
Total Options Purchased (Cost $49,767,969)
            49,281,187       2 .9
                         
                         
                         
Short-Term Obligations
                       
                         
    Principal Amount        
 
Repurchase Agreement with State Street Bank, 0.01% due 10/3/11, Repurchase price $64,316,054 (Collateral: $49,475,000 U.S. Treasury Bonds, 2.72% — 2.74% due 2/15/40 to 11/15/40, Value $65,606,997)
    64,316,000       64,316,000       3 .8
                         
Total Investments (Cost $1,970,530,047)
            1,731,559,578       103 .2
                         
Other Assets and Liabilities, Net
            (54,260,942 )     (3 .2)
                         
Net Assets
          $ 1,677,298,636       100 .0%
                         
Net asset value per share
          $ 12.16          
                         
* Non-income producing security.
(a) Affiliated issuer, as defined under Section 2(a)(3) of the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of the issuer during the period).
(b) Illiquid. Board valued.
(c) A portion designated as collateral for forward and option contracts.
 
See footnotes on page 9.
Options Written
 
                                       
                Unrealized
 		     
    Share Equivalents     Market Value      Gain (Loss)     Net Assets
 
Computers and Peripherals
                                     
 
Dell Inc. Put, 8/15/16, with Bank of America Merrill Lynch Strike Price $15.50
(United States)
    (6,476,800 )       $(32,148,244 )       $(3,132,180 )       (1 .9)%
Household Products
                                     
 
Colgate-Palmolive Company Put, 1/29/16, with J.P. Morgan, Strike Price $65
(United States)
    (1,200,000 )       (8,244,000 )       2,009,349         (0 .5)
                                       
 
               $(40,392,244 )       (1,122,831 )       (2 .4)
                                       
 

8

 

Longleaf Partners Funds Trust
Notes to Schedules of Investments
September 30, 2011
(Unaudited)

1. Organization, Significant Accounting Policies, and other investment related disclosures are hereby incorporated by reference from the December 31, 2010 Annual Report and the June 30, 2011 Semi-Annual Report previously filed with the Securities and Exchange Commission on Form N-CSR.

2. Unrealized Appreciation (Depreciation) and Tax Cost

The net unrealized appreciation and federal tax cost of investments held by each fund as of the period end were as follows:
                         
    Partners Fund     Small-Cap Fund     International Fund  
Unrealized Appreciation
   $ 988,329,080     $ 414,307,946     $ 185,139,849  
Unrealized Depreciation
     (1,223,752,650 )     (510,677,503 )     (424,110,318 )
 
                  
Net Unrealized Appreciation
   $ (235,423,570 )   $ (96,369,557 )   $ (238,970,469 )
 
                  
Cost for Federal Income Tax Purposes
   $ 7,959,345,016     $ 2,874,701,281     $ 2,026,344,908  
 
                  

3. Investments in Affiliates

Under Section 2(a)(3) of the Investment Company Act of 1940, a portfolio company is defined as “affiliated” if a Fund owns five percent or more of its voting stock. Each Fund held at least five percent of the outstanding voting stock of the following companies during the period ended September 30, 2011.
                         
    Shares(a) at     Market Value at  
    September 30, 2011     September 30, 2011     December 31, 2010  
Partners Fund
                        
InterContinental Hotels Group PLC
     19,147,000     $ 310,482,666     $ 59,577,510  
InterContinental Hotels Group PLC ADR
     1,331,245       21,406,420       -  
Level 3 Communications, Inc.*
     142,006,754       211,590,063       139,166,619  
Level 3 Communications, Inc.
                        
15% Convertible Senior Notes due 1-15-13
     100,062,000 (b)     128,454,593       112,569,750  
Vulcan Materials Company
     10,704,110       295,005,272       238,517,332  
 
                    
 
             966,939,014       549,831,211  
 
                    
Small-Cap Fund
                        
Dillards, Inc.
     3,679,180       159,970,746       249,476,481  
DineEquity, Inc.*
     2,978,100       114,627,069       147,058,578  
Fair Isaac Corporation(e)
     376,400       8,216,812       152,362,842  
Potlatch Corporation
     2,688,952       84,755,767       87,525,388  
Ruddick Corporation(e)
     -       84,755,767       92,799,960  
Quicksilver Resources Inc.*
     14,838,952       112,479,256       -  
Saks Incorporated*
     13,281,000       116,208,750       -  
Service Corporation International
     17,451,523       159,855,951       132,726,000  
Texas Industries, Inc.
     7,105,000       225,512,700       200,988,850  
tw telecom, inc.*
     11,150,100       184,199,652       216,480,951  
Vail Resorts, Inc.
     3,404,000       128,637,160       111,058,564  
The Wendy’s Company
     29,705,000       136,345,950       137,237,100  
Worthington Industries, Inc.(e)
     -       -       92,799,960  
 
                    
 
             1,515,565,580       1,620,514,674  
 
                    
International Fund
                        
IronCo LLC*
     91,000     $ 68,647,467     $ -  
 
                    

9

 

Purchases, sales and dividend income for these affiliates for the period ended September 30, 2011 were as follows:
                         
                    Dividend or  
    Purchases     Sales     Interest Income (c)  
Partners Fund
                        
InterContinental Hotels Group PLC
   $ 310,395,546     $ 60,388,615     $ 48,512  
InterContinental Hotels Group PLC ADR
     21,609,095       -       3,536  
Level 3 Communications, Inc.*
     -       -       -  
Level 3 Communications, Inc.
                        
15% Convertible Senior Notes due 1-15-13
     -       -       11,256,975 (d)
Vulcan Materials Company
     175,137,886       -       5,364,456  
 
                  
 
     507,142,527       60,388,615       16,673,479  
 
                  
Small-Cap Fund
                        
Dillards, Inc.
     -       122,990,930       515,085  
DineEquity, Inc.*
     -       -       -  
Fair Isaac Corporation(e)
     -       173,049,616       225,347  
Potlatch Corporation
     -       -       4,114,097  
Ruddick Corporation(e)
     -       101,548,516       633,303  
Quicksilver Resources Inc.*
     137,204,471       -       -  
Saks Incorporated*
     123,382,763       -       -  
Service Corporation International
     11,577,613       -       2,388,672  
Texas Industries, Inc.
     106,536,042       -       1,185,278  
tw telecom, inc.*
     -       34,748,675       -  
Vail Resorts, Inc.
     53,955,102       -       401,790  
The Wendy’s Company
     -       -       1,782,300  
Worthington Industries, Inc.(e)
     -       139,558,269       -  
 
                  
 
     432,655,991       571,896,006       11,245,872  
 
                  
International Fund
                        
IronCo LLC*
   $ 91,000,000     $ -     $ -  
 
                  
 
*   Non-income producing
(a)   Common stock unless otherwise noted.
(b)   Principal amount.
(c)   Dividend income unless otherwise noted.
(d)   Interest income.
(e)   Not an afffiliate at the end of the period.

10

 

4. Fair Value for Financial Reporting
FASB ASC 820 established a single definition of fair value for financial reporting, created a three-tier framework for measuring fair value based on inputs used to value the Funds’ investments, and required additional disclosure about the use of fair value measurements. The hierarchy of inputs is summarized below.
       Level 1 - quoted prices in active markets for identical investments
       Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds,
                           credit risk, etc.)
       Level 3 - significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)

Observable inputs are those based on market data obtained from sources independent of the Funds’, and unobservable inputs reflect the Funds’ own assumptions based on the best information available. The input levels are not necessarily an indication of risk or liquidity associated with investing in those securities.

A summary of the inputs used in valuing the Funds’ net assets as of September 30, 2011 follows:

                                 
Partners Fund   Level 1     Level 2     Level 3     Total Value  
Common Stocks
   $ 6,154,104,604     $ 773,335,266     $ -     $ 6,927,439,870  
Short-Term Obligations
     136,290,000       -       -       136,290,000  
Corporate Bonds
     -       128,454,593       -       128,454,593  
Options Purchased
     -       294,598,000       -       294,598,000  
Options Written
     -       (35,037,000 )     -       (35,037,000 )
Swaps
     -       (34,404,473 )     -       (34,404,473 )
 
                        
Total
     6,290,394,604       1,126,946,386       -       7,417,340,990  
 
                        
Small-Cap Fund
                                
Common Stocks
     2,630,558,079       105,183,944       -       2,735,742,023  
Short-Term Obligations
     40,671,000       -       -       40,671,000  
 
                        
Total
     2,671,229,079       105,183,944       -       2,776,413,023  
 
                        
International Fund
                                
Common Stocks
     425,592,860       1,123,722,064       68,647,467       1,617,962,391  
Short-Term Obligations
     64,316,000       -       -       64,316,000  
Options Purchased
     -       49,281,187       -       49,281,187  
Options Written
     -       (40,392,244 )     -       (40,392,244 )
Forward Currency Contracts
     637,009       -       -       637,009  
 
                        
Total
   $ 490,545,869     $ 1,132,611,007     $ 68,647,467     $ 1,691,804,343  
 
                        
Between the year ended December 31, 2010 and September 30, 2011, application of standing Board valuation procedures related to non-U.S. securities triggered reclassifications from Level 1 to Level 2 Common Stock of $773,335,266, $105,183,944 and $1,123,722,064 in the Partners Fund, Small-Cap and International Fund, respectively.

11

 

5. Derivatives Instruments
At September 30, 2011, the Funds held four types of derivatives instruments: purchased call options, written put options, swaps and forward currency contracts.
The Partners Fund held purchased call options on Dell, Inc. In 2010, the Fund sold a portion of the underlying equity position to pay for the very in-the-money options with extended maturities, securing significant additional exposure to the stock at very low implied long-term interest rates. At September 30, 2011, the market value of the calls represented 2.8% of the Partner’s Fund’s Net Assets.
In 2011, both the Partners and International Funds executed long-term maturity put and call options on Colgate-Palmolive, effectively creating a long position in five years if the stock sells below $65 (written put) or above $80 (purchased call.) At September 30, 2011, the market value of the net put/call position represented 0.7% of both the Partners and International Funds’ Net Assets.
The Partners Fund executed a swap transaction to gain exposure to Cemex Convertible bonds at a very low financing rate. At September 30, 2011, the swap represented (0.4)% of the Fund’s net assets.
In 2011, the International Fund sold its position in Dell while executing a put/call combination at the same strike price on the underlying security. The options provide exposure to Dell at an attractive financing rate while freeing up cash. At September 30, 2011, the put/call combo represented (0.2)% of the Fund’s Net Assets.
Additionally, the International Fund executed limited currency hedges related to specific holdings. At September 30, 2011, less than 0.1% of the International Fund’s Net Assets were held in currency hedges.
Please see the Funds’ Annual Report dated December 31, 2010 for additional disclosure regarding the risks associated with forward currency contracts and options.

Item 2. Controls and Procedures.

(a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are effective and provide reasonable assurance that information required to be disclosed by the investment company in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b) At the date of filing this Form N-Q, the registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

Separate certifications by the registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Longleaf Partners Funds Trust

     
By
  /s/ O. Mason Hawkins
  O. Mason Hawkins
  Trustee
 
    
Date
  November 28, 2011

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

     
By
  /s/ O. Mason Hawkins
  O. Mason Hawkins
  Chairman and CEO, Southeastern Asset Management, Inc.
Functioning as principal executive officer under agreements with Longleaf Partners Funds Trust and its separate series.
 
    
Date
  November 28, 2011
 
    
By
  /s/ Julie M. Bishop
  Julie M. Bishop
  Mutual Fund Chief Financial Officer and Principal, Southeastern Asset Management, Inc.
Functioning as principal financial officer under agreements with Longleaf Partners Funds Trust and its separate series.
 
    
Date
  November 28, 2011