SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Telephone and Data Systems, Inc.
___________________________________________
(Name of Issuer)
Common Stock
___________________________________________
(Title of Class and Securities)
879433100
___________________________________________
(CUSIP Number of Class of Securities)
O. Mason Hawkins
Chairman of the Board and C.E.O.
and
Andrew R. McCarroll
Vice President & General Counsel
Southeastern Asset Management, Inc.
6410 Poplar Avenue; Suite 900
Memphis, TN 38119
(901) 761-2474
___________________________________________________________
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
December 16, 2004
___________________________________________
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
Schedule because of Sections 240.13d-1(e), 240.13d-1(f), or 240.13d-1(g), check
the following box: [X]
CUSIP No. 879433100 13D
___________________________________________________________________
(1) NAMES OF REPORTING PERSONS
Southeastern Asset Management, Inc. I.D. No. 62-0951781
___________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a)
(b) X
___________________________________________________________________
(3) SEC USE ONLY
___________________________________________________________________
(4) SOURCE OF FUNDS
OO: Funds of investment advisory clients
___________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [X]
___________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Tennessee
___________________________________________________________________
:(7) SOLE VOTING POWER
: (Discretionary Accounts)
NUMBER OF SHARES BENEFICIALLY : 5,941,957 shares
OWNED BY EACH REPORTING PERSON ________________________________
WITH :(8) SHARED OR NO VOTING POWER
: 3,598,500 shares (Shared)
2,082,000 shares (None)
________________________________
:(9) SOLE DISPOSITIVE POWER
: (Discretionary Accounts)
: 8,014,957 shares
________________________________
:(10) SHARED OR NO DISPOSITIVE POWER
: 3,598,500 shares (Shared)
9,000 shares (None)
___________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,622,457 shares
___________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES
CERTAIN SHARES -X- See Item 5(a)
___________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
22.8%
___________________________________________________________________
(14) TYPE OF REPORTING PERSON
IA
___________________________________________________________________
Note: All shares identified above are shares of the Issuer's class of Common
Stock, and the percentage in Row 13 above relates to such class of Common
Stock.
CUSIP No. 879433100 13D
___________________________________________________________________
(1) NAMES OF REPORTING PERSONS
Longleaf Partners Fund I.D. No. 63-6147721
___________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a)
(b) X
___________________________________________________________________
(3) SEC USE ONLY
___________________________________________________________________
(4) SOURCE OF FUNDS
OO: Funds of investment company shareholders
___________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
___________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
___________________________________________________________________
:(7) SOLE VOTING POWER
:
NUMBER OF SHARES BENEFICIALLY : None
OWNED BY EACH REPORTING PERSON ________________________________
WITH :(8) SHARED VOTING POWER
: 3,598,500 shares
________________________________
:(9) SOLE DISPOSITIVE POWER
:
: None
________________________________
:(10) SHARED DISPOSITIVE POWER
: 3,598,500 shares
___________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,598,500 shares
___________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES
CERTAIN SHARES
___________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
7.1%
___________________________________________________________________
(14) TYPE OF REPORTING PERSON
IV
___________________________________________________________________
Note: All shares identified above are shares of the Issuer's class of Common
Stock, and the percentage in Row 13 above relates to such class of Common
Stock.
CUSIP No. 879433100 13D
___________________________________________________________________
(1) NAMES OF REPORTING PERSONS
O. Mason Hawkins I.D. No. XXX-XX-XXXX
___________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a)
(b) X
___________________________________________________________________
(3) SEC USE ONLY
___________________________________________________________________
(4) SOURCE OF FUNDS
OO: None
___________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
___________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Citizen of United States
___________________________________________________________________
:(7) SOLE VOTING POWER
: (Discretionary Accounts)
NUMBER OF SHARES BENEFICIALLY : None
OWNED BY EACH REPORTING PERSON ________________________________
WITH :(8) SHARED VOTING POWER
: None
________________________________
:(9) SOLE DISPOSITIVE POWER
: None
________________________________
:(10) SHARED DISPOSITIVE POWER
: None
___________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None (See Item 2 )
___________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES
CERTAIN SHARES
___________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
0.0%
___________________________________________________________________
(14) TYPE OF REPORTING PERSON
IN
___________________________________________________________________
Note: All shares identified above are shares of the Issuer's class of Common
Stock, and the percentage in Row 13 above relates to such class of Common
Stock.
Item 1. Security and Issuer
The securities to which this statement on Schedule 13D relates are
the Common Shares, $.01 par value (the "Securities"), of Telephone and Data
Systems, Inc., a Delaware corporation (the "Issuer"). The Issuer has its
principal executive offices located at 30 North LaSalle Street, Chicago,
Illinois, 60602.
Item 2. Identity and Background
Subparagraphs (a), (b), and (c). This statement is being filed by
Southeastern Asset Management, Inc. ("Southeastern"), an investment advisor
registered with the Securities and Exchange Commission ("SEC")under the
Investment Advisers Act of 1940, as amended. The address of its principal
office is 6410 Poplar Avenue, Suite 900, Memphis, Tennessee 38119.
Southeastern serves as an investment advisor to various individual clients,
institutions(including qualified retirement plans), endowment funds and to
Longleaf Partners Fund, a series of Longleaf Partners Funds Trust, a registered
investment company organized as a Massachusetts business trust and having three
series of portfolios.
The Securities of the Issuer reported in Item 5 herein were acquired
on behalf of the investment advisory clients of Southeastern, including
Longleaf Partners Fund, under sole or shared discretionary authority granted
Southeastern. None of the Securities are owned by or on behalf of Southeastern
or by any of its directors or officers, or any Trustees or officers of
Longleaf.
This statement is also being filed by Mr. O. Mason Hawkins,
Chairman of the Board and Chief Executive Officer of Southeastern, in the event
he could be deemed to be an indirect beneficial owner of the Securities
reported by Southeastern through the exercise of voting control and/or
dispositive power over the Securities as the result of his official positions
or ownership of voting securities of Southeastern. Neither Southeastern nor
Mr. Hawkins owns any Securities for its or his own account and each disclaims
beneficial interest in any of the Securities reported herein.
Longleaf Partners Fund and Mr. Hawkins, each of whom is a joint
filer of this Schedule 13D, may be reached c/o Southeastern Asset Management,
Inc., 6410 Poplar Avenue, Suite 900, Memphis, Tennessee 38119.
(d) During the last five years, neither Southeastern, Longleaf
Partners Fund, nor Mr. Hawkins has been convicted in any criminal proceeding.
(e) During the last five years, neither Southeastern, Longleaf
Partners Fund, nor Mr. Hawkins has been a party to any civil or administrative
proceeding which resulted in a judgment, decree or final order enjoining future
violations, or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws, except as
follows: in February 2004, Southeastern and Longleaf Partners Small-Cap Fund, a
separate series of Longleaf Partners Funds Trust, were named in a Complaint
filed by The MONY Group, Inc. (MONY) in the US District Court for the Southern
District of New York alleging that Southeastern and the Small-Cap Fund had
violated Sections 14(a) and 13(d) of the Securities Exchange Act of 1934 with
respect to their activities opposing the acquisition of MONY by AXA Financial.
MONY obtained a preliminary injunction against Southeastern, the Small-Cap Fund
and other unaffiliated parties enjoining distribution of a duplicate copy of
MONY's proxy card, a strategy Southeastern and the Small-Cap Fund's legal
counsel had first reviewed with the staff of the SEC's Division of Corporate
Finance (the "Staff"). The Staff of the SEC had advised Southeastern's legal
counsel that such a strategy was permitted if certain conditions were
satisfied. The Staff, on two occasions, also furnished the Federal courts with
a letter which confirmed the Staff's position which had been given orally to
Southeastern's counsel. Even though Southeastern and the Small-Cap Fund
satisfied the conditions outlined by the Staff, in light of the litigation,
neither of them actually distributed a duplicate of MONY's proxy card. At
MONY's May 18, 2004 meeting, MONY's shareholders approved the acquisition by
AXA, and MONY subsequently dismissed its lawsuit against Southeastern and the
Small-Cap Fund with prejudice.
(f) Southeastern is a corporation organized and existing under the
laws of the State of Tennessee; Longleaf Partners Funds Trust, of which
Longleaf Partners Fund is a series, is a Massachusetts business trust. Mr.
Hawkins is a citizen of the United States. The names, business addresses, and
principal occupations of each director and executive officer of Southeastern,
and each Trustee of Longleaf Partners Fund are set forth in Schedule I.
Item 3. Source and Amount of Funds or Other Consideration
The respective investment advisory clients of Southeastern used
approximately $923,035,051 in the aggregate to purchase the Securities reported
in this statement. All assets used to purchase Securities were assets of these
respective clients and none were assets of Southeastern. In addition, none of
the proceeds used to purchase the Securities were provided through borrowings
of any nature.
Item 4. Purpose of Transaction
The Securities reported in this filing were initially purchased and
have been held for investment purposes on behalf of client accounts over which
Southeastern has either sole or shared discretionary investment or voting
power. The Securities are reported by Southeastern and by Mr. O. Mason
Hawkins, Chairman of the Board and Chief Executive Officer of Southeastern, in
the event that either should be deemed to be a member of a group under Section
13(d)(3) or the beneficial owner of these Securities under the provisions of
subparagraph (b)of Rule 13d-3 under the Securities Exchange Act of 1934.
Beneficial ownership on the part of Southeastern and Mr. Hawkins as members of
a group or as beneficial owners is expressly disclaimed, as permitted by Rule
13d-4. All purchases of Securities initially were made for investment purposes
only, in the ordinary course of business of Southeastern as a registered
investment advisor. Southeastern may purchase additional Securities on behalf
of clients in the future, or may sell all or a part of the current holdings of
the Securities, in each case in the open market, in privately negotiated
transactions or otherwise.
Southeastern is engaged in the business of investment management of
its clients' assets and pursues an investment philosophy of identifying
undervalued situations and acquiring positions in undervalued companies on
behalf of its clients. In pursuing this investment philosophy, Southeastern
analyzes the operations, capital structure and markets of companies in which
its clients invest and continuously monitors the business operations of such
companies through analysis of financial statements and other public documents,
through discussions with knowledgeable industry observers, and with management
of such companies, often at management's invitation.
Southeastern qualifies as an institution which may elect to file
securities ownership reports required by the Securities Exchange Act of 1934 on
Schedule 13G and, as a routine matter, Southeastern utilizes Schedule 13G for
its reporting of the ownership positions held by its investment advisory
clients. As the result of investment analysis or the occurrence of events,
however, Southeastern may desire to become more active in discussions with the
particular portfolio company's management, its Board of Directors, or with
third parties about significant matters in which Southeastern may suggest
possible courses of action to assist in building corporate intrinsic value or
to cause the company's true economic value to be recognized. In such
situations, Southeastern may elect to convert a filing on Schedule 13G to a
filing on Schedule 13D in order to be more active in corporate governance and
management matters, and to have the ability to enter into discussions with
third parties concerning proposed corporate transactions of a significant
nature.
In this situation, Southeastern has made recommendations to the
Company's management and Board of Directors on ways to improve the Company's
capital allocation decision making, its capital structure, and that of its
subsidiaries. Because management and the Board have so far not been responsive
to Southeastern's recommendations, on December 16, 2004, Longleaf Partners Fund
submitted to the Company a shareholder proposal under SEC Rule 14a-8, to be
voted on by shareholders at the Company's 2005 annual meeting. The shareholder
proposal recommends that the Board recapitalize the Company's equity structure
into one class of common stock to result in all shares of stock having one vote
per share. Currently, the Company's Series A Common Shares have ten votes per
share, while shares of the Company's Common Stock have one vote per share.
Southeastern believes that a one vote per share capital structure would make
management and the Board more accountable to all of the Company's shareholders.
A copy of Longleaf Partners Fund's shareholder proposal submitted to the
Company is attached as Exhibit 1 to this statement. In light of Southeastern's
views concerning the Company's capital allocation and capital structure,
Southeastern intends to closely monitor the Board's ongoing decisions relating
to capital allocation issues and the Company's capital structure and may from
time to time continue to discuss these issues with members of the Board of
Directors and/or management of the Company. In addition, Southeastern and its
representatives and advisors may communicate with other shareholders, industry
participants and other interested parties concerning the Company. Although
Southeastern and the other filing parties have not made any final determination
concerning future actions with respect to the investment in the Securities,
Southeastern and the other filing parties may in the future exercise any or all
of their respective rights as shareholders of the Company, including, among
other things, seeking to elect one or more nominees to the Company's Board of
Directors at a meeting of the Company's shareholders.
Because Southeastern's activities could lead to or result in any of
the actions or transactions enumerated in clauses (a) through (j) of Item 4 of
Schedule 13D, Southeastern is converting its ownership filing on Schedule 13G
to a filing on Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) The aggregate number and percentage of Securities to which
this Schedule 13D relates is 11,622,457 shares of the common stock of the
Issuer, constituting approximately 22.8% of the 50,979,842 shares outstanding.
Common % of outstanding
Shares Held Common Shares
___________________________________________________________________
Voting Authority
Sole: 5,941,957 11.6%
Shared: 3,598,500* 7.1%
None: 2,082,000 4.1%
Total 11,622,457 22.8%
*Shares owned by Longleaf Partners Fund, a series of Longleaf Partners Funds
Trust. Does not include 84,000 shares held by one non-discretionary account
over which the filing parties have neither voting nor dispositive authority.
Beneficial ownership is expressly disclaimed with respect to these shares.
Dispositive Authority
Sole: 8,014,957 15.7%
Shared: 3,598,500* 7.1%
None: 9,000 0.0%
Total 11,622,457 22.8%
*Shares owned by Longleaf Partners Fund, a series of Longleaf Partners Funds
Trust. Does not include 84,000 shares held by one non-discretionary account
over which the filing parties have neither voting nor dispositive authority.
Beneficial ownership is expressly disclaimed with respect to these shares.
(b) Southeastern generally has the sole power to dispose of or to
direct the disposition of the Securities held for discretionary accounts of its
investment clients, and may be granted the sole power to vote or direct the
vote of such Securities; such powers may be retained by or shared with the
respective clients for shared or non-discretionary accounts, for which
Southeastern generally makes recommendations with respect thereto. Shares held
by any Series of Longleaf Partners Funds Trust are reported in the "shared"
category.
(c) Sales transactions in the Securities during the past sixty days
are attached as Schedule II. All such sale transactions were effected on the
American Stock Exchange. There have been no purchases of the Securities during
the last sixty days.
(d) The investment advisory clients of Southeastern have the sole
right to receive and, subject to notice, to withdraw the proceeds from the sale
of the Securities, and the sole power to direct the receipt of dividends from
any of the Securities held for their respective accounts. Such clients may
also terminate the investment advisory agreements without penalty upon
appropriate notice. Southeastern does not have an economic interest in any of
the Securities reported herein.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer
The powers of disposition with respect to Securities owned by
discretionary private accounts of Southeastern are established in written
investment advisory agreements between clients and Southeastern, which are
entered into in the normal and usual course of the business of Southeastern as
a registered investment advisor and which are generally applicable to all
securities purchased for the benefit of each such discretionary private
account. There are no special or different agreements relating to the
Securities of the Issuer.
The written investment advisory agreements with clients do not
contain provisions relating to borrowing of funds to finance the acquisition of
the Securities, acquisition of control, transfer of securities, joint ventures,
or any of the other transactions listed in the instructions to Item 7 of
Schedule 13D other than voting of proxies. In connection with voting,
Southeastern may be allowed or directed to vote the proxies received by
accounts classified as "discretionary" or "shared" accounts; such authority is
generally retained by the clients for accounts classified as "non-
discretionary".
Item 7. Material to be Filed as an Exhibit
Schedule I. Information with Respect to Directors and Officers of Southeastern
Asset Management, Inc. and Longleaf Partners Fund.
Schedule II. Sales in the last sixty days.
Exhibit 1. Shareholder Proposal submitted by Longleaf Partners Fund.
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: December 27, 2004
SOUTHEASTERN ASSET MANAGEMENT, INC.
By /s/ Andrew R. McCarroll
_______________________________
Andrew R. McCarroll
Vice President & General Counsel
LONGLEAF PARTNERS FUND
By /s/ O. Mason Hawkins
_______________________________
O. Mason Hawkins
Trustee and Co-Portfolio Manager
O. MASON HAWKINS
(Individually)
/s/ O. Mason Hawkins
_______________________________
Joint Filing Agreement
In accordance with Rule 13d-1(f) under the Securities Exchange Act
of 1934, the persons or entities named below agree to the joint
filing on behalf of each of them of this Schedule 13D with respect
to the Securities of the Issuer and further agree that this joint
filing agreement be included as an exhibit to this Schedule 13D. In
evidence thereof, the undersigned hereby execute this Agreement as
of December 27, 2004.
Southeastern Asset Management, Inc.
By /s/ Andrew R. McCarroll
__________________________________
Andrew R. McCarroll
Vice President and General Counsel
Longleaf Partners Fund
By /s/ O. Mason Hawkins
______________________________
O. Mason Hawkins
Trustee and Co-Portfolio Manager
O. Mason Hawkins, Individually
/s/ O. Mason Hawkins
_______________________________
SCHEDULE I
Information with Respect to Executive
Officers and Directors
The following information is disclosed for each of the directors and executive
officers of Southeastern: name; business address; and present principal
occupation or employment and the name, principal business and address of any
corporation or other organization in which such employment is conducted.
Unless otherwise specified, the principal employer of each such individual
is Southeastern Asset Management, Inc., having its principal executive offices
located at 6410 Poplar Ave., Suite 900, Memphis, Tennessee 38119. Each
individual identified below is a citizen of the United States.
To the knowledge of management of Southeastern, during the last five years,
no such person has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), and no such person was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which he was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities law or finding any violation with respect to
such laws, except as follows: in February 2004, Southeastern and Longleaf
Partners Small-Cap Fund, a separate series of Longleaf Partners Funds Trust,
were named in a Complaint filed by The MONY Group, Inc. (MONY) in the US
District Court for the Southern District of New York alleging that Southeastern
and the Small-Cap Fund had violated Sections 14(a) and 13(d) of the Securities
Exchange Act of 1934 with respect to their activities opposing the acquisition
of MONY by AXA Financial. MONY obtained a preliminary injunction against
Southeastern, the Small-Cap Fund and other unaffiliated parties enjoining
distribution of a duplicate copy of MONY's proxy card, a strategy Southeastern
and the Small-Cap Fund's legal counsel had first reviewed with the staff of the
SEC's Division of Corporate Finance (the "Staff"). The Staff of the SEC had
advised Southeastern's legal counsel that such a strategy was permitted if
certain conditions were satisfied. The Staff, on two occasions, also furnished
the Federal courts with a letter which confirmed the Staff's position which had
been given orally to Southeastern's counsel. Even though Southeastern and the
Small-Cap Fund satisfied the conditions outlined by the Staff, in light of the
litigation, neither of them actually distributed a duplicate of MONY's proxy
card. At MONY's May 18, 2004 meeting, MONY's shareholders approved the
acquisition by AXA, and MONY subsequently dismissed its lawsuit against
Southeastern and the Small-Cap Fund with prejudice.
SOUTHEASTERN ASSET MANAGEMENT, INC.
Directors
O. Mason Hawkins: Director, Chairman of the Board and Chief Executive Officer
of Southeastern Asset Management, Inc.; Trustee and Co-Portfolio Manager of
Longleaf Partners Fund.
G. Staley Cates: Director and President of Southeastern Asset Management,
Inc.; Co-Portfolio Manager Longleaf Partners Fund.
Frank N. Stanley, III: Director and Vice President of Southeastern Asset
Management, Inc.
Other Officers
James H. Barton Vice President
John B. Buford Vice President
Deborah L. Craddock Vice President-Trading
Julie M. Douglas CFO-Mutual Funds
C. T. Fitzpatrick Vice President
Lee B. Harper Vice President
Randy D. Holt Vice President and Secretary
Andrew R. McCarroll Vice President and General Counsel
E. Andrew McDermott Vice President
John McFadden CCO-Mutual Funds
Joseph L. Ott Vice President and Treasurer
James E. Thompson, Jr. Vice President
Michael J. Wittke Vice President and Assistant General Counsel
LONGLEAF PARTNERS FUND
The following information is disclosed for each of the trustees of
Longleaf Partners Fund: name; address; and present principal occupation or
employment and the name, principal business and address of any corporation or
other organization in which such employment is conducted. Each individual
identified below is a citizen of the United States. The address of each
individual for purposes of correspondence is c/o Southeastern Asset Management,
Inc., 6410 Poplar Avenue, Suite 900, Memphis, Tennessee 38119.
To the knowledge of management of Longleaf Partners Fund, during
the last five years, no such person has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), and no such person was
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which he was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities law or finding any violation
with respect to such laws, except as follows: in February 2004, Southeastern
and Longleaf Partners Small-Cap Fund, a separate series of Longleaf Partners
Funds Trust, were named in a Complaint filed by The MONY Group, Inc. (MONY) in
the US District Court for the Southern District of New York alleging that
Southeastern and the Small-Cap Fund had violated Sections 14(a) and 13(d) of
the Securities Exchange Act of 1934 with respect to their activities opposing
the acquisition of MONY by AXA Financial. MONY obtained a preliminary
injunction against Southeastern, the Small-Cap Fund and other unaffiliated
parties enjoining distribution of a duplicate copy of MONY's proxy card, a
strategy Southeastern and the Small-Cap Fund's legal counsel had first reviewed
with the staff of the SEC's Division of Corporate Finance (the "Staff"). The
Staff of the SEC had advised Southeastern's legal counsel that such a strategy
was permitted if certain conditions were satisfied. The Staff, on two
occasions, also furnished the Federal courts with a letter which confirmed the
Staff's position which had been given orally to Southeastern's counsel. Even
though Southeastern and the Small-Cap Fund satisfied the conditions outlined by
the Staff, in light of the litigation, neither of them actually distributed a
duplicate of MONY's proxy card. At a May 18, 2004 meeting, MONY shareholders
approved the acquisition by AXA, and MONY subsequently dismissed its lawsuit
against Southeastern and the Small-Cap Fund with prejudice.
Trustees
O. Mason Hawkins: Director, Chairman of the Board and Chief Executive Officer
of Southeastern Asset Management, Inc.; Trustee and Co-Portfolio Manager of
Longleaf Partners Fund.
Chadwick H. Carpenter, Jr.: Trustee of Longleaf Partners Funds; private
investor and consultant.
Margaret H. Child: Trustee of Longleaf Partners Funds; private investor and
consultant.
Daniel W. Connell, Jr.: Trustee of Longleaf Partners Funds; private investor
and consultant.
Rex M. Deloach: Trustee of Longleaf Partners Funds; President, Financial
Insights, Inc.
Steven N. Melnyk: Trustee of Longleaf Partners Funds; private investor and
consultant.
C. Barham Ray: Trustee of Longleaf Partners Funds; Chairman of the Board and
Secretary, SSM Corporation.
Perry C. Steger: Chairman of the Board of Longleaf Partners Funds; President,
Steger and Bizzell Engineering, Inc.
Schedule II
Transactions in the Last Sixty Days*
Transaction Type
Date
# of Shares
Price per Share**
Sale
12/21/04
15,000
$75.20
Sale
10/26/04
14,000
$73.13
*Sales by Southeastern's private account clients in the ordinary course of
business in connection with rebalancing of portfolios.
** Net of commissions.
EXHIBIT 1
SHAREHOLDER PROPOSAL FOR 2005 ANNUAL MEETING
RESOLVED, that the shareholders request that the Board of Directors of
Telephone and Data Systems, Inc. (the "Company") take all steps necessary in
accordance with Delaware law to re-capitalize the Company's equity structure
into one class of common stock to result in one share, one vote, for all of the
outstanding stock on all matters subject to a shareholder vote, including, if
necessary, presenting to shareholders for a vote an amendment to the Company's
Restated Certificate of Incorporation in order to accomplish such re-
capitalization.
Supporting Statement:
Longleaf Partners Fund (the "Fund") owns 3,598,500 shares of the Company, or
just over 7% of the Common Stock. Clients of the Fund's adviser, Southeastern
Asset Management, Inc. ("Southeastern"), own an additional 8,122,957 shares, or
almost 16% of the Common Stock. Together, the Fund and Southeastern's other
clients own over 20% of the Company's market value, but because of the
Company's dual class voting structure, this ownership represents aggregate
voting power of only 10.2%. By comparison, the Series A Common Shares owned by
the Carlson family represent only 11% of the Company's market value, but more
than 50% of the Company's voting power. Common Stock holders who collectively
own approximately 87% of the Company's market value are entitled to elect only
4 of the Company's 12 directors. Holders of Series A Common Stock and
Preferred Stock are entitled to elect the remaining 8 directors.
Southeastern has informed the Fund that while it believes the Company's
management has done a good job running the wireless and wireline businesses,
management has done a poor job of allocating the capital generated by those
businesses. Over the last two years, Southeastern has invited management to
consider a number of options to improve its defective holding company structure
relating to US Cellular, all of which have been ignored, to the detriment of
the Company's stock price. As a result, the Fund believes that the board
should face greater accountability from shareholders.
In its 2004 Proxy Statement, the Company recommended the elimination of its
classified board structure, stating: "the board of directors has determined
that annual elections of directors would be in the best interests of all
shareholders since it would give TDS shareholders more frequent opportunity to
evaluate the performance of TDS's directors." Unfortunately, the Company did
not give holders of Common Stock the opportunity to elect more than 4 of the
Company's 12 directors. As the primary owners of the Series A Common Stock,
the Carlson family is in a position to elect the remaining 8 directors. An
important responsibility of the Company's directors is oversight of management,
but if senior management of the Company and their family members are able to
elect two-thirds of the directors, we believe those directors may be more
likely to act in the interests of management than in the interests of all
shareholders.
Please vote "FOR" this proposal and communicate to the Board your desire that
directors be more accountable to all shareholders.
16