THE MALLARD FUND, INC.
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
ANNUAL REPORT
March 31, 1998
Directors
William S. Dietrich II
Jennings R. Lambeth
Evans Rose, Jr.
Officers
William S. Dietrich II
President and Chief Investment Officer
Richard F. Berdik
Secretary and Treasurer
Carl M. Rizzo
Assistant Secretary
Theresa A. Dolan
Assistant Treasurer
Legal Counsel
Kirkpatrick & Lockhart LLP
Independent Auditors
Coopers & Lybrand L.L.P.
The Mallard Fund, Inc.
Insert for Annual Report
On May 27, 1998, the Board of Directors of The Mallard Fund, Inc. ("Fund")
held their annual board meeting ("Annual Meeting"). At the meeting, the Board
revised the Fund's investment policy to increase the percentage of the Fund's
assets that can be invested in, and committed to make future investments in,
private investment companies that are organized as hedge funds or private
equity or venture capital funds. The revised investment policy is described
below.
The Fund may invest in private investment companies that are organized as
hedge funds and private investment companies that are organized as private
equity or venture capital funds (together, "Underlying Private Funds") and may
enter into commitments to make future investments in Underlying Private Funds,
provided, however, that at the time of and as a result of each investment or
commitment, the Fund does not have either (i) more than 50% of its total
assets invested in Underlying Private Funds or (ii) an aggregate of more than
75% of its total assets invested in or committed to investments in Underlying
Private Funds.
The Fund could have more than 50% of its total assets invested in Underlying
Private Funds as a result of the Fund's capital contribution to an Underlying
Private Fund pursuant to a commitment previously made by the Fund or as a
result of changed values of the Underlying Private Funds or of other assets of
the Fund, but not because of direct investment in an Underlying Private Fund.
These percentage limitations are applied at the time a transaction is
effected.
At all times the Fund has outstanding commitments to make future investments
in Underlying Private Funds, it shall instruct its custodian to earmark on its
books liquid securities, such as redeemable shares of mutual funds and shares
of exchange traded, closed-end investment companies, cash and cash
equivalents, at least equal in value to the aggregate amount of such
commitments. If any such securities are sold, and equivalent value of other
liquid securities or cash shall immediately be substituted.
All other investment policies of the Fund remain the same. The Fund's
investment policies, however, may be changed by the Board of Directors.
Immediately following the Annual Meeting, the Fund held a special meeting of
its shareholders. Shareholders of the Fund were asked to vote on three
matters: 1) the election of Thomas Marshall as a new director of the Fund; 2)
the approval of a new investment consulting contract with Cambridge
Associates, Inc. and Cambridge Capital Advisors, Inc., which contract would go
into effect July 1, 1998; and 3) the ratification of the selection by the
Board of Directors of Coopers & Lybrand L.L.P. as the Fund's independent
public accountants for the upcoming fiscal year.
All of Mallard's 8,312,635.948 shares were present and voted at the
shareholder meeting. Shareholders voted unanimously to approve Items 1, 2 and
3 described above. There were no abstentions or withheld votes at the
shareholder meeting.
The following directors of the Fund continued in office after the shareholder
meeting: William S. Dietrich, II, Jennings R. Lambeth and Evans Rose, Jr.
At the Annual Meeting, the Board of Directors adopted the following dividend
policy for the Fund, which was made effective as of April 1, 1998. The Fund
will pay a dividend annually of at least 10% of the Fund's net asset value
based on the most recent net asset value calculated prior to the dividend
declaration date and at a higher rate, if necessary, to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), or to avoid incurring any tax liability under the excise
tax provisions of Section 4982 of the Code.
THE MALLARD FUND, INC.
Schedule of Investments / March 31, 1998
(Showing Percentage of Total Value of Net Assets)
__________________________________________________________________________
Shares Value
MUTUAL FUNDS - 73.3%
American Funds - EuroPacfic Growth Fund 2 368,701 $10,898,806
Brandywine Fund, Inc. 2 270,580 8,596,331
Emerging Markets Growth Fund, Inc. #, 1 367,609 21,251,500
Morgan Stanley Emerging Markets Portfolio 2 1,374,689 19,286,890
Templeton Institutional Emerging Markets Fund 2 1,976,101 21,420,937
Tweedy, Browne American Value Fund 2 217,014 5,000,000
Tweedy, Browne Global Value Fund 2 825,960 15,676,712
TOTAL MUTUAL FUNDS (COST $113,572,064) 102,131,176
LIMITED PARTNERSHIPS - 43.0%
Blackstone Capital Partners III, L.P. #,^ 518,125
Bulldog Capital Partners Limited Partnership # 2,636,343
Delphi Ventures IV, L.P. #,^ 481,135
Dorchester Partners, L.P. # 2,870,855
Doughty Hanson & Co., III L.P. #,^ 2,500
Everest Capital Frontier, L.P. # 11,054,136
Feirstein Partners, L.P. # 6,358,265
Forum Capital Partners # 1,453,943
Lone Redwood, L.P. # 3,044,065
Maverick Fund USA, Ltd. # 6,289,856
Millgate Partners, L.P. # 2,071,163
Mt. Everest QP Fund, L.P. # 2,180,157
Murray Partners, L.P. # 2,309,084
Oppenheimer Emerging Markets, L.P. # 2,000,000
Oracle Partners, L.P. # 4,690,000
Peak Investment, L.P. # 2,101,622
Sankaty High Yield Partners, L.P. #,^ 340,000
Sevin Rosen Fund VI, L.P. #,^ 55,759
Spinnaker Technology Fund, L.P. # 3,639,056
Summit Ventures V, L.P. # 123,966
Tontine Partners, L.P. # 2,395,836
The Varde Fund IV-A, L.P. # 3,172,397
Whitney Equity Partners III, L.P. #,^ 80,203
TOTAL LIMITED PARTNERSHIPS (COST $52,572,988) 59,868,466
1
THE MALLARD FUND, INC.
Schedule of Investments / March 31, 1998 (continued)
_________________________________________________________________________
FUND OF FUNDS - 1.1 %
Knightsbridge Integrated Holdings III-Limited #,3
(COST $1,337,070) 3,000 1,501,860
TOTAL INVESTMENTS (COST $167,482,122)* -- 117.4% 163,501,502
OTHER ASSETS AND LIABILITIES, NET -- (17.4)% (24,265,592)
NET ASSETS - 100.00% $139,235,910
* Cost for federal income tax purposes is $159,229,125. At March 31,
1998, net unrealized appreciation was $4,272,377. This consisted of
aggregate gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $10,080,943 and aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $5,808,566.
# See Note 7.
^ As of March 31, 1998, the Fund has committed to investing additional
capital into these entities. See Note 7 for amounts of future capital
commitments.
1 Closed-end investment company.
2 Open-end investment company.
3 The valuation of Knightsbridge Integrated Holdings III-Limited will not
be finalized until the end of June 1998. However, the investment company
has experienced significant appreciation in its holdings during 1998 and
the Fund's management is unaware of any factors that would materially
affect the value of the underlying investments in the fund. Therefore,
no adjustment in the value is proposed at March 31, 1998.
The accompanying notes are an integral part of the financial statements.
2
The Mallard Fund, Inc.
Statement of Assets and Liabilities
as of 03/31/98
Assets:
Investments, at value (Cost $167,482,122)(Note 2) $ 163,501,502
Cash 5,889,777
Receivable for investments sold 5,766,418
Total Assets 175,157,697
Liabilities:
Payable for investments purchased 11,500,000
Bank loan 24,170,447
Accrued advisory fees 117,899
Other accrued expenses 133,441
Total Liabilities 35,921,787
Commitments (Note 7)
Net Assets $ 139,235,910
Net assets consist of:
Common stock, $0.001 par value
Authorized 100,000,000 shares; 8,312,636 shares
issued and outstanding $ 8,313
Paid-in capital 143,596,521
Distributions in excess of net investment income (388,304)
Net unrealized depreciation on investments (3,980,620)
Net Assets Applicable to Shares Outstanding $ 139,235,910
Net Asset Value Per Share
($139,235,910 / 8,312,636 shares of common stock outstanding) $16.75
The accompanying notes are an integral part of the financial statements.
3
The Mallard Fund, Inc.
Statement of Operations
For the Period May 30, 1997^ through March 31, 1998
INVESTMENT INCOME
Income
Interest income $ 16,266
Dividend income 8,617,486
Total Income 8,633,752
Expenses:
Investment advisory fee (Note 5) 228,665
Administration fee (Note 5) 75,170
Custodian fees (Note 5) 12,500
Legal fees 145,688
Audit fees 25,001
Directors fees and expenses 15,000
Insurance 2,507
Organizational expenses (Note 3) 171,221
Interest on bank loan 821,903
Miscellaneous expense 4,533
Total Expenses 1,502,188
NET INVESTMENT INCOME 7,131,564
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments during the period (1,741,707)
Net unrealized depreciation of investments during the period (3,980,620)
Net realized and unrealized loss on investments (5,722,327)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,409,237
^ Commencement of Operations
The accompanying notes are an integral part of the financial statements.
4
The Mallard Fund, Inc.
Statement of Changes in Net Assets
For the Period May 30, 1997^ through March 31, 1998
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 7,131,564
Net realized loss on investments (1,741,707)
Net increase in unrealized depreciation of investments (3,980,620)
Net increase in net assets resulting from operations 1,409,237
Distributions to Shareholders: (Note 2)
Net investment income (7,131,564)
In excess of net investment income (388,304)
In excess of capital gains (3,933,164)
Return of capital (14,994,870)
Total distributions to shareholders (26,447,902)
Capital Share Transactions:
Issuance of 6,927,197 shares of common stock 138,543,932
Offering cost charged to capital (190,927)
Issuance of 1,385,439 shares of common stock in the
reinvestment of dividends 25,921,570
Net increase in net assets from Fund share transactions 164,274,575
Increase in net assets 139,235,910
NET ASSETS:
Beginning of period 0
End of period $ 139,235,910
^ Commencement of Operations
The accompanying notes are an integral part of the financial statements.
5
The Mallard Fund, Inc.
Statement of Cash Flows
For the Period May 30, 1997^ through March 31, 1998
INCREASE IN CASH FROM:
Operating Activities
Net increase in net assets resulting from operations......... $1,409,237
Adjustments:
Increase in accrued advisory expenses................... 117,899
Increase in accrued other expenses....................... 133,441
Net realized and unrealized loss on investments.......... 5,722,327
Net increase in cash from operating activities........... 7,382,904
Investing Activities
Purchases of portfolio investments ................... (64,770,946)
Proceeds from disposition of portfolio investments... 38,924,632
Net decrease in cash from investing activities....... (25,846,314)
Financing Activities
Issuance of common stock in exchange for contributed capital. 900,000
Dividends paid.......................................... (526,333)
Offering costs paid................................... (190,927)
Bank loan................................................ 24,170,447
Net increase in cash from financing activities............... 24,353,187
Net increase in cash.................................... 5,889,777
Cash at beginning of year........................... 0
Cash at end of year........................................ $ 5,889,777
Supplemental cash flow information:
Cash paid for interest $ 691,716
Supplemental statement of non-cash financing activities:
Issuance of common stock in exchange for investments
in securities $137,643,932
Issuance of common stock in the reinvestment of dividends $25,921,570
^ Commencement of Operations
The accompanying notes are an integral part of the financial statements.
6
The Mallard Fund, Inc.
Financial Highlights
The following table includes selected data for a share outstanding
throughout the period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto. Per share information has been determined
based on weighted average shares outstanding.
For the Period
May 30, 1997^ through
March 31, 1998
Net Asset Value - Beginning of Period $ 19.97**
Investment Operations:
Net investment income...................... 0.97
Net realized and unrealized loss on investments..... (0.59)
Total from investment operations ......................... 0.38
Distributions:
From net investment income ................ (0.97)
In excess of net investment income ................. (0.05)
In excess of capital gain......................... (0.54)
Return of capital........................... (2.04)
Total distributions............................. (3.60)
Net Asset Value - End of Period.................. $ 16.75
Total Return (a)............................ 0.85%
Ratios (to average net assets)/Supplemental
Expenses .................................... 1.06%
Net investment income .............................. 5.05%
Portfolio turnover rate...................... 28.87%
Net assets at end of period (000 omitted).. ..... $139,236
Number of shares outstanding at end of period....... 8,312,636
Amount of bank loans outstanding at end
of the period (000 omitted)........... $24,170
Average amount of bank loans outstanding
during the period (000 omitted)........................ $17,713
Amount of maximum month-end bank loans
during the period (000 omitted)................. $24,170
Average amount of bank loans per share
during the period..................... $2.13
Weighted average interest rate of bank loans
during the period................. 6.04%
* Annualized
** Initial public offering price of $20.00 per share less offering
expenses of $0.03 per share
^ Commencement of Operations
(a) Based on per share net asset value. Per share market price is not
readily determinable since fund shares are not currently sold to the
public. Total return assumes reinvestment of dividends at the most
recent quarterly net asset value. Total investment return does not
reflect brokerage commissions or initial underwriting discounts and
has not been annualized.
The accompanying notes are an integral part of the financial statements.
The Mallard Fund, Inc.
Notes to Financial Statements
1. Organization: The Mallard Fund, Inc. (the "Fund") was organized on
October 15, 1996 as a Maryland corporation. The Fund is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as a
non-diversified, closed-end, management investment company. The Fund
commenced operations, on May 30,1997, with the sale of 6,927,197 shares
of common stock (the "initial shares") through a private placement to the
William S. Dietrich II Charitable Remainder Annuity Trust and the William
S. Dietrich II Charitable Remainder Unit Trust on May 30, 1997. For
federal income tax purposes, the Fund qualifies as a non-publicly held
regulated investment company. Accordingly, certain investment expenses
will not be deductible by the Fund, but will instead be allocated to the
shareholders for purposes of determining the shareholder's taxable income.
Since the private placement was treated as a tax free exchange, securities
received by the Fund maintained the cost basis and holding period as
reflected by the trusts prior to the private placement.
Since the Fund's stock will not be readily marketable and may be considered
illiquid, the Board of Directors will consider, on an annual basis, the
possibility of making tender offers to repurchase all of the stock of the
Fund from stockholders at the net asset value per share. There can be no
assurance, however, that the Board of Directors will decide to make any
tender offers. If the Board of Directors does not make a tender offer to
repurchase all of the stock of the Fund by December 31, 2000, the Fund will
be liquidated as soon as practical thereafter unless the Fund obtains
unanimous approval from all stockholders not to liquidate the Fund. Refer
to the Prospectus for full disclosure.
2. Significant Accounting Policies
A. Portfolio Valuation: Investments are stated at value in the
accompanying financial statements. Shares of open-end funds are valued
at their respective net asset values under the 1940 Act. An open-end
fund values securities in its portfolio for which market quotations are
readily available at their current market value (generally the last
reported sales price) and all other securities and assets at fair value
pursuant to methods established in good faith by the board of directors of
the underlying fund. Shares of closed-end funds that are listed on U.S.
exchanges are valued at the last sales price on the day the securities are
valued or, lacking any sales on such day, at the last available bid price.
Shares of closed-end funds traded in the OTC market and listed on NASDAQ
are valued at the last trade price on NASDAQ at 4:00 p.m., New York
Time; other shares traded in the OTC market are valued at the last bid
price available prior to valuation. Other Fund assets are valued at
current market value or, where unavailable, at fair value as determined
in good faith by or under the direction of the Board of Directors.
The Board of Directors has established general guidelines for calculating
fair value of non-publicly traded securities. At March 31, 1998, the
Fund held 59.3% of its net assets in securities valued in good faith by
the Board of Directors with an aggregate cost of $77,855,019 and fair value
of $82,621,826. The net asset value of the Fund is calculated quarterly
and at any other times determined by the Board of Directors.
In determining fair value, management considers all relevant qualitative
and quantitative information available. These factors are subject to
change over time and are reviewed periodically. The values assigned to
fair value investments are based on available information and do not
necessarily represent amounts that might ultimately be realized, since
such amounts depend on future developments inherent in long-term
investments. However, because of the inherent uncertainty of valuation,
those estimated values may differ significantly from the values that
would have been used had a ready market of the investment existed, and
the differences could be material.
B. Determination of Gains or Losses on Sale of Securities: Gains or
losses on the sale of securities are calculated for accounting and tax
purposes on the identified cost basis, net of wash sales. The year end
cost basis for federal income tax purposes is $159,229,125.
The Mallard Fund, Inc.
Notes to Financial Statements - continued
C. Federal Income Taxes: The Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
D. Other: Security transactions are accounted for on the trade date.
The Fund records interest income on the accrual basis. Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
E. Distributions to Shareholders: For the fiscal year ending March 31,
1998, the policy of the Fund was to pay a dividend annually at a rate
necessary to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code") and to avoid
incurring any tax liability under the excise tax provisions of Section
4982 of the Code. Beginning April 1, 1998, the Board of Directors adopted
the following dividend policy. The Fund will pay a dividend annually of at
least 10% of the Fund's net asset value based on the most recent net asset
value calculated prior to the dividend declaration date and at a higher
rate, if necessary, to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
or to avoid incurring any tax liability under the excise tax provisions of
Section 4982 of the Code.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for U.S. federal income tax purposes due to U.S.
generally accepted accounting principles/tax differences in the character
of income and expense recognition.
At March 31, 1998, the Fund reclassified $14,994,870 from accumulated net
investment loss to paid in capital. In addition, the Fund reclassified
$5,674,871 from accumulated net realized loss to paid in capital.
F. Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
3. Organizational Costs and Offering Costs: Organizational costs in the
amount of $171,221 have been expensed during the current year based on
the early adoption of the AICPA's Statement of Position 98-5, Reporting
on the Costs of Start-Up Activities. Offering costs amounting to
$190,927 were charged to paid-in- capital upon the commencement of the
Fund's offering period.
4. Portfolio Transactions: The following is a summary of the security
transactions for the period ended March 31, 1998:
Proceeds
Cost of from Sales
Purchases or Maturities
Long Term Securities $ 76,270,948 $ 44,691,050
5. Investment Advisory Services and Payments to Affiliated Persons: The
Fund receives investment consulting services from Cambridge Associates,
Inc. ("Cambridge") pursuant to an investment consulting agreement dated
July 1, 1997 (the "Agreement"). Cambridge provides the Fund, on a non-
discretionary basis, investment consulting services regarding the Fund's
purchase, sale and holding of investment securities. Under the terms of
the Agreement, Cambridge receives the following: 55 basis points on
assets invested in Underlying Private Funds (other than general
partnerships or other types of
The Mallard Fund, Inc.
Notes to Financial Statements - continued
entities formed to invest in a diversified pool of marketable or non-
marketable alternative asset investment managers ("Fund of Funds")); 30
basis points on assets invested in Fund of Funds; and 10 basis points
on assets invested in Underlying Funds, cash, securities and other assets,
all assets as of the most recently ended calendar quarter. These fees
also will be applied on any firm commitment made by the Fund to make
investments in Underlying Private Funds and Fund of Funds. As a result
of this fee structure, Cambridge will receive higher fees to the extent
that the Fund invests in, and makes future commitments to invest in,
Underlying Private Funds.
Rodney Square Management Corporation ("RSMC") serves as administrator for
the Fund pursuant to a Fund Administration and Accounting Services
Agreement dated August 27, 1997 with the Fund. ("Administration
Agreement"). As administrator, RSMC provides office facilities, supplies
and administrative services and also assists in the preparation of reports
to shareholders, proxy statements and filings with the SEC and state
securities authorities. RSMC also performs certain accounting services
(including determining the Fund's net asset value per share), financial
reporting, and compliance monitoring activities. For the services provided
as Administrator, RSMC receives an annual fee equal to $80,000 from the
Fund plus an amount equal to 0.02% of the average daily net assets of the
Fund in excess of $100 million. On May 27, 1998, the Board of Directors
of the Fund ratified RSMC's appointment of its parent, Wilmington Trust
Company, as RSMC's agent to perform certain portfolio accounting functions
previously performed by RSMC pursuant to the Administration Agreement.
Rodney Square Distributors, Inc. ("RSD") serves as the underwriter of the
Fund.
Mellon Bank, N.A. ("Mellon") serves as custodian of the Fund's assets. The
Fund pays Mellon an annual maintenance fee of $250.00 per month.
Beginning April 1, 1998, the Fund will pay Mellon an annual fee equal to
0.01% of the average daily net assets of the Fund for all assets held in
domestic custody. In addition, the Fund reimburses Mellon for its out-
of-pocket expenses.
None of the directors affiliated with the Fund receives compensation for
his services as a Director of the Fund. Similarly, none of the Fund's
officers receives compensation from the Fund.
6. Transactions with Affiliates: The William S. Dietrich II Charitable
Remainder Annuity Trust and the William S. Dietrich II Charitable
Remainder Unit Trust, affiliates of William S. Dietrich II, the Fund's
President and Chief Investment Officer, hold 6,629,327 (79.75%) and
1,683,309 (20.25%), respectively, of the 8,312,636 shares of common stock
of the Fund.
7. Credit Agreement: The Fund is authorized to borrow money to make
investments in amounts up to 33 1/3% of the value of its total assets
(including the amount borrowed) at the time of such borrowings. The Fund
has obtained an uncommitted line of credit for up to $50 million from
Boston Safe Deposit & Trust Company. Interest is paid on such borrowings
generally at a rate equal to the interest rate announced by the Federal
Reserve Bank of New York as the average rate on overnight Federal funds
transactions plus 1/2 of 1%. As of March 31, 1998, the Fund had
outstanding borrowings of $24,170,447 from the line of credit at an
annualized average interest rate of 6.04%.
The Mallard Fund, Inc.
Notes to Financial Statements - continued
8. Restricted Securities: Certain of the Fund's investments are
restricted as to resale and are valued at the direction of the Fund's Board
of Directors in good faith, at fair value, after taking into consideration
appropriate indications of value. The table below shows the number of
shares held, the acquisition dates, aggregate costs, fair value as of
March 31, 1998, per share value of the securities, percentage of net
assets which the securities comprise and future capital commitments.
Number of Acquisition Fair Value
Security Shares Dates at 03/31/98
Emerging Markets Growth
Fund, Inc. 367,609 05/30/97 $21,251,500
Blackstone Capital
Partners III, L.P. -- 11/03/97 518,125
Bulldog Capital Partners L.P. -- 05/30/97 2,636,343
Delphi Ventures IV, L.P. -- 01/28/98 481,135
Dorchester Partners, L.P. -- 05/30/97 2,870,855
Doughty Hanson -- 10/31/97 2,500
Everest Capital Frontier, L.P. -- 05/30/97 11,054,136
Feirstein Partners, L.P. -- 05/30/97 6,358,265
Forum Capital Partners -- 05/30/97 1,453,943
Lone Redwood, L.P. -- 12/29/97 3,044,065
Maverick Fund USA, Ltd. -- 05/30/97 6,289,856
Millgate Partners, L.P. -- 02/01/98 2,071,163
Mt. Everest QP, L.P. -- 10/02/97 2,180,157
Murray Partners, L.P. -- 05/30/97 2,309,084
Oppenheimer Emerging
Market, L.P. -- 03/31/98 2,000,000
Oracle Partners, L.P. -- 05/30/97 4,690,000
Peak Investment, L.P. -- 09/30/97 2,101,622
Sankaty High Yield
Partners, L.P. -- 01/12/98 340,000
Sevin Rosen Fund VI, L.P. -- 03/20/98 55,759
Spinnaker Technology
Fund, L.P. -- 07/01/97 3,639,056
Summit Ventures V, L.P. -- 03/09/98 123,966
The Varde Fund IV-A, L.P. -- 05/30/97 3,172,397
Tontine Partners, L.P. -- 10/01/97 2,395,836
Whitney Equity
Partners III, L.P. -- 03/12/98 80,203
Knightsbridge Integrated
Holdings III-Limited 3,000 05/30/97 1,501,860
Totals $82,621,826
The Fund may incur certain costs in connection with the disposition of the
above securities.
Future
Cost of Percentage of Capital
Security Investment Net Assets Commitments
Emerging Markets Growth
Fund, Inc. $23,944,960 15.26% --
Blackstone Capital
Partners III, L.P. 555,124 0.37% $4,481,875
Bulldog Capital Partners L.P. 1,959,124 1.89% --
Delphi Ventures IV, L.P. 500,000 0.35% 4,500,000
Dorchester Partners, L.P. 2,609,678 2.06% --
Doughty Hanson 25,785 0.00% 2,497,500
Everest Capital Frontier, L.P. 10,200,180 7.94% --
Feirstein Partners, L.P. 4,880,315 4.57% --
Forum Capital Partners 1,069,985 1.04% --
Lone Redwood, L.P. 3,000,000 2.19% --
Maverick Fund USA, Ltd. 5,077,543 4.52% --
Millgate Partners, L.P. 2,000,000 1.49% --
Mt. Everest QP, L.P. 2,000,000 1.57% --
Murray Partners, L.P. 2,139,197 1.66% --
Oppenheimer Emerging
Market, L.P. 2,000,000 1.44% --
Oracle Partners, L.P. 3,940,600 3.37% --
Peak Investment, L.P. 2,000,000 1.51% --
Sankaty High Yield
Partners, L.P. 340,000 0.24% 660,000
Sevin Rosen Fund VI, L.P. 56,250 0.04% 693,750
Spinnaker Technology
Fund, L.P. 5,000,000 2.61% --
Summit Ventures V, L.P. 125,000 0.09% 2,375,000
The Varde Fund IV-A, L.P. 3,001,508 2.28% --
Tontine Partners, L.P. 2,000,000 1.72% --
Whitney Equity
Partners III, L.P. 92,700 0.06% 2,407,300
Knightsbridge Integrated
Holdings III-Limited 1,337,070 1.08% 1,500,000
Totals $79,855,019 59.35% $19,115,425
The Fund may incur certain costs in connection with the disposition of the
above securities.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The Mallard Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
The Mallard Fund, Inc. (the "Fund"), including the schedule of investments,
as of March 31, 1998, and the related statement of operations, cash flows,
changes in net assets, and financial highlights for the period from May
30, 1997 (Commencement of Operations) through March 31, 1998. These
financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statement. Our procedures included confirmation of
securities owned as of March 31, 1998 by correspondence with the custodian,
brokers and the general partners of the underlying investment partnerships.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above presents fairly, in all material respects, the financial position
of The Mallard Fund, Inc. as of March 31, 1998, the results of its
operations, cash flows, changes in its net assets, and financial
highlights for the period from May 30, 1997 (Commencement of Operations)
through March 31, 1998, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 5, 1998
