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SIGNATURE MARCIE GAUS
TITLE SENIOR ACCOUNTANT
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> MALLARD FUND INC
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</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
The Mallard Fund, Inc.:
In planning and performing our audit of the financial statements
of The Mallard Fund, Inc. (the "Fund") for the year ended March
31, 1999 (on which we have issued our report dated May 21,
1999), we considered its internal control, including control
activities for safeguarding securities, in order to determine
our auditing procedures for the purpose of expressing our opinion
on the financial statements and to comply with the requirements
of Form N-SAR, and not to provide assurance on the Fund's
internal control.
The management of the Fund is responsible for establishing
and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are
required to assess the expected benefits and related
costs of controls. Generally, controls that are relevant to
an audit pertain to the entity's
objective of preparing financial statements for external purposes
that are fairly presented in conformity with generally accepted
accounting principles. Those controls include the safeguarding
of assets against unauthorized acquisition, use, or disposition.
Because of inherent limitations in any internal control,
misstatements due to error or fraud may occur and not be detected.
Also, projections of any evaluation of internal control to future
periods are subject to the risk that the internal control may
become inadequate because of changes in conditions, or that the
degree of compliance with policies and procedures may
deteriorate.
Our consideration of the Fund's internal control would not
necessarily disclose all matters in internal control that might
be material weaknesses under standards established by the American
Institute of Certified Public Accountants. A material weakness is
a condition in which the design or operation of one or more of
the internal control components does not reduce to a relatively
low level the risk that misstatements caused by error or fraud
in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing
their assigned functions.
However, we noted no matters involving the Fund's internal
control and its operation, including controls for safeguarding
securities, that we consider to be material weaknesses as
defined above as of March 31, 1999.
This report is intended solely for the information and use of
management, the Board of Directors of The Mallard Fund, Inc.,
and the Securities and Exchange Commission and is not intended to
be and should not be used by anyone other than these specified parties.
Deloitte & Touche LLP
May 21, 1999
THE MALLARD FUND, INC.
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
FINANCIAL STATEMENTS
March 31, 1999
Directors
William S. Dietrich II
Jennings R. Lambeth
Evans Rose, Jr.
Thomas Marshall
Officers
William S. Dietrich II
President and Chief Investment Officer
Richard F. Berdik
Secretary and Treasurer
Legal Counsel
Kirkpatrick & Lockhart LLP
Independent Auditors
Deloitte & Touche LLP
THE MALLARD FUND, INC.
Investments / March 31, 1999
(Showing Percentage of Total Value of Net Assets)
_______________________________________________________________________________
Shares Value
MUTUAL FUNDS - 58.0%
American Funds - EuroPacfic Growth Fund 284,146 $8,584,065
DFA US Small Cap Value 478,731 7,846,403
CI Emerging Markets Growth Fund, Inc. (a), (b) 332,466 15,283,462
Morgan Stanley Emerging Markets Portfolio 624,210 6,654,083
Templeton Institutional Emerging Markets Fund 1,472,499 13,267,220
Tweedy Browne American Value Fund 379,592 8,502,871
Tweedy Browne Global Value Fund 421,718 7,624,666
TOTAL MUTUAL FUNDS (COST $85,032,159) $67,762,770
LIMITED PARTNERSHIPS - 47.8% (a)
AMA 98 Corporate, L.P. 126,699
Bain Capital Fund VI, L.P. 436,297
Bain Capital VI Coinvestment Fund L.P. 425,960
BC European Capital VI 467,954
Berkshire Fund V, L..P. 35,278
Blackstone Capital Partners III Merchant Banking Fund, L.P. 1,052,339
Brookside Capital Partners Fund, L.P. 2,067,511
Delphi Ventures IV, L.P. 1,355,556
Doughty Hanson & Co. III, L.P. Number 6 280,386
Everest Capital Frontier, L.P. 3,394,992
Feirstein Partners, L.P. 4,495,678
Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 2,976,000
Highfields Capital Ltd. 5,733,100
J.H. Whitney III, L.P. 1,224,992
J.H. Whitney Mezzanine Fund, L.P. 789,210
J.W. Childs Equity Partners II, L.P. 244,988
Lone Redwood, L.P. 3,507,871
Maverick Fund USA, Ltd. 7,126,548
Millgate Partners, L.P. 2,102,216
Morgenthaler Venture Partners V 420,810
Mt. Everest QP Fund, L.P. 2,580,000
Oppenheimer Emerging Markets, L.P. 132,539
Peak Investments Limited Partnership 1,889,058
Sankaty High Yield Partners, L.P. 921,739
Sevin Rosen Fund VI L.P. 176,593
Spinnaker Technology Fund, L.P. 5,405,415
Summit Ventures V, L.P. 675,528
TCV III (Q), L.P. 252,905
The Varde Fund IV-A, L.P. 938,148
Tiger Management 4,559,000
Weston Presidio Capital III, L.P. 131,383
TOTAL LIMITED PARTNERSHIPS (COST $56,459,655) 55,926,693
FUND OF FUNDS - 2.5%
Knightsbridge Integrated Holdings III-Limited (a)
(COST $1,637,070) 3,000 2,864,430
TOTAL INVESTMENTS (COST $143,128,884)* -- 108.3% 126,553,893
OTHER ASSETS AND LIABILITIES, NET -- (8.3)% (9,693,216)
NET ASSETS - 100.00% $116,860,677
* Cost for federal income tax purposes at March 31, 1999 has not been
determined due to the Fund not having received tax
information on all of the Fund's investments in limited partnerships.
(a) See Note 8.
(b) Closed-end investment company.
The Mallard Fund, Inc.
Statement of Assets and Liabilities
as of March 31, 1999
Assets:
Investments, at value (Cost $143,128,884) (Note 2) $126,553,893
Cash 612,757
Total Assets 127,166,650
Liabilities:
Bank loan 10,109,864
Other accrued expenses 71,109
Payable for Investments Purchased 125,000
Total Liabilities 10,305,973
Commitments (Note 8)
Net Assets $ 116,860,677
Net assets consist of:
Common Stock, $0.001 par value
Authorized 100,000,000 shares; 10,140,988 shares
issued and outstanding $ 10,141
Paid-in capital 164,639,450
Distributions in excess of net investment income (23,912,337)
Accumulated net realized loss on investments (7,301,586)
Net unrealized depreciation on investments (16,574,991)
Net Assets $116,860,677
Net Asset Value Per Share
($116,860,677 / 10,140,988 shares of common stock) $11.52
The accompanying notes are an integral part of the financial statements.
The Mallard Fund, Inc.
Statement of Operations
For the Period April 1, 1998 through March 31, 1999
INVESTMENT INCOME
Income:
Interest Income $ 22,019
Dividend Income 2,221,852
Total Income 2,243,871
Expenses:
Investment consulting fee (Note 4) 385,900
Investment management fees 85,106
Administration fee (Note 4) 44,048
Custodian fees (Note 4) 3,394
Legal fees 104,203
Audit fees 26,900
Directors fees and expenses 10,685
Insurance 2,533
Interest on bank loan 778,528
Miscellaneous expenses 23,556
Total Expenses 1,464,853
NET INVESTMENT INCOME 779,018
Net realized loss on investments during the period (5,559,879)
Net unrealized depreciation of investments during the period (12,594,371)
Net realized and unrealized loss on investments (18,154,250)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(17,375,232)
The accompanying notes are an integral part of the financial statements.
The Mallard Fund, Inc.
Statement of Changes in Net Assets
Year Ended Year Ended
March 31, 1999 March 31,1998*
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 779,018 $7,131,564
Net realized loss on
investments (5,559,879) (1,741,707)
Net increase in unrealized
depreciation of investment (12,594,371) (3,980,620)
Net decrease in net assets
resulting from operations (17,375,232) 1,409,237
Distributions to Shareholders from:
Net Investment Income $ (779,018) (7,131,564)
In excess of Net Investment Income (23,912,337) (388,304)
In excess of capital gains - (3,933,164)
Return of Capital - (14,994,870)
Total Distributions to
Shareholders (24,691,355) (26,447,902)
Share Transactions:
Issuance of 6,927,197
shares of common stock - 138,543,932
Offering cost charged to
capital - (190,927)
Proceeds from 1,828,352
shares of common stock reinvested 19,691,354 25,921,570
Net increase in net assets from
Fund share transactions 19,691,354 164,274,575
NET ASSETS:
Beginning of period 139,235,910 0
End of period
(including distributions in
excess of net investment $116,860,677 $139,235,910
Income of $23,912,337 and $388,304, respectively)
*For the period from 5/30/97 (commencement of operations) to 3/31/98.
The accompanying notes are an integral part of the financial statements.
Financial Highlights
For a share outstanding throughout each period
For the Period For the Period
May 30, 1997+ to April 1, 1998 to
March 31, 1998 March 31, 1999
Net Asset Value - Beginning of Period $ 19.97** $ 16.75
Investment Operations:
Net investment income ... .97 .09
Net realized and unrealized loss on
investments...................... (.59) (2.55)
Total from investment operations...... .38 (2.46)
Distributions:
From net investment income ....... (0.97) (.09)
In excess of net investment income (0.05) (2.68)
In excess of realized gain............ (0.54) 0
Return of capital ..................... (2.04) 0
Total distributions ....... ($3.60) (2.77)
Net Asset Value - End of Period ... $ 16.75 $11.52
Total Return (a)................... 0.85%(b) (12.18%)
Ratios (to average net assets)/Supplemental
Expenses (excludes loan
interest expenses)..... 1.06%* .58%
Net investment income......... 5.05%* .66%
Portfolio turnover rate ............. 28.87% 26.98%
Net assets at end of period
(000 omitted).. ................. $139,236 $116,820
Number of shares outstanding at end of
period .......................... 8,312,636 10,140,988
Amount of bank loans outstanding at end
of the period (000 omitted)................. $24,170 $10,109
Average amount of bank loans outstanding
during the period (000 omitted)............. $17,713 $13,699
Amount of maximum month-end bank loans
during the period (000 omitted)............. $24,170 $24,745
Average amount of bank loans per share
during the period......................... $2.13 $1.35
Weighted average interest rate of bank loans
during the period...... ...... 6.04% 5.69%
* 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 and does not
reflect brokerage commissions or initial underwriting
discounts.
(b) Total investment return has not been annualized.
The accompanying notes are an integral part of the financial statements.
The Mallard Fund, Inc.
Statement of Cash Flows
For the Period April 1, 1998 through March 31, 1999
INCREASE IN CASH FROM:
Operating Activities
Net decrease in net assets resulting from operations ..... ($17,375,232)
Adjustments:
Decrease in accrued advisory expenses ................... (117,899)
Decrease in accrued other expenses ................... (62,332)
Net realized and unrealized loss on investments 18,154,250
Purchases of portfolio investments (49,059,451)
Proceeds from disposition of
portfolio investments 61,592,757
Investment paydowns 651,470
Net increase in cash from operating activities 13,783,563
Financing Activities
Decrease in Bank loan .................................. (14,060,583)
Dividends Paid .................... (5,000,000)
Net decrease in cash from financing activities (19,060,583)
Net decrease in cash ...................................... (5,277,020)
Cash at beginning of year .. ......................... .. 5,889,777
Cash at end of year ...................................... $612,757
Supplemental cash flow information:
Interest paid $ 865,306
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 exchange of 6,927,197 shares of common
stock (the "initial shares") for contributed investment securities through a
private placement to the William S. Dietrich II Charitable Remainder Annuity
Trust and the William S. Dietrich II Charitable Remainder Unit Trust. 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 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 mutual funds are valued at their
respective net asset values as determined under the 1940 Act. An open-end
mutual 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 mutual 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 mutual 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, 1999, the Fund held
50.3% of its net assets in securities valued in good faith by the Board of
Directors with an aggregate cost of $58,096,725 and fair value of $58,791,123.
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 investment values determined
in good faith by the board of directors 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.
The Mallard Fund, Inc.
Notes to Financial Statements - continued
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.
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.
The Fund has not yet determined the capital gain or loss for income tax purposes
for 1999.
D. Other: Security transactions are accounted for on 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: The policy of the Fund will be to pay a
dividend, commencing after April 1, 1998, 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 under generally accepted accounting principles
may differ from their ultimate characterization for U.S.
federal income tax purposes due to differences in the character of income
and expense recognition.
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. Portfolio Transactions: The following is a summary of the security
transactions for the period ended March 31, 1999:
Proceeds
Cost of from Sales
Purchases or Maturities
Long Term Securities $ 35,465,783 $ 55,774,912
4. Investment Consulting 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. For the fiscal year
ended March 31, 1999, Cambridge received $87,500 per quarter. Under the
terms of a modified Agreement dated March 24, 1999, the Fund will pay $48,125
per quarter for fiscal year March 31, 2000.
For the period April 1 to August 31, 1998, Rodney Square Management Corporation
("RSMC") served as administrator for the Fund. Beginning on September 1,
1998, Arthur Andersen, L.L.P.("AA") became the administrator. As
administrator, AA 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. AA
also performs certain accounting services (including calculating the Fund's
net asset value per share), financial reporting, and compliance monitoring
activities. For the services provided as Administrator, AA receives an annual
fee equal to $70,000 from the Fund.
The Mallard Fund, Inc.
Notes to Financial Statements - continued
American Stock Transfer and Trust Company serves as the Fund's Transfer Agent
and Dividend Disbursing Agent on an as needed basis.
Mellon Bank, N.A. ("Mellon") serves as custodian of the Fund's assets,
except for investments in limited partnerships. The Fund pays Mellon an
annual fee equal to 0.01% of the average daily net assets 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.
5. 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 8,457,679 (83.4%) and 1,683,309
(16.6%), respectively, of the 10,140,988 shares of common stock of the Fund.
6. Contingencies: The Fund is delinquent in filing the initial tax return
for fiscal year 1998. As such, the Fund has not made the election with the
IRS to be recognized as a Regulated Investment Company ("RIC") for income
tax purposes. Management has requested permission from the IRS to file such
election late. Management believes that the resolution of this matter will
result in the Fund qualifying as a RIC. Should the IRS not grant the Fund
permission to file the election late, the Fund would be
required to pay income taxes on 1998 income approximating $2.9 million.
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 a line of credit for up to $50 million from Boston Safe
Deposit & Trust Company. The Fund must maintain a minimum asset coverage
ratio of at least 3 to 1. Payments on the line of credit are interest only,
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 one-half of 1%. As of March 31, 1999, the Fund had
outstanding borrowings of $10,109,864 from the line of credit at an
annualized average interest rate of 5.69%. As of March 31, 1999, the Fund
held collateral in the form of open-end mutual funds with a market value
of $52,479,308.
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,
1999, per share value of the securities, percentage of
net assets which the securities comprise and future capital commitments.
Number of Acquisition Fair Value Cost of
Shares Dates at 3/31/99 Investments
CI Emerging Markets Growth
Fund, Inc. 332,466 05/30/97 $15,283,462 $21,486,632
AMA Corporate 98 -- 12/11/98 126,699 150,000
Bain Capital -- 06/12/98 436,297 450,000
Bain Coinvestment Fund -- 12/10/98 425,960 427,500
BC European Capital -- 08/04/98 467,954 467,601
Berkshire Fund V _ 11/10/98 35,278 62,206
Blackstone Capital
Partners III, L.P - 11/03/97 1,052,339 1,089,405
Brookside Capital -- 07/31/98 2,067,511 2,000,000
Delphi Ventures IV, L.P. -- 01/28/98 1,355,556 1,500,000
Doughty Hanson -- 10/31/97 280,386 351,296
Everest Capital
Frontier, L.P. - 05/30/97 3,394,992 10,200,180
Feirstein Partners, L.P. -- 05/30/97 4,495,678 2,205,448
Hicks, Muse, Tate & Furst - 02/03/99 2,976,000 2,976,000
Highfields Capital -- 09/29/98 5,733,100 5,000,000
J. H. Whitney III, L.P. -- 03/12/98 1,224,992 1,287,404
J.H. Whitney Mezzanine - 09/24/98 789,210 780,000
J.W. Childs Equity Ptns. - 06/26/98 244,988 244,676
Lone Redwood, L.P. - 12/29/97 3,507,871 3,000,000
Maverick Fund USA, Ltd. - 05/30/97 7,126,548 5,077,543
Millgate Partners, L.P. - 02/01/98 2,102,216 2,000,000
Morgenthaler Ventures
Ptns. V - 10/08/98 420,810 450,000
Mt. Everest QP, L.P. -- 10/02/97 2,580,000 2,000,000
Peak Investment, L.P. - 09/30/97 1,889,058 2,000,000
Sankaty High Yield
Partners, L.P. - 01/12/98 921,739 1,000,000
Sevin Rosen Fund VI, L.P. - 03/20/98 176,593 187,500
Spinnaker Technology
Fund, L.P. - 07/01/97 5,405,415 3,000,000
Summit Ventures V, L.P. _ 03/09/98 675,528 812,500
TCV III (Q) LP - 02/11/99 252,905 300,000
Tiger Management _ 01/04/99 4,559,000 5,000,000
Weston Presidio
Capital III -- 11/25/98 131,383 150,000
Knightsbridge Integrated
Holdings III-Limited 3,000 05/30/97 2,864,430 1,637,070
Totals $ 73,003,898 $ 77,292,961
Future
Security Percentage Capital
of net assets Commitments
CI Emerging Markets
Growth Fund, Inc. 13.08% $-
AMA Corporate 98 .11% 2,850,000
Bain Capital .37% 1,050,000
Bain Coinvestment .36% 1,072,500
BC European Capital .40% 1,532,399
Berkshire Fund V .03% 1,937,794
Blackstone Capital
Partners III, L.P. .90% 3,910,595
Brookside Capital 1.77% --
Delphi Ventures IV 1.16% 3,500,000
Doughty Hanson .24% 2,148,704
Everest Capital Frontier, LP 2.91% --
Feirstein Partners, L.P. 3.85% --
Hicks, Muse, Tate & Furst 2.55% 2,024,000
Highfields Capital 4.91% --
J.H. Whitney III, L.P. 1.05% 1,212,596
J.H. Whitney Mezzanine .67% 720,000
J.W. Childs Equity Ptns. .21% 1,755,324
Lone Redwood, L.P. 3.00% --
Maverick Funds USA, Ltd. 6.10% --
Millgate Partners, L.P. 1.80% --
Morgenthaler Ventures
Ptns. V .36% 2,550,000
Mt. Everest QP, LP 2.20% --
Peak Investment, L.P. 1.62% --
Sankaty High Yield
Partners, L.P. .79% --
Sevin Rosen Fund VI, L.P. .15% 562,500
Spinnaker Technology
Fund, L.P. 4.63% --
Summitt Ventures V, L.P. .58% 1,687,500
TCV III (Q) LP .22% 2,700,000
Tiger Management 3.90% --
Weston Presidio Capital III .11% 2,850,000
Knightsbridge Integrated
Holdings III- Limited 2.45% 1,362,930
Total 62.50% $35,426,842
The Fund may incur certain costs in connection with the
disposition of the above securities.
The Mallard Fund, Inc.
Notes to Financial Statements - continued
9. Year 2000 (unaudited): Similar to other financial organizations, the Fund
could be adversely affected if the computer systems used by the Fund's
service providers do not properly process and calculate date-related
information and data from and after January 1, 2000. The Fund is taking
measures that management believes are reasonably designed to address the
Year 2000 issue with respect to computer systems that they use and to
obtain reasonable assurances that comparable steps are begin taken by each
of the Fund's other service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse
impact to the Fund.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
The Mallard Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Mallard Fund, Inc., including the schedule of investments, as of
March 31, 1999, and the related statements of operations, changes in net
assets and cash flows and financial highlights for the year then ended. 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. The statement of changes in net assets and the financial
highlights for the period ended March 31, 1998 were audited by other
auditors, whose report thereon dated June 5, 1998, expressed an unqualified
opinion.
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
statements. Our procedures included confirmation of the securities owned as
of March 31, 1999, by correspondence with the custodian and limited
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 present fairly, in all material respects, the financial position of The
Mallard Fund, Inc. as of March 31, 1999, the results of its operations, the
changes in its net assets, its cash flows and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
May 21, 1999
