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[LOGO]
TWEEDY, BROWNE
AMERICAN VALUE FUND
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ANNUAL
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MARCH 31, 1996
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This report is for the information of the shareholders of Tweedy, Browne
Fund Inc. Its use in connection with any offering of the Company's shares is
authorized only in a case of a concurrent or prior delivery of the Company's
current prospectus. Tweedy, Browne Company L.P. is a member of the NASD and is
the Distributor of the Company.
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TWEEDY, BROWNE AMERICAN VALUE FUND
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Investment Manager's Report
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To Our Shareholders in the Tweedy, Browne American Value Fund:
We are pleased to present the Annual Report of Tweedy, Browne American
Value Fund (the "Fund") for the year ended March 31, 1996. To the surprise of
stock market pundits, the past year turned out to be much better than almost
anyone expected. Of course, even the most daring market prognosticators did
not stick their necks out and say, "Standard & Poor's Composite Index of 500
stocks will rise 32.5% over the next twelve months." Once again, the futility
of market timing rears its ugly head. When the year began, the more common
view was that stocks were fairly valued, whatever that means, and that the
most one could expect was a ho-hum year. Moreover, the risk on the downside
was considered substantial. Investment strategies that took this risk into
consideration missed out on one of the better years in the stock market. The
net asset value of shares of your Fund increased from $10.71 to $14.29 or
34.7%*, after adding back a dividend of $0.126 per share on December 29, 1995.
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* Past performance is not a guarantee of future results and total return and
principal value of investments will fluctuate with market changes; and
shares, when redeemed, may be worth more or less than their original cost.
Much of the rise in the overall stock market in the first half of the year
was driven by technology stocks, which the Fund did not own, with the
exception of Digital Equipment Corporation which rose 45% last year.
Technology is generally not an industry in which value investors put much of
their money because of the difficulty in valuing technology. One can see years
of investment and research wiped out overnight as some other company invents a
way to do the same thing faster and cheaper. Moreover, technology stocks
seldom trade at discounts to book values or low multiples of sustainable
earnings. Few technology companies have sustainable earnings, and need to
reinvent themselves every few years. In the case of Digital Equipment, we saw
a company trading below book value with a strong balance sheet and a large
continuing revenue base. While we do not presume to make judgments as to the
company's technological position, the repeated and significant pattern of
insider purchases of the company's stock gave us some degree of confidence
that a turnaround was on the horizon.
Another group of stocks that performed quite well in this past year was
bank stocks, of which we owned several. Two of our larger holdings were Chase
Manhattan Corporation, which gained 85%, and Wells Fargo & Company, which rose
65%. Both banks were purchased at single digit price-to-earnings ratios at a
time when banks were not viewed favorably by the investment community. In the
case of Wells Fargo, there was considerable scepticism about the value of its
rather substantial real estate loan portfolio at a time when California was in
a recession. At the time we first purchased the stock, two well-respected bank
analysts had completely opposite points of view on the bank. One made the case
that Wells Fargo was sitting on significant potential losses in its real
estate loan portfolio that could threaten the very existence of the bank.
Logic held that if all other California banks were experiencing loan losses,
how could Wells Fargo avoid the same fate. The second analyst agreed with the
bank's position that its real estate loans were performing and that no
potentially large losses could be identified. If that were true, then the
stock was trading at less than five times normalized earnings, and the bank
had a high return on stockholders' equity coupled with a strong market
position in California. When two such respected analysts reach such opposite,
yet plausible, conclusions, and when the upside is significant but the
downside would be a major loss, we would normally pass. However, if we could
get a brilliant analyst to go out to California to meet with the management
and come back feeling confident that the bank's point of view was correct,
perhaps then we would buy the stock. Such an analyst did appear, and did tell
us the bank was correct; his name was Warren Buffett. While Warren Buffett did
not visit the company at our behest, and did not report his findings directly
to us, he did the next best thing. He bought the stock, and he bought it in
large quantities. So did we, and it has turned out to be one of our better
performing investments.
In the case of Chase Manhattan, we saw a bank with a strong market
position, and with a new management that had addressed the bank's loan
problems, and had built a solid base of fee income. The stock was selling for
about five or six times expected earnings. This meant that if the bank were to
return all of its earnings to the stockholders, we would have a return of 16%
to 20%. The stock market did not focus on this return, but was more concerned
with the earnings growth potential of a major money center bank. Moreover, the
"street" was not willing to give much of a multiple to earnings derived from
non-banking related activities. Our opinion was that a 16% to 20% earnings
yield controlled by smart management would somehow benefit the shareholders by
either wisely reinvesting the money or returning it to us in the form of
dividends or stock buybacks. We did not anticipate that Chase Manhattan would
be bought out, given its size and the long tradition of ownership by the
Rockefeller family. However, it turns out that even a Chase Manhattan is not
immune to the forces of consolidation in the banking industry, and its
proposed acquisition by Chemical Bank (with the Chase name attached to the
surviving institution) will provide significantly enhanced shareholder value.
While the stock has risen 85%, largely because of the merger announcement, it
still sells at less than eight to nine times expected, post merger earnings.
Other stocks that performed well last year include American Express
Company (42%), Federal Home Loan Mortgage Corporation (40%), Johnson & Johnson
(49%), Philip Morris Companies, Inc. (30%) and Mercantile Stores Company Inc.
(42%). Johnson & Johnson may appear inconsistent with our value approach to
investing, which is often considered to be buying stocks selling at
significant discounts to book value. However, as Warren Buffett has said,
value and growth are joined at the hip, the difference is only price. (Our
apologies to Warren Buffett for quoting him again, but his pearls of wisdom
are legendary.) We initially purchased J&J under $40 per share, or at roughly
12.5 times earnings. The chance to buy a company of this caliber, at that
price, is a rare occurrence. Granted, at the time J&J was under the cloud of
"health care reform", but the company still had some great businesses like
Band-Aids and Tylenol that were safe from governmental meddling. And while we
were not privy to management's view of the company's future, we could track
stock purchases by certain directors we respected and whose opinions we
valued.
We also had our share of bummers in the last year, with Kmart Corporation
being the most obvious example. Here is a classic case of management making a
difference (in this instance negative), and a board of directors not acting
quickly enough to replace management. Kmart is nothing but Walmart without the
profits. We did field research before making our initial investment in Kmart.
The new store format was just like Walmart; the price of the same basket of
goods was the same, if not cheaper, at Kmart. The management of Kmart had an
avowed goal of improving margins to match Walmart. What they lacked was a
proper focus and an ability to implement their strategy. Kmart did not have to
reinvent itself, it merely had to copy its primary competitor. But while
Walmart was moving to expand in Mexico, a developing economy contiguous to the
United States, where delivery trucks merely had to cross one border, Kmart was
experimenting with discount stores in the Czech Republic. Given the task
confronting the company to straighten out its U.S. operations, the idea of
diverting management's attention to a venture in Eastern Europe was
ridiculous. Our investment in Kmart declined 28% over the previous twelve
months. What was obvious to the investment community for some time, namely
that the chairman had to go, was not forced upon the board of directors until
a significant portion of the market value of the company was lost. In the
United Kingdom, this would not have been the case. In the U.K., shareholders
who are displeased with the management of a company can meet with the board
and force changes. In the U.S., such actions would be met with a lawsuit
alleging the formation of an illegal group bent on taking over the company.
Although such actions have become easier from a regulatory standpoint, the
culture here is still biased against activist shareholders. The jury is still
out on Kmart. Statistically, it is cheap. If the new management can do what
the old management could not, the phoenix will rise from the ashes and patient
investors will be amply rewarded from this level. The recent pattern of open
market stock purchases by certain officers and directors of the company may
indicate that a turnaround is coming.
If we could only determine which of our investments would be Wells Fargos
or Chase Manhattans, rather than Kmarts, we could significantly improve our
returns. However, as in life, things happen that we cannot predict. That is
why we adhere to certain investment principles, which have provided above
average rates of return over long periods of time. And that is why we
diversify, so that the bad, unforeseen occurrences do not significantly reduce
our net worth. We know that, on average, favorable event surprises in a
portfolio of stocks comprised of low price-to-earnings or low price-to-book
value companies outnumber unfavorable event surprises. In effect, we are
writing insurance. If we stick to time tested criteria, we will do well. This
does not mean we will not experience some losses. But so long as our gains
outnumber our losses, we will increase our net worth at acceptable rates.
All of our gains in fiscal 1996 did not come from large capitalization,
household name companies. We have always invested a significant portion of our
assets in mid-cap and small capitalization companies. Unlike the millionaire
who is unwilling to bend down and pick up a nickel in the street, we will
invest wherever value can be found. One of the smaller stocks we owned last
year was National Education Corporation, with a market cap of about $100
million, which we began buying at about $4 per share. (The definition of small
cap stocks varies depending upon whom you ask. Some would say small cap stocks
have market caps of less than $1 billion, or less than $500 million.) The
company had four divisions, although its principal business was vocational
training. Two of the divisions were losing money, while two were quite
profitable. Our appraisal of the company was that the two money making
divisions were worth more than $8 per share, and that the management was
working to fix or close the unprofitable parts of the business. If the losing
divisions could be turned around, the company could be worth even more. After
we started buying the stock, the company, which had been part of the Standard
& Poor's Composite Index of 500 Stocks ("S&P 500"), was dropped from the index
and replaced by another company. This caused the index funds, funds whose
portfolios mirror the S&P 500, to sell their shares of National Education. The
resulting selling pressure drove the stock down to $3.25, despite an improving
trend in operations. Once the selling was over, the stock market recognized
the improvement, and the shares rose to $11.75 at March 31, 1996.
Small cap stocks are generally considered likely to provide higher returns
than large cap stocks over long periods of time, because small growth
companies can sometimes grow into mighty Walmarts and provide spectacular
returns. In an article in the December 4, 1995 issue of BARRON'S entitled The
Small Cap Myth, the author found that although small cap stocks did outperform
large cap stocks over a 69-year period, from 1926 to 1994, all of the
advantage occurred in just three of the years. The average investor is not
content to wait for an advantage that happens every 23 years. In a similar
study by Frank Russell Company, covering the 16 years from 1979 to 1994, there
is almost no difference in the returns from small cap versus large cap stocks.
However, Russell further divides the universe of stocks, other than just large
and small cap. They also divide stocks into growth stocks and value stocks.
With four categories, large and small growth and large and small value, a more
significant difference is apparent. The results are shown below:
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RATES OF RETURN FROM 1979 THROUGH 1994
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LARGE SMALL LARGE SMALL
CAP CAP CAP CAP
GROWTH GROWTH VALUE VALUE
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Aggregate Total Return 709% 567% 850% 1,080%
Average Annual Return 13.96% 12.59% 15.11% 16.68%
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Clearly, there is value added in investing in small cap stocks, but it is
difficult for many money managers to do so. The supply of small cap stocks is
limited. If a manager is investing $7 billion or $11 billion, it is not
possible to invest a significant portion of these assets in small cap stocks,
so that their presence will have an impact on results. For example, to invest
1% of a $10 billion fund, or $100 million, in one stock would require a market
capitalization of $3.333 billion if the fund were to buy 3% of the company's
shares. There are only 532 companies in the U.S. that have a market cap
greater than $3.333 billion. This is why most large money managers pick from a
limited list of stocks, perhaps as few as 800. The total number of publicly
traded stocks in the U.S. is somewhere between 10,000 and 12,000. The same
relationship holds true for foreign stocks, with the majority of funds
invested in only a handful of issues. Some of the large asset managers are
restricting themselves to less than 10% of the companies traded in the U.S. or
internationally. Granted, the large companies may account for half, or more
than half, of the total market capitalization of U.S. stocks, but that still
leaves a lot of opportunities in names and total dollars in which to invest.
Within our Fund's portfolio, we estimate that approximately one-third of
equity assets are in stocks with a market capitalization of less than $500
million.
Large money managers do not think it is worth their time, or the money
they have devoted to research, to analyze smaller companies because they
cannot put enough money to work in any individual issue to make it worth their
while. Moreover, many, if not most, small cap companies are not followed by
brokerage firm analysts for much the same reason. It does not pay to have an
analyst research a company where a buy recommendation will not generate orders
for hundreds of thousands of shares. And the money manager often likes to
confirm his conclusions on a particular company with brokerage firm analysts.
We believe the lack of investment community coverage can result in a greater
disparity between market price and a company's true intrinsic value. Smaller
companies are often much less complex than larger companies and, therefore,
easier to analyze. They may have one or two product lines as opposed to a
myriad of large divisions. They are often less leveraged because it is more
difficult for a small company to borrow money than it is for a large company.
Moreover, if we buy shares in a company at less than its net cash, as we did
with Astrosystems Inc. (market cap of $26 million), we do not have to make
detailed earnings predictions to develop enough comfort to buy the stock.
These companies are not like Netscape with a stratospheric price, little sales
and a technology that could face significant competition from some well
capitalized companies. If you buy Netscape at $87, you had better be sure of
your predictions, or you could have had more fun with your money in Las Vegas.
With large cap stocks, we find that we have less to bring to the research
table than we do with small cap stocks. This does not mean we do not buy large
companies. We have a significant part of our assets invested in large
companies. However, we do not believe we are any better at estimating the same
store sales growth for Walmart next quarter than the 50 or 100 brokerage firm
analysts who make a living doing only that. What we do bring to the table is
the ability to recognize a bargain when we see it. When we bought Johnson &
Johnson at 12.5 times earnings, we did not do so because we were any better at
estimating next year's sales of Band-Aids or Tylenol, nor because we could
divine the earnings potential of new drugs they were developing better than
the army of drug stock analysts on Wall Street. We bought J&J because it was
an incredibly cheap price to pay for such an outstanding business. And we
bought Chase Manhattan because the earnings yield (the inverse of the price-
to-earnings ratio) was two to three times that of the long-term bond yield,
which is pure Ben Graham stock investing. If you have not already done so, we
heartily recommend that you read Roger Lowenstein's book, BUFFETT, THE MAKING
OF AN AMERICAN CAPITALIST. One chapter describes how Warren Buffett went on a
stock buying binge in the mid-1970s after the bear market of 1973-1974. No one
among the great market pundits of the time had the courage to buy because they
were afraid the market would go lower. But Warren Buffett concluded that some
of the greatest businesses of the time were being offered at once in a
lifetime prices. And it turned out to be a once in a lifetime opportunity. It
is the willingness to buy, when no one else will, that distinguishes true
value investors. In 1975, the market pundits agreed that stocks were cheap,
but were still unwilling to put out a buy recommendation for fear of not being
at the bottom. This is what we bring to large cap stock investing. We buy when
a stock is obviously cheap, often against the consensus on Wall Street.
The market caps in which the Fund is currently invested range from Philip
Morris at $79 billion to Kent Financial Services Inc. at $5.6 million. Our
investments are almost evenly divided between stocks with market caps above
and below a billion dollars. As previously mentioned, approximately one-third
of our assets are invested in stocks with market caps of less than $500
million. The range of our investments makes it difficult for those who track
money managers to pigeonhole Tweedy, Browne. Money managers are usually either
value or growth, and big cap versus small cap. While we are easily placed in
the value category, the breadth of our investments by market cap makes it
difficult to define our peer group. You may ask at this point, "So what?" All
you really care about is making money without betting the ranch. However,
certain members of the investment community are obsessed with comparing money
managers to an index or, as they call it, a benchmark. In professional
circles, performance measurement is a relative, not absolute, exercise. There
has been a proliferation of indices measuring all sorts of different stock
groups. Gone are the days when one looked only at the Dow Jones Industrials or
the S&P 500. Now there is the Russell 1000 and 2000, and the Wilshire 5000.
And there are indices for technology and biotechnology, and all sorts of other
industry specific averages. However, you cannot spend relative earnings. And
relatively good performance does not necessarily increase your wealth.
Some shrewd money managers have figured out how to beat the system if they
are to be measured on a basis relative to a benchmark. They tailor their
portfolios to mirror their designated benchmark. For example, if the chosen
benchmark is the S&P 500, their portfolio would look very much like that
index. Industry groups within the portfolio would be weighted so as not to
deviate too much from the industry groups of the S&P 500. The reason for this
is that if they did not own any oil stocks and oil stocks took off, they would
be left in the dust. So it would be better if they owned some oil stocks even
if they did not like oil stocks. If they were international money managers and
their designated benchmark was the Morgan Stanley Capital International
Europe, Australia, and the Far East Index (known as EAFE), they would tailor
their portfolio both on an industrial sector basis, and a geographic basis,
not to deviate significantly from the benchmark. Japanese stocks comprise
approximately 40% of the EAFE Index and portfolios are thus heavily weighted
towards Japan. So when the Nikkei Index was trading near 40,000, they might
have been a little nervous having 40% of their money in Japan. But on a
relative basis, it would not matter. If the Japanese stock market went in the
tank, which it did, the absolute loss of wealth would not matter in the world
of relative performance measurement. Their benchmark would have been down, and
they would not have been blamed.
If this sounds a bit bizarre to those of you who like to see your net
worth grow on a fairly consistent basis, don't be surprised. Most money
management is measured in this way. Most money in the stock market does not
belong to those individuals charged with picking the money managers. If you
make a bad investment decision with your own money, there is no one who will
know except perhaps your broker or your spouse. But if you are living in the
world of institutional money management, you have to answer to your boss, or a
board of directors. If you lost money, but less than or equal to your
benchmark, no one could blame you. It was a bad market. However, if the
designated benchmark significantly outperformed you, or the managers you
selected, you would be in trouble. In addition, the money manager would
probably lose the account. After all, someone has to take the blame. If this
is reality, it should come as no surprise that money managers that want to
keep their clients will construct safe portfolios that will not produce a
result much different from the benchmark.
The only problem with this investment strategy is that if you want to beat
the index, you cannot look like the index. You have to find stocks that have
different fundamental financial characteristics than the market, and your
choice of stocks will most likely deviate significantly from the index in
terms of industry categories or country allocations. You must also accept the
fact that you could underperform the index or benchmark for reasonably long
periods of time. In Are Short-Term Performance and Value Investing Mutually
Exclusive, Eugene Shahan analyzed the investment performance of seven money
managers, about whom Warren Buffett wrote in his article, The Super Investors
of Graham and Doddsville. Over long periods of time, the seven managers
significantly outperformed the market as measured by the S&P 500 by between
7.7% to 16.5% annually. (The goal of most institutional money managers is to
outperform the market by 2% to 3%.) However, for periods ranging from 13 years
to 28 years, this group of managers underperformed the market between 7.7% to
42% of the years. Six of the seven investment managers underperformed the
market between 28% to 42% of the years. In today's environment, they would
have lost many of their clients during their periods of underperformance.
Longer term, it would have been the wrong decision to fire any of these money
managers.
We believe the fundamental financial characteristics of your Fund differ
significantly from the popular stock market indices. As of the end of March,
the S&P 500 as reported in BARRON'S closed at 18.99 times earnings and 3.87
times book value. In your Fund, we invest the major portion of your money in
two broad categories of stocks: stocks selling at a significant discount to
tangible book value and stocks selling at a low price-to-earnings ratio. In
the Fund, 23.4% of assets are invested in 97 stocks that sell for a weighted
average price-to-book value ratio of 78%. In the Bloomberg database of 3,880
companies with a market capitalization of more than $100 million, only 48
companies, or 1.2% of the universe, were selling for 78% of book value or
less. Your Fund is invested in 48 issues, representing 56.2% of assets, with a
weighted average price-to-earnings ratio of 10.6 times earnings. Again in the
Bloomberg database, only 364 companies, or 9.4% of the universe, were selling
for 10.6 times earnings or less.
A few years ago, a friend of ours told us she was going to interview a
number of money managers for some money she had just inherited. Mrs. X is a
very smart woman. She conducted seminars for women on financial planning. In
her view, too many women are kept in the dark about financial affairs, and as
a result of either the death of their spouse or a divorce, are suddenly in
charge of a large amount of money whose preservation and growth is central to
their well being. Mrs. X's seminars stopped short of the actual selection of
money managers, but were very instructive as to where to seek advice. When
Mrs. X began to interview money managers herself, we offered the following
friendly advice.
1. Ask for their investment record over a ten-year period. Whose record was
it, and was that person going to be the one managing her money? Today, we
might ask for a fifteen-year performance record simply because the last ten
years have been an exceptional time for the market. There is nothing like a
bull market to make us all feel like geniuses.
2. Ask them to explain their investment philosophy in simple, layman's, candy
store arithmetic terms. Beware of someone with a strategy so complex that
only an Einstein could comprehend it. They probably do not understand it
either.
3. Ask what they do with their own money. If the manager is not willing to
personally own what will be put into your account, why would you want to
own it? If they have a better way of making money, they should let you in
on the secret. The current and retired general partners and their families,
as well as employees of Tweedy, Browne, the investment adviser to the Fund,
have approximately $18.3 million of their own money invested in the Fund.
4. A client of ours adds one additional criteria. He says, "Who wants a poor
money manager?"
To us, these questions all seem quite logical. This is not a business that
requires rocket scientist intelligence. It does require discipline, adherence
to some basic investment principles that have worked over time, and a dose of
intellectual honesty. The industry has other criteria, of which we agree with
some, much of which we do not. John Spears was asked what our succession plan
was for Tweedy, Browne. He responded that he was 47 years old and that his
hero was Phil Carret who, at close to 100, was still going to the office,
reading annual reports and buying stocks. In our own office, Walter Schloss
still comes in every day at the age of 79, manages money, never gives out a
list of his holdings, but has perhaps the best (if not the only) 40-year
investment record of any investor we know. Warren Buffett is just behind
Walter in terms of years of managing money. In the world of institutional
money manager selection, Warren Buffett and Walter Schloss would probably fail
several tests. Neither one of them have much of an organization. Walter has
always refused to hire a secretary because he does not want to fill out social
security forms. Walter has been joined by his son Edwin for the past 23 years,
but Edwin pays his own social security taxes. Warren Buffett makes all his own
investment decisions. They make large bets on a few stocks, increasing
"portfolio risk" because of significant concentration. Their betas (a measure
of volatility relative to the market) are off the charts despite the fact that
their volatility is all on the upside.
Given a perfect world, we would prefer some organization, by which we mean
that we would prefer that performance not be dependent on one person.
Unfortunately, cloning has yet to be perfected. At Tweedy, Browne we have what
we believe is the next best thing with three partners who think in a similar
fashion, plus the added benefit of Jim Clark's input notwithstanding his
retirement last year. We have four very good, perhaps excellent, analysts. We
have Geri Rosenberger and her staff to guide us through the minefield of
securities' regulation, and a trading desk that seems to be able to buy and
sell stocks for us that consistently place us at the most efficient level as
measured by independent consultants hired by one of our clients.
Now comes the part we hate, predicting the current year. As we have always
said, this is not our strong point. Nor do we think it is anyone's strong
point. Our stocks are still valued well below the market, and at reasonable
levels given current interest rates. There is no reason to believe interest
rates will rise in the near future, especially in an election year. Inflation
is low and the economy is growing at a modest rate. We are not economists, but
we are comfortable with what we own. We have a mix of good businesses at
reasonable prices, and out of favor stocks that will respond to any favorable
news. We have been adding stocks to our Fund that are low in price-to-book
value or price-to-earnings, are small to medium in market capitalization, and
where we see a pattern of insider purchases. This combination has empirically
produced better results, and we would be happy if we could invest all of our
assets in this way. After a reasonably good first quarter in calendar year
1996, the stock market has been rather choppy of late with some fairly
significant one day swings in the averages. It has been a field day for the
market pundits trying to predict the market's movements and trying to draw
conclusions from all the noise. We take the long view. We know we cannot
predict short, or even medium term market movements. But we do know that if we
are investing for our retirement or for our children's education, and if we
can ignore all the daily reports of boom or bust, we should be able to reach
our goals over the long term.
In closing, we would like to say that we appreciate your responses to our
letters, and encourage you to let us know what you do not like, and maybe what
you do like, so that we can better respond to your desires for information on
what we are doing with your and our money.
Sincerely,
Christopher H. Browne
William H. Browne
John D. Spears
General Partners
TWEEDY, BROWNE COMPANY L.P.
Investment Adviser to the Fund
April 26, 1996
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
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Portfolio Highlights
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March 31, 1996
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
TWEEDY, BROWNE AMERICAN VALUE FUND VS.
STANDARD & POOR'S 500 STOCK INDEX
12/8/93 THROUGH 3/31/96
Standard & Poor's
Tweedy, Browne Stock Index
American Value Fund (the "S&P 500")
Growth of Investment Growth of Investment
with Distributions with Distributions
Date Reinvested Reinvested
- ---- -------------------- --------------------
12/08/93 $10,000 10,000.00
12/93 9,940 10,120.90
03/94 9,710 9,737.78
06/94 9,820 9,778.47
09/94 10,260 10,255.58
12/94 9,884 10,253.85
03/95 10,780 11,251.12
06/95 11,978 12,323.67
09/95 13,065 13,302.31
12/95 13,463 14,102.50
03/96 14,520 14,859.29
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The S&P 500 is an index composed of 500 widely held common stocks listed on
the New York Stock Exchange, American Stock Exchange and over-the-counter
market and includes the reinvestment of dividends.
Index information is available at month end only; therefore, the closest month
end to inception date of the Fund, November 30, 1993, has been used.
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<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN* AGGREGATE TOTAL RETURN*
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YEAR INCEPTION
WITHOUT ENDED 12/8/93 -
THE FUND ACTUAL WAIVERS** 3/31/96 3/31/96
-------------------------- ----------------- ---------------- ------- --------
<S> <C> <C> <C> <C> <C>
Inception (12/8/93)
through 3/31/96 17.51% 17.13% The Fund 34.70% 45.20%
Year Ended 3/31/96 34.70% 34.29% S&P 500 32.07% 48.59%
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<FN>
Note: The performance shown represents past performance and is not a guarantee of future results. A Fund's share price
and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be
more or less than original cost.
* Assumes the reinvestment of all dividends and distributions.
** See Note 2 to Financial Statements.
</TABLE>
<PAGE>
In accordance with rules and guidelines set out by the Securities and
Exchange Commission, we have provided a comparison of the historical
investment results of Tweedy, Browne American Value Fund to the historical
investment results of the most appropriate broad based securities market
index, the Standard & Poor's 500 Stock Index (the "S&P 500"). However the
historical results of the S&P 500 in large measure represent the investment
results of stocks that we do not own. Any portfolio which does not own exactly
the same stocks in exactly the same proportions as the index to which the
particular portfolio is being compared is not likely to have the same results
as the index. The investment behavior of a diversified portfolio of
undervalued stocks tends to be correlated to the investment behavior of a
broad index; i.e., when the index is up, probably more than one-half of the
stocks in the entire universe of public companies in all the countries that
are included in the same index will be up, albeit, in greater or lesser
percentages than the index. Similarly, when the index declines, probably most
of the stocks in the entire universe of public companies in all countries that
are included in the index will be down in greater or lesser percentages than
the index. But it is almost a mathematical truth that "different stocks equal
different results."
Favorable or unfavorable historical investment results in comparison to an
index are not necessarily predictive of future comparative investment results.
In Are Short-Term Performance and Value Investing Mutually Exclusive? Eugene
Shahan analyzed the investment performance of seven money managers, about whom
Warren Buffett wrote in his article, The Super Investors of Graham and
Doddsville. Over long periods of time, the seven managers significantly
outperformed the market as measured by the Dow Jones Industrial Average (the
"DJIA") or the S&P 500 by between 7.7% to 16.5% annually. (The goal of most
institutional money managers is to outperform the market by 2% to 3%.)
However, for periods ranging from 13 years to 28 years, this group of managers
underperformed the market between 7.7% to 42% of the years. Six of the seven
investment managers underperformed the market between 28% to 42% of the years.
In today's environment, they would have lost many of their clients during
their periods of underperformance. Longer term, it would have been the wrong
decision to fire any of these money managers. In examining the seven long-term
investment records, unfavorable investment results as compared to either Index
did not predict the future favorable comparative investment results which
occurred, and favorable investment results in comparison to the DJIA or the
S&P 500 were not always followed by future favorable comparative results.
Stretches of consecutive annual underperformance ranged from one to six years.
Mr. Shahan concluded "Unfortunately, there is no way to distinguish between a
poor three-year stretch for a manager who will do well over 15 years, from a
poor three-year stretch for a manager who will continue to do poorly. Nor is
there any reason to believe that a manager who does well from the outset
cannot continue to do well, and consistently."
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
Portfolio of Investments
- ------------------------------------------------------------------------------
March 31, 1996
MARKET
VALUE
SHARES (NOTE 1)
------ --------
COMMON STOCKS--DOMESTIC--82.8%
BANKING--17.2%
55,000 BancFirst Corporation ............................ $ 1,196,250
4,500 Bank of Nashville ................................ 47,813
129,780 BanPonce Corporation, New ........................ 6,002,325
5,000 Cape Cod Bank & Trust Company .................... 193,750
83,180 Chase Manhattan Corporation ...................... 6,113,730
78,900 Comerica, Inc. ................................... 3,294,075
111,410 First Chicago NBD Corporation .................... 4,623,515
5,400 First Mortgage Corporation+ ...................... 33,750
32,900 Mercantile Bancorporation, Inc. .................. 1,505,175
9,000 Peoples Bank Corporation of Indianapolis ......... 225,000
216,500 PNC Bank Corporation ............................. 6,657,375
42,760 Salomon Inc. ..................................... 1,603,500
4,300 Suffolk Bancorp .................................. 131,150
18,125 Transworld Bancorp+ 235,625
10,600 Wells Fargo & Company ............................ 2,766,600
------------
34,629,633
------------
FINANCIAL SERVICES--11.2%
144,930 American Express Company ......................... 7,155,919
2,000 CM Bank Holding Company .......................... 140,000
77,670 Federal Home Loan Mortgage Corporation ........... 6,621,367
31,800 Household International Inc. ..................... 2,138,550
18,300 HPSC Inc.+ ....................................... 89,213
387,600 Jan Bell Marketing Inc.+ ......................... 1,187,025
20,100 Kent Financial Services Inc.+ .................... 130,650
10,000 Kinnard Investments Inc.+ ........................ 41,250
117,450 Lehman Brothers Holdings Inc. .................... 3,141,787
10,000 Letchworth Independent Bancshares Corporation .... 310,000
44,200 Norex American Inc.+ ............................. 707,200
6,615 Stifel Financial Corporation ..................... 42,171
23,100 Value Line Inc. .................................. 808,500
1,604 Whitney Holding Corporation ...................... 50,125
------------
22,563,757
------------
CONSUMER NON-DURABLES--9.4%
138,100 Bairnco Corporation .............................. 932,175
57,700 Coca-Cola Bottling Company ....................... 1,947,375
202,900 EKCO Group Inc. .................................. 1,192,037
37,800 Fuji Photo Film Company Ltd., ADR ................ 2,182,950
42,235 Great Atlantic & Pacific Tea Company, Inc. ....... 1,309,285
19,000 Hyde Athletic Industries Inc., Class A+ .......... 73,625
25,000 Hyde Athletic Industries Inc., Class B+ .......... 95,313
108,035 Nestle, ADR ...................................... 6,049,960
49,800 OroAmerica Inc.+ ... 227,212
59,559 Polaroid Corporation ............................. 2,680,155
61,900 Reebok International Ltd. ........................ 1,709,987
10,800 TCC Industries Inc.+ ............................. 28,350
55,500 Village Super Market Inc., Class A+ .............. 444,000
------------
18,872,424
------------
INSURANCE--7.0%
15,000 Allstate Financial Corporation+ .................. 96,563
75,100 American Indemnity Financial Corporation ......... 741,612
76,625 American National Insurance Company .............. 5,172,188
600 Amwest Insurance Group Inc. ...................... 8,475
16,700 Kansas City Life Insurance Company ............... 885,100
20,900 Merchants Group Inc. ............................. 384,037
50,100 National Western Life Insurance Company+ ......... 3,156,300
30,500 Provident Companies Inc. ......................... 926,438
74,000 Security-Connecticut Corporation ................. 1,933,250
26,700 USLIFE Corporation ............................... 784,313
------------
14,088,276
------------
RETAIL--5.1%
135,400 Ben Franklin Retail Stores Inc.+ ................. 287,725
85,000 Best Products Corporation Inc.+ .................. 201,875
1,000 Dart Group Corporation, Class A .................. 87,500
84,300 EZCORP Inc., Class A+ ............................ 569,025
168,500 Fingerhut Companies, Inc. ........................ 2,169,437
126,200 Forschner Group Inc.+ ............................ 1,782,575
59,000 Kmart Corporation ................................ 553,125
32,300 Luria (L) and Sons Inc.+ ......................... 163,519
9,700 Mercantile Stores Company Inc. ................... 595,338
52,000 Penney (J.C.) Company, Inc. ...................... 2,587,000
7,500 Seaman Furniture Company+ ........................ 138,750
133,900 Syms Corporation+ ................................ 1,104,675
------------
10,240,544
------------
LEISURE AND ENTERTAINMENT--4.8%
136,100 C-TEC Corporation+ . 5,069,725
105,743 Hasbro Inc. ...................................... 3,912,491
7,500 Latin American Casinos Inc.+ ..................... 25,312
124,900 Savoy Pictures Entertainment Inc.+ ............... 733,788
------------
9,741,316
------------
BASIC INDUSTRIES--4.4%
97,400 ACX Technologies Inc.+ ........................... 1,765,375
5,235 Binks Manufacturing Company ...................... 116,806
59,500 Monarch Machine Tool Company ..................... 661,937
65,700 Tremont Corporation+ ............................. 2,184,525
29,800 Unilever NV, ADR ................................. 4,045,350
------------
8,773,993
------------
CHEMICALS--4.3%
172,300 Lilly Industries Inc., Class A ................... $ 2,347,587
72,920 Philip Morris Companies Inc. ..................... 6,398,730
------------
8,746,317
------------
HEALTH CARE--3.5%
10,000 Ciba-Geigy AG, Sponsored ADR ..................... 625,625
65,735 Horizon/CMS Healthcare Corporation+ .............. 920,290
16,706 Johnson & Johnson ................................ 1,541,129
299,000 Sun Healthcare Group Inc.+ ....................... 3,961,750
------------
7,048,794
------------
CONSUMER SERVICES--3.1%
186,000 Jones Intercable Inc., Class A+ .................. 2,697,000
296,100 National Education Corporation+ .................. 3,479,175
------------
6,176,175
------------
REAL ESTATE--2.6%
220,000 American Real Estate Partners Ltd. ............... 1,980,000
25,700 Arizona Land Income Corporation, Class A ......... 131,713
13,200 Mays (J.W.), Inc.+ ............................... 105,600
121,800 Price Enterprises Inc.+ .......................... 1,918,350
19,700 Reading Company, Class A+ ........................ 211,775
144,100 RPS Realty Trust ................................. 684,475
21,100 Storage Properties Inc. .......................... 146,381
------------
5,178,294
------------
ENGINEERING AND CONSTRUCTION--2.2%
12,500 Atkinson (Guy F.) Company California+ ............ 143,750
22,000 Devcon International Corporation+ ................ 206,250
4,080 Oilgear Company .................................. 63,240
40,700 Oriole Homes Corporation, Class A+ ............... 307,794
43,800 Oriole Homes Corporation, Class B+ ............... 333,975
474,500 Standard-Pacific Corporation ..................... 3,440,125
------------
4,495,134
------------
OIL AND GAS--2.2%
80,000 Isramco, Inc.+ ................................... 42,500
155,400 Matrix Service Company+ .......................... 951,825
84,900 Penn Virginia Corporation ........................ 2,886,600
48,900 Pool Energy Services Company+ .................... 544,012
848 Resource America, Inc., Class A .................. 29,680
------------
4,454,617
------------
BUSINESS AND COMMERCIAL SERVICES--1.8%
77,100 Duplex Products Inc.+ ............................ 708,356
300 IIC Industries Inc.+ ............................. 10,950
226,400 Kindercare Learning Centers, Inc.+ ............... 2,830,000
12,500 Paris Corporation+ ............................... 67,187
------------
3,616,493
------------
TECHNOLOGY--0.9%
44,600 Astrosystems Inc.+ ............................... 263,419
28,800 Digital Equipment Corporation+ ................... 1,587,600
11,600 LDI Corporation+ ................................. 46,400
------------
1,897,419
------------
AUTOMOTIVE PARTS--0.7%
66,900 Capco Automotive Products Corporation ............ 827,887
23,000 Standard Products Company ........................ 560,625
1,300 Woodward Governor Company ........................ 110,825
------------
1,499,337
------------
RESTUARANT CHAINS--0.6%
80,900 Vicorp Restaurants Inc.+ ......................... 1,193,275
------------
METALS AND METAL PRODUCTS--0.5%
14,000 American Metals Service, Inc.+ ................... 10,008
108,600 Proler International Corporation+ ................ 963,825
------------
973,833
------------
FOOD AND BEVERAGES--0.4%
13,400 Guinness PLC, Sponsored ADR ...................... 476,504
21,300 National Beverage Corporation+ ................... 191,700
40,000 United Foods, Inc., Class A+ ..................... 80,000
25,000 United Foods, Inc., Class B+ ..................... 53,125
7,000 Western Beef Inc.+ ............................... 51,625
------------
852,954
------------
TRANSPORTATION/TRANSPORTATION SERVICES--0.3%
51,500 KLLM Transport Services Inc.+ .................... 553,625
2,500 Petroleum Helicopters Inc. ....................... 35,000
------------
588,625
------------
ADVERTISING--0.3%
2,180 Grey Advertising Inc. ............................ 497,040
------------
TEXTILES--0.1%
44,400 Chic by H.I.S. Inc.+ ............................. 271,950
------------
TELECOMMUNICATIONS--0.1%
11,200 Falcon Cable Systems Company+ .................... 107,800
15,000 TCI International Inc.+ .......................... 105,000
------------
212,800
------------
ELECTRONIC EQUIPMENT--0.1%
8,000 Espey Manufacturing and Electronics Corporation .. 116,000
------------
FURNITURE--0.0%++
9,000 Flexsteel Industries Inc. ........................ 90,000
------------
TOTAL COMMON STOCKS--DOMESTIC
(COST $132,766,840) .............................. 166,819,000
------------
COMMON STOCKS--FOREIGN--7.4%
JAPAN--1.9%
63,000 Aichi Electric Company Ltd. ...................... 329,874
49,000 Amada Sonoike Company Ltd. ....................... 348,200
12,000 Chofu Seisakusho Company ......................... 295,091
5,000 Dowa Fire & Marine Insurance Company ............. 27,583
17,000 Fuji Photo Film Ltd. ............................. 486,396
53,000 Koyosha Inc.+ ...... 401,898
19,000 Matsushita Electric Industrial Company ........... 309,116
32,000 Morito ........................................... 314,166
43,000 Nissan Fire & Marine Insurance Company ........... 305,563
36,000 Oak & Company .................................... 234,951
62,000 Osaka Securities Finance ......................... 376,812
15,000 Sankyo Company Ltd. .............................. 343,619
5,000 Shikoku Coca-Cola Bottling ....................... 62,179
10,000 Toyo Technical Company Ltd. ...................... 107,527
------------
3,942,975
------------
NETHERLANDS--1.6%
16,388 Heineken Holdings NV, Class A .................... 3,223,836
------------
SWITZERLAND--1.0%
2,000 Danzas Holding AG PC ............................. 469,164
1,000 Edipresse SA, Bearer ............................. 285,870
1,500 Magazine Zum Globus PC ........................... 798,335
500 Swissair AG, Registered+ ......................... 525,497
------------
2,078,866
------------
UNITED KINGDOM--1.0%
145,000 McAlpine (Alfred) PLC ............................ $ 371,807
32,000 SmithKline Beecham, PLC Units, ADR ............... 1,648,000
------------
2,019,807
------------
FINLAND--0.8%
15,500 Kone Corporation, Class B ........................ 1,606,027
------------
FRANCE--0.5%
7,200 Compagnie Financiere de Suez ..................... 279,424
2,725 Klepierre ........................................ 348,908
2,300 Peugeot SA ....................................... 350,650
------------
978,982
------------
SPAIN--0.3%
5,000 Argentaria ....................................... 211,549
16,000 Unipapel SA ...................................... 327,517
------------
539,066
------------
SINGAPORE--0.2%
78,000 Robinson and Company Ord ......................... 326,916
------------
ITALY--0.1%
21,000 Arnoldo Mondadori Editore SPA .................... 174,119
15,000 Franco Tosi SPA .................................. 118,630
------------
292,749
------------
TOTAL COMMON STOCKS--FOREIGN
(COST $12,118,229) ............................... 15,009,224
------------
PREFERRED STOCK--0.0%++
(COST $16,100)
1,400 Grant Geophysical Inc., Preferred ................ 21,088
------------
<PAGE>
MARKET
FACE VALUE
VALUE (NOTE 1)
----- --------
COMMERCIAL PAPER--10.6%
$7,311,000 Ford Motor Credit Company, 5.500% due 4/1/96 ..... $ 7,311,000
7,000,000 General Electric Capital Corporation, 5.450% due
4/1/96 ........................................... 7,000,000
7,000,000 Prudential Securities, 5.430% due 4/1/96 ......... 7,000,000
------------
TOTAL COMMERCIAL PAPER
(COST $21,311,000) ............................... 21,311,000
------------
U.S. TREASURY BILLS--0.2%
150,000 6,186%** due 5/2/96 .............................. 149,247
315,000 5.587%** due 8/22/96 ............................. 308,368
------------
TOTAL U.S. TREASURY BILLS
(COST $457,615) .................................. 457,615
------------
TOTAL INVESTMENTS (COST $166,669,784*) ................ 101.0% 203,617,927
OTHER ASSETS AND LIABILITIES (NET) .................... (1.0) (2,019,420)
----- ------------
NET ASSETS ............................................ 100.0% $201,598,507
===== ============
- ----------
* Aggregate cost for Federal tax purposes.
** Rate represents annualized yield at date of purchase.
+ Non-income producing security.
++ Amount represents less than 0.1% of net assets.
Abbreviation:
ADR--American Depository Receipt
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
Schedule of Forward Exchange Contracts
- ------------------------------------------------------------------------------
March 31, 1996
CONTRACT MARKET
VALUE VALUE
CONTRACTS DATE (NOTE 1)
--------- -------- --------
FORWARD EXCHANGE CONTRACTS TO BUY
(CONTRACT AMOUNT $102,944)
476,663 Finnish Markka ...................... 4/3/96 $ 102,900
============
FORWARD EXCHANGE CONTRACTS TO SELL
3,681,860 Finnish Markka ...................... 6/28/96 $ (798,008)
1,316,790 Finnish Markka ...................... 9/13/96 (286,219)
911,820 Finnish Markka ...................... 2/28/97 (199,333)
3,048,600 French Franc ........................ 9/13/96 (608,552)
980,600 French Franc ........................ 10/31/96 (196,048)
127,828 Great Britain Pound Sterling ........ 10/31/96 (194,448)
418,500,000 Italian Lira ........................ 10/31/96 (260,249)
31,776,000 Japanese Yen ........................ 4/30/96 (298,408)
29,036,000 Japanese Yen ........................ 6/28/96 (274,882)
18,720,000 Japanese Yen ........................ 9/13/96 (179,080)
192,800,000 Japanese Yen ........................ 10/31/96 (1,856,757)
100,600,000 Japanese Yen ........................ 12/27/96 (976,715)
30,345,000 Japanese Yen ........................ 2/28/97 (296,967)
1,522,000 Netherlands Guilder ................. 4/29/96 (923,093)
1,083,740 Netherlands Guilder ................. 6/28/96 (659,909)
1,235,025 Netherlands Guilder ................. 9/13/96 (755,883)
231,690 Netherlands Guilder ................. 10/31/96 (142,257)
482,550 Netherlands Guilder ................. 2/28/97 (298,574)
414,900 Singapore Dollar .................... 10/31/96 (299,459)
38,001,000 Spanish Peseta ...................... 10/31/96 (301,421)
885,975 Swiss Franc ......................... 9/13/96 (757,716)
218,500 Swiss Franc ......................... 10/31/96 (187,805)
1,010,070 Swiss Franc ......................... 12/27/96 (873,452)
173,115 Swiss Franc ......................... 2/28/97 (150,608)
------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(CONTRACT AMOUNT $12,350,000) .................. $(11,775,843)
============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
March 31, 1996
ASSETS
Investments, at value (Cost $166,669,784) (Note 1)
See accompanying schedule ................ $203,617,927
Cash and foreign currency (Cost $28,060) ..... 28,000
Receivable for investment securities sold .... 820,915
Receivable for Fund shares sold .............. 780,959
Net unrealized appreciation of forward
exchange contracts (Note 1) ................ 574,113
Dividends and interest receivable ............ 269,255
Unamortized organization costs (Note 5) ...... 51,918
Prepaid expense .............................. 558
------------
TOTAL ASSETS ............................. 206,143,645
------------
LIABILITIES
Payable for investment securities purchased .. $4,187,830
Investment advisory fee payable (Note 2) ..... 181,042
Payable for Fund shares redeemed ............. 74,627
Administration fee payable (Note 2) .......... 19,793
Transfer agent fees payable (Note 2) ......... 5,500
Accrued expenses and other payables .......... 76,346
----------
TOTAL LIABILITIES ........................ 4,545,138
------------
NET ASSETS ....................................... $201,598,507
============
NET ASSETS CONSIST OF
Undistributed net investment income .......... $ 371,199
Accumulated net realized gain on securities,
forward exchange contracts and foreign
currencies ................................. 2,261,481
Net unrealized appreciation of securities,
forward exchange contracts, foreign
currencies and net other assets ............ 37,522,076
Par value .................................... 1,410
Paid-in capital in excess of par value ....... 161,442,341
------------
TOTAL NET ASSETS ......................... $201,598,507
============
NET ASSET VALUE, offering and redemption price per
share ($201,598,507 / 14,103,718 shares of
common stock outstanding) .................... $14.29
======
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
Statement of Operations
- ------------------------------------------------------------------------------
For the year ended March 31, 1996
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $64,710) ... $ 2,288,549
Interest .................................................. 1,170,676
-----------
TOTAL INVESTMENT INCOME ............................... 3,459,225
-----------
EXPENSES
Investment advisory fee (Note 2) .............. $1,710,423
Administration fee (Note 2) ................... 210,669
Transfer agent fees (Note 2) .................. 61,961
Custodian fees (Note 2) ....................... 51,118
Legal and audit fees .......................... 25,515
Amortization of organization costs (Note 5) ... 19,470
Directors' fees and expenses (Note 2) ......... 8,908
Other ......................................... 115,563
Waiver of fees by investment adviser,
administrator and custodian (Note 2) ........ (295,284)
---------
TOTAL EXPENSES ........................................ 1,908,343
-----------
NET INVESTMENT INCOME ......................................... 1,550,882
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3)
Net realized gain (loss) on:
Securities .............................................. 2,590,149
Forward exchange contracts .............................. (7,843)
Foreign currencies ...................................... (13,036)
-----------
Net realized gain on investment during the year ........... 2,569,270
-----------
Net change in unrealized appreciation (depreciation) of:
Securities .............................................. 33,616,990
Forward exchange contracts .............................. 638,355
Foreign currencies and net other assets ................. (694)
-----------
Net unrealized appreciation of investments during the year 34,254,651
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ............... 36,823,921
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... $38,374,803
===========
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
3/31/96 3/31/95
-------------- -------------
Net investment income ......................... $ 1,550,882 $ 382,282
Net realized gain (loss) on securities, forward
exchange contracts and foreign currencies
during the year ............................. 2,569,270 (54,613)
Net unrealized appreciation of securities,
forward exchange contracts, foreign
currencies and net other .................... 34,254,651 3,809,073
------------- ------------
Net increase in net assets resulting from
operations .................................. 38,374,803 4,136,742
DISTRIBUTIONS:
Dividends to shareholders from net investment
income .................................... (1,344,358) (236,230)
Distributions to shareholders from net
realized gain on investments .............. (253,652) --
Net increase in net assets from Fund share 105,965,682 38,822,437
------------- ------------
Net increase in net assets .................... 142,742,475 42,722,949
NET ASSETS
Beginning of year ............................. 58,856,032 16,133,083
------------- ------------
End of year (including undistributed net
investment income of $371,199 and $164,675,
respectively) ............................... $201,598,507 $58,856,032
============ ===========
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Financial Highlights
For a Fund share outstanding throughout each year.
YEAR YEAR PERIOD
ENDED ENDED ENDED
3/31/96(f) 3/31/95(f) 3/31/94(a)
---------- ---------- ----------
Net asset value, beginning
of year .................. $ 10.71 $ 9.71 $ 10.00
-------- -------- --------
Income from investment operations:
Net investment income(c) ... 0.15 0.13 0.01
Net realized and unrealized
gain (loss) on investments 3.56 0.93 (0.30)
-------- -------- --------
Total from investment
operations ........... 3.71 1.06 (0.29)
-------- -------- --------
DISTRIBUTIONS:
Dividends from net
investment income ...... (0.11) (0.06) --
Distributions from net
realized gains ......... (0.02) -- --
-------- -------- --------
Total distributions .... (0.13) (0.06) --
-------- -------- --------
Net asset value, end of year $ 14.29 $ 10.71 $ 9.71
======== ======== ========
Total return(d) ............ 34.70% 11.02% (2.90)%
======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year
(in 000's) ............... $201,599 $58,856 $16,133
Ratio of operating expenses
to average net assets(e) 1.39% 1.74% 2.26%(b)
Ratio of net investment
income to average net
assets ................... 1.13% 1.25% 0.64%(b)
Portfolio turnover rate .... 9% 4% 0%
Average commission rate
(per share of security)(g) $ 0.0341 N/A N/A
- ----------
(a) The Fund commenced operations on December 8, 1993.
(b) Annualized.
(c) Net investment income (loss) for a Fund share outstanding, before the
waiver of fees by the investment adviser and/or administrator and/or
custodian for the years ended March 31, 1996 and 1995 and the 3.75-month
period ended March 31, 1994 was $0.12, $0.11 and $ (0.01), respectively.
(d) Total return represents aggregate total return for the periods indicated.
(e) Annualized expense ratios before the waiver of fees by the investment
adviser and/or administrator and/or custodian for the years ended March 31,
1996 and 1995 and the 3.75- month period ended March 31, 1994 were 1.61%,
1.94% and 3.51%, respectively.
(f) Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the use of the undistributed income method does not accord with
results of operations.
(g) Average commission rate (per share of security) as required by amended
disclosure requirements effective September 1, 1995.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
Notes to Financial Statements
- ------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Tweedy, Browne American Value Fund (the "Fund") is a diversified series of
Tweedy, Browne Fund Inc. (the "Company"). The Company is an open-end
management investment company registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended. The Company
was organized as a Maryland corporation on January 28, 1993. The Fund
commenced operations on December 8, 1993. The preparation of financial
statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements.
PORTFOLIO VALUATION Generally, the Fund's investments are valued at
market value or, in the absence of market value with respect to any portfolio
securities, at fair value as determined by or under the direction of the
Company's Board of Directors. Portfolio securities that are traded primarily
on a domestic exchange are valued at the last sale price on that exchange or,
if there were no sales during the day, at the mean between the last ask price
and the last bid price prior to the close of regular trading. Over-the-counter
securities and securities listed or traded on certain foreign exchanges whose
operations are similar to the United States ("U.S.") over-the-counter market
are valued at the mid price between the bid and ask prices. Portfolio
securities that are traded primarily on foreign exchanges generally are valued
at the preceding closing values of such securities on their respective
exchanges, except that when an occurrence subsequent to the time that a value
was so established is likely to have changed such value, then the fair value
of those securities will be determined by consideration of other factors by or
under the direction of the Company's Board of Directors. Short-term
investments that mature in 60 days or less are valued at amortized cost.
REPURCHASE AGREEMENTS The Fund engages in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund
takes possession of an underlying debt obligation subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an agreed-
upon price and time, thereby determining the yield during the Fund's holding
period. This arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Fund's holding period. The value of the
collateral is at least equal at all times to the total amount of the
repurchase obligations, including interest. In the event of counterparty
default, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is delayed
or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment adviser, acting under the supervision of the
Company's Board of Directors, reviews the value of the collateral and the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate potential risks.
FOREIGN CURRENCY The books and records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of
the period, and purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Unrealized gains and losses which result from changes in foreign currency
exchange rates have been included in the unrealized appreciation
(depreciation) of currencies and net other assets. Net realized foreign
currency gains and losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date on
investment securities transactions, foreign currency transactions and the
difference between the amounts of interest and dividends recorded on the books
of the Fund and the amount actually received. The portion of foreign currency
gains and losses related to fluctuation in the exchange rates between the
initial purchase trade date and subsequent sale trade date is included in
realized gains and losses on investment securities sold.
FORWARD EXCHANGE CONTRACTS The Fund has entered into forward exchange
contracts for non-trading purposes in order to reduce its exposure to
fluctuations in foreign currency exchange on its portfolio holdings. Forward
exchange contracts are valued at the forward rate and are marked-to-market
daily. The change in market value is recorded by the Fund as an unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
that it was opened and the value of the contract of the time that it was
closed.
The use of forward exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's investment securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward exchange contracts limit the risk of loss due to a decline in the
value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Fund could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts. The Fund currently enters into such contracts
with Mellon Bank Corporation ("Mellon Bank") and Brown Brothers Harriman & Co.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Dividend income and interest income
may be subject to foreign withholding taxes.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment
income, if any, and distributions from realized capital gains after
utilization of capital loss carryforwards, if any, will be declared and paid
annually. Additional distributions of net investment income and capital gains
from the Fund may be made at the discretion of the Board of Directors in order
to avoid the application of a 4% non-deductible Federal excise tax on certain
undistributed amounts of ordinary income and capital gains. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Fund, timing
differences and differing characterization of distributions made by the Fund.
FEDERAL INCOME TAXES The Fund intends to qualify as a regulated
investment company, if such qualification is in the best interest of its
shareholders, by complying with the requirements of the Internal Revenue Code
of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
EXPENSES Expenses directly attributable to each Fund as a diversified
series of the Company are charged to that Fund. Other expenses of the Company
are allocated to each Fund based on the average net assets of each Fund.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED
PARTY TRANSACTIONS
The Company on behalf of the Fund has entered into an investment advisory
agreement (the "Advisory Agreement") with Tweedy, Browne Company L.P.
("Tweedy, Browne"). Under the Advisory Agreement, the Company pays Tweedy,
Browne a fee at the annual rate of 1.25% of the value of its average daily net
assets. The fee is payable monthly, provided the Fund will make such interim
payments as may be requested by the adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid. From time to time,
Tweedy, Browne may voluntarily waive a portion of its fee otherwise payable to
it. For the year ended March 31, 1996, Tweedy, Browne voluntarily waived fees
of $192,301.
The current and retired general partners and their families, as well as
employees of Tweedy, Browne, the investment adviser to the Fund, have
approximately $18.3 million of their own money invested in the Fund.
The Company on behalf of the Fund has entered into an administration
agreement (the "Administration Agreement") with First Data Investor Services
Group, Inc. ("FDISG"), a wholly owned subsidiary of First Data Corporation.
Under the Administration Agreement, the Company pays FDISG an administrative
fee and a fund accounting fee computed daily and payable monthly at the
following annual rates of the value of the average daily net assets of the
Fund.
FEES ON ASSETS
----------------------------------------------------
BETWEEN
UP TO $200 AND EXCEEDING
$200 MILLION $500 MILLION $500 MILLION
- -------------------------------------------------------------------------------
Administration Fees 0.10% 0.08% 0.06%
- -------------------------------------------------------------------------------
UP TO EXCEEDING
$100 MILLION $100 MILLION
- -------------------------------------------------------------------------------
Accounting Fees 0.06% 0.04%
- -------------------------------------------------------------------------------
For the year ended March 31, 1996, FDISG voluntarily waived administration
fees of $54,000.
Under the terms of the Administration Agreement, the Company will pay for
Fund Administration Services, a minimum fee of $40,000 per Fund per annum, not
to be aggregated with fees for Fund Accounting Services. The Company will pay
for Fund Accounting Services a minimum fee of $40,000 per Fund per annum, not
to be aggregated with fees for Fund Administration Services.
No officer, director or employee of Tweedy, Browne, FDISG or any parent or
subsidiary of those corporations receives any compensation from the Company
for serving as a director or officer of the Company. The Company pays each
director who is not an officer, director or employee of Tweedy, Browne, FDISG
or any of their affiliates $2,000 per annum plus $500 per Regular or Special
Board Meeting attended in person or by telephone, plus out-of-pocket expenses.
Boston Safe Deposit and Trust Company ("Boston Safe"), an indirect wholly
owned subsidiary of Mellon Bank, serves as the Fund's custodian pursuant to a
custody agreement (the "Custody Agreement"). From time to time, Boston Safe
may voluntarily waive a portion of its fee otherwise payable to it. For the
year ended March 31, 1996, Boston Safe voluntarily waived fees of $48,983.
Unified Advisers, Inc., serves as the Fund's transfer agent. Tweedy, Browne
also serves as the distributor to the Fund and pays all distribution fees. No
distribution fees are paid by the Fund.
For the year ended March 31, 1996, the Fund incurred total brokerage
commissions of $210,767.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments for the year ended March 31, 1996, aggregated
$104,565,645 and $10,791,655, respectively.
At March 31, 1996, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost was
$38,572,397 and the aggregate gross unrealized depreciation for all
securities, in which there was an excess of tax cost over value was
$1,624,254.
4. CAPITAL STOCK
The Company is authorized to issue one billion shares of $0.0001 par value
capital stock, of which 400,000,000 of the unissued shares have been
designated as shares of the Fund. Changes in shares outstanding for the Fund
were as follows:
YEAR ENDED 3/31/96 YEAR ENDED 3/31/95
------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Sold 12,329,516 $153,231,522 4,305,320 $43,591,028
Reinvested 112,691 1,493,159 22,466 224,083
Redeemed (3,834,573) (48,758,999) (492,575) (4,992,674)
- ------------------------------------------------------------------------------
Net Increase 8,607,634 $105,965,682 3,835,211 $38,822,437
- ------------------------------------------------------------------------------
5. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including the
fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations. All such costs have been
deferred and are being amortized over a five-year period using the straight-
line method from the commencement of operations of the Fund. In the event that
any of the initial shares of the Fund are redeemed during such amortization
period, the Fund will be reimbursed for any unamortized organization costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
<PAGE>
TWEEDY, BROWN AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
- ------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Tweedy, Browne Fund Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments and schedule of forward exchange
contracts of the Tweedy, Browne American Value Fund (one of the series of
Tweedy, Browne Fund Inc.) as of March 31, 1996, the related statement of
operations for the year then ended and the related statement of changes in net
assets for each of the two years in the period then ended and financial
highlights for each of the two years in the period then ended and for the
period from December 8, 1993 (commencement of operations) to March 31, 1994.
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 audits.
We conducted our audits 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 securities
owned as of March 31, 1996, by correspondence with the custodian and brokers
and other appropriate auditing procedures where replies from brokers were not
received. An audit also includes assessing the accounting principles used and
signficant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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
Tweedy, Browne American Value Fund, a series of Tweedy, Browne Fund Inc., at
March 31, 1996, the results of its operations for the year then ended and the
changes in its net assets for each of the two years in the period then ended
and financial highlights for each of the two years in the period then ended
and for the period from December 8, 1993 to March 31, 1994, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
May 3, 1996
<PAGE>
TWEEDY, BROWNE FUND INC.
52 Vanderbilt Avenue, NY, NY 10017
800-432-4789 or 800-873-8242
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
TWEEDY, BROWNE
GLOBAL VALUE FUND
-----------------
ANNUAL
-----------------
MARCH 31, 1996
-----------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
This report is for the information of the shareholders of Tweedy, Browne
Fund Inc. Its use in connection with any offering of the Company's shares is
authorized only in a case of a concurrent or prior delivery of the Company's
current prospectus. Tweedy, Browne Company L.P. is a member of the NASD and is
the Distributor of the Company.
- --------------------------------------------------------------------------------
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT MANAGER'S REPORT
- --------------------------------------------------------------------------------
To Our Shareholders in the Tweedy, Browne Global Value Fund:
We are pleased to present the Annual Report of Tweedy, Browne Global Value
Fund (the "Fund") for the year ended March 31, 1996. The net asset value of
the shares of the Fund increased from $11.52 to $14.28, or 25.88%*, after
adding back a dividend of $0.2009 per share paid on December 29, 1995. During
the same period, the Morgan Stanley Capital International World Indices
("MSCI") showed the following results.
- -------------------------------------------------------------------------------
U.S. LOCAL
DOLLARS CURRENCY
- -------------------------------------------------------------------------------
Europe, Australia and the Far East ("EAFE") 12.33% 25.13%
World Index 20.02% 27.71%
- -------------------------------------------------------------------------------
Neither MSCI EAFE nor MSCI World Index is directly comparable to our
portfolio. MSCI EAFE excludes the U.S. stock market, in which your Fund has
approximately 15% of its assets invested, and the MSCI World Index is heavily
weighted towards the U.S., which comprises approximately 34% of the index. We
fall somewhere in between the two. Additionally, with respect to currency, the
Fund is more directly comparable to the local currency versions of the two
indices because we continue to hedge our foreign currency exposure back into
U.S. Dollars, thereby eliminating the effect of fluctuations in the U.S. Dollar
versus other currencies. Unlike the prior year, the relative strength of the
U.S. Dollar against most foreign currencies during this fiscal year had a
negative impact on unhedged portfolios. Our policy of hedging our foreign
currency exposure back into U.S. Dollars is intended to reduce volatility in our
investment results. A comparison of the results of the hedged versus the
unhedged EAFE index shows very little difference in investment results over
25-year periods. The conclusion some investment professionals reach from this
data is that hedging is not worth the bother. However, as most investors do not
take a 25-year, Rip Van Winkle approach to their portfolios, the increased
volatility that comes with an unhedged portfolio could mean millions for the
makers of Prozac and Tagamet.
- ----------
*Past performance is not a guarantee of future results and total return and
principal value of investments will fluctuate with market changes; and shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
The U.S. Dollar has experienced significant and protracted rises against
other currencies in the past and could do so again in the future, having a
severe negative effect on a portfolio of foreign stocks. For example, during the
five-year period from 1979 to 1984, the U.S. Dollar rose against most European
currencies. The following table shows the overall decline and the annually
compounded rate of decline of the British Pound, the French Franc and the Dutch
Guilder for this five-year period:
-----------------------------------------------
OVERALL ANNUALLY
CURRENCY DECLINE COMPOUNDED
-----------------------------------------------
British Pound -48.1% -12.32%
French Franc -58.1 -15.97
Dutch Guilder -46.3 -11.69
-----------------------------------------------
All of the above rates of decline are greater than the long-term average
annual rate of increase of the Standard & Poor's Composite Index of 500 stocks
("S&P 500") and almost all long-term rates of increase for foreign indices,
which were approximately 10% to 11%. To recoup these currency losses, which
averaged about 50%, your portfolio's value had to increase by 100%. If you were
willing to wait another 15 years, perhaps the fall of the U.S. Dollar would have
made you whole. However, in 1984 you would have needed a lot of conviction to
keep investing outside the U.S. without hedging. Or, if you had to sell your
stocks for retirement or some other purpose, you would have been forced to
"lock-in" some rather hefty losses caused by currency exposure. This may partly
explain why U.S. investment abroad was not nearly as significant in the 1980s as
it is today. Moreover, even if you were willing to commit your capital for 25
years to an unhedged portfolio in order to achieve the same result as a hedged
portfolio, investments in your portfolio must have the identical currency
composition as the index. The result could be considerably different if, at some
point, you were in or out of Japan, Germany, or the U.K.
If we now roll forward to the present, we hear a lot of talk about having
"foreign currency" exposure in a diversified investment portfolio. When we
question the authors of such statements, their explanations never seem quite
plausible. Perhaps the relative weakness of the U.S. Dollar in the past decade,
coupled with the trumpet cry of the U.S. trade and budget deficits, has created
a perception by some investors that the U.S. Dollar will continue to be a weak
currency, and investors will thus benefit from having their investments in some
currency other than U.S. Dollars. We simply are not capable of answering that
question. There is an advantage to recognizing the limits of one's intelligence.
We believe that one should not try to do things one cannot do. Moreover, this
conclusion flies in the face of the empirical evidence. We are always amazed by
people who can arrive at a conclusion that is inconsistent with the facts and
choose to rely on their "gut feeling." If 25 years of data indicate that there
is no difference between hedging or not hedging, yet hedging significantly
reduces volatility at little or no cost, we are at a loss to understand why
someone would not choose the less volatile option. Instead, the world focuses on
the U.S. budget deficit, which in U.S. Dollar terms is quite large, on the
theory that it will continue to lower the value of our currency. However, in
relation to our economy, it is proportionately much smaller than the deficits of
most European countries. Few care about the size of the Belgian deficit, but if
the U.S. ran a deficit at the same percentage of our economy as the Belgians do,
the world would be in economic chaos. Americans have an additional advantage
over Europeans in that we can live and die in U.S. Dollars. We can be born in
Minnesota, work in Massachusetts, live in Rhode Island, vacation in Colorado,
and retire in Florida, all in one currency. We do not have to worry about
currency fluctuations affecting the cost of owning a second home in another
state. If you lived in Belgium, you might not have that luxury. If the Belgian
Franc is devalued, which is what many people believe should occur, the cost of
having someone cut your grass at your vacation home in Spain just went up.
Currency speculation is just that . . . speculation.
We sometimes think that history is a better major than finance for a college
student hoping to pursue a career in money management. History has a nasty way
of repeating itself. History also teaches us the ebb and flow of economic tides.
The U.S. Dollar rises and the U.S. Dollar falls. Good, cheap stocks generally
rise with time. Why lose the rise in the price of your stocks to a currency
fluctuation that you may not be able to predict? Some of our peers say they will
hedge the currency "opportunistically." This means they will hedge when they
think a particular currency is about to fall. In our opinion, this is no
different than predicting when the S&P 500 or the Dow Jones Industrial Average
is about to fall, except that it is far more complex. We believe that stock
market predictions are difficult, if not impossible, to make. What form of
intellectual conceit would lead us to believe that we could predict the rise or
fall of eighteen different currencies? If you factor into your decisions
emerging markets, the number of currencies, economic growth rates, deficits, and
governmental policies, it becomes dizzying. The human brain is a wonderful
thing, but it is not that wonderful. If a currency is strong, by which we mean
it is rising, the natural human reaction is to believe that it will continue to
rise. Most currency speculation is based on momentum. After a particular
currency has fallen significantly, a hedge is put on because it has fallen
significantly. To paraphrase the legendary John Neff, every trend continues
forever until it ends. To hedge a strong, rising currency is against human
nature. Similarly, conventional wisdom holds that a bad currency can only get
worse.
We are currency agnostics. We look for cheap stocks on a worldwide basis. As
we have said before, we believe that the ability to pick from a shopping list of
more than 20,000 companies around the world, rather than limiting ourselves to
10,000 companies located in the U.S., increases our chances twofold of finding
cheap stocks. By hedging our currency positions, we believe that buying shares
of a ceramic tile manufacturer in Italy is not much different than buying shares
of a ceramic tile manufacturer in Iowa. While we may not be unique in our view
on currencies, we believe we are certainly in the minority. Contrarians always
like to be in the minority.
Another reason many money managers or mutual funds do not hedge their
currency exposure is related to their "benchmark". In our opinion, the world of
money management is measured incorrectly. The concept of absolute returns has
fallen victim to the world of "relative" returns. If your client measures your
performance against a benchmark, such as the MSCI unhedged EAFE index, all you
have to do is make sure that your performance does not "deviate" from the index
benchmark. The client, usually institutional, has made the "asset allocation". A
committee usually decides what percent of the assets will be allocated to each
investment class. These classes include bonds and stocks, which are subdivided
into investment grade bonds and high yield (a.k.a. junk) bonds, value stocks,
growth stocks, large cap stocks, small cap stocks, domestic stocks, foreign
stocks, developed markets, emerging markets, and on and on. And as the managers
of each class are selected, they are measured against a relevant benchmark. The
world of institutional money management claims that if the S&P 500 is down 25%
and the manager is only down 23%, the client should be happy. The manager beat
the benchmark by 200 basis points. As human beings who calculate our personal
net worth at least once a year, we would not be happy to see our retirement
account decline by 23%, but it could happen. Although we would not panic at such
a result, we certainly would not applaud the result either. The vast majority of
professionally managed money in this country is measured against benchmarks.
This is because the vast majority of professionally managed money in this
country is given to money managers by people who are investing other people's
money, not their own. Boards of Directors and investment committees are more
concerned with embarrassment than absolute results. The committee or board
cannot be criticized if their managers' performance has not deviated from the
index. Those of us old enough to remember the early 1970s, when one of the worst
bear markets in history wiped out considerable wealth, know that the excuse then
was that if everyone else did just as badly, you could explain the result. As
the thinking went, if you owned IBM and it went down, you could not be blamed
because everyone else owned IBM, too.
Money management today is even more cynical. If the basis of performance
measurement is a benchmark, managers are safe by modelling their portfolios
after the index so that their performance will never deviate significantly from
the index. However, this approach imposes significant restrictions on the search
for good investments. Indices are generally market capitalization weighted,
which means the largest capitalization companies have the greatest influence on
the results of the indices. Benchmark-focused money managers must therefore
concentrate their portfolios in large capitalization companies. Next, the
indices are divided into industry sectors, a segmentation called industry
weighting. This means that if oil stocks are X% of the chosen index, the
portfolio should not have an exposure to that industry that deviates very much
from the index benchmark. If oil stocks decline, you will be riding the tide of
the index. However, if oil stocks rise and you do not have the requisite
exposure, your performance will lag the index. To avoid the risk of deviating
from the results of the index, your portfolio will own oil stocks irrespective
of whether your money managers think oil stocks are a sound investment. On an
international basis, the same logic persists. Japan represents 40% of the EAFE
Index. Whether or not you believe Japanese stocks represent good value,
benchmark management dictates that you cannot be out of the Japanese market.
When the Nikkei Index was at 40,000, despite the fact that any reasonable
measurement of investment value would have driven you out of Japan, or to short
the Nikkei Index, the benchmark weighted index required your portfolio to be
heavily invested in Japan. The Japanese market subsequently declined more than
60% from its highpoint.
We are in the enviable position of managing our own money along with our
clients and fellow shareholders of the Fund, who participate in our personally
motivated investment decisions. We want to see our net worth grow in a
reasonable manner, above the popular indices, over long periods of time, and in
a way that minimizes risk. We have accomplished this in the past, and we are
perhaps naive enough to think we can continue doing so in the future. (No
guarantees made or implied.) Cold comfort though it is, our shareholders know
that if they lose money, we lose money. As of March 31, 1996, the Tweedy, Browne
partners, employees and their families have $19.9 million invested in the Fund.
Since inception on June 15, 1993, we have seen our investment compound at an
annual rate of 14.8%, which means that our investment could just about double
every five years. This is slightly below the low range of our personal long-term
goal for compounding our investments, but two years and nine months is not long
enough to make a judgment. Additionally, from a tax standpoint, we have been
reasonably efficient so far. Since inception, our investment of $10 per share
has experienced a gain of $4.64, of which only $0.36 has been taxable income.
When a portfolio is tailored to track a particular benchmark, there is
little chance to significantly outperform the benchmark. In effect, your
portfolio becomes a sort of index fund. Many money managers select investments
from a rather short list of companies. Their list of potential investment
opportunities may run from 400 to 800 companies. In general, these are the large
capitalization companies that comprise the bulk of most stock market indices. By
limiting one's universe to a list of companies that make up the index, the money
manager is reasonably assured that his performance will not deviate
significantly from the index. The money manager can also manage huge sums of
money because it is relatively easy to invest money in large cap stocks. From
the money manager's perspective, this is a win-win situation. However, it may
not be a winning strategy from the investor's perspective. If one hopes to beat
an index over a long period of time, one's portfolio should not look like that
index.
At Tweedy, Browne, we are students of long-term investment performance. Our
observations of numerous studies of financial characteristics that have produced
superior long-term rates of return, both in the U.S. and internationally,
indicate to us that value investing has worked well in the past over
statistically significant periods of time. The characteristics that have
produced the best returns in the stock market are at the extremes -- the
cheapest 10% to 20% of all stocks ranked on the basis of price-to-book value,
price-to-earnings, and price-to-cash flow ratios. Other areas of high return are
stocks that have performed poorly in the last three to five years, stocks in
which officers and directors are buying shares, and small capitalization
companies. A universe of investment opportunities that is limited to the 800
largest companies, either in the U.S. or internationally, may not include a
significant number of these "extreme" stocks. The 800 largest companies do not
include small capitalization companies. The 800 largest companies on a global
basis all have a market cap greater than $4 billion. In the U.S. alone, the 800
largest companies all have a market cap greater than $1.56 billion. While the
largest companies may account for half of total stock market capitalization,
that still leaves over 10,000 companies in the other half where many bargains
may exist. Depressed stocks, by virtue of their historically low share price,
may well not be numbered among the largest companies on any particular exchange.
The portfolio of the Fund has what we believe to be "extreme" financial
characteristics. Approximately 40% of the Fund's assets are invested in stocks
purchased on the basis of a low price-to-book value ratio. The weighted average
price-to-book value of these stocks is 72%. Of the 7,542 stocks with a market
cap of $100 million or more in World Scope global database, only 308, or 4% of
the companies, are selling for 72% of book value or less. An additional 43% of
the Fund's assets are invested in stocks purchased on the basis of a low
price-to-earnings ratio. This group of stocks has a weighted average
price-to-earnings ratio of 10.9 times. Of the stocks in the same database, only
984, or 13% of all the companies, are selling at a price-to- earnings ratio of
10.9 times or less. Among the 800 largest capitalization companies in the World
Scope global database, only four are selling at 72% of book value or less, and
only 78 stocks have a price-to-earnings ratio of 10.9 times or less. By not
limiting our universe of investment opportunities to a small list of large cap
companies, we increase the number of companies to explore by more than tenfold.
Many money managers avoid smaller cap companies for the additional reason that
it is not economically efficient to invest their research dollars in companies
where they cannot put large sums of money to work. Finally, from time to time,
many companies outside the large cap universe are not covered by the research
departments of the brokerage houses. This lack of coverage can lead to further
inefficiencies in the price of stocks and thus greater values. For example, we
own shares in an Italian bank, Banco di Sardegna Risp, which is selling at
one-third of book value. When we first bought shares a few years back, we called
the president of the bank to ask some questions. The president was delighted to
talk to us as we were the first call he had received from anyone in the
investment community in more than a year. The absence of security analysts'
coverage of a particular company can lead to more obviously cheap stocks. With a
large company, there can be an army of security analysts following its progress
on a quarterly basis. Moreover, we often find that smaller companies are easier
to analyze because they are often in only one business rather than having
numerous divisions in a myriad of sometimes unrelated businesses.
The other area in which we believe we differ from many international money
managers is in the geographic distribution of our investments. Many
international funds or portfolios will weight the country allocations of their
investments to be similar to the country weightings of the benchmark index to
which they are being compared. These money managers do not want to run the risk
of being out of a particular country in their benchmark index for fear that if
its market rises significantly, they will underperform. Similarly, if they
overweight their investments in any particular country and it performs poorly,
on a relative basis their performance will suffer. Within this framework of
country weightings, money managers will variously underweight and overweight
their investments to a limited degree based on their view of the macroeconomic
conditions of a particular country. This is called "top down" investing. If
their best guesstimate for a country's economic growth rate is for significant
improvement, or the outlook for interest rates is good, they will concentrate a
limited portion of their portfolio in that country.
Here again, we believe that we "deviate" from the norm. We look for cheap
stocks in the universe of developed stock markets around the world, and attempt
to make apples-to-apples comparisons of Dutch stocks and Japanese stocks using
the same fundamental investment criteria. Just as we do not care if a U.S.
company is located in Kansas or Maine, we generally do not care if an
international company is in Belgium or Denmark. We do not make macroeconomic
predictions. As the economist, Oskar Morganstern, said, "Everything is
unpredictable, especially the future." Or to paraphrase John Kenneth Galbraith:
There are two kinds of economists. There are those who don't know, and there are
those who don't know they don't know. We know we don't know when the Bundesbank
will begin easing its monetary policy and cut German interest rates. However, we
believe that buying Villeroy and Boch, the German manufucturer of tableware
products that are sold around the world, at 66% of book value, 11 times earnings
and only 3 times its cash net of all debt, is good value. Our macroeconomic view
is based on the theory of reversion to the mean. By this we mean that if things
are really bad, they will eventually get better; and if they are really great,
they will eventually get worse. In the meantime, when things are really bad,
stocks often get cheap. When things get better, stocks generally go up and we
can make money.
Our approach to investing has resulted in a portfolio for the Fund that is
approximately 90% invested in 223 issues in 19 countries. The country in which
we have the largest investment is tiny Switzerland, at 16.0% of net assets.
Switzerland accounts for only 6.2% of the EAFE index, whereas Germany is 7.0% of
EAFE but only 2.1% of our Fund. In our opinion, there are more cheap companies
and more small cap companies in Switzerland than in Germany, which accounts for
this geographic disparity in our portfolio. We have 56% of the Fund's assets
invested in Western Europe, 16% in North America, 15% in Japan, and almost 3% in
the rest of the Pacific Basin. We are often asked where we are finding values
today by folks who think that particular countries or industries currently offer
more value. The answer is that we are continuing to find companies everwhere in
our universe of developed markets. As we say among ourselves, the idea flow is
still pretty good. Despite strong markets in places like Japan and, at long
last, France, we are still finding bargains around the world.
There are other good reasons for investing internationally beyond just
increasing the chances of finding a cheap stock. The following table compares
the 25-year annually compounded rates of return of eight foreign stock markets
and the U.S. from 1970 to 1994, and the value of $10,000 invested in each market
over that time period on a local currency basis.
- ------------------------------------------------------------------------------
ANNUAL RATE VALUE OF
COUNTRY OF RETURN $10,000
- ------------------------------------------------------------------------------
Japan 17.1% $517,514
Netherlands 15.4 359,042
Sweden 15.0 329,190
Switzerland 12.9 207,658
United Kingdom 12.6 194,294
France 11.8 162,572
Germany 11.5 152,010
UNITED STATES 10.2 113,381
Italy 5.7 39,983
- ------------------------------------------------------------------------------
The preceding table indicates that rates of return in foreign markets have been
competitive if not superior to the U.S. The table also makes clear the
significant difference that a small increase in the rate of return can make over
a period of time. The difference between the U.S. and the U.K. of only 2.4
percentage points in the annually compounded rate of return over 25 years
resulted in 71.3% more money. Although 25 years may seem like a long time for
someone 40 years of age, that is the normal timespan to retirement. Having 71.3%
more money could make a major difference in one's lifestyle during retirement.
Or, the effect can be similarly dramatic for those of you who have recently
given birth to a child and are planning on setting aside money for his or her
college education. The value of $10,000 invested for 18 years at 10.2% is
$57,447, as compared to the same $10,000 compounded over 18 years at 12.6% of
$84,662. The cost of a year at a private college in 1996 is approximately
$25,000, and it has been increasing at the rate of 6% per year. At this rate,
the first year of college in 18 years will cost $71,358. That may sound
impossible, but the mother of one of our partners remembers going to the movies
for a nickel, and she is still healthy and active. The difference between 10.2%
and 12.6% is the difference between being able to pay for college and having to
come up with more money.
Investing should have long-term goals, such as paying for college or
retirement. And we believe that expanding one's investment options may increase
the chances of achieving those goals. Internationally, we are seeing changes in
capitalistic behavior in Europe, and to a lesser extent in Japan, that should be
beneficial to investment returns. One of the major complaints that Americans
have had about investing outside the U.S. is that shareholders have fewer
rights, and that managements are less concerned with enhancing shareholder value
than their U.S. counterparts. However, Huhtamaki Group, a food and
pharmaceutical company in Finland, is talking of a restructuring by selling off
several businesses as a way of increasing shareholder value. Unipapel, a Spanish
paper company, is paying a special dividend to shareholders, and several other
Spanish companies are considering the same action. One of our stocks in
socialist Sweden, Invik & Company, a holding company for Kinnevik Investment, a
company involved in several media and telecommunications businesses, is
proposing to split up into several companies for the purpose of creating more
value for shareholders. Takeovers, share buybacks and mergers are also
increasing. The merger of Swiss chemical and pharmaceutical giants Ciba-Geigy
and Sandoz would have been inconceivable only a few months ago, but their
proposed combination, with significant corporate savings, sounds more like the
U.S. and not Switzerland. In France, there are numerous holding companies, some
of which are holding companies of holding companies, which traditionally trade
at discounts to their net asset value. One such stock owned by the Fund, Idia,
sold at 50% of net asset value, and is being tendered for by its controlling
shareholder at net asset value. We have had takeovers such as Lloyds Chemists in
the U.K., and Cementeria di Barletta in Italy. Germany is now proposing to
institute stock options for its managements. It may come as a surprise to many
that Germany has not had stock options in the past, but the corporate culture of
that country has always been that shareholders are only one stakeholder among
several others. The concept of options is so radical in Germany that the labor
unions are concerned that if management is given incentives they might consider
laying off workers in an effort to maximize profits. And in Japan, tax laws that
previously prohibited companies from buying back their shares have now changed.
This, too, may come as a surprise to many U.S. investors, who live in a country
where share buybacks are common practice, to realize that, until very recently,
they were against the law in a modern country like Japan. Many Japanese
companies in our portfolio have significant excess cash and securities that are
not part of their operating capital structure and which can be used to buy in
stock. Already several Japanese companies have announced their intention to buy
in their stock. This can only be positive for Japanese stock prices. And
finally, companies around the world are adopting international accounting
standards which, in most cases, will increase reported earnings by eliminating
some of the practices previously employed to hide income from shareholders and
the tax authorities. As the globalization of the world economy increases,
corporations are discovering that they need to access capital from sources
beyond their own borders, and that this requires more standardized accounting
and reporting. These are all encouraging signs for the international investor
and part of the reason we remain optimistic about the prospects for our Fund.
Sincerely,
Christopher H. Browne
William H. Browne
John D. Spears
General Partners
TWEEDY, BROWNE COMPANY L.P.
Investment Adviser to the Fund
April 26, 1996
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
March 31, 1996
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
TWEEDY, BROWNE GLOBAL VALUE FUND VS. MORGAN STANLEY
CAPITAL INTERNATIONAL ("MSCI") WORLD INDEX AND MSCI EUROPE,
AUSTRALIA AND FAR EAST ("EAFE") INDEX,
6/15/93 THROUGH 3/31/96
Tweedy, Browne MSCI World MSCI World MSCI EAFE MSCI EAFE
Global Value (Local (U.S. (U.S. (Local
Date Fund Currency) Dollars) Dollars) Currency)
- ---- ------------- ---------- ---------- --------- ----------
6/15/93 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
6/93 9,980.00 9,999.90 9,913.54 9,843.95 9,983.70
9/93 10,310.00 10,460.36 10,378.43 10,496.86 10,621.25
12/93 11,540.00 10,890.95 10,545.92 10,587.55 11,150.70
3/94 12,260.00 10,633.01 10,610.45 10,957.67 10,971.95
6/94 12,210.00 10,685.90 10,928.67 11,517.51 11,084.91
9/94 12,300.00 10,834.21 11,182.87 11,528.66 10,975.74
12/94 12,043.00 10,801.56 11,081.22 11,411.05 10,923.52
3/95 11,678.00 10,656.53 11,599.48 11,623.61 10,071.90
6/95 12,327.00 11,091.26 12,094.55 11,708.01 10,119.71
9/95 12,875.00 12,161.64 12,770.18 12,196.12 11,251.75
12/95 13,332.00 12,899.21 13,377.29 12,689.98 11,960.42
3/96 14,701.00 13,609.39 13,921.73 13,056.66 12,603.14
- --------------------------------------------------------------------------------
MSCI World Index represents the change in market capitalizations of Europe,
Australia and the Far East (EAFE) plus Canada, the U.S. and South African Gold
Mines, including dividends reinvested monthly, net after foreign withholding
taxes.
MSCI EAFE Index represents the change in market capitalizations of EAFE,
including dividends reinvested monthly, net after foreign withholding taxes.
Index information is available at month end only; therefore, the closest month
end to inception date of the Fund, May 31, 1993, has been used.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN* AGGREGATE TOTAL RETURN*
-------------------------------------------------- -----------------------------------------------------------------
WITHOUT INCEPTION (6/15/93) U.S. LOCAL
THE FUND ACTUAL WAIVERS** THROUGH 3/31/96 ACTUAL DOLLARS CURRENCY
------ ----------- ----- ----------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Inception (6/15/93) The Fund 47.01% -- --
through 3/31/96 14.80% 14.79% MSCI World -- 39.22% 36.09%
Year Ended 3/31/96 25.88% N/A MSCI EAFE -- 30.57% 26.03%
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
Note: The performance shown represents past performance and is not a guarantee of future results. A Fund's share price and
investment return will vary with market conditions, and the principal value of shares, when redeemed, may be more or
less than original cost.
* Assumes the reinvestment of all dividends and distributions and is net of foreign withholding tax.
** See Note 2 to Financial Statements.
</TABLE>
<PAGE>
In accordance with rules and guidelines set out by the Securities and
Exchange Commission, we have provided a comparison of the historical investment
results of Tweedy, Browne Global Value Fund to the historical investment results
of the two most appropriate broad based securities indices, the Morgan Stanley
Capital International (MSCI) World Index and MSCI Europe, Australia and the Far
East (EAFE). However the historical results of the MSCI Indices in large measure
represents the investment results of stocks that we do not own. Any portfolio
which does not own exactly the same stocks in exactly the same proportions as
the index to which the particular portfolio is being compared is not likely to
have the same results as the index. The investment behavior of a diversified
portfolio of undervalued stocks tends to be correlated to the investment
behavior of a broad index; i.e., when the index is up, probably more than
one-half of the stocks in the entire universe of public companies in all the
countries that are included in the same index will be up, albeit, in greater or
lesser percentages than the index. Similarly, when the index declines, probably
most of the stocks in the entire universe of public companies in all countries
that are included in the index will be down in greater or lesser percentages
than the index. But it is almost a mathematical truth that "different stocks
equal different results."
Favorable or unfavorable historical investment results in comparison to an
index are not necessarily predictive of future comparative investment results.
In Are Short-Term Performance and Value Investing Mutually Exclusive?, Eugene
Shahan analyzed the investment performance of seven money managers, about whom
Warren Buffett wrote in his article, The Super Investors of Graham and
Doddsville. Over long periods of time, the seven managers significantly
outperformed the market as measured by the Dow Jones Industrial Average (the
"DJIA") or the S&P 500 by between 7.7% to 16.5% annually. (The goal of most
institutional money managers is to outperform the market by 2% to 3%.) However,
for periods ranging from 13 years to 28 years, this group of managers
underperformed the market between 7.7% to 42% of the years. Six of the seven
investment managers underperformed the market between 28% to 42% of the years.
In today's environment, they would have lost many of their clients during their
periods of underperformance. Longer term, it would have been the wrong decision
to fire any of these money managers. In examining the seven long-term investment
records, unfavorable investment results as compared to either Index did not
predict the future favorable comparative investment results which occurred, and
favorable investment results in comparison to the DJIA or the S&P 500 were not
always followed by future favorable comparative results. Stretches of
consecutive annual underperformance ranged from one to six years. Mr. Shahan
concluded "Unfortunately, there is no way to distinguish between a poor
three-year stretch for a manager who will do well over 15 years, from a poor
three-year stretch for a manager who will continue to do poorly. Nor is there
any reason to believe that a manager who does well from the outset cannot
continue to do well, and consistently."
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
March 31, 1996
MARKET
VALUE
SHARES (NOTE 1)
------ --------
COMMON STOCKS--89.7%
AUSTRALIA--0.0%++
83,000 Allied Queensland Coalfields Ltd.+ ........... $ 39,565
96,353 Carillon Development Ltd. .................... 124,237
------------
163,802
------------
AUSTRIA--0.7%
48,700 Bau Holding AG ............................... 3,242,750
8,746 Papierfabrik Laakirchen AG ................... 3,207,218
1,030 Steyr-Daimler-Puch AG+ ....................... 15,208
------------
6,465,176
------------
BELGIUM--0.7%
453 Fabrique de Fer de Charleroi ................. 936,984
1,650 Glaces de Charleroi .......................... 3,279,604
720 Henex SA ..................................... 1,002,126
541 Spadel SA .................................... 724,008
777 Uco SA ....................................... 384,818
------------
6,327,540
------------
CANADA--1.5%
196,891 BRL Enterprises Inc.+ ........................ 556,128
166,500 Corby Distilleries Ltd., Class A ............. 5,206,751
104,600 Corby Distilleries Ltd., Class B ............. 3,059,994
42,900 E.L. Financial Corporation Ltd. .............. 2,958,512
253,900 Melcor Developments Ltd. ..................... 2,014,082
772,383 Westfield Minerals Ltd.+ ..................... 750,822
------------
14,546,289
------------
DENMARK--1.8%
9,000 Bikuben Girobank A/S ......................... 315,873
4,474 Foras Holding A/S, Class B ................... 142,107
23,930 Gronlandsbanken .............................. 1,058,236
1,801 Hojgaard Holdings, Class A ................... 169,086
10,700 Nordvestbank ................................. 886,268
44,738 Ove Arkil, Class B ........................... 3,493,623
235,571 Spar Nord Holding A/S ........................ 6,944,973
124,698 Syd-Sonderjylland Holdings+ .................. 3,851,338
------------
16,861,504
------------
FINLAND--4.4%
6,000 Atria OY ..................................... 64,759
216,314 Huhtamaki Group, Class I ..................... 6,910,767
3,200 Huhtamaki Group, Class K ..................... 100,161
764,900 Kesko Ord .................................... 9,659,183
214,385 Kone Corporation, Class B .................... 22,213,425
171,300 Wemer Soderstrom, Class B .................... 3,124,597
------------
42,072,892
------------
FRANCE--9.0%
14,053 Alcatel Alsthom Compagnie Generale
d'Electricite ................................ 1,302,500
14,400 Alspi ........................................ 1,356,387
24,763 Centenaire-Blanzy SA ......................... 2,133,428
5,229 Christian Dior, SA ........................... 696,508
71,019 Compagnie Financiare de Paribas .............. 4,314,008
131,684 Compagnie Financiere de Suez ................. 5,110,515
57,700 Compagnie Lebon SA ........................... 2,668,804
206 Didot-Bottin ................................. 27,358
737 Docks Lyonnais ............................... 21,141
26,087 Dollfus Mieg & Cie ........................... 1,402,872
29,677 Eurafrance SA ................................ 11,758,867
1,150 Fiat France SA ............................... 29,906
60,931 Fonciere Financiere Et de Participation+ ..... 2,703,341
31,875 France SA .................................... 7,150,124
109 Gantois ...................................... 31,569
2,022 Idianova SA+ ................................. 28,097
35,674 Investissements de Paris ..................... 1,026,137
52,218 Klepierre .................................... 6,685,977
27,558 La Concorde+ ................................. 3,823,929
10,535 Legris Industries SA+ ........................ 541,232
5,229 LVMH Moet Hennessey .......................... 1,326,583
44,973 Marine-Wendel ................................ 3,633,550
20,945 Mecelec SA ................................... 382,519
3,347 Monneret Jouets+ ............................. 47,174
3,723 Nordon Et Cie ................................ 357,704
38,018 Paluel Marmont SA ............................ 2,294,287
9,073 Paris Orleans ................................ 495,300
58,800 Peugeot SA ................................... 8,964,447
22,534 Rallye+ ...................................... 939,383
49,464 Salins du Midi, Series A ..................... 4,811,387
13,082 Sediver ...................................... 610,277
61,500 Siparex ...................................... 1,226,948
161,562 Vallourec+ ................................... 7,668,382
------------
85,570,641
------------
GERMANY--2.1%
15,018 Axel Springer Verlag, Class A ................ 9,919,755
33,395 Sinn AG ...................................... 5,565,456
3,069 Tiag Tabbert-Industrie AG .................... 291,078
13,250 Weru AG ...................................... 4,497,155
------------
20,273,444
------------
HONG KONG--1.6%
2,333,000 Jardine Strategic Holdings Ltd.+ ............. 7,372,280
1,953,173 Semi-Tech (Global) Ltd. ...................... 2,942,134
8,891,000 Sing Tao Holdings ............................ 4,425,957
5,780,000 Tomei International Holdings Ltd.+ ........... 302,676
------------
15,043,047
------------
ITALY--4.5%
1,210,500 Arnoldo Mondadori Editore SPA ................ 10,036,705
2,750,400 Banca Toscana+ ............................... 5,499,414
3,708,000 Banco di Napoli di Risp+ ..................... 975,544
592,850 Banco di Sardegna Risp+ ...................... 4,301,097
17,000 Bassetti SPA ................................. 62,887
122,000 Cementerie di Augusta+ ....................... 186,747
323,000 Cementerie di Barletta Ord ................... 1,082,576
810,500 Cementerie di Sardegna SPA ................... 1,576,652
465,000 Cementerie Siciliane SPA ..................... 904,557
575,000 Falck Ord+ ................................... 1,686,975
642,920 Franco Tosi SPA .............................. 5,084,657
566,750 IMI SPA ...................................... 3,882,208
113,000 Industrie Zignago ............................ 691,883
669,000 Maffei SPA ................................... 1,109,386
897,200 Magneti Marelli SPA .......................... 1,213,132
136,000 Marangoni SPA ................................ 511,769
58,000 Serfi SPA .................................... 218,994
1,553,500 Tecnost SPA .................................. 2,571,175
1,825,000 Vianini Industria SPA ........................ 827,591
78,000 Zucchi Inc. .................................. 388,036
------------
42,811,985
------------
JAPAN--14.9%
18,000 Agro-Kanesho Company Ltd. .................... 223,843
139,000 Aichi Electric Company Ltd. .................. 727,817
611,000 Amada Sonoike Company Ltd. ................... 4,341,842
344,000 Chofu Seisakusho Company ..................... 8,459,280
291,000 Chubu Steel Plate Company Ltd. ............... 1,599,888
39,000 Daidoh Ltd. .................................. 310,323
819,000 Daiichi Cement Company Ltd. .................. 3,951,416
26,000 Denkyosh & Company Ltd. ...................... 238,972
604,000 Dowa Fire & Marine Insurance Company ......... 3,332,024
330,000 Fuji Coca-Cola Bottling Company .............. 4,196,354
618,000 Fuji Photo Film Ltd. ......................... 17,681,907
162,000 Fujico Company Ltd. .......................... 2,044,881
153,000 Hitachi Medical Corporation .................. 2,389,060
322,000 Kawagishi Bridge Works ....................... 3,432,258
3,000 Kinki Coca-Cola Bottling Company ............. 42,076
667,000 Kirin Brewery Company Ltd. ................... 8,045,161
479,000 Koa Fire & Marine Insurance Company .......... 2,978,354
225,000 Kokura Enterprises Company ................... 2,734,923
213,000 Koyosha Inc.+ ................................ 1,615,175
315,000 Matsushita Electric Industrial Company ....... 5,124,825
7,000 Morito ....................................... 68,724
870,000 Nichimo Co. Ltd.+ ............................ 3,847,686
42,000 Nippon Cable System .......................... 363,647
968,000 Nissan Fire & Marine Insurance Company ....... 6,878,728
657,000 Nisshinbo Industries ......................... 6,327,349
488,000 Nittetsu Mining .............................. 4,791,024
169,000 Oak .......................................... 1,102,964
127,000 Osaka Securities Finance ..................... 771,856
116,000 Riken Vitamin ................................ 1,670,313
204,000 Sangetsu Company Ltd. ........................ 4,921,178
338,000 Sankyo Company Ltd. .......................... 7,742,871
336,800 Shikoku Coca-Cola Bottling ................... 4,188,350
61,000 Shin Nikkei Company Ltd. ..................... 415,792
16,000 Shinmei Electric ............................. 306,685
194,000 Sotoh Company Ltd. ........................... 2,339,972
25,000 Tachi-S Company Ltd. ......................... 181,159
183,000 Taisei Fire & Marine Insurance Company ....... 1,009,537
630,000 Takeda Chemical Industries ................... 9,837,307
201,000 Takigami Steel Construction .................. 2,311,641
162,000 Teikoku Hormone Manufacturing Company ........ 2,211,501
263,000 Torishima Pump Manufacturing ................. 2,176,297
11,000 Totech Corporation ........................... 88,967
410,000 Toyo Technical Company Ltd. .................. 4,408,602
40,000 Zojirushi .................................... 448,808
------------
141,881,337
------------
NETHERLANDS--8.9%
87,100 Akzo NV Ord .................................. 9,684,807
201,600 Hal Trust Units .............................. 2,269,693
150,855 Heineken Holdings NV, Class A ................ 29,676,094
207,869 International Nederlanden Groep .............. 15,098,529
207,100 Unilever NV CVA .............................. 28,242,619
------------
84,971,742
------------
NEW ZEALAND--1.0%
2,471,300 Independent Newspaper ........................ 9,123,629
------------
SINGAPORE--0.3%
716,500 Robinson and Company Ord ..................... 3,003,019
------------
SPAIN--2.6%
189,031 Argentaria ................................... 7,997,846
125,927 Banco de Valencia, Registered ................ 1,968,799
10,227 Banco Pastor SA .............................. 583,529
521,942 Corporacion Financiara Reunida ............... 1,850,784
10,000 Fabrica Auto Renault de Espana ............... 216,787
168,514 Grupo Anaya SA ............................... 3,782,177
381,818 Grupo Fosforera SA+ .......................... 1,458,530
22,108 Indo Internacional SA ........................ 641,406
47,943 Omsa ......................................... 169,038
79,728 Prim SA+ ..................................... 481,895
45,068 Roberto Zubiri+ .............................. 181,601
244,796 Unipapel SA .................................. 5,010,935
------------
24,343,327
------------
SWEDEN--1.9%
711,350 Atle AB ...................................... 4,733,858
83,685 BRIO AB, Class B ............................. 775,910
777,360 Bure Forvaltning AB .......................... 5,521,890
269,000 Forsheda AB, Class B ......................... 4,666,402
80,600 Invik & Company AB, Class A .................. 2,169,599
------------
17,867,659
------------
SWITZERLAND--16.0%
5,075 Attisholz Holding AG+ ........................ 2,099,382
33 Bank of International Settlements America .... 321,856
6,200 Ciba-Geigy AG, Bearer ........................ 7,689,074
9,375 Ciba-Geigy AG, Registered .................... 11,736,978
2,685 Daetwyler Holding, Bearer .................... 5,779,291
23,610 Danzas Holding AG PC ......................... 5,538,479
8,296 Danzas Holding AG, Registered ................ 10,393,106
31,650 Edipresse SA, Bearer ......................... 9,047,799
3,225 Edipresse SA, Registered ..................... 178,963
2,111 Golay Buchel Holding, Bearer ................. 1,464,308
300 Industrie Holding, Cham Registered ........... 176,567
27,827 Loeb Holding PC .............................. 4,749,553
21,195 Magazine Zum Globus PC ....................... 11,280,477
5,000 Magazine Zum Globus, Registered .............. 3,110,943
27,439 Nestle SA, Registered ........................ 30,960,725
200 Sandoz AG .................................... 234,582
10,771 Saurer AG, Registered ........................ 4,573,385
11,003 Sig Schweiz Industrie, Registered ............ 12,211,679
17,235 Swissair AG, Registered+ ..................... 18,113,886
20,130 Swisslog Holding AG .......................... 6,245,403
3,050 Vetropack Holding AG PC ...................... 987,304
3,750 Zehnder Holding, Bearer ...................... 1,671,081
11,224 Zschokke Holding AG, Registered+ ............. 3,822,020
------------
152,386,841
------------
UNITED KINGDOM--3.2%
1,408,668 Dyson (J&J) PLC, Class A, Non-voting ......... 1,698,540
803,000 Folkes Group PLC ............................. 710,859
1,950 French Property Trust PLC .................... 2,202
131,965 Guinness PLC ................................. 958,751
760,500 Higgs & Hill PLC ............................. 1,033,069
615,000 Intercare Group PLC .......................... 572,591
350,000 Johnston Group PLC ........................... 2,136,821
580,128 Lloyds Chemist PLC ........................... 4,223,595
2,831,333 McAlpine (Alfred) PLC ........................ 7,173,632
400,000 Partridge Fine Art Ord ....................... 409,048
1,852,839 Proudfoot Alexander .......................... 919,096
184,600 SmithKline Beecham, PLC Units, ADR ........... 9,506,900
600,000 Union PLC .................................... 943,254
------------
30,288,358
------------
UNITED STATES--14.6%
221,000 American Express Company ..................... 10,911,875
75,700 American National Insurance Company .......... 5,109,750
149,000 BanPonce Corporation, New .................... 6,891,250
247,500 Chase Manhattan Corporation .................. 18,191,250
68,000 Coca-Cola Bottling Company ................... 2,295,000
232,200 Comerica, Inc. ............................... 9,694,350
47,300 Digital Equipment Corporation+ ............... 2,607,413
35,000 Federal Home Loan Mortgage Corporation ....... 2,983,750
90,000 Fingerhut Companies, Inc. .................... 1,158,750
205,616 First Chicago Corporation .................... 8,533,064
62,590 Great Atlantic & Pacific Tea Company ......... 1,940,290
193,100 Hasbro Inc. .................................. 7,144,700
98,063 Horizon/CMS Healthcare Corportation+ ......... 1,372,882
65,700 Household International Inc. ................. 4,418,325
15,000 Kindercare Learning Centers, Inc.+ ........... 187,500
392,100 Lehman Brothers Holdings Inc. ................ 10,488,675
48,750 Mercantile Bancorporation, Inc. .............. 2,230,312
50,000 National Education Corporation+ .............. 587,500
73,200 Philip Morris Companies Inc. ................. 6,423,300
460,000 PNC Bank Corporation ......................... 14,145,000
15,000 Polaroid Corporation ......................... 675,000
146,075 Reebok International Ltd. .................... 4,035,322
253,200 Salomon Inc. ................................. 9,495,000
185,000 Sun Healthcare Group Inc.+ ................... 2,451,250
160,000 Syms Corporation+ ............................ 1,320,000
12,500 Wells Fargo & Company ........................ 3,262,500
------------
138,554,008
------------
TOTAL COMMON STOCKS
(COST $707,861,937) .......................... 852,556,240
------------
PREFERRED STOCKS--0.4%
603 Stuttgarter Hofbrau, Preferred ............... 147,472
23,835 Villeroy & Boch AG, Preferred ................ 3,390,929
------------
TOTAL PREFERRED STOCKS
(COST $3,490,299) ............................ 3,538,401
------------
COMMON STOCK WARRANTS--0.0%++
105,920 Franco Tosi, Strike 20,000, Expires 11/30/97+ 10,809
9,073 Paris Orleans, Strike 330, Expires 4/30/98+ .. 26,386
1,592 Rallye, Class B, Strike 150, Expires 12/31/96+
.............................................. 15,896
------------
TOTAL COMMON STOCK WARRANTS
(COST $11,945) ............................... 53,091
------------
FACE
VALUE
-----
CONVERTIBLE CORPORATE BONDS--0.1%
ESP 29,870,000 Grupo Anaya SA, Convertible Bond, 7.000% due
3/18/98 ...................................... 223,847
SEK 2,592,000 Kinnevik Investment, Convertible Bond, 10.500%
due 7/21/97 .................................. 786,870
JPY 9,000,000 Shikoku Coca-Cola Bottling, Convertible Bond,
2.400% due 3/29/02 92,819
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(COST $738,524) .............................. 1,103,536
------------
COMMERCIAL PAPER--6.8%
$20,000,000 Ford Motor Credit Company, 5.500% due 4/1/96 . 20,000,000
30,000,000 General Electric Capital Corporation, 5.450%
due 4/1/96 ................................... 30,000,000
15,113,000 Prudential Securities, 5.430% due 4/1/96 ..... 15,113,000
------------
TOTAL COMMERCIAL PAPER
(COST $65,113,000) ........................... 65,113,000
------------
U.S. TREASURY BILLS--0.4%
$ 525,000 5.780%** due 5/30/96 ......................... 520,311
550,000 5.638%** due 7/25/96 ......................... 540,627
1,000,000 5.764%** due 8/22/96 ......................... 978,351
1,500,000 5.533%** due 9/19/96 ......................... 1,462,665
------------
TOTAL U.S. TREASURY BILLS
(COST $3,501,954) ............................ 3,501,954
------------
TOTAL INVESTMENTS (COST $780,717,659*) ................. 97.4% 925,866,222
OTHER ASSETS AND LIABILITIES (NET) ..................... 2.6 25,044,744
---- ------------
NET ASSETS ............................................. 100.0% $950,910,966
===== ============
- ----------
* Aggregate cost for Federal tax purposes.
** Rate represents annualized yield at date of purchase.
+ Non-income producing security.
++ Amount represents less than 0.1% of net assets.
Abbreviations:
ADR--American Depository Receipt
ESP--Spanish Peseta
JPY--Japanese Yen
SEK--Swedish Krona
<PAGE>
<TABLE>
<CAPTION>
MARKET
PERCENTAGE OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 1)
---------------------- ------------- --------
<S> <C> <C>
COMMON STOCKS:
Food and Beverages ...................................... 11.0% $104,788,201
Banking ................................................. 10.3 97,938,801
Financial Services ...................................... 6.4 60,883,757
Holdings ................................................ 6.3 60,038,915
Printing and Publishing ................................. 5.2 49,666,940
Insurance ............................................... 5.1 48,339,489
Machinery ............................................... 5.0 47,916,431
Retail .................................................. 4.7 44,357,610
Chemicals ............................................... 3.6 34,146,089
Transportation .......................................... 3.6 34,045,470
Consumer Non-Durables ................................... 3.4 32,277,940
Pharmaceuticals ......................................... 3.3 31,203,474
Engineering and Construction ............................ 2.8 26,295,972
Manufacturing ........................................... 2.5 23,747,206
Mining and Metal Fabrication ............................ 2.5 23,700,541
Consumer Durables ....................................... 2.4 22,806,732
Textiles ................................................ 1.8 16,781,713
Electronics ............................................. 1.4 13,742,318
Real Estate ............................................. 1.2 11,282,842
Autos ................................................... 1.2 11,230,250
Forest Products ......................................... 1.1 10,675,703
Building Materials ...................................... 0.9 8,529,539
Leisure ................................................. 0.8 7,967,783
Wholesale ............................................... 0.5 4,989,902
Health Care ............................................. 0.5 4,403,348
Technology and Computers ................................ 0.4 3,909,913
Basic Industries ........................................ 0.4 3,432,258
Other ................................................... 1.4 13,457,103
----- ------------
TOTAL COMMON STOCKS ..................................... 89.7 852,556,240
----- ------------
PREFERRED STOCKS ........................................ 0.4 3,538,401
COMMON STOCK WARRANTS ................................... 0.0+ 53,091
CONVERTIBLE CORPORATE BONDS ............................. 0.1 1,103,536
COMMERCIAL PAPER ........................................ 6.8 65,113,000
U.S. TREASURY BILLS ..................................... 0.4 3,501,954
OTHER ASSETS AND LIABILITIES (NET) ...................... 2.6 25,044,744
----- ------------
NET ASSETS .............................................. 100.0% $950,910,966
===== ============
</TABLE>
- ----------
+ Amount represents less than 0.1% of net assets.
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF FORWARD EXCHANGE CONTRACTS
- --------------------------------------------------------------------------------
March 31, 1996
CONTRACT MARKET
VALUE VALUE
CONTRACTS DATE (NOTE 1)
--------- -------- --------
FORWARD EXCHANGE CONTRACTS TO BUY
483,045 Belgian Franc ................... 4/2/96 $ 15,923
49,496 Canadian Dollar ................. 4/3/96 36,313
3,977,400 Danish Kroner ................... 4/30/96 698,726
6,629,088 Danish Kroner ................... 5/31/96 1,165,788
3,985,560 Danish Kroner ................... 6/28/96 701,501
5,529,665 Finnish Markka .................. 4/3/96 1,193,724
2,053,317 German Mark ..................... 4/3/96 1,391,152
2,000,000 Great Britain Pound Sterling .... 7/31/96 3,046,876
1,010,955,281 Italian Lira .................... 4/1/96 644,750
615,694,900 Italian Lira .................... 4/3/96 392,619
62,198,425 Italian Lira .................... 4/4/96 39,659
81,213,200 Japanese Yen .................... 4/1/96 759,401
28,659,798 Japanese Yen .................... 4/2/96 268,005
29,402,633 Japanese Yen .................... 4/3/96 274,973
12,505,000 Norwegian Krone ................. 6/28/96 1,954,008
2,497,800 Norwegian Krone ................. 11/15/96 391,577
486,380,755 Spanish Peseta .................. 4/2/96 3,919,454
27,148,500 Spanish Peseta .................. 4/3/96 218,763
1,393,744 Spanish Peseta .................. 4/9/96 11,225
46,780,469 Spanish Peseta .................. 4/10/96 376,702
1,099,665 Swedish Krona ................... 4/3/96 164,438
635,000 Swiss Franc ..................... 4/2/96 533,953
53,180 Swiss Franc ..................... 4/3/96 44,720
-------------
TOTAL FORWARD EXCHANGE CONTRACTS TO BUY
(Contract Amount $18,271,180) ................. $ 18,244,250
=============
FORWARD EXCHANGE CONTRACTS TO SELL
7,708,800 Austrian Schilling .............. 7/31/96 $ (749,211)
6,136,800 Austrian Schilling .............. 8/30/96 (597,476)
12,435,600 Austrian Schilling .............. 9/13/96 (1,211,721)
14,610,000 Austrian Schilling .............. 10/31/96 (1,427,725)
7,908,800 Austrian Schilling .............. 11/15/96 (773,582)
2,979,000 Austrian Schilling .............. 1/16/97 (292,463)
4,989,950 Austrian Schilling .............. 1/31/97 (490,286)
7,093,030 Austrian Schilling .............. 2/28/97 (697,970)
15,456,100 Belgian Franc ................... 5/31/96 (511,358)
8,959,200 Belgian Franc ................... 8/30/96 (298,027)
4,530,000 Belgian Franc ................... 9/13/96 (150,816)
17,268,000 Belgian Franc ................... 11/15/96 (577,151)
28,900,000 Belgian Franc ................... 11/29/96 (966,788)
11,564,000 Belgian Franc ................... 1/16/97 (387,969)
24,709,500 Belgian Franc ................... 1/31/97 (829,687)
23,882,400 Belgian Franc ................... 2/14/97 (802,533)
29,630,000 Belgian Franc ................... 2/28/97 (996,435)
1,389,800 Canadian Dollar ................. 5/31/96 (1,020,357)
2,150,470 Canadian Dollar ................. 6/28/96 (1,579,029)
3,855,880 Canadian Dollar ................. 7/31/96 (2,831,531)
851,886 Canadian Dollar ................. 8/30/96 (625,567)
686,250 Canadian Dollar ................. 9/13/96 (503,916)
1,077,200 Canadian Dollar ................. 10/15/96 (790,958)
1,935,780 Canadian Dollar ................. 10/31/96 (1,421,380)
1,428,315 Canadian Dollar ................. 11/15/96 (1,048,746)
3,406,250 Canadian Dollar ................. 11/29/96 (2,500,991)
956,690 Canadian Dollar ................. 1/16/97 (702,360)
342,375 Canadian Dollar ................. 1/31/97 (251,348)
688,250 Canadian Dollar ................. 2/14/97 (505,245)
1,108,880 Canadian Dollar ................. 2/28/97 (813,992)
89,640 Danish Kroner ................... 4/1/96 (15,731)
63,097 Danish Kroner ................... 4/3/96 (11,073)
3,977,400 Danish Kroner ................... 4/30/96 (698,726)
6,629,088 Danish Kroner ................... 5/31/96 (1,165,788)
3,985,560 Danish Kroner ................... 6/28/96 (701,501)
5,775,500 Danish Kroner ................... 9/13/96 (1,018,890)
38,493,700 Danish Kroner ................... 11/15/96 (6,805,725)
12,175,900 Danish Kroner ................... 11/29/96 (2,153,841)
4,144,125 Danish Kroner ................... 1/16/97 (734,301)
16,575,000 Danish Kroner ................... 1/31/97 (2,938,311)
15,926,400 Danish Kroner ................... 2/14/97 (2,824,554)
13,814,968 Finnish Markka .................. 5/31/96 (2,990,708)
10,818,650 Finnish Markka .................. 6/28/96 (2,344,839)
21,171,760 Finnish Markka .................. 7/31/96 (4,594,702)
21,160,800 Finnish Markka .................. 8/30/96 (4,597,329)
4,441,900 Finnish Markka .................. 9/13/96 (965,498)
5,589,610 Finnish Markka .................. 10/15/96 (1,216,349)
16,900,000 Finnish Markka .................. 10/31/96 (3,679,729)
7,655,580 Finnish Markka .................. 11/15/96 (1,667,785)
12,640,500 Finnish Markka .................. 11/29/96 (2,755,119)
17,228,000 Finnish Markka .................. 12/16/96 (3,757,221)
2,146,500 Finnish Markka .................. 1/16/97 (468,609)
12,201,300 Finnish Markka .................. 2/14/97 (2,666,166)
25,075,050 Finnish Markka .................. 2/28/97 (5,481,650)
18,227,200 Finnish Markka .................. 3/14/97 (3,986,339)
16,319,365 French Franc .................... 4/30/96 (3,243,520)
22,811,250 French Franc .................... 4/30/96 (4,533,801)
27,153,800 French Franc .................... 6/28/96 (5,407,416)
37,067,800 French Franc .................... 7/31/96 (7,389,498)
8,557,970 French Franc .................... 8/15/96 (1,706,831)
24,336,960 French Franc .................... 8/30/96 (4,856,052)
23,666,540 French Franc .................... 9/13/96 (4,724,241)
147,892,500 French Franc .................... 9/30/96 (29,537,042)
12,442,500 French Franc .................... 10/15/96 (2,486,253)
4,903,000 French Franc .................... 10/31/96 (980,238)
14,725,200 French Franc .................... 11/15/96 (2,945,429)
5,889,360 French Franc .................... 11/29/96 (1,178,580)
48,807,000 French Franc .................... 1/16/97 (9,782,693)
10,080,000 French Franc .................... 2/14/97 (2,022,269)
7,515,900 French Franc .................... 2/28/97 (1,508,525)
34,933,500 French Franc .................... 3/14/97 (7,014,655)
6,508,190 French Franc .................... 3/26/97 (1,307,345)
392,683 German Mark ..................... 4/4/96 (266,058)
1,337,700 German Mark ..................... 4/30/96 (907,795)
1,927,380 German Mark ..................... 5/31/96 (1,310,675)
5,467,600 German Mark ..................... 7/31/96 (3,731,307)
1,738,680 German Mark ..................... 8/15/96 (1,187,637)
6,095,670 German Mark ..................... 8/30/96 (4,167,620)
1,325,070 German Mark ..................... 9/13/96 (906,744)
689,800 German Mark ..................... 10/31/96 (473,426)
2,224,960 German Mark ..................... 11/15/96 (1,528,448)
3,242,540 German Mark ..................... 11/29/96 (2,229,402)
281,320 German Mark ..................... 1/16/97 (193,989)
2,119,350 German Mark ..................... 1/31/97 (1,462,753)
1,451,500 German Mark ..................... 2/14/97 (1,002,655)
4,335,600 German Mark ..................... 3/14/97 (2,999,961)
387,272 Great Britain Pound Sterling .... 6/28/96 (590,284)
2,214,629 Great Britain Pound Sterling .... 7/31/96 (3,373,850)
7,680,000 Great Britain Pound Sterling .... 8/15/96 (11,697,260)
555,302 Great Britain Pound Sterling .... 8/30/96 (845,571)
897,148 Great Britain Pound Sterling .... 10/15/96 (1,365,086)
1,597,852 Great Britain Pound Sterling .... 10/31/96 (2,430,597)
1,964,637 Great Britain Pound Sterling .... 12/16/96 (2,986,092)
453,838 Great Britain Pound Sterling .... 1/16/97 (689,367)
2,648,831 Great Britain Pound Sterling .... 3/26/97 (4,017,343)
104,652,950 Hong Kong Dollar ................ 6/28/96 (13,533,256)
11,619,000 Hong Kong Dollar ................ 12/27/96 (1,500,136)
1,776,000,000 Italian Lira .................... 4/30/96 (1,128,154)
518,700,000 Italian Lira .................... 6/28/96 (327,104)
1,255,875,000 Italian Lira .................... 7/31/96 (788,896)
2,877,080,000 Italian Lira .................... 8/15/96 (1,804,137)
1,001,812,500 Italian Lira .................... 8/30/96 (627,129)
1,685,500,000 Italian Lira .................... 9/13/96 (1,053,443)
21,761,350,000 Italian Lira .................... 10/15/96 (13,554,443)
8,370,000,000 Italian Lira .................... 10/31/96 (5,204,981)
4,008,480,000 Italian Lira .................... 11/29/96 (2,485,680)
5,800,200,000 Italian Lira .................... 1/16/97 (3,580,387)
907,775,000 Italian Lira .................... 1/31/97 (559,563)
7,488,000,000 Italian Lira .................... 2/14/97 (4,609,676)
1,661,620,000 Italian Lira .................... 2/28/97 (1,021,596)
6,459,400,000 Italian Lira .................... 3/14/97 (3,966,357)
513,308,000 Japanese Yen .................... 4/30/96 (4,820,466)
586,342,000 Japanese Yen .................... 5/31/96 (5,530,807)
330,360,000 Japanese Yen .................... 6/28/96 (3,127,502)
2,835,750,000 Japanese Yen .................... 7/15/96 (26,907,968)
652,938,000 Japanese Yen .................... 7/31/96 (6,209,084)
923,100,000 Japanese Yen .................... 8/15/96 (8,796,035)
930,900,000 Japanese Yen .................... 8/30/96 (8,888,383)
771,300,000 Japanese Yen .................... 9/13/96 (7,378,445)
331,835,000 Japanese Yen .................... 10/15/96 (3,188,511)
867,600,000 Japanese Yen .................... 10/31/96 (8,355,406)
579,960,000 Japanese Yen .................... 11/15/96 (5,597,213)
587,491,000 Japanese Yen .................... 11/29/96 (5,681,241)
1,457,850,000 Japanese Yen .................... 12/16/96 (14,132,357)
1,385,020,000 Japanese Yen .................... 1/16/97 (13,481,411)
279,244,000 Japanese Yen .................... 1/31/97 (2,723,245)
354,025,000 Japanese Yen .................... 2/28/97 (3,464,616)
405,480,000 Japanese Yen .................... 3/14/97 (3,975,029)
559,033,750 Japanese Yen .................... 3/26/97 (5,488,588)
139,820 Netherlands Guilder ............. 4/3/96 (84,639)
1,597,100 Netherlands Guilder ............. 4/29/96 (968,641)
12,162,400 Netherlands Guilder ............. 5/31/96 (7,392,869)
5,197,920 Netherlands Guilder ............. 7/31/96 (3,172,030)
4,544,960 Netherlands Guilder ............. 8/30/96 (2,779,097)
5,298,425 Netherlands Guilder ............. 9/13/96 (3,242,840)
1,563,000 Netherlands Guilder ............. 10/15/96 (958,659)
4,633,800 Netherlands Guilder ............. 10/31/96 (2,845,151)
10,161,775 Netherlands Guilder ............. 11/15/96 (6,245,571)
8,819,440 Netherlands Guilder ............. 11/29/96 (5,425,625)
3,968,000 Netherlands Guilder ............. 12/16/96 (2,443,848)
4,722,900 Netherlands Guilder ............. 1/16/97 (2,914,527)
20,155,200 Netherlands Guilder ............. 1/31/97 (12,449,458)
11,356,100 Netherlands Guilder ............. 2/14/97 (7,020,486)
9,698,400 Netherlands Guilder ............. 3/14/97 (6,005,934)
11,822,194 New Zealand Dollar .............. 12/16/96 (7,872,745)
2,114,804 New Zealand Dollar .............. 3/26/97 (1,398,925)
12,505,000 Norwegian Krone ................. 6/28/96 (1,954,008)
2,497,800 Norwegian Krone ................. 11/15/96 (391,577)
2,091,000 Singapore Dollar ................ 8/30/96 (1,502,790)
833,700 Singapore Dollar ................ 10/15/96 (601,233)
1,031,400 Singapore Dollar ................ 2/28/97 (749,582)
490,152,000 Spanish Peseta .................. 5/31/96 (3,929,570)
79,260,000 Spanish Peseta .................. 9/13/96 (630,663)
380,400,000 Spanish Peseta .................. 10/15/96 (3,020,433)
190,005,000 Spanish Peseta .................. 10/31/96 (1,507,103)
44,478,000 Spanish Peseta .................. 11/15/96 (352,459)
37,944,000 Spanish Peseta .................. 11/29/96 (300,420)
100,648,000 Spanish Peseta .................. 1/16/97 (794,468)
386,850,000 Spanish Peseta .................. 2/14/97 (3,047,891)
637,000,000 Spanish Peseta .................. 3/14/97 (5,009,830)
178,430,000 Spanish Peseta .................. 3/26/97 (1,402,228)
22,711,500 Swedish Krona ................... 4/30/96 (3,391,190)
4,758,600 Swedish Krona ................... 10/31/96 (707,166)
20,143,500 Swedish Krona ................... 11/29/96 (2,991,880)
6,803,000 Swedish Krona ................... 12/16/96 (1,010,154)
4,445,415 Swedish Krona ................... 1/16/97 (659,713)
13,514,600 Swedish Krona ................... 1/31/97 (2,005,065)
14,174,000 Swedish Krona ................... 2/14/97 (2,102,387)
40,554,000 Swedish Krona ................... 3/14/97 (6,012,522)
8,726,250 Swiss Franc ..................... 4/30/96 (7,360,967)
12,459,510 Swiss Franc ..................... 5/31/96 (10,545,020)
9,625,980 Swiss Franc ..................... 7/31/96 (8,195,839)
2,722,970 Swiss Franc ..................... 8/15/96 (2,321,943)
7,425,810 Swiss Franc ..................... 8/30/96 (6,341,800)
7,776,875 Swiss Franc ..................... 9/13/96 (6,651,046)
666,600 Swiss Franc ..................... 10/15/96 (571,991)
1,857,250 Swiss Franc ..................... 10/31/96 (1,596,346)
11,036,500 Swiss Franc ..................... 11/15/96 (9,501,209)
4,461,600 Swiss Franc ..................... 11/29/96 (3,846,681)
6,735,000 Swiss Franc ..................... 12/16/96 (5,817,338)
41,384,500 Swiss Franc ..................... 12/27/96 (35,786,986)
389,235 Swiss Franc ..................... 1/16/97 (337,241)
7,828,100 Swiss Franc ..................... 1/31/97 (6,792,213)
34,561,000 Swiss Franc ..................... 2/28/97 (30,067,607)
2,301,800 Swiss Franc ..................... 3/26/97 (2,007,476)
-------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(Contract Amount $702,890,903) ................ $(676,113,735)
=============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
March 31, 1996
ASSETS
Investments, at value (Cost $780,717,659)
(Note 1) See accompanying schedule ........ $925,866,222
Cash and foreign currency (Cost $928,420) ... 927,395
Net unrealized appreciation of forward
exchange contracts
(Note 1) .................................. 26,750,238
Receivable for investment securities sold ... 3,617,038
Receivable for Fund shares sold ............. 3,231,221
Dividends and interest receivable ........... 2,758,218
Unamortized organization costs (Note 5) ..... 48,356
Prepaid expense ............................. 7,669
------------
TOTAL ASSETS ............................ 963,206,357
------------
LIABILITIES
Payable for investment securities purchased . $10,286,158
Investment advisory fee payable (Note 2) .... 978,189
Payable for Fund shares redeemed ............ 616,476
Custodian fees payable (Note 2) ............. 119,390
Administration fee payable (Note 2) ......... 105,542
Transfer agent fees payable (Note 2) ........ 32,000
Accrued expenses and other payables ......... 157,636
-----------
TOTAL LIABILITIES ....................... 12,295,391
-----------
NET ASSETS ...................................... $950,910,966
============
NET ASSETS CONSIST OF
Undistributed net investment income ......... $ 14,504,033
Accumulated net realized loss on securities,
forward exchange contracts and foreign
currencies ................................ (10,403,439)
Distributions in excess of net realized gain
on securities, forward exchange contracts
and foreign currencies .................... (9,099,176)
Net unrealized appreciation of securities,
forward exchange contracts, foreign
currencies and net other assets ........... 171,863,759
Par value ................................... 6,657
Paid-in capital in excess of par value ...... 784,039,132
-----------
TOTAL NET ASSETS ........................ $950,910,966
============
NET ASSET VALUE, offering and redemption price
per share ($950,910,966 / 66,567,401 shares
of common stock outstanding) $14.28
======
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the year ended March 31, 1996
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $2,065,477) $ 16,146,043
Interest (net of foreign withholding taxes of $1,466) ..... 5,563,538
------------
TOTAL INVESTMENT INCOME ............................... 21,709,581
------------
EXPENSES
Investment advisory fee (Note 2) ............. $9,864,278
Administration fee (Note 2) .................. 1,116,971
Custodian fees (Note 2) ...................... 664,245
Transfer agent fees (Note 2) ................. 486,019
Legal and audit fees ......................... 80,913
Amortization of organization costs (Note 5) .. 22,285
Directors' fees and expenses (Note 2) ........ 8,908
Other ........................................ 420,016
----------
TOTAL EXPENSES ........................................ 12,663,635
------------
NET INVESTMENT INCOME ......................................... 9,045,946
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3)
Net realized gain (loss) on:
Securities .............................................. 25,616,751
Forward exchange contracts .............................. (35,790,543)
Foreign currencies ...................................... (229,647)
------------
Net realized loss on investment during the year ........... (10,403,439)
------------
Net change in unrealized appreciation (depreciation) of:
Securities .............................................. 112,914,718
Forward exchange contracts .............................. 72,887,090
Foreign currencies and net other assets ................. (113,812)
------------
Net unrealized appreciation of investments during the year 185,687,996
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ............... 175,284,557
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $184,330,503
============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
3/31/96 3/31/95
------------ ------------
Net investment income ........................ $ 9,045,946 $ 5,359,826
Net realized loss on securities, forward
exchange contracts and foreign currencies
during the year ............................ (10,403,439) (2,869,436)
Net unrealized appreciation (depreciation) of
securities, forward exchange contracts,
foreign currencies and net other assets
during the year ............................ 185,687,996 (36,494,105)
------------ ------------
Net increase (decrease) in net assets
resulting from operations .................. 184,330,503 (34,003,715)
DISTRIBUTIONS:
Distributions to shareholders from net
realized gain on investments ............. (3,341,225) (3,010,114)
Distributions in excess of net realized gain
on investments ........................... (9,099,176) (4,759,223)
Net increase in net assets from Fund share
transactions (Note 4) 123,986,313 399,373,423
------------ ------------
Net increase in net assets ................... 295,876,415 357,600,371
NET ASSETS
Beginning of year ............................ 655,034,551 297,434,180
------------ ------------
End of year (including undistributed net
investment income of $14,504,033 and
$5,458,087, respectively) .................. $950,910,966 $655,034,551
============ ============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
3/31/96(h) 3/31/95 3/31/94(a)(h)
---------- ------- -------------
<S> <C> <C> <C>
Net asset value, beginning of year ................. $ 11.52 $ 12.26 $ 10.00
-------- -------- --------
Income from investment operations:
Net investment income (loss) ....................... 0.15 0.10 (0.00)(c)(f)
Net realized and unrealized gain (loss)
on investments ................................... 2.81 (0.68) 2.26
-------- -------- --------
Total from investment operations ............... 2.96 (0.58) 2.26
-------- -------- --------
DISTRIBUTIONS:
Distributions from net realized gains ............ (0.05) (0.06) --
Distributions in excess of net realized
gains .......................................... (0.15) (0.10) --
-------- -------- --------
Total distributions ............................ (0.20) (0.16) --
-------- -------- --------
Net asset value, end of year ....................... $ 14.28 $ 11.52 $ 12.26
======== ======== ========
Total return(d) .................................... 25.88% (4.74)% 22.60%
======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (in 000's) ................. $950,911 $655,035 $297,434
Ratio of operating expenses
to average net assets ............................ 1.60% 1.65% 1.73%(b)(e)
Ratio of net investment income (loss)
to average net assets ............................ 1.15% 1.08% (0.00)%(b)(g)
Portfolio turnover rate ............................ 17% 16% 14%
Average commission rate
(per share of security)(i) ....................... $ 0.0206 N/A N/A
<FN>
- ----------
(a) The Fund commenced operations on June 15, 1993.
(b) Annualized.
(c) Net investment loss for a Fund share outstanding, before the waiver of fees by the investment adviser
was $(0.01) for the 7.5-month period ended March 31, 1994.
(d) Total return represents aggregate total return for the periods indicated.
(e) Annualized expense ratio before the waiver of fees by the investment adviser was 1.83% for the 7.5-month
period ended March 31, 1994.
(f) Amount represents less than $(0.01) per share.
(g) Amount represents less than (0.01)% per share.
(h) Per share amounts have been calculated using the monthly average share method, which more appropriately
presents the per share data for the period since the use of the undistributed income method does not
accord with results of operations.
(i) Average commission rate (per share of security) as required by amended disclosure requirements effective
September 1, 1995.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Tweedy, Browne Global Value Fund (the "Fund") is a diversified series of
Tweedy, Browne Fund Inc. (the "Company"). The Company is an open-end management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended. The Company was organized as a
Maryland corporation on January 28, 1993. The Fund commenced operations on June
15, 1993. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
PORTFOLIO VALUATION Generally, the Fund's investments are valued at market
value or, in the absence of market value with respect to any portfolio
securities, at fair value as determined by or under the direction of the
Company's Board of Directors. Portfolio securities that are traded primarily on
a domestic exchange are valued at the last sale price on that exchange or, if
there were no sales during the day, at the mean between the last ask price and
the last bid price prior to the close of regular trading. Over-the-counter
securities and securities listed or traded on certain foreign exchanges whose
operations are similar to the United States ("U.S.") over-the-counter market are
valued at the mean between the bid and ask prices. Portfolio securities that are
traded primarily on foreign exchanges generally are valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time that a value was so established is
likely to have changed such value, then the fair value of those securities will
be determined by consideration of other factors by or under the direction of the
Company's Board of Directors. Short-term investments that mature in 60 days or
less are valued at amortized cost.
REPURCHASE AGREEMENTS The Fund engages in repurchase agreement transactions.
Under the terms of a typical repurchase agreement, the Fund takes possession of
an underlying debt obligation subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. The Fund's investment adviser, acting under the
supervision of the Company's Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks.
FOREIGN CURRENCY The books and records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of the
period, and purchases and sales of investment securities, income and expenses
are translated on the respective dates of such transactions. Unrealized gains
and losses which result from changes in foreign currency exchange rates have
been included in the unrealized appreciation (depreciation) of currencies and
net other assets. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investments securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amount actually received.
The portion of foreign currency gains and losses related to fluctuation in the
exchange rates between the initial purchase trade date and subsequent sale trade
date is included in realized gains and losses on investment securities sold.
FORWARD EXCHANGE CONTRACTS The Fund has entered into forward exchange
contracts for non-trading purposes in order to reduce its exposure to
fluctuations in foreign currency exchange on its portfolio holdings. Forward
exchange contracts are valued at the forward rate and are marked-to-market
daily. The change in market value is recorded by the Fund as an unrealized gain
or loss. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time that it
was opened and the value of the contract at the time that it was closed.
The use of forward exchange contracts does not eliminate fluctuations in the
underlying prices of the Fund's investment securities, but it does establish a
rate of exchange that can be achieved in the future. Although forward exchange
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
The Fund currently enters into such contracts with Mellon Bank Corporation
("Mellon Bank") and Brown Brothers Harriman & Co.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Dividend income and interest income may
be subject to foreign withholding taxes. The Fund's custodian applies for
refunds where available. If the Fund meets the requirements of Section 853 of
the Internal Revenue Code of 1986, as amended, the Fund may elect to pass
through to its shareholders credits for foreign taxes paid.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment
income, if any, and distributions from realized capital gains after utilization
of capital loss carryforwards, if any, will be declared and paid annually.
Additional distributions of net investment income and capital gains from the
Fund may be made at the discretion of the Board of Directors in order to avoid
the application of a 4% non-deductible Federal excise tax on certain
undistributed amounts of ordinary income and capital gains. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
FEDERAL INCOME TAXES The Fund intends to qualify as a regulated investment
company, if such qualification is in the best interest of its shareholders, by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by distributing
substantially all of its taxable income to its shareholders. Therefore, no
Federal income tax provision is required.
EXPENSES Expenses directly attributable to each Fund as a diversified series
of the Company are charged to that Fund. Other expenses of the Company are
allocated to each Fund based on the average net assets of each Fund.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS
The Company on behalf of the Fund has entered into an investment advisory
agreement (the "Advisory Agreement") with Tweedy, Browne Company L.P. ("Tweedy,
Browne"). Under the Advisory Agreement, the Company pays Tweedy, Browne a fee at
the annual rate of 1.25% of the value of its average daily net assets. The fee
is payable monthly, provided the Fund will make such interim payments as may be
requested by the adviser not to exceed 75% of the amount of the fee then accrued
on the books of the Fund and unpaid.
The current and retired general partners and their families, as well as
employees of Tweedy, Browne, the investment adviser to the Fund, have
approximately $19.9 million of their own money invested in the Fund.
The Company on behalf of the Fund has entered into an administration
agreement (the "Administration Agreement") with First Data Investor Services
Group, Inc. ("FDISG"), a wholly owned subsidiary of First Data Corporation.
Under the Administration Agreement, the Company pays FDISG an administrative fee
and a fund accounting fee computed daily and payable monthly at the following
annual rates of the value of the average daily net assets of the Fund.
FEES ON ASSETS
----------------------------------------------
BETWEEN
UP TO $200 AND EXCEEDING
$200 MILLION $500 MILLION $500 MILLION
- ------------------------------------------------------------------------------
Administration Fees 0.12% 0.10% 0.08%
- ------------------------------------------------------------------------------
BETWEEN
UP TO $50 AND EXCEEDING
$50 MILLION $100 MILLION $100 MILLION
- ------------------------------------------------------------------------------
Accounting Fees 0.08% 0.06% 0.04%
- ------------------------------------------------------------------------------
Under the terms of the Administration Agreement, the Company will pay for
Fund Administration Services, a minimum fee of $40,000 per Fund per annum, not
to be aggregated with fees for Fund Accounting Services. The Company will pay
for Fund Accounting Services a minimum fee of $20,000 per Fund per annum, not to
be aggregated with fees for Fund Administration Services.
No officer, director of employee of Tweedy, Browne, FDISG or any parent or
subsidiary of those corporations receives any compensation from the Company for
serving as a director or officer of the Company. The Company pays each director
who is not an officer, director or employee of Tweedy, Browne, FDISG or any of
their affiliates $2,000 per annum plus $500 per Regular or Special Board Meeting
attended in person or by telephone, plus out-of-pocket expenses.
Boston Safe Deposit and Trust Company ("Boston Safe"), an indirect wholly
owned subsidiary of Mellon Bank, serves as the Fund's custodian pursuant to a
custody agreement (the "Custody Agreement"). Unified Advisers, Inc., serves as
the Fund's transfer agent. Tweedy, Browne also serves as the distributor to the
Fund and pays all distribution fees. No distribution fees are paid by the Fund.
For the year ended March 31, 1996, the Fund incurred total brokerage
commissions of $1,135,039.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments for the year ended March 31, 1996, aggregated
$229,070,934 and $122,365,578, respectively.
At March 31, 1996, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost was $172,545,775
and the aggregate gross unrealized depreciation for all securities, in which
there was an excess of tax cost over value was $27,397,212.
4. CAPITAL STOCK
The Company is authorized to issue one billion shares of $0.0001 par value
capital stock, of which 600,000,000 of the unissued shares have been designated
as shares of the Fund. Changes in shares outstanding for the Fund were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED 3/31/96 YEAR ENDED 3/31/95
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 29,891,616 $381,433,296 43,211,400 $526,880,460
Reinvested 854,225 11,062,218 610,480 7,251,537
Redeemed (21,057,222) (268,509,201) (11,196,210) (134,758,574)
- ---------------------------------------------------------------------------------------------------------
Net increase 9,688,619 $123,986,313 32,625,670 $399,373,423
- ---------------------------------------------------------------------------------------------------------
</TABLE>
5. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including the
fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations. All such costs have been
deferred and are being amortized over a five-year period using the straight-line
method from the commencement of operations of the Fund. In the event that any of
the initial shares of the Fund are redeemed during such amortization period, the
Fund will be reimbursed for any unamortized organization costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves economic and political risks and considerations not typically
associated with investing in U.S. companies and the U.S. Government. These
considerations include changes in exchange rates and exchange rate controls
(which may include suspension of the ability to transfer currency from a given
country), costs incurred in conversions between currencies, non-negotiable
brokerage commissions, less publicly available information, different accounting
standards, lower trading volume, delayed settlements and greater market
volatility, the difficulty of enforcing obligations in other countries, less
securities regulation, different tax provisions (including withholding on
dividends paid to the Fund), war, expropriation, political and social
instability and diplomatic developments.
7. LINE OF CREDIT
The Fund and Mellon Bank, N.A. have entered into a Line of Credit Agreement
(the "Agreement") which provides the Fund with a $50 million line of credit,
primarily for temporary or emergency purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition of
securities. The Fund may borrow up to the lesser of $50 million or one-third of
its net assets. Interest is payable at the bank's Money Market Rate plus 0.75%
on an annualized basis. Under the Agreement, the Fund is charged a facility fee
equal to 0.10% annually of the unutilized credit. The Agreement requires, among
other provisions, the Fund to maintain a ratio of net assets (not including
funds borrowed pursuant to the Agreement) to aggregated amount of indebtedness
pursuant to the Agreement of no less than three to one. For the year ended March
31, 1996, the Fund did not borrow under this Agreement.
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Tweedy, Browne Fund Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments and the schedule of forward exchange
contracts of the Tweedy, Browne Global Value Fund (one of the series of Tweedy,
Browne Fund Inc.) as of March 31, 1996, the related statement of operations for
the year then ended and the related statement of changes in net assets for each
of the two years in the period then ended and financial highlights for each of
the two years in the period then ended and for the period from June 15, 1993
(commencement of operations) to March 31, 1994. 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 audits.
We conducted our audits 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 securities owned as of March
31, 1996, by correspondence with the custodian and brokers and other appropriate
auditing procedures where replies from brokers were not received. An audit also
includes assessing the accounting principles used and signficant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide 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
Tweedy, Browne Global Value Fund, a series of Tweedy, Browne Fund Inc., at March
31, 1996, the results of its operations for the year then ended and the changes
in its net assets for each of the two years in the period then ended and
financial highlights for each of the two years in the period then ended and for
the period from June 15, 1993 to March 31, 1994, in conformity with generally
accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
May 3, 1996
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1996
For the fiscal year ended March 31, 1996, the total amount of income
received by the Fund from sources within foreign countries and possessions of
the United States was $0.33 per share (representing a total of $21,709,581). The
total amount of taxes paid by the Fund to foreign countries was $0.03 per share
(representing a total of $2,066,943).
<PAGE>
TWEEDY, BROWNE FUND INC.
52 Vanderbilt Avenue, NY NY 10017
800-432-4789 or 800-873-8242
