As filed with the Securities and Exchange Commission on July
28, 1996
File No. 33-57724
File No. 811-7458
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
__
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
^X^
__
Pre-Effective Amendment No.
^_^
__
Post-Effective Amendment No.
6
^X^
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
__
COMPANY ACT OF 1940
^X^
__
AMENDMENT No. 9
^X^
Tweedy, Browne Fund Inc.
(Exact name of Registrant as Specified in Charter)
52 Vanderbilt Avenue, New York, NY 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 916-
0600
M. Gervase Rosenberger, Esq. Copy to:
Tweedy, Browne Company L.P.
52 Vanderbilt Avenue Richard T. Prins, Esq.
New York, NY 10017 Skadden, Arps, Slate,
Meagher & Flom
_________________________ 919 Third Avenue
(Name and Address of Agent New York, NY 10022
for Service)
Patricia L. Bickimer, Esq.
First Data Investor Services
Group, Inc.
One Exchange Place
Boston, MA 02109
It is proposed that this filing will become effective
(check appropriate box)
immediately upon filing pursuant to paragraph (b)
X on August 1, 1996 pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on (________) pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on ________ pursuant to paragraph (a)(2) of Rule 485.
_____________________
The Registrant has previously filed a declaration of
indefinite registration of its shares pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended. Registrant's Rule
24f-2 Notice for the fiscal year ended March 31, 1996 was filed
on May 29, 1996.
TWEEDY, BROWNE FUND INC.
Cross Reference Sheet
(as required by Item 501(b) of Regulation S-K)
Item Number of
Part A Form N-1A Location or
Caption
Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Information
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Tweedy,
Browne Global Value
of Registrant Fund;Tweedy,
Browne American
Value Fund; Investment
Objectives and Policies
Item 5. Management of the Fund Why Invest in the Funds?;
Commitment of the Investment Adviser; Operation of the Funds;
Additional Information; Purchasing, Redeeming and Exchanging
Shares
Item 5A. Management's Discussion Not Applicable
of Fund Performance
Item 6. Capital Stock and Operation of the Funds
Other Securities
Item 7. Purchase of Securities Purchasing, Redeeming and
Being Offered Exchanging Shares
Item 8. Redemption or Repurchase Purchasing, Redeeming
and
Exchanging Shares
Item 9. Pending Legal Proceedings Not Applicable
Item Number of
Part B Form N-1A Location or
Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information Historical Investment Results
of
and History the Investment Adviser
Item 13. Investment Objectives Investment Objectives
and Policies and Policies
Item 14. Management of the Fund Historical Investment Results
of the Investment Adviser; Why Invest in the Funds?; Commitment of
the Investment Adviser; Operation of the Funds; Purchasing,
Redeeming and Exchanging Shares
Item 15. Control Persons and Principal Operation of the Funds
Holdings of the Fund
Item 16. Investment Advisory and Historical Investment Results
of
Other Services the Investment Adviser; Why Invest in the
Funds?; Commitment of the Investment Adviser; Operation of the
Funds; Additional Information; Purchasing, Redeeming and
Exchanging Shares
Item 17. Brokerage Allocation Portfolio Transactions
and Other Practices
Item 18. Capital Stock and Operation of the Funds
Other Securities
Item 19. Purchase, Redemption and Net Asset Value and
contained
Pricing of Securities Being in Prospectus under related
Offered captions
Item 20. Tax Status Tax Information
Item Number of
Part B Form N-1A Location or
Caption
Item 21. Underwriters Operation of the Funds
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in part C is set forth
under the appropriate Item, so numbered, in Part C of this
Registration Statement.
<PAGE>
The Date of this Prospectus is August 1, 1996
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
<TABLE>
<S> <C> <C>
52 VANDERBILT AVENUE FUND INFORMATION: 800-
432-4789
NEW YORK, NY 10017 FOR SPECIAL ASSISTANCE IN
OPENING A NEW ACCOUNT: 800-
432-4789, EXT. 9
SHAREHOLDER SERVICES: 800-
873-8242
NAV PRICES: 800-
873-8242, EXT. 1
</TABLE>
- ------------------------------------------------------------------
- --------------
[LOGO Global Fund] GLOBAL FUND
Tweedy, Browne Global Value Fund (the "Global Fund") seeks
long-term growth
of capital by investing throughout the world in a diversified
portfolio
consisting primarily of marketable equity securities, including
common stocks,
preferred stocks and securities representing the right to acquire
stocks. The
Global Fund may also invest in debt instruments, although income
is an
incidental consideration. The Global Fund expects to invest
primarily in foreign
securities, although investments in U.S. securities are permitted
and will be
made when opportunities in U.S. markets appear more attractive.
[LOGO American Fund] AMERICAN FUND
Tweedy, Browne American Value Fund (the "American Fund")
seeks long-term
growth of capital by investing in a diversified portfolio of
domestic equity
securities of U.S. issuers, including common stocks, preferred
stocks and
securities representing the right to acquire stocks. The American
Fund may
invest up to 20% of its portfolio in foreign securities when
opportunities in
foreign markets appear attractive. Both the Global Fund and the
American Fund
are diversified series of Tweedy, Browne Fund Inc., an open-end
management
investment company (the "Corporation").
------------
The Funds are sold without any sales charges or 12b-1 fees
and are
accordingly purely "no-load." The minimum initial investment for
each Fund is
$2,500 ($500 for IRAs and similar accounts) and subsequent
investments must be a
minimum of $250.
The Funds' investment adviser is Tweedy, Browne Company L.P.
("Tweedy,
Browne" or the "Investment Adviser"), which was founded as Tweedy
& Co. in 1920
and has managed assets since 1968. Tweedy, Browne currently
manages
approximately $3.1 billion in client funds, including
approximately $1 billion
in foreign securities. The current and retired partners and their
families, as
well as employees of Tweedy, Browne, have more than $136 million
in portfolios
combined with or similar to client portfolios, including
approximately $20.5
million in the Global Fund and $19.5 million in the American Fund.
This prospectus sets forth concisely the information about
the Funds that a
prospective investor should know before investing. Please retain
it for future
reference.
If you require more detailed information, a Statement of
Additional
Information dated August 1, 1996 (the "Statement of Additional
Information"), as
amended from time to time, may be obtained without charge by
writing or calling
the address or number above. The Statement of Additional
Information, which is
incorporated by reference into this prospectus, has been filed
with the
Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
This information is designed to help you understand the
various costs and
expenses of investing in the Global Fund and the American Fund. By
reviewing
this table and those in other mutual funds' prospectuses, you can
compare the
Funds' fees and expenses with those of other funds. With the
Funds, you pay no
commissions to purchase or redeem shares. As a result, all of your
investment
goes to work for you.
HOW TO COMPARE THE GLOBAL FUND AND THE AMERICAN FUND TO OTHER
MUTUAL FUNDS
1) SHAREHOLDER TRANSACTION EXPENSES:
Expenses charged directly to your individual account in each
Fund for
various transactions.
<TABLE>
<CAPTION>
GLOBAL
FUND AMERICAN FUND
--------
- --- -------------
<S> <C>
<C>
Sales commissions to purchase shares (sales load)... NONE
NONE
Commissions to reinvest dividends................... NONE
NONE
Redemption fees..................................... NONE
NONE
</TABLE>
2) ANNUAL OPERATING EXPENSES:
Expenses paid by either Fund before it distributes its net
investment
income, expressed as a percentage of the Funds' average daily
net assets.
<TABLE>
<CAPTION>
GLOBAL FUND
AMERICAN FUND
-----------
- -------------
<S> <C>
<C>
Investment advisory fee...................... 1.25%
1.11% *
12b-1 fees................................... NONE
NONE
Other Expenses............................... 0.35%
0.28% *
----
- ----
Total Fund Operating Expenses................ 1.60%
1.39% *
====
====
<FN>
- ---------------
*The purpose of the above table is to assist the investor in
understanding the
various costs and expenses that an investor in the American
Value Fund will
bear directly or indirectly. Without the voluntary fee waiver
the investment
advisory fee would have been 1.25%. Without the voluntary fee
waiver of the
administrator and custodian, other expenses would have been
0.36% and the
Total Fund Operating Expenses would have been 1.61% for the
American Fund.
</TABLE>
- ------------------------------------------------------------------
- --------------
2
<PAGE>
In addition, shareholders pay a $10 charge for redemptions by
bank wire
sent to U.S. banks. "Other expenses" in the table on the preceding
page is based
on the Funds' fiscal year ended March 31, 1996. The Funds'
investment advisory
fees are higher than that charged by most mutual funds. See
"Operation of the
Funds -- Investment Adviser" for further information on both
Funds' investment
advisory fees.
EXAMPLE
Based on the level of total operating expenses listed on the
preceding
page, the total expenses relating to a $1,000 investment in either
Fund,
assuming a 5% annual return and redemption at the end of each
period, are listed
below. Investors do not pay these expenses directly; they are paid
by each Fund
before it distributes its net investment income to shareholders.
<TABLE>
<CAPTION>
GLOBAL AMERICAN
FUND FUND
------ --------
<S> <C> <C>
One Year......................... $ 16 $ 14
Three Years...................... $ 50 $ 44
Five Years....................... $ 87 $ 76
Ten Years........................ $190 $167
</TABLE>
This example assumes reinvestment of all dividends and
distributions and
that the percentage amounts listed under "Annual operating
expenses" remain the
same each year. THIS EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST
OR FUTURE EXPENSES OR RETURNS. ACTUAL EXPENSES AND RETURNS VARY
FROM YEAR TO
YEAR AND MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
- ------------------------------------------------------------------
- --------------
3
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
TWEEDY, BROWNE GLOBAL VALUE FUND
The following information for the fiscal year ended March 31,
1996, has
been audited by Ernst & Young LLP, independent auditors whose
report thereon
appears in the Global Fund's Annual Report dated March 31, 1996.
This
information should be read in conjunction with the financial
statements and
related notes that also appear in the Global Fund's Annual Report.
==================================================================
=======================================
TWEEDY, BROWNE GLOBAL VALUE FUND
(For a Fund share outstanding throughout each year)
==================================================================
=======================================
<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>
- ------------------------------------------------------------------
- --------------
4
<PAGE>
<TABLE>
TWEEDY, BROWNE AMERICAN VALUE FUND
The following information for the fiscal year ended March 31,
1996, has
been audited by Ernst & Young LLP, independent auditors whose
report thereon
appears in the American Fund's Annual Report dated March 31, 1996.
This
information should be read in conjunction with the financial
statements and
related notes that also appear in the American Fund's Annual
Report.
==================================================================
======================================
TWEEDY, BROWNE AMERICAN VALUE FUND
(For a Fund share outstanding throughout each year)
==================================================================
======================================
<CAPTION>
YEAR
Year PERIOD
ENDED
Ended ENDED
3/31/96 (f)
3/31/95 (f) 3/31/94 (a)
-----------
- ----------- -----------
<S> <C>
<C> <C>
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 period $ 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
- ------------------------------------------------------------------
- ---------------------------------------
<FN>
(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.
</TABLE>
- ------------------------------------------------------------------
- -------------
5
<PAGE>
PERFORMANCE OF THE FUNDS
<TABLE>
The following chart illustrates the unaudited total returns
of the Global
Fund and the American Fund for the periods specified.
- ------------------------------------------------------------------
- --------------
<CAPTION>
AVERAGE
ANNUAL VALUE OF $10,000
TWEEDY, BROWNE GLOBAL VALUE FUND TOTAL
RETURN* INVESTED AT INCEPTION
- ------------------------------------------------------------------
- ----------------------------------
<S> <C>
<C>
From inception (6/15/93) to 3/31/96
14.80%** $14,701
- ------------------------------------------------------------------
- ----------------------------------
One year period ended 3/31/96
25.88% --
- ------------------------------------------------------------------
- ----------------------------------
From inception (6/15/93) to 6/30/96
15.13%** $15,349
- ------------------------------------------------------------------
- ----------------------------------
One year period ended 6/30/96
24.52% --
- ------------------------------------------------------------------
- ----------------------------------
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------
- ----------------------------------
From inception (12/8/93) to 3/31/96
17.51%** $14,520
- ------------------------------------------------------------------
- ----------------------------------
One year period ended 3/31/96
34.70%** --
- ------------------------------------------------------------------
- ----------------------------------
From inception (12/8/93) to 6/30/96
17.14%** $14,997
- ------------------------------------------------------------------
- ----------------------------------
One year period ended 6/30/96
25.21%** --
- ------------------------------------------------------------------
- ----------------------------------
<FN>
* See page 23, "Performance Information," for a discussion of
"total return."
These unaudited figures reflect changes in the price of the
shares and assume
that any income dividends and/or capital gains distributions
made by the Fund
during the period were reinvested. 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.
** These figures reflect waiver of fees.
</TABLE>
WHY INVEST IN THE FUNDS?
EXPERIENCED MANAGEMENT. Tweedy, Browne, which was founded in
1920, is a
registered investment adviser and, as of June 30, 1996, manages in
excess of
$3.1 billion, which includes several private investment funds. The
Investment
Adviser is substantially owned by its three general partners,
Christopher H.
Browne, William H. Browne and John D. Spears. In its entire
history, the
Investment Adviser has had only nine principals, three of whom are
currently
active and have been with the Investment Adviser for eighteen to
twenty-seven
years and have been principals working with each other for over
eighteen years.
No general partner has ever left the Investment Adviser to join
another
investment firm.
COMMITMENT OF THE INVESTMENT ADVISER. Tweedy, Browne was
founded as Tweedy
& Co. in 1920 and has extensive experience in selecting
undervalued stocks in
U.S. domestic equity markets. Tweedy, Browne's history is grounded
in
undervalued securities, first as a market maker, then as an
investor and
investment adviser. We do not attempt to be all things to all
people, but
instead pursue a value-oriented approach to investment management
that is based
on the work of the late Benjamin Graham, co-author of the first
textbook on
investment research, Security Analysis (1934), and author of The
Intelligent
Investor (1949). We began investing outside the United States in
1983 by
applying the same principles of value investing we have applied to
U.S.
securities for thirty-six years.
- ------------------------------------------------------------------
- --------------
6
<PAGE>
We strongly believe in the opportunities available to value
investors on
both a global and domestic basis. So much so that we, the general
partners of
Tweedy, Browne, have more than $136 million of our personal and
family funds,
including retired general partners, invested in domestic
portfolios combined
with or similar to our clients' portfolios, including
approximately $18.6
million in the Global Fund and $17.3 million in the American Fund.
We own what
our clients own.
INVESTMENT PRINCIPLES. The investment management principles
practiced by
the Investment Adviser derive from the work of the late Benjamin
Graham,
professor of investments at Columbia Business School and author of
Security
Analysis and The Intelligent Investor. Our research seeks to
appraise the worth
of a company, what Graham called "intrinsic value", by determining
its
acquisition value, or by estimating the collateral value of its
assets and/or
cash flow. The term "intrinsic value" may also be referred to as
private market
value, breakup value or liquidation value. The process is more
closely related
to credit analysis, for as Will Rogers once said, "I'm more
concerned about the
return of my money than the return on my money". Investments are
made at a
significant discount to intrinsic value, normally 40% to 50%,
which Graham
called an investor's "margin of safety". Investments are sold as
the market
price approaches intrinsic value, with the proceeds reinvested in
other
situations offering a greater discount to intrinsic value. These
principles
result in a contrarian approach to investment, forcing the
purchase of
securities in generally declining stock markets, conversely
forcing sales as
stock markets or individual companies achieve new highs.
Most investments in Tweedy, Browne portfolios have one or
more of the
following investment characteristics: low stock price in relation
to book value,
low price to earnings ratio, low price to cash flow, above average
dividend
yield, low price to sales ratio as compared to other companies in
the same
industry, low corporate leverage, low share price, purchases of a
company's own
stock by the company's officers and directors, company share
repurchases, a
stock price which has declined significantly from its previous
high price and/or
small market capitalization. Academic research and studies have
indicated a
historical statistical correlation between each of these
investment
characteristics and above average investment rates of return over
long
measurement periods.
GENERAL PARTNERS OF THE INVESTMENT ADVISER. The following is
a brief
biography of each of the general partners of Tweedy, Browne:
Christopher H. Browne has been with the Investment Adviser
since 1969. He
is a general partner of Tweedy, Browne Company L.P., and of TBK
Partners, L.P.
and Vanderbilt Partners, L.P., both private investment
partnerships. Mr. Browne
is a Trustee of the University of Pennsylvania and sits on the
Executive
Committee of its Investment Board; he is also a member of The
Council of The
Rockefeller University. He also serves as a Director of Tweedy,
Browne Fund
Inc., and the American Atlantic Corporation. Mr. Browne holds a
B.A. degree from
the University of Pennsylvania.
William H. Browne has been with the Investment Adviser since
1978. He is a
general partner of Tweedy, Browne Company L.P., and of TBK
Partners, L.P. and
Vanderbilt Partners, L.P., both private investment partnerships.
Mr. Browne is
on the Board of Directors of Tweedy, Browne Fund Inc. He also
serves as a
Director of Fairchild Aerospace Corp. and Dornier Luftfahrt GmbH.
Additionally,
he is a Trustee of Colgate University. Mr. Browne holds the
degrees of B.A. from
Colgate University and M.B.A. from Trinity College in Dublin,
Ireland.
- ------------------------------------------------------------------
- --------------
7
<PAGE>
John D. Spears joined the Investment Adviser in 1974, and is
a general
partner of Tweedy, Browne Company L.P., TBK Partners, L.P. and
Vanderbilt
Partners, L.P. Previously, he had been in the investment business
for five years
with Berger, Kent Associates; Davic Associates; and Hornblower &
Weeks-Hemphill,
Noyes & Co. Mr. Spears studied at the Babson Institute of Business
Administration, Drexel Institute of Technology and the University
of
Pennsylvania -- The Wharton School.
REDUCING CURRENCY RISK THROUGH CURRENCY HEDGING. Both the
Global Fund's
and the American Fund's share price will tend to reflect the
movements of the
different securities markets in which they are invested and, to
the degree not
hedged, the foreign currencies in which investments are
denominated. Tweedy,
Browne intends to hedge both Funds' foreign securities investments
back to the
U.S. dollar where practicable except when, in its judgment,
currency movements
affecting particular investments are likely to improve the
performance of the
Funds. Possible losses from changes in currency exchange rates are
primarily a
risk of investing unhedged in foreign stocks. While a stock may
perform well on
the London Stock Exchange, if the pound declines against the
dollar, gains can
disappear or become losses. Currency fluctuations are more extreme
than stock
market fluctuations. In the more than thirty-one years in which
the partners of
Tweedy, Browne have been investing, the Standard & Poor's Index of
500 stocks
has declined on an annual basis more than 20% only once, in 1974.
By contrast,
the dollar/pound/deutsche mark relationship has moved more than
20% on numerous
occasions. In the last twenty years, there was a four to five-year
period,
during 1979-1984, when the U.S. dollar value of British, French,
German and
Dutch currency declined by 45% to 58%. Accordingly, the strength
or weakness of
the U.S. dollar against these foreign currencies may account for
part of the
Funds' investment performance although both the Global Fund and
the American Fund
intends to minimize currency risk through hedging activities.
PURSUIT OF LONG-TERM CAPITAL GROWTH. The partners of Tweedy,
Browne
believe that there are substantial opportunities for long-term
capital growth
from professionally managed portfolios of securities selected from
foreign and
domestic equity markets. A security's long-term capital growth
based on a value-
oriented investment approach is generally realized over a three-
year period,
although this period may be significantly shorter or longer
depending on the
circumstances. Investments in the Global Fund will focus on those
markets around
the world where Tweedy, Browne believes value is more abundant.
Investments in
the American Fund will focus on those issues in the U.S. market
that Tweedy,
Browne believes will provide greater value. With both Funds,
Tweedy, Browne will
consider all market capitalization sizes for investment with the
result that a
significant portion of the two portfolios may be invested in
smaller (generally
from $1 million to $500 million) and medium (up to $1 billion)
capitalization
companies. Tweedy, Browne believes smaller and medium
capitalization companies
can provide enhanced long-term investment results in part because
the
possibility of a corporate acquisition may be greater than with
large,
multinational companies.
ASSOCIATED RISK FACTORS. The Funds' investment techniques
involve
potential risks. These include the special economic, currency
exchange and
political risks of investing in non-U.S. securities, unrated and
lower credit
quality debt obligations, smaller capitalization stocks, illiquid
securities and
ancillary portfolio practices such as hedging currency risk, short
sales and
lending of securities. For further information regarding these and
other
investment considerations, please see "Investment Objectives and
Policies --
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Associated Risk Factors" below and "Investment Objectives and
Policies -- Risk
Considerations of the Funds" in the Statement of Additional
Information.
[LOGO Global Fund] GLOBAL FUND
We have formed the Global Fund for investors who would like
to participate
in a diversified fund which seeks undervalued investment
opportunities wherever
they may be in the developed world. Although economies around the
world are
becoming more integrated, local variances in economic and stock
market cycles
can lead to a greater or lesser number of investment opportunities
in different
stock markets at different times. For this reason, the ability to
invest on a
global basis may provide increased opportunities to the value
investor than a
fund which is restricted to one country.
Through the years we have developed an understanding of the
different
reporting and accounting procedures characteristic of non-U.S.
companies and
have acquired financial databases that permit us to screen more
than 10,000
companies in much the same way that we can screen U.S. companies.
The ability to
screen so many non-U.S. companies is the key to our decision to
sponsor the
Global Fund since we are now able to research and analyze many
small and medium
capitalization companies rather than concentrate on the more
obvious large
capitalization multinational corporations.
GLOBAL FUND'S WORLDWIDE OPPORTUNITIES. Investing globally
increases the
number of potential investment opportunities that would meet
Tweedy, Browne's
investment criteria, which are discussed below. Although world
economies are
becoming increasingly integrated, economic conditions in specific
countries can
lead to substantial differences in stock market valuations. Often
the worst
performing economies hold the best equity investment
opportunities. Investing
worldwide affords the Global Fund the ability to invest in equity
securities
wherever the greatest opportunities exist without being
constrained by the
location of the company's headquarters or the trading market for
its shares.
Investing directly in foreign securities is usually
impractical for most
investors because it presents complications and extra costs.
Investors often
find it difficult to arrange purchases and sales, to obtain
current information,
to hold securities in safekeeping and to convert the value of
their investments
from foreign currencies into dollars. The Global Fund manages
these problems for
the investor. With a single investment, the investor has a
diversified worldwide
investment portfolio which is managed actively by experienced
professionals.
[LOGO American Fund] AMERICAN FUND
We have formed the American Fund for investors who would like
to
participate in a diversified fund which seeks undervalued
investment
opportunities in equity securities of U.S. issuers. We believe the
purchase of
undervalued domestic equity securities continues to offer long-
term investors
profitable investment opportunities. We believe that our extensive
investment
experience in the U.S. domestic equity markets, guided by
investment principles
that feature undervalued stock selection and portfolio
diversification, offers
value investors a sensible strategy for long-term profits.
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AMERICAN FUND'S DOMESTIC OPPORTUNITIES. The equity
capitalization of the
United States is the largest in the world, comprising more than
one-third of the
Morgan Stanley Capital International (MSCI) World Index. The
American Fund
offers investors the opportunity to invest in a diversified
portfolio of
primarily domestic, undervalued securities whose market price may
be well below
the stock's intrinsic value.
There are significant costs associated with individual
investors
successfully purchasing and profitably maintaining a large
portfolio of stocks:
high transaction costs, inability to access the latest company
specific news and
lack of sophisticated research data, to name a few. The American
Fund manages
these problems for investors by pooling their resources with other
investors in
a diversified portfolio of domestic equity securities managed
actively by
experienced professionals. Moreover, an investment in the American
Fund will
enable investors to access the sophisticated investment advisory
resources of
Tweedy, Browne, with seventy-six years of investment know-how in
U.S. equity
domestic markets.
The American Fund is designed for long-term value investors
who desire to
limit their exposure to foreign markets. The American Fund's
portfolio consists
of many of the same securities which are owned by the separate
accounts and
private investment funds managed by the general partners of
Tweedy, Browne,
including those in which they participate.
As with any long-term investment, the value of the Funds'
shares when sold
may be higher or lower than when purchased. Investment in shares
of either Fund
should not be considered a complete investment program, which for
many investors
may include cash and fixed income investments. In this context, it
is Tweedy,
Browne's objective to generally have each Fund's assets primarily
or fully
invested in equities believed by Tweedy, Browne to be undervalued.
INVESTMENT OBJECTIVES AND POLICIES
Except as otherwise indicated, the Funds' investment
objectives and
policies are not fundamental and thus may be changed without
shareholder votes.
Shareholders will receive at least 30 days' prior written notice
of any changes
in the Funds' investment objectives. If there is a change in
investment
objective, shareholders should consider whether investment in
either Fund
remains appropriate in light of their then current financial
position and needs.
There can be no assurance that the Funds' respective investment
objectives will
be achieved. See "Purchasing, Redeeming and Exchanging Shares."
[LOGO Global Fund] GLOBAL FUND
THE GLOBAL FUND. The Global Fund seeks long-term growth of
capital by
investing throughout the world in a diversified portfolio
consisting primarily
of marketable equity securities, including common stocks,
preferred stocks and
securities representing the right to acquire stocks. The Global
Fund may also
invest in debt securities, although income is an incidental
consideration. The
Global Fund expects to invest primarily in foreign securities
although
investments in U.S. securities are permitted and will be made when
opportunities
in U.S. markets appear more attractive.
The Global Fund invests in companies of varying sizes that
the Fund's
Investment Adviser believes are selling at substantial discounts
to the
underlying value of the assets, earning power or private market
value. It is
expected that investments will be spread broadly around the world.
The Global
Fund will be invested
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10
<PAGE>
under normal circumstances in securities of at least three
countries, one of
which may be the United States. The Global Fund may be invested
100% in non-U.S.
issues, and for temporary defensive purposes may be invested 100%
in U.S.
issues, although under normal circumstances it is expected that
the Fund's
portfolio will consist primarily of foreign investments.
[LOGO American Fund] AMERICAN FUND
THE AMERICAN FUND. The American Fund seeks long-term growth
of capital by
investing in a diversified portfolio of U.S. equity securities
consisting
primarily of common stocks, preferred stocks and securities
representing the
right to acquire stocks. The American Fund expects to invest
primarily in
domestic equity securities although it may invest up to 20% of its
assets in
foreign securities when opportunities in foreign markets appear
attractive. The
American Fund may also invest in debt securities, although income
is an
incidental consideration.
The American Fund invests in domestic companies of varying
sizes that the
Fund's Investment Adviser believes are selling at a substantial
discount to the
underlying value of the assets, earning power or private market
value. It is
expected that investments will be spread broadly throughout U.S.
equity markets.
OTHER INVESTMENTS. The Global Fund and the American Fund
generally invest
in equity securities of established companies (i.e., companies
with at least
three years' business operations) listed on U.S. or foreign
securities
exchanges, but also may invest in securities traded over-the-
counter or
privately. Equity securities include common stock, preferred
stock, securities
representing the right to acquire stock (such as convertible
debentures, options
and warrants) and depository receipts for any of the above.
Depository receipts
are utilized to make investing in a particular foreign security
more convenient
for U.S. investors. Depository receipts that are not sponsored by
the issuer may
be less liquid and there may be less readily available public
information about
the issuer.
Both the Global Fund and the American Fund may also invest in
non-convertible debt instruments of governments, government
agencies,
supranational agencies and companies when the Investment Adviser
believes the
potential for appreciation will equal or exceed the total return
available from
investments in equity securities. These debt instruments will be
predominantly
investment-grade securities, that is, those rated Aaa, Aa, A or
Baa by Moody's
Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB by
Standard & Poor's
Ratings Group ("S&P") or those of equivalent quality as determined
by the
Investment Adviser. Each Fund may not invest more than 15% of its
total assets
in debt securities rated below Baa by Moody's, or below BBB by S&P
or deemed by
the Investment Adviser to be of comparable quality. Each Fund may
invest in
securities which are rated as low as C by Moody's or D by S&P at
the time of
purchase. Securities rated D may be in default with respect to
payment of
principal or interest. Securities rated below BBB or Baa are
typically referred
to as "junk bonds" and have speculative characteristics.
Each Fund may also invest without limitation in fixed income
obligations
including cash equivalents (such as bankers' acceptances,
certificates of
deposit, commercial paper, short-term government and corporate
obligations and
repurchase agreements) for temporary defensive purposes when the
Investment
Adviser believes market conditions so warrant and for liquidity.
The Funds may
also engage in strategic transactions as described below for
hedging purposes
and to seek to increase gain.
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11
<PAGE>
For further information regarding these investments, see
"Associated Risk
Factors" below and the Statement of Additional Information.
OTHER PORTFOLIO TRANSACTIONS
As a means of earning income for periods as short as
overnight, both the
Global Fund and the American Fund may enter into repurchase
agreements with
selected banks and broker/dealers. Under a repurchase agreement,
the Funds
acquire securities, subject to the seller's agreement to
repurchase at a
specified time and price. Each Fund does not expect to utilize
repurchase
agreements with respect to more than 5% of its assets except for
short-term
investment of excess cash. The Funds may also sell securities
short or lend
portfolio securities to dealers or others with respect to up to
25% of its
assets and may buy securities on a when-issued basis and enter
into delayed
delivery and forward commitment transactions.
STRATEGIC TRANSACTIONS
The Global Fund and the American Fund may but are not
required to utilize
various other investment strategies as described below. Such
strategies are
generally accepted as modern portfolio management techniques and
are regularly
utilized by many mutual funds and other institutional investors.
Techniques and
instruments may change over time as new instruments and strategies
are developed
or regulatory changes occur.
In the course of pursuing these investment strategies, each
Fund may
purchase and sell exchange-listed and over-the-counter put and
call options on
securities, equity and fixed-income indices and other financial
instruments,
purchase and sell financial futures contracts and options thereon,
enter into
various interest rate transactions such as swaps, caps, floors or
collars, and
enter into various currency transactions such as currency forward
contracts,
currency futures contracts, currency swaps or options on
currencies or currency
futures (collectively, all the above are called "Strategic
Transactions").
Strategic Transactions may be used to attempt to protect
against possible
changes in the market value of securities held in or to be
purchased for the
Funds' portfolios resulting from securities markets or currency
exchange rate
fluctuations, to protect the Funds' unrealized gains in the value
of its
portfolio securities, to facilitate the sale of such securities
for investment
purposes, to manage the effective maturity or duration of the
Funds' portfolios,
or to establish a position in the derivatives markets as a
temporary substitute
for purchasing or selling particular securities. Some Strategic
Transactions may
also be used for speculation to enhance potential gain although no
more than 5%
of each Fund's assets will be committed to Strategic Transactions
entered into
for non-hedging purposes involving speculation. See "Investment
Objectives and
Policies -- Risk Considerations of the Funds" in the Statement of
Additional
Information. Any or all of these investment techniques may be used
at any time
and there is no particular strategy that dictates the use of one
technique
rather than another, as use of any Strategic Transaction is a
function of
numerous variables including market conditions. The ability of the
Funds to
utilize these Strategic Transactions successfully will depend on
the Investment
Adviser's ability to predict pertinent market movements, which
cannot be
assured. Each Fund will comply with applicable regulatory
requirements when it
implements these strategies, techniques and instruments. Strategic
Transactions
involving financial futures and options thereon will be purchased,
sold or
entered into only for bona fide hedging, risk management or
portfolio management
purposes and not for speculative purposes.
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12
<PAGE>
BORROWING
The Global Fund and the American Fund each may borrow up to
one-third of
its total assets (after giving effect to the borrowing) from banks
for use in
connection with Strategic Transactions, as a temporary measure for
extraordinary
or emergency purposes, in connection with clearance of
transactions or to pay
for redemptions. Except when borrowing in connection with
Strategic
Transactions, a Fund will not purchase any security when any
borrowings are
outstanding. The Funds' borrowings in connection with Strategic
Transactions
will be limited to the purchase of liquid high grade securities to
post as
collateral or satisfy segregation requirements with respect to
such
transactions. The Funds do not enter into any of such borrowings
for the purpose
of earning incremental returns in excess of its borrowing costs
from investments
made with such funds.
INVESTMENT RESTRICTIONS
The Global Fund and the American Fund have separately adopted
certain
fundamental policies which may not be changed without shareholder
approval and
which are designed to maintain both Funds' diversity and reduce
investment risk.
In this regard, neither Fund may invest more than 25% of its
assets in
securities of companies in the same industry; make loans except
through the
purchase of fixed income obligations, the lending of portfolio
securities or
through repurchase agreements; borrow money except to obtain
liquid high grade
collateral for use in hedging and other Strategic Transactions or
as a temporary
measure for extraordinary or emergency purposes; or, and with
respect to 75% of
its assets, purchase more than 10% of any issuer's outstanding
voting securities
or invest more than 5% of its assets in any one issuer, except in
each case
those of the U.S. Government, its agencies or instrumentalities
and those of
other investment companies.
In addition, the Board of Directors has adopted the following
policy (among
others) which may be changed without a shareholder vote: neither
Fund may invest
more than 15% of its net assets in securities which are not
readily marketable.
These include securities subject to contractual or legal resale
restrictions in
their primary trading market (such as OTC options, including
floors, caps,
collars and swaps, securities of private companies and longer-term
repurchase
agreements). In connection with selling its shares in certain
states, each Fund
may restrict such investments to 10% of its net assets.
ASSOCIATED RISK FACTORS
The Global Fund's and the American Fund's risks are
determined by the
nature of the securities each holds and the portfolio management
strategy for
each used by Tweedy, Browne. The following are descriptions of
certain risks
related to the investment policies and techniques that the Funds
are permitted
to use from time to time.
Foreign Securities. Investing in foreign securities involves
economic and
political considerations not typically found in U.S. markets.
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
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13
<PAGE>
provisions (including withholding on dividends paid to each Fund),
war,
expropriation, political and social instability and diplomatic
developments.
These considerations generally are more of a concern in
developing
countries, inasmuch as their economic systems are generally
smaller and less
diverse and mature and their political systems less stable than
those in
developed countries. The Funds seek to mitigate the risks
associated with these
considerations through diversification and active professional
management.
Debt Obligations. Ratings of debt securities generally are
intended to
reflect the rating agency's analysis of the strength of the issuer
and the
likelihood of timely payment of principal and interest. Because
the Funds may
invest in lower rated securities (those rated below Baa by Moody's
or below BBB
by S&P) or non-rated securities, both Funds bear greater risk of
loss of the
purchase price as a result of bankruptcy, default or
reorganization of the
issuer than funds that own higher rated debt securities, and both
Funds are more
dependent upon the Investment Adviser's evaluations of the
security and the
issuer. The market values of lower quality debt securities tend to
be less
sensitive to changes in prevailing interest rates and more
sensitive to
individual corporate developments and economic conditions than
higher rated
securities. The secondary market for lower rated securities is
generally not as
liquid as that for higher rated securities, which may adversely
affect the
Funds' liquidity or net asset valuation process. The lower the
quality of such
debt securities, the greater their risks render them like equity
securities.
Zero coupon securities (which do not make periodic interest
payments in
cash) are subject to greater market value fluctuations from
changing interest
rates than debt obligations of comparable maturities which make
current cash
distributions of interest. Structured securities, particularly
mortgage backed
securities, are usually subject to some degree of prepayment risk
which can vary
significantly with various economic and market factors. Depending
on the nature
of the structured security purchased, a change in the rate of
prepayments can
have the effect of enhancing or reducing the yields to a Fund from
such
investment and expose the Fund to the risk that any reinvestment
will be at a
lower yield.
Strategic Transactions. Strategic Transactions have risks
associated with
them including possible default by the other party to the
transaction,
illiquidity and, to the extent the Investment Adviser's view as to
certain
market movements is incorrect, the risk that the use of such
Strategic
Transactions could result in losses greater than if they had not
been used. Use
of put and call options may result in losses to the Funds, force
the sale or
purchase of portfolio securities at inopportune times or for
prices higher than
(in the case of put options) or lower than (in the case of call
options) current
market values, limit the amount of appreciation each Fund can
realize on its
investments or cause a Fund to hold securities it might otherwise
sell. The use
of currency transactions can result in the Funds' incurring losses
as a result
of a number of factors including the imposition of exchange
controls, suspension
of settlements, or the inability to deliver or receive a specified
currency. The
use of options and futures transactions entails certain other
risks. In
particular, the variable degree of correlation between price
movements of
futures contracts and price movements in the related portfolio
position of a
Fund creates the possibility that losses on the hedging instrument
may be
greater than gains in the value of the Fund's position. In
addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in
certain markets, a
Fund might not be able to close out a transaction without
incurring substantial
losses, if at all. Although the use of futures and options
transactions for
hedging should tend to minimize the risk of loss due to a decline
in the value
of the hedged position, at the same time they tend to
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14
<PAGE>
limit any potential gain which might result from an increase in
value of such
position. The daily variation margin requirements for futures
contracts would
create a greater ongoing potential financial risk than would
purchases of
options, where the exposure is limited to the cost of the initial
premium. The
Funds' borrowings to obtain high grade liquid securities for
segregation and
margin purposes expose the Funds to net yield, principal value
and/or currency
exchange rate risks on such securities in addition to the risks of
the related
Strategic Transactions. Losses resulting from the use of Strategic
Transactions
would reduce net asset value, and possibly income, and such losses
can be
greater than if the Strategic Transactions had not been utilized.
Small Capitalization Companies. The equity securities of
small
capitalization companies often exhibit more volatile trading
patterns than
securities of larger companies. Often they are less established
companies and
may have a more highly leveraged capital structure, less
experienced management,
greater dependence on a few customers and similar factors that
make their
performance susceptible to greater fluctuation.
Illiquid Securities. Disposition of illiquid securities
often takes more
time than for more liquid securities, may result in higher selling
expenses and
may not be able to be made at desirable prices or at the prices at
which such
securities have been valued by the Fund.
Other Portfolio Transactions. If the seller under a
repurchase agreement
becomes insolvent, the Fund's right to dispose of the securities
may be
restricted or delayed. Lending of securities can result in a
failure to deliver
the original securities by the borrower, and similar risks with
respect to
disposition of collateral. When issued and delayed delivery
securities
transactions and forward commitments involve potential loss to the
Funds if the
counterparty fails to perform. If one of the Funds sells
securities short, the
Fund will incur a loss if the security does not decrease in value
by more than
the cost of maintaining the short position. The Funds may invest
without limit
in securities of issuers in which the Investment Adviser and its
affiliates have
interests.
Redemptions-in-Kind. The Funds are authorized to pay for
redemptions
in-kind on redemptions in excess of $250,000 by any one
shareholder in any three-
month period. A shareholder receiving securities upon redemption
will incur
additional expenses in disposing of such securities.
Further Information. Various investment policies and
techniques that one
or both of the Funds intend to use and some of their risks are
described more
fully in the Statement of Additional Information.
OPERATION OF THE FUNDS
STRUCTURE OF THE FUNDS
Both the Global Fund and the American Fund are diversified
series of
Tweedy, Browne Fund Inc. (the "Corporation"), an open-end
management investment
company registered under the Investment Company Act of 1940. The
Corporation was
organized as a Maryland corporation on January 28, 1993.
The Corporation's activities are supervised by its Board of
Directors.
Shareholders have one vote for each share held on matters on which
they are
entitled to vote. The Corporation is not required to and has no
current
intention of holding annual shareholder meetings, although special
meetings may
be called for purposes such as electing or removing Directors, or
changing
fundamental investment policies. Shareholders
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15
<PAGE>
will be assisted in communicating with other shareholders in
connection with
removing a Director as if Section 16(c) of the Investment Company
Act of 1940
were applicable.
INVESTMENT ADVISER
The Corporation, on behalf of both Funds, retains Tweedy,
Browne to manage
each of the Fund's daily investment and business affairs subject
to the policies
established by the Board of Directors. Tweedy, Browne is owned
substantially and
controlled by its general partners, who are Christopher H. Browne,
William H.
Browne and John D. Spears.
The general partners together manage the day-to-day
operations of the Funds
and make all the investment decisions. The general partners'
management
discussion and analysis, and additional performance information
regarding the
Funds during the fiscal year ended March 31, 1996 is included in
the Annual
Report for each Fund.
Tweedy, Browne is entitled to receive an investment advisory
fee for the
Global Fund equal to 1.25% of average daily net assets on an
annual basis. The
fee is payable monthly, provided the Global Fund makes such
interim payments as
may be requested by the Investment Adviser not to exceed 75% of
the amount of
the fee then accrued on the books of the Global Fund and unpaid.
The fee is
higher than that charged to most mutual funds. For the fiscal year
ended March
31, 1996, the Global Fund paid advisory fees equal to 1.25% of the
value of its
average daily net assets.
Tweedy, Browne is entitled to receive an investment advisory
fee for the
American Fund equal to 1.25% of the average daily net assets on an
annual basis.
The fee is payable monthly, provided the American Fund makes such
interim
payments as may be requested by the Investment Adviser not to
exceed 75% of the
amount of the fee then accrued on the books of the American Fund
and unpaid. The
fee is higher than that charged to most mutual funds. For the
fiscal year ended
March 31, 1996, the American Fund paid advisory fees equal to
1.11% of the value
of its average daily net assets after voluntary waiver by the
Investment Adviser
of $192,301.
In addition to the fees of the Investment Adviser, each Fund
is responsible
for the payment of all its other expenses incurred in the
operation of the Fund,
which include, among other things, expenses for legal and
independent auditor's
services, costs of printing all materials sent to shareholders,
charges of its
custodian, transfer agent and dividend paying agent and any other
persons hired
by the Fund, securities registration fees, fees and expenses of
unaffiliated
directors, accounting and printing costs for reports and similar
materials sent
to shareholders, membership fees in trade organizations, fidelity
bond and
liability coverage for the Corporation's directors, officers and
employees,
interest, brokerage and other trading costs, taxes, expenses of
qualifying the
Fund for sale in various jurisdictions, expenses of personnel
performing
shareholder servicing functions, litigation and other
extraordinary or
nonrecurring expenses and other expenses properly payable by the
Funds.
The Investment Adviser is located at 52 Vanderbilt Avenue,
New York, New
York 10017.
ADMINISTRATOR
First Data Investor Services Group, Inc. (the
"Administrator") is
responsible for providing administrative services to the Global
Fund for a fee
equal to .20% of average daily net assets on an annual basis
(subject
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16
<PAGE>
to certain minimum fee levels and fee caps for services by the
Administrator and
the Custodian) and may engage a third party to provide all or a
portion of such
services at a cost to the Global Fund not in excess of such fee.
These fees
decline to as low as .12% of average daily net assets on an annual
basis on
average assets over $500 million.
The Administrator is responsible for providing administrative
services to
the American Fund for a fee equal to 0.16% of average daily net
assets on an
annual basis (subject to certain minimum fee levels and fee caps
for services by
the Administrator and the Custodian) and may engage a third party
to provide all
or a portion of such services at a cost to the American Fund not
in excess of
such fee. These fees decline to as low as 0.10% of average daily
net assets on
an annual basis on average assets over $500 million.
TRANSFER AGENT AND CUSTODIAN
Unified Advisers, Inc., 429 N. Pennsylvania Street, P.O. Box
6110,
Indianapolis, Indiana 46206-6110, is the Funds' transfer,
shareholder servicing
and dividend paying agent. Boston Safe Deposit and Trust Company
is the Funds'
custodian.
UNDERWRITER
Tweedy, Browne, which is also a registered broker-dealer, is
the Funds'
principal underwriter.
TAXATION
The Global Fund and the American Fund each qualified in their
last taxable
year and intend to qualify in future years as regulated investment
companies
under Subchapter M of the Internal Revenue Code of 1986, as
amended (the
"Code"). As a result, the Funds generally will not be liable for
U.S. federal
income or excise taxes with respect to net investment income and
net capital
gains that have been distributed to shareholders. The Funds could
be subject to
U.S. federal income tax on a portion of their income if they
invest in passive
foreign investment companies. See the Statement of Additional
Information for
more information regarding U.S. federal income tax consequences.
Investors are
urged to consult with their tax advisors concerning the tax
consequences of an
investment in the Funds.
ADDITIONAL INFORMATION
NO-LOAD FUNDS. The Funds are true no-load funds. There are
no commissions
or fees for purchasing or redeeming shares, and no "12b-1" fees
which many funds
charge to support their marketing efforts. The minimum investment
is $2,500 for
individual accounts and $500 for IRAs and similar accounts.
Subsequent
investments must be a minimum of $250.
DIVIDEND REINVESTMENT PLAN. Dividends and distributions are
automatically
reinvested in additional shares unless shareholders request
otherwise in
writing.
SHAREHOLDER STATEMENTS. You will receive a detailed account
statement
every time you purchase or redeem shares of either Fund. All of
your statements
should be retained to help you keep track of account activity and
the cost of
shares for tax purposes.
SHAREHOLDER REPORTS. In addition to account statements, you
will receive
periodic shareholder reports highlighting relevant information,
including
investment results and a review of portfolio changes.
- ------------------------------------------------------------------
- --------------
17
<PAGE>
To reduce the volume of mail you receive, only one copy of
each report will
be mailed to your household (same surname, same address). Please
call
shareholder services at 1-800-873-8242 if you wish to receive
additional
shareholder reports.
CHANGE OF ADDRESS. All address changes must be submitted in
writing and
sent by mail to shareholder services c/o Unified Advisers, Inc.,
429 North
Pennsylvania Street, P.O. Box 6110, Indianapolis, Indiana 46206-
6110.
PURCHASING, REDEEMING AND EXCHANGING SHARES
PURCHASING SHARES
If you would like assistance in purchasing shares of either
the Global Fund
or the American Fund or in providing us with the appropriate
information, please
feel free to call shareholder services at 1-800-873-8242 and we
will be happy to
assist you.
Purchases are executed at the net asset value per share next
calculated
after the Funds' transfer agent receives the purchase request in
good order. A
purchase request will not be considered in good order unless it is
accompanied
or preceded by a completed and signed application and a check or
guaranteed
payment procedures acceptable to Tweedy, Browne. Purchases are
made in full and
fractional shares. (See "Share Price" below.)
BY CHECK. If you purchase shares of either Fund with a check
that does not
clear, your purchase will be cancelled and you will be subject to
any losses or
fees incurred in the transaction. Checks must be drawn on or
payable through a
U.S. bank or savings institution. If you purchase shares by check
and redeem
them by letter within seven business days of purchase, either Fund
may hold
redemption proceeds until the purchase check has cleared, which
may take up to
seven business days. If you purchase shares by federal wire, you
may avoid this
delay. Redemption requests by telephone or fax prior to the
expiration of the
seven-day period will not be accepted.
BY THE AUTOMATED CLEARING HOUSE ("ACH"). You may use ACH to
purchase
additional shares. ACH is the electronic transfer of money
directly from your
bank account to either Fund or vice versa. If you want to use the
ACH service,
complete the Systematic Purchase and Redemption Form and allow at
least two
weeks for preparation before using ACH. Monies sent via ACH take
approximately
two business days to reach your bank. Your bank may charge you a
check clearing
fee. When you are ready to make a purchase, call the Funds'
transfer agent.
BY WIRE. To open a new account by wire, first call
shareholder services at
1-800-873-8242 to obtain information with regard to procedures for
faxing a
completed and signed application. A representative will call you
back with an
account number. Accounts cannot be opened without a completed,
signed
application form. Contact your bank to arrange a wire transfer to
the transfer
agent.
- ------------------------------------------------------------------
- --------------
18
<PAGE>
Give your bank:
-- the name and number of the bank account from which
you wish to send
funds,
-- the amount you wish to send, and
-- the name(s) of the account holder(s) exactly as will
appear on your
application,
-- the following instructions:
-- For Global Fund
Boston Safe Deposit & Trust Co.
Boston, MA
Account of Tweedy, Browne Global Value Fund
Account #16-219-1
ABA # 011001234
-- For American Fund
Boston Safe Deposit & Trust Co.
Boston, MA
Account of Tweedy, Browne American Value Fund
Account #16-523-9
ABA #011001234
For further credit to [give the name(s) you want for your
Fund's account
and the account numbers provided to you].
The account will be established at the net asset value per
share next
calculated after the wire transfer is made. You will not be able
to redeem your
shares, however, until your application is received in good order.
You may also make additional investments of $250 or more to
your existing
account by following the same procedures.
SUBSEQUENT PURCHASES BY TELEPHONE ORDER. If you are already
a shareholder,
you may purchase shares of either Fund at a certain day's price by
calling
shareholder services at 1-800-873-8242 before the regular close of
the New York
Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on
that day.
Orders must be for $250 or more and cannot be for an amount
greater than four
times the value of your account at the time the order is placed.
You must
include with your payment the order number given to you at the
time the order is
placed. A confirmation with complete purchase information is sent
shortly after
your payment is received. If payment by check or wire is not
received within
three business days, the order will be cancelled and you will be
responsible for
any loss to the Funds resulting from this cancellation.
REDEEMING SHARES
Both the Global Fund and the American Fund allow you to
redeem shares
(i.e., sell them back to the Funds) without redemption fees or
deferred sales
charges of any kind. Redemptions are made at net asset value per
share next
calculated after a redemption request in good order is received by
the Funds'
transfer agent.
BY TELEPHONE. This is the quickest and easiest way to sell
either Funds'
shares. If you elected telephone redemption on your application,
you can call to
request that federal wire be sent to your
- ------------------------------------------------------------------
- --------------
19
<PAGE>
authorized bank account or request the proceeds to be transferred
by ACH. ACH
takes two business days to settle at your bank. (See page 18 for
additional
details with respect to ACH procedures.) The Funds and the
transfer agent will
not be liable for following telephone instructions reasonably
believed to be
genuine. In this regard, the Funds and the transfer agent require
personal
identification information before accepting a telephone
redemption. If the Funds
or the transfer agent fail to use reasonable procedures, the Funds
might be
liable for losses due to fraudulent instructions.
Redemption proceeds will be wired to your bank. Any other
payment
instructions may not be accepted over the telephone; they must be
submitted in
writing. If your bank cannot receive federal wires, redemptions
will be mailed
to your bank. There will be a $10 charge for all wire redemptions
sent to U.S.
banks.
If you open an account by wire, you cannot redeem shares by
telephone until
the Funds' transfer agent has received your completed and signed
application.
In the event that you are unable to reach either Fund by
telephone, you
should write to both Funds c/o Unified Advisers Inc., P.O. Box
6110,
Indianapolis, Indiana 46206-6110.
BY MAIL OR FAX. A shareholder may redeem shares by mailing a
written
request to Tweedy, Browne Fund Inc., c/o Unified Advisers, Inc.,
P.O. Box 6110,
Indianapolis, Indiana 46206-6110. Written requests must state the
shareholder's
name, the name of the Fund, the account number and the shares or
dollar amount
to be redeemed and be signed exactly as the shares are registered.
Shareholders
requesting a redemption of $5,000 or more, or a redemption of any
amount payable
to a person other than the shareholder of record, or to be sent to
an address
other than that on record with the Fund, must have all signatures
guaranteed.
(The Corporation on behalf of both Funds reserves the right,
however, to require
a signature guarantee for all redemptions.) You can obtain a
signature guarantee
from most banks, credit unions or savings associations, or from
broker/dealers,
municipal securities broker/dealers, government securities
broker/dealers,
national securities exchanges, registered securities associations,
or clearing
agencies deemed eligible by the Securities and Exchange
Commission. Signature
guarantees by a notary public are not acceptable. Redemption
requirements for
corporations, other organizations, trusts, fiduciaries, agents,
institutional
investors and retirement plans may be different from those for
regular accounts.
For more information, please call shareholder services at 1-800-
873-8242.
EXCHANGING SHARES
Shares held in either the Global Fund or the American Fund
which have been
registered in a shareholder's name for at least 5 days may be
exchanged for
shares of the other Fund in any state where such exchange may
legally be made.
Exchanges of shares between Funds are made at net asset value per
share
calculated after an exchange request in good order is received by
the Funds'
transfer agent. If any portion of the shares requested to be
exchanged between
Funds represents an investment made by personal check for which
collection of
payment has not yet been received, the transfer agent and the
Funds reserve the
right not to honor the exchange until collection of payment is
reasonably
satisfied, which could take up to 15 days or more. A shareholder
who anticipates
the need for more immediate access to his or her investment should
purchase
shares by federal wires or by certified or cashier's check. The
exchange
privilege may be modified or terminated at any time subject to
shareholder
notification. The Funds reserve the right to limit the number of
times an
investor may exercise the exchange privilege.
- ------------------------------------------------------------------
- --------------
20
<PAGE>
BY TELEPHONE. If you elected telephone exchange on your
application, you
can call to request that an exchange of shares between the Funds
be made on your
behalf. To exchange shares by telephone, you must contact the
transfer agent.
The transfer agent will not be liable for following telephone
instructions
reasonably believed to be genuine. In this regard, the transfer
agent requires
personal identification information before accepting a telephone
exchange. If
the Funds or the transfer agent fail to use reasonable procedures,
the Funds
might be liable for losses due to fraudulent instructions.
BY MAIL OR FAX. If you did not elect telephone exchange on
your
application, you can exchange shares by mail or fax by sending a
letter to the
transfer agent with the appropriate account information. For your
protection and
to prevent fraudulent exchanges, on written exchange requests in
excess of
$5,000 from one registered shareholder to a different registered
shareholder, we
require a signature and a signature guarantee for each person in
whose name the
account is registered. (The Corporation on behalf of both Funds
reserves the
right, however, to require a signature guarantee for all
exchanges.)
Institutions granting signature guarantees for purposes of
redemption can also
perform the same function for exchanges of shares. Signature
guarantees by
notaries public are not acceptable. Exchange requirements for
corporations,
other organizations, trusts, fiduciaries, agents, institutional
investors and
retirement plans may be different from those for regular accounts.
For more
information, please call shareholder services at 1-800-873-8242.
SHARE PRICE
Purchases and redemptions, including exchanges, are made at
net asset
value. The Funds' Administrator determines net asset value per
share as of the
close of regular trading on the Exchange, normally 4 p.m. eastern
time, on each
day the Exchange is open for trading. Net asset value per share is
calculated by
dividing the current market value of total assets, less all
liabilities, by the
total number of shares outstanding. The Funds will normally send
your redemption
proceeds within one business day following the redemption request,
but may take
up to seven days (or within 15 days in the case of shares recently
purchased by
check).
SHORT-TERM TRADING
Purchases and sales should be made for long-term investment
purposes only.
The Corporation, on behalf of both Funds, and the distributor each
reserve the
right to restrict purchases of either Funds' shares when a pattern
of frequent
purchases and sales made in response to short-term fluctuations in
either Funds'
share price appears evident.
TAX INFORMATION
A redemption of shares of either Fund is a sale of shares and
may result in
a gain or loss for income tax purposes. An exchange of shares
between Funds
pursuant to the exchange privilege is treated as a sale for
Federal income tax
purposes and, depending upon the circumstances, a capital gain or
loss may be
realized. Any loss realized on a sale of shares of either Fund
will be
disallowed to the extent that shares disposed of are replaced
within a 61-day
period beginning 30 days before and ending 30 days after the
disposition of the
Shares.
Be sure to complete the Tax Identification Number section in
each Fund's
application when you open an account. Federal tax law requires the
Funds to
withhold 31% of taxable dividends, capital gains distributions and
redemption
and exchange proceeds from accounts (other than those of certain
exempt payees)
without a Social Security or tax identification number and certain
other
certified information or upon notification from the IRS or a
broker that
withholding is required. Both Funds' reserve the right,
- ------------------------------------------------------------------
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21
<PAGE>
following 30 days' notice to shareholders, to redeem all shares in
accounts
without a Social Security or tax identification number. A
shareholder may avoid
involuntary redemption by providing the Funds with a tax
identification number
during the 30-day notice period.
MINIMUM BALANCES
Shareholders should maintain a share account balance worth at
least $2,500
($500 for retirement plans), which amount may be changed by the
Directors. Both
Funds reserve the right, following 30 days' written notice to
shareholders, to
redeem all shares in sub-minimum accounts, including accounts of
new investors,
where a reduction in value has occurred due to a redemption out of
the account.
Reductions in value that result solely from market activity will
not trigger an
involuntary redemption. Each Fund will mail the proceeds of its
redeemed account
to the shareholder. The shareholders may restore their account
balance to the
requisite amount or more during the 30-day notice period and must
maintain it at
no lower than that minimum to avoid involuntary redemption.
THIRD PARTY TRANSACTIONS
If purchases and redemptions of either Fund's shares are
arranged and
settlement is made at an investor's election through a member of
the National
Association of Securities Dealers, Inc., other than the
distributor, that member
may, at its discretion, charge a fee for that service.
REDEMPTIONS-IN-KIND
The Corporation on behalf of both Funds reserves the right,
if conditions
exist which make cash payments undesirable, to honor any request
for redemption
in excess of $250,000 by making payment in whole or in part
in readily marketable securities chosen by the Funds and valued as
they are for
purposes of computing the Funds' net asset value (a redemption-in-
kind). If
payment is made in securities, a shareholder may incur transaction
expenses in
converting these securities to cash.
DISTRIBUTIONS
Each Fund intends to distribute dividends from net investment
income and
any net realized capital gains after utilization of capital loss
carryforwards,
if any, annually in December to prevent application of a federal
excise tax. Any
dividends or capital gains distributions declared in October,
November or
December with a record date in such a month and paid during the
following
January will be treated by shareholders for federal income tax
purposes as if
received on December 31 of the calendar year declared.
Distributions will be
reinvested in additional shares of each Fund unless an investor
elects to
receive distributions in cash. If an investment is in the form of
a retirement
plan, all dividends and capital gains distributions must be
reinvested into the
shareholder's account.
TAX INFORMATION
Generally, dividends from net investment income of the Funds
are taxable to
shareholders as ordinary income. The Funds will seek to maximize
gains which
qualify for long-term capital gains treatment. Long-term capital
gains
distributions, if any, are taxable as long-term capital gains
regardless of the
length of time shareholders have owned their shares. Short-term
capital gains
and any other taxable income distributions are taxable as ordinary
income. A
portion of dividends from net investment income may qualify for
the
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22
<PAGE>
dividends-received deduction for corporations. Shareholders may be
able to claim
a credit or reduction on their income tax returns for their pro
rata portions of
qualified taxes paid by the Funds to foreign countries.
Both Funds will send to its shareholders detailed tax
information about the
amount and type of its distributions made during each calendar
year. Information
regarding any foreign income tax payments or credits will also be
provided.
PERFORMANCE INFORMATION
From time to time, quotations of each Fund's performance may
be included in
advertisements, sales literature or shareholder reports. All
performance figures
are historical, show the performance of a hypothetical investment
and are not
intended to indicate future performance. "Total return" is the
change in value
of an investment in a Fund for a specified period. "Average annual
total return"
refers to the average annual compound rate of return of an
investment in a Fund
assuming that the investment has been held for the indicated
period as of a
stated ending date or for the life of the Fund to the extent it
has not been in
existence for any such periods. "Cumulative total return"
represents the
cumulative change in value of an investment in a Fund for various
periods. These
calculations assume that dividends and capital gains distributions
were
reinvested. "Capital change" measures return from capital,
including
reinvestment of any capital gains distributions but not
reinvestment of
dividends. Performance will vary based upon, among other things,
changes in
market conditions and the level of the Funds' expenses.
- ------------------------------------------------------------------
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23
<PAGE>
CONTENTS
PAGE
----
Expense Information .................... 2
Financial Highlights ................... 4
Performance of the Funds ............... 6
Why Invest in the Funds? ............... 6
Global Fund ............................ 9
American Fund .......................... 9
Investment Objectives and Policies ..... 10
Operation of the Funds ................. 15
Additional Information ................. 17
Purchasing, Redeeming, and Exchanging
Shares ............................... 18
Distributions .......................... 22
Performance Information ................ 23
[LOGO]
TWEEDY, BROWNE FUND INC.
--------------------------
PROSPECTUS
--------------------------
AUGUST 1 , 1996
==========================
[LOGO]
TWEEDY, BROWNE
GLOBAL VALUE FUND
[LOGO]
TWEEDY, BROWNE
AMERICAN VALUE FUND
<TABLE>
- -------------------------------------------------- ----------
- ----------------------------------------
<S> <C> <C>
<C>
Fund Information: 800-432-4789 Fund
Information: 800-432-4789
For Special Assistance In For
Special Assistance In
Opening A New Account: 800-432-4789, Ext. 9 Opening
A New Account: 800-432-4789, Ext. 9
Shareholder Services: 800-873-8242
Shareholder Services: 800-873-8242
NAV Prices: 800-873-8242, Ext. 1 NAV
Prices: 800-873-8242, Ext. 1
</TABLE>
<PAGE>
GENERAL ACCOUNT APPLICATION Please complete this form
and mail it to:
[LOGO] TWEEDY, BROWNE FUND INC.
C/O UNIFIED ADVISERS, INC.
P.O. BOX 6110
INDIANAPOLIS, INDIANA 46206-
6110
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
Complete this form to establish an account with either Tweedy,
Browne Global
Value Fund or Tweedy, Browne American Value Fund. Do not use this
application
for an IRA account. A separate IRA Account Application is
available for IRA
accounts. If you have any questions regarding this application or
how to invest,
please call Shareholder Services toll free at 1-800-873-8242.
<TABLE>
- ------------------------------------------------------------------
- -------------------------------
<S> <C> <C>
1. YOUR INVESTMENT SELECTION
/ / Tweedy, Browne Global Value Fund
Minimum initial investment is $2,500.
/ / Tweedy, Browne American Value Fund
Amount of investment $______________
Please make check payable to the Fund you selected.
Additional investments must be $250.
Check $___________________________________________ / /
WIRE: Call (800) 873-8242
</TABLE>
2. REGISTRATION
INDIVIDUAL
Name:
__________________________________________________________________
___
FIRST M.I.
LAST
Social Security Number:
___________________________________________________
JOINT TENANTS (IF ANY)*
Name:
__________________________________________________________________
___
FIRST M.I.
LAST
Social Security Number:
___________________________________________________
*"Joint Tenants with rights of
survivorship" unless
you specify otherwise.
GIFT/TRANSFER TO MINOR
Custodian's Name
__________________________________________________________
Minor's Name
______________________________________________________________
Minor's Social Security Number:
___________________________________________
Minor's Birthday:
_________________________________________________________
State ______________________ Under the Uniform Gifts/Transfer
to Minors Act
<PAGE>
A TRUST
Name of Trust*
_____________________________________________________________
Date of Trust Agreement
____________________________________________________
Name of Trustee
____________________________________________________________
Taxpayer ID Number:
________________________________________________________
*First and last page of trust agreement must
be furnished.
A CORPORATION, PARTNERSHIP OR OTHER ENTITY
Name of Corporation or Other Entity
________________________________________
Taxpayer ID Number:
________________________________________________________
3. YOUR MAILING ADDRESS
Street
__________________________________________________________________
_
City, State, Zip
_________________________________________________________
Home phone
_______________________________________________________________
Business phone
___________________________________________________________
4. DIVIDEND DISTRIBUTIONS
<TABLE>
All income, dividends and capital gains distributions will be
reinvested unless marked below.
<S> <C>
/ / Pay all income and capital gains in cash. / / Pay
income in cash and reinvest capital gains.
5. TELEPHONIC EXCHANGE OF SHARES / / Yes /
/ No
</TABLE>
<PAGE>
6. TELEPHONIC REDEMPTION OF SHARES / /
Yes / / No
/ / Check mailed to address of record.
/ / Federal reserve wire to your bank (plus applicable
redemption charge).
/ / Via Automated Clearing House (ACH)*
Name of Bank
_______________________________________________________________
Bank ABA/Routing No.
_______________________________________________________
Bank Address
_______________________________________________________________
City, State, Zip
___________________________________________________________
Name of Account
____________________________________________________________
Account Number
_____________________________________________________________
*Please attach a check marked "VOID" for the
bank account
designated in this option.
7. DUPLICATE ACCOUNT STATEMENTS
Please send a duplicate account statement to:
Telephone ( )
__________________________________________________________________
Name
__________________________________________________________________
_____
Street
__________________________________________________________________
___
City, State, Zip
___________________________________________________________
8. SIGNATURE MUST APPEAR BELOW TO ESTABLISH AN ACCOUNT
I (We) am (are) of legal age in the state of my (our) residence
and wish to
purchase shares of the Fund as described in the current
Prospectus, a copy
of which I (we) have received. By the execution of this Account
Application, the undersigned represents and warrants that the
investor has
full right, power and authority to make this investment and
that the
undersigned is (are) duly authorized to sign this Application
and to
purchase or redeem shares of the Fund on behalf of the
investor.
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
Under penalties of perjury, I certify: That the number shown on
this form
is my current taxpayer identification number and that I am not
subject to
backup withholding because (a) I have not been notified that I
am subject
to backup withholding as a failure to report all interest or
dividends, or
(b) the Internal Revenue Service ("IRS") has notified me that I
am no
longer subject to backup withholding. (You must line out items
(a) and (b)
above if you have been notified by the IRS that you are
currently subject
to backup withholding because of underreporting interest or
dividends on
your tax return).
CHECK BOX BELOW ONLY IF APPLICABLE
/ / I am neither a citizen nor a resident of the United States.
SIGN BELOW
__________________________________________________________________
________
INDIVIDUAL/CUSTODIAN/TRUSTEE/OFFICER
__________________________________________________________________
________
DATE
__________________________________________________________________
________
JOINT REGISTRANT, IF ANY
__________________________________________________________________
________
DATE
__________________________________________________________________
________
JOINT REGISTRANT
__________________________________________________________________
________
DATE
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1996
This Statement of Additional Information is not itself a
Prospectus and should be read in conjunction with the Prospectus
of Tweedy, Browne Global Value Fund and Tweedy, Browne American
Value Fund also dated August 1, 1996 , as amended from time
to time, copies of which may be obtained without charge by writing
to Tweedy, Browne Global Value Fund and/or Tweedy, Browne American
Value Fund, c/o Unified Advisers, Inc., P.O. Box 6110,
Indianapolis, Indiana 46206-6110.
TABLE OF CONTENTS
Page
Investment Objective and Policies 1
Performance Information 22
Operation of the Funds 25
Taxes 36
Portfolio Transactions 42
Net Asset Value 44
Additional Information 46
Financial Statements 46
Appendix A A-1
INVESTMENT OBJECTIVES AND POLICIES
Tweedy, Browne Fund Inc., a Maryland corporation of
which Tweedy, Browne Global Value Fund (the "Global Fund") and
Tweedy, Browne American Value Fund (the "American Fund") are
separate series, is referred to herein as the "Corporation". The
Corporation is a no-load, open-end, management investment company
which continuously offers and redeems its shares. The Corporation
is a company of the type commonly known as a mutual fund. The Funds
are diversified series of the Corporation.
The Funds' objectives and policies, except as otherwise
stated, are not fundamental and may be changed without shareholder
votes. The Global Fund seeks long-term growth of capital by
investing throughout the world in a diversified portfolio of
marketable equity securities. The American Fund seeks long-term
growth of capital by investing in a diversified portfolio of domes-
tic equity securities. Both Funds are permitted to invest in debt
securities. There can be no assurance that the Funds will achieve
their respective objectives.
Risk Considerations of the Funds
Global Fund. The Global Fund is intended to provide individual
and institutional investors with an opportunity to invest a portion
of their assets in globally oriented portfolios, according to the
Fund's objective and policies, and is designed for long-term inves-
tors who can accept international investment risk. The Global Fund
expects to invest primarily in foreign securities although in-
vestments in U.S. securities are permitted and will be made when
opportunities in U.S. markets appear attractive. The Global Fund
may also invest in debt instruments, although income is an
incidental consideration. The investment adviser of the Global
Fund, Tweedy, Browne Company L.P. ("Tweedy, Browne" or the
"Adviser"), believes that allocation of assets on a global basis de-
creases the degree to which events in any one country, including the
United States, will affect an investor's entire investment holdings.
As with any long-term investment, the value of the Global Fund's
shares when sold may be higher or lower than when purchased.
Investors should recognize that investing in foreign
securities involves certain special considerations, including those
set forth below, which are not typically associated with investing
in United States securities and which may favorably or unfavorably
affect the Global Fund's performance. As foreign companies are not
generally subject to uniform standards, practices and requirements
with respect to accounting, auditing and financial reporting to the
same degree as are domestic companies, there may be less or less
helpful publicly available information about a foreign company than
about a domestic company. Many foreign securities markets, while
growing in volume of trading activity, have substantially less
volume than the U.S. market, and securities of most foreign issuers
are less liquid and more volatile than securities of comparably
sized domestic issuers. Similarly, volume and liquidity in most
foreign bond markets is less than in the United States and vola-
tility of price is often greater than in the United States.
Further, foreign markets have different clearance and settlement
procedures and in certain markets there have been times when
settlements have been unable to keep pace with the volume of
securities transactions making it difficult to conduct such
transactions. Delays in settlement could result in temporary
periods when assets of the Global Fund are uninvested and no return
is earned thereon. The inability of the Global Fund to make in-
tended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dis-
pose of portfolio securities due to settlement problems could result
in losses to the Global Fund due to subsequent declines in value of
the portfolio security. Fixed commissions on some foreign secu-
rities exchanges and bid to asked spreads in some foreign bond
markets are higher than negotiated commissions on U.S. exchanges and
bid to asked spreads in the U.S. bond market. Further, the Global
Fund may encounter difficulties or be unable to pursue legal reme-
dies and obtain judgments in foreign courts. There is generally
less government supervision and regulation of business and industry
practices, securities exchanges, securities traders, brokers and
listed companies than in the United States. It may be more
difficult for the Global Fund's agents to keep currently informed
about corporate actions such as stock dividends or other matters
which may affect the prices of portfolio securities. Communications
between the United States and foreign countries are often less
reliable than within the United States, thus increasing the risk of
delayed settlements of portfolio transactions or loss of certifi-
cates for portfolio securities. In addition, with respect to
certain foreign countries, there is the possibility of expropriation
or confiscatory taxation, political or social instability, or
diplomatic developments which could affect United States investments
in those countries. Moreover, at any particular time, individual
foreign economies may differ favorably or unfavorably from the
United States economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. The Adviser seeks to
mitigate the risks associated with the foregoing considerations
through continuous professional management.
Investments in foreign securities usually will involve
currencies of foreign countries. Because of the considerations
discussed above, the value of the assets of the Global Fund as
measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control
regulations, and the Fund may incur costs in connection with conver-
sions between various currencies. Although the Global Fund values
its assets daily in terms of U.S. dollars, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Global Fund will engage in currency conversions
when it shifts holdings from one country to another. Although
foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the
prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Global
Fund at one rate, while offering a lesser rate of exchange should
the Fund desire to resell that currency to the dealer. The Global
Fund will conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into forward
or futures contracts (or options thereon) to purchase or sell for-
eign currencies. The Global Fund may, for hedging purposes,
purchase foreign currencies in the form of bank deposits.
Because the Global Fund may be invested in both U.S. and
foreign securities markets, changes in the Fund's share price may
have a low correlation with movements in the U.S. markets. The
Global Fund's share price will tend to reflect the movements of both
the different stock and bond markets in which it is invested and, to
the extent it is unhedged, of the currencies in which the invest-
ments are denominated; the strength or weakness of the U.S. dollar
against foreign currencies may account for part of the Fund's
investment performance. Foreign securities such as those purchased
by the Global Fund may be subject to foreign government taxes which
could reduce the yield on such securities, although a shareholder of
the Fund may, subject to certain limitations, be entitled to claim a
credit or deduction for U.S. federal income tax purposes for his or
her proportionate share of such foreign taxes paid by the Fund (see
"TAXES"). U.S. and foreign securities markets do not always move in
step with each other, and the total returns from different markets
may vary significantly. The Global Fund invests in many securities
markets around the world in an attempt to take advantage of
opportunities wherever they may arise.
American Fund. The American Fund is intended to provide individual
and institutional investors with an opportunity to invest a portion
of their assets in a domestic equity portfolio, according to the
Fund's objective and policies and is designed for long-term inves-
tors who can accept domestic investment risk. The American Fund
will be invested largely in U.S. equity securities although it may
allocate up to 20% of its portfolio assets to foreign equity securi-
ties when Tweedy, Browne, the Fund's investment adviser, believes
that economic conditions warrant foreign investment. The Fund may
also invest in debt instruments, although income is an incidental
consideration. Tweedy, Browne believes that a value oriented in-
vestment strategy offers investors profitable investment in under-
valued domestic equity securities whose prices may be below
intrinsic worth, private market value or previously high stock pric-
es. As with any long-term investment, the value of the American
Fund's shares when sold may be higher or lower than when purchased.
Investments in a fund which purchases value oriented
stocks as its guiding principle involves special considerations.
The equity capitalization of the United States is the largest in the
world comprising more than one-third of the Morgan Stanley Capital
International world indices. The American Fund offers investors the
opportunity to invest in a diversified portfolio of primarily
domestic undervalued securities whose market price may be well below
the stock's intrinsic value.
The American Fund cannot guarantee a gain or eliminate
the risk of loss. The net asset value of the American Fund's shares
will tend to increase or decrease with changes in the value of U.S.
equity markets. To the extent the American Fund invests in foreign
securities, comparable risk factors discussed above with regard to
the Global Fund will apply. There is no assurance that the American
Fund's objectives will be achieved. Investment in shares of the
American Fund is not intended to provide a complete investment
program for an investor.
Investments and Investment Techniques
Repurchase Agreements. Both the Global Fund and the
American Fund may enter into repurchase agreements with member banks
of the Federal Reserve System, any foreign bank or with any domestic
or foreign broker/dealer which is recognized as a reporting govern-
ment securities dealer, if the creditworthiness of the bank or
broker/dealer has been determined by the Adviser to be at least as
high as that of other obligations the Funds may purchase.
A repurchase agreement provides a means for each Fund to
earn income on funds for periods as short as overnight. It is an
arrangement under which the purchaser (i.e., one of the Funds)
acquires a debt security ("Obligation") and the seller agrees, at
the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in
a segregated account and the value of such securities is kept at
least equal to the repurchase price (plus any interest accrued if
interest will be paid in cash) on a daily basis. The repurchase
price may be higher than the purchase price, the difference being
income to the Fund, or the purchase and repurchase prices may be the
same, with interest at a stated rate due to the Fund together with
the repurchase price on repurchase. In either case, the income to
the Fund is unrelated to the interest rate on the Obligation itself.
Obligations will be physically held by the Fund's custodian or in
the Federal Reserve Book Entry system.
For purposes of the Investment Company Act of 1940 (the
"1940 Act"), a repurchase agreement is deemed to be a loan from the
Fund to the seller of the Obligation subject to the repurchase
agreement. It is not clear whether a court would consider the
Obligation purchased by the Fund subject to a repurchase agreement
as being owned by the Fund or as being collateral for a loan by the
Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the
Obligation before repurchase of the Obligation under a repurchase
agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or
decline in price of the Obligation. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that
the seller may fail to repurchase the security. It is possible that
the Fund will be unsuccessful in seeking to enforce the seller's
contractual obligation to deliver additional securities.
Debt Securities. The Funds may purchase "investment
grade" bonds, which are those rated Aaa, Aa, A or Baa by Moody's
Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB by Standard
& Poor's Ratings Service a division of McGraw-hill Companies,
Inc., ("S&P") or, if non-rated, judged to be of equivalent
credit quality by the Adviser. Bonds rated Baa or BBB may have
speculative elements as well as investment-grade characteristics.
High Yield, High Risk Securities. Both Funds may also
invest up to 15% of net assets in securities rated lower than the
foregoing and in non-rated securities of equivalent credit quality
in the Adviser's judgment. The Funds may invest in debt securities
which are rated as low as C by Moody's or D by S&P. Securities
rated D may be in default with respect to payment of principal or
interest. Below investment-grade securities (those rated Ba and
lower by Moody's and BB and lower by S&P) or non-rated securities of
equivalent credit quality carry a high degree of risk (including a
greater possibility of default or bankruptcy of the issuers of such
securities), generally involve greater volatility of price, and may
be less liquid, than securities in the higher rating categories and
are considered speculative. The lower the ratings of such debt
securities, the greater their risks render them like equity
securities. See the Appendix to this Statement of Additional
Information for a more complete description of the ratings assigned
by ratings organizations and their respective characteristics.
As has occurred during the 1990-1992 period, an economic
downturn can disrupt the high yield market and impair the ability of
issuers to repay principal and interest. Also, an increase in
interest rates is likely to have a greater adverse impact on the
value of such obligations than on higher quality debt securities.
During an economic downturn or period of rising interest rates,
highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and
interest payment obligations. Prices and yields of high yield
securities will fluctuate over time and, during periods of economic
uncertainty, volatility of high yield securities may adversely
affect a Fund's net asset value. In addition, investments in high
yield zero coupon or pay-in-kind bonds, rather than income-bearing
high yield securities, may be more speculative and may be subject to
greater fluctuations in value due to changes in interest rates.
The trading market for high yield securities may be thin
to the extent that there is no established retail secondary market
or because of a decline in the value of such securities. A thin
trading market may limit the ability of the Funds to value
accurately high yield securities in the Funds' portfolios and to
dispose of those securities. Adverse publicity and investor percep-
tions may decrease the values and liquidity of high yield
securities. These securities may also involve special registration
responsibilities, liabilities and costs.
It is the policy of the Adviser not to rely exclusively
on ratings issued by established credit rating agencies, but to
supplement such ratings with its own independent and on-going review
of credit quality. If the rating of a portfolio security is
downgraded, the Adviser will determine whether it is in the best
interest of each Fund to retain or dispose of such security.
Zero Coupon Securities. The Funds may invest in zero
coupon securities which pay no cash income and are sold at
substantial discounts from their value at maturity although it
currently has no intention to invest in such securities. When held
from issuance to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue
price and their value at maturity. Zero coupon securities are
subject to greater market value fluctuations from changing interest
rates than debt obligations of comparable maturities which make
current cash distributions of interest.
Convertible Securities. The Funds may invest in
convertible securities, that is, bonds, notes, debentures, preferred
stocks and other securities which are convertible into or
exchangeable for another security, usually common stock.
Investments in convertible securities can provide an opportunity for
capital appreciation and/or income through interest and dividend
payments by virtue of their conversion or exchange features.
The convertible securities in which the Funds may invest
are either fixed income or zero coupon debt securities which may be
converted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. The exchange ratio for any
particular convertible security may be adjusted from time to time
due to stock splits, dividends, spin-offs, other corporate distribu-
tions or scheduled changes in the exchange ratio. Convertible debt
securities and convertible preferred stocks, until converted, have
general characteristics similar to both debt and equity securities.
Although to a lesser extent than with debt securities generally, the
market value of convertible securities tends to decline as interest
rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion or exchange feature,
the market value of convertible securities typically changes as the
market value of the underlying common stock declines, convertible
securities tend to trade increasingly on a yield basis, and so
usually do not experience market value declines to the same extent
as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underly-
ing common stock, although usually not as much as the underlying
common stock.
As debt securities, convertible securities are invest-
ments which provide for a stream of income (or in the case of zero
coupon securities, accretion of income) with generally higher yields
than common stocks. Of course, like all debt securities, there can
be no assurance of income or principal payments because the issuers
of the convertible securities may default on their obligations.
Convertible securities generally offer lower yields than non-
convertible securities of similar quality because of their
conversion or exchange features.
Convertible securities generally are subordinated to
other similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, enjoy
seniority in right of payment to all equity securities, and
convertible preferred stock is senior to common stock of the same
issuer. However, because of the subordination feature, convertible
bonds and convertible preferred stock typically have lower ratings
than similar non-convertible securities.
Other Rights to Acquire Securities
The Funds may also invest in other rights to acquire
securities, such as options and warrants. These securities
represent the right to acquire a fixed or variable amount of a
particular issue of securities at a fixed or formula price either
during specified periods or only immediately prior to termination.
These securities are generally exercisable at premiums above the
value of the underlying security at the time the right is issued.
These rights are more volatile than the underlying stock and will
result in a total loss of the Funds' investment if they expire
without being exercised because the value of the underlying security
does not exceed the exercise price of the right.
Strategic Transactions
The Funds may, but are not required to, utilize various
other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and
broad or specific equity or fixed-income market movements), to
manage the effective maturity or duration of fixed-income
securities, or to enhance potential gain. Such strategies are
generally accepted by modern portfolio managers and are regularly
utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments
and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies,
the Funds may purchase and sell exchange-listed and over-the-counter
put and call options on securities, equity and fixed-income indices
and other financial instruments, purchase and sell financial futures
contracts and options thereon, enter into various currency
transactions such as currency forward contracts, currency futures
contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic
Transactions"). Strategic Transactions may be used to attempt to
protect against possible changes in the market value of securities
held in or to be purchased for a Fund's portfolio resulting from
securities markets or currency exchange rate fluctuations, to
protect a Fund's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of a Fund's
portfolio, or to establish a position in the derivatives markets as
a temporary substitute for purchasing or selling particular
securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of a Fund's assets will be
committed to initial margin on instruments regulated by the
Commodity Futures Trading Commission ("CFTC") in Strategic
Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and there is no
particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of
numerous variables including market conditions. A Fund's ability to
utilize these Strategic Transactions successfully will depend on the
Adviser's ability to predict pertinent market movements, which
cannot be assured. Each Fund will comply with applicable regulatory
requirements when implementing these strategies, techniques and
instruments. Strategic Transactions involving financial futures and
options thereon will be purchased, sold or entered into only for
bona fide hedging, risk management or portfolio management purposes
and not for speculative purposes.
Strategic Transactions have risks associated with them
including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such
Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses
to a Fund, force the sale or purchase of portfolio securities at
inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market
values, limit the amount of appreciation a Fund can realize on its
investments or cause a Fund to hold a security it might otherwise
sell. The use of currency transactions can result in a Fund
incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements, or the
inability to deliver or receive a specified currency. The use of
options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price move-
ments of futures contracts and price movements in the related
portfolio position of a Fund creates the possibility that losses on
the hedging instrument may be greater than gains in the value of a
Fund's position. In addition, futures and options markets may not
be liquid in all circumstances and certain over-the-counter options
may have no markets. As a result, in certain markets, a Fund might
not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transac-
tions for hedging should tend to minimize the risk of loss due to a
decline in the value of a hedged position, at the same time they
tend to limit any potential gain which might result from an increase
in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing
potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses
resulting from the use of Strategic Transactions would reduce net
asset value, and possibly income, and such losses can be greater
than if the Strategic Transactions had not been utilized.
General Characteristics of Options. Put options and call options
typically have similar structural characteristics and operational
mechanics regardless of the underlying instrument on which they are
purchased or sold. Thus, the following general discussion relates
to each of the particular types of options discussed in greater
detail below. In addition, many Strategic Transactions involving
options require segregation of a Fund's assets in special accounts,
as described below under "Use of Segregated and Other Special
Accounts."
A put option gives the purchaser of the option, upon
payment of a premium, the right to sell, and the issuer the
obligation to buy, the underlying security, commodity, index,
currency or other instrument at the exercise price. For instance, a
Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the
market value by giving a Fund the right to sell such instrument at
the option exercise price. A call option, upon payment of a
premium, gives the purchaser of the option the right to buy, and the
issuer the obligation to sell, the underlying instrument at the
exercise price. A Fund's purchase of a call option on a security,
financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the
underlying instrument that it intends to purchase in the future by
fixing the price at which it may purchase such instrument. An
American style put or call option may be exercised at any time
during the option period while a European style put or call option
may be exercised only upon expiration or during a fixed period prior
thereto. The Funds are authorized to purchase and sell exchange
listed options and over-the-counter options ("OTC options").
Exchange listed options are issued by a regulated intermediary such
as the Options Clearing Corporation ("OCC"), which guarantees the
performance of the obligations of the parties to such options. The
discussion below regarding exchange listed options uses the OCC as a
paradigm, but is also applicable to other financial intermediaries.
Each Fund's ability to close out its position as a pur-
chaser or seller of an OCC or exchange listed put or call option is
dependent, in part, upon the liquidity of the option market. Among
the possible reasons for the absence of a liquid option market on an
exchange are: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying
securities including reaching daily price limits; (iv) interruption
of the normal operations of the OCC or an exchange; (v) inadequacy
of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue
the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange
would cease to exist, although outstanding options on that exchange
would generally continue to be exercisable in accordance with their
terms.
The hours of trading for listed options may not coincide
with the hours during which the underlying financial instruments are
traded. To the extent that the option markets close before the
markets for the underlying financial instruments, significant price
and rate movements can take place in the underlying markets that
cannot be reflected in the option markets.
OTC options are purchased from or sold to securities
dealers, financial institutions or other parties ("Counterparties")
through direct bilateral agreement with the Counterparty. In
contrast to exchange listed options, which generally have
standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term,
exercise price, premium, guarantees and security, are set by
negotiation of the parties.
Unless the parties provide for it, there is no central
clearing or guaranty function in an OTC option. As a result, if the
Counterparty fails to make or take delivery of the security,
currency or other instrument underlying an OTC option it has entered
into with a Fund or fails to make a cash settlement payment due in
accordance with the terms of that option, the Fund may lose any
premium it paid for the option as well as any anticipated benefit of
the transaction. Accordingly, the Adviser must assess the
creditworthiness of each such Counterparty or any guarantor or
credit enhancement of the Counterparty's credit to determine the
likelihood that the terms of the OTC option will be satisfied. The
Funds will engage in OTC option transactions only with United States
government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers", or broker dealers, domestic or
foreign banks or other financial institutions which have received
(or the guarantors of the obligation of which have received) a
short-term credit rating of A-1 from S&P or P-1 from Moody's or an
equivalent rating from any other nationally recognized statistical
rating organization ("NRSRO").
If a Fund sells (i.e., issues) a call option, the
premium that it receives may serve as a partial hedge, to the extent
of the option premium, against a decrease in the value of the
underlying securities or instruments in its portfolio, or will
increase the Fund's income. The sale of put options can also
provide income.
All calls sold by the Funds must be "covered" (i.e., the
Fund must own the securities or futures contract subject to the
calls) or must meet the asset segregation requirements described
below as long as the call is outstanding. Even though the Fund will
receive the option premium to help protect it against loss, a call
sold by one of the Funds exposes that Fund during the term of the
option to possible loss of opportunity to realize appreciation in
the market price of the underlying security or instrument and may
require the Fund to hold a security or instrument which it might
otherwise have sold.
Neither Fund will sell put options if, as a result, more
than 50% of that Fund's assets would be required to be segregated to
cover its potential obligations under such put options other than
those with respect to futures and options thereon. In selling put
options, there is a risk that the Fund may be required to buy the
underlying security at a disadvantageous price above the market
price.
General Characteristics of Futures. The Funds may enter into
financial futures contracts or purchase or sell put and call options
on such futures as a hedge against anticipated interest rate,
currency or equity market changes, for duration management and for
risk management purposes. Futures are generally bought and sold on
the commodities exchanges where they are listed with payment of
initial and variation margin as described below. The sale of a
futures contract creates a firm obligation by a Fund, as seller, to
deliver to the buyer the specific type of financial instrument
called for in the contract at a specific future time for a specified
price (or, with respect to index futures and Eurodollar instruments,
the net cash amount). Options on futures contracts are similar to
options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to
assume a position in a futures contract and obligates the seller to
deliver such position.
The Funds' use of financial futures and options thereon
will in all cases be consistent with applicable regulatory
requirements and in particular the rules and regulations of the CFTC
and will be entered into only for bona fide hedging, risk management
(including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an
option thereon requires a Fund to deposit with a financial
intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically
1% to 10% of the face amount of the contract (but may be higher in
some circumstances). Additional cash or assets (variation margin)
may be required to be deposited thereafter on a daily basis as the
mark to market value of the contract fluctuates. The purchase of an
option on financial futures involves payment of a premium for the
option without any further obligation on the part of the purchaser.
If one of the Funds exercises an option on a futures contract, it
will be obligated to post initial margin (and potential subsequent
variation margin) for the resulting futures position just as it
would for any position. Futures contracts and options thereon are
generally settled by entering into an offsetting transaction but
there can be no assurance that the position can be offset prior to
settlement at an advantageous price, nor that delivery will occur.
Neither Fund will enter into a futures contract or
related option (except for closing transactions) if, immediately
thereafter, the sum of the amount of its initial margin and premiums
on open futures contracts and options thereon would exceed 5% of
that Fund's total assets (taken at current value); however, in the
case of an option that is in-the-money at the time of the purchase,
the in-the-money amount may be excluded in calculating the 5% limi-
tation. The segregation requirements with respect to futures
contracts and options thereon are described below.
Options on Securities Indices and Other Financial Indices. The
Funds also may purchase and sell call and put options on securities
indices and other financial indices and in so doing can achieve many
of the same objectives it would achieve through the sale or purchase
of options on individual securities or other instruments. Options
on securities indices and other financial indices are similar to
options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they
settle by cash settlement, i.e., an option on an index gives the
holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the index upon which the option is
based exceeds, in the case of a call, or is less than, in the case
of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of
cash is equal to the excess of the closing price of the index over
the exercise price of the option, which also may be multiplied by a
formula value. The seller of the option is obligated, in return for
the premium received, to make delivery of this amount. The gain or
loss on an option on an index depends on price movements in the
instruments making up the market, market segment, industry or other
composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to
options on securities.
Currency Transactions. The Funds may engage in currency
transactions with counterparties in order to hedge the value of
portfolio holdings denominated in particular currencies against
fluctuations in relative value. Currency transactions include
forward currency contracts, exchange listed currency futures,
exchange listed and OTC options on currencies, and currency swaps.
A forward currency contract involves a privately negotiated obliga-
tion to purchase or sell (with delivery generally required) a
specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. A currency swap is an
agreement to exchange cash flows based on the notional difference
among two or more currencies and operates similarly to an interest
rate swap, which is described below. The Funds may enter into
currency transactions with counterparties which have received (or
the guarantors of the obligations of which have received) a credit
rating of A-1 or P-1 by S&P or Moody's, respectively, or that have
an equivalent rating from an NRSRO or (except for OTC currency
options) are determined to be of equivalent credit quality by the
Adviser.
The Funds' dealings in forward currency contracts and
other currency transactions such as futures, options, options on
futures and swaps generally will be limited to hedging involving
either specific transactions or portfolio positions. Transaction
hedging is entering into a currency transaction with respect to
specific assets or liabilities of a Fund, which will generally arise
in connection with the purchase or sale of its portfolio securities
or the receipt of income therefrom. Position hedging is entering
into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency.
The Funds generally will not enter into a transaction to
hedge currency exposure to an extent greater, after netting all
transactions intended wholly or partially to offset other
transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its
portfolio that are denominated or generally quoted in or currently
convertible into such currency, other than with respect to proxy
hedging as described below.
The Funds may also cross-hedge currencies by entering
into transactions to purchase or sell one or more currencies that
are expected to decline in value relative to other currencies to
which the Funds have or in which the Funds expect to have portfolio
exposure.
To reduce the effect of currency fluctuations on the
value of existing or anticipated holdings of portfolio securities,
the Funds may also engage in proxy hedging. Proxy hedging is often
used when the currency to which a Fund's portfolio is exposed is
difficult to hedge or to hedge against the U.S. dollar. Proxy
hedging entails entering into a forward contract to sell a currency
whose changes in value are generally considered to be linked to a
currency or currencies in which some or all of a Fund's portfolio
securities are or are expected to be denominated, and to buy U.S.
dollars. The amount of the contract would not exceed the value of
the Fund's securities denominated linked currencies. For example,
if the Adviser considers that the Austrian schilling is linked to
the German deutsche mark (the "D-mark"), a Fund holds securities
denominated in schillings and the Adviser believes that the value of
schillings will decline against the U.S. dollar, the Adviser may
enter into a contract to sell D-marks and buy U.S. dollars.
Risks of Currency Transactions. Currency transactions are subject
to risks different from those of other portfolio transactions.
Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively af-
fected by government exchange controls, blockages, and manipulations
or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency
or funds in settlement of obligations and could also cause hedges it
has entered into to be rendered useless, resulting in full currency
exposure as well as incurring transaction costs. Buyers and sellers
of currency futures are subject to the same risks that apply to the
use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank
based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions
on such options is subject to the maintenance of a liquid market
which may not always be available. Currency exchange rates may
fluctuate based on factors extrinsic to that country's economy.
Currency transactions can result in losses to the Fund if the
currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that
the perceived linkage between various currencies may not be present
or may not be present during the particular time when a Fund is
engaging in proxy hedging. If a Fund enters into a currency hedging
transaction, the Fund will comply with the asset segregation
requirements described below.
Short Sales. Each Fund may make short sales of securities traded on
domestic or foreign exchanges. A short sale is a transaction in
which a Fund sells a security it does not own in anticipation that
the market price of that security will decline. The Fund may make
short sales to hedge positions, for duration and risk management, in
order to maintain portfolio flexibility or to enhance income or
gain.
When a Fund makes a short sale, it must borrow the
security sold short and deliver it to the broker-dealer through
which it made the short sale as collateral for its obligation to
deliver the security upon conclusion of the sale. The Fund may have
to pay a fee to borrow particular securities and is often obligated
to pay over any payments received on such borrowed securities.
A Fund's obligation to replace the borrowed security
will be secured by collateral deposited with the broker-dealer,
usually cash, U.S. government securities or other high grade liquid
securities. The Fund will also be required to segregate similar
collateral with its custodian to the extent, if any, necessary so
that the aggregate collateral value is at all times at least equal
to the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the
security regarding payment over any payments received by the Fund on
such security, the Fund may not receive any payments (including
interest) on its collateral deposited with such broker-dealer.
If the price of the security sold short increases
between the time of the short sale and the time the Fund replaces
the borrowed security, the Fund will incur a loss; conversely, if
the price declines, the Trust will realize a gain. Any gain will be
decreased, and any loss increased, by the transaction costs de-
scribed above. Although the Fund's gain is limited to the price at
which it sold the security short, its potential loss is
theoretically unlimited.
A Fund will not make a short sale if, after giving
effect to such sale, the market value of all securities sold short
exceeds 25% of the value of its total assets and the value of
securities of any one issuer in which a Fund has made a short sale
may not exceed the lesser of 2% of the value of the Funds net assets
or 2% of the securities of any class of any issuer.
Combined Transactions. Each Fund may enter into multiple
transactions, including multiple options transactions, multiple
futures transactions, multiple currency transactions (including
forward currency contracts) and multiple interest rate transactions
and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
Strategic Transaction, as part of a single or combined strategy
when, in the opinion of the Adviser, it is in the best interests of
that Fund to do so. A combined transaction will usually contain
elements of risk that are present in each of its component
transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies
will reduce risk or otherwise more effectively achieve the desired
portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the portfolio
management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions
into which the Funds may enter are interest rate, currency and index
swaps and the purchase or sale of related caps, floors and collars.
The Funds expect to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of
its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in
the price of securities the Funds anticipate purchasing at a later
date. Each Fund intends to use these transactions as hedges and not
as speculative investments and will not sell interest rate caps or
floors where it does not own securities or other instruments
providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is
an agreement to exchange cash flows on a notional amount of two or
more currencies based on the relative value differential among them
and an index swap is an agreement to swap cash flows on a notional
amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the
extent that a specified index falls below a predetermined interest
rate or amount. A collar is a combination of a cap and a floor that
preserves a certain return within a predetermined range of interest
rates or values.
The Funds will usually enter into swaps on a net basis,
i.e., the two payment streams are netted out in a cash settlement on
the payment date or dates specified in the instrument, with a Fund
receiving or paying, as the case may be, only the net amount of the
two payments. Inasmuch as these swaps, caps, floors and collars are
entered into for good faith hedging purposes, the Adviser and the
Funds believe such obligations do not constitute senior securities
under the 1940 Act and, accordingly, will not treat them as being
subject to its borrowing restrictions. Neither Fund will enter into
any swap, cap, floor or collar transaction unless, at the time of
entering into such transaction, the unsecured long-term debt of the
counterparty, combined with any credit enhancements, is rated at
least A by S&P or Moody's or has an equivalent rating from an NRSRO
or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively
liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed
and, accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Funds may make investments in
instruments that are U.S. dollar-denominated futures contracts or
options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"). Eurodollar futures contracts enable purchasers to
obtain a fixed rate for the lending of funds and sellers to obtain a
fixed rate for borrowings. The Funds might use Eurodollar futures
contracts and options thereon to hedge against changes in LIBOR, to
which many interest rate swaps and fixed income instruments are
often linked.
Risks of Strategic Transactions Outside the United States. When
conducted outside the United States, Strategic Transactions may not
be regulated as rigorously as in the United States, may not involve
a clearing mechanism and related guarantees, and are subject to the
risk of governmental actions affecting trading in, or the prices of,
foreign securities, currencies and other instruments. The value of
such positions also could be adversely affected by: (i) other
complex foreign political, legal and economic factors, (ii) delays
in a Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the United States; (iii) the
imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (iv) lower
trading volume and liquidity.
Use of Segregated and Other Special Accounts. Many Strategic
Transactions, in addition to other requirements, require that the
Funds segregate liquid high grade assets with its custodian to the
extent the Funds' obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by a
Fund to pay or deliver securities or assets must be covered at all
times by the securities, instruments or currency required to be
delivered, or, subject to any regulatory restrictions, an amount of
cash or liquid high grade debt securities at least equal to the
current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred
unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. For example, a call option
written by a Fund will require the Fund to hold the securities
subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate liquid
high-grade securities sufficient to purchase and deliver the
securities if the call is exercised. A call option sold by a Fund
on an index will require the Fund to own portfolio securities which
correlate with the index or to segregate liquid high grade assets
equal to the excess of the index value over the exercise price on a
current basis. A put option written by a Fund requires the Fund to
segregate liquid, high grade assets equal to the exercise price.
A forward currency contract which obligates the Fund to
buy or sell currency will generally require the Fund to hold an
amount of that currency or securities denominated in that currency
equal to the Fund's obligations or to segregate liquid high grade
assets equal to the amount of the Fund's obligations unless the
contract is entered into to facilitate the purchase or sale of a
security denominated in a particular currency or for hedging
currency risks of one or more of a Fund's portfolio investments.
OTC options entered into by the Funds, including those
on securities, currency, financial instruments or indices and OCC
issued and exchange listed options, will generally provide for cash
settlement. As a result, when one of the Funds sells these
instruments, the Fund will only segregate an amount of assets equal
to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These
amounts will equal 100% of the exercise price in the case of a non
cash-settled put, the same as an OCC guaranteed listed option sold
by a Fund, or the in-the-money amount plus any sell-back formula
amount in the case of a cash-settled put or call. In addition, when
a Fund sells a call option on an index at a time when the in-the-
money amount exceeds the exercise price, the Fund will segregate,
until the option expires or is closed out, cash or cash equivalents
equal in value to such excess. OCC issued and exchange listed
options sold by the Funds other than those above generally settle
with physical delivery, and the Seller will segregate an amount of
assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other
options settling with physical delivery.
In the case of a futures contract or an option thereon,
a Fund must deposit initial margin and possible daily variation
margin in addition to segregating assets sufficient to meet its
obligation to purchase or provide securities or currencies, or to
pay the amount owed at the expiration of an index-based futures con-
tract. Such assets may consist of cash, cash equivalents, liquid
debt or equity securities or other acceptable assets.
With respect to swaps, the Funds will accrue the net
amount of the excess, if any, of its obligations over its
entitlements with respect to each swap on a daily basis and will
segregate an amount of cash or liquid high grade securities having a
value equal to the accrued excess. Caps, floors, and collars
require segregation of assets with a value equal to the Fund's net
obligation, if any.
Strategic Transactions may be covered by other means
when consistent with applicable regulatory policies. In the case of
portfolio securities which are loaned, collateral values of the
loaned securities will be continuously maintained at not less than
100% by "marking to market" daily. A Fund may also enter into
offsetting transactions so that its combined position, coupled with
any segregated assets, equals its net outstanding obligation in
related options and Strategic Transactions. For example, a Fund
could purchase a put option if the strike price of that option is
the same or higher than the strike price of a put option sold by the
Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the
same futures or forward contract with a strike price as high or
higher than the price of the contract held. Other Strategic
Transactions may also be offset in combinations. If the offsetting
transaction terminates at the time of or after the primary transac-
tion no segregation is required, but if it terminates prior to such
time, assets equal to any remaining obligation would need to be
segregated.
The Funds' activities involving Strategic Transactions
may be limited by the requirements of Subchapter M of the Internal
Revenue Code for qualification as a regulated investment company
(see "TAXES").
Borrowing for Strategic Transactions
Both Funds may borrow money in order to purchase liquid
high grade assets for segregation or margin purposes in connection
with Strategic Transactions. Although neither Fund expects that the
interest rate differential between its borrowing costs and the yield
on such securities will be significant, such borrowings could result
in net interest expense for the Fund and also expose the Fund to
risk of loss from loss of market value due to adverse interest rate,
credit quality or currency exchange rate changes.
Investment Restrictions
The policies set forth below are fundamental policies of
the Global Fund and the American Fund and may not be changed with
respect to a Fund without approval of a majority of the outstanding
voting securities of that Fund. As used in this Statement of Addi-
tional Information a "majority of the outstanding voting securities
of a Fund" means the lesser of (1) 67% or more of the voting securi-
ties present at such meeting, if the holders of more than 50% of the
outstanding voting securities of the Funds are present or repre-
sented by proxy; or (2) more than 50% of the outstanding voting
securities of the Funds.
As a matter of fundamental policy, neither Fund may:
1. borrow money, except to obtain liquid high grade securi-
ties for use in connection with Strategic Transactions conducted by
the Funds in connection with its portfolio activities or as a
temporary measure for extraordinary or emergency purposes, in
connection with the clearance of transactions or to pay for redemp-
tions, in each case subject to applicable U.S. government limita-
tions;
2. purchase or sell real estate (other than securities
representing interests in real estate or fixed income obligations
directly or indirectly secured by real estate and other than real
estate acquired upon exercise of rights under such securities) or
purchase or sell physical commodities or contracts relating to
physical commodities (other than currencies and specie to the extent
they may be considered physical commodities) or oil, gas or mineral
leases or exploration programs;
3. act as underwriter of securities issued by others,
except to the extent that it may be deemed an underwriter in
connection with the disposition of portfolio securities of the Fund;
4. make loans to other persons, except (a) loans of portfo-
lio securities, and (b) to the extent the entry into repurchase
agreements and the purchase of debt obligations may be deemed to be
loans;
5. issue senior securities, except as appropriate to evi-
dence borrowings of money; and except that Strategic Transactions
conducted by the Fund in connection with its portfolio activities
are not considered to involve the issuance of senior securities for
purposes of this restriction;
6. purchase any securities which would cause more than 25%
of the market value of its total assets at the time of such purchase
to be invested in the same industry; or
7. with respect to 75% of its total assets taken at market
value, purchase more than 10% of the voting securities of any one
issuer or invest more than 5% of the value of its total assets in
the securities of any one issuer; except in each case securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and securities of other investment companies.
If a percentage restriction on investment or utilization
of assets as set forth under "Investment Restrictions" above is
adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value or the total cost of
the Funds' assets will not be considered a violation of the restric-
tion. As a matter of non-fundamental policy:
1. Neither Fund will acquire shares of other mutual funds
except in compliance with Section 12(d)(1) of the 1940 Act;
2. Neither Fund will invest more than 5% of its assets in
companies that, together with their predecessors, have less than 3
years operations. The foregoing does not apply to investment grade
securities of special purpose financing companies;
3. Neither Fund will invest more than 5% of its assets in
warrants;
4. Short sales may be made only in those securities which
are traded on principal domestic or foreign exchanges;
5. Neither Fund will purchase warrants, valued at the lower
of cost or market, in excess of 5% of the Fund's net assets.
Included in that amount, but not to exceed 2% of net assets, are
warrants whose underlying securities are not traded on principal
domestic or foreign exchanges; and
6. Neither Fund will invest in real estate limited
partnerships.
Share Certificates
Due to the desire of the Funds to keep purchase and re-
demption of shares simple, certificates will not be issued to
indicate ownership in either of the Funds.
PERFORMANCE INFORMATION
From time to time, each Fund may calculate its per-
formances for inclusion in advertisements, sales literature or
reports to shareholders or prospective investors. These performance
figures are calculated by the Funds in the following manner:
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of
return for the periods of one year and the life of a Fund, each
ended on the last day of a recent calendar quarter. Average annual
total return quotations reflect changes in the price of a Fund's
shares and assume that all dividends and capital gains distributions
during the respective periods were reinvested in the Fund's shares.
Average annual total return is calculated by computing the average
annual compound rates of return of a hypothetical investment over
such periods, according to the following formula (average annual
total return is then expressed as a percentage):
T = (ERV/P)1/n - 1
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical $1,000 investment
made at the beginning of the applicable period.
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period.
Cumulative total return quotations reflect changes in the price of
the Fund's shares and assume that all dividends and capital gains
distributions during the period were reinvested in the Fund's
shares. Cumulative total return is calculated by computing the cumu-
lative rates of return of a hypothetical investment over such
periods, according to the following formula (cumulative total return
is then expressed as a percentage):
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical $1,000 investment
made at the beginning of the applicable period.
Total Return
Total Return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total
return.
Capital Change
Capital Change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not
include the reinvestment of income dividends.
Quotations of a Fund's performance are historical, show
the performance of a hypothetical investment, and are not intended
to indicate future performance. An investor's shares when redeemed
may be worth more or less than their original cost. Performance of
each Fund will vary based on changes in market conditions and the
level of the Fund's expenses.
Comparison of Portfolio Performance
Comparison of the quoted non-standardized performance of
various investments is valid only if performance is calculated in
the same manner or the differences are understood. Since there are
different methods of calculating performance investors should
consider the effect of the methods used to calculate performance
when comparing performance of either Fund with performance quoted
with respect to other investment companies or types of investments.
In connection with communicating its performance to
current or prospective shareholders, either Fund also may compare
these figures to unmanaged indices which may assume reinvestment of
dividends or interest but generally do not reflect deductions for
operational, administrative and management costs.
Because normally most of the Global Fund's investments
are denominated in foreign currencies, the strength or weakness of
the U.S. dollar against these currencies will account for part of
the Global Fund's investment performance except to the extent hedged
to the U.S. dollar. Historical information on the value of the
dollar versus foreign currencies may be used from time to time in
advertisements concerning the Global Fund. Such historical
information is not indicative of future performance.
From time to time, in advertising and marketing litera-
ture, a Fund's performance may be compared to the performance of
broad groups of mutual funds with similar investment goals, as
tracked by independent organizations. When these organizations'
tracking results are used, a Fund will be compared to the appro-
priate fund category, that is, by fund objective and portfolio hold-
ings, or to the appropriate volatility grouping, where volatility is
a measure of a fund's risk.
Since the assets in funds are always changing, either
Fund may be ranked within one asset-size class at one time and in
another asset-size class at some other time. In addition, the
independent organization chosen to rank a Fund in fund literature
may change from time to time depending upon the basis of the
independent organization's categorizations of mutual funds, changes
in the Fund's investment policies and investments, the Fund's asset
size and other factors deemed relevant. Footnotes in advertisements
and other marketing literature will include the organization issuing
the ranking, time period and asset-size class, as applicable, for
the ranking in question.
Evaluations of a Fund's performance made by independent
sources may also be used in advertisements concerning that Fund,
including reprints of, or selections from, editorials or articles
about the Fund.
OPERATION OF THE FUNDS
Structure of the Funds
Both the Global Fund and the American Fund are separate
series of Tweedy, Browne Fund Inc., a Maryland corporation organized
on January 28, 1993.
Costs incurred by each Fund in connection with the
organization and initial registration of the corporation and each
Fund will be amortized over a five year period beginning at the com-
mencement of the operation of the applicable Fund.
The authorized capital stock of the Corporation consists
of one billion shares with $0.0001 par value, 600 million shares of
which are allocated to the Global Fund and 400 million shares of
which are allocated to the American Fund. Each share has equal
voting rights as to each other share of that series as to voting for
directors, redemption, dividends and liquidation. Shareholders have
one vote for each share held. The Directors have the authority to
issue additional series of shares and to designate the relative
rights and preferences as between the different series. All shares
issued and outstanding are fully paid and non-assessable,
transferable, and redeemable at net asset value at the option of the
shareholder. Shares have no preemptive or conversion rights.
The shares have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the directors if they choose
to do so, and, in such event, the holders of the remaining less than
50% of the shares voting for the election of Directors will not be
able to elect any person or persons to the Board of Directors.
Maryland corporate law provides that a Director of the
Corporation shall not be liable for actions taken in good faith, in
a manner he or she reasonably believes to be in the best interests
of the Corporation and with the care that an ordinarily prudent
person in a like position would use under similar circumstances. In
so acting, a Director shall be fully protected in relying in good
faith upon the records of the Corporation and upon reports made to
the Corporation by persons selected in good faith by the Directors
as qualified to make such reports. The By-Laws provide that the
Corporation will indemnify Directors and officers of the Corporation
against liabilities and expenses reasonably incurred in connection
with litigation in which they may be involved because of their
positions with the Corporation, to the fullest extent permitted by
Maryland corporate law as amended from time to time. However,
nothing in the Articles of Incorporation or the By-Laws protects or
indemnifies a Director or officer against any liability to which he
or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Investment Adviser
Tweedy, Browne Company L.P. acts as investment adviser
(the "Adviser") to both the Global Fund and the American Fund. The
Adviser is registered with the Securities and Exchange Commission
(the "SEC") as an investment adviser and as a broker/dealer and is a
member of the National Association of Securities Dealers.
Tweedy, Browne was founded in 1920 and began managing
money for the account of persons other than its principals and their
families in 1968. Tweedy, Browne began investing in foreign
securities in 1983. Investment decisions are made by consensus
among its general partners, who collectively control Tweedy, Browne
and who are Christopher H. Browne, William H. Browne and John D.
Spears. Messrs. Browne are brothers.
Certain investments may be appropriate for one or both
of the Funds and also for other clients advised by the Adviser.
Investment decisions for each Fund and other clients are made with a
view to achieving their respective investment objectives and after
consideration of such factors as their current holdings,
availability of cash for investment and the size of their
investments generally. Frequently, a particular security may be
bought or sold for only one client or in different amounts and at
different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security. In
addition, purchases or sales of the same security may be made for
two or more clients on the same day. In such event, such transac-
tions will be allocated among the clients in a manner believed by
the Adviser to be equitable to each. In some cases, this procedure
could have an adverse effect on the price or amount of the
securities purchased or sold by a Fund. Purchase and sale orders
for the Funds may be combined with those of other clients of the
Adviser in the interest of most favorable net results to a
particular Fund.
The Adviser renders services to the Global Fund pursuant
to an Investment Advisory Agreement dated as of June 2, 1993. This
Agreement will remain in effect from year to year upon the annual
approval by the vote of a majority of those Directors who are not
parties to such Agreement or interested persons of the Adviser or
the Corporation, cast in person at a meeting called for the purpose
of voting on such approval, and either by vote of the Corporation's
Directors or of the outstanding voting securities of the Fund. The
Agreement may be terminated at any time without payment of penalty
by either party on sixty days' written notice, and automatically
terminates in the event of its assignment.
The Adviser renders services to the American Fund
pursuant to an Investment Advisory Agreement dated as of December 8,
1993. This Agreement will remain in effect from year to year upon
the annual approval by the vote of a majority of those Directors who
are not parties to such Agreement or interested persons of the
Adviser or the Corporation, cast in person at a meeting called for
the purpose of voting on such approval, and either by vote of the
Corporation's Directors or of the outstanding voting securities of
the Fund. The Agreement may be terminated at any time without
payment of penalty by either party on sixty days' written notice,
and automatically terminates in the event of its assignment.
Under both Investment Advisory Agreements, the Adviser
regularly provides the Funds with continuing investment management
for the Funds' portfolios consistent with the Funds' investment
objectives, policies and restrictions and determines what securities
shall be purchased for the portfolios of the Funds, what portfolio
securities shall be held or sold by the Funds, and what portion of
the Funds' assets shall be held uninvested, subject always to the
provisions of the Corporation's Articles of Incorporation and By-
Laws, the 1940 Act and the Internal Revenue Code of 1986 and to the
Funds' investment objectives, policies and restrictions, and
subject, further, to such policies and instructions as the Directors
of the Corporation may from time to time establish.
Under both Investment Advisory Agreements, the Adviser
also renders significant administrative services (not otherwise pro-
vided by third parties) necessary for the Funds' operations as open-
end investment companies including, but not limited to: preparing
reports and notices to the Directors and shareholders, supervising,
negotiating contractual arrangements with, and monitoring various
third-party service providers to the Funds (such as the Funds'
transfer agent, pricing agents, custodians, accountants and others);
preparing and making filings with the Commission and other
regulatory agencies; assisting in the preparation and filing of the
Funds' federal, state and local tax returns; assisting in
preparing and filing the Funds' federal excise tax returns;
assisting with investor and public relations matters; monitoring the
valuation of securities and the calculation of net asset value;
monitoring the registration of shares of the Funds under applicable
federal and state securities laws; maintaining the Funds' books and
records; assisting in establishing accounting policies of the Funds;
assisting in the resolution of accounting and legal issues; estab-
lishing and monitoring the Funds' operating budgets; processing the
payment of the Funds' bills; assisting the Funds in, and otherwise
arranging for, the payment of distributions and dividends and
otherwise assisting each Fund in the conduct of its business,
subject to the direction and control of the Directors.
Subject to the ability of the Adviser upon approval of
the Board to obtain reimbursement for the administrative time spent
on the Funds' operations (other than investment advisory matters) by
employees of the Adviser, the Adviser pays the compensation and
expenses of all directors, officers and executive employees of the
Corporation affiliated with the Adviser and makes available, without
expense to the Funds, the services of such directors, officers and
employees as may duly be elected officers, subject to their
individual consent to serve and to any limitations imposed by law,
and provides the Funds' office spaces and facilities.
For the Adviser's investment advisory services, to
the Global Fund the Adviser is entitled to receive an
annual fee equal to 1.25% of that Fund's average daily net assets.
The fee is payable monthly in arrears, provided the Global 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
Global Fund and unpaid. For the fiscal year ended March 31,
1996 and March 31, 1995 and for the period June 15, 1993
(commencement of operations) through March 31, 1994, the Global Fund
incurred $9,864,278 , $6,221,404 and $1,301,761 (after
voluntary waiver of $109,577) , respectively, in investment
advisory fees.
For the Adviser's investment advisory services, to
the American Fund the Adviser is entitled to receive an
annual fee equal to 1.25% of that Fund's average daily net assets.
The fee is payable monthly in arrears, provided the American 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 American Fund and unpaid. For the fiscal years ended
March 31, 1996 and March 31, 1995 and for the period December
8, 1993 (commencement of operations) through March 31, 1994, the
American Fund incurred $1,518,122 , $321,535 and $0,
respectively, in investment advisory fees after voluntary waivers of
$192,301, $61,245 and $37,497, respectively.
Under the Agreements, each Fund is responsible
for all of its other expenses including organization expenses; fees
and expenses incurred in connection with membership in investment
company organizations; broker's commissions; legal, auditing and
accounting expenses; taxes and governmental fees; net asset
valuation; the fees and expenses of the transfer agent; the cost of
preparing share certificates or any other expenses, including
clerical expenses of issue, redemption or repurchase of shares of
capital stock; the expenses of and the fees for registering or
qualifying securities for sale; the fees and expenses of the
Directors, officers and employees who are not affiliated with the
Adviser and, to the extent described above, employees of the
Adviser; the cost of printing and distributing reports and notices
to shareholders; and the fees and disbursements of custodians. The
Corporation may arrange to have third parties assume all or part of
the expenses of sale, underwriting and distribution of shares of the
Funds. Each Fund is also responsible for its expenses incurred in
connection with litigation, proceedings and claims and the legal
obligation it may have to indemnify the Adviser and its
Directors and officers with respect thereto.
The Adviser has agreed to reimburse the Funds for annual
expenses to the extent required by the most restrictive expense
limitations imposed by any state in which the Corporation is, with
the consent of the Adviser, at the time offering the Funds' shares
for sale, although no payments are required to be made by the
Adviser pursuant to this reimbursement provision in excess of the
annual fee paid by the Funds to the Adviser. Management has been
advised that, subject to waiver by the states involved, the lowest
of such limitations is presently 2 1/2% of such net assets up to $30
million, 2% of the next $70 million of such net assets and 1 1/2% of
such net assets in excess of that amount. Certain expenses such as
brokerage commissions, taxes, excess foreign custody expense ,
extraordinary expenses and interest are excluded from time to time.
If reimbursement is required, it will be made as promptly as practi-
cable after the end of the Funds' fiscal year. In addition, no fee
payment will be made to the Adviser during any fiscal year which
will cause year-to-date expenses to exceed the cumulative pro-rata
expense limitation at the time of such payment.
Each Agreement also provides that the applicable Fund
and the Corporation may use any name utilizing or derived from the
name "Tweedy, Browne" only as long as the Agreement or any
extension, renewal or amendment thereof remains in effect.
Each Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by a Fund in connection with matters to which the Agreement
relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser in the performance of
its duties or from reckless disregard by the Adviser of its
obligations and duties under the Agreement and indemnifies the
Adviser and its employees, officers and partners against any cost or
expense in any circumstance in which the Adviser is not liable to
the Fund.
Officers and employees of the Adviser from time to time
may have transactions with various banks, including the Funds'
custodian banks. It is the Adviser's opinion that the terms and
conditions of those transactions which have occurred were not
influenced by existing or potential custodial or other Fund
relationships.
None of the Directors or officers may have dealings with
the Funds as principals in the purchase or sale of securities,
except as individual subscribers or holders of shares of the Funds.
The Investment Adviser has compiled a booklet, titled
WHAT HAS WORKED IN INVESTING, which describes 44 academic studies of
investment criteria that have produced high rates of return. In the
44 studies included in WHAT HAS WORKED IN INVESTING, exceptional
returns were found for stocks with one or more of the following
investment characteristics: low stock price in relation to book
value, net current assets, earnings, cash flow, dividends or
previous share price; small market capitalization; and a significant
pattern of stock purchases by one or more insiders (officers and
directors), or by the company itself. The study periods range from
1 to 55 years; indicated annual returns ranged from 12.1% to 49.6%
and indicated annual returns in excess of the relevant market index
ranged from 2.7% to 33.5% for the various characteristics and
historical periods that were examined. Approximately half of the
studies focused on U.S. stocks and the balance focused on mature
foreign stock markets. The investment characteristics explained in
this booklet, which are "value"-oriented characteristics, have been
the core of Tweedy, Browne's investment philosophy for more than 30
years, and are the basis for the management of the American Value
Fund and the Global Value Fund. Because Tweedy, Browne does not
make portfolio decisions in accordance with any particular academic
study or computer model and because the studies analyze only
historical data, the returns from the American Value Fund and the
Global Value Fund will differ from those indicated by these studies.
WHAT HAS WORKED IN INVESTING is generally furnished by the Funds'
Distributor to potential investors, and marketing materials and
advertisements prepared by the Distributor may quote or otherwise
refer to the booklet.
Administrator
First Data Investor Services Group, Inc. (the "Admin-
istrator") provides administrative services for the Global Fund for
a fee equal to .20% of the Global Fund's average daily net assets on
an annual basis, subject to specified minimum fee levels and fee
caps and subject to reductions to as low as .12% on average assets
in excess of $500 million. For the fiscal years ended March 31,
1996 and March 31, 1995 and for the period June 15, 1993
(commencement of operations) through March 31, 1994, the Global Fund
incurred $1,116,971 , $758,219 and $199,971, respectively, in
administration fees.
The Administrator also provides administrative services
for the American Fund for a fee equal to .16% of the American Fund's
average daily net assets on an annual basis, subject to specified
minimum fee levels and fee caps and subject to reductions as low as
.10% on average assets in excess of $500 million. For the fiscal
years ended March 31, 1996 and March 31, 1995 and for the
period December 8, 1993 (commencement of operations) through March
31, 1994, the American Fund incurred $156,669 (after voluntary
waiver of $54,000) , $51,904 and $5,102, respectively, in
administration fees.
Under the Administration Agreements for each Fund, the
Administrator is required to provide office facilities, clerical,
legal and administrative services, accounting and record keeping,
internal auditing, valuing a Fund's assets, preparing SEC and share-
holder reports, preparing, signing and filing tax returns,
monitoring 1940 Act compliance and providing other mutually agree-
able services. The Administration Agreements continue from year to
year unless terminated and is terminable on 90 days notice by either
party.
Prior to the close of business on May 6, 1994, The Boston
Company Advisors, Inc. ("Boston Advisors"), an indirect wholly owned
subsidiary of Mellon Bank Corporation, served as the Funds'
administrator. For the period June 15, 1993 (commencement of
operations) to March 31, 1994 and for the period April 1, 1994 to
May 6, 1994, the Global Fund paid fees to Boston Advisors of
$199,971and $41,970, respectively, and for the period December 8,
1993 (commencement of operations) to March 31, 1994 and for the
period April 1, 1994 to May 6, 1994, the American Fund paid fees to
Boston Advisors of $5,102 and $4,338, respectively.
Directors and Executive Officers
The Directors and executive officers of the Corporation,
together with information as to their principal business occupations
during the past five years are shown below. Each Director who is an
"interested person" of the Corporation, as defined in the Investment
Company Act of 1940, as amended, is indicated by an asterisk.
<TABLE>
<S> <C> <C>
Name and Address Position with Corporation Principal Occupation**
Bruce A. Beal, Age 60 Director Partner and
Officer of various real estate
The Beal Companies development and investment
companies.
177 Milk Street Real estate consultant.
Boston, MA 02109
Christopher H. Browne*, Age 50 President, Director General Partner
of Investment Adviser
and Distributor
William H. Browne*, Age 52 Treasurer, Director General Partner of
Investment Adviser and
and Distributor
Arthur Lazar, Age 84 Director President of
Lazar Brokerage
Lazar Brokerage (insurance brokerage)
355 Lexington Avenue
New York, NY 10017
Daniel J. Loventhal, Age 75 Director Private
Investor
4740 S. Ocean Boulevard
Highland Beach, FL 33487
Richard Salomon, Age 49 Director Partner in
Christy & Viener
(law firm)
M. Gervase Rosenberger, Age 45 Secretary General Counsel
for Investment
Adviser and Distributor
John D. Spears, Age 48 Vice President General Partner
of Investment
Adviser and Distributor
* Messrs. Christopher Browne and William Browne are considered by the
Corporation to be Directors who are "interested persons" of the Adviser or
of the Corporation (within the meaning of the 1940 Act). Messrs. Browne
are brothers.
** Unless otherwise stated, all the Directors and officers have been
associated with their respective companies for more than five years.
</TABLE>
Except as stated, the address of each such person is the same
as the Adviser's. Each of the Directors who is not affiliated with
the Adviser will be paid by the Corporation on behalf of the Funds.
Each of these unaffiliated Directors receives an annual Director's
fee of $2,000 and fees of $500 for attending each Directors meeting.
The officers are paid by the Adviser or the Administrator.
The following table sets forth certain information
regarding the compensation of the Corporation's Directors for the
fiscal year ended March 31, 1996. No executive officer or person
affiliated with the Funds received compensation from the Funds. No
Director receives pension or retirement benefits from the Funds.
<TABLE>
COMPENSATION TABLE <S>
<C>
<S> <C> TOTAL
COMPENSATION
AGGREGATE FROM THE
COMPENSATION CORPORATION
NAME OF PERSON FROM THE AND COMPLEX
AND POSITION CORPORATION PAID TO DIRECTORS
Christopher H. Browne
Chairman of the Board and President $0 $0
William H. Browne
Treasurer and Director $0 $0
Bruce A. Beal
Director $4,000 $4,000
Arthur Lazar
Director $4,000 $4,000
Daniel J. Loventhal
Director $4,000 $4,000
Richard Salomon
Director $4,000 $4,000
</TABLE>
Control Persons and Principal Holders of Securities
As of July 11, 1996 , the following persons owned
5% or more of the outstanding shares of the Global Fund and the
American Fund:
<TABLE>
<S> <C> <C>
Fund Name, Name and Address, Percent
of Total Shares
Outstanding
Tweedy, Browne Global Value Fund Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104 22%
Tweedy, Browne Global Value Fund Donaldson Lufkin & Jenrette
P.O. Box 2052
Jersey City, NJ 07303 5%
Tweedy, Browne Global Value Fund National Financial Services Corp
P.O. Box 3908
Church Street Station
New York, NY 10008 5%
Tweedy, Browne American Value Fund National Financial Services Corp
P.O. Box 3908
Church Street Station
New York, NY 10008 25%
Tweedy, Browne American Value Fund Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104 18%
Tweedy, Browne American Value Fund Tweedy Browne Co., L.P.
52 Vanderbilt Avenue, 8th Floor
New York, NY 10017 5%
</TABLE>
The Corporation believes that such ownership is of
record only and is not aware that any person owns beneficially 5% or
more of the shares of the Global Fund or American Fund.
As of July 11, 1996 the Directors and officers of
the Corporation beneficially owned 1% of the outstanding common
stock of the Global Fund and 3.5% , of the outstanding common
stock of the American Fund.
Distributor
The Corporation has a distribution agreement with the
Adviser to act as distributor (the "Distributor") for the Global
Fund dated as of June 2, 1993. This Agreement will remain in effect
from year to year upon the annual approval by a majority of the
Directors who are not parties to such agreement or interested
persons of any such party and either by vote of a majority of the
Board of Directors or a majority of the outstanding voting
securities of the Corporation.
The Corporation has a distribution agreement with the
Adviser for the American Fund dated as of December 8, 1993. This
Agreement will remain in effect from year to year upon the annual
approval by a majority of the Directors who are not parties to such
agreement or interested persons of any such party and either by vote
of a majority of the Board of Directors or a majority of the out-
standing voting securities of the Corporation.
Under both distribution agreements (the "Distribution
Agreements"), the Corporation is responsible for: the payment of
all fees and expenses in connection with the preparation and filing
with the Commission of the Corporation's registration statement and
a Fund's prospectus (including this Statement of Additional Informa-
tion) and any amendments and supplements thereto, the registration
and qualification of shares for sale in the various states,
including registering the Corporation as a broker/dealer in various
states; the fees and expenses of preparing, printing and mailing
prospectuses annually to existing shareholders, notices, proxy
statements, reports or other communications to shareholders of the
Fund; the cost of printing and mailing confirmations of purchases of
shares and any prospectuses accompanying such confirmations; any
issue taxes or any initial transfer taxes; shareholder toll-free
telephone charges and expenses of shareholder service
representatives, the cost of wiring funds for share purchases and
redemptions (unless paid by the shareholder who initiates the trans-
action); the cost of printing and postage of business reply
envelopes; and that portion of any equipment, service or activity
which is primarily intended to result in the sale of shares issued
by the Corporation.
The Distributor will pay for printing and distributing
prospectuses or reports prepared for its use in connection with the
offering of the Fund's shares to the public and preparing, printing
and mailing any other literature or advertising in connection with
the offering of shares of a Fund to the public. The Distributor
will pay all fees and expenses in connection with its qualification
and registration as a broker or dealer under federal and state laws,
as well as the sales related portion of any equipment, service or
activity which is primarily intended to result in the sale of shares
issued by the Corporation.
As agent, the Distributor currently offers each Fund's
shares on a continuous basis to investors in selected states. The
Distribution Agreements provide that the Distributor accepts orders
for shares at net asset value as no sales commission or load is
charged to the investor. The General Partners of the Adviser will
not acquire any shares of either Fund other than the Corporation's
initial seed money.
TAXES
Each Fund has qualified and intends to qualify
each year and elect to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended,
(the "Code"). To qualify as a regulated investment company, a Fund
must comply with certain requirements of the Code relating to, among
other things, the sources of income and diversification of assets.
If the Fund fails to qualify for treatment as a regulated investment
company for any taxable year, the Fund would be taxed as an ordinary
corporation on taxable income for that year (even if that income was
distributed to its shareholders), and all distributions out of earn-
ings and profits would be taxable to shareholders as dividends (that
is, ordinary income).
A regulated investment company qualifying under the Code
is required to distribute each year to its shareholders at least 90%
of its investment company taxable income (generally including
dividends, interest and net short-term capital gain but not net
capital gain, which is the excess of net long-term capital gains
over net short-term capital losses) and generally is not subject to
federal income tax to the extent that it distributes annually its
investment company taxable income and net capital gains in the
manner required under the Code. Each Fund intends to distribute at
least annually all of its investment company taxable income and net
capital gains and therefore generally does not expect to pay federal
income taxes.
Each Fund is subject to a 4% nondeductible excise tax on
amounts required to be but not distributed under a prescribed
formula. The formula requires payment to shareholders during a
calendar year of distributions representing at least 98% of a Fund's
ordinary income for the calendar year, at least 98% of its capital
gain net income realized during the one-year period ending
October 31 during such year, and all ordinary income and capital
gain net income for prior years that were not previously
distributed. For purposes of the excise tax, any ordinary income or
capital gain net income retained by, and subject to federal income
tax in the hands of, the Funds will be treated as having been
distributed.
Distributions of investment company taxable income are
taxable to shareholders as ordinary income. Dividends from domestic
corporations are expected to comprise some portion of each Fund's
gross income. To the extent that such dividends constitute a
portion of a Fund's investment company taxable income, a portion of
the income distributions of that Fund may be eligible for the deduc-
tion for dividends received by corporations. Shareholders will be
informed of the portion of dividends which may so qualify.
Distributions of net capital gains are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares
of the distributing Fund have been held by such shareholders. Such
distributions are not eligible for the dividends-received deduction
discussed above. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date
of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital
gain during such six-month period.
Distributions of investment company taxable income and
net realized capital gains will be taxable as described above,
whether received in shares or in cash. Shareholders receiving
distributions in the form of additional shares will have a cost
basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the distribution date.
All distributions of investment company taxable income
and net realized capital gain, whether received in shares or in
cash, must be reported by each shareholder on his or her federal
income tax return. Dividends and capital gains distributions
declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of
the following year. Redemptions of shares may result in tax conse-
quences (discussed below) to the shareholder and are also subject to
these reporting requirements.
Distributions by a Fund results in a reduction in the
net asset value of the Fund's shares. Should distributions reduce
the net asset value below a share-holder's cost basis, such
distributions would nevertheless be taxable to the shareholder as
ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should consider the tax
implications of buying shares just prior to a distribution. The
price of shares purchased at that time includes the amount of the
forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution which will nevertheless be taxable to them.
Each Fund intends to qualify for and may make the
election permitted under Section 853 of the Code so that share-
holders may (subject to limitations) be able to claim a credit or
deduction on their federal income tax returns for, and may be
required to treat as part of the amounts distributed to them, their
pro rata portion of qualified taxes paid by that Fund to foreign
countries (which taxes relate primarily to investment income). A
shareholder who does not itemize deductions may not claim a
deduction for such taxes. Each Fund may make an election under
Section 853 of the Code, provided that more than 50% of the value of
the total assets of the Fund at the close of the taxable year
consists of stocks or securities in foreign corporations. The
foreign tax credit available to shareholders is subject to certain
limitations imposed by the Code. Each Fund will notify each share-
holder within 60 days after the close of the Fund's taxable year as
to whether the taxes paid by the Fund to foreign countries will
qualify for the treatment discussed above for that year, and if they
do, such notification will designate (i) each shareholders' pro rata
portion of the qualified taxes paid and (ii) the portion of the
distributions that represents income derived from foreign sources.
Generally, a foreign tax credit is subject to the
limitation that it may not exceed the shareholder's U.S. tax (before
the credit) attributable to the shareholder's total taxable income
from foreign sources. For this purpose, the shareholder's
proportionate share of dividends paid by the Fund that represents
income derived from foreign sources will be treated as foreign
source income. The Fund's gains and losses from the sale of
securities, and certain currency gains and losses, generally will be
treated as being derived from U.S. sources. The limitation on the
foreign tax credit applies separately to specific categories of
foreign source income, including "passive income," a category that
includes the portion of dividends received from each Fund that
qualifies as foreign source income. The foregoing limitation may
prevent a shareholder from claiming a credit for the full amount of
his proportionate share of the foreign income taxes paid by each
Fund.
Equity options (including options on stock and options
on narrow-based stock indices) and over-the-counter options on debt
securities written or purchased by a Fund are subject to Section
1234 of the Code. In general, no loss is recognized by a Fund upon
payment of a premium in connection with the purchase of a put or
call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a
lapse or sale of the option, on a Fund's holding period for the
option and, in the case of an exercise of the option, on the Fund's
holding period for the underlying stock. The purchase of a put
option may constitute a short sale for federal income tax purposes,
causing an adjustment in the holding period of the underlying stock
or substantially identical stock in the Fund's portfolio. If the
Fund sells a put or call option, no gain is recognized upon its
receipt of a premium. If the option lapses or is closed out, any
gain or loss is treated as a short-term capital gain or loss. If a
call option sold by the Fund is exercised, any resulting gain or
loss is a short-term or long-term capital gain or loss depending on
the holding period of the underlying stock. The exercise of a put
option sold by the Fund is not a taxable transaction for the Fund.
Many of the futures contracts (including foreign
currency futures contracts) entered into by a Fund, certain forward
foreign currency contracts, and all listed non-equity options
written or purchased by the Fund (including options on a debt
securities, options on futures contracts, options on securities
indices and certain options on broad-based stock indices) will be
governed by Section 1256 of the Code. Absent a tax election to the
contrary, gain or loss attributable to the lapse, exercise or
closing out of any such position generally will be treated as 60%
long-term and 40% short-term capital gain or loss. In addition, on
the last trading day of the Fund's fiscal year, all outstanding
Section 1256 positions will be marked to market (i.e., treated as if
such positions were closed out at their closing price on such day),
with any resulting gain or loss recognized as 60% long-term and 40%
short-term capital gain or loss. Under certain circumstances, entry
into a futures contract to sell a security may constitute a short
sale for federal income tax purposes, causing an adjustment in the
holding period of the underlying security or a substantially
identical security in the Fund's portfolio. Under Section 988 of
the Code, discussed below, certain foreign currency gain or loss
from foreign currency related forward contracts, certain futures and
similar financial instruments entered into or acquired by the Fund
will be treated as ordinary income or loss.
The Code requires that a Fund realize less than 30% of
its annual gross income from the sale or other disposition of stock,
securities and certain options, futures and forward contracts held
for less than three months. The Fund's options, futures and forward
transactions may increase the amount of gains realized by the Fund
that are subject to this 30% limitation. Accordingly, the amount of
such transactions that each Fund may undertake may be limited.
Positions of each Fund which consist of at least one
stock and at least one stock option with respect to such stock or
substantially identical stock or securities or other position with
respect to substantially similar or related property which
substantially diminishes a Fund's risk of loss with respect to such
stock could be treated as a "straddle" which is governed by Section
1092 of the Code, the operation of which may cause deferral of
losses, adjustments in the holding periods of stock or securities
and conversion of short-term capital losses into long-term capital
losses. In addition, the Fund will not be allowed to currently
deduct interest and carry costs properly attributable to the
straddle position. The Fund may make certain elections to mitigate
the operation of the rules discussed above. An exception to these
straddle rules exists for any "qualified covered call options" on
stock written by the Fund.
Straddle positions of a Fund which consist of at least
one position not governed by Section 1256 and at least one futures
contract or forward contract or non-equity option governed by
Section 1256 which substantially diminishes the Fund's risk of loss
with respect to such other position will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle
rules of Section 1092 of the Code, certain tax elections exist for
them which reduce or mitigate the operation of these rules. Each
Fund will monitor its transactions in options and futures and may
make certain tax elections in connection with these investments.
Under the Code, gains or losses attributable to fluctua-
tions in exchange rates which occur between the time a Fund accrues
interest or other receivables, or accrues expenses or other
liabilities, denominated in a foreign currency and the time the Fund
actually collects such interest or receivables, or pays such expense
or liabilities, generally is treated as ordinary income or ordinary
loss. Similarly, gains or losses from dispositions of foreign
currencies, debt securities denominated in a foreign currency and
certain futures and forward contracts, attributable to fluctuations
in the value of the foreign currency between the date of acquisition
of the currency or security or contract and the date of disposition
are also treated as ordinary gain or loss. These gains or losses may
increase or decrease the amount of the Fund's investment company
taxable income to be distributed to its shareholders as ordinary
income.
If a Fund owns shares in a foreign corporation that
constitutes a "passive foreign investment company" for U.S. federal
income tax purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of the
Code, the Fund may be subject to U.S. federal income tax on a
portion of any "excess distribution" it receives from the foreign
corporation or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend by
the Fund to its U.S. shareholders. Each Fund may also be subject to
additional tax in the nature of an interest charge with respect to
deferred taxes arising from such distributions or gains. Any tax
paid by a Fund as a result of its ownership of shares in a "passive
foreign investment company" will not give rise to any deduction or
credit to the Fund or any shareholder. If the Fund owns shares in a
"passive foreign investment company" and the Fund elects to treat
the foreign corporation as a "qualified electing fund" under the
Code, the Fund may be required to include in its income each year a
portion of the ordinary income and net capital gains of the foreign
corporation, even if this income is not distributed to the Fund.
Any such income would be subject to the distribution requirements
described above, even if the Fund does not receive any funds to
distribute.
A portion of the difference between the issue price of
zero coupon securities and their face value ("original issue
discount") is considered to be income to the Fund each year, even
though the Fund will not receive cash interest payments from these
securities. This original issue discount imputed income will
comprise a part of the investment company taxable income of the Fund
which must be distributed to shareholders in order to maintain the
qualification of the Fund as regulated investment company and to
avoid federal income tax at the level of the Fund.
Each Fund will be required to report to the IRS all dis-
tributions of investment company taxable income and capital gains as
well as gross proceeds from the redemption or exchange of the Fund's
shares, except in the case of certain exempt shareholders. Under
the backup withholding provisions of Section 3406 of the Code,
distributions of investment company taxable income and capital gains
and proceeds from the redemption or exchange of the shares of a
regulated investment company may be subject to withholding of
federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish either Fund with their taxpayer
identification numbers and with required certifications regarding
their status under the federal income tax law. Withholding may also
be required if either Fund is notified by the Internal Revenue
Service or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder is
incorrect or that the shareholder has previously failed to report
interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the
amounts required to be withheld.
Redeeming shareholders will recognize gain or loss in an
amount equal to the difference between the basis in their redeemed
shares and the amount received. If such shares are held as a capital
asset, the gain or loss will be a capital gain or loss and will be
long-term if such shares have been held for more than one year. Any
loss realized upon a taxable disposition of shares held for six
months or less will be treated as a long-term capital loss to the
extent of any capital gain dividends received with respect to such
shares.
Shareholders of each Fund may be subject to state and
local taxes on distributions received from either Fund and on
redemptions of each Fund's shares.
Each distribution is accompanied by a brief explanation
of the form and character of the distribution. In January of each
year the Corporation issues to each shareholder a statement of the
federal income tax status of all distributions.
The foregoing general discussion of U.S. federal income
tax law relates solely to the application of that law to U.S.
persons, i.e., U.S. citizens and residents and U.S. corporations,
partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Funds, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a
rate of 31% (or at a lower rate under an applicable income tax
treaty) on amounts constituting ordinary income received by him or
her, where such amounts are treated as income from U.S. sources
under the Code.
Shareholders should consult their tax advisers about the
application of the provisions of tax law described in this Statement
of Additional Information in light of their particular tax
situations.
PORTFOLIO TRANSACTIONS
The Adviser conducts all of the trading operations for
both the Global Fund and the American Fund. The Adviser executes
portfolio transactions with or through issuers, underwriters and
other brokers and dealers. In its capacity as a broker-dealer, the
Adviser reserves the right to receive a ticket charge from each Fund
for such service although it currently does not engage in this prac-
tice.
The primary objective of the Adviser in placing orders
for the purchase and sale of securities for each Fund's portfolio is
to obtain the most favorable net results, taking into account such
factors as price, commission, where applicable, (which is negotiable
in the case of U.S. national securities exchange transactions but
which is generally fixed in the case of foreign exchange trans-
actions), size of order, difficulty of execution and skill required
of the executing broker/dealer. The Adviser reviews on a routine
basis commission rates, execution and settlement services performed,
making internal and external comparisons.
When it can be done consistently with the policy of
obtaining the most favorable net results, it is the Adviser's
practice to place such orders with brokers and dealers who supply
market quotations to the custodian of the Funds for appraisal
purposes, or who supply research, market and statistical information
to either Fund or the Adviser. The term "research, market and
statistical information" includes advice as to the value of securi-
ties, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or
sellers of securities, and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. The
Adviser is not authorized when placing portfolio transactions for
either Fund to pay a brokerage commission in excess of that which
another broker might have charged for executing the same transaction
solely on account of the receipt of research, market or statistical
information. The Adviser does not place orders with brokers or
dealers on the basis that the broker or dealer has or has not sold a
Fund's shares. Except for implementing the policy stated above,
there is no intention to place portfolio transactions with partic-
ular brokers or dealers or groups thereof. In effecting
transactions in over-the-counter securities, orders are placed with
the principal market makers for the security being traded unless it
appears that more favorable results are available otherwise.
Although certain research, market and statistical infor-
mation from brokers and dealers can be useful to the Funds and to
the Adviser, it is the opinion of the Adviser, that such information
is only supplementary to its own research effort since the
information must still be analyzed, weighed, and reviewed by the
Adviser's staff. Such information may be useful to the Adviser in
providing services to clients other than the Funds, and not all such
information is useful to the Adviser in providing services to the
Funds. For the fiscal year ended March 31, 1996, the Global Fund
paid brokerage commissions of $1,135,039 . For the fiscal year
ended March 31, 1995, the Global Fund paid brokerage commissions of
$1,336,935 of which $7,960 was paid to affiliates. For the fiscal
year ended March 31, 1996, the American Fund paid brokerage
commission of $210,767 . For the fiscal year ended March 31,
1995, the American Fund paid brokerage commissions of $54,742 of
which $2,240 was paid to affiliates. For the fiscal period ended
March 31, 1994, the Global Fund and the American Fund paid brokerage
commissions of $782,906 and $17,018, respectively. The increase in
commission payments is attributable to the increased size of the
Funds.
Average annual portfolio turnover rate is the ratio of
the lesser sales or purchases to the monthly average value of the
portfolio securities owned during the year, excluding from both the
numerator and the denominator all securities with maturities at the
time of acquisition of one year or less. For the fiscal years ended
March 31, 1996 and March 31, 1995, the Global Fund's
portfolio turnover rates were 17% and 16%, respectively. For
the fiscal years ended March 31, 1996 March 31, 1995, the
American Fund's portfolio turnover rates were 9% and 4%,
respectively.
NET ASSET VALUE
The net asset value of shares for both the Global Fund
and the American Fund will be computed as of the close of regular
trading on the New York Stock Exchange on each day during which the
Exchange is open for trading. The Exchange is normally closed on
the following national holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas. Net asset value per share for the
Funds is determined by dividing the value of the total assets, less
all liabilities, by the total number of shares outstanding.
In valuing a Fund's assets, a security listed on an
exchange or through any system providing for daily publication of
actual prices (and not subject to restrictions against sale by the
Fund on such exchange or system) will be valued at its last sale
price prior to the close of regular trading (or, in the case of
securities traded on the London Stock Exchange, at the "Mid Price",
i.e., the mid price between the bid and ask prices, rounded to the
nearest dollar if the spread between the bid and the ask prices is
more than one pence). Lacking any sales, the security will be
valued at the mean between the last asked price and the last bid
price prior to the close of regular trading.
Securities for which daily publication of actual prices
is not available and for which bid and asked quotations are readily
available will be valued at the mean between the current bid and
asked prices for such securities in the over-the-counter market.
Other securities will be valued at their fair value as determined in
good faith by or under the direction of the Directors. Open futures
contracts are valued at the most recent settlement price, unless
such price does not reflect the fair value of the contract, in which
case such positions will be valued by or under the direction of the
Directors.
The value of a security which is not readily marketable
and which accordingly is valued by or under the direction of the
Directors is valued periodically on the basis of all relevant
factors which may include the cost of such security to the Fund, the
market price of unrestricted securities of the same class at the
time of purchase and subsequent changes in such market price,
potential expiration or release of the restrictions affecting such
security, the existence of any registration rights, the fact that
the Fund may have to bear part or all of the expense of registering
such security, any potential sale of such security by or to another
investor as well as traditional methods of private security analy-
sis.
Following the calculation of security values in terms of
the currency in which the market quotation used is expressed ("local
currency"), the valuing agent will calculate these values in terms
of United States dollars on the basis of the conversion of the local
currencies (if other than U.S.) into U.S. dollars at the rates of
exchange prevailing at the value time as determined by the valuing
agent.
Trading in securities on European and Far Eastern
securities exchanges and over-the-counter markets is normally
completed well before the close of business on each business day in
New York (i.e., a day on which the Exchange is open). In addition,
European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business
days in New York. Furthermore, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days
which are not business days in New York and on which a Fund's net
asset value is not calculated. Each Fund generally calculates net
asset value per share, and therefore effects sales, redemptions and
repurchases of its shares, as of the regular close of the Exchange
on each day on which the Exchange is open. Such calculation does not
take place contemporaneously with the determination of the prices of
the majority of the portfolio securities used in such calculation.
If events materially affecting the value of such securities occur
between the time when their price is determined and the time when
that Fund's net asset value is calculated, such securities will be
valued at fair value as determined in good faith by the Board of
Directors.
ADDITIONAL INFORMATION
Experts
The financial statements
and schedules of investments
of Tweedy, Browne Global Value Fund and Tweedy, Browne American
Value Fund at March 31, 1996 and for each of the periods indicated
therein appearing in this Statement of Additional Information have
been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
Other Information
The Corporation employs Boston Safe Deposit and Trust
Company as custodian and Unified Advisers Inc. as transfer agent for
both the Global Fund and the American Fund.
The Prospectus and the Statement of Additional
Information omit certain information contained in the Registration
Statement which the Corporation has filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933 and
reference is hereby made to the Registration Statement for further
information with respect to the Funds and the securities offered
hereby. The Registration Statement is available for inspection by
the public at the SEC in Washington, D.C.
Financial Statements
The Funds' Annual Report for the fiscal year ended March
31, 1996 is included herein.
<PAGE>
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[LOGO]
TWEEDY, BROWNE
GLOBAL VALUE FUND
-----------------
ANNUAL
-----------------
MARCH 31, 1996
-----------------
- --------------------------------------------------------------------
- ------------
<PAGE>
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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.
- --------------------------------------------------------------------
- ------------
<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
<PAGE>
- --------------------------------------------------------------------
- ----------
[LOGO]
TWEEDY, BROWNE
AMERICAN 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 AMERICAN VALUE FUND
- --------------------------------------------------------------------
- ----------
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.
- --------------
* 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:
- --------------------------------------------------------------------
- ----------
RATES OF RETURN FROM 1979
THROUGH 1994
- --------------------------------------------------------------------
- ----------
LARGE SMALL LARGE
SMALL
CAP CAP CAP
CAP
GROWTH GROWTH VALUE
VALUE
- --------------------------------------------------------------------
- ----------
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
- --------------------------------------------------------------------
- ----------
Portfolio Highlights
- --------------------------------------------------------------------
- ----------
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
- --------------------------------------------------------------------
- ----------
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.
- --------------------------------------------------------------------
- ----------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
AGGREGATE TOTAL RETURN*
----------------------------
- -----------------------
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%
- --------------------------------------------------------------------
- ---------------------------------------------------------------
<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
APPENDIX A
The following is a description of the ratings given by
Moody's and S&P to corporate and municipal bonds.
Ratings of Municipal and Corporate Bonds
S&P:
Debt rated AAA has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong. Debt rated AA has a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity
to pay interest and repay principal. BB indicates the least degree
of speculation and C the highest. While such debt will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse
conditions.
Debt rated BB has less near-term vulnerability to
default than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial,
or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The BB rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating. Debt rated B has a
greater vulnerability to default but currently has the capacity to
meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB-rating.
Debt rated CCC has a currently identifiable vulner-
ability to default, and is dependent upon favorable business,
financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt
that is assigned and actual or implied B or B-rating. The rating
CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is
assigned an actual or implied CCC-debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. The rating C1 is
reserved for income bonds on which no interest is being paid.
Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due even if the applicable grace period had not expired,
unless S&P believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most un-
likely to impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long term risks appear somewhat larger than in Aaa
securities. Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment character-
istics and in fact have speculative characteristics as well
assured. Often the protection of interest and principal payments
may be very moderate and there by not well safeguarded during
other good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B
generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small.
Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which are
rated Ca represent obligations which are speculative to a high
degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
List all financial statements and exhibits as part of the
Registration Statement.
(a) Financial Statements (included in Part A)
(i) Financial Highlights for The Tweedy,
Browne Global Value Fund for the period June 15, 1993
(commencement of operations) to March 31, 1996 (audited).
(ii) Financial Highlights for The Tweedy,
Browne American Value Fund for the period December 8, 1993
(commencement of operations) to March 31, 1996 (audited).
(b) Financial Statements (included in Part B):
Audited Financial Statements as of March
31, 1995 for the Tweedy Browne Global Value Fund and Tweedy Browne
American Value Fund:
Portfolio of Investments
Schedule of Forward Exchange Contracts
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Ernst & Young LLP, Independent
Auditors
(b) Exhibits:
(1) (a) Articles of Incorporation is
incorporated by reference to Exhibit 1 to Pre-Effective Amendment
No. 2 to the Registration Statement ("Pre-Effective Amendment No.
2").
(1) (b) Articles Supplementary is
incorporated by reference to Exhibit 1 to Post-Effective Amendment
No. 1 to the Registration Statement ("Post-Effective Amendment
No. 1").
(2) By-Laws is incorporated by reference
to Exhibit 2 to Pre-Effective Amendment No. 2.
(3) None.
(4) (a) Specimen Certificate for the
Tweedy, Browne Global Value Fund is incorporated by reference to
Exhibit 4 to Pre-Effective Amendment No. 2.
(4) (b) Specimen Certificate for the
Tweedy, Browne American Value Fund is incorporated by reference to
Exhibit 4 to Post-Effective Amendment No. 3 to the Registration
Statement ("Post-Effective Amendment No. 3").
(5) (a) Advisory Agreement between
Registrant and Tweedy, Browne Company L.P. dated June 3, 1993
relating to the Tweedy, Browne Global Value Fund is incorporated
by reference to Exhibit 5 to Pre-Effective Amendment No. 2.
(5) (b) Advisory Agreement between
Registrant and Tweedy, Browne Company L.P. dated December 8, 1993
relating to the Tweedy, Browne American Value Fund is incorporated
by reference to Exhibit 5 to the Registration Statement ("Post-
Effective Amendment No. 5").
(6) (a) Distribution Agreement between Registrant
and Tweedy, Browne Company L.P. dated June 3, 1993 relating to the
Tweedy, Browne Global Value Fund is incorporated by reference to
Exhibit 6 to Pre-Effective Amendment No. 2.
(6) (b) Distribution Agreement between
Registrant and Tweedy, Browne Company L.P. dated December 8, 1993
relating to the Tweedy, Browne American Value Fund is incorporated
by reference to Exhibit 6 to Post-Effective Amendment No. 5.
(7) None.
(8) (a) Custody Agreement between
Registrant and Boston Safe Deposit and Trust Company dated June 2,
1993 relating to the Tweedy, Browne Global Value
Fund is incorporated by reference to
Exhibit 8 to Pre-Effective Amendment No. 2.
(8) (b) Amended and Restated Custody
Agreement between Registrant and Boston Safe Deposit and Trust
Company relating to the Tweedy, Browne Global Value Fund and the
Tweedy, Browne American Value Fund dated December 8, 1993 is
incorporated by reference to Exhibit 8 to Post-Effective Amendment
No. 3.
(9) (a) Transfer Agent Agreement
between Registrant and Unified Advisers, Inc. dated June 2, 1993
relating to the Tweedy, Browne Global Value Fund is incorporated
by reference to Exhibit 9 to Pre-Effective Amendment No. 2.
(9) (b) Transfer Agent Agreement
between Registrant and Unified Advisers, Inc. relating to the
Tweedy, Browne Value Fund is incorporated by reference to Exhibit
9 to Post-Effective Amendment No. 3.
(9) (c) Administration Agreement
between Registrant and The Boston Company Advisors, Inc. dated
June 2, 1993 relating to the Tweedy, Browne Global Value Fund is
incorporated by reference to Exhibit 9 to Pre-Effective Amendment
No. 2.
(9) (d) Amended and Restated
Administration Agreement between Registrant and The Boston Company
Advisors, Inc. relating to the Tweedy, Browne Global Value Fund
and the Tweedy, Browne American Value Fund dated December 8, 1993
is incorporated by reference to Exhibit 9 to Post-Effective
Amendment No. 3.
(10) Opinion and Consent of Miles &
Stockbridge is incorporated by reference to Exhibit 10 to Post-
Effective Amendment No. 1.
(11) Consent of Ernst & Young LLP,
independent auditors is filed herein.
(12) Not applicable.
(13) (a) Purchase Agreement dated June 2,
1993 relating to the initial capital for the Tweedy, Browne Global
Value Fund is incorporated by reference to Exhibit 13 to Post-
Effective Amendment No.3.
(13) (b) Purchase Agreement relating to the
initial capital for the Tweedy, Browne American Value Fund is
incorporated by reference to Exhibit 13 to Post-Effective
Amendment No. 4 to the Registration Statement.
(14) None.
(15) None.
(16) None.
(17) Financial Data Schedule is filed
herein.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
No person is controlled by the Registrant.
Item 26. Number of Holders of Securities.
As of July 15, 1996:
(1) (2)
Number of
Title of Class Record
Holders
Tweedy, Browne Global
Value Fund Stock
par value $.0001 per share 25,531
Tweedy, Browne American
Value Fund Stock
par value $.0001 per share 4,251
Item 27. Indemnification.
Under Registrant's Articles of Incorporation and By-
Laws, as amended, the Directors and officers of Registrant will be
indemnified to the fullest extent allowed and in the manner
provided by Maryland law and applicable provisions of the
Investment Company Act of 1940, as amended, including advancing of
expenses incurred in connection therewith. Indemnification shall
not be provided however to any officer or director against any
liability to the Registrant or its security holders to which he or
she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Article 2, Section 405.2 of the Maryland General
Corporation Law provides that the Articles of Incorporation of a
Maryland corporation may limit the extent to which directors or
officers may be personally liable to the Corporation or its
stockholders for money damages in certain instances. The
Registrant's Articles of Incorporation, as amended, provide that,
to the fullest extent permitted by Maryland law, as it may be
amended or interpreted from time to time, no Director or officer
of the Registrant shall be personally liable to the Registrant or
its stockholders. The Registrant's Articles of Incorporation also
provide that no amendment of the Registrant's Articles of Incor-
poration, as amended, or repeal of any of its provisions shall
limit or eliminate any of the benefits provided to Directors and
officers in respect of any act or omission that occurred prior to
such amendment or repeal.
The Investment Advisory Agreement and Distribution
Agreement filed as exhibits hereto contain provisions requiring
indemnification of the Registrant's investment advisor and
principal underwriter by the Registrant.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant and the
investment advisor and distributor pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a Director,
officer, or controlling person of the Registrant and the
Distributor in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by
such Director, officer or controlling person or the Distributor in
connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate juris-
diction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
See "Why Invest in the Funds?" in the Prospectus re-
garding the business of Tweedy, Browne Company L.P. (the "In-
vestment Adviser"). The Investment Adviser also acts as the
adviser for the following investment company: Tweedy, Browne
Global Value Fund, Inc. The address of the Investment Adviser is
52 Vanderbilt Avenue, New York, New York 10017. Set forth below
is a list of each General Partner of the Investment Adviser.
NAME
EMPLOYMENT
Christopher
H. Browne
Associated with the
Investment Adviser since
1969; General Partner of
TBK Partners, L.P. ("TBK")
and Vanderbilt Partners,
L.P. ("Vanderbilt")
(Private investment
funds).
William H.
Browne
Associated with the
Investment Adviser since
1978; General Partner of
TBK and Vanderbilt.
John D.
Spears
Associated with the
Investment Adviser since
1974; General Partner in
TBK and Vanderbilt.
Item 29. Principal Underwriters.
(a) Tweedy, Browne N.V. and Tweedy, Browne Inter-
national N.V., offshore funds not offered to U.S. persons.
(b) Not applicable.
(c) Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Registrant by Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder will be maintained at
the offices of the Administrator at One Exchange Place, Boston,
Massachusetts 02109 or at the offices of the Adviser at 52
Vanderbilt Avenue, New York, New York l00l7.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) The undersigned Registrant undertakes to furnish
each person to whom a prospectus is delivered with a copy of the
registrant's latest annual report to shareholders, upon request
and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
Registrant certifies that this Post-Effective Amendment No. 2 to
the Registration Statement meets the requirements for
effectiveness pursuant to Rule 485(b) of the Securities Act of
1933, as amended, and the Registrant has duly caused this Post-
Effective Amendment No. 6 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on the
25th day of July, 1996.
TWEEDY, BROWNE FUND INC.
By: /s/ Christopher H. Browne
Christopher H. Browne
President
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Post-Effective Amendment No. 6 to the
Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
/s/ Christopher H. Browne Chairman of the Board,
Christopher H. Browne President and Director July
25, 1996
/s/ William H. Browne Treasurer and Director July
25, 1996
William H. Browne
/s/ Bruce A. Beal Director July 25,
1996
Bruce A. Beal
/s/ Arthur Lazar Director July 25,
1996
Arthur Lazar
/s/ Daniel J. Loventhal Director July
25, 1996
Daniel J. Loventhal
/s/ Richard Salomon Director July
25, 1996
Richard Salomon
EXHIBIT INDEX
Exhibit # Description Page #
11 Consent of Ernst & Young LLP,
independent auditors
17 Financial Data Schedule
G:\SHARED\COMPLI2\VACCA\TWEEDY\SAI&PROS\SAI895.DOC
35
P:\SHARED\3RDPARTY\TWEEDY\PEA\PEA#6.DOC 11
P:\SHARED\3RDPARTY\TWEEDY\PEA\PEA#6.DOC
Consent of Ernst & Young, LLP, Independent Auditors
We consent to the references to our firm under the captions
"Financial Highlights" in the Prospectus and "Experts" in the
Statement of Additional Information and to the use of our reports
dated May 3, 1996 on the financial statements and financial
highlights of Tweedy, Browne Global Value Fund and Tweedy, Browne
American Value Fund, the portfolios of Tweedy, Browne Fund Inc.
included in Post-Effective Amendment No. 6 to Registration
Statement (Form N-1A No. 33-57724).
ERNST & YOUNG LLP
Boston, Massachusetts
July 22, 1996
[ARTICLE] 6
[SERIES] 01
[NUMBER] 01
[NAME] TWEEDY, BROWNE GLOBAL VALUE FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-1996
[PERIOD-END] MAR-31-1996
[INVESTMENTS-AT-COST]
780,717,659
[INVESTMENTS-AT-VALUE]
925,866,222
[RECEIVABLES]
9,606,477
[ASSETS-OTHER]
0
[OTHER-ITEMS-ASSETS]
27,733,658
[TOTAL-ASSETS]
963,206,357
[PAYABLE-FOR-SECURITIES]
10,286,158
[SENIOR-LONG-TERM-DEBT]
0
[OTHER-ITEMS-LIABILITIES]
2,009,233
[TOTAL-LIABILITIES]
12,295,391
[SENIOR-EQUITY]
0
[PAID-IN-CAPITAL-COMMON]
784,045,789
[SHARES-COMMON-STOCK]
66,567,401
[SHARES-COMMON-PRIOR]
56,878,782
[ACCUMULATED-NII-CURRENT]
14,504,033
[OVERDISTRIBUTION-NII]
0
[ACCUMULATED-NET-GAINS]
(10,403,439)
[OVERDISTRIBUTION-GAINS]
(9,099,176)
[ACCUM-APPREC-OR-DEPREC]
171,863,759
[NET-ASSETS]
950,910,966
[DIVIDEND-INCOME]
16,146,043
[INTEREST-INCOME]
5,563,538
[OTHER-INCOME]
0
[EXPENSES-NET]
12,663,635
[NET-INVESTMENT-INCOME]
9,045,946
[REALIZED-GAINS-CURRENT]
(10,403,439)
[APPREC-INCREASE-CURRENT]
185,687,996
[NET-CHANGE-FROM-OPS]
184,330,503
[EQUALIZATION]
0
[DISTRIBUTIONS-OF-INCOME]
0
[DISTRIBUTIONS-OF-GAINS]
(12,440,401)
[DISTRIBUTIONS-OTHER]
0
[NUMBER-OF-SHARES-SOLD]
29,891,616
[NUMBER-OF-SHARES-REDEEMED]
(21,057,222)
[SHARES-REINVESTED]
854,225
[NET-CHANGE-IN-ASSETS]
295,876,415
[ACCUMULATED-NII-PRIOR]
5,458,087
[ACCUMULATED-GAINS-PRIOR]
3,341,225
[OVERDISTRIB-NII-PRIOR]
0
[OVERDIST-NET-GAINS-PRIOR]
0
[GROSS-ADVISORY-FEES]
9,864,278
[INTEREST-EXPENSE]
0
[GROSS-EXPENSE]
12,663,635
[AVERAGE-NET-ASSETS]
789,142,230
[PER-SHARE-NAV-BEGIN]
11.52
[PER-SHARE-NII]
0.15
[PER-SHARE-GAIN-APPREC]
2.81
[PER-SHARE-DIVIDEND]
0.00
[PER-SHARE-DISTRIBUTIONS]
(0.20)
[RETURNS-OF-CAPITAL]
0.00
[PER-SHARE-NAV-END]
14.28
[EXPENSE-RATIO]
1.60
[AVG-DEBT-OUTSTANDING]
0
[AVG-DEBT-PER-SHARE]
0
[ARTICLE] 6
[SERIES] 02
[NUMBER] 02
[NAME] TWEEDY, BROWNE AMERICAN VALUE FUND
</TABLE>
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-1996
[PERIOD-END] MAR-31-1996
[INVESTMENTS-AT-COST]
166,669,784
[INVESTMENTS-AT-VALUE]
203,617,927
[RECEIVABLES]
1,871,129
[ASSETS-OTHER]
0
[OTHER-ITEMS-ASSETS]
654,589
[TOTAL-ASSETS]
206,143,645
[PAYABLE-FOR-SECURITIES]
4,187,830
[SENIOR-LONG-TERM-DEBT]
0
[OTHER-ITEMS-LIABILITIES]
357,308
[TOTAL-LIABILITIES]
4,545,138
[SENIOR-EQUITY]
0
[PAID-IN-CAPITAL-COMMON]
161,443,751
[SHARES-COMMON-STOCK]
14,103,718
[SHARES-COMMON-PRIOR]
5,496,084
[ACCUMULATED-NII-CURRENT]
371,199
[OVERDISTRIBUTION-NII]
0
[ACCUMULATED-NET-GAINS]
2,261,481
[OVERDISTRIBUTION-GAINS]
0
[ACCUM-APPREC-OR-DEPREC]
37,522,076
[NET-ASSETS]
201,598,507
[DIVIDEND-INCOME]
2,288,549
[INTEREST-INCOME]
1,170,676
[OTHER-INCOME]
0
[EXPENSES-NET]
1,908,343
[NET-INVESTMENT-INCOME]
1,550,882
[REALIZED-GAINS-CURRENT]
2,569,270
[APPREC-INCREASE-CURRENT]
34,254,651
[NET-CHANGE-FROM-OPS]
38,374,803
[EQUALIZATION]
0
[DISTRIBUTIONS-OF-INCOME]
(1,344,358)
[DISTRIBUTIONS-OF-GAINS]
(253,652)
[DISTRIBUTIONS-OTHER]
0
[NUMBER-OF-SHARES-SOLD]
12,329,516
[NUMBER-OF-SHARES-REDEEMED]
(3,834,573)
[SHARES-REINVESTED]
112,691
[NET-CHANGE-IN-ASSETS]
142,742,475
[ACCUMULATED-NII-PRIOR]
164,675
[ACCUMULATED-GAINS-PRIOR]
(54,137)
[OVERDISTRIB-NII-PRIOR]
0
[OVERDIST-NET-GAINS-PRIOR]
0
[GROSS-ADVISORY-FEES]
1,710,423
[INTEREST-EXPENSE]
0
[GROSS-EXPENSE]
2,203,627
[AVERAGE-NET-ASSETS]
136,833,735
[PER-SHARE-NAV-BEGIN]
10.71
[PER-SHARE-NII]
0.15
[PER-SHARE-GAIN-APPREC]
3.56
[PER-SHARE-DIVIDEND]
(0.11)
[PER-SHARE-DISTRIBUTIONS]
(0.02)
[RETURNS-OF-CAPITAL]
0.00
[PER-SHARE-NAV-END]
14.29
[EXPENSE-RATIO]
1.39
[AVG-DEBT-OUTSTANDING]
0
[AVG-DEBT-PER-SHARE]
0
</TABLE>
