File No. 811-7458
33-57724
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. X
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Post-Effective Amendment No. 7 X
and
REGISTRATION STATEMENT UNDER THE INVESTMENT ---
COMPANY ACT OF 1940 X
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AMENDMENT No. 10 X
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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)
Coleen Downs Dinneen, 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)
on ( ) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
X on (August 1, 1997) 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, 1997 was filed on May 27, 1997 .
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
<PAGE>
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, 1997
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
<TABLE>
<S> <C>
52 VANDERBILT AVENUE FOR SPECIAL ASSISTANCE IN
NEW YORK, NY 10017 OPENING A NEW ACCOUNT: 800-432-4789, PRESS 2
FUND INFORMATION: 800-432-4789, PRESS 1
SHAREHOLDER SERVICES: 800-432-4789, PRESS 3
NAV PRICES: 800-432-4789, PRESS 3
</TABLE>
- --------------------------------------------------------------------------------
[LOGO] 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
Tweedy, Browne American Value Fund (the "American Fund") seeks long-term
growth of capital by investing in a diversified portfolio consisting primarily
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 (the "Funds") 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 $3.9 billion in client funds, including approximately $1.7 billion
in foreign securities. The current and retired partners and their families, as
well as employees of Tweedy, Browne, have more than $ million in portfolios
combined with or similar to client portfolios, including approximately $24.4
million in the Global Fund and $22.8 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, 1997 (the "Statement of Additional Information"), as
amended from time to time, may be obtained without charge by writing to the
address or calling the 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. You pay no commissions to
purchase or redeem shares of the Funds. 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% 1.14%*
12b-1 fees.............................................. NONE NONE
Other Expenses.......................................... 0.33% 0.25%**
---- ----
Total Fund Operating Expenses........................... 1.58% 1.39%**
==== ====
</TABLE>
- ---------------
The purpose of the above table is to assist the investor in understanding
the various costs and expenses that investors in the Global Fund and the
American Fund will bear directly or indirectly.
*Without the voluntary fee waiver the investment advisory fee would have been
1.25% for the American Fund.
**Without the voluntary fee waivers of the administrator and custodian, Other
Expenses and Total Fund Operating Expenses would have been 0.27% and 1.52%,
respectively.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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, 1997. 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 FUND AMERICAN FUND
----------- -------------
<S> <C> <C>
One Year............................... $ 16 $ 14
Three Years............................ $ 50 $ 44
Five Years............................. $ 86 $ 76
Ten Years.............................. $188 $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
TWEEDY, BROWNE GLOBAL VALUE FUND
The following information for the fiscal year ended March 31, 1997, has
been audited by Ernst & Young LLP, independent auditors whose report thereon
appears in the Global Fund's Annual Report dated March 31, 1997. 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)
================================================================================
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
3/31/97 3/31/96(a) 3/31/95 3/31/94(a)(b)
---------- ---------- -------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 14.28 $ 11.52 $ 12.26 $ 10.00
================================================================================================================
Income from investment operations:
Net investment income (loss)(c) 0.12 0.15 0.10 (0.00)(d)
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.18 2.81 (0.68) 2.26
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations 2.30 2.96 (0.58) 2.26
================================================================================================================
DISTRIBUTIONS:
Dividends from net investment income (0.19) -- -- --
- ----------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income (0.36) -- -- --
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.57) (0.05) (0.06) --
- ----------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gains -- (0.15) (0.10) --
- ----------------------------------------------------------------------------------------------------------------
Total distributions (1.12) (0.20) (0.16) --
================================================================================================================
Net asset value, end of year $ 15.46 $ 14.28 $ 11.52 12.26
================================================================================================================
Total return(e) 16.65% 25.88% (4.74)% 22.60%
================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (in 000's) $1,441,210 $950,911 $655,035 297,434
- ----------------------------------------------------------------------------------------------------------------
Ratio of operating expenses to average net assets(f) 1.58% 1.60% 1.65% 1.73%(g)
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets 0.73% 1.15% 1.08% (0.00)(g)(h)
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 17% 16% 14%
- ----------------------------------------------------------------------------------------------------------------
Average commission rate (per share of security)(i) $ 0.0249 $ 0.0206 N/A N/A
- ----------------------------------------------------------------------------------------------------------------
(a) 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.
(b) The Fund commenced operations on June 15, 1993.
(c) Net investment income for a Fund share outstanding, before the waiver of fees by the administrator and/or
investment adviser for the year ended March 31, 1997 and for the 7.5-month period ended March 31, 1994 was
$0.11 and $(0.01)per share, respectively.
(d) Amount represents less than $(0.01) per share.
(e) Total return represents aggregate total return for the periods indicated.
(f) Annualized expense ratio before the waiver of fees by the administrator and/or investment adviser for the year
ended March 31, 1997 and for the 7.5-month period ended March 31, 1994 was 1.58% and 1.83%, respectively.
(g) Annualized.
(h) Amount represents less than (0.01)% per share.
(i) Average commission rate (per share of security) as required by amended disclosure requirements effective
September 1, 1995.
</TABLE>
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4
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
The following information for the fiscal year ended March 31, 1997, has
been audited by Ernst & Young LLP, independent auditors whose report thereon
appears in the American Fund's Annual Report dated March 31, 1997. 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)
================================================================================
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
3/31/97 3/31/96 (b) 3/31/95 (b) 3/31/94 (a)
------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 14.29 $ 10.71 $ 9.71 $ 10.00
================================================================================================
Income from investment operations:
Net investment income (c) 0.13 0.15 0.13 0.01
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 2.39 3.56 0.93 (0.30)
- ------------------------------------------------------------------------------------------------
Total from investment operations 2.52 3.71 1.06 (0.29)
================================================================================================
DISTRIBUTIONS:
Dividends from net investment income (0.17) (0.11) (0.06) --
- ------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.42) (0.02) -- --
- ------------------------------------------------------------------------------------------------
Total distributions (0.59) (0.13) (0.06) --
================================================================================================
Net asset value, end of year $ 16.22 $ 14.29 $ 10.71 $ 9.71
================================================================================================
Total return (d) 17.75% 34.70% 11.02% (2.90)%
================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (in 000's) $342,467 $ 201,599 $58,856 $16,133
- ------------------------------------------------------------------------------------------------
Ratio of operating expenses to average net
assets (e) 1.39%(b) 1.39% 1.74% 2.26%(b)
- ------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets 0.92%(b) 1.13% 1.25% 0.64%(b)
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 16% 9% 4% 0%
- ------------------------------------------------------------------------------------------------
Average commission rate
(per share of security)(h) $ 0.0302 $ 0.0341 N/A N/A
- ------------------------------------------------------------------------------------------------
(a) The Fund commenced operations on December 8, 1993.
(b) 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.
(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, 1997, March 31, 1996 and 1995 and the
3.75-month period ended March 31, 1994 was $0.11, $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, 1997, March 31, 1996 and 1995 and the 3.75-month period ended March
31, 1994 were 1.52%, 1.61%, 1.94% and 3.51%, respectively.
(f) Annualized.
(g) Amount rounds to less than 1.0%.
(h) Average commission rate (per share of security) as required by amended disclosure requirements effective
September 1, 1995.
</TABLE>
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
5
<PAGE>
PERFORMANCE OF THE FUNDS
The following chart illustrates the unaudited total returns of the Global
Fund and the American Fund for the periods specified.
================================================================================
<TABLE>
<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 3/31/97 15.29%** $17,149
- ----------------------------------------------------------------------------------------------------
One year period ended 3/31/97 16.66% --
- ----------------------------------------------------------------------------------------------------
From inception (6/15/93) to 6/30/97 [To be supplied 7/97]
- ----------------------------------------------------------------------------------------------------
One year period ended 6/30/97 [To be supplied 7/97]
====================================================================================================
<CAPTION>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
From inception (12/8/93) to 3/31/97 17.58%** $17,097
- ----------------------------------------------------------------------------------------------------
One year period ended 3/31/97 17.75%** --
- ----------------------------------------------------------------------------------------------------
From inception (12/8/93) to 6/30/97 [To be supplied 7/97]
- ----------------------------------------------------------------------------------------------------
One year period ended 6/30/97 [To be supplied 7/97]
====================================================================================================
</TABLE>
* 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.
WHY INVEST IN THE FUNDS?
EXPERIENCED MANAGEMENT. Tweedy, Browne, which was founded in 1920,
is a registered investment adviser and, as of June 30, 1997, manages in excess
of
$3.9 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 nineteen to twenty-eight
years and have been principals working with each other for over nineteen 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. The Investment Adviser does not attempt to be all things to
all people, but instead pursues 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). Tweedy, Browne began investing outside the
United States in 1983 by applying the same principles of value investing that
they applied to U.S. securities for thirty-seven years.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
6
<PAGE>
HISTORICAL U.S. INVESTMENT RESULTS OF THE INVESTMENT
ADVISER. Set forth on the chart below is performance information data provided
by Tweedy, Browne relating to certain investment results of Tweedy, Browne
investment
advisory accounts and the S&P 500. The performance data below relates only to
domestic equity accounts and therefore should not be relied upon by
investors in the
Global Fund in making investment decisions. These advisory accounts have the
same investment objective as the American Fund and were managed using investment
strategies and techniques substantially similar, but not necessarily identical,
to those implemented by the American Fund. However, the American Fund is subject
to investment limitations, diversification requirements and other restrictions
imposed by the Investment Company Act or the Internal Revenue Code which are not
legally required for the advisory accounts. (See "Investment Objective and
Policies.") Tweedy, Browne believes that its management of the advisory accounts
is sufficiently comparable to its management of the American Fund to make the
performance data listed below relevant to investors in the American Fund. The
results presented are not intended to predict or suggest the returns that will
be experienced by the American Fund or the return investors will achieve by
investing in the American Fund and investors should not rely on these results as
an indication of future performance of any of Tweedy, Browne's separate advisory
accounts or the American Fund. Different methods of determining performance from
those described in the footnote to the chart may result in different performance
figures.
<TABLE>
<CAPTION>
Tweedy, Browne American Fund 1994 1995 1996
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Annual Return for 1-Year Period -1.16%* +36.21% +22.35%
Average Annual Total Return Since Inception (12/8/93) -- -- +17.73%
Total Return Since Inception (12/8/93) -- -- +64.85%
*Represents the period from commencement of operations (12/8/93 through 12/31/94
</TABLE>
[CAPTION]
TWEEDY, BROWNE COMPANY L.P.
22 Year Investment Results -- U.S. Equity Composite -- 1/1/75 through 12/31/96
<TABLE>
ADVISORY ACCOUNTS
---------------------------------------------------------------------------
Average Total Average Total Return on
Return Before Total Return Average % Common Stocks Alone S & P
Year Deducting Fees Net of Actual Fees in Cash Net of Actual Fees 500
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1975 58.6% 56.4% 11.8% 63.1% 37.2 %
1976 42.7 40.4 7.7 43.5 23.8
1977 28.8 27.2 6.7 28.9 -7.2
1978 21.4 19.9 7.5 21.1 6.6
1979 30.8 28.7 5.8 30.0 18.7
1980 16.2 14.6 7.2 15.0 32.5
1981 11.4 9.9 17.7 8.7 -4.9
1982 17.2 15.6 13.7 16.4 21.5
1983 33.3 31.2 15.6 35.8 22.7
1984 18.0 15.8 16.2 17.3 6.3
1985 31.3 28.9 24.8 36.7 31.8
</TABLE>
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
7
<PAGE>
<TABLE>
<CAPTION>
ADVISORY ACCOUNTS
---------------------------------------------------------------------------
Average Total Average Total Return on
Return Before Total Return Average % Common Stocks Alone S & P
Year Deducting Fees Net of Actual Fees in Cash Net of Actual Fees 500
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1986 13.8 11.6 38.5 16.6 18.7
1987 6.2 4.2 32.4 4.5 5.3
1988 20.4 18.1 37.2 26.5 16.6
1989 15.3 13.2 30.3 16.4 31.7
1990 -10.5 -12.3 28.8 -19.5 -3.1
1991 25.3 24.0 35.2 34.7 30.5
1992 16.1 14.9 26.5 19.5 7.6
1993 14.0 12.7 15.6 14.6 10.1
1994 1.3 -0.1 6.7 -0.4 1.3
1995 38.2 36.4 5.9 38.4 37.6
1996 28.2 26.6 5.1 27.8 23.0
22 Years 20.9% 19.1% 18.0% 21.4% 15.9%
</TABLE>
<TABLE>
<CAPTION>
VALUE AT DECEMBER 31, 1996 OF $10,000 CONTINUOUSLY REINVESTED
SINCE JANUARY 1, 1975 IN THE FOLLOWING WAYS:
---------------------------------------------------------------------------------------
<S> <C>
Tweedy, Browne average of advisory accounts
(net of actual fees) $423,430
Portion of Tweedy, Browne average of advisory
accounts invested in common stocks alone (net of actual fees) $642,200
S & P 500 $238,790
</TABLE>
The following notes are to provide additional information relating to the
computation of the performance data in the charts:
1. The schedule presents the annual average investment results for the
following: (1) Asset Investors Fund ("AIF"), a closed-end investment company
advised by Tweedy, Browne from 1975 through 1982, (2) a composite of all client
accounts whose portfolios were managed by Tweedy, Browne continuously over a 14
or 15 year period commencing in either 1976 (four accounts) or 1977 (twenty-two
accounts), (3) after 1990, all fully discretionary fee-paying client portfolios
with assets in excess of $250,000 that have been under management for at least 6
months prior to measurement. The S&P 500 is an unmeasured index which measures
the reinvestment of dividends and which is generally considered representative
of U.S. large capitalization stocks.
2. Average Total Return Net of Actual Fees:
Total return includes realized and unrealized gains and losses plus income, net
of advisory fees, transaction expenses and fund expenses charged to the account
by Tweedy, Browne Company L.P. In calculating performance results, each client
portfolio (other than AIF and one other client) was valued monthly and the
internal rate of return was then compounded monthly, calculated quarterly and
then compounded to
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
8
<PAGE>
produce an annual rate of return. For AIF the annual rate of return was the
yearly percentage change in net asset value, with dividends reinvested as of the
beginning of the year and liquidating distributions reducing the net asset value
base. For the other client in 1976, the portfolio was valued quarterly and the
internal rate of return was compounded quarterly, calculated quarterly and then
compounded to produce an annual rate of return. in subsequent years after 1976
the performance for this client was calculated in the same manner as all other
months as described above. Performance results have been calculated over a
time-weighted, mean basis and are computed in accordance with the standardized
formula for such computation as required by the Securities and Exchange
Commission for use by open-end investment companies. Since December 31, 1990
results for the advisory accounts are asset weighted using beginning-of-quarter
values and exclude any investment in the Tweedy Browne Global Value Fund. Prior
to December 31, 1990 results are computed on an equal weighted basis.
3. Average Percentage of Accounts Invested in Common Stocks:
The percentage invested in common stocks is determined by comparing the value of
common stocks in an account to the value of the total assets of the account.
Total assets are defined as cash, cash equivalents, short-term investments and
securities (substantially all of which were common stocks) valued at current
market prices. The percentage invested was measured quarterly for client
portfolios and semiannually for AIF. The average percentage invested for a
particular year is an average of the sub-period averages.
4. Actual Fees:
Actual fees range from 1.5% of the invested portion of each advisory account to
2% on a advisory account's total assets and include brokerage fees.
Tweedy, Browne strongly believes in the opportunities available to value
investors on both a global and domestic basis. So much so that the current and
retired general partners of Tweedy, Browne and their families and Tweedy, Browne
employees have more than $ million of their personal funds invested in
domestic portfolios combined with or similar to their clients' portfolios,
including approximately $24.4 million in the Global Fund and $22.8 million in
the American Fund. They own what their 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. The Investment Adviser's 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.
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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 ratio, 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.
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-two 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
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10
<PAGE>
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
intend 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 $2 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 --
Associated Risk Factors" below and "Investment Objectives and Policies -- Risk
Considerations of the Funds" in the Statement of Additional Information. As with
any long-term, 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 or fixed income investments.
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.
There can be no assurance that the Funds' respective investment objectives will
be achieved. See "Purchasing, Redeeming and Exchanging Shares."
LOGO 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.
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<PAGE>
GLOBAL FUND'S WORLDWIDE OPPORTUNITIES. The Global Fund was formed
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 or 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. Investing globally also increases the number of potential
investment opportunities that would meet Tweedy, Browne's investment criteria,
which are discussed below. For temporary defensive purposes, the Fund 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.
Through the years, Tweedy, Browne has developed an understanding of the
different reporting and accounting procedures characteristic of non-U.S.
companies and has acquired financial databases that permit them to screen more
than 10,000 companies in much the same way that they screen U.S. companies. The
ability to screen so many non-U.S. companies is the key to Tweedy, Browne's
decision to sponsor the Global Fund since they are now able to research and
analyze many small and medium capitalization companies rather than concentrate
on the more obvious large capitalization, multinational corporations.
LOGO 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.
Tweedy, Browne believes that its 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. See "Historical U.S.
Investment Results of the Investment Adviser" on page 7.
AMERICAN FUND'S DOMESTIC OPPORTUNITIES. The American Fund was
formed for long-term value investors who desire to limit their exposure to
foreign
markets. 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. 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.
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12
<PAGE>
OTHER INVESTMENTS OF THE FUNDS
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.
For liquidity and flexibility, each Fund may also invest in cash or
investment grade short-term securities. The Funds may also engage in strategic
transactions as described below for hedging purposes and to seek to increase
gain.
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
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13
<PAGE>
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").
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 borrowing costs from investments
made with such funds.
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 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.
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,
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14
<PAGE>
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.
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.
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
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15
<PAGE>
purposes such as electing or removing Directors, or changing fundamental
investment policies. Shareholders will be assisted in communicating with other
shareholders in connection with any effort to remove a Director.
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, 1997 is included in the Annual
Report for each Fund.
Tweedy, Browne is entitled to receive investment advisory fees for each
Fund in an amount equal to 1.25% of each Fund's average daily net assets on an
annual basis. The fee is payable monthly, provided that each 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 applicable Fund's books and unpaid.
For the fiscal year ended March 31, 1997, the Global Fund paid advisory fees
equal to 1.25% of the value of its average daily net assets. For the same
period, the American Fund paid advisory fees equal to 1.14% of the value of its
average daily net assets after voluntary waivers by the Investment Adviser of
$284,262.
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, 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 and
American Fund for a fee equal to .09% of the average daily net assets of each
Fund on an annual basis. The fee is subject to reductions based on certain asset
levels and fee minimums.
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TRANSFER AGENT AND CUSTODIAN
First Data Investor Services Group, Inc., 4400 Computer Drive, Westboro, MA
01581, 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 intend to qualify each year 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. Shareholders will receive a detailed account
statement every time there is a purchase or redemption of shares of either Fund.
All statements should be retained in order to keep track of account activity and
the cost of shares for tax purposes.
SHAREHOLDER REPORTS. In addition to account statements, shareholders will
receive periodic shareholder reports highlighting relevant information,
including investment results and a review of portfolio changes.
To reduce the volume of mail received by shareholders, only one copy of
each report will be mailed to your household (same surname, same address).
Please call shareholder services at 1-800-423-4789, press 3 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 First Data Investor Services Group,
Inc., 4400 Computer Drive, Westboro, MA 01581.
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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 1-800-432-4789, press 3 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
1-800-432-4789, press 3 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.
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 #138-517
ABA # 011001234
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-- For American Fund
Boston Safe Deposit & Trust Co.
Boston, MA
Account of Tweedy, Browne American Value Fund
Account #138-517
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 1-800-423-4789, press 3 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 will be 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 Fund's
shares. If you elected telephone redemption on your application, you can call to
request that federal wire be sent to your 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.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
19
<PAGE>
In the event that you are unable to reach either Fund by telephone, you
should write to both Funds c/o First Data Investor Services Group, Inc., P.O.
Box 5160, Westboro, MA 01581.
BY MAIL OR FAX. A shareholder may redeem shares by mailing a written
request to Tweedy, Browne Fund Inc., c/o First Data Investor Services Group,
Inc., P.O. Box 5160, Westboro, MA 01581. 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 1-800-432-4789, press 3.
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. 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.
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
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
20
<PAGE>
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 1-800-432-4789, press
3.
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 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, following 30 days' notice
to shareholders, to redeem all shares in accounts that still do not have a
Social Security or tax identification number.
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.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
21
<PAGE>
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 make distributions of substantially all of its net
investment income and any net realized capital gains after utilization of
capital loss carryforwards, if any, annually in December. 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 (including short-term
gains) 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. A
portion of dividends from net investment income may qualify for the
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.
Each Fund will send to its shareholders detailed tax information about the
amount and type of its distributions made during each calendar year and any
foreign income tax payments or credits.
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
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
22
<PAGE>
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.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
23
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
August 1, ^ 1997
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, ^ 1997 , 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 ^ First Data
Investor Services Group Inc., 4400 Computer Drive, Westboro,
Massachusetts 01581.
<PAGE>
TABLE OF CONTENTS
Page
Investment Objective and Policies... 1
Performance Information............. ^ 23
Operation of the Funds...................^ 27
Taxes....................................^ 38
Portfolio Transactions...................^ 45
Net Asset Value.......................... ^ 47
Additional Information................... ^ 48
Financial Statements..................... ^ 49
Appendix A............................... A-1
<PAGE>
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 domestic 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 investors who can accept international
investment risk. 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 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 decreases 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 volatility 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 intended
security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to
dispose 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 securities 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 remedies 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 certificates 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 conversions 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 foreign 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 investments 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 investors 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 securities 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
investment strategy offers investors profitable investment in
undervalued domestic equity securities whose prices may be
below intrinsic worth, private market value or previously high
stock prices. 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 involve 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 government 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.
Fixed Income Obligations. 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.
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,
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 perceptions 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 and Structured 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. 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 form such investment and expose the Fund to
the risk that any reinvestment will be at a lower yield.
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 distributions 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 underlying common stock,
although usually not as much as the underlying common stock.
As debt securities, convertible securities
are investments 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 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 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 transactions 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 purchaser 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.
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%
limitation. 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 obligation 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 affected 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 described above. Although
the Fund's gain is limited to the price at which it sold the
security short, its potential loss is theoretically unlimited.
^
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 ^ assets with its custodian to the
extent the Funds' obligations are not otherwise "covered"
through ownership of the underlying security, financial
instrument or currency. Liquid assets include equity and debt
securities so long as they are readily marketable. The
Investment Adviser, subject to oversight by the Board of
Directors, is responsible for determining and monitoring the
liquidity of securities in segregated accounts on a daily
basis. 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 ^ securities at
least equal to the current amount of the obligation must be
segregated with the custodian. The segregated account may
consist of notations on the books of 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 ^ 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 ^ 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^ 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 ^ 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 contract. 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 ^ 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 transaction 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 Additional Information a "majority
of the outstanding voting securities of a Fund" means the
lesser of (1) 67% or more of the voting securities present at
such meeting, if the holders of more than 50% of the
outstanding voting securities of the Funds are present or
represented 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 ^ securities 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
redemptions, in each case subject to applicable U.S. government limitations;
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 portfolio 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 evidence 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.
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.
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 restriction. ^
^
Share Certificates
Due to the desire of the Funds to keep
purchase and redemption of shares simple, generally,
certificates will not be issued to indicate ownership in
either of the Funds.
PERFORMANCE INFORMATION
From time to time, each Fund may calculate
its performances for inclusion in advertisements, sales
literature or reports to shareholders or prospective
investors. These performance figures are calculated by the
Funds in the ^ manner described in the section below.
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 cumulative 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. ^ Investors should consider the
methods used to calculate performance when comparing the
performance of either Fund with the performance ^ of other
investment companies or other 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 literature, 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 appropriate fund category, that is, by
fund objective and portfolio holdings, 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 commencement 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 transactions 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 provided 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;
establishing 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 ^ years ended March 31, 1997, March
31, 1996 and March 31, 1995 ^, the Global Fund incurred ^
$14,318,034, $9,864,278 and $6,221,404, 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, 1997,
March 31, 1996 and March 31, 1995 ^, the American Fund
incurred $3,176,537, $1,518,122^ and $321,535 ^, respectively,
in investment advisory fees after voluntary waivers of
$284,262, $192,301^ and $61,245 ^, 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.
^
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 "Administrator" or "FDISG") provides administrative
services for the Global Fund for a fee equal to ^.09% of the
Global Fund's average daily net assets on an annual basis,
subject to specified minimum fee levels and subject to
reductions ^ as low as ^.03% on average assets in excess of ^
$1 billion. For the fiscal year ended March 31, 1997, the
Global Fund incurred $1,398,274 in administration fees with a
voluntary waiver of $84,934. For the fiscal years ended March
31, 1996 and March 31, 1995 ^, the Global Fund incurred
$1,116,971^ and $758,219 ^, respectively, in administration
fees.
^ Prior to February 15, 1997, the Company paid FDISG
an administrative fee equal to .12% of the Global Fund's
average daily net assets on an annual basis, subject to
specified minimum fee levels and subject to reductions as low
as ^.08% on ^ average assets in excess of $500 million.
The Administrator also provides
administrative services for the American Fund for a fee equal
to .09% of the American Fund's average daily net assets on an
annual basis, subject to specified minimum fee levels and
subject to reductions as low as .03% on average assets in
excess of $1 billion. For the fiscal year ended March 31,
1997, the American Fund incurred $329,781, after voluntary
waiver of $32,914 for the period April 1, 1996 through
February 14, 1997 and $21,979 for the period February 15, 1997
through March 31, 1997. For the fiscal years ended March 31,
1996 and March 31, 1995 ^, the American Fund incurred $156,669
(after voluntary waiver of $54,000)^ and $51,904 ^,
respectively, in administration fees.
Prior to February 15, 1997, the Company paid FDISG an
administrative fee equal to .10% of the American Fund's
average daily net assets on an annual basis, subject to
specified minimum fee levels and subject to reductions as low
as .06% on average assets in excess of $500 million.
Under the Administration Agreement 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 shareholder reports,
preparing, signing and filing tax returns, monitoring 1940 Act
compliance and providing other mutually agreeable services.
Subject to certain conditions, the Administration Agreement
has a term of three years until February 15, 2000 and
thereafter shall automatically renew for successive terms of
one year unless terminated and is terminable on ^ 60 days
notice by either party.
^
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>
<CAPTION>
Name and Address Position with Corporation Principal Occupation**
-------------------------------- ---------------------------- -------------------------------------
<S> <C> <C>
Bruce A. Beal, Age ^ 61 Director Partner and Officer of various real
==
The Beal Companies estate development and investment
177 Milk Street companies. Real estate consultant.
Boston, MA 02109
Christopher H. Browne*, President, Director General Partner of Investment
Age 50 Adviser and Distributor
William H. Browne*, Treasurer, Director General Partner of Investment
Age 52 Adviser and Distributor
Arthur Lazar, Age ^ 85 Director President of Lazar Brokerage
Lazar Brokerage (insurance brokerage)
355 Lexington Avenue
New York, NY 10017
Daniel J. Loventhal, Age ^ 76 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, Secretary General Counsel for Investment
Age ^ 46 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, ^ 1997 .
No executive officer or person affiliated with the Funds received
compensation from the Funds. No Director receives pension or
retirement benefits from the Funds.
COMPENSATION TABLE
TOTAL COMPENSATION
FROM THE CORPORATION
AND COMPLEX PAID TO
AGGREGATE DIRECTORS
COMPENSATION FROM
NAME OF PERSON THE CORPORATION
AND POSITION
Christopher H. Browne $0 $0
Chairman of the Board
and President
William H. Browne $0 $0
Treasurer and Director
TOTAL COMPENSATION
FROM THE CORPORATION
AND COMPLEX PAID TO
AGGREGATE DIRECTORS
COMPENSATION FROM
NAME OF PERSON THE CORPORATION
AND POSITION
Bruce A. Beal $4,000 $4,000
Director
Arthur Lazar $4,000 $4,000
Director
Daniel J. Loventhal $4,000 $4,000
Director
Richard Salomon $4,000 $4,000
Director
Control Persons and Principal Holders of Securities
As of May 15, ^ 1997, the following persons
owned 5% or more of the outstanding shares of the Global Fund
and the American Fund:
<TABLE>
<CAPTION>
Percent
of Total Shares
Fund Name Name and Address Outstanding
<S> <C> <C>
Tweedy, Browne Global Value Fund Charles Schwab & Co., Inc. 22.8%
101 Montgomery Street
San Francisco, CA 94104
Tweedy, Browne Global Value Fund Donaldson Lufkin & Jenrette 5.1%
=
P.O. Box 2052
Jersey City, NJ 07303
Tweedy, Browne Global Value Fund National Financial Services Corp 7.8%
=
P.O. Box 3908
Church Street Station
New York, NY 10008
Tweedy, Browne American Value Fund National Financial Services Corp 24.6%
=
P.O. Box 3908
Church Street Station
New York, NY 10008
Tweedy, Browne American Value Fund Charles Schwab & Co., Inc. 19.3%
=
101 Montgomery Street
San Francisco, CA 94104
</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 May 15, ^ 1997, the Directors and
officers of the Corporation beneficially owned 3% of the
outstanding common stock of the Global Fund and 7.3%, 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 outstanding 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 Information) 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
transaction); 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 ^. 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. ^
TAXES
Each Fund ^ 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
earnings 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 deduction 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 consequences (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 ^
shareholder'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 shareholders 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 shareholder 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 fluctuations 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 distributions 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 practice.
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 transactions),
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 securities, 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 particular 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 information 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 ^ years ended March 31, 1997 and March 31,
1996, the Global Fund paid brokerage commissions of $2,167,248
and $1,135,039, respectively. 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 second-tier affiliated
persons. For the fiscal ^ years ended March 31, 1997, March
31, 1996, the American Fund paid brokerage ^ commissions of
$223,652 and $210,767, respectively. For the fiscal year ended
March 31, 1995, the American Fund paid brokerage commissions
of $54,742 of which $2,240 was paid to second-tier affiliated
persons.^ 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, 1997,
March 31, 1996 and March 31, 1995, the Global Fund's portfolio
turnover rates were 20%, 17% and 16%, respectively. For the
fiscal years ended March 31, 1997, March 31, 1996 and March
31, 1995, the American Fund's portfolio turnover rates were
16%, 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 analysis.
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, ^ 1997 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 ^ First Data
Investor Services Group, 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, ^ 1997
is included herein.
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
vulnerability 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 unlikely 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 characteristics and in
fact have speculative characteristics as well ^. Often the
protection of interest and principal payments may be very
moderate and ^ thereby 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 ^ 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.
<PAGE>
[graphic omitted]
TWEEDY, BROWNE
GLOBAL VALUE FUND
----------------
ANNUAL
----------------
MARCH 31, 1997
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[graphic omitted]
TWEEDY, BROWNE
AMERICAN VALUE FUND
<PAGE>
TWEEDY, BROWNE FUND INC.
Investment Manager's Report ........................................ 1
Tweedy, Browne Global Value Fund:
Portfolio Highlights ............................................. 15
Portfolio of Investments ......................................... 16
Schedule of Forward Exchange Contracts ........................... 25
Statement of Assets and Liabilities .............................. 31
Statement of Operations .......................................... 32
Statements of Changes in Net Assets .............................. 33
Financial Highlights ............................................. 34
Notes to Financial Statements .................................... 35
Report of Ernst & Young LLP, Independent Auditors ................ 43
Tax Information .................................................. 44
Tweedy, Browne American Value Fund:
Portfolio Highlights ............................................. 45
Portfolio of Investments ......................................... 46
Schedule of Forward Exchange Contracts ........................... 53
Statement of Assets and Liabilities .............................. 54
Statement of Operations .......................................... 55
Statements of Changes in Net Assets .............................. 56
Financial Highlights ............................................. 57
Notes to Financial Statements .................................... 58
Report of Ernst & Young LLP, Independent Auditors ................ 66
Tax Information .................................................. 67
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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 FUND INC.
- ------------------------------------------------------------------------------
Investment Manager's Report
- ------------------------------------------------------------------------------
To Our Shareholders:
[Graphic Omitted]
Will Browne, John Spears and Chris Browne
We are pleased to present the Annual Report for Tweedy, Browne Global Value
Fund and Tweedy, Browne American Value Fund for the fiscal year ended March 31,
1997. In our Semi-Annual Report as of September 30, 1996, we experimented with
combining the reports of our two Funds and asked our shareholders for their
opinion on this combined format. We are happy to report that the new format was
met with approval by all who re-
sponded, so we will continue to report in this manner. Unanimity of opinion is
rare in the investment world, so we are particularly gratified that our
experiment was greeted with approval. It makes our task of reporting somewhat
easier and permits all of our shareholders to hear our complete views,
irrespective of whether they apply to stocks in the U.S. or outside the U.S.
Additionally, as some of you pointed out, there is a savings in printing costs
by combining the reports. We have also followed the suggestion of one
shareholder and separated the discussions that are specific to one or the other
Fund, and combined the discussion that is more general and relevant to both
Funds.
For the year ended March 31, 1997, the net asset value of the shares of the
Global Value Fund increased 16.66%* to $15.46 per share. This performance
includes the reinvestment of a dividend of $1.1225 per share paid in December
1996. For the same period, the Morgan Stanley Capital International ("MSCI")
Europe, Australasia and Far East Index ("EAFE") gained 1.45%. The EAFE Index is
measured in U.S. dollars so any rise in the value of the dollar vis-a-vis other
currencies would reduce the reported results of the Index. This was the case in
the past twelve months. EAFE in local currencies rose 10.23%. However, the most
relevant comparison to our performance is EAFE hedged back into the dollar, by
which we mean the Index is calculated as if the investment positions in each of
the countries in the Index were dollar hedged. The EAFE Index hedged showed a
gain of 12.53%. One of the questions we were asked following our discussion of
currency hedging in a previous letter was whether we know what our performance
would have been if we had not hedged our currency exposure. We have not made
this particular calculation and we do not think it would be easy to do. The
comparison of the EAFE Index in dollars, in local currency, and hedged gives
some indication of the impact of currencies and hedging. Clearly, hedging was
the course to have followed in the past year. If we subtract the results of the
EAFE Index, as measured in dollars, 1.45%, from the local currency version of
the EAFE Index, 10.23%, we see that the rise in the dollar reduced the increase
in the local markets by 8.78%.
Furthermore, if we subtract the increase in the local currency version,
10.23%, from the hedged EAFE Index, 12.53%, we see that hedging actually added
2.30% to the EAFE Index's performance. The reason for this is the difference in
the one-year interest rate between the U.S. and the countries that comprise the
EAFE Index. Put another way, the weighted average interest rate in the countries
in the Index was 2.29% lower than the one-year U.S. interest rate. While hedging
was a good thing to do last year, we do not wish to take any credit for doing
so. As we hope our shareholders all know, it is our policy to maintain a fully
hedged position at all times. Just as we do not pretend to be able to predict
where individual stock markets are headed, we certainly do not have a clue as to
where eighteen different currencies are going in relation to the dollar.
- ------------
*Past performance is not a guarantee of future results and total return and
principal value of investments will fluctuate with market changes. Shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
The composition of the portfolio of the Global Value Fund, in geographic
terms, has not changed appreciably over the past year. The table below shows our
investment positions by geographic area:
1996 1997
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Europe 55.8% 49.0%
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Australasia 17.8 21.6
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North America 16.1 17.2
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We are currently invested in 21 countries. The five largest areas of
investment by country at fiscal year-end 1997 as compared to fiscal year-end
1996 is as follows:
1996 1997
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Switzerland 16.0% Japan 18.7%
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Japan 14.9 USA 15.1
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USA 14.6 Switzerland 12.7
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France 9.0 U.K. 6.5
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Netherlands 8.9 France 6.3
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We still do not, and probably never will, pay any attention to country
weightings of the popular indices when investing the assets of your/our Fund.
Our relatively small position in Japan as compared to EAFE probably helped last
year as the Japanese Index declined 25.7%. Again, this should be chalked up to
luck rather than genius. We simply have not found enough opportunities in Japan
to warrant investing an amount equal to the 29% weighting Japan has in the EAFE
Index. In some future year, the Japanese market could well roar ahead, and if we
are less invested than the Index, in all likelihood we will underperform.
Our focus is on finding cheap stocks on a global basis. In this regard, we
are more concerned with what we call the portfolio characteristics of the Global
Value Fund. We focus on how much of our money is invested in stocks that have a
cheap market price in relation to book value, and how much of our money is
invested in stocks that are selling at low price/earnings ratios. As of March
31, 1997, 32% of our assets were invested in 139 issues selling at a weighted
average price of 74% of book value. In the Worldscope global database of 8,272
stocks with a market capitalization of $100 million or more, only 445 issues, or
5% of the total, were selling at a price-to-book value ratio of 74% or less. In
other words, 95% were more expensive than our holdings on this basis. From a
price/earnings standpoint, 51% of the Global Value Fund's assets were invested
in 79 issues selling at a weighted average of 10.7 times actual or estimated
earnings. Again, in the Worldscope global database, only 994 companies, or 12%
of the total, were selling at 10.7 times earnings or less, which means that 88%
of the companies were more expensive.
The performance of the American Value Fund was better on an absolute basis,
although not as good on a relative basis. For the year ended March 31, 1997, the
net asset value of the American Value Fund increased 17.75%*, to $16.22 per
share after adding back a dividend of $0.5865 per share paid in December 1996.
During the same period, the Standard & Poor's 500 Stock Index ("S&P 500") gained
19.82%, including the reinvestment of dividends. It is always nice to think one
can beat the S&P 500 year in and year out, but our experience tells us this is
not possible. Since we do not invest your/our Fund to look like the S&P 500, we
assume that the S&P 500 will outperform us about 33% of the time as it has over
the last 22 years. The results of the S&P 500 this past year were primarily
caused by a handful of big capitalization stocks. Broader indices, which include
smaller and medium size stocks, did not fair as well. For example, the Wilshire
5000 Index gained 15.51% and the Russell 3000 Index rose 16.42%. Because we
invest across the full spectrum of all market caps (approximately 40% of the
American Value Fund is invested in stocks with market caps of less than $1
billion), it is difficult for us to outperform the S&P 500 at a time when large
cap stocks are beating the overall market. On a calendar year basis, our
performance in 1996 just about matched that of the S&P 500, 22.45% for the
American Value Fund versus 23% for the S&P 500. Our long-term goal is to
compound our net worth at something north of 15% per year as compared to the S&P
500's long-term result of 10.5%. While past performance is no guarantee of
future performance, we have achieved our goal in the past and hope we will
continue to do so in the future.
The portfolio characteristics of the American Value Fund also diverge
significantly from that of the S&P 500. While there is some concern voiced in
the investment community about the current level of the S&P 500 in terms of
price/earnings ratios and price-to-book value ratios as compared to historic
levels, we believe our portfolio holds greater value than the S&P 500. As of
March 31, 1997, 20% of the American Value Fund's assets were invested in 73
stocks selling at a weighted average price-to-book value ratio of 76% as
compared to a price-to-tangible book value ratio of 443% for the S&P 500.
Moreover, in the Bloomberg database of 3,809 stocks with a market capitalization
of $100 million or more, only 75 stocks, or 2% of the total, were selling at 76%
of book value or less. A further 53% of the American Value Fund's portfolio was
invested in 58 stocks selling at a weighted average price-to-actual or estimated
earnings of 10 times as compared to a price/ earnings ratio of 20 times for the
S&P 500. Again, in the Bloomberg database, only 261 stocks out of 3,809 stocks
with a market capitalization of $100 million or more, 7% of the total, were
selling at 10 times earnings or less. We like to keep both of our Funds invested
in the lower value tiers of all stocks, as our experience and that of numerous
academic studies tells us that this is where we can expect satisfactory
long-term results.
- ------------
*Past performance is not a guarantee of future results and total return and
principal value of investments will fluctuate with market changes. Shares, when
redeemed, may be worth more or less than their original cost.
The fact that we discuss our results in relation to an index, whether it be
EAFE or the S&P 500, may seem inconsistent with our previously espoused views
that too much short-term attention is focused on comparisons to an index
benchmark. We are required to present our results in relation to some relevant
index. Although we do not think it is important on a short-term basis, over the
long term, these comparisons provide a measure of how successful a particular
investment philosophy is. Over the short term, the indices also provide fodder
for the stock market pundits. The last two years have been exceptionally good in
the stock market. This much prosperity usually begets fears that things cannot
continue to be so good. This is probably true. We do not think the stock market
can continue to compound at 20% to 30% as it has in the past two years unless
all rational measurements of fundamental values are thrown out the window. Stock
market pundits are increasingly talking of a "correction" in stock prices. The
month of March, which is supposed to come in like a lion and go out like a lamb,
did the opposite this year, at least as measured by the market. A correction
could certainly happen if for no other reason than corrections do happen, and it
has been so long since we have had one. Moreover, the S&P 500 is selling at
somewhere between 17 and 19 times estimated 1997 earnings, depending upon
whether one assumes earnings will increase 7% or 10% this year as compared to an
historic multiple of 14.5 times earnings. Last year the earnings of the S&P 500
came in better than analysts' predictions, which helped to propel the market's
rise in 1996. This is not usually the case. Traditionally, analysts' estimates
start high in the beginning of the year and are revised downward as the year
unfolds. We do not pay much attention to these estimates as we are generally
skeptical about predictions of the future other than the inevitability of death
and taxes. However, the question keeps coming up, particularly now, given the
market's performance so far in April. As "professionals", we are presumed to
have some opinion on these matters or some special knowledge which will guide
our investment decisions. We do not like to disappoint our investors, but we
must admit that we do not know what the stock market will do this quarter, this
year or next year. Long term, we know that the stock market has risen, as
corporate profits, dividends and intrinsic values have grown, and that stocks
have beaten bonds and cash. We see no reason why this should not continue in the
future, especially for stocks that are cheap in relation to assets or earnings.
We also know that from time to time the market declines. The S&P 500 has
declined in 20 of the past 71 years, or 28% of the time. If Mr. Stock Market
were a major league baseball player and got a hit 72% of the times at bat, he
would be in both the Baseball Hall of Fame AND "Ripley's Believe It or Not".
It would be nice to be able to "call the market" with some degree of
accuracy, but we cannot. If we could, we would presumably sell everything the
day before the onset of the correction or the bear market, sit on the sidelines,
and then plunge back in when the market started to rise again. This presumes we
would not only know when the decline would begin but also when it would end.
When we start to claim such divine knowledge, our investors should start to
worry. We recently saw some data that showed the results an investor would have
experienced if he/she had invested in the S&P 500 at the beginning of 1985 and
had cashed out before the 1987 crash, just after the crash, or ignored the whole
thing and stayed invested through 1993. The respective performance numbers are:
204%, 117% and 278%. Bear markets do occur. Fortunately, they generally do not
last more than six to twelve months, and the average time it takes a market to
recover to its previous high is another six to twelve months. The bear market of
1973-1974 and the Great Depression are obvious exceptions, but so were the
economic circumstances. This is not to say that some unforeseen economic or
political event could not send the stock market into a tailspin. The future is
nothing more than the past repeating itself. If Iran decided to lob a few
missiles across the Persian Gulf towards Saudi Arabia, the stock market would
probably decline significantly. These things happen. One friend of ours calls
this the caribou factor. When a hunter looks into the woods, he cannot see the
caribou until it moves. After it moves, it seems obvious where the beast had
been standing all the time. Similarly, no one knows what will make the stock
market decline. After it happens, many will wonder why they could not foresee
these events. If investors knew what was going to make the market decline in the
future, it would have already declined. Stock markets are very efficient at
processing important economic events and incorporating them into the overall
price level. In the same way, everyone in Los Angeles probably knows there will
someday be another earthquake, and yet they have not all moved away. Few assume
these courageous souls believe that they can predict when this event will happen
and plan to leave the day before. Instead, we assume that most Angelinos know
there will be another earthquake, and that they will survive it and go on
enjoying their warm, sunny climate.
We have the same attitude towards the stock market. We assume there will be
"corrections" and bear markets in the future; it comes with the territory. We
also assume that the market will recover and that we will go on compounding our
wealth by owning cheap stocks. If the stock market drops 20% tomorrow, we are
sure some soothsayer will say that we are the ostriches of the investment world
with our heads stuck in the sand. Another market pundit who happens to be the
one to predict the decline closest to its occurrence, will be interviewed by
every television station as the new market guru and will enter the hall of fame
of market pundits. Perhaps, as Warren Buffett would say, our "circle of
competence" is a bit too limited. We have no way of knowing if the next stock
market decline will be a more common 10% drop or a more significant drop of 20%
or more. Nor do we know if our net worth will increase by 30% or more before the
decline occurs. We do know that nothing is accomplished by selling out AFTER the
market has gone down. In the meantime, our advice is to not invest money that
you know you will need to spend in the near future. If a correction occurs at
about the time you are planning to take this money out of the stock market, you
will be forced to lock in those losses. If you know you want to take some money
out of your investments in August to buy a new car, take it out now. Who knows
if August will be a good time to sell stocks?
In our opinion, we like what is owned in our Funds. If all the stocks in our
Funds were interests in private businesses and someone offered to buy the entire
portfolio at the current market price, we would say thanks, but no thanks. The
problem with the stock market is that it assigns a value to your business every
day, more often than not for reasons unrelated to the true intrinsic value of
the business. If you owned a successful business, would you really care if the
stock market thought it was worth an eighth of a point more or a quarter of a
point less on any given day for reasons such as the latest labor statistics
report or the most recent ruminations of Alan Greenspan? We think not. In the
aggregate, in our opinion, the stocks we own are worth far more in a private
sale than their current stock market valuations, and they are far cheaper than
the stocks which comprise the popular market indices now or even historically.
For example, last year we accumulated shares of Price Enterprises. We came
across this company because it was selling at less than 65% of book value.
Within the Bloomberg database, only 1% of the companies sell for 65% of book
value or less. However, reported earnings were minimal and the price/earnings
ratio was close to 100 times. The company had been spun out of Price/Costco, a
discount retailer. Shareholders were given the opportunity to exchange their
shares in Price/Costco for shares of Price Enterprises. The company's assets
consisted primarily of real estate, mainly shopping centers. The Price family,
founders of Price/Costco, exchanged their shares of Price/Costco for shares of
Price Enterprises. We assumed that if the founders preferred to own the real
estate assets rather than the retailing side of the business, maybe they knew
something we did not. Unlike most real estate companies, the company had
virtually no debt. An appraisal of the assets provided by the company indicated
the assets were worth more than book value, which value was justified by the
cash flow they generated. The company was reporting only minimal earnings
because of a start-up retail operation, which was experiencing losses that
masked profits of the real estate holdings. In our analysis, if the company shut
down or sold the retail operations, the market would realize the value of the
real estate holdings, which could be almost twice the market price of the stock.
The analysis is very much the same with international stocks. Recently, we
purchased shares in a Japanese company, Kita Kyushu Coca-Cola, a regional
Coca-Cola bottler. This company turned up in the Nikkei database of Japanese
stocks because of relatively low price/book value and price/earnings ratios. We
purchased shares at a modest 18% premium to book value versus U.S. Coke
bottlers, which sell at multiples of book value as high as 8 times. Moreover,
the company had virtually no long-term debt, and cash and securities equaled
more than one-half of book value. U.S. bottlers have debt-to-equity ratios of
between 3 and 8 times. The price/earnings ratio of Kita is 14.5 times, but if
the company were to pay out its cash and securities as a dividend, the price/
earnings ratio would be less than 8 times. Again, the equivalent U.S. company
trades at price/earnings ratios in excess of 20 times earnings. Furthermore, a
Japanese company should have a higher, not lower, price/earnings ratio because
the long-term cost of capital in Japan, as measured by long-term government bond
yields, is only 2.2% as compared to 6.9% in the U.S. In addition, our purchase
price, net of the company's excess cash and securities, was 3 times EBITDA
(Earnings Before deducting Interest, Taxes, Depreciation and Amortization).
Coca-Cola bottlers in the U.S. have typically been valued at about 10 times
EBITDA in acquisitions.
Another international example is James Crean, a small Irish conglomerate
engaged in food, industrial parts distribution, printing and packaging
businesses. While the historic numbers on this company were not particularly
compelling from a value standpoint, the reporting of recent insider purchases of
stock provided a clue to value. Upon further analysis, we learned that the
company was in the process of selling several divisions that would result in a
balance sheet where cash exceeded debt and the stock price was approximately 65%
of book value.
Will our stocks go down if the market suddenly drops? The answer is yes.
When the tide goes out, all the ships go down. We want to avoid the ships that
get stuck in the mud and do not rise when the tide comes back, what we call the
"crash and burn" stocks. This is what happened in the bear market of 1973-1974
when, in many instances, the "nifty-fifty" group of growth stocks crashed far
more than the market. Despite the fact that the nifty-fifty comprised a list of
some of the best companies in America based on past performance, their stock
market valuations had been driven to unrealistic levels. Many were selling at
fifty and sixty times earnings. When, as Alan Greenspan would say, this
"irrational exuberance" had been wrung out of the market, investors were left
with huge losses that in some cases have not been recouped even twenty-three
years later. This is our definition of permanent capital loss. While we can
accept or tolerate temporary market losses, we want to own stocks we think will
return to their former, pre-bear market levels when the stock market recovers.
We think some of the high tech wonder stocks of today could experience a
similar fate. We have no way of knowing if Netscape will revolutionize the way
millions of people will surf the Internet and grow its earnings to a level that
will justify its current price or future gains. We do know that even after
declining more than 60% from its previous twelve-month high, it still sells for
more than 50 times estimated 1997 earnings. We also hear that Netscape has about
$250 million to spend on research and development, and that up in Redmond,
Washington, Bill Gates has $11 billion to spend on research and development. We
also hear that Bill Gates has indicated he does not intend to cede this market
to Netscape. This is akin to one of us going into the boxing ring against Mike
Tyson. Suicide, either financial or physical, is not high on our "To Do" list.
Many investors, both individual and professional, believe they have some
special knowledge that enables them to predict where the overall market or
individual stocks are going on an almost daily basis, despite personal
experience and empirical evidence to the contrary. It is part of the theory that
behavioral psychologists call an over-confidence factor. More often than not
this leads to costly, excessive trading as investors attempt to stay one step
ahead of the market. We are not aware of any other reason to explain the high
turnover rates that studies have shown occur in individual brokerage accounts
and also in many mutual fund portfolios. Our own experience shows that a small
number of investors in our Funds buy and redeem at a feverish pace. This can
only mean that they believe they can predict what our net asset value will be
tomorrow or the next day. Even we do not know this. Fortunately, this trading
does not affect the management of the Funds, as all this activity relates to a
small number of shares and seems to be a zero sum game, with as many going in as
out on any given day. We would like to discourage this behavior if only for the
reason that we do not think it is in the investors' best interests financially.
However, "irrational exuberance" and excessive pessimism provide many of our
investment opportunities.
We are pleased to be speaking for the third time at a conference on
behavioral psychology as it affects investment decisions that is being jointly
sponsored by the Kennedy School of Government and Harvard University Economics
Department. This conference explores why many investors react as they do to
short-term market events and seem incapable of maintaining a long-term focus. We
like to describe these conferences as contrarian "love-ins" because so much of
the psychology of contrarian, value investing runs counter to the herd instincts
of the stock market. We have been doing what we do for so long that it is
impossible for us to change. We also think that our own personal experience and
the long-term results we have achieved indicate that we are doing something
right.
There is a fashion today to portray successful fund managers as celebrities,
often based on rather short-term results. Descriptions such as "aggressive" and
"mean" are becoming synonymous with success in money management. Whereas The
Wall Street Journal reports that portfolio managers were once "geeks" wearing
green eyeshades, now they are shown spending their free time boxing, mountain
climbing or racing Formula One cars on the weekends. We call it the "Jean-Claude
Van Damme Syndrome". If the macho actor decided to become a fund manager, we
would have to say, "move over Mr. Buffett". We do not believe that being
aggressive or mean has anything to do with being successful money managers.
While we do not like to think of ourselves as "geeks," we lead pretty mundane
lives. Chris Browne resides in New York City and East Hampton with two dogs and
spends his weekends pursuing his interest in landscape architecture. Will Browne
lives in Connecticut, and most of his spare time is devoted to raising four
sons, ages 8 to 20. John Spears, who lives in New Jersey, is the father of three
daughters at or near college age, and swims outside, yes outside, almost every
day. (He does not admit to being a member of the Polar Bear Club!) All three of
us have a keen interest in education and Chris and Will serve on the boards of
trustees of their respective alma maters. On vacations, John and Chris like to
catch up on reading and prefer no greater risk than falling eighteen inches from
a beach chair onto two feet of sand. Because of his children, Will's vacations
are a bit more active. We do not come into the office on Monday morning raring
to roil the markets or turn over our Funds' portfolios for a point or two in a
stock. Our turnover rate is quite low: 20% for the Global Value Fund and 16% for
the American Value Fund this past year. In our minds, turnover is equated with
taxes, and we think of April 15th as a national day of mourning. We think the
tendency to report both before-tax and after-tax performance of mutual funds is
a good one. After all, you can only spend or reinvest the share of profits our
government leaves you.
We recognize that we are not the geniuses who will figure out if Netscape or
Yahoo will become the next Microsoft, nor are we able to predict next month's
same store sales for Walmart or the level of the Dow Jones Industrials come the
end of the year. We are not "masters of the universe" managers. We have a
process based on observation by us and numerous academics of the financial
characteristics of stock portfolios that over time have beaten the stock market:
stocks selected from the bottom tiers of all stocks ranked on the basis of
price-to-book value, earnings or cash flow.
Today's technology permits us to screen more than 20,000 companies in twenty
countries to come up with a short list of candidates for further, in-depth
research. In the early 1970s, when the three of us began our careers, screening
was a manual process which required turning the pages of Standard & Poor's
Directory of Corporations, and it was not possible to rank stocks. Today, we pop
a CD-ROM disk into our computer containing all the financial information
companies file with the Securities and Exchange Commission or their respective
national exchanges, run a feed of the previous night's closing prices over the
fundamental financial information and get a list of stocks ranked as we choose
with as much information as we want. The next step is to review the basic
financial information such as balance sheets, income statements, cash flow
statements, historical performance, etc., to determine which stocks should
continue in our financial beauty contest. In this process, we are further aided
by technology. Bloomberg Financial Services provides every bit of financial
information and every ratio one could ever need for all U.S. companies and for
many non-U.S. companies on one, simple-to-use terminal. In our investment
church, Michael Bloomberg would be canonized. We also have all Wall Street
research reports and insider trading information on-line.
The entire process is geared towards finding a reason to reject an
investment opportunity rather than becoming advocates for a particular company.
We try to keep our personal prejudices out of the process such as trying to
justify buying McDonald's just because we like Big Macs or think their
restaurants are cleaner than Burger King's. If a candidate is still in the
running, we or one of our analysts enter all relevant financial data including
46 financial data items onto a form we call a "rolodex". This rolodex form,
along with any reports, management interview notes, or notes of conversations
with competitors or experts, is then distributed to the partners for
consideration. We do not have a formal "investment committee" which must convene
to approve or reject an idea. When an idea is ready, we discuss its individual
merits and make a decision or ask for further information. In the near future,
we will be able to import the financial data from the database directly to the
rolodex form and e-mail the forms to each other no matter where we might be. We
want to do everything we can to speed the process of research and, thus, improve
our hit rate for investment ideas. Speed is also important because, on average,
stocks that are in the lower tier of value do not stay there. We want to
research and buy them while they are there, before they go up.
Our investment process is not merely putting round pegs into round holes and
square pegs into square holes by only buying stocks in the bottom 10% of stocks
ranked on price-to-book value or their price/earnings ratios. Sometimes we even
buy better businesses, the kinds of companies others call growth stocks to
justify owning them at higher price/earnings ratios. These candidates often
appear on our screens as having high returns on capital and above-average
earnings growth rates, yet are selling at relatively low price/ earnings ratios
or low price-to-book value ratios. We also use insider trading reports for
stocks in the U.S., Canada and the United Kingdom for indications of potential
value. Officers, directors and principal shareholders in public companies are
required to file reports of purchases and sales of shares in their companies. We
can now track patterns of buying by company officials over time rather than
merely seeing what buys or sells were reported the previous day. We can call up
a company on our system and get a printout of all insider transactions for
whatever time period we choose. Insider purchases are usually made because the
person sitting in the board room or at the management meetings thinks the
business is improving and the stock will go up. We call it a sort of company
specific leading economic indicator. Combining insider purchases with low
price/earnings or low price/book value criteria may provide even better
performance. We think it may be like finding a spouse who is good looking,
intelligent, personable, kind and rich all rolled into one.
All investment decisions are made by the three partners. We do not employ
portfolio managers. If our performance is lagging, you will not hear from us
that we have fired our mini-cap fund portfolio manager and hired a new star from
a competitor. We cannot fire ourselves; only our clients can do that by
redeeming their shares in our Funds. After working together for 20 to 25 years,
we do not often disagree on investment decisions. None of us ever seems to
propose an investment to which the other two respond, "What was he thinking?" We
work with four research analysts who do the same basic research that we do.
Although the partners make the final decision to buy or sell, our analysts
freely offer their opinions and never seem to come up with recommendations that
are out in left field. Left field is an appropriate location for baseball, not
investments. And after 20 to 25 years together, we like to think we are at the
midpoint in our careers. Our ages range from 48 to 52. Our good friend and role
model, Walter Schloss, has been camping out at Tweedy, Browne since 1955
managing a private investment partnership first alone, and then, with his son
Edwin for the past 23 years. Walter is now 80 and he shows no signs of slowing
down either physically or from a performance standpoint. We hope we can be as
lucky in life and as successful in investing as Walter.
Regarding our personal commitment to our investment approach, we have more
than $100 million of our own money, none of which was inherited or given to us,
invested alongside our clients. In our last report, several shareholders noted
that this statement does not square with our reported investment in the Funds.
Our investment in the two Funds is approximately $33 million, including our pro
rata share of our employees' profit sharing plan, which is also invested in the
Funds. The balance of the partners' capital is in other pooled accounts with
clients which were established before the Funds, and in individual portfolios.
To move these investments into the Funds would result in the realization of
significant capital gains. With the exception of our personal residences, more
than 95% of our investable assets are invested in the same stocks our clients
and shareholders own. A reporter recently asked us what the significance of
co-investing with our clients was. We responded that it was a bit like going to
a doctor who prescribed a course of action for you that was different from what
he or she would prescribe for themselves or their family. We want the same
medicine the doctor would take. We do not have any other prescription for your
money than we have for our own, and that will not change.
Sincerely,
Christopher H. Browne
William H. Browne
John D. Spears
General Partners
TWEEDY, BROWNE COMPANY L.P.
Investment Adviser to the Fund
April 17, 1997
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
March 31, 1997
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
TWEEDY, BROWNE GLOBAL VALUE FUND VS. MORGAN STANLEY
CAPITAL INTERNATIONAL ("MSCI") EUROPE, AUSTRALASIA AND
FAR EAST ("EAFE") INDEX (IN U.S. DOLLARS & HEDGED)
6/15/93 THROUGH 3/31/97
Tweedy, Browne MSCI EAFE Index MSCI EAFE Index
Global Value Fund (In U.S. Dollars) (Hedged)
----------------- ----------------- ---------------
JUN 1993 9.98 9.84 9.96
SEP 1993 10.31 10.49 10.56
DEC 1993 11.54 10.59 11.03
MAR 1994 12.26 10.96 10.84
JUN 1994 12.20 11.52 10.95
SEP 1994 12.30 11.53 10.86
DEC 1994 12.04 11.41 10.85
MAR 1995 11.67 11.62 10.03
JUN 1995 12.30 11.71 10.22
SEP 1995 12.87 12.20 11.38
DEC 1995 13.33 12.69 12.17
MAR 1996 14.70 13.06 12.87
JUN 1996 15.34 13.26 13.36
SEP 1996 15.17 13.25 13.45
DEC 1996 16.02 13.46 13.82
MAR 1997 17.15 13.25 14.36
- --------------------------------------------------------------------------------
MSCI EAFE Index represents the change in market capitalizations of Europe,
Australasia and the Far East (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.
THE FUND ACTUAL WAIVERS** THROUGH 3/31/97 ACTUAL DOLLARS HEDGED
- -------- ------ --------- ------------------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Inception (6/15/93) The Fund 71.49% N/A N/A
through 3/31/97 15.29% 15.25% MSCI EAFE N/A 32.47% 44.84%
Year Ended 3/31/97 16.66% 16.65%
- --------------------------------------------------------------------------------------------------------
Note: The performance shown represents past performance and is not a guarantee of future
results. The 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>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Portfolio of Investments
- -------------------------------------------------------------------------------
March 31, 1997
[Graphic Omitted]
MARKET
VALUE
SHARES (NOTE 1)
------ --------
COMMON STOCKS--86.8%
AUSTRALIA--0.0%++
96,353 Carillon Development Ltd. ......................... $ 147,295
--------------
BELGIUM--0.8%
788 Belvuco NV ........................................ 164,930
592 Fabrique de Fer de Charleroi ...................... 1,858,605
1,824 Glaces de Charleroi ............................... 4,719,070
636 Henex SA .......................................... 1,255,360
2,333 Spadel SA ......................................... 2,678,881
3,252 Uco Textiles SA ................................... 307,238
--------------
10,984,084
--------------
CANADA--2.1%
196,891 BRL Enterprises Inc.+ ............................. 647,176
166,500 Corby Distilleries Ltd., Class A .................. 5,743,453
104,600 Corby Distilleries Ltd., Class B .................. 3,324,833
1,635,200 Kaufel Group NV, Class B .......................... 3,337,143
260,700 Melcor Developments Ltd. .......................... 2,824,995
1,226,000 National Bank of Canada, Toronto .................. 13,063,753
243,300 Shirmax Fashions .................................. 386,679
785,883 Westfield Minerals Ltd.+ .......................... 936,758
--------------
30,264,790
--------------
DENMARK--0.6%
11,390 Nordvestbank ...................................... 1,102,102
186,571 Spar Nord Holding A/S ............................. 7,866,868
--------------
8,968,970
--------------
FINLAND--3.1%
6,000 Atria OY .......................................... 82,873
75,714 Huhtamaki Group, Class I .......................... 3,689,004
794,900 Kesko Ord ......................................... 11,615,762
241,035 Kone Corporation, Class B ......................... 29,287,422
--------------
44,675,061
--------------
FRANCE--6.3%
24,332 Bongrain SA ....................................... 9,681,661
24,763 Centenaire-Blanzy SA .............................. 2,022,676
5,229 Christian Dior, SA ................................ 800,951
72,419 Compagnie Financiere de Paribas ................... 5,052,368
229,987 Compagnie Financiere de Suez ...................... 11,916,149
57,700 Compagnie Lebon SA ................................ 2,291,762
176,692 Dollfus Mieg & Cie ................................ 4,626,186
6,636 Eurafrance SA ..................................... 3,129,776
1,150 Fiat France SA .................................... 26,627
14,896 Fin Marc de Lacharriere SA ........................ 1,483,100
60,931 Fonciere Financiere Et de Participation+ .......... 2,821,633
34,750 Groupe Danone ..................................... 5,520,883
<PAGE>
FRANCE--(CONTINUED)
2,022 Idianova SA+ ...................................... $ 24,814
52,218 Klepierre ......................................... 7,719,466
33,971 La Concorde+ ...................................... 5,693,599
5,229 LVMH Moet Hennessey ............................... 1,272,208
9,697 Marine-Wendel ..................................... 1,105,366
21,145 Mecelec SA ........................................ 263,630
3,347 Monneret Jouets+ .................................. 68,556
2,259 Nordon Et Cie ..................................... 183,070
36,372 NSC Groupe ........................................ 4,683,757
38,018 Paluel Marmont SA ................................. 2,024,648
9,073 Paris Orleans ..................................... 467,022
87,700 Peugeot SA ........................................ 10,012,593
2,232 Precia ............................................ 65,594
11,136 Rallye+ ........................................... 475,826
49,464 Salins du Midi, Series A .......................... 5,409,368
13,082 Sediver ........................................... 264,692
5,925 Signaux Girod ..................................... 125,582
61,500 Siparex ........................................... 1,347,315
--------------
90,580,878
--------------
GERMANY--1.6%
15,018 Axel Springer Verlag, Class A ..................... 11,169,483
61,660 Kaufring AG ....................................... 4,031,153
4,136 Linder Holding .................................... 855,852
33,968 Sinn AG ........................................... 6,010,232
3,755 Tiag Tabbert-Industrie AG ......................... 202,699
--------------
22,269,419
--------------
HONG KONG--1.1%
2,912,500 Jardine Strategic Holdings Ltd.+ .................. 10,077,250
2,067,953 Semi-Tech (Global) Ltd. ........................... 2,188,395
8,891,000 Sing Tao Holdings ................................. 3,929,908
--------------
16,195,553
--------------
IRELAND--0.5%
1,873,618 Crean (James) PLC ................................. 7,064,566
--------------
ITALY--6.3%
2,650,800 Arnoldo Mondadori Editore SPA ..................... 16,694,197
2,750,400 Banca Toscana+ .................................... 5,328,410
638,850 Banco di Sardegna Risp+ ........................... 5,824,273
494,500 Bassetti SPA ...................................... 1,732,122
2,061,730 Cartiere Burgo Ord ................................ 10,746,099
424,500 Cementerie di Augusta+ ............................ 636,527
323,000 Cementerie di Barletta Ord ........................ 973,504
218,450 Cristalleria Artistica ............................ 737,666
476,600 Ericsson Italia ................................... 6,760,588
642,920 Franco Tosi SPA ................................... 4,592,699
529,750 IMI SPA ........................................... 4,605,624
620,862 Industrie Zignago ................................. 4,245,210
1,234,000 Maffei SPA ........................................ 1,739,332
5,237,200 Magneti Marelli SPA ............................... 7,146,277
237,000 Marangoni SPA ..................................... 682,322
3,210,300 Merloni ........................................... 7,875,320
4,174,735 Montefibre SPA .................................... 2,391,286
2,371,500 Tecnost SPA ....................................... 5,348,232
1,825,000 Vianini Industria SPA ............................. 864,747
493,000 Zucchi ............................................ 2,143,799
--------------
91,068,234
--------------
JAPAN--18.7%
25,000 Agro-Kanesho Company Ltd. ......................... 321,420
735,000 Aichi Electric Manufacturing ...................... 3,239,064
627,000 Amada Sonoike Company Ltd. ........................ 2,458,923
730,740 Chofu Seisakusho Company .......................... 12,231,194
819,000 Daiichi Cement Company Ltd. ....................... 2,417,199
442,000 Danto Corporation ................................. 4,253,093
243,000 Denkyosha ......................................... 1,542,452
1,765,000 Dowa Fire & Marine Insurance Company .............. 7,250,101
632,000 Fuji Coca-Cola Bottling Company ................... 6,285,760
618,000 Fuji Photo Film Ltd. .............................. 20,338,481
296,000 Fujicco Company Ltd. .............................. 3,350,853
344,000 Fukuda Denshi ..................................... 6,675,831
947,000 Gakken Company Ltd. ............................... 4,357,104
867,000 Hitachi Koki ...................................... 5,194,849
195,000 Hitachi Medical Corporation ....................... 2,412,469
323,000 Kawagishi Bridge Works ............................ 1,802,135
3,000 Kinki Coca-Cola Bottling Company .................. 32,748
93,000 Kita Kyushu Coca-Cola Bottling .................... 1,699,523
680,000 Koa Fire & Marine Insurance Company ............... 3,161,640
144,000 Koito Manufacturing ............................... 923,361
315,000 Kokura Enterprises Company ........................ 3,158,405
264,000 Koyosha Inc.+ ..................................... 1,364,082
1,941,000 Matsushita Electric Industrial Company ............ 30,291,340
81,000 Meito Sangyo Company .............................. 792,512
1,397,000 Mitsubishi Electric Corporation ................... 7,850,853
98,000 Morito ............................................ 675,944
870,000 Nichimo Co. Ltd.+ ................................. 2,047,142
575,000 Nippon Cable System ............................... 5,114,417
152,000 Nippon Konpo Unyu Soko ............................ 860,354
1,016,400 Nissan Fire & Marine Insurance Company ............ 3,961,388
674,000 Nisshinbo Industries .............................. 4,452,640
409,000 Nittetsu Mining ................................... 2,414,248
477,000 Nitto FC Co. ...................................... 3,355,624
446,000 Oak ............................................... 1,911,377
401,000 Osaka Securities Finance .......................... 1,332,668
522,000 Riken Vitamin ..................................... 5,149,511
431,000 Sangetsu Company Ltd. ............................. 7,458,074
388,000 Sankyo Company Ltd. ............................... 10,698,472
311,960 Sanyo Shinpan Finance Company, Ltd. ............... 15,740,522
545,800 Shikoku Coca-Cola Bottling ........................ 5,958,034
771,000 Shin Nikkei Company Ltd. .......................... 2,337,875
452,000 SK Kaken Co., Ltd. ................................ 7,127,032
377,000 Sonton Food Industry .............................. 3,901,997
304,000 Sotoh Company Ltd. ................................ 2,286,084
1,330,000 Suzuki Motor Corporation .......................... 12,905,313
183,000 Taisei Fire & Marine Insurance Company ............ 606,695
646,000 Takeda Chemical Industries ........................ 13,529,069
377,000 Takigami Steel Construction ....................... 1,981,483
166,000 Teikoku Hormone Manufacturing Company ............. 1,785,235
188,000 Tomita Electric Company Limited ................... 1,641,789
308,000 Torii Company Ltd. ................................ 2,540,309
779,000 Torishima Pump Manufacturing ...................... 6,425,002
11,000 Totech Corporation ................................ 56,481
608,000 Toyo Technical Company Ltd. ....................... 4,867,147
338,000 U-Shin ............................................ 1,721,840
204,000 Zojirushi ......................................... 1,896,984
--------------
270,146,142
--------------
NETHERLANDS--4.9%
99,300 Akzo NV Ord ....................................... 14,264,000
4,050 European Vinyls Corporation ....................... 134,752
85,499 Heineken Holdings NV, Class A ..................... 12,901,553
207,100 Unilever NV CVA ................................... 40,460,391
28,750 Wegener NV ........................................ 2,881,975
--------------
70,642,671
--------------
NEW ZEALAND--1.1%
3,388,000 Independent Newspaper ............................. 15,581,124
164,600 Radio Pacific Limited ............................. 400,217
--------------
15,981,341
--------------
NORWAY--1.4%
20,000 Nycomed, ASA, Class B, ADR ........................ 300,000
435,000 Nycomed, Class A .................................. 6,896,382
580,800 Nycomed, Class B .................................. 8,679,178
232,300 Schibsted ......................................... 4,722,476
--------------
20,598,036
--------------
SINGAPORE--0.7%
2,505,500 Robinson and Company Ord .......................... 10,407,061
--------------
SPAIN--2.2%
269,497 Argentaria ........................................ 11,750,851
10,227 Banco Pastor SA ................................... 586,365
1,396,015 Corporacion Financiera Reunida .................... 4,693,733
151,997 Fabrica Auto Renault de Espana .................... 2,818,844
381,818 Fosforera ......................................... 905,390
199,014 Grupo Anaya SA .................................... 4,120,446
31,598 Indo Internacional SA ............................. 1,118,315
51,846 Omsa .............................................. 302,764
80,898 Prim SA+ .......................................... 286,314
45,068 Roberto Zubiri+ ................................... 206,399
250,996 Unipapel SA ....................................... 4,752,534
--------------
31,541,955
--------------
SWEDEN--1.1%
602,800 Atle AB ........................................... 8,678,560
124,085 BRIO AB, Class B .................................. 1,333,672
80,600 Invik & Company AB, Class A ....................... 3,743,241
19,179 Kinnevik Investment AB, Class B ................... 536,974
55,200 Nolato AB, Class B ................................ 908,250
7,200 VLT AB, Class B ................................... 116,557
--------------
15,317,254
--------------
SWITZERLAND--12.7%
20,010 Attisholz Holding AG+ ............................. 7,787,074
33 Bank of International Settlements America ......... 245,379
2,415 Daetwyler Holding, Bearer ......................... 4,271,143
6,235 Danzas Holding AG PC .............................. 1,230,535
8,061 Danzas Holding AG, Registered ..................... 7,904,149
80,068 Edipresse SA, Bearer .............................. 18,417,309
8,225 Edipresse SA, Registered .......................... 348,662
3,525 Forbo Holding AG .................................. 1,452,623
2,200 Golay Buchel Holding, Bearer ...................... 1,605,281
4,984 Grand Magasin Jelmoli ............................. 533,382
9,100 Helvetia Patria Holding ........................... 3,984,017
300 Industrie Holding, Cham Registered ................ 185,545
6,248 Jelmoli, Bearer ................................... 3,590,755
21,015 Liechtenstein Global Trust ........................ 11,829,152
29,327 Loeb Holding PC ................................... 4,402,107
26,045 Magazine Zum Globus PC ............................ 11,402,606
9,890 Magazine Zum Globus, Registered ................... 4,982,801
1,815 Metallwaren Holding ............................... 1,064,531
27,789 Nestle SA, Registered ............................. 32,539,587
6,698 Novartis, AG, Bearer .............................. 8,345,736
10,329 Novartis, AG, Registered .......................... 12,819,732
1,180 Sarna Kunsstoff Holding AG, Registered ............ 1,193,120
8,423 Sig Schweiz Industrie, Registered ................. 10,418,999
13,535 Swissair AG, Registered+ .......................... 12,077,095
20,130 Swisslog Holding AG ............................... 7,134,329
200 UMS Schweizzerische Metalwerke .................... 14,663
3,050 Vetropack Holding AG PC ........................... 741,835
16,455 Zehnder Holding, Bearer ........................... 6,918,190
11,224 Zschokke Holding AG, Registered+ .................. 2,347,758
5,500 Zuercher Ziegeleien ............................... 2,866,574
--------------
182,654,669
--------------
THAILAND--0.0%++
28,700 S & J Enterprises ................................. 45,060
--------------
UNITED KINGDOM--6.5%
19,562,822 Bardon Group ...................................... 13,034,822
201,000 British Mohair Holdings PLC ....................... 391,862
200,000 British Steel Ord ................................. 535,512
3,720,000 BTR Ord ........................................... 16,310,179
1,420,000 Courtaulos Textiles Ord ........................... 6,599,718
1,408,668 Dyson (J&J) PLC, Class A, Non-voting .............. 2,966,451
803,000 Folkes Group PLC .................................. 819,079
145,000 Gibbs Mew PLC ..................................... 564,180
427,800 Glaxo Wellcome PLC Units, ADR ..................... 15,133,425
887,000 Guinness PLC ...................................... 7,508,057
515,000 Intercare Group PLC ............................... 686,295
350,000 Johnston Group PLC ................................ 3,014,417
3,535,120 McAlpine (Alfred) PLC ............................. 9,421,884
584,000 Partridge Fine Art Ord ............................ 696,578
1,386,739 Proudfoot Alexander ............................... 262,368
1,221,500 Sherwood Group PLC ................................ 833,989
184,600 SmithKline Beecham, PLC Units, ADR ................ 12,922,000
779,500 Swan Hill Group PLC ............................... 1,160,602
600,000 Union PLC ......................................... 858,794
--------------
93,720,212
--------------
UNITED STATES--15.1%
221,000 American Express Company .......................... 13,232,375
75,700 American National Insurance Company ............... 5,923,525
298,000 BanPonce Corporation, New ......................... 10,579,000
257,400 Chase Manhattan Corporation ....................... 24,099,075
68,000 Coca-Cola Bottling Company ........................ 2,958,000
232,200 Comerica, Inc. .................................... 13,090,275
313,000 Darden Restaurants Inc. ........................... 2,464,875
140,000 Federal Home Loan Mortgage Corporation ............ 3,815,000
240,000 Fingerhut Companies, Inc. ......................... 3,360,000
205,616 First Chicago Corporation ......................... 11,128,966
35,000 GATX Corporation .................................. 1,710,625
31,590 Great Atlantic & Pacific Tea Company .............. 801,596
129,462 Hasbro Inc. ....................................... 3,544,021
65,700 Household International Inc. ...................... 5,641,988
125,000 Kmart Stores ...................................... 1,515,625
505,400 Lehman Brothers Holdings Inc. ..................... 14,719,775
100,000 McDonald's Corporation ............................ 4,725,000
48,750 Mercantile Bancorporation, Inc. ................... 2,583,750
584,700 Pharmacia & Upjohn Inc. ........................... 21,414,637
73,200 Philip Morris Companies Inc. ...................... 8,353,950
460,000 PNC Bank Corporation .............................. 18,400,000
169,000 Ryland Group Inc. ................................. 1,985,750
118,400 Standard Motor Products, Inc. ..................... 1,554,000
185,000 Sun Healthcare Group Inc.+ ........................ 2,659,375
160,000 Syms Corporation .................................. 1,460,000
196,400 Transatlantic Holdings Inc. ....................... 16,497,600
20,000 Tremont Corporation ............................... 697,500
546,000 UST Inc. .......................................... 15,219,750
12,500 Wells Fargo & Company ............................. 3,551,563
--------------
217,687,596
--------------
TOTAL COMMON STOCKS
(COST $1,087,043,013) ............................. 1,250,960,847
--------------
PREFERRED STOCK--1.0% (COST $13,969,243)
108,212 Villeroy & Boch AG ................................ 14,668,413
--------------
COMMON STOCK WARRANTS--0.0%++
105,920 Franco Tosi, Strike 20,000, Expires 11/30/97+ ..... 12,706
9,073 Paris Orleans, Strike 330, Expires 4/30/98+ ....... 18,745
--------------
TOTAL COMMON STOCK WARRANTS
(COST $37,986) .................................... 31,451
--------------
FACE
VALUE
CONVERTIBLE CORPORATE BONDS--0.0%++
ESP 29,870,000 Grupo Anaya SA, 7.000% due 3/18/98 ............ 215,660
JPY 9,000,000 Shikoku Coca-Cola Bottling, 2.400% due 3/29/02 78,160
--------------
TOTAL CONVERTIBLE CORPORATE BONDS
(COST $322,356) ............................... 293,820
--------------
COMMERCIAL PAPER--1.5% (COST $21,427,000)
$ 21,427,000 Ford Motor Company, 6.500% due 4/1/97 ......... 21,427,000
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
March 31, 1997
MARKET
FACE VALUE
VALUE (NOTE 1)
----- --------
U.S. TREASURY BILLS--0.4%
$ 600,000 5.760%** due 5/29/97 .............................. $ 594,732
2,000,000 5.840%** due 7/24/97 .............................. 1,965,040
1,000,000 5.600%** due 8/21/97 .............................. 979,094
1,500,000 5.840%** due 9/18/97 .............................. 1,460,900
---------------
TOTAL U.S. TREASURY BILLS
(COST $4,999,766) ................................. 4,999,766
---------------
REPURCHASE AGREEMENT--6.9%
(COST $100,000,000)
100,000,000 Agreement with UBS Securities, Inc., 6.350%
dated 3/31/97, to be repurchased at
$100,017,639 on 4/1/97, collateralized by
$50,000,000 U.S. Treasury Notes, 6.375% due
9/30/01 and $44,657,000 U.S. Treasury
Bonds, 8.75% due 8/15/20 (market value
$49,281,250 and $52,220,779, respectively) ........ 100,000,000
---------------
TOTAL INVESTMENTS (COST $1,227,799,364*) .......... 96.6% 1,392,381,297
OTHER ASSETS AND LIABILITIES (NET) ................ 3.4 48,829,195
----- ---------------
NET ASSETS ........................................ 100.0% $1,441,210,492
===== ==============
- ------------
* Aggregate cost for Federal tax purposes is $1,237,720,743.
** Rate represents annualized yield at date of purchase.
+ Non-income producing security.
++ Amount represents less than 0.1% of net assets.
Abbreviations:
ADR--American Depositary Receipt
ESP--Spanish Peseta
JPY--Japanese Yen
Ord--Ordinary Share
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
March 31, 1997
MARKET
PERCENTAGE OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 1)
---------------------- ------------- --------
COMMON STOCKS:
Banking ................................. 10.1% $ 145,555,198
Food and Beverages ...................... 9.0 129,336,536
Pharmaceuticals ......................... 7.8 112,523,866
Financial Services ...................... 5.9 85,485,449
Printing and Publishing ................. 5.7 82,339,240
Retail .................................. 4.7 67,421,735
Consumer Durables ....................... 4.1 59,569,671
Machinery ............................... 3.9 56,578,594
Holdings ................................ 3.4 48,429,706
Manufacturing ........................... 3.4 48,329,655
Engineering and Construction ............ 2.8 40,717,750
Autos ................................... 2.8 40,677,503
Consumer Non-Durables ................... 2.8 40,460,391
Electronics ............................. 2.5 36,355,181
Chemicals ............................... 2.3 33,003,482
Textiles ................................ 2.1 29,935,480
Insurance ............................... 1.8 26,596,947
Forest Products ......................... 1.6 23,677,652
Transportation .......................... 1.5 22,072,133
Real Estate ............................. 1.1 16,057,273
Tobacco ................................. 1.1 15,219,750
Mining and Metal Fabrication ............ 0.9 13,059,172
Wholesale ............................... 0.7 8,134,018
Telecommunications ...................... 0.5 6,760,588
Construction Materials .................. 0.4 5,512,317
Leisure ................................. 0.3 4,946,249
Building Materials ...................... 0.3 4,891,977
Commercial Services ..................... 0.3 4,867,147
Other ................................... 3.0 42,446,187
----- --------------
TOTAL COMMON STOCKS ..................... 86.8 1,250,960,847
----- --------------
PREFERRED STOCK ......................... 1.0 14,668,413
COMMON STOCK WARRANTS ................... 0.0++ 31,451
CONVERTIBLE CORPORATE BONDS ............. 0.0++ 293,820
COMMERCIAL PAPER ........................ 1.5 21,427,000
U.S. TREASURY BILLS ..................... 0.4 4,999,766
REPURCHASE AGREEMENT .................... 6.9 100,000,000
OTHER ASSETS AND LIABILITIES (NET) ...... 3.4 48,829,195
----- --------------
NET ASSETS .............................. 100.0% $1,441,210,492
===== ==============
- ------------
++ Amount represents less than 0.1% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Schedule of Forward Exchange Contracts
- -------------------------------------------------------------------------------
March 31, 1997
<TABLE>
<CAPTION>
CONTRACT MARKET
VALUE VALUE
CONTRACTS DATE (NOTE 1)
--------- ------- --------
FORWARD EXCHANGE CONTRACTS TO BUY
<C> <S> <C> <C>
5,075,500 Austrian Schilling ....................... 8/14/97 $ 434,205
10,356,200 Austrian Schilling ....................... 10/31/97 891,258
2,688,311 French Franc ............................. 4/30/97 479,790
20,382 Great Britain Pound Sterling ............. 4/2/97 33,532
183,708 Great Britain Pound Sterling ............. 4/4/97 302,234
350,439 Great Britain Pound Sterling ............. 4/7/97 576,525
8,000,000 Hong Kong Dollar ......................... 6/16/97 1,032,209
4,154,667,300 Italian Lira ............................. 4/3/97 2,491,880
228,684,000 Italian Lira ............................. 4/4/97 137,157
4,450,504 Irish Pound .............................. 4/7/97 7,065,648
44,348,969 Japanese Yen ............................. 4/1/97 358,607
630,031 Japanese Yen ............................. 4/2/97 5,095
80,570,989 Japanese Yen ............................. 4/3/97 651,540
23,824,850 Swedish Krona ............................ 4/30/97 3,165,546
16,363,700 Swedish Krona ............................ 5/15/97 2,169,998
1,152,305 Swiss Franc .............................. 4/2/97 800,779
4,500,851 Swiss Franc .............................. 4/3/97 3,127,902
-------------
TOTAL FORWARD EXCHANGE CONTRACTS TO BUY
(CONTRACT AMOUNT $23,512,542) ..................................... $ 23,723,905
=============
FORWARD EXCHANGE CONTRACTS TO SELL
5,075,500 Austrian Schilling ....................... 8/14/97 $ (434,205)
10,356,200 Austrian Schilling ....................... 10/31/97 (891,258)
30,845,000 Belgian Franc ............................ 4/30/97 (898,420)
40,261,000 Belgian Franc ............................ 5/30/97 (1,175,161)
30,670,000 Belgian Franc ............................ 6/16/97 (896,092)
30,268,000 Belgian Franc ............................ 10/31/97 (893,383)
30,820,000 Belgian Franc ............................ 11/14/97 (910,656)
48,045,000 Belgian Franc ............................ 1/20/98 (1,427,150)
32,990,000 Belgian Franc ............................ 2/5/98 (981,223)
50,850,000 Belgian Franc ............................ 2/17/98 (1,513,922)
34,130,000 Belgian Franc ............................ 3/6/98 (1,017,558)
34,122,000 Belgian Franc ............................ 4/6/98 (1,019,875)
9,553,600 Canadian Dollar .......................... 4/30/97 (6,915,832)
4,077,600 Canadian Dollar .......................... 5/15/97 (2,954,780)
1,707,125 Canadian Dollar .......................... 5/30/97 (1,238,303)
2,032,650 Canadian Dollar .......................... 6/16/97 (1,476,002)
6,805,000 Canadian Dollar .......................... 7/15/97 (4,950,049)
1,351,300 Canadian Dollar .......................... 8/15/97 (984,694)
1,350,000 Canadian Dollar .......................... 9/15/97 (985,376)
3,986,400 Canadian Dollar .......................... 9/30/97 (2,911,983)
3,172,800 Canadian Dollar .......................... 10/15/97 (2,319,647)
3,272,750 Canadian Dollar .......................... 10/31/97 (2,394,884)
3,950,700 Canadian Dollar .......................... 11/14/97 (2,893,245)
2,007,450 Canadian Dollar .......................... 3/6/98 (1,477,966)
39,903,500 Danish Krona ............................. 10/31/97 (6,358,318)
5,777,500 Danish Krona ............................. 11/14/97 (921,399)
11,906,000 Danish Krona ............................. 1/20/98 (1,906,512)
9,459,750 Danish Krona ............................. 2/17/98 (1,517,217)
15,615,060 Finnish Markka ........................... 4/15/97 (3,129,551)
6,996,000 Finnish Markka ........................... 4/29/97 (1,403,579)
17,779,440 Finnish Markka ........................... 5/30/97 (3,575,518)
6,808,500 Finnish Markka ........................... 6/16/97 (1,370,961)
8,749,800 Finnish Markka ........................... 7/15/97 (1,765,697)
8,795,600 Finnish Markka ........................... 7/31/97 (1,777,090)
21,997,500 Finnish Markka ........................... 8/15/97 (4,449,481)
8,923,000 Finnish Markka ........................... 8/29/97 (1,806,781)
8,951,400 Finnish Markka ........................... 9/30/97 (1,816,916)
4,433,500 Finnish Markka ........................... 10/15/97 (900,944)
18,018,000 Finnish Markka ........................... 11/14/97 (3,670,110)
24,854,500 Finnish Markka ........................... 11/28/97 (5,068,236)
9,274,000 Finnish Markka ........................... 1/20/98 (1,898,814)
44,262,900 Finnish Markka ........................... 3/13/98 (9,097,007)
4,940,300 Finnish Markka ........................... 3/27/98 (1,016,371)
4,914,500 Finnish Markka ........................... 4/14/98 (1,012,464)
5,089,800 French Franc ............................. 4/15/97 (907,464)
17,695,146 French Franc ............................. 4/30/97 (3,158,099)
5,111,700 French Franc ............................. 5/15/97 (913,261)
5,137,000 French Franc ............................. 5/30/97 (918,773)
20,302,000 French Franc ............................. 6/16/97 (3,635,342)
44,524,500 French Franc ............................. 7/15/97 (7,989,017)
9,991,000 French Franc ............................. 7/31/97 (1,794,778)
22,421,250 French Franc ............................. 8/14/97 (4,031,910)
20,203,200 French Franc ............................. 8/29/97 (3,637,122)
151,680,000 French Franc ............................. 9/15/97 (27,341,622)
17,775,800 French Franc ............................. 9/30/97 (3,207,925)
15,039,900 French Franc ............................. 10/15/97 (2,717,362)
22,494,600 French Franc ............................. 10/31/97 (4,069,386)
10,173,000 French Franc ............................. 11/14/97 (1,842,404)
86,596,950 French Franc ............................. 1/20/98 (15,768,754)
13,936,250 French Franc ............................. 3/6/98 (2,547,034)
18,419,610 French Franc ............................. 4/6/98 (3,374,880)
5,544,500 French Franc ............................. 4/14/98 (1,016,504)
8,180,300 German Mark .............................. 4/15/97 (4,911,627)
1,342,800 German Mark .............................. 4/30/97 (807,071)
3,016,000 German Mark .............................. 5/15/97 (1,814,656)
2,112,040 German Mark .............................. 5/30/97 (1,272,145)
1,192,960 German Mark .............................. 6/16/97 (719,435)
5,778,000 German Mark .............................. 7/31/97 (3,496,195)
5,766,400 German Mark .............................. 8/15/97 (3,493,183)
1,468,500 German Mark .............................. 8/29/97 (890,556)
2,990,200 German Mark .............................. 9/30/97 (1,817,964)
2,215,650 German Mark .............................. 10/15/97 (1,348,679)
2,207,400 German Mark .............................. 10/31/97 (1,345,403)
2,243,700 German Mark .............................. 11/14/97 (1,369,101)
1,552,250 German Mark .............................. 1/20/98 (952,475)
4,003,750 German Mark .............................. 2/5/98 (2,459,998)
5,749,240 German Mark .............................. 2/17/98 (3,536,005)
8,266,000 German Mark .............................. 3/27/98 (5,100,199)
2,463,000 German Mark .............................. 4/14/98 (1,521,872)
5,470 Great Britain Pound Sterling ............. 4/3/97 (8,999)
1,647,757 Great Britain Pound Sterling ............. 4/15/97 (2,710,460)
1,993,620 Great Britain Pound Sterling ............. 4/30/97 (3,278,820)
1,330,495 Great Britain Pound Sterling ............. 5/15/97 (2,187,724)
648,004 Great Britain Pound Sterling ............. 6/16/97 (1,064,950)
6,137,160 Great Britain Pound Sterling ............. 7/31/97 (10,078,729)
641,643 Great Britain Pound Sterling ............. 8/15/97 (1,053,478)
642,880 Great Britain Pound Sterling ............. 9/15/97 (1,054,960)
955,171 Great Britain Pound Sterling ............. 9/30/97 (1,567,022)
2,187,637 Great Britain Pound Sterling ............. 10/15/97 (3,588,060)
3,350,798 Great Britain Pound Sterling ............. 11/28/97 (5,491,662)
1,208,971 Great Britain Pound Sterling ............. 12/31/97 (1,980,276)
906,098 Great Britain Pound Sterling ............. 1/20/98 (1,483,770)
1,244,400 Great Britain Pound Sterling ............. 2/5/98 (2,037,315)
9,568,905 Great Britain Pound Sterling ............. 2/17/98 (15,663,594)
6,179,324 Great Britain Pound Sterling ............. 3/13/98 (10,111,954)
6,609,801 Great Britain Pound Sterling ............. 3/27/98 (10,814,466)
1,554,533 Great Britain Pound Sterling ............. 4/14/98 (2,542,704)
100,687,600 Hong Kong Dollar ......................... 6/16/97 (12,991,326)
11,613,450 Hong Kong Dollar ......................... 8/29/97 (1,497,938)
11,619,750 Hong Kong Dollar ......................... 9/30/97 (1,498,525)
7,746,300 Hong Kong Dollar ......................... 1/20/98 (998,329)
4,432,320,000 Italian Lira ............................. 4/15/97 (2,656,647)
7,180,150,000 Italian Lira ............................. 4/30/97 (4,300,522)
7,966,500,000 Italian Lira ............................. 5/30/97 (4,765,366)
468,105,000 Italian Lira ............................. 6/16/97 (279,798)
4,658,600,000 Italian Lira ............................. 7/15/97 (2,781,249)
5,411,875,000 Italian Lira ............................. 8/14/97 (3,227,513)
18,651,600,000 Italian Lira ............................. 8/29/97 (11,117,871)
21,678,300,000 Italian Lira ............................. 9/30/97 (12,909,673)
18,472,800,000 Italian Lira ............................. 10/15/97 (10,996,753)
4,608,750,000 Italian Lira ............................. 10/31/97 (2,742,597)
9,171,420,000 Italian Lira ............................. 11/14/97 (5,456,263)
16,382,835,000 Italian Lira ............................. 1/20/98 (9,736,359)
7,321,950,000 Italian Lira ............................. 2/5/98 (4,350,551)
2,548,875,000 Italian Lira ............................. 3/6/98 (1,514,035)
15,423,300,000 Italian Lira ............................. 3/27/98 (9,159,840)
1,709,300,000 Italian Lira ............................. 4/14/98 (1,014,650)
31,057,436 Japanese Yen ............................. 4/3/97 (251,147)
1,595,877,500 Japanese Yen ............................. 4/15/97 (12,931,863)
555,747,500 Japanese Yen ............................. 4/30/97 (4,513,080)
1,654,040,000 Japanese Yen ............................. 5/15/97 (13,462,166)
725,200,000 Japanese Yen ............................. 5/30/97 (5,916,016)
313,020,000 Japanese Yen ............................. 6/16/97 (2,560,029)
2,625,250,000 Japanese Yen ............................. 6/30/97 (21,515,710)
411,680,000 Japanese Yen ............................. 7/15/97 (3,381,714)
823,640,000 Japanese Yen ............................. 7/31/97 (6,782,372)
1,031,700,000 Japanese Yen ............................. 8/15/97 (8,515,426)
837,440,000 Japanese Yen ............................. 8/29/97 (6,927,164)
421,120,000 Japanese Yen ............................. 9/15/97 (3,492,765)
532,100,000 Japanese Yen ............................. 9/30/97 (4,423,770)
1,197,405,000 Japanese Yen ............................. 10/15/97 (9,979,135)
1,064,200,000 Japanese Yen ............................. 10/31/97 (8,892,189)
1,620,300,000 Japanese Yen ............................. 11/14/97 (13,570,072)
1,513,680,000 Japanese Yen ............................. 11/28/97 (12,706,644)
920,405,500 Japanese Yen ............................. 12/30/97 (7,767,584)
1,440,270,000 Japanese Yen ............................. 1/20/98 (12,193,512)
635,855,000 Japanese Yen ............................. 2/5/98 (5,396,205)
3,521,700,000 Japanese Yen ............................. 2/27/98 (29,985,660)
3,487,500,000 Japanese Yen ............................. 3/6/98 (29,725,501)
2,198,110,000 Japanese Yen ............................. 4/6/98 (18,824,200)
2,902,375,000 Japanese Yen ............................. 4/14/98 (24,887,102)
6,669,800 Netherlands Guilder ...................... 4/15/97 (3,560,080)
6,685,600 Netherlands Guilder ...................... 4/29/97 (3,572,074)
4,180,000 Netherlands Guilder ...................... 5/15/97 (2,235,978)
6,722,400 Netherlands Guilder ...................... 5/30/97 (3,600,064)
1,625,800 Netherlands Guilder ...................... 7/31/97 (874,656)
1,648,500 Netherlands Guilder ...................... 10/31/97 (893,368)
8,386,000 Netherlands Guilder ...................... 11/14/97 (4,549,847)
16,164,900 Netherlands Guilder ...................... 2/5/98 (8,829,750)
5,898,240 Netherlands Guilder ...................... 2/17/98 (3,224,848)
18,562,000 Netherlands Guilder ...................... 3/6/98 (10,162,372)
5,578,200 Netherlands Guilder ...................... 4/6/98 (3,061,468)
2,005,554 New Zealand Dollar ....................... 5/15/97 (1,390,167)
1,136,364 New Zealand Dollar ....................... 6/16/97 (786,481)
1,487,874 New Zealand Dollar ....................... 7/31/97 (1,027,668)
4,345,307 New Zealand Dollar ....................... 10/15/97 (2,990,772)
13,060,514 New Zealand Dollar ....................... 11/28/97 (8,971,026)
1,457,938 New Zealand Dollar ....................... 4/14/98 (995,946)
64,785,000 Norwegian Krone .......................... 6/16/97 (9,881,329)
12,790,000 Norwegian Krone .......................... 11/28/97 (1,972,753)
9,625,950 Norwegian Krone .......................... 2/5/98 (1,491,782)
1,652,520 Singapore Dollar ......................... 4/30/97 (1,145,318)
1,102,000 Singapore Dollar ......................... 5/30/97 (765,012)
1,381,300 Singapore Dollar ......................... 6/16/97 (960,613)
1,390,200 Singapore Dollar ......................... 7/31/97 (969,794)
4,848,900 Singapore Dollar ......................... 8/15/97 (3,384,345)
834,420 Singapore Dollar ......................... 9/30/97 (583,099)
2,385,100 Singapore Dollar ......................... 3/6/98 (1,681,744)
1,413,000 Singapore Dollar ......................... 4/14/98 (997,829)
16,807,547 Spanish Peseta ........................... 4/3/97 (118,970)
127,840,000 Spanish Peseta ........................... 4/15/97 (904,828)
130,050,000 Spanish Peseta ........................... 4/30/97 (920,395)
130,550,000 Spanish Peseta ........................... 5/15/97 (923,873)
524,800,000 Spanish Peseta ........................... 5/30/97 (3,713,689)
194,355,000 Spanish Peseta ........................... 6/16/97 (1,375,316)
127,490,000 Spanish Peseta ........................... 7/15/97 (902,207)
126,410,000 Spanish Peseta ........................... 8/15/97 (894,709)
259,040,000 Spanish Peseta ........................... 9/15/97 (1,833,930)
194,685,000 Spanish Peseta ........................... 9/30/97 (1,378,547)
192,810,000 Spanish Peseta ............................ 10/15/97 (1,365,543)
129,350,000 Spanish Peseta ........................... 11/14/97 (916,537)
130,645,000 Spanish Peseta ........................... 11/28/97 (925,952)
398,190,000 Spanish Peseta ........................... 1/20/98 (2,825,185)
426,864,000 Spanish Peseta ........................... 2/17/98 (3,030,427)
819,432,000 Spanish Peseta ........................... 3/27/98 (5,822,580)
571,600,000 Spanish Peseta ........................... 4/14/98 (4,062,357)
23,824,850 Swedish Krona ............................ 4/30/97 (3,165,546)
16,363,700 Swedish Krona ............................ 5/15/97 (2,170,000)
6,577,300 Swedish Krona ............................ 8/15/97 (878,171)
6,653,000 Swedish Krona ............................ 8/29/97 (888,888)
22,934,100 Swedish Krona ............................ 9/30/97 (3,069,069)
13,449,000 Swedish Krona ............................ 11/28/97 (1,805,033)
6,832,000 Swedish Krona ............................ 1/20/98 (919,361)
60,983,250 Swedish Krona ............................ 2/5/98 (8,212,707)
75,152,000 Swedish Krona ............................ 4/14/98 (10,154,347)
8,370,000 Swiss Franc .............................. 4/15/97 (5,825,596)
8,344,350 Swiss Franc .............................. 4/30/97 (5,817,129)
10,440,500 Swiss Franc .............................. 5/15/97 (7,290,365)
12,315,000 Swiss Franc .............................. 5/30/97 (8,613,695)
1,828,950 Swiss Franc .............................. 6/16/97 (1,281,660)
5,817,000 Swiss Franc .............................. 7/31/97 (4,097,234)
8,650,500 Swiss Franc .............................. 8/15/97 (6,103,700)
7,726,550 Swiss Franc .............................. 8/29/97 (5,460,784)
4,832,400 Swiss Franc .............................. 9/30/97 (3,428,496)
9,704,000 Swiss Franc .............................. 10/15/97 (6,897,606)
14,691,600 Swiss Franc .............................. 10/31/97 (10,463,782)
5,008,400 Swiss Franc .............................. 11/14/97 (3,573,482)
7,628,100 Swiss Franc .............................. 11/28/97 (5,452,448)
42,586,500 Swiss Franc .............................. 12/31/97 (30,570,383)
10,588,600 Swiss Franc .............................. 1/20/98 (7,619,233)
13,715,000 Swiss Franc .............................. 2/5/98 (9,887,927)
11,137,600 Swiss Franc .............................. 2/27/98 (8,051,087)
38,460,960 Swiss Franc .............................. 3/13/98 (27,849,596)
5,595,200 Swiss Franc .............................. 4/6/98 (4,063,291)
7,682,400 Swiss Franc .............................. 4/14/98 (5,584,459)
-------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(CONTRACT AMOUNT $1,050,991,191) .................................. $(988,738,908)
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
March 31, 1997
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $1,227,799,364) (Note 1)
See accompanying schedule ........................ $1,392,381,297
Cash and foreign currency (Cost $1,075,991) .......... 1,084,452
Net unrealized appreciation of forward exchange
contracts
(Note 1) ........................................... 62,463,646
Receivable for Fund shares sold ...................... 6,165,754
Dividends and interest receivable .................... 4,052,021
Receivable for investment securities sold ............ 796,618
Unamortized organization costs (Note 5) .............. 26,071
Prepaid expenses ..................................... 6,650
--------------
TOTAL ASSETS ..................................... 1,466,976,509
--------------
LIABILITIES
Payable for investment securities purchased .......... $21,573,132
Payable for Fund shares redeemed ..................... 2,002,529
Investment advisory fee payable (Note 2) ............. 1,520,549
Transfer agent fees payable (Note 2) ................. 60,000
Custodian fees payable (Note 2) ...................... 55,000
Accrued expenses and other payables .................. 554,807
-----------
TOTAL LIABILITIES ................................ 25,766,017
--------------
NET ASSETS ............................................... $1,441,210,492
==============
NET ASSETS CONSIST OF
Undistributed net investment income .................. $ 11,956,516
Accumulated net realized gain on securities, forward
exchange contracts and foreign currencies .......... 23,644,999
Net unrealized appreciation of securities, forward
exchange
contracts, foreign currencies and net other assets . 226,761,808
Par value ............................................ 9,324
Paid-in capital in excess of par value ............... 1,178,837,845
--------------
TOTAL NET ASSETS ................................. $1,441,210,492
==============
NET ASSET VALUE, offering and redemption price per share
($1,441,210,492 / 93,237,678 shares of common stock
outstanding) ......................................... $15.46
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Statement of Operations
- -------------------------------------------------------------------------------
For the Year Ended March 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $2,667,110) .............. $ 21,537,601
Interest (net of foreign withholding taxes of $192) ..................... 4,832,359
-------------
TOTAL INVESTMENT INCOME ............................................. 26,369,960
-------------
EXPENSES
Investment advisory fee (Note 2) ...................... $14,318,034
Administration fee (Note 2) ........................... 1,398,274
Custodian fees (Note 2) ............................... 894,791
Transfer agent fees (Note 2) .......................... 545,246
Legal and audit fees .................................. 107,479
Amortization of organization costs (Note 5) ........... 22,285
Directors' fees and expenses (Note 2) ................. 15,300
Other ................................................. 844,873
Waiver of fees by administrator (Note 2) .............. (84,934)
-----------
TOTAL EXPENSES ...................................................... 18,061,348
-------------
NET INVESTMENT INCOME ....................................................... 8,308,612
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3)
Net realized gain (loss) on:
Securities ............................................................ 54,568,300
Forward exchange contracts ............................................ 66,112,135
Foreign currencies .................................................... (674,536)
-------------
Net realized gain on investments during the year ........................ 120,005,899
-------------
Net change in unrealized appreciation (depreciation) of:
Securities ............................................................ 19,433,370
Forward exchange contracts ............................................ 35,713,408
Foreign currencies and net other assets ............................... (248,729)
-------------
Net unrealized appreciation on investments during the year .............. 54,898,049
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ............................. 174,903,948
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 183,212,560
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
3/31/97 3/31/96
------------------- -----------------
<S> <C> <C>
Net investment income ................................. $ 8,308,612 $ 9,045,946
Net realized gain (loss) on securities, forward
exchange
contracts and currency transactions during the year . 120,005,899 (10,403,439)
Net unrealized appreciation of securities,
forward exchange contracts, foreign currencies and
net other assets during the year .................... 54,898,049 185,687,996
-------------- ------------
Net increase in net assets resulting from operations .. 183,212,560 184,330,503
DISTRIBUTIONS:
Dividends to shareholders from net investment income (14,614,831) --
Dividends in excess of net investment income ........ (28,673,453) --
Distributions to shareholders from net realized gain
on
investments ....................................... (44,555,478) (3,341,225)
Distributions to shareholders in excess of net
realized gain
on investments .................................... -- (9,099,176)
Net increase in net assets from Fund share transactions
(Note 4) ............................................ 394,930,728 123,986,313
-------------- ------------
Net increase in net assets ............................ 490,299,526 295,876,415
NET ASSETS
Beginning of year ..................................... 950,910,966 655,034,551
-------------- ------------
End of year (including undistributed net investment
income of $11,956,516 and $14,504,033, respectively) $1,441,210,492 $950,910,966
============== ============
</TABLE>
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 YEAR PERIOD
ENDED ENDED ENDED ENDED
3/31/97 3/31/96(a) 3/31/95 3/31/94(a)(b)
---------- ---------- ------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year.......................... $ 14.28 $ 11.52 $ 12.26 $ 10.00
---------- -------- -------- --------
Income from investment operations:
Net investment income (loss)(c) 0.12 0.15 0.10 (0.00)(d)
Net realized and unrealized gain
(loss) on investments ........ 2.18 2.81 (0.68) 2.26
---------- -------- -------- --------
Total from investment
operations ............... 2.30 2.96 (0.58) 2.26
---------- -------- -------- --------
DISTRIBUTIONS:
Dividends from net investment
income ..................... (0.19) -- -- --
Dividends in excess of net
investment income .......... (0.36) -- -- --
Distributions from net
realized gains (0.57) (0.05) (0.06) --
Distributions in excess of net
realized gains ............. -- (0.15) (0.10) --
---------- -------- -------- --------
Total distributions ........ (1.12) (0.20) (0.16) --
---------- -------- -------- --------
Net asset value, end of year ... $ 15.46 $ 14.28 $ 11.52 $ 12.26
========== ======== ======== ========
Total return(e) ................ 16.66% 25.88% (4.74)% 22.60%
========== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (in 000's) $1,441,210 $950,911 $655,035 $297,434
Ratio of operating expenses
to average net assets(f) ..... 1.58% 1.60% 1.65% 1.73%(g)
Ratio of net investment income
(loss) to average net assets . 0.73% 1.15% 1.08% (0.00)%(g)(h)
Portfolio turnover rate ........ 20% 17% 16% 14%
Average commission rate
(per share of security)(i) ... $ 0.0249 $ 0.0206 N/A N/A
- ------------
(a) 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.
(b) The Fund commenced operations on June 15, 1993.
(c) Net investment income for a Fund share outstanding, before the waiver of fees by the administrator and/or investment
adviser for the year ended March 31, 1997 and for the 7.5- month period ended March 31, 1994 was $0.11 and $(0.01) per
share, respectively.
(d) Amount represents less than $(0.01) per share.
(e) Total return represents aggregate total return for the periods indicated.
(f) Annualized expense ratio before the waiver of fees by the administrator and/or investment adviser for the year ended
March 31, 1997 and for the 7.5-month period ended March 31, 1994 was 1.58% and 1.83%, respectively.
(g) Annualized.
(h) Amount represents less than (0.01)% per share.
(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 Statements
- -------------------------------------------------------------------------------
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, for which the primary market
is a national securities exchange or other market where there exists a reliable
daily publication of actual transaction prices, are valued at the last sale
price prior to the close of regular trading 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 credit-worthiness 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.
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 $24.4 million of their own money invested in the Fund.
The Company on behalf of the Fund has entered into an administration
agreement, as amended on February 15, 1997 (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 $500 AND EXCEEDING
$500 MILLION $1 BILLION $1 BILLION
- ------------------------------------------------------------------------------
Administration Fees 0.06% 0.04% 0.02%
- ------------------------------------------------------------------------------
UP TO EXCEEDING
$100 MILLION $100 MILLION
- ------------------------------------------------------------------------------
Accounting Fees 0.03% 0.01%
- ------------------------------------------------------------------------------
For the period from February 15, 1997 through March 31, 1997, FDISG
voluntarily waived administration and fund accounting fees of $84,934.
Under the terms of the Administration Agreement, the Company will pay for
Fund Administration Services a minimum fee of $40,000 per annum, not to be
aggregated with fees for Fund Accounting Services. The Company will pay a
minimum monthly fee of $4,000 for Fund Accounting Services for the Fund, not to
be aggregated with fees for Fund Administration Services.
Prior to February 15, 1997, the Company paid FDISG an administrative fee and
a fund accounting fee computed daily and paid monthly at the annual rates of the
value of the average daily net assets of the Fund as follows:
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%
- ------------------------------------------------------------------------------
For the period April 1, 1996 through February 14, 1997, the Company paid for
Fund Administration Services a minimum fee of $40,000 per Fund per annum, not to
be aggregated with fees for Fund Accounting Services and a minimum fee of
$20,000 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"). Unified Advisers, Inc., serves as
the Fund's transfer agent. Effective May 12, 1997, FDISG will replace Unified
Advisers, Inc. 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, 1997, the Fund incurred total brokerage
commissions of $2,167,248.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments for the year ended March 31, 1997, aggregated
$537,030,192 and $202,319,185, respectively.
At March 31, 1997, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost, was
$232,016,098 and the aggregate gross unrealized depreciation for all securities,
in which there was an excess of tax cost over value, was $77,355,544.
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 3/31/97 YEAR ENDED 3/31/96
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 35,117,166 $522,414,402 29,891,616 $381,433,296
Reinvested 5,409,129 78,324,194 854,225 11,062,218
Redeemed (13,856,018) (205,807,868) (21,057,222) (268,509,201)
- --------------------------------------------------------------------------------------------------------------
Net increase 26,670,277 $394,930,728 9,688,619 $123,986,313
- --------------------------------------------------------------------------------------------------------------
</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 Company 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 lessor 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 Company 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, 1997, 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 Tweedy, Browne Global Value Fund (the "Fund") (one of a series
of Tweedy, Browne Fund Inc.) as of March 31, 1997, 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 three 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 and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 1997, 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, 1997, 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 three 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.
Boston, Massachusetts ERNST & YOUNG LLP
May 2, 1997
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- ------------------------------------------------------------------------------
Tax Information (unadited)
- ------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1997
For the fiscal year ended March 31, 1997, the amount of long-term capital
gain distributed to shareholders by the Fund was $32,491,565.
Of the ordinary income (including short-term capital gain) distributions
made by the Fund during the fiscal year ended March 31, 1997, 5.56% qualify
for the dividend received deduction available to corporate shareholders.
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
March 31, 1997
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
TWEEDY, BROWNE AMERICAN VALUE FUND VS.
STANDARD & POOR'S 500 STOCK INDEX 12/8/93 THROUGH 3/31/97
INDEX: STANDARD & POOR'S
TWEEDY, BROWNE 500 STOCK INDEX
AMERICAN VALUE FUND* (THE "S&P 500")
-------------------- ------------------------
DEC 1993 10.00 10.12
MAR 1994 9.71 9.74
JUN 1994 9.82 9.78
SEP 1994 10.26 10.26
DEC 1994 9.88 10.25
MAR 1995 10.78 11.25
JUN 1995 11.98 12.32
SEP 1995 13.06 13.30
DEC 1995 13.46 14.10
MAR 1996 14.52 14.86
JUN 1996 14.99 15.53
SEP 1996 15.17 16.01
DEC 1996 16.48 17.34
MAR 1997 17.09 17.80
- --------------------------------------------------------------------------------
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** 3/31/97 3/31/97
- ---------- ---------- ----------------------------------------------- -----------
<S> <C> <C> <C> <C> <C>
Inception (12/8/93) The Fund 17.75% 70.97%
through 3/31/97 17.58% 17.28% S&P 500 19.82% 78.04%
Year Ended 3/31/97 17.75% 17.61%
- --------------------------------------------------------------------------------------------------------
Note: The performance shown represents past performance and is not a guarantee of future
results. The 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>
TWEEDY, BROWNE AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
- --------------------------------------------------------------------------------
March 31, 1997
[Graphic Omitted]
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (NOTE 1)
------ -------
COMMON STOCKS--DOMESTIC--86.5%
ADVERTISING--0.5%
<C> <S> <C>
6,680 Grey Advertising Inc. .................................. $ 1,796,920
------------
APPAREL/TEXTILES--0.2%
45,900 Chic by H.I.S. Inc.+ ................................... 281,136
9,400 Garan Inc. .............................................. 169,200
2,000 Thomaston Mills, Inc., Class A ......................... 22,000
------------
472,336
------------
AUTOMOTIVE PARTS--0.8%
144,500 Standard Motor Products, Inc. ........................... 1,896,562
23,300 Standard Products Company .............................. 541,725
5,200 Woodward Governor Company .............................. 141,700
------------
2,579,987
------------
BANKING--14.0%
56,700 BancFirst Corporation .................................. 1,658,475
316,160 BanPonce Corporation ................................... 11,223,680
10,200 Cape Cod Bank & Trust Company .......................... 275,400
89,207 Chase Manhattan Corporation ............................ 8,352,005
75,100 Comerica, Inc. .......................................... 4,233,762
4,500 Community Financial Group--Bank of Nashville ........... 54,000
114,910 First Chicago NBD Corporation .......................... 6,219,505
20,400 First Mortgage Corporation+ ............................. 94,350
33,900 Mercantile Bancorporation, Inc. ......................... 1,796,700
40,855 Mid-America Bancorporation ............................. 817,100
9,000 Peoples Bank Corporation of Indianapolis ............... 391,500
230,700 PNC Bank Corporation ................................... 9,228,000
4,300 Suffolk Bancorp ........................................ 180,600
18,425 Transworld Bancorp+ .................................... 331,650
11,000 Wells Fargo & Company .................................. 3,125,375
------------
47,982,102
------------
BASIC INDUSTRIES--4.6%
100,500 ACX Technologies Inc.+ ................................. 1,934,625
25,000 Blessings Corporation .................................. 246,874
103,300 Gorman-Rupp Company .................................... 1,652,800
61,400 Monarch Machine Tool Company ........................... 452,825
70,200 Sequa Corporation, Class A+ ............................. 3,132,675
78,000 Tremont Corporation+ ................................... 2,720,250
30,200 Unilever NV, ADR ....................................... 5,624,750
------------
15,764,799
------------
BUSINESS AND COMMERCIAL SERVICES--0.0%++
1,300 IIC Industries Inc.+ ................................... 54,275
12,500 Paris Corporation+ ..................................... 25,781
------------
80,056
------------
CHEMICALS--1.4%
177,700 Lilly Industries Inc., Class A ......................... $ 3,265,238
103,100 Oil-Dri Corporation of America ......................... 1,688,263
------------
4,953,501
------------
CONSUMER NON-DURABLES--11.6%
142,400 Bairnco Corporation .................................... 996,800
76,700 Coca-Cola Bottling Company ............................. 3,336,450
209,200 EKCO Group Inc. ......................................... 1,046,000
76,800 Fuji Photo Film Company Ltd., ADR ...................... 2,515,200
43,535 Great Atlantic & Pacific Tea Company, Inc. .............. 1,104,701
19,000 Hyde Athletic Industries Inc., Class A+ ................ 87,875
25,000 Hyde Athletic Industries Inc., Class B+ ................ 124,220
121,735 Nestle, ADR ............................................ 7,037,805
49,800 OroAmerica Inc.+ ....................................... 249,000
106,750 Philip Morris Companies Inc. ............................ 12,182,844
10,800 TCC Industries Inc.+ ................................... 16,200
366,200 UST Inc. ................................................ 10,207,825
57,200 Village Super Market Inc., Class A+ .................... 514,800
------------
39,419,720
------------
CONSUMER SERVICES--1.8%
301,800 Jones Intercable Inc., Class A+ ........................ 2,867,100
128,900 Pinkerton's, Inc. ....................................... 3,319,175
------------
6,186,275
------------
ELECTRONIC EQUIPMENT--0.1%
8,000 Espey Manufacturing and Electronics Corporation ........ 143,000
------------
ENGINEERING AND CONSTRUCTION--3.1%
12,700 Atkinson (Guy F.) Company California+ .................. 104,775
22,700 Devcon International Corporation+ ...................... 116,337
107,300 Harding Lawson Associates Group ......................... 737,688
150,500 Hovnanian Enterprises, Inc.+ ........................... 978,250
58,800 M/I Schottenstein Homes Inc.+ .......................... 602,700
4,080 Oilgear Company ........................................ 66,300
42,000 Oriole Homes Corporation, Class A+ ..................... 330,750
91,500 Oriole Homes Corporation, Class B+ ..................... 714,843
329,700 Ryland Group, Inc. ...................................... 3,873,975
489,300 Standard-Pacific Corporation ............................ 3,058,125
------------
10,583,743
------------
FINANCIAL SERVICES--11.5%
191,230 American Express Company ................................ 11,449,895
418,280 Federal Home Loan Mortgage Corporation .................. 11,398,130
48,300 Household International Inc ............................. 4,147,762
18,600 HPSC Inc.+ ............................................. 111,600
20,800 Kent Financial Services Inc.+ .......................... 158,600
345,550 Lehman Brothers Holdings Inc ............................ 10,064,145
10,000 Letchworth Independent Bancshares Corporation .......... 355,000
1,500 Norex American Inc.+ ................................... 68,625
88,200 Phoenix Duff & Phelps Corporation ....................... 672,525
29,800 Value Line Inc. ......................................... 983,400
1,604 Whitney Holding Corporation ............................. 62,456
------------
39,472,138
------------
FOOD AND BEVERAGES--0.0%++
40,600 United Foods, Inc., Class A+ ........................... 73,588
25,400 United Foods, Inc., Class B+ ........................... 46,037
------------
119,625
------------
FURNITURE--0.1%
29,900 Flexsteel Industries Inc ................................ 358,800
------------
HEALTH CARE--8.5%
163,670 Glaxo Wellcome PLC, Sponsored ADR ...................... 5,789,826
33,412 Johnson & Johnson ...................................... 1,766,660
10,666 Novartis AG, ADR ....................................... 650,182
222,300 Nycomed ASA, ADR, Class B .............................. 3,334,500
167,000 Pharmacia & Upjohn, Inc. ................................ 6,116,375
401,800 Regency Health Services, Inc. ........................... 4,269,125
497,600 Sun Healthcare Group Inc.+ ............................. 7,153,000
7,500 Trans Leasing International, Inc. ....................... 42,186
8,000 Wyant Corporation ....................................... 40,000
------------
29,161,854
------------
INSURANCE--11.1%
15,200 Allstate Financial Corporation+ ........................ 92,150
221,000 American Annuity Group Inc. ............................. 3,453,125
77,400 American Indemnity Financial Corporation ............... 1,020,713
112,125 American National Insurance Company .................... 8,773,781
600 Amwest Insurance Group Inc. ............................. 7,275
122,600 Integon Corporation .................................... 1,808,350
23,300 Kansas City Life Insurance Company ..................... 1,578,575
21,600 Merchants Group Inc. .................................... 410,400
50,900 National Western Life Insurance Company+ ............... 4,199,250
13,200 RLI Corporation ........................................ 420,750
74,000 Security-Connecticut Corporation ....................... 3,339,250
109,500 Transatlantic Holdings, Inc. ............................ 9,198,000
81,715 USLIFE Corporation ..................................... 3,820,176
------------
38,121,795
------------
LEISURE AND ENTERTAINMENT--1.2%
165,000 Alliance Entertainment Corporation+ ..................... 226,875
140,400 C-TEC Corporation+ ..................................... 3,966,300
------------
4,193,175
------------
METALS AND METAL PRODUCTS--0.0%++
14,000 American Metals Service, Inc.+ ......................... 13,125
------------
OIL AND GAS--1.4%
80,000 Isramco, Inc.+ ......................................... 50,000
1,900 Lufkin Industries, Inc. ................................. 41,919
90,400 Matrix Service Company+ ................................ 689,300
87,600 Penn Virginia Corporation ............................... 3,876,300
10,000 Wiser Oil Company ....................................... 176,250
------------
4,833,769
------------
REAL ESTATE--2.3%
347,800 American Real Estate Partners Ltd. ..................... 3,738,850
26,100 Arizona Land Income Corporation, Class A ............... 127,237
18,012 Atlantic Realty Trust Inc.+ ............................ 194,755
13,200 Mays (J.W.), Inc.+ ..................................... 125,400
154,400 Price Enterprises Inc.+ ................................ 2,837,100
3,623 Public Storage, Inc. .................................... 105,067
36,025 Ramco-Gershenson Properties ............................. 630,437
20,000 Reading Company, Class A+ ............................... 217,500
------------
7,976,346
------------
RESTAURANT CHAINS--5.0%
719,100 Darden Restaurants Inc. ................................. 5,662,911
219,000 McDonald's Corporation ................................. 10,347,750
83,400 Vicorp Restaurants Inc.+ ............................... 1,063,350
------------
17,074,011
------------
RETAIL--5.4%
82,500 Burlington Coat Factory Warehouse+ ...................... 1,485,000
1,000 Dart Group Corporation, Class A ........................ 90,750
25,000 Discount Auto Parts Inc.+ .............................. 400,000
117,900 EZCORP Inc., Class A+ .................................. 928,462
280,500 Fingerhut Companies, Inc ................................ 3,927,000
90,100 Government Technology Services, Inc. .................... 456,130
479,000 Jan Bell Marketing Inc.+ ................................ 1,017,875
164,000 Kmart Corporation ...................................... 1,988,500
32,800 Luria (L) and Sons Inc.+ ............................... 69,700
9,900 Mercantile Stores Company Inc. .......................... 459,113
67,200 Penney (J.C.) Company, Inc. ............................. 3,200,400
32,100 Seaman Furniture Company+ .............................. 625,950
130,100 Swiss Army Brands, Inc. ................................. 1,626,250
158,700 Syms Corporation+ ...................................... 1,448,137
138,000 United Retail Group, Inc. ............................... 621,000
------------
18,344,267
------------
TECHNOLOGY--0.1%
44,600 Astrosystems Inc.+ ..................................... 245,300
------------
TELECOMMUNICATIONS--0.0%++
15,300 TCI International Inc.+ ................................ 108,056
------------
TRANSPORTATION/TRANSPORTATION SERVICES--1.8%
114,000 GATX Corporation ........................................ 5,571,750
53,100 KLLM Transport Services Inc.+ .......................... 577,463
------------
6,149,213
------------
TOTAL COMMON STOCKS--DOMESTIC
(COST $234,985,659) ..................................... 296,133,913
------------
COMMON STOCKS--FOREIGN--4.8%
FINLAND--0.5%
15,500 Kone Corporation, Class B .............................. 1,883,357
------------
FRANCE--0.3%
7,200 Compagnie Financiere de Suez ........................... 373,048
2,725 Klepierre .............................................. 402,841
2,300 Peugeot SA ............................................. 262,588
------------
1,038,477
------------
ITALY--0.2%
72,100 Arnoldo Mondadori Editore SPA .......................... 454,072
15,000 Franco Tosi SPA ........................................ 107,153
------------
561,225
------------
JAPAN--1.4%
63,000 Aichi Electric Company Ltd. ............................ 277,634
49,000 Amada Sonoike Company Ltd. ............................. 192,165
15,200 Chofu Seisakusho Company ............................... 254,420
58,000 Dowa Fire & Marine Insurance Company ................... 238,247
17,000 Fuji Photo Film Ltd. ................................... 559,473
30,000 Gakken Company Ltd. .................................... 138,030
53,000 Koyosha Inc.+ .......................................... 273,850
19,000 Matsushita Electric Industrial Company ................. 296,515
54,000 Mitsubishi Electric Corporation ........................ 303,470
32,000 Morito ................................................. 220,716
45,150 Nissan Fire & Marine Insurance Company ................. 175,971
36,000 Oak .................................................... 154,282
62,000 Osaka Securities Finance ............................... 206,048
19,000 Sangetsu Company Ltd. .................................. 328,778
15,000 Sankyo Company Ltd. .................................... 413,601
5,000 Shikoku Coca-Cola Bottling ............................. 54,581
99,000 Shin Nikkei Company Ltd. ............................... 300,195
33,000 Suzuki Motor Corporation ............................... 320,207
19,000 Toyo Technical Company Ltd. ............................ 152,098
------------
4,860,281
------------
NETHERLANDS--0.5%
10,900 Heineken Holdings NV, Class A .......................... 1,644,779
------------
SINGAPORE--0.1%
79,000 Robinson and Company Ord ............................... 328,141
------------
SPAIN--0.2%
7,600 Argentaria ............................................. 331,382
16,000 Unipapel SA ............................................ 302,955
------------
634,337
------------
SWITZERLAND--0.6%
2,000 Danzas Holding AG PC ................................... 394,719
2,000 Edipresse SA, Bearer ................................... 460,042
1,500 Magazine Zum Globus PC ................................. 656,706
500 Swissair AG, Registered+ ............................... 446,143
------------
1,957,610
------------
UNITED KINGDOM--1.0%
177,800 BTR Ord ................................................ 779,556
147,300 McAlpine (Alfred) PLC .................................. 392,587
32,500 SmithKline Beecham, PLC Units, ADR ..................... 2,275,000
------------
3,447,143
------------
TOTAL COMMON STOCKS--FOREIGN
(COST $14,616,162) ...................................... 16,355,350
------------
FACE
VALUE
-----
COMMERCIAL PAPER--3.8% (COST $13,000,000)
$13,000,000 General Electric Capital Corporation, 6.500% due 4/1/97 13,000,000
------------
U.S. TREASURY BILLS--0.2%
$200,000 5.630%** due 5/1/97 .................................... $ 199,112
350,000 5.600%** due 8/21/97 ................................... 342,683
315,000 5.508%** due 10/16/97 ................................... 305,956
------------
TOTAL U.S. TREASURY BILLS
(COST $847,751) ......................................... 847,751
------------
REPURCHASE AGREEMENT--5.4%
(COST $18,665,000)
18,665,000 Agreement with UBS Securities, Inc., 6.350% dated 3/31/97,
to be repurchased at $18,668,292 on 4/1/97, collateralized
by $19,329,000 U.S. Treasury Notes, 6.375% due 9/30/01
(market value $19,051,146) .............................. 18,665,000
------------
TOTAL INVESTMENTS (COST $282,114,572*) ................................ 100.7% 345,002,014
OTHER ASSETS AND LIABILITIES (NET) .................................. (0.7) (2,534,635
---- ------------
NET ASSETS ............................................................ 100.0% $342,467,379
===== ============
- ------------
* Aggregate cost for Federal tax purposes is $282,090,648.
** Rate represents annualized yield at date of purchase.
+ Non-income producing security.
++ Amount represents less than 0.1% of net assets.
Abbreviations:
ADR--American Depositary Receipt
Ord--Ordinary Share
</TABLE>
<PAGE>
<TABLE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------------------------------
Schedule of Forward Exchange Contracts
- -------------------------------------------------------------------------------------------------------
March 31, 1997
<CAPTION>
CONTRACT MARKET
VALUE VALUE
CONTRACTS DATE (NOTE 1)
--------- -------- --------
FORWARD EXCHANGE CONTRACTS TO SELL
<C> <S> <C> <C>
2,147,265 Finnish Markka ................................ 4/15/97 $ (430,352)
4,464,000 Finnish Markka ................................ 8/29/97 (903,897)
1,721,335 Finnish Markka ................................ 3/13/98 (353,773)
3,029,280 French Franc .................................. 8/29/97 (545,352)
1,002,660 French Franc .................................. 10/15/97 (181,158)
125,008 Great Britain Pound Sterling .................. 10/15/97 (205,032)
1,813,456 Great Britain Pound Sterling .................. 12/31/97 (2,970,414)
466,650 Great Britain Pound Sterling .................. 2/5/98 (763,993)
617,932 Great Britain Pound Sterling .................. 3/13/98 (1,011,195)
544,148,500 Italian Lira .................................. 8/29/97 (324,357)
423,335,000 Italian Lira .................................. 10/15/97 (252,009)
55,814,250 Japanese Yen .................................. 4/15/97 (452,279)
67,990,000 Japanese Yen .................................. 8/29/97 (562,402)
190,496,250 Japanese Yen .................................. 10/15/97 (1,587,590)
75,798,100 Japanese Yen .................................. 12/31/97 (639,683)
29,050,000 Japanese Yen .................................. 3/13/98 (247,864)
116,095,000 Japanese Yen .................................. 4/14/98 (995,484)
750,353 Netherlands Guilder ........................... 4/15/97 (400,509)
1,972,080 Netherlands Guilder ........................... 8/29/97 (1,063,340)
248,355 Netherlands Guilder ........................... 10/15/97 (134,415)
3,407,800 Netherlands Guilder ........................... 12/31/97 (1,856,172)
1,857,800 Netherlands Guilder ........................... 3/13/98 (1,017,677)
6,478,500 Norwegian Krone ............................... 6/16/97 (988,133)
4,812,975 Norwegian Krone ............................... 2/5/98 (745,891)
418,260 Singapore Dollar .............................. 10/15/97 (292,590)
38,562,000 Spanish Peseta ................................ 10/15/97 (273,108)
6,767,00 Swedish Krona ................................. 12/31/97 (909,688)
951,040 Swiss Franc ................................... 8/29/97 (672,153)
242,600 Swiss Franc ................................... 10/15/97 (172,440)
3,871,500 Swiss Franc ................................... 12/31/97 (2,779,126)
1,371,500 Swiss Franc ................................... 2/5/98 (988,793)
1,068,360 Swiss Franc ................................... 3/13/98 (773,600)
------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(CONTRACT AMOUNT $26,975,000) .................................... $(25,494,469)
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------------------------
March 31, 1997
ASSETS
<S> <C> <C>
Investments, at value (Cost $282,114,572) (Note 1)
See accompanying schedule ............................ $345,002,014
Cash and foreign currency (Cost $39,445) ................. 8,740
Receivable for Fund shares sold .......................... 3,071,641
Net unrealized appreciation of forward exchange contracts
(Note 1) ............................................... 1,480,531
Receivable for investment securities sold ................ 1,168,695
Dividends and interest receivable ........................ 529,305
Unamortized organization costs (Note 5) .................. 32,449
Prepaid expenses ......................................... 1,381
------------
TOTAL ASSETS ......................................... 351,294,756
------------
LIABILITIES
Payable for investment securities purchased .............. $7,535,139
Payable for Fund shares redeemed ......................... 796,746
Investment advisory fee payable (Note 2) ................. 362,902
Transfer agent fees payable (Note 2) ..................... 12,300
Custodian fees payable (Note 2) .......................... 7,395
Accrued expenses and other payables ...................... 112,895
---------
TOTAL LIABILITIES .................................... 8,827,377
-----------
NET ASSETS ................................................... $342,467,379
============
NET ASSETS CONSIST OF
Undistributed net investment income ...................... $ 1,039,581
Accumulated net realized gain on securities, forward
exchange
contracts and foreign currencies ....................... 5,415,390
Net unrealized appreciation of securities, forward
exchange
contracts, foreign currencies and net other assets ..... 64,337,091
Par value ................................................ 2,112
Paid-in capital in excess of par value ................... 271,673,205
-----------
TOTAL NET ASSETS ..................................... $342,467,379
============
NET ASSET VALUE, offering and redemption price per share
($342,467,379 / 21,119,090 shares of common stock
outstanding) $16.22
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ----------------------------------------------------------------------------------------------------
Statement of Operations
- ----------------------------------------------------------------------------------------------------
For the Year Ended March 31, 1997
INVESTMENT INCOME
<S> <C>
Dividends (net of foreign withholding taxes of $83,262) .................. $ 4,842,528
Interest ................................................................. 1,015,320
-----------
TOTAL INVESTMENT INCOME .............................................. 5,857,848
-----------
EXPENSES
Investment advisory fee (Note 2) ......................... $3,176,537
Administration fee (Note 2) .............................. 329,781
Transfer agent fees (Note 2) ............................. 98,552
Custodian fees (Note 2) .................................. 56,005
Legal and audit fees ..................................... 32,659
Amortization of organization costs (Note 5) .............. 19,469
Directors' fees and expenses (Note 2) .................... 3,820
Other .................................................... 151,863
Waiver of fees by investment adviser, administrator and
custodian (Note 2) ..................................... (343,759)
----------
TOTAL EXPENSES ....................................................... 3,524,927
-----------
NET INVESTMENT INCOME ........................................................ 2,332,921
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3)
Net realized gain on:
Securities ............................................................. 10,230,036
Forward exchange contracts ............................................. 1,264,232
Foreign currencies ..................................................... 16,177
-----------
Net realized gain on investments during the year ......................... 11,510,445
-----------
Net change in unrealized appreciation (depreciation) of:
Securities ............................................................. 25,939,299
Forward exchange contracts ............................................. 906,418
Foreign currencies and net other assets ................................ (30,702)
-----------
Net unrealized appreciation of investments during the year ............... 26,815,015
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .............................. 38,325,460
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $40,658,381
===========
</TABLE>
<PAGE>
<TABLE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- ----------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR
ENDED ENDED
3/31/97 3/31/96
------------ ---------
<S> <C> <C>
Net investment income ................................... $ 2,332,921 $ 1,550,882
Net realized gain on securities, forward exchange
contracts and currency transactions during the year ... 11,510,445 2,569,270
Net unrealized appreciation of securities, forward
exchange contracts, foreign currencies and net other
assets during the year 26,815,015 34,254,651
------------ ------------
Net increase in net assets resulting from operations .... 40,658,381 38,374,803
DISTRIBUTIONS:
Dividends to shareholders from net investment income .. (2,924,069) (1,344,358)
Distributions to shareholders from net realized gain on
investments ......................................... (7,097,006) (253,652)
Net increase in net assets from Fund share transactions
(Note 4) 110,231,566 105,965,682
------------ ------------
Net increase in net assets .............................. 140,868,872 142,742,475
NET ASSETS
Beginning of year ....................................... 201,598,507 58,856,032
------------ ------------
End of year (including undistributed net investment
income of $1,039,581 and $371,199, respectively) ...... $342,467,379 $201,598,507
------------ ------------
</TABLE>
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
3/31/97 3/31/96(a) 3/31/95(a) 3/31/94(b)
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of year .. $ 14.29 $ 10.71 $ 9.71 $ 10.00
-------- -------- -------- --------
Income from investment operations:
Net investment income(c) ............ 0.13 0.15 0.13 0.01
Net realized and unrealized gain
(loss) on investments ............. 2.39 3.56 0.93 (0.30)
-------- -------- -------- --------
Total from investment operations 2.52 3.71 1.06 (0.29)
-------- -------- -------- --------
DISTRIBUTIONS:
Dividends from net investment
income .......................... (0.17) (0.11) (0.06) --
Distributions from net realized
gains ........................... (0.42) (0.02) -- --
-------- -------- -------- --------
Total distributions ............. (0.59) (0.13) (0.06) --
-------- -------- -------- --------
Net asset value, end of year ........ $ 16.22 $ 14.29 $ 10.71 $ 9.71
======== ======== ======== ========
Total return(d) ..................... 17.75% 34.70% 11.02% (2.90)%
======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (in 000's) .. $342,467 $201,599 $ 58,856 $ 16,133
Ratio of operating expenses
to average net assets(e) .......... 1.39% 1.39% 1.74% 2.26%(f)
Ratio of net investment income
to average net assets ............. 0.92% 1.13% 1.25% 0.64%(f)
Portfolio turnover rate ............. 16% 9% 4% 0%(g)
Average commission rate
(per share of security)(h) ........ $ 0.0302 $ 0.0341 N/A N/A
- ------------
(a) 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.
(b) The Fund commenced operations on December 8, 1993.
(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,
1997, 1996 and 1995 and the 3.75-month period ended March 31, 1994 was $0.11, $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, 1997, 1996 and 1995 and the
3.75-month period ended March 31, 1994 were 1.52%, 1.61%, 1.94% and 3.51%, respectively.
(f) Annualized.
(g) Amount rounds to less than 1.0%.
(h) Average commission rate (per share of security) as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
<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, for which the primary
market is a national securities exchange or other market where there exists a
reliable daily publication of actual transaction prices, are valued at the
last sale price prior to the close of regular trading 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
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.
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. From time to time,
Tweedy, Browne may voluntarily waive a portion of its fee otherwise payable to
it. For the year ended March 31, 1997, Tweedy, Browne voluntarily waived fees
of $284,262.
The current and retired general partners and their families, as well as
employees of Tweedy, Browne, the investment adviser to the Fund, have
approximately $22.8 million of their own money invested in the Fund.
The Company on behalf of the Fund has entered into an administration
agreement, as amended on February 15, 1997 (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 $500 AND EXCEEDING
$500 MILLION $1 BILLION $1 BILLION
- --------------------------------------------------------------------------------
Administration Fees 0.06% 0.04% 0.02%
- --------------------------------------------------------------------------------
UP TO EXCEEDING
$100 MILLION $100 MILLION
- --------------------------------------------------------------------------------
Accounting Fees 0.03% 0.01%
- --------------------------------------------------------------------------------
For the period from April 1, 1996 through February 14, 1997, FDISG
voluntarily waived administration fees of $32,914. For the period from
February 15, 1997 through March 31, 1997, FDISG voluntarily waved
administration and fund accounting fees of $21,979.
Under the terms of the Administration Agreement, the Company will pay for
Fund Administration Services a minimum fee of $40,000 per annum, not to be
aggregated with fees for Fund Accounting Services. The Company will pay a
minimum monthly fee of $3,000 for Fund Accounting Services for the Fund, not
to be aggregated with fees for Fund Administration Services.
Prior to February 15, 1997, the Company paid FDISG an administrative fee
and a fund accounting fee computed daily and paid monthly at the annual rates
of the value of the average daily net assets of the Fund as follows:
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 period April 1, 1996 through February 14, 1997, the Company paid
for Fund Administration Services a minimum fee of $40,000 per Fund per annum,
not to be aggregated with fees for Fund Accounting Services and 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, 1997, Boston Safe voluntarily waived fees of $4,604.
Unified Advisers, Inc., serves as the Fund's transfer agent. Effective May 12,
1997, FDISG will replace Unified Advisers, Inc. 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, 1997, the Fund incurred total brokerage
commissions of $223,652.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments for the year ended March 31, 1997, aggregated
$131,396,987 and $36,926,371, respectively.
At March 31, 1997, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost, was
$63,617,578 and the aggregate gross unrealized depreciation for all
securities, in which there was an excess of tax cost over value, was $706,212.
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 3/31/97 YEAR ENDED 3/31/96
----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
Sold 9,381,470 $146,286,093 12,329,516 $153,231,522
Reinvested 599,957 9,419,276 112,691 1,493,159
Redeemed (2,966,055) (45,473,803) (3,834,573) (48,758,999)
- --------------------------------------------------------------------------------
Net Increase 7,015,372 $110,231,566 8,607,634 $105,965,682
- --------------------------------------------------------------------------------
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. LINE OF CREDIT
Effective October 1, 1996, the Company 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 lessor 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
Company 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, 1997, the Fund did not borrow under
this Agreement.
<PAGE>
TWEEDY, BROWNE 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 Tweedy, Browne American Value Fund (the "Fund") (one of a series
of Tweedy, Browne Fund Inc.) as of March 31, 1997, 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 three 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 and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 1997, 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, 1997, 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 three 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 2, 1997
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1997
For the fiscal year ended March 31, 1997, the amount of long-term capital
gain distributed to shareholders by the Fund was $4,309,940.
Of the ordinary income (including short-term capital gain) distributions
made by the Fund during the fiscal year ended March 31, 1997, 62.17% qualify
for the dividend received deduction available to corporate shareholders.
<PAGE>
TWEEDY, BROWNE FUND, INC.
52 Vanderbilt Avenue, NY, NY 10017
800-432-4789 or 800-873-8242
<PAGE>
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,
1997 (audited).
(ii) Financial Highlights for
The Tweedy, Browne American
Value Fund for the period
December 8, 1993
(commencement of
operations) to March 31,
1997 (audited).
(b) Financial Statements (included in Part B):
Audited Financial Statements as of March 31, 1997 for
the Tweedy Browne Global Value Fund and Tweedy Browne
American Value Fund:
Portfolio Highlights
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.
(8) (c) First Amendment to the Amended and
Restated Custody Agreement between Registrant and
Boston Safe Deposit & Trust Company relating to
the
Tweedy, Browne Global Value Fund and the Tweedy,
Browne American Value Fund dated December 31,
1996 is filed herein.
(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) Transfer Agent Agreement between Registrant and
First Data Investor Services Group, Inc. dated
May 9, 1997, relating to the Tweedy, Browne
Global Value Fund and the Tweedy, Browne
American Value Fund is filed herein.
(9) (d) 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) (e) 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.
(9) (f) Amendment No. 1 to the Amended and Restated
Administration Agreement between Registrant and
First Data Investor Services Group, Inc.
relating to the Tweedy, Browne Global Value Fund
and the Tweedy, Browne American Value Fund dated
February 15, 1997 is filed herein.
(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 May 15, 1997:
(1) (2)
Number of
Title of Class Record
Holders
Tweedy, Browne Global
Value Fund Stock
par value $.0001 per share.................25,531
<PAGE>
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 Incorporation, 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 jurisdiction 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 regarding the business of
Tweedy, Browne Company L.P. (the "Investment 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 Value Fund (SICAV) offshore fund series
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
10017.
<PAGE>
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this 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
day of May, 1997.
TWEEDY, BROWNE FUND INC.
By: ____________________
Christopher H. Browne
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
- ------------------------
Christopher H. Browne Chairman of the Board, May , 1997
President and Director
- -------------------------
William H. Browne Treasurer and Director May , 1997
- -------------------------
Bruce A. Beal Director May , 1997
- ------------------------
Arthur Lazar Director May , 1997
- -------------------------
Daniel J. Loventhal Director May , 1997
- -------------------------
Richard Salomon Director May , 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this 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
29th day of May, 1997.
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 Amendment has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
/s/ Christopher H. Browne
Christopher H. Browne Chairman of the Board, May 29, 1997
President and Director
/s/ William H. Browne
William H. Browne Treasurer and Director May 29, 1997
/s/ Bruce A. Beal
Bruce A. Beal Director May 29, 1997
/s/ Arthur Lazar
Arthur Lazar Director May 29, 1997
/s/ Daniel J. Loventhal
Daniel J. Loventhal Director May 29, 1997
/s/ Richard Salomon
Richard Salomon Director May 29, 1997
<PAGE>
EXHIBIT INDEX
Exhibit # Description Page #
8(c)..... First Amendment to the Amended and Restated
......... Custody Agreement between Registrant and
......... Boston Safe Deposit & Trust Company relating
......... to the Tweedy, Browne Global Value Fund
......... and the Tweedy, Browne American Value Fund
......... dated December 31, 1996 <R/>
9(c)..... Transfer Agent Agreement between Registrant and
......... First Data Investor Services Group, Inc. dated
......... May 9, 1997, relating to the Tweedy, Browne
......... Global Value Fund and the Tweedy, Browne
......... American Value Fund
9(f)..... Amendment No. 1 to the Amended and Restated
......... Administration Agreement between Registrant and
......... First Data Investor Services Group, Inc. relating to
......... the Tweedy, Browne Global Value Fund and the
......... Tweedy, Browne American Value Fund dated
......... February 15, 1997
11....... Consent of Ernst & Young LLP, independent
......... auditors
17....... Financial Data Schedule
......... FIRST AMENDMENT TO THE
......... AMENDED AND RESTATED CUSTODY AGREEMENT
.........This First Amendment to the Amended and Restated Custody Agreement
dated December 8, 1993 (the "Custody Agreement") by and between TWEEDY, BROWNE
FUND INC. (the "Company"), on behalf of its Tweedy, Browne Global Value Fund and
Tweedy, Browne American Value Fund (formerly, Tweedy, Browne Value Fund)
(individually a "Fund" and collectively, the "Funds") and BOSTON SAFE DEPOSIT
AND TRUST COMPANY (the "Custodian") is entered into as of the 31st day of
December, 1996.
.........WHEREAS, the Company and the Custodian have entered previously
into the Custody Agreement; and
.........WHEREAS, the Company and the Custodian wish to amend certain
provisions of the Custody Agreement pursuant to Section 14(e) of said Agreement.
.........NOW, THEREFORE, the parties hereto agree to amend the Custody
Agreement as follows:
1.......Section 12. Term and Termination is hereby deleted in its entirety
and the following is substituted --------------------- therefor:
Section 12. Term and Termination.
.........(a) The Custody Agreement shall be effective on the date first
written above and shall continue for a period of three (3) years (the "Initial
Term").
.........(b) Upon the expiration of the Initial Term or the then-current Renewal
Term, the Custody Agreement shall automatically renew for successive terms of
one (1) year ("Renewal Term"), unless either the Company or Custodian provides
written notice to the other of its intent not to renew. Such notice must be
received sixty (60) days prior to the expiration of the Initial Term or the
then-current Renewal Term. Not less than one-hundred fifty (150) days prior to
the expiration of the Initial Term or then-current Renewal Term, if either party
wishes to modify the fees listed in the Schedule to this Agreement with respect
to the upcoming Renewal Term, the parties will promptly enter into good faith
discussions with regard thereto.
.........(c) In the event a termination notice is given by the Company, it
shall be accompanied by a certified resolution of the Board of Directors of the
Company, electing to terminate the Custody Agreement and designating a successor
custodian or custodians, which shall be a person qualified to so act under the
1940 Act. All expenses associated with the movement of records and materials and
conversion thereof to a successor custodian will be borne by the Company.
.........(d) In the event a termination notice is given by the Custodian, the
Company shall, on or before the termination date, deliver to the Custodian a
certified resolution of the Board of Directors of the Company, designating a
successor custodian or custodians. In the absence of such designation by the
Company, the Company shall, upon the date specified in the notice of termination
of the Custody Agreement and upon the delivery by the Custodian of all
Securities (other than Securities held in the Book-Entry System which cannot be
delivered to the Funds) and monies then owned by the Funds, be deemed to be its
own custodian and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to the Custody Agreement, other than the duty with
respect to Securities held in the Book-Entry System which cannot be delivered to
the Funds.
.........(e) Upon the date set forth in such notice under paragraph (d) of this
Section 12, the Custody Agreement shall terminate to the extent specified in
such notice, and the Custodian shall, upon receipt of a notice of acceptance by
the successor custodian on that date, deliver directly to the successor
custodian all Securities and monies then held by the Custodian on behalf of the
Funds, after deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
.........(f) If the Board of Directors of the Company determines in good faith
in the exercise of its fiduciary duties that the Custodian has materially
breached it obligations hereunder in a material manner or has failed to maintain
service quality at levels at least as high as during the Fall of 1996, the
Company will notify the Custodian of that determination and provide the
Custodian with an opportunity to cure such breach or service deficiency during
the sixty (60) day period following the date of such notice. If the Custodian is
unable, in the good faith judgment of the Company's Board of Directors, to cure
such breach or bring such service quality up to the level considered by the
Board of Directors to be adequate, the Company may terminate this Agreement by
giving the Custodian not less than sixty (60) days prior written notice. The
Custodian will have parallel termination rights with respect to any breach of
this Agreement by the Company. Termination of this Agreement in accordance with
the foregoing process shall not constitute a waiver of any other rights the
terminating party may have with respect to services performed or failed to be
performed prior to such termination under this Agreement or its otherwise or
rights of the Custodian to payment of its fees and out-of-pocket expenses.
2........All other terms and conditions of the Custody Agreement shall remain in
full force and effect.
<PAGE>
.........IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed on the date set forth above.
TWEEDY, BROWNE FUND INC. on behalf of Tweedy, Browne Global Value Fund and
Tweedy, Browne American Value Fund
By:......
Name:
Title:
BOSTON SAFE DEPOSIT AND TRUST
COMPANY
By:......
Name:
Title:
TRANSFER AGENCY AND SERVICES AGREEMENT
.........THIS AGREEMENT, dated as of this 9th day of May, 1997 between
Tweedy, Browne Fund Inc. (the "Fund"), a Maryland corporation having its
principal place of business at 52 Vanderbilt Avenue, New York, New York 10017
and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts
corporation with principal offices at 4400 Computer Drive, Westboro,
Massachusetts 01581.
.........WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Exhibit 1, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint FDISG as its
transfer agent, dividend disbursing agent and agent in connection with certain
other activities and FDISG desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and FDISG agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
(a)......"Articles of Incorporation" shall mean the Articles of Incorporation,
Declaration of Trust, or other similar organizational document as the case may
be, of the Fund as the same may be amended from time to time.
(b)......"Authorized Person" shall be deemed to include (i) any authorized
officer of the Fund; or (ii) any person, whether or not such person is an
officer or employee of the Fund, duly authorized to give Oral Instructions or
Written Instructions on behalf of the Fund as indicated in writing to FDISG from
time to time.
(c)......"Board of Directors" shall mean the Board of Directors or Board of
Trustees of the Fund, as the case may be.
(d)......"Commission" shall mean the Securities and Exchange Commission.
(e)......"Custodian" refers to any custodian or subcustodian of securities and
other property which the Fund may from time to time deposit, or cause to be
deposited or held under the name or account of such a custodian pursuant to a
Custodian Agreement.
(f)......"1934 Act" shall mean the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, all as amended from time to time.
(g)......"1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, all as amended from time to time.
(h)......"Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by FDISG from a person reasonably believed by
FDISG to be an Authorized Person;
(i)......"Portfolio" shall mean each separate series of shares offered by
the Fund representing interests in a separate portfolio of securities and other
assets;
(j)......"Prospectus" shall mean the most recently dated Fund Prospectus and
Statement of Additional Information, including any supplements thereto, if any,
which has become effective under the Securities Act of 1933 and the 1940 Act.
(k)......"Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of each respective
Portfolio of the Fund as may be issued from time to time.
(l)......"Shareholder" shall mean a record owner of Shares of each respective
Portfolio of the Fund.
(m)......"Written Instructions" shall mean a written communication signed by a
person reasonably believed by FDISG to be an Authorized Person and actually
received by FDISG. Written Instructions shall include manually executed
originals and authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 Appointment of FDISG.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes FDISG as
transfer agent and dividend disbursing agent for Shares of each respective
Portfolio of the Fund and as shareholder servicing agent for the Fund and FDISG
hereby accepts such appointments and agrees to perform the duties hereinafter
set forth.
Article 3 Duties of FDISG.
3.1 FDISG shall be responsible for:
(a)......Administering and/or performing the customary services of a transfer
agent; acting as service agent in connection with dividend and distribution
functions; and performing shareholder account and administrative agent functions
in connection with the issuance, transfer and redemption or repurchase
(including coordination with the Custodian) of Shares of each Portfolio, as more
fully described in the written schedule of Duties of FDISG annexed hereto as
Schedule A and incorporated herein, and in accordance with the terms of the
Prospectus of the Fund on behalf of the applicable Portfolio, applicable law and
the procedures established from time to time between FDISG and the Fund.
(b)......Recording the issuance of Shares and maintaining pursuant to Rule
17Ad-10(e) of the 1934 Act a record of the total number of Shares of each
Portfolio which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. FDISG shall provide the Fund on a regular basis with the
total number of Shares of each Portfolio which are authorized and issued and
outstanding and shall have no obligation under this Agreement, when recording
the issuance of Shares, to monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund or its administrator.
(c)......Notwithstanding any of the foregoing provisions of this Agreement,
under this Agreement FDISG shall be under no duty or obligation to inquire into,
and shall not be liable for: (i) the legality of the issuance or sale of any
Shares or the sufficiency of the amount to be received therefor; (ii) the
legality of the redemption of any Shares, or the propriety of the amount to be
paid therefor; (iii) the legality of the declaration of any dividend by the
Board of Directors, or the legality of the issuance of any Shares in payment of
any dividend; or (iv) the legality of any recapitalization or readjustment of
the Shares.
3.2......In addition, the Fund or its agent shall (i) identify to FDISG in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of FDISG under this Agreement for
the Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
3.3......FDISG shall serve as the Fund's exclusive service provider with respect
to those teleservicing, fulfillment and print/mail services more fully described
in Schedule B for the fees also set forth in Schedule B.
3.4......In addition to the duties set forth herein, FDISG shall perform such
other duties and functions, and shall be paid such amounts therefor, as may from
time to time be agreed upon in writing between the Fund and FDISG.
<PAGE>
Article 4 Recordkeeping and Other Information.
4.1......FDISG shall create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule A in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be maintained by
FDISG for the periods and in the places required by Rule 31a-2 under the 1940
Act.
4.2......To the extent required by Section 31 of the 1940 Act, FDISG agrees that
all such records prepared or maintained by FDISG relating to the services to be
performed by FDISG hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such section, and will be
surrendered promptly to the Fund on and in accordance with the Fund's request.
4.3......In case of any requests or demands for the inspection of Shareholder
records of the Fund, FDISG will endeavor to notify the Fund of such request and
secure Written Instructions as to the handling of such request. Unless expressly
indemnified by the Fund, FDISG reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to comply with such request.
Article 5 Fund Instructions.
5.1......FDISG will have no liability when acting upon Written or Oral
Instructions believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from the
Fund. FDISG will also have no liability when processing Share certificates which
it reasonably believes to bear the proper manual or facsimile signatures of the
officers of the Fund and the proper countersignature of FDISG.
5.2......At any time, FDISG may request Written Instructions from the Fund and
may seek advice from legal counsel for the Fund, or its own legal counsel, with
respect to any matter arising in connection with this Agreement, and it shall
not be liable for any action taken or not taken or suffered by it in good faith
in accordance with such Written Instructions or in accordance with the opinion
of counsel for the Fund or for FDISG. Written Instructions requested by FDISG
will be provided by the Fund within a reasonable period of time.
5.3......FDISG, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing or
acting on behalf of the Fund only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within one
business day by confirming Written Instructions, and that the Fund's failure to
so confirm shall not impair in any respect FDISG's right to rely on Oral
Instructions.
<PAGE>
Article 6 Compensation.
6.1......The Fund on behalf of each of the Portfolios will compensate FDISG for
the performance of its obligations hereunder in accordance with the fees set
forth in the written Fee Schedule annexed hereto as Schedule B and incorporated
herein.
6.2......In addition to those fees set forth in Section 6.1 above, the Fund on
behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by FDISG in the performance of its duties
hereunder. Out-of-pocket expenses shall include, but shall not be limited to,
the items specified in the written schedule of out-of-pocket charges annexed
hereto as Schedule C and incorporated herein. Schedule C may be modified by
written agreement between the parties. Unspecified out-of-pocket expenses shall
be limited to those out-of-pocket expenses reasonably incurred by FDISG in the
performance of its obligations hereunder.
6.3......The Fund on behalf of each of the Portfolios agrees to pay all
fees and out-of-pocket expenses within fifteen (15) days following the receipt
of the respective invoice.
6.4......Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule B, a revised Fee Schedule executed and dated by
the parties hereto.
6.5......The Fund acknowledges that the fees that FDISG charges the Fund under
this Agreement reflect the allocation of risk between the parties, including the
disclaimer of warranties in Section 9.3 and the exclusion of remedies in Article
12. Modifying the allocation of risk from what is stated here would affect the
fees that FDISG charges, and in consideration of those fees, the Fund agrees to
the stated allocation of risk.
Article 7 Documents.
In connection with the appointment of FDISG, the Fund shall, on or before the
date this Agreement goes into effect, but in any case within a reasonable period
of time for FDISG to prepare to perform its duties hereunder, deliver or cause
to be delivered to FDISG the documents set forth in the written schedule of Fund
Documents annexed hereto as Schedule D except to the extent previously delivered
to FDISG in connection with any other agreement.
Article 8 Transfer Agent System.
8.1......FDISG shall retain title to and ownership of any and all data bases,
computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by FDISG in connection with the services
provided by FDISG to the Fund herein (the "FDISG System").
8.2......FDISG hereby grants to the Fund a limited license to the FDISG System
for the sole and limited purpose of having FDISG provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately terminate
with the termination of this Agreement.
Article 9 Representations and Warranties.
9.1......FDISG represents and warrants to the Fund that:
(a)......it is a corporation duly organized, existing and in good standing
under the laws of the Commonwealth of Massachusetts;
(b)......it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c)......all requisite corporate proceedings have been taken to authorize
it to enter into this Agreement;
(d)......it is duly registered with its appropriate regulatory agency as a
transfer agent and such registration will remain in effect for the duration of
this Agreement; and
(e)......it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
9.2......The Fund represents and warrants to FDISG that:
(a)......it is duly organized, existing and in good standing under the laws
of the jurisdiction in which it is organized;
(b)......it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
(c)......all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize it to
enter into this Agreement;
(d)......a registration statement under the Securities Act of 1933, as amended,
and the 1940 Act on behalf of each of the Portfolios is currently effective and
will remain effective, and all appropriate state securities law filings have
been made and will continue to be made, with respect to all Shares of the Fund
being offered for sale; and
(e)......all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with the terms
of the Fund's Articles of Incorporation and its Prospectus with respect to each
Portfolio, such Shares shall be validly issued, fully paid and non-assessable.
9.3...... THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, FDISG DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING, WITHOUT LIMITATION,
ANY WARRANTIES REGARDING QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM
OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES
PROVIDED UNDER THIS AGREEMENT. FDISG DISCLAIMS ANY WARRANTY OF TITLE OR
NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 FDISG shall not be responsible under this Agreement for and the Fund on
behalf of each Portfolio shall indemnify and hold FDISG harmless from and
against any and all claims, costs, expenses (including reasonable attorneys'
fees), losses, damages, charges, payments and liabilities of any sort or kind
which may be asserted against FDISG or for which FDISG may be held to be liable
(a "Claim") arising out of or attributable to any of the following:
(a)......any actions of FDISG taken pursuant to this Agreement unless such Claim
arises out of gross negligence or bad faith or willful misconduct by FDISG in
the performance of its duties hereunder;
(b)......FDISG's reasonable reliance on, or reasonable use of information, data,
records and documents (including but not limited to magnetic tapes, computer
printouts, hard copies and microfilm copies) received by FDISG from the Fund, or
any authorized third party acting on behalf of the Fund, including but not
limited to the prior transfer agent for the Fund, in the performance of FDISG's
duties and obligations hereunder;
(c)......the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund on behalf of the
applicable Portfolio;
(d)......the offer or sale of shares in violation of any requirement under the
securities laws or regulations of any state that such shares be registered in
such state or in violation of any stop order or other determination or ruling by
any state with respect to the offer or sale of such shares in such state; and
(e)......the Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's gross negligence or bad
faith or willful misconduct (except to the extent of FDISG's gross negligence or
bad faith or willful misconduct) or the breach of any representation or warranty
of the Fund made herein.
10.2 In any case in which the Fund may be asked to indemnify or hold FDISG
harmless, FDISG will notify the Fund promptly after identifying any situation
which it believes presents or appears likely to present a claim for
indemnification against the Fund although the failure to do so shall not prevent
recovery by FDISG and shall keep the Fund advised with respect to all
developments concerning such situation. The Fund shall have the option to defend
FDISG against any Claim which may be the subject of this indemnification, and,
in the event that the Fund so elects, such defense shall be conducted by counsel
chosen by the Fund and satisfactory to FDISG, and thereupon the Fund shall take
over complete defense of the Claim and FDISG shall sustain no further legal or
other expenses in respect of such Claim. FDISG will not confess any Claim or
make any compromise in any case in which the Fund will be asked to provide
indemnification, except with the Fund's prior written consent. The obligations
of the parties hereto under this Article 10 shall survive the termination of
this Agreement.
10.3.....Any claim for indemnification under this Agreement must be made prior
to the earlier of:
(a)......one year after the Fund becomes aware of the event for which
indemnification is claimed; or
(b)......one year after the earlier of the termination of this Agreement or
the expiration of the term of this Agreement.
10.4.....Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
FDISG's sole and exclusive remedy for claims or other actions or proceedings to
which the Fund's indemnification obligations pursuant to this Article 10 may
apply.
Article 11 Standard of Care.
11.1 FDISG shall at all times act in good faith and agrees to use its best
efforts within commercially reasonable limits to ensure the accuracy of all
services performed under this Agreement, but assumes no responsibility for loss
or damage to the Fund unless said errors are caused by FDISG's own gross
negligence, bad faith or willful misconduct or that of its employees.
11.2 Neither party may assert any cause of action against the other party under
this Agreement that accrued more than six (6) years prior to the filing of the
suit (or commencement of arbitration proceedings) alleging such cause of action.
11.3 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL
EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE TO THE OTHER PARTY UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS OF THE OTHER PARTY, EXEMPLARY, PUNITIVE, SPECIAL, OR INCIDENTAL
DAMAGES OR INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED
BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE
OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above and shall
continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall automatically
renew for successive terms of one (1) year ("Renewal Terms") each, unless the
Fund or FDISG provides written notice to the other of its intent not to renew.
Such notice must be received not less than sixty (60) days prior to the
expiration of the Initial Term or the then current Renewal Term. Not less than
one hundred and fifty (150) days prior to the expiration of the Initial Term or
the then current Renewal Term, if either party wishes to modify the fees listed
in the schedules to this Agreement with respect to the upcoming Renewal Term,
the parties will promptly enter into good faith discussions with regard thereto.
13.3 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion thereof to a
successor transfer agent will be borne by the Fund.
13.4 If the Board of Directors of the Fund determines in good faith in the
exercise of its fiduciary duties that FDISG has breached its obligations
hereunder in a material manner or has failed to maintain service quality, the
Fund will notify FDISG of that determination and provide FDISG with an
opportunity to cure such breach or service deficiency during the sixty (60) days
following the receipt of such notice. If FDISG is unable, in the good faith
judgment of the Fund's Board of Directors, to cure such breach or bring such
service quality up to the reasonable satisfaction of the Board, the Fund may
terminate this Agreement by giving FDISG not less than sixty (60) days prior
written notice. In making any determination hereunder, the Board will take into
account data regarding FDISG's transaction throughput, transaction handling
quality, telephone abandonment rate, average speed of answer, speed and accuracy
of response to financial and non-financial correspondence and any other data
provided by FDISG or management. In the event that (i) the Fund provides notice
of termination as a result of service quality issues in accordance with the
provisions outlined above and determines that FDISG is unable to bring such
quality levels up to the standards previously; and (ii) FDISG in good faith
disputes the determination made by the Board of Directors with respect thereto,
the parties shall agree to submit the issues in dispute to a mutually agreed
upon independent third party arbiter for determination. If the arbiter
determines that there are material quality issues with respect to the
performance of services by FDISG and FDISG has failed to cure such issues, the
Fund may terminate this Agreement upon sixty (60) days written notice as set
forth above. If the arbiter determines that there are no material quality issues
with respect to the performance of services by FDISG or that there were material
quality issues with respect to the performance of services by FDISG, but FDISG
has cured such issues, the Fund may terminate this Agreement upon sixty (60)
days written notice as set forth above; provided, however, that the Fund shall
prior to the effective date of such termination, provide FDISG with a rebate of
the unamortized portion of all costs associated with the Fund's conversion to
FDISG and further provided that such unamortized costs will not exceed $103,000
and which shall be amortized over a period not greater than the Initial Term.
FDISG will have parallel termination rights with respect to breach of this
Agreement by the Fund. Termination of this Agreement in accordance with the
foregoing process shall not constitute a waiver of any other rights the
terminating party may have with respect to the services performed or failed to
be performed prior to such termination under this Agreement or otherwise or
rights of FDISG to payment of its fees and out-of pocket expenses.
13.5 This Agreement shall terminate upon the termination of the Amended and
Restated Administration Agreement between the Fund and FDISG.
Article 14 Additional Portfolios.
In the event that the Fund establishes one or more Portfolios in addition to
those identified in Exhibit 1, with respect to which the Fund desires to have
FDISG render services as transfer agent under the terms hereof, the Fund shall
so notify FDISG in writing, and if FDISG agrees in writing to provide such
services, Exhibit 1 shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1.....The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and FDISG shall exercise at least the same degree of care, but not less than
reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect its own confidential
information of a similar nature. Except as required by law, the Fund and FDISG
shall not duplicate, sell or disclose to others the Confidential Information of
the other, in whole or in part, without the prior written permission of the
other party. The Fund and FDISG may, however, disclose Confidential Information
to their respective parent corporation, their respective affiliates, their
subsidiaries and affiliated companies and employees, provided that each shall
use reasonable efforts to ensure that the Confidential Information is not
duplicated or disclosed in breach of this Agreement. The Fund and FDISG may also
disclose the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
FDISG disclose the Confidential Information to any competitor of the other
without specific, prior written consent.
15.2.....Proprietary Information means:
(a)......any data or information that is competitively sensitive material, and
not generally known to the public, including, but not limited to, information
about product plans, marketing strategies, finance, operations, customer
relationships, customer profiles, sales estimates, business plans, and internal
performance results relating to the past, present or future business activities
of the Fund or FDISG, their respective subsidiaries and affiliated companies and
the customers, clients and suppliers of any of them;
(b)......any scientific or technical information, design, process, procedure,
formula, or improvement that is commercially valuable and secret in the sense
that its confidentiality affords the Fund or FDISG a competitive advantage over
its competitors; and
(c)......all confidential or proprietary concepts, documentation, reports, data,
specifications, computer software, source code, object code, flow charts,
databases, inventions, know-how, show-how and trade secrets, whether or not
patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and models,
and any other tangible manifestation of the foregoing of either party which now
exist or come into the control or possession of the other.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance of its
obligations under this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by (i) fire, flood, elements of nature or other
acts of God; (ii) any outbreak or escalation of hostilities, war, riots or civil
disorders in any country, (iii) any act or omission of the other party or any
governmental authority; (iv) any labor disputes (whether or not the employees'
demands are reasonable or within the party's power to satisfy); or (v)
nonperformance by a third party (other than any person to whom a party has
delegated any responsibilities hereunder in accordance herewith) or any similar
cause beyond the reasonable control of such party, including without limitation,
failures or fluctuations in telecommunications or other equipment. In any such
event, the non-performing party shall be excused from any further performance
and observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned or otherwise transferred by either
party hereto, without the prior written consent of the other party, which
consent shall not be unreasonably withheld; provided, however, that FDISG may
upon sixty (60) days notice to the Fund, in its sole discretion, assign all its
right, title and interest in this Agreement to an affiliate, parent or
subsidiary. FDISG may, in its sole discretion, engage subcontractors to perform
any of the obligations contained in this Agreement to be performed by FDISG. If
FDISG shall assign or otherwise transfer this Agreement to an unaffiliated third
party, the Fund shall have the right to terminate this Agreement upon sixty (60)
days written notice to FDISG without the payment of any unamortized costs
referred to in Section 13.4 of this Agreement.
Article 18 Arbitration.
18.1.....Any claim or controversy arising out of or relating to this Agreement,
or breach hereof, shall be settled by arbitration administered by the American
Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the obligations
under this Agreement necessitates the use of instrumentalities of interstate
commerce and, notwithstanding other general choice of law provisions in this
Agreement, the parties agree that the Federal Arbitration Act shall govern and
control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement to be
given in writing to the Fund or FDISG, shall be sufficiently given if addressed
to that party and received by it at its office set forth below or at such other
place as it may from time to time designate in writing.
To the Fund:
Tweedy, Browne Company L.P.
52 Vanderbilt Avenue
New York, New York 10017
Attention: M. Gervase Rosenberger, Esq.
To FDISG:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to FDISG's General Counsel
<PAGE>
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on conflicts
of laws, shall govern the interpretation, validity, and enforcement of this
agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and FDISG
and Client hereby submit themselves to the exclusive jurisdiction of those
courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of reference only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
Article 23 Publicity.
Neither FDISG nor the Fund shall release or publish news releases, public
announcements, advertising or other publicity relating to this Agreement or to
the transactions contemplated by it without the prior review and written
approval of the other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements
after making reasonable efforts in the circumstances to consult in advance with
the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not partners or
co-venturers and nothing contained herein shall be interpreted or construed
otherwise.
24.2 During the term of this Agreement and for one (1) year afterward, the Fund
shall not recruit, solicit, employ or engage, for the Fund or others, FDISG's
employees.
Article 25 Entire Agreement; Severability.
25.1.....This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against FDISG unless said writing is executed by a Senior Vice
President, Executive Vice President, or President of FDISG. A party's waiver of
a breach of any term or condition in the Agreement shall not be deemed a waiver
of any subsequent breach of the same or another term or condition.
25.2.....The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not affect
the validity of the remainder of this Agreement. In such case, the parties shall
in good faith modify or substitute such provision consistent with the original
intent of the parties. Without limiting the generality of this paragraph, if a
court determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement, including the
limitations on liability and exclusion of damages, shall remain fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers, as of the day and year first above written.
TWEEDY, BROWNE FUND INC.
By:......
Title:...
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:......
Title:...
<PAGE>
.........Exhibit 1
LIST OF PORTFOLIOS
Tweedy, Browne American Value Fund
Tweedy, Browne Global Value Fund
<PAGE>
.........Schedule A
.........DUTIES OF FDISG
1........Shareholder Information. FDISG shall maintain a record of the number of
Shares held by each Shareholder of record which shall include name, address,
taxpayer identification and which shall indicate whether such Shares are held in
certificates or uncertificated form. In addition, FDISG shall maintain and track
such Shareholder records in a manner which will enable the Fund to properly
comply with applicable escheatment laws.
2........Shareholder Services. FDISG shall respond as appropriate to all
inquiries and communications from Shareholders relating to Shareholder accounts
with respect to its duties hereunder and as may be from time to time mutually
agreed upon between FDISG and the Fund.
3........Share Certificates.
(a)......If the Fund requests FDISG to issue a stock certificate for any Shares
then, at the expense of the Fund, the Fund shall supply FDISG with an adequate
supply of blank share certificates to meet FDISG requirements therefor. Such
Share certificates shall be properly signed manually. The Fund agrees that,
notwithstanding the death, resignation, or removal of any officer of the Fund
whose signature appears on such certificates, FDISG or its agent may continue to
countersign certificates which bear such signatures until otherwise directed by
Written Instructions.
(b) FDISG shall issue replacement Share certificates in lieu of certificates
which have been lost, stolen or destroyed, upon receipt by FDISG of properly
executed affidavits and lost certificate bonds, in form satisfactory to FDISG,
with the Fund and FDISG as obligees under the bond.
(c) FDISG shall also maintain a record of each certificate issued, the number of
Shares represented thereby and the Shareholder of record. With respect to Shares
held in open accounts or uncertificated form (i.e., no certificate being issued
with respect thereto) FDISG shall maintain comparable records of the
Shareholders thereof, including their names, addresses and taxpayer
identification. FDISG shall further maintain a stop transfer record on lost
and/or replaced certificates.
4........Mailing Communications to Shareholders; Proxy Materials. FDISG will
address and mail to Shareholders of the Fund, all reports to Shareholders,
dividend and distribution notices and proxy material for the Fund's meetings of
Shareholders. In connection with meetings of Shareholders, FDISG will prepare
Shareholder lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies voted prior to
meetings, act as inspector of election at meetings and certify Shares voted at
meetings.
5........Sales of Shares
(a) FDISG shall not be required to issue any Shares of the Fund where it has
received a Written Instruction from the Fund or official notice from any
appropriate authority that the sale of the Shares of the Fund has been suspended
or discontinued. The existence of such Written Instructions or such official
notice shall be conclusive evidence of the right of FDISG to rely on such
Written Instructions or official notice.
(b) In the event that any check or other order for the payment of money is
returned unpaid for any reason, FDISG will endeavor to: (i) give prompt notice
of such return to the Fund or its designee; (ii) place a stop transfer order
against all Shares issued as a result of such check or order; and (iii) take
such actions as FDISG may from time to time deem appropriate.
6........Transfer and Repurchase
(a) FDISG shall process all requests to transfer or redeem Shares in accordance
with the transfer or repurchase procedures set forth in the Fund's Prospectus.
(b) FDISG will transfer or repurchase Shares upon receipt of Oral or Written
Instructions or otherwise pursuant to the Prospectus and Share certificates, if
any, properly endorsed for transfer or redemption, accompanied by such documents
as FDISG reasonably may deem necessary.
(c) FDISG reserves the right to refuse to transfer or repurchase Shares until it
is satisfied that the endorsement on the instructions is valid and genuine.
Unless instructed by an officer of the Fund to the contrary, FDISG also reserves
the right to refuse to transfer or repurchase Shares until it is satisfied that
the requested transfer or repurchase is legally authorized, and it shall incur
no liability for the refusal, in good faith, to make transfers or repurchases
which FDISG, in its good judgment, deems improper or unauthorized, or until it
is reasonably satisfied that there is no basis to any claims adverse to such
transfer or repurchase as instructed by an officer of the Fund.
(d) When Shares are redeemed, FDISG shall, upon receipt of the instructions and
documents in proper form, deliver to the Custodian and the Fund or its designee
a notification setting forth the number of Shares to be repurchased. Such
repurchased shares shall be reflected on appropriate accounts maintained by
FDISG reflecting outstanding Shares of the Fund and Shares attributed to
individual accounts.
(e) FDISG, upon receipt of the monies provided to it by the Custodian for the
repurchase of Shares, pay such monies as are received from the Custodian, all in
accordance with the procedures described in the written instruction received by
FDISG from the Fund.
(f) FDISG shall not process or effect any repurchase with respect to Shares of
the Fund after receipt by FDISG or its agent of notification of the suspension
of the determination of the net asset value of the Fund until such determination
is resumed or processing is permitted during such suspension.
7........Dividends
(a) Upon the declaration of each dividend and each capital gain distribution by
the Board of Directors of the Fund with respect to Shares of the Fund, the Fund
shall furnish or cause to be furnished to FDISG Written Instructions setting
forth the date of the declaration of such dividend or distribution, the
ex-dividend date, the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined, the amount payable per
Share to the Shareholders of record as of that date, the total amount payable on
the payment date and whether such dividend or distribution is to be paid in
Shares at net asset value.
(b) On or before the payment date specified in such resolution of the Board of
Directors, the Fund will provide FDISG with sufficient cash to make payment to
the Shareholders of record as of such payment date.
(c)......If FDISG does not receive sufficient cash from the Fund to make total
dividend and/or distribution payments to all Shareholders of the Fund as of the
record date, FDISG will, upon notifying the Fund, withhold payment to all
Shareholders of record as of the record date until sufficient cash is provided
to FDISG.
8........In addition to and neither in lieu nor in contravention of the
services set forth above, FDISG shall perform all
the customary services of a transfer agent, registrar, dividend disbursing
agent and agent of the dividend reinvestment and cash purchase plan as
described herein consistent with those requirements in effect as at the date
of this Agreement. The detailed definition, frequency, limitations and
associated costs (if any) set out in the attached fee schedule, include
but are not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, tabulating proxies, mailing
prospectuses, Shareholder reports to current Shareholders, withholding
taxes on U.S. resident and non-resident alient accounts where applicable,
preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders.
Schedule B
FEE SCHEDULE
I. Per Account Fees
Open Accounts $9.75/Account
Closed Accounts $1.80/Account
Beginning on the one year anniversary from the effective date, the
per account fees will be increased on an annual basis by a percentage
amount equal to the percentage increase in the then current Consumer
Price Index (all urban consumers), or its successor index, with a
maximum increase of seven percent (7%) per annum over the
prior years fees.
II. Fund Minimums: (annually) $24,000.00/Portfolio/Class
IV. IRA Account Fees: $10.00/Account
V. Transaction Charges:
New account & set up $4.00/Set Up
Manual Transactions $1.50 Transaction
Incoming and outgoing wires $10.00/wire
......... NSCC Fees*: ......... Financial Transactions $.10 per transaction
......... Same Day Trade Confirmations $.15 per confirm
*NSCC Fees will be waived for years one and two and will commence in the third
year from the effective date of this Agreement
VI.......Other Fees (if applicable)
......... 12b-1 Commission $1.20/Account
VII......Conversion Fees:
......... Per Account Fee $1.00/Account
......... Minimum per Portfolio $20,000.00
VIII.....Teleservicing, Conversion Tracking and Fulfillment Fees:
.........A. Inbound Teleservicing: $2.00 per minute with
......... monthly minimum
.........B. Marketing Reports:
......... Source of Leads and Conversion Reports $125/each
.........C. Out-Of-Pocket Expenses:
......... Telephone line usage charges (800 connect time)
......... Fax transmissions
......... Line charges for order transmission to fulfillment vendor
......... Forms
......... Overnight/Express Mail packages
......... Travel expenses, if on-site visits are requested
......... $.32 per order fee for all orders placed in IWS Literature
.........D. Special Projects:
......... If special programming support is required to develop a need
outside of our current scope of services, this will be billed at $75 per hour.
.........E. Fulfillment: $1.25 per package
<PAGE>
.........Schedule C
.........OUT-OF-POCKET EXPENSES
The Fund shall reimburse FDISG monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
o........Microfiche/microfilm production
o........Magnetic media tapes and freight
o........Printing costs, including certificates, envelopes, checks and
stationery o........Postage (bulk, pre-sort, ZIP+4, barcoding, first class)
direct pass through to the Fund o........Due diligence mailings
o........Telephone and telecommunication costs, including all lease, maintenance
and line costs o........Ad hoc reports o........Proxy solicitations, mailings
and tabulations o........Daily & Distribution advice mailings relative to stock
inserts and postage o........Shipping, Certified and Overnight mail and
applicable insurance o........Year-end form production and mailings
o........Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
o........Duplicating services o........Courier services o........Federal Reserve
charges for check clearance o........Overtime, as approved by the Fund
o........Temporary staff, as approved by the Fund o........Travel and
entertainment, as approved by the Fund o........Record retention, retrieval and
destruction costs, including, but not limited to exit fees charged by third
party record keeping vendors o........Third party audit reviews o........Ad hoc
SQL time o........All Systems enhancements not related to the conversion at the
rate of $75.00 per hour o........Such other miscellaneous expenses reasonably
incurred by FDISG in performing its duties and responsibilities under this
Agreement.
The Fund agrees that postage and mailing expenses will be paid on the day of or
prior to mailing as agreed with FDISG. In addition, the Fund will promptly
reimburse FDISG for any other unscheduled expenses incurred by FDISG whenever
the Fund and FDISG mutually agree that such expenses are not otherwise properly
borne by FDISG as part of its duties and obligations under the Agreement.
<PAGE>
.........Schedule D
.........FUND DOCUMENTS
o........Certified copy of the Articles of Incorporation of the Fund, as
amended. ......... o........Certified copy of the By-laws of the Fund, as
amended. ......... o........Copy of the resolution of the Board of Directors
authorizing the execution and delivery of this Agreement. .........
o........Specimens of the certificates for Shares of the Fund, if applicable, in
the form approved by the Board of Directors of the Fund, with a certificate of
the Secretary of the Fund as to such approval. ......... o........All account
application forms and other documents relating to Shareholder accounts or to any
plan, program or service offered by the Fund. ......... o........Certified list
of Shareholders as of the conversion date of the Fund with the name, address and
taxpayer identification number of each Shareholder, and the number of Shares of
the Fund held by each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and the
number of Shares redeemed by the Fund as of the conversion date. .........
o........All notices issued by the Fund with respect to the Shares in accordance
with and pursuant to the Articles of Incorporation or By-laws of the Fund or as
required by law and shall perform such other specific duties as are set forth in
the Articles of Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required thereby.
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
.........This Amendment No. 1 dated as of February 15, 1997, is entered
into by TWEEDY, BROWNE FUND INC. (the "Company") and FIRST DATA INVESTOR
SERVICES GROUP, INC. ("FDISG").
.........WHEREAS, the Company and The Boston Company Advisors, Inc. entered
into an Amended and Restated Administration Agreement dated as of December 8,
1993 which agreement was assigned to FDISG on April 24, 1994 (the
"Administration Agreement");
.........WHEREAS, the Company and FDISG wish to amend the Administration
Agreement to amend certain provisions of the Administration Agreement;
.........NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:
.........I. Section 6, "Termination of Agreement" is hereby deleted and
replaced in its entirety as follows:
.........Section 6 Term and Termination.
--------------------
(a) This Agreement shall be effective on the date first
written above and shall continue for a period of three (3) years (the
"Initial Term").
(b) Upon the expiration of the Initial Term, this Agreement
shall automatically renew for successive terms of one (1) year
("Renewal Terms") each, unless the Company or FDISG provides written
notice to the other of its intent not to renew. Such notice must be
received at least sixty (60) days prior to the expiration of the
Initial Term or the then current Renewal Term. Not less than 150 days
prior to the expiration of the Initial Term or the then current Renewal
Term, if either party wishes to modify the fees listed in the schedules
to this Agreement with respect to the upcoming Renewal Term, the
parties will promptly enter into good faith discussions with regard
thereto.
(c) In the event a termination notice is given by the Company,
all expenses associated with movement of records and materials and
conversion thereof to a successor administrator will be borne by the
Company.
(d) If the Board of Directors of the Company determines in
good faith in the exercise of its fiduciary duties that FDISG has
breached its obligations hereunder in a material manner or has failed
to maintain service quality at levels at least as high as during the
Fall of 1996, the Company will notify FDISG of that determination and
provide FDISG with an opportunity to cure such breach or service
deficiency during the sixty (60) days following the receipt of such
notice. If FDISG is unable, in the good faith judgment of the Company's
Board of Directors, to cure such breach or bring such service quality
up to the levels at least as high as the Fall of 1996, the Company may
terminate this Agreement by giving FDISG not less than sixty (60) days
prior written notice. FDISG will have parallel termination rights with
respect to breach of this Agreement by the Company. Termination of this
Agreement in accordance with the foregoing process shall not constitute
a waiver of any other rights the terminating party may have with
respect to the services performed or failed to be performed prior to
such termination under this Agreement or otherwise or rights of FDISG
to payment of its fees and out-of pocket expenses.
(e) In the event that (i) the Company provides notice of
termination as a result of service quality issues in accordance with
Section (d) above and determines that FDISG is unable to bring such
quality levels up to the standards set forth in Section (d) above; and
(ii) FDISG in good faith disputes the determination made by the Board
of Directors with respect thereto, the parties shall agree to submit
the issues in dispute to a mutually agreed upon independent third party
arbiter for determination. If the arbiter determines that there are
material quality issues with respect to the performance of services by
FDISG and FDISG has failed to cure such issues, the Company may
terminate this Agreement upon sixty (60) days written notice as set
forth in section (d) above. If the arbiter determines that there are no
material quality issues with respect to the performance of services by
FDISG or that there were material quality issues with respect to the
performance of services by FDISG, but FDISG has cured such issues, the
Company may terminate this Agreement upon sixty (60) days written
notice as set forth in section (d) above, provided however, the Company
shall, prior to the effective date of such termination, provide FDISG
with a rebate of the unamortized amount of the Fee Waiver granted by
FDISG in Section III. C. below which amount shall be amortized over a
period not greater than the Initial Term.
(f) This Agreement shall terminate upon the termination of the Transfer
Agency and Services Agreement in effect between the Company and FDISG.
II. Paragraph (l) of Section 3 is hereby deleted in its entirety.
III. The Fee Schedule referred to in Section 4 of the Administration
Agreement is hereby deleted in full and replaced with the following:
A. Annual Fees for Fund Accounting Services
Net Assets Per Fund Annual Fee Per Fund
First $100 million 3 BP
Thereafter 1 BP
Minimum Monthly Charges for $3,000
Domestic
Minimum Monthly Charges for Global $4,000
B. Annual Fees for Administration Services
Average Total Aggregate Assets Total Aggregate Fee
for All Funds
First $500 million 6 BP
Next $500 million 4 BP
Thereafter 2 BP
Company Minimum $40,000
C. Fee Waiver
FDISG agrees to waive its fund accounting and fund
administration fees for the first three months following the effective
date of this fee schedule. All other waivers previously agreed to by
the parties to this Agreement are hereby terminated as of the effective
date of this Amendment No. 1.
D. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, registration of new funds or series
and the preparation of special reports will be subject to negotiation.
Fees for other special items will be negotiated separately.
E. Multiple Classes of Shares
An additional $5,000 annual fee will be applied for each class
of shares, excluding the initial class of shares, if more than one
class of shares is operational in a Fund.
F. Blue Sky Administration Services
A fee of $2,500 per annum for each class of shares, excluding
the initial class of shares, if more than one class of shares is
operational in a Fund.
IV. The Schedule A referred to in Section 4 of the Administration Agreement
is hereby deleted in full and replaced with the following:
Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month. Out-of-pocket
expenses include, but are not limited to the following:
- Courier services
- Pricing services used by the Company
- Vendor set-up charges for Blue Sky services for new Funds only -
Customized programming requests at $100 per hour - Printing for
shareholder reports and SEC filings - External legal fees, audit fees
and other professional fees - Postage, telephone, telecommunications,
fax, and photocopying - Supplies and Forms related to Fund records -
Travel and lodging for Board, Shareholder and Operations meetings -
Advertised Yields and Total Returns $300 per Fund, per month -
Independent Auditor's Report (as requested by the Company) - Such other
expenses as are agreed to by FDISG and the Company
V. Paragraph (b) of Section 8 "Miscellaneous" is hereby deleted in its
entirety and the following substituted in its place:
(b) This Agreement, its benefits and obligations shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement may not be
assigned or otherwise transferred by either party hereto, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that FDISG may upon sixty
(60) days notice to the Fund, in its sole discretion, assign all its
right, title and interest in this Agreement to an affiliate, parent or
subsidiary. FDISG may, in its sole discretion, engage subcontractors to
perform any of the obligations contained in this Agreement to be
performed by FDISG. If FDISG shall assign or otherwise transfer this
Agreement to an unaffiliated third party, the Company shall have the
right to terminate this Agreement upon sixty (60) days written notice
to FDISG without the payment of any unamortized Fee Waivers referred to
in Section 6 of this Agreement.
VI. Except to the extent amended hereby, the Administration Agreement shall
remain unchanged and in full force and effect and is hereby ratified and
confirmed in all respects as amended hereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as
of the date and year first written above.
TWEEDY, BROWNE FUND INC.
By: __________________________
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: __________________________
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 2, 1997 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. 7 to Registration
Statement (Form N-1A, No. 33-57724).
Boston, Massachusetts
May 23, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> TWEEDY, BROWNE AMERICAN VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 282,114,572
<INVESTMENTS-AT-VALUE> 345,002,014
<RECEIVABLES> 4,769,641
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,523,101
<TOTAL-ASSETS> 351,294,756
<PAYABLE-FOR-SECURITIES> 7,535,139
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,292,238
<TOTAL-LIABILITIES> 8,827,377
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 271,675,317
<SHARES-COMMON-STOCK> 21,119,090
<SHARES-COMMON-PRIOR> 14,103,718
<ACCUMULATED-NII-CURRENT> 1,039,581
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,415,390
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 64,337,091
<NET-ASSETS> 342,467,379
<DIVIDEND-INCOME> 4,842,528
<INTEREST-INCOME> 1,015,320
<OTHER-INCOME> 0
<EXPENSES-NET> 3,524,927
<NET-INVESTMENT-INCOME> 2,332,921
<REALIZED-GAINS-CURRENT> 11,510,445
<APPREC-INCREASE-CURRENT> 26,815,015
<NET-CHANGE-FROM-OPS> 40,658,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,924,069)
<DISTRIBUTIONS-OF-GAINS> (7,097,006)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,381,470
<NUMBER-OF-SHARES-REDEEMED> (2,966,055)
<SHARES-REINVESTED> 599,957
<NET-CHANGE-IN-ASSETS> 140,868,872
<ACCUMULATED-NII-PRIOR> 371,199
<ACCUMULATED-GAINS-PRIOR> 2,261,481
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,176,537
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,868,686
<AVERAGE-NET-ASSETS> 254,122,945
<PER-SHARE-NAV-BEGIN> 14.29
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 2.39
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> (0.42)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.22
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> TWEEDY, BROWNE GLOBAL VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1,227,799,364
<INVESTMENTS-AT-VALUE> 1,392,381,297
<RECEIVABLES> 11,014,393
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 63,580,819
<TOTAL-ASSETS> 1,466,976,509
<PAYABLE-FOR-SECURITIES> 21,573,132
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,192,885
<TOTAL-LIABILITIES> 25,766,017
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,178,847,169
<SHARES-COMMON-STOCK> 93,237,678
<SHARES-COMMON-PRIOR> 66,567,401
<ACCUMULATED-NII-CURRENT> 11,956,516
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,644,999
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 226,761,808
<NET-ASSETS> 1,441,210,492
<DIVIDEND-INCOME> 21,537,601
<INTEREST-INCOME> 4,832,359
<OTHER-INCOME> 0
<EXPENSES-NET> 18,061,348
<NET-INVESTMENT-INCOME> 8,308,612
<REALIZED-GAINS-CURRENT> 120,005,899
<APPREC-INCREASE-CURRENT> 54,898,049
<NET-CHANGE-FROM-OPS> 183,212,560
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (43,288,284)
<DISTRIBUTIONS-OF-GAINS> (44,555,478)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35,117,166
<NUMBER-OF-SHARES-REDEEMED> (13,856,018)
<SHARES-REINVESTED> 5,409,129
<NET-CHANGE-IN-ASSETS> 490,299,526
<ACCUMULATED-NII-PRIOR> 14,504,033
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (19,502,615)
<GROSS-ADVISORY-FEES> 14,318,034
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,146,282
<AVERAGE-NET-ASSETS> 1,145,442,686
<PER-SHARE-NAV-BEGIN> 14.28
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 2.18
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> (0.57)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.46
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
