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TWEEDY, BROWNE
GLOBAL VALUE FUND
ANNUAL
MARCH 31, 1998
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TWEEDY, BROWNE
AMERICAN VALUE FUND
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TWEEDY, BROWNE FUND INC.
Investment Manager's Report ........................................ 1
Tweedy, Browne Global Value Fund:
Portfolio Highlights ............................................... 19
Perspective On Assessing Investment Results ........................ 20
Portfolio of Investments ........................................... 22
Schedule of Forward Exchange Contracts ............................. 32
Statement of Assets and Liabilities ................................ 39
Statement of Operations ............................................ 40
Statements of Changes in Net Assets ................................ 41
Financial Highlights ............................................... 42
Notes to Financial Statements ...................................... 43
Report of Ernst & Young LLP, Independent Auditors .................. 51
Tax Information (unaudited) ........................................ 52
Tweedy, Browne American Value Fund:
Portfolio Highlights ............................................... 53
Perspective On Assessing Investment Results ........................ 54
Portfolio of Investments ........................................... 56
Schedule of Forward Exchange Contracts ............................. 64
Statement of Assets and Liabilities ................................ 66
Statement of Operations ............................................ 67
Statements of Changes in Net Assets ................................ 68
Financial Highlights ............................................... 69
Notes to Financial Statements ...................................... 70
Report of Ernst & Young LLP, Independent Auditors .................. 77
Tax Information (unaudited) ........................................ 78
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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 LLC is a member of the NASD and is
the Distributor of the Company.
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TWEEDY, BROWNE FUND INC.
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Investment Manager's Report
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[Photo of Will Browne, John Spears and Chris Browne]
To Our Shareholders: 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 year ended March 31, 1998.
For the year ended March 31, 1998 the net asset value of the shares of the
Tweedy, Browne Global Value Fund increased 33.09%* to $18.98 per share. This
performance includes the reinvestment of a dividend of $1.36070 per share paid
in December 1997. For the same period the Morgan Stanley Capital International
("MSCI") Europe, Australasia and Far East ("EAFE") Index gained 18.61%. 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. Once
again, this was the case over the last twelve months with the dollar
appreciating against most major foreign currencies. As you know, because we
believe that we are unable to predict the direction of twenty different
currencies in relation to the dollar, it is our policy to remain fully hedged
back into the dollar at all times with respect to our foreign currency exposure.
Therefore, perhaps the most relevant comparison to our performance is the EAFE
Index hedged back into the U.S. dollar. The EAFE Index hedged showed a gain of
28.67% for the twelve months ended March 31, 1998. Foreign currency declines
against the dollar have had a significant dilutive effect on the results of
unhedged international portfolios and indexes over the last two years. Our
policy of being hedged has protected us from these currency effects, and allowed
our shareholders to get the full benefit from the appreciation of our stocks.
The country weightings in the Global Value Fund have not changed appreciably
over the last year. However, we have started to slowly increase the number of
holdings in the Far East, including Japan, Hong Kong, Singapore, and Malaysia.
As you would expect, with the collapse in Asian markets over the last year,
there has been a corresponding increase in "value" opportunities. Many of the
bargains we are finding today are reminiscent of the type of valuations we last
saw in U.S. markets in 1974.
The overall financial characteristics of the Global Value Fund have changed
little since our mid-year report. Currently, approximately 43% of assets are
invested in stocks having a weighted average price/earnings ratio of 12.9 times
earnings. Stocks with a price/earnings ratio of 12.9 times earnings are cheaper
than 86.5% of the 7,459 stocks in the Worldscope database with market
capitalizations above $100 million in those countries where the Global Value
Fund has investments. A further 29% of assets are invested in stocks with a
weighted average price/book value ratio of .91. Stocks with an average
price/book value ratio of .91 are cheaper than 89% of the issues in the
database.
The performance of the American Value Fund was good on an absolute basis,
although not quite as good on a relative basis to that list of stocks which we
don't own, the S&P 500. For the year ended March 31, 1998 the net asset value of
the American Value Fund increased 46.14%* to $23.04 per share after adding back
a dividend of .59910 per share paid in December 1997. The American Value Fund
slightly underperformed the S&P 500, which was up 47.96% for the same period. On
a calendar year basis, our performance in 1997 exceeded that of the S&P 500 by
over 500 basis points (38.87% vs. 33.38%). As we've pointed out in previous
reports, it would be nice to beat the S&P 500 each and every year, but our own
research and experience suggests that it is simply not possible. (Please see the
enclosed booklet, Ten Ways to Beat an Index.)
We happen to be, and have been for the last several years, in a period where
large cap stocks have led the market and boosted the returns of capitalization
weighted indexes, such as the S&P 500. For instance, over the last 4 1/3 years
since the American Value Fund's inception, the S&P 500 was up 22.22% annually,
excluding dividends (25.04% including dividends), versus 16.24% annually for the
Russell 2000 Index (excluding dividends) of smaller companies. This is quite a
divergence from longer measurement periods, where empirical studies indicate an
edge for smaller cap stocks (particularly small cap value stocks). As we've
explained in the past, because we invest across the full spectrum of market caps
(approximately 34% of the American Value Fund is invested in stocks with market
caps less than $1 billion), it is difficult for us to outperform the S&P 500
when large cap stocks are beating the overall market. The American Value Fund
also has approximately 17% of its assets in undervalued foreign stocks, which
have not performed quite as well on an absolute basis as U.S. stocks over the
last several years. With our exposure to smaller and medium capitalization
companies, including some that we think are terrific bargains outside the U.S.,
the portfolio of the American Value Fund bears little resemblance to the S&P
500. That's the way we like it. If we are going to have a chance to beat the
index over the long term, our portfolio can't look like it. While we wait for
our small cap stocks to perk up, we are quite pleased with the 23%* plus
annualized returns we have been achieving. In fact, the annualized return for
the American Value Fund ranks in the top 13%, based on the annualized return
from December 31, 1993 to March 31, 1998 of all 393 funds measured by Lipper
Analytical Services in the Growth Fund Investment Objective category. For the
year ended March 31, 1998, the American Value Fund's annualized return of
46.14%* ranks in the top 40% measured by Lipper for the same category.
As with the Global Value Fund, the fundamental financial characteristics of
the American Value Fund have changed little since our mid-year report.
Currently, approximately 53% of assets are invested in stocks with a weighted
average price/earnings ratio of 12.7 times earnings. Stocks with a price/
earnings ratio of 12.7 times earnings are the cheapest 8% of U.S. stocks with
market capitalizations above $100 million in the Bloomberg database. Stocks
bought on a low price/book value ratio comprise 19% of assets, and have a
weighted average price/book ratio of 1.02. Stocks with an average price/book
ratio of 1.02 are the cheapest 3% of the database.
There has been little portfolio turnover for either Fund with the turnover
rates for the Global Value Fund and the American Value Fund running 16% and 6%
in the past year, respectively. Even with a lower capital gains tax rate for
stocks held for at least 18 months, our aversion to taxes remains the same.
The past year was obviously a good time to be invested in stocks almost
anywhere with the obvious exception of the emerging markets of Asia. In fact,
the last three calendar years, 1995 through 1997, have been an extraordinary
time for U.S. stocks with the Standard & Poor's 500 Stock Index showing a
cumulative gain of 125.8% for an average annually compounded rate of return of
31.2%. These results again bring up the question of how long this will continue.
We wish we knew. Caution could have led one to have taken some money out of the
market after the great results experienced in 1995 alone. Another year of
well-above-average stock market returns in 1996 could only increase one's
apprehension about staying in the market. Then, 1997 saw the stock market turn
in one of its best years in the last twenty years. Not being invested in any or
all of the past three years would have had tremendous opportunity costs to the
average investor.
Stock markets do not rise all the time. Equity investing is not a passbook
savings account with returns of 10% or 20% or 30% per year where your principal
is never at risk. Stock markets can decline. Investors in Asia learned that
lesson last year. However, if the stock market declined 25% in 1998, we would
only be giving back the gains of the previous year. The S&P 500 gain for the
four years ending 1998, even after a 25% decline, would still be an impressive
69.3%. Of course, if 1998 is going to be the year the stock market drops 25%, it
would be a great move to sell out now and go back in after the dust settles.
Unfortunately, the economic and political tea leaves that affect stock markets
are never that easy to read. From 1975 through 1997, the S&P 500 has declined on
an annual basis in only three years and each decline was less than 10%. It went
up in each of the other twenty years. (We will choose for our purposes to ignore
interim fluctuations such as the "Crash of '87" on the assumption that we were
invested at all times, and we count our wealth once a year on December 31.) If
an investor were presented with the proposition that he or she could invest his
or her money for twenty-three years at an annually compounded rate greater than
inflation, bonds or short-term money market instruments, but they would
experience declines in three of those years that could not be predicted or
avoided, it is unlikely that anyone would not make that investment.
Despite the generally accepted fact that it is impossible to predict
short-term stock market trends, hope of doing so springs eternal. And our
industry does not help. In our opinion, far too much attention is devoted to
speculation about events that we cannot predict. With enough so-called experts
making so many predictions, enough to cover every possible eventuality, someone
is bound to be right. However, as a simple investor, how are we to determine who
has made the correct prediction? The answer is: we cannot. This has not put a
stop to people holding themselves out as experts and who claim to know what the
future will bring, nor legions of others willing to accept such predictions as
having validity. We recently ran into a friend who was praising the
prognosticating ability of a particular money manager. This money manager
specializes in selling short, picking companies that he believes will decline in
the future. One of his recent picks was Oxford Health Plans. From a high in the
past twelve months of $89 per share, the stock has recently been trading around
$13. The company discovered some problems in its accounting systems which were
masking enormous losses rather than the profits that had been previously
reported. Our friend thought this money manager was brilliant based on this one
fortuitous stock pick. When we asked our friend if he had any idea how this
money manager had done overall in the past few years, he did not have a clue.
The manager in question has had one up year in the past seven. Short selling is
not an easy place to be in a bull market. However, our friend was willing to
focus on one stock selection which worked beautifully while ignoring the sum of
all the manager's selections. A stock portfolio is comprised of many stocks; it
is the result of the portfolio that counts, not one stock. The same can be said
for stock market predictions. Calling one movement in the stock market is of
little value over the long term, and we are not aware of anyone who has compiled
a long-term record of successfully predicting stock market movements.
One of the more absurd sound bites we heard recently was in one of those
fifteen-second promos you hear on television for a show that will be shown later
that evening. The host of the show was enticing us to tune in to hear one of the
more celebrated stock market pundits with this prediction: "So and so sees
market gains in the first half of 1998, but rough sledding for investors in the
second half. Find out why at ten o'clock." This statement can only mean that
there now exists some reason the stock market will be in trouble four or six
months from now, but for the time being, investors are unaware of it or are
choosing to ignore it. If in fact there was some degree of certainty that there
was going to be a war in the Middle East later in the year, or that Alan
Greenspan was going to raise interest rates, or that corporate profits were
going to decline in the second half, this news would already be incorporated
into the level of the stock market. That is what stock markets do; they process
important economic and political information, calculate their effect on the
economy and adjust stock prices accordingly. Often these adjustments exaggerate
the significance of the news that caused them and investment opportunities are
created. We can only presume in the situation above that the news that would
roil the markets in the second half of 1998 was known only to the pundit who
would be appearing at ten o'clock, and that if we tuned in, this knowledge would
be imparted to us.
As we have said in the past, the stock market will decline at some point in
the future. We do not know when or by how much, and we do not know what event or
circumstances will precipitate the decline. The current economic problems in
Asia are cited as one possible cause of trouble for the U.S. markets, but so far
we have weathered the storm. We could cash out now, wait for the decline and
then reinvest when it reaches the bottom. This presumes one can determine when
the bottom has been reached, and if the decline has been particularly
disquieting, would have the courage to go back in. We could have done this last
year, two years ago, or even three years ago. The same apprehension about stock
prices has existed in varying degrees for several years. Cashing out one, two or
three years ago would have been a costly mistake in terms of foregone profits.
So far in 1998, the same holds true. Over the long term, stocks have
outperformed bonds and cash. With the exceptions of the 1973-74 market and the
Great Depression, it has not taken more than two years for stock prices to
recover losses experienced in a bear market. Generally, recovery takes far less
than two years. We find these odds favorable to investors and therefore see no
reason to do anything differently than we have for many, many years.
While we have not signed on to the theory that recessions will never happen
again and therefore one should throw caution to the wind because the stock
market can only go up, times are definitely better for now. Forty years ago, the
auto companies dominated the American economy and "What was good for General
Motors was good for America". However, recessions occurred periodically. Cars
would begin to pile up on dealers' lots, but no one really knew how serious the
situation was until they counted the inventory once a month. When there were too
many unsold cars, dealers cut back on orders, the auto companies cut back
production and laid off workers. The effect spilled over into the steel industry
and so on down the line. Today, thanks to computers, General Motors probably
knows hourly how many unsold cars are in inventory. Production can be adjusted
and big inventory buildups that led to layoffs can be avoided or at least
softened. Corporate raiders of the 1980s may also have benefitted American
industry by breaking up the old boy network of complacency in a world that was
opening up to global competition. Ten years later, the United States, which was
almost given up as an inefficient, lumbering, former economic power is now the
engine that is driving the world economy. We have traded places with Japan.
Technology has become one of the largest sectors of the S&P 500 and is
creating new jobs every year. Corporate leaders are also acting in a more
rational way. Corporations are more focused; acquisitions are now generally in
their principal lines of business where two plus two does have the possibility
of equaling five. Conglomeration and diversification are seldom mentioned. While
companies must now compete on a global basis, they can also sell their products
on a global basis. And interest rates could go lower still. We forget that for
forty years, from 1926 to 1966, the Standard & Poor's high grade bond yield was
always below 6%, and for thirty-eight of those years it was below 5%. It could
happen again.
We do not mean to imply that we are becoming macro-economic investors. We
are merely making the observation that there may be less obvious reasons stocks
have performed well and could continue to perform well. Despite the fact that we
may sometimes sound somewhat skeptical, we are essentially optimists. We think
you have to be optimistic to succeed in the investment business. Our optimism is
not Prozac-induced but is a result of our observation that sound investment
principles produce favorable results over time. We do not fret that after so
many years of prosperity, we are fated to enter a period of adversity. The
market is high on a historic basis, but it is not in silly land. In 1972, before
one of the greatest bear markets of the century, stocks were much higher,
irrationally higher. The nifty-fifty growth stocks of their day, which comprised
a significant part of the stock market indexes, were in many cases selling at
fifty and sixty times earnings. A decline of 10% or 20% would not have brought
those stocks back to rational levels. There was no margin of safety in a company
selling cosmetics door-to-door that was trading at 68 times earnings. That
company, Avon Products, went from a high of $132 to a low of $17 in
approximately twelve months, a decline of 87%. A few declines like that in some
large capitalization growth stocks and it becomes easy to see why the averages
fell 60%. If we avoid owning these irrationally over-priced stocks and the
growth fad stocks of the day, we do not have to worry about permanent loss of
capital. The stock market can go down; the fall could even be particularly
nasty. Unfortunately, this comes with the territory. Fortunately, it does not
mean that you will not be better off in the long run by sticking with your
investment strategy.
In our opinion, investment managers who believe they can predict stock
market fluctuations are engaging in self-deception. There is a lot of self-
deception in the investment business because people are often unwilling to
accept the limitations of their own abilities, because they need to justify
their work, or because their boss requires it. Take security analysts, which is
how we generally describe ourselves. If an analyst spends a week investigating a
company, visits the management and tours the plants or laboratories, he wants to
make a case for buying the company. After devoting so much time to one company,
he would be reluctant to tell his boss that it was a complete waste of his time
because it was a lousy company. He would have to explain why he looked at it in
the first place. In many large money management firms, there are numerous
analysts who are each assigned to a specific industry. Can you imagine the
widget industry analyst walking into the weekly or daily portfolio managers
meeting and saying, "All the widget stocks are overpriced, and I don't think we
should own any of them." Time to check the help wanted ads. What if one of the
more successful portfolio managers loved the widget stocks? Is it likely the
analyst would be willing to voice an opinion that was contrary to his superior's
point of view?
As securities analysts, we believe our job is part detective and part
reporter. As detectives, we look for clues that may lead us to investment
opportunities. As reporters, we gather facts by reading reports and filings, and
by talking to people who may be knowledgeable about a specific company. We then
consider this information in the context of our particular investment "schema"
and decide whether a company fits or not. The fact gathering and investigation
we do is generally limited to determining if a company has the fundamental
financial characteristics of stocks that we buy. It is not unlike buying a new
house. If you were in the market for a house, presumably you would make up a
list of your requirements; four bedrooms, three bathrooms, a family room, a
certain location, etc., etc. If a house does not meet your needs, there is no
point in looking at it. If you need four bedrooms for the kids, you would
probably keep looking rather than say: "We like this three bedroom house and
maybe we could make the kids double up." We do the same thing when looking at
stocks. Our requirements, or criteria, are what psychologists call schemas.
Schemas determine how we will interpret financial information. In essence we are
"scripted" to reject companies like Netscape, which has no book value and
minimal earnings, but has the supposed prospects to revolutionize some field of
technology. We will react positively to a Pharmacia & Upjohn which, when we
bought it, had the lowest price-to-sales ratio in the industry, and a new CEO
who spent approximately $4 million of his own savings to buy stock in the
company.
We are at a loss to understand why so few people in the investment business
appear to have any hard schemas. Decades of data is available to determine which
financial characteristics of stocks have produced superior performance, and
computers can easily do the back testing. One word of caution; the
characteristics must have some logical validity. We are sure that some program
could produce the result that companies with blue corporate logos located west
of the Mississippi beat the averages 65% of the time. This may be true, but it
has no relevance. A possible explanation of why most investors have no schemas
may be that many stocks that do not fit a logical set of criteria still do very
well. We have to accept the fact that a lot of stocks we would never own may do
very well, perhaps better than the ones we would own. Most money managers
probably try to find those great performing stocks, having convinced themselves
that they are smart enough to succeed where few have. Also, many investors
looking for good money managers try to find just those "smart" guys.
For our own money, we are content to rely on the criteria that over long
periods of time have outperformed the popular stock market averages, remembering
that the averages beat between 75% and 85% of the money managers. We have to
accept the fact that we are not capable of picking only the best performing
stocks. We have to accept periods of underperformance. We must also accept the
fact that we will own some clunkers despite how well they fit our criteria. We
like to think that research will enable us to weed out all the bad investments,
but that is just not the case. If we had the prescience to pick out the top ten
performers from among all the stocks we own, our results would be off the
charts. But we cannot. Trying to identify winning stocks without a set of
criteria is, in our estimation, as difficult as trying to determine whether and
when the market is going up or down.
It is true that earnings generally drive individual stock prices. This
explains why most Wall Street research focuses on earnings estimates. Rising
earnings are equated with rising stock prices no matter how high the price/
earnings ratio may be. Analysts are expected to make these estimates accurately.
Again, we do not believe this is consistently possible. Numerous studies,
including some by David Dreman, point to the inaccuracy of analysts' earnings
estimates. The financial press is full of stories about companies whose stocks
have plummeted because earnings came in below estimates. Usually these
companies' valuations did not provide any margin of safety for a negative
surprise. Having been members of several corporate boards through the years, we
can attest to the difficulty of predicting short-term earnings results even by
management, which presumably has access to more information than Wall Street
analysts. Many widely followed companies lead the analysts to correct earnings
projections. This makes the analyst look good, and the company is often rewarded
with a higher price/earnings ratio.
In a recent telephone conversation with a reporter for a major financial
publication, we were asked how many research people we employed. We responded
that we had the three original principals who were all analysts, and in addition
we had four other research analysts. When the reporter began to laugh, we asked
what was so funny. He said he visits large mutual fund companies who proudly
boast of having 100 or more analysts. We wondered what they could be doing? If a
large mutual fund company is managing $40 billion, the number of stocks large
enough for them to invest even one percent of their assets in is about 300. That
is one analyst for every three companies. All they can be doing is babysitting
their stocks, listening for every bit of information that comes out and
forwarding it on to the portfolio managers. Most information is either not
significant or not really relevant. In the management of time, it is important
to know what is worth knowing and what is not.
Another reporter, who seems to like us, told us that the only criticism he
had heard of Tweedy, Browne was that the principals may not be as hungry as they
used to be. Given that our investment performance of late does not appear to
have suffered and we do not think we are doing anything differently than we did
five or ten years ago, we could not understand what would give rise to that
comment. He offered one explanation. Most growth stock managers or momentum
investors seem to turn over their portfolios at a much faster rate than we do.
We admit that we do not arrive at work each day ready to sell and buy a
significant portion of our holdings. We tend to hold stocks for a long time.
That is good in our opinion. It means lower transaction costs, and for
tax-paying clients, lower taxes. If our premise for buying a stock is still
valid, small changes in its share price do not require new buy and sell
decisions. As we do not buy stocks based on next quarter's earnings estimate, we
do not have to sell if it misses its projections by a few pennies per share. We
may also be a bit older than most money managers. Our five managing directors
range in age from 40 to 53. We still think this is relatively young, and that we
have a number of years of "tread on our tires."
There could also be a perception that following our partial sale of Tweedy,
Browne to Affiliated Managers Group, our "hunger" may be diminished. There is no
reason to stop doing what we have been doing; there is, in fact, greater reason
to keep on doing what we have been doing because our personal net worth that is
invested in the stocks our clients own is now greater. We enjoy the intellectual
challenge of the investment business, and we enjoy being successful at it. We
also think we picked the right partner in AMG. Other than treating us to a
celebratory dinner, we have had almost no contact with them. They have been
helpful when we have asked how other investment advisors have dealt with some
operational problems, but otherwise the folks at AMG have done just as they said
they would: left us alone.
What we do is relatively easy and does not require the stamina of a
triathalon runner. Almost any Wall Street analyst has enough brains to do the
kind of research we do. Again, it comes back to the kind of information we are
looking for, and the use we make of that information. As we discussed with our
"hungry"-comment reporter, value money managers tend not to burnout. High
turnover, growth and momentum money managers lead much more stressful lives.
They do not have an investment schema to fall back on for comfort when stock
prices are moving against them. They also feel compelled to know every last bit
of information about the stocks they own: the latest earnings information, who
is buying, and who is selling the stock on Wall Street. Physical stamina tends
to peak at a fairly early age, as many Olympic athletes have learned when they
become has-beens in their late twenties. Fortunately, investing requires mental
stamina, and that seems to hold up much longer. This may be God's way of
compensating us for a decline in our physical abilities. Our friend, Walter
Schloss, is now eighty-one years old, and his investment record spans
forty-three years with no sign of diminishing returns. He is the Energizer man
of the investment world: "he just keeps going and going and going." We hope we
can, too. As long as our marbles are intact, age can bring the added benefit of
experience, which is both intellectual and emotional. Hopefully, we are better
able to recognize investment ideas that do not work and thus not waste our time
going down some dead-end path, and are better able to cope with the "agita"+
which usually accompanies a bear market. We told our reporter friend that the
only thing different about our attitude towards work is that we have a lower
tolerance for unpleasant clients. Fortunately, we do not think we have any such
clients now, but if a potential new client came along who we suspected might
take up an unreasonable amount of our time, we would be reluctant to take them
on. This is not complacency; it is common sense. We want to maximize the time we
can devote to research and money management.
In our opinion, far too much time is devoted to keeping track of money
managers. This is probably because money managers are selected because the
client thinks "they are smart." Proving to the client that a money manager is
"smart" is an enormously time-intensive business. "Smart" usually means the
ability to pick stocks that only go up, which requires intense research on the
part of the manager. The manager must devote endless hours following his/her
investments for fear some unforeseen event will result in the stock going down.
The client will take away from the time the manager has to devote to investment
research in order to visit with the manager to see if he/she is still hard at
work and not goofing off. These visits would seem to be self- defeating. While
the client will categorize managers as to investment "styles," they often do not
try to understand what the manager actually does. They do not try to figure out
what investment schemas the manager uses in selecting investments because they
believe smart research of individual companies leads to success. Estimating a
company's next quarter earnings per share to the penny is more important than
asking why you own that company in the first place. Analysts will attempt to
estimate how much money Coca-Cola will earn in the March quarter rather than
focusing on how many more hundreds of millions or billions of people around the
world can be persuaded to buy Coke. The fact that there are 160 million
Indonesians who do not drink alcohol is far more important to the long-term
success of owning Coke than getting a three-month earnings projection right. But
the investment world believes that if Coke makes next quarter's estimates, the
stock will continue to rise. However, if it earns, say 32 cents, when the
estimate was 34 cents, the stock might go down in the short run despite the fact
the 160 million thirsty Indonesians are still out there.
We believe understanding how a money manager thinks is far more important
than how accurate his/her earnings projections are or how many hours he/she
spends in the office. We can look at another money manager's portfolio and
almost always understand why they own what they own. Two of us sit on our alma
maters' investment boards. We do not believe it is necessary to visit the
managers these endowments employ to learn if they have hired a new analyst or
fired an analyst, or try to determine if they are still working hard. So long as
the principals are still active, we can merely look at the stocks they buy to
tell if they are still doing what they told us they would. When you understand
how a money manager looks at investments and have determined that the portfolio
holdings are consistent with that view, you are better off leaving the manager
alone to do what you are paying him/her to do.
Unfortunately, too few managers are really asked what they do, and too few
could answer the question if asked. The focus is on intense, detailed research
of individual stocks rather than some set of principles, or schemas, that guide
the investment process. What these clients and their managers are trying to do
without realizing it is pick anywhere from fifty to one-hundred-fifty stocks or
more, depending on the portfolio turnover rate, every year that will outperform
the market. This is a daunting task made impossible without a set of valid
investment principles. Warren Buffett has been quoted as saying he only needs
one good investment idea a year, and he has not done so badly. By concentrating
their effort on individual stocks and earnings guesstimates, analysts are
missing the big picture. Far more important is a focus on the characteristics of
a group of stocks, a portfolio, that has outperformed the market over long
periods of time. Once a manager has determined those characteristics, the
manager will have a schema by which to analyze individual stocks. Research
becomes much easier. If you were going to take up golf, you would not take a bag
of clubs and start swinging. You would learn the use of each club and the proper
way to swing. You would take the time to find out what successful golfers do.
Why should investing be any different?
Successful investing becomes much more quantitative than qualitative. That
is what schemas will do. They will permit the manager to take a universe of
stocks and quantitatively screen out those issues that do not fit the schema
and, thus, should not be researched. The schema will also provide a list of
stocks that should be researched because they fit some or all of the criteria.
The more criteria an individual stock meets, the easier it is to analyze. If a
company is analyzed from the perspective of a schema, it either fits or it does
not. Facts tend not to be bent to produce a desired result. If a stock does not
fit, it is difficult to make a case for buying it. If you need a house with four
bedrooms, one with three bedrooms will not do no matter what. However, money
managers are expected to only let winners into their portfolios. Even the best
schemas will let a real dog in from time to time. As we have said, we accept
this. Not every stock we buy goes up the next day. Some occasionally never go
up, while others take longer than we would like. How many times has an advisor
met with a client and gone through the following dialogue: "Mr. Jones, your
portfolio was up 40% last year as compared to a stock market gain of 30%."
"Yeah, but why did you own Kmart? It went down last year." Ever wonder why so
many portfolios have such high turnover rates?
Quantitative investment strategies are for the most part shunned by the
investment community. After all, why are we paying these money managers? We want
our managers to be smart, to be able to predict if the market will go up or
down, and which companies will do well. Anybody can feed a set of criteria into
a database of stocks and let the computer pick the holdings. No creative
brilliance there. We are at a loss to understand this aversion to quantitative
investment approaches since the most widely employed one is the index fund,
which we have said beats 75% to 85% of the money managers. Moreover, the
benchmarks used to measure manager performance are nearly all quantitative. Part
of the problem relates to the fact that a quantitative approach loses some of
the time. The market has outperformed us approximately 35% of the years we have
been managing money. These periods of underperformance may be more than either
the client or the manager can tolerate. The client may begin to question the
validity of the strategy, and the manager may react by tweaking the criteria.
Consistency is key to successful investing.
It takes time to get comfortable with an investment approach. It is only
human nature to worry about losing money. We have been doing what we do for so
long and have been rewarded so handsomely, that we do not think we will ever
change. This may account for what some may perceive as a lack of "hunger." We do
not worry as much about how we invest. If the market drops 200 points on a given
day, we do not equate this with a mile-wide asteroid heading for Manhattan.
Investing is now easier and more fun than in years past. It is easier not
because there are so many cheap stocks today, but because technology has made it
easier to analyze companies. Instead of scurrying around to get our hands on
annual reports, 10Ks, and other research information, we can point and click and
even surf the Internet for information. And, it is more fun because we can now
look for investment ideas globally. We also have the camaraderie of five
managing directors rather than three general partners. We think that the way we
work together, the spirit of cooperation we share, and the absence of any
oversized egos is special, if not unique, and makes coming to work that much
more enjoyable. The two individuals who became managing directors last October
are Tom Shrager and Bob Wyckoff. Their promotion is not an indication that the
three original partners, Chris and Will Browne and John Spears are slowing down,
but a recognition of Tom's and Bob's contribution to our efforts. Tom joined us
in 1989 after sending us an unsolicited resume. We were not looking for anyone,
but thought his experience in corporate finance might be interesting.
Interesting is an understatement. While talking with Tom, we noted an accent we
could not place. He told us he was a Romanian who was kicked out of the country
for the seditious activity of organizing a philosophy club at the University of
Bucharest. As Tom said, "You have to understand. There wasn't much to do in
Romania under Ceausescu." After a stay in a refugee camp in Italy, Tom arrived
in New York with a political asylum visa. He took a job as a night watchman
while studying English during the day. Six months later, he talked his way into
Columbia University where he earned both a bachelors and a masters degree. He
recognized our growing interest in international investing and zoomed in on
foreign stocks. Certainly his knowledge of five languages works to our
advantage. Tom currently works for us in London, where he is in closer proximity
to many of the markets in which we invest.
Bob Wyckoff is a native of Florida who joined us in 1991 after working at
several investment management firms. Again, Bob came to us unsolicited because
he also was afflicted with the "value bug." He is a lawyer by training, which we
have never held against him, and our only Phi Beta Kappa. While his past may not
be as colorful as Tom's, his contribution is no less. He principally devotes his
time to figuring out ways we can better service our investors and clients.
Some of you may have read the April 20, 1998 cover article in FORBES
magazine entitled, "I've got mine, Jack", which makes mention of Tweedy, Browne
along with several other money managers. Rather than belabor the absurdity of
the article, we have reprinted our response to the editor of FORBES Magazine
below.
In closing, let us assure you that nothing has changed, we are thankfully
all quite well, even if a bit grayer at the temples or thinner on top (primarily
a John Spears problem), and hope you are the same--well, that is . . . .
Sincerely,
TWEEDY, BROWNE COMPANY LLC
Christopher H. Browne
William H. Browne
John D. Spears
Thomas H. Shrager
Robert Q. Wyckoff, Jr.
Managing Directors
- ----------
*Past performance is not a guarantee of future results, and total return and
principa1 value of investments will fluctuate with market changes. Shares, when
redeemed, may be worth more or less than their original cost.
- ----------
+We cannot find the correct spelling of this word in our collection of
dictionaries and would appreciate hearing from any of our shareholders who may
be able to shed some light on this for us.
<PAGE>
TWEEDY, BROWNE COMPANY LLC
- -------------------------------------------------------------------------------
April 9, 1998
Mr. James Michaels, Editor
Forbes Magazine
60 Fifth Avenue
New York, NY 10011
Dear Sir:
The cover article in Forbes' April 20, 1998 issue, "I've got mine, Jack,"
written by Thomas Easton contains factual errors and has created a misleading
impression about the partners of Tweedy, Browne that is causing us to spend time
we would otherwise spend managing our clients' assets to assure numerous clients
that "it is business as usual" at Tweedy.
Fact: We continue to own a significant equity interest in our firm and have
no plans or intentions of retiring. We have entered into 10-year employment
contracts that provide significant financial incentives for us to remain active.
We have committed to invest at least $100 million more in the same investments
we have made for our clients, which is in addition to the approximately $275
million we, our families and retired partners, and current employees have under
management at Tweedy, Browne.
Fact: Affiliated Managers Group did not pay 65 times earnings for their
interest in Tweedy, Browne. The price was 10 times current pre-tax earnings,
which is consistent with numerous other transactions in our industry. We took
cash rather than AMG stock because, along with a desire to create liquidity for
our estates, we also wanted to diversify our holdings. In addition, we believe
that by increasing the money we have invested alongside our clients, we have
increased our personal commitment to the investments we make on their behalf.
Fact: We know of no reason why Forbes chose to delve into our personal
lives, nor what purpose it served. Chris Browne was not "recently divorced." He
was divorced 23 years ago. Furthermore he is not and never said he was leaving
his money to his two dogs. His estate will be divided among relatives, friends,
and charitable organizations involved in education, human rights, medical
research and the care of the terminally ill.
Fact: Estate planning was the reason we chose to sell an interest in Tweedy,
Browne, not the "excuse." Before the transaction, in the event that Chris Browne
were to die, or Will Browne and his wife were to die, all of their accumulated
liquid net worths and their personal residences might potentially have to be
sold to pay inheritance taxes leaving the estates with only an illiquid interest
in a privately held company. In the case of Chris Browne, only his dogs would be
directly affected. In Will Browne's case, his four school-age children would be
affected.
While references to yachts may be "cute," they bear no relation to reality.
Chris Browne does not own a yacht; he does not even own a dinghy. If you invite
him on board Forbes' yacht, the Highlander, it will be his first time on a
yacht. In fact, none of us has a yacht, a horse, or a plane. As Sherlock Holmes
said, "I make a point of never having prejudices and of following docilely
wherever facts may lead." He also said, "Insensibly, one begins to twist facts
to suit theories instead of theories to suit facts." Sound advice in our
opinion.
Christopher H. Browne
William H. Browne
John D. Spears
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- ------------------------------------------------------------------------------
Portfolio Highlights
- ------------------------------------------------------------------------------
March 31, 1998
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 3/31/98
Tweedy, Browne MSCI EAFE Index MSCI EAFE Index
Global Value Fund* (in U.S. Dollars) (Hedged)
- --------------------------------------------------------------------------
Jun 1993 9,980 9,840 9,960
Sep 1993 10,310 10,490 10,560
Dec 1993 11,540 10,590 11,030
Mar 1993 12,260 10,960 10,840
Jun 1994 12,200 11,520 10,950
Sep 1994 12,300 11,530 10,860
Dec 1994 12,040 11,410 10,850
Mar 1995 11,670 11,620 10,030
Jun 1995 12,300 11,710 10,130
Sep 1995 12,870 12,200 11,290
Dec 1995 13,330 12,690 12,170
Mar 1996 14,700 13,060 12,760
Jun 1996 15,340 13,260 13,250
Sep 1996 15,170 13,250 13,340
Dec 1996 16,020 13,460 13,700
Mar 1997 17,150 13,250 14,364
Jun 1997 18,880 14,970 16,140
Sep 1997 19,880 14,860 16,600
Mar 1998 22,823 15,711 18,481
- ------------------------------------------------------------------------------
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*
- ------------------------------------------------------------------------------------------------------------
YEAR INCEPTION
WITHOUT ENDED 6/15/93-
THE FUND ACTUAL WAIVERS** 3/31/98 3/31/98
- ------------------- ------ -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Inception (6/15/93) The Fund 33.09% 128.23%
through 3/31/98 18.79% 18.76% MSCI EAFE in(U.S. Dollars) 18.61% 57.11%
Year Ended 3/31/98 33.09% 33.08% MSCI EAFE (Hedged) 28.67% 84.81%
- ------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
Perspective On Assessing Investment Results
- -------------------------------------------------------------------------------
March 31, 1998
In accordance with rules and guidelines set out by the Securities and
Exchange Commission, we have provided a comparison of the historical investment
results of Tweedy, Browne Global Value Fund to the historical investment results
of the most appropriate broad-based securities index, the Morgan Stanley Capital
International (MSCI) Europe, Australasia and the Far East Index (EAFE) in U.S.
dollars and hedged into U.S. dollars. However, the historical results of the
MSCI Indices in large measure represents the investment results of stocks that
we do not own. Any portfolio which does not own exactly the same stocks in
exactly the same proportions as the index to which the particular portfolio is
being compared is not likely to have the same results as the index. The
investment behavior of a diversified portfolio of undervalued stocks tends to be
correlated to the investment behavior of a broad index; i.e., when the index is
up, probably more than one-half of the stocks in the entire universe of public
companies in all the countries that are included in the same index will be up,
albeit, in greater or lesser percentages than the index. Similarly, when the
index declines, probably most of the stocks in the entire universe of public
companies in all countries that are included in the index will be down in
greater or lesser percentages than the index. But it is almost a mathematical
truth that "different stocks equal different results."
Favorable or unfavorable historical investment results in comparison to an
index are not necessarily predictive of future comparative investment results.
In Are Short-Term Performance and Value Investing Mutually Exclusive?, Eugene
Shahan analyzed the investment performance of seven money managers, about whom
Warren Buffett wrote in his article, The Super Investors of Graham and
Doddsville. Over long periods of time, the seven managers significantly
outperformed the market as measured by the Dow Jones Industrial Average (the
"DJIA") or the S&P 500 by between 7.7% to 16.5% annually. (The goal of most
institutional money managers is to outperform the market by 2% to 3%.) However,
for periods ranging from 13 years to 28 years, this group of managers
underperformed the market between 7.7% to 42% of the years. Six of the seven
investment managers underperformed the market between 28% to 42% of the years.
In today's environment, they would have lost many of their clients during their
periods of underperformance. Longer term, it would have been the wrong decision
to fire any of these money managers. In examining the seven long-term investment
records, unfavorable investment results as compared to either index did not
predict the future favorable comparative investment results which occurred, and
favorable investment results in comparison to the DJIA or the S&P 500 were not
always followed by future favorable comparative results. Stretches of
consecutive annual underperformance ranged from one to six years. Mr. Shahan
concluded "Unfortunately, there is no way to distinguish between a poor
three-year stretch for a manager who will do well over 15 years, from a poor
three-year stretch for a manager who will continue to do poorly. Nor is there
any reason to believe that a manager who does well from the outset cannot
continue to do well, and consistently."
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Portfolio of Investments
- -------------------------------------------------------------------------------
March 31, 1998 [graphic omitted]
MARKET
VALUE
SHARES (NOTE 1)
------ ---------
COMMON STOCKS--85.6%
AUSTRALIA--0.0%++
96,353 Carillon Development Ltd. .................... $ 108,378
--------------
BELGIUM--0.2%
3,940 Ibel ......................................... 252,296
2,726 Spadel SA .................................... 3,205,589
3,252 Uco Textiles SA .............................. 425,850
--------------
3,883,735
--------------
CANADA--2.0%
196,891 BRL Enterprises Inc.+ ........................ 693,987
60,000 Canadian Western Bank ........................ 1,015,121
166,500 Corby Distilleries Ltd., Class A ............. 7,453,209
104,600 Corby Distilleries Ltd., Class B ............. 4,239,893
1,728,361 Kaufel Group NV, Class B+ .................... 5,360,959
260,700 Melcor Developments Ltd. ..................... 3,367,754
1,391,000 National Bank of Canada, Toronto ............. 26,083,395
258,600 Shirmax Fashions+ ............................ 738,310
785,883 Westfield Minerals Ltd.+ ..................... 831,007
--------------
49,783,635
--------------
DENMARK--0.1%
11,390 Nordvestbank ................................. 1,299,500
--------------
FINLAND--3.2%
6,000 Atria OY ..................................... 55,304
542,027 Huhtamaki Group, Class I ..................... 29,445,134
6,200 Huhtamaki Group, Class K ..................... 325,767
1,036,900 Kesko Ord .................................... 16,621,575
257,555 Kone Corporation, Class B .................... 34,863,931
--------------
81,311,711
--------------
FRANCE--5.5%
32,342 Bongrain SA .................................. 16,482,658
24,763 Centenaire-Blanzy SA ......................... 2,280,409
5,229 Christian Dior, SA ........................... 694,895
79,419 Compagnie Financiere de Paribas .............. 8,030,919
45,108 Compagnie Fives-Lille ........................ 3,128,933
57,700 Compagnie Lebon SA ........................... 2,754,488
188,692 Dollfus Mieg & Cie+ .......................... 4,622,581
1,150 Fiat France SA ............................... 24,111
14,896 Fin Marc de Lacharriere SA ................... 1,756,145
60,931 Fonciere Financiere Et de Participation ...... 4,372,921
33,250 Generali France+ ............................. 8,049,069
42,900 Groupe Danone ................................ 10,350,520
52,218 Klepierre .................................... 8,379,471
5,229 LVMH Moet Hennessey .......................... 1,108,121
201,188 Lyonnaise des Eaux-Dumez+ .................... 29,040,119
21,145 Mecelec SA ................................... 296,688
3,115 Nordon Et Cie+ ............................... 259,227
36,372 NSC Groupe ................................... 4,810,102
9,073 Paris Orleans ................................ 431,664
97,700 Peugeot SA ................................... 16,828,256
18,699 Precia+ ...................................... 328,714
9,340 Signaux Girod ................................ 171,571
49,723 Siparex ...................................... 1,122,687
63,700 Societe Generale ............................. 12,738,973
--------------
138,063,242
--------------
GERMANY--0.9%
15,018 Axel Springer Verlag, Class A ................ 12,902,132
61,660 Kaufring AG .................................. 3,298,306
41,360 Linder Holding ............................... 759,822
33,968 Sinn AG+ ..................................... 5,873,165
2,973 Tiag Tabbert-Industrie AG+ ................... 150,999
--------------
22,984,424
--------------
HONG KONG--2.8%
8,860,495 Asean Resources Holdings Ltd. ................ 1,589,439
24,921,000 CDL Hotels International Ltd. ................ 9,246,438
504,000 Grand Hotel Holdings Ltd. .................... 104,069
2,666,000 Harbour Ring International Holdings .......... 101,497
700,000 Jardine International Motor Holdings Ltd. .... 440,396
7,687,000 Jardine Strategic Holdings Ltd. .............. 21,062,380
18,004,828 Semi-Tech (Global) Ltd. ...................... 1,928,583
10,601,000 Sing Tao Holdings ............................ 1,983,746
1,758,000 South China Morning Post (Holdings) Ltd. ..... 1,179,759
1,687,500 Swire Pacific Ltd., Class A .................. 8,928,917
15,986,000 Swire Pacific Ltd., Class B .................. 15,369,765
3,026,500 Wing Hang Bank Ltd. .......................... 8,983,378
--------------
70,918,367
--------------
IRELAND--0.4%
2,698,121 Crean (James) PLC ............................ 5,605,583
1,105,000 Unidare PLC .................................. 4,051,296
--------------
9,656,879
--------------
ITALY--4.8%
1,782,500 Arnoldo Mondadori Editore SPA ................ 20,519,392
150,000 Banca Popolare di Novara+ .................... 1,578,731
1,682,500 Banca Toscana ................................ 7,738,070
741,850 Banco di Sardegna Risp ....................... 15,331,092
472,500 Bassetti SPA ................................. 4,791,695
1,530,230 Cartiere Burgo Ord ........................... 13,588,996
447,000 Cementerie di Augusta ........................ 1,247,214
323,000 Cementerie di Barletta Ord ................... 2,379,674
1,156,450 Cristalleria Artistica ....................... 5,895,565
209,100 Ericsson Italia .............................. 14,385,117
265,000 IMI SPA ...................................... 4,299,849
494,862 Industrie Zignago ............................ 5,913,659
1,234,000 Maffei SPA ................................... 2,827,529
237,000 Marangoni SPA ................................ 948,390
8,072,735 Montefibre SPA ............................... 9,049,606
1,864,000 Tecnost SPA .................................. 6,028,560
845,000 Vianini Industria SPA ........................ 921,776
493,000 Zucchi ....................................... 5,053,638
--------------
122,498,553
--------------
JAPAN--14.1%
219,000 Agro-Kanesho Company Ltd. .................... 1,511,194
735,000 Aichi Electric Manufacturing ................. 1,929,496
6,000 Aiful Corporation ............................ 378,024
627,000 Amada Sonoike Company Ltd. ................... 1,693,006
78,000 Amatsuji Steel Ball Manufacturing Company .... 625,989
228,000 Belluna Company Ltd. ......................... 1,607,500
484,000 Bunka Shutter Company Ltd. ................... 1,441,200
46,000 CCI Corporation .............................. 316,040
36,000 Charle Company ............................... 299,719
555,500 Chiyoda Company .............................. 3,870,688
773,740 Chofu Seisakusho Company ..................... 10,446,143
156,800 Credia Company Ltd. .......................... 2,175,736
347,000 Daido Metal Company .......................... 1,067,092
763,000 Daiichi Cement Company Ltd. .................. 1,144,572
1,202,000 Danto Corporation ............................ 8,195,147
516,000 Denkyosha .................................... 2,411,161
189,000 Denyo Company Ltd. ........................... 963,960
1,765,000 Dowa Fire & Marine Insurance Company ......... 5,679,242
453,500 Exedy Corporation ............................ 2,727,973
500,000 Fidelity Japanese Values Trust ............... 230,175
2,100 Fidelity Japan OTC & Regional Market Fund Ltd. 9,660
906,000 Fuji Coca-Cola Bottling Company .............. 8,290,418
618,000 Fuji Photo Film Ltd. ......................... 22,991,037
332,000 Fujicco Company Ltd. ......................... 3,735,233
2,380,000 Fujisawa Pharmaceutical Company .............. 21,242,828
1,264,000 Fujitec Company Ltd. ......................... 8,276,557
569,000 Fukuda Denshi ................................ 6,871,104
1,293,000 Gakken Company Ltd. .......................... 2,754,262
2,290,000 Hitachi Koki ................................. 9,790,362
569,000 Hitachi Medical Corporation .................. 6,060,229
4,000 Idec Izumi Corporation ....................... 23,251
24,000 Inaba Denkisangyo Company Ltd. ............... 243,015
395,000 Kansai Paint Company Ltd. .................... 1,007,313
224,000 Katsuragawa Electric Company ................. 898,856
218,000 Kawagishi Bridge Works ....................... 604,988
3,000 Kinki Coca-Cola Bottling Company ............. 33,977
155,100 Kita Kyushu Coca-Cola Bottling ............... 3,047,905
680,000 Koa Fire & Marine Insurance Company .......... 2,896,981
1,512,000 Koito Manufacturing .......................... 6,237,390
313,000 Kokura Enterprises Company ................... 2,063,581
215,000 Koyosha Inc. ................................. 1,112,694
665,000 Mandom Corporation ........................... 5,237,202
1,941,000 Matsushita Electric Industrial Company ....... 31,154,997
111,000 Matsumoto Yushi-Seiyaku Company .............. 2,106,357
250,000 Meito Sangyo Company ......................... 2,212,638
2,911,000 Mitsubishi Electric Corporation .............. 7,641,853
204,000 Mitsubishi Pencil Company Ltd. ............... 1,866,717
424,000 Morito ....................................... 2,289,743
385,000 Nankai Plywood Company Ltd. .................. 1,501,594
1,023,000 Nippon Cable System .......................... 6,905,682
934,000 Nippon Konpo Unyu Soko ....................... 5,709,432
56,000 Nippon Typewriter Company Ltd. ............... 175,151
1,016,400 Nissan Fire & Marine Insurance Company ....... 3,887,973
674,000 Nisshinbo Industries ......................... 3,392,117
6,000 Nissho Electronics Corporation ............... 39,737
138,200 Nissin Company Ltd. .......................... 2,850,553
409,000 Nittetsu Mining .............................. 1,656,554
524,000 Nitto FC Co. ................................. 3,183,499
516,000 Oak .......................................... 1,141,721
323,000 Osaka Securities Finance ..................... 649,271
179,400 Osaka Steel Company Ltd. ..................... 928,453
195,503 Prospect Japan Fund Ltd. ..................... 842,618
845,000 Riken Vitamin ................................ 5,862,554
452,000 Sangetsu Company Ltd. ........................ 5,932,871
160,000 Sanko Sangyo ................................. 1,218,076
504,000 Sankyo Company Ltd. .......................... 13,986,874
339,660 Sanyo Shinpan Finance Company Ltd. ........... 13,502,329
23,000 Shaddy Company Ltd. .......................... 134,558
674,200 Shikoku Coca-Cola Bottling ................... 6,776,133
1,470,000 Shin Nikkei Company Ltd.+ .................... 1,554,622
34,300 Shinki Company Ltd. .......................... 504,242
452,000 SK Kaken Co., Ltd. ........................... 5,153,122
592,000 Sonton Food Industry ......................... 5,683,555
317,000 Sotoh Company Ltd. ........................... 2,163,660
507,000 Suzuki Motor Corporation ..................... 4,753,422
42,000 Tachi-S ...................................... 231,224
183,000 Taisei Fire & Marine Insurance Company ....... 440,600
546,000 Takeda Chemical Industries ................... 13,882,918
84,800 Takefuji Corporation ......................... 4,007,050
377,000 Takigami Steel Construction .................. 1,088,655
229,000 Teikoku Hormone Manufacturing Company ........ 1,288,206
256,000 TENMA Corporation ............................ 2,880,180
139,000 Toa Medical Electronics Company .............. 1,178,099
246,000 Tomita Electric Company Ltd. ................. 1,328,483
384,000 Torii Company Ltd. ........................... 1,756,910
799,000 Torishima Pump Manufacturing ................. 4,794,300
150,000 Toso Company Ltd. ............................ 731,296
11,000 Totech Corporation ........................... 41,170
675,000 Toyo Technical Company Ltd. .................. 3,341,459
585,500 Tsubaki Nakashima Company Ltd. ............... 2,674,438
325,600 Tsuchiya Home Company ........................ 1,299,225
695,000 U-Shin ....................................... 2,606,413
136,000 Yomeishu Seizo Company Ltd. .................. 877,255
270,000 Zojirushi .................................... 2,025,127
--------------
355,978,586
--------------
MALAYSIA--0.3%
610,000 Sapura Telecommunications Berhad ............. 262,384
4,656,000 Star Publications (Malaysia) ................. 7,972,603
65,000 Tractor Malaysia Holdings Berhad+ ............ 30,274
--------------
8,265,261
--------------
NETHERLANDS--5.0%
193,400 Akzo NV Ord .................................. 39,234,940
535,158 European Vinyls Corporation .................. 11,023,350
7,500 Heineken Holdings NV, Class A ................ 1,490,982
740,124 Holdingmaatschappij De Telegraaf NV+ ......... 15,670,753
30,000 Koninklijke Bols Wessanen NV+ ................ 475,677
828,400 Unilever NV CVA .............................. 55,794,132
131,250 Wegener NV+ .................................. 2,540,059
--------------
126,229,893
--------------
NEW ZEALAND--1.0%
6,356,600 Air New Zealand Ltd. ......................... 8,776,081
3,388,000 Independent Newspaper ........................ 15,155,287
164,600 Radio Pacific Ltd. ........................... 331,786
--------------
24,263,154
--------------
NORWAY--0.2%
232,300 Schibsted .................................... 4,107,143
--------------
SINGAPORE--1.3%
5,000 CarnaudMetalbox Asia Ltd.+ ................... 5,262
2,716,500 Cycle & Carriage Ltd.+ ....................... 12,275,116
2,929,000 Fraser & Neave Ltd. .......................... 12,419,468
19,000 Isetan (Singapore) Ltd. ...................... 23,522
3,033,000 Robinson and Company Ord ..................... 9,161,894
--------------
33,885,262
--------------
SPAIN--1.2%
79,197 Argentaria ................................... 6,552,079
133,000 Corporacion Financiera Reunida+ .............. 1,113,024
151,997 Fabrica Auto Renault de Espana ............... 5,320,161
199,014 Grupo Anaya SA ............................... 6,585,883
31,598 Indo Internacional SA ........................ 1,807,783
51,846 Omsa ......................................... 529,563
80,898 Prim SA+ ..................................... 556,018
250,996 Unipapel SA .................................. 8,577,647
--------------
31,042,158
--------------
SWEDEN--4.6%
148,685 BRIO AB, Class B ............................. 1,096,415
80,600 Invik & Company AB, Class A .................. 4,633,921
19,179 Kinnevik Investment AB, Class B .............. 447,055
456,383 Marieberg Tidnings AB, Class A ............... 13,860,901
19,179 Modern Times Group AB, Class A+ .............. 170,192
55,200 Nolato AB, Class B ........................... 1,462,617
2,182,500 Pharmacia & Upjohn Inc. ...................... 94,108,549
69,200 VLT AB, Class B .............................. 1,600,050
--------------
117,379,700
--------------
SWITZERLAND--13.6%
23,990 Attisholz Holding AG+ ........................ 11,387,111
33 Bank of International Settlements America .... 205,101
36,658 Banque Cantonale Vaudoise+ ................... 15,741,815
30,260 Compagnie Financiere Richemont AG ............ 40,669,377
2,415 Daetwyler Holding, Bearer .................... 4,591,556
46,540 Danzas Holding AG, Registered ................ 12,052,252
80,068 Edipresse SA, Bearer ......................... 28,188,891
8,225 Edipresse SA, Registered ..................... 576,985
6,115 Forbo Holding AG ............................. 3,371,609
2,450 Fotolabo SA .................................. 722,809
2,200 Golay Buchel Holding, Bearer ................. 2,091,392
12,150 Helvetia Patria Holding ...................... 14,178,850
23,575 Liechtenstein Global Trust ................... 21,298,335
29,327 Loeb Holding PC .............................. 4,705,817
57,089 Nestle SA, Registered ........................ 109,027,901
6,698 Novartis, AG, Bearer ......................... 11,900,334
10,329 Novartis, AG, Registered ..................... 18,270,269
1,180 Sarna Kunsstoff Holding AG, Registered ....... 1,790,926
6,783 Sig Schweiz Industrie, Registered ............ 10,583,846
9,035 Swissair AG, Registered+ ..................... 12,610,972
200 UMS Schweizzerische Metalwerke ............... 17,439
3,355 Vetropack Holding AG PC ...................... 624,677
17,695 Zehnder Holding, Bearer ...................... 9,106,782
11,224 Zschokke Holding AG, Registered+ ............. 2,759,457
7,340 Zuercher Ziegeleien .......................... 6,255,819
--------------
342,730,322
--------------
THAILAND--0.0%++
132,300 S & J Enterprises ............................ 55,475
--------------
UNITED KINGDOM--10.3%
19,855,350 Aggregate Industries PLC ..................... 20,856,739
515,000 Arjo Wiggins Appleton PLC .................... 1,702,666
2,117,400 Bernard Matthews PLC ......................... 3,243,240
455,000 British Mohair Holdings PLC .................. 658,844
5,190,000 British Steel Ord ............................ 12,337,036
8,514,000 BTR PLC ...................................... 27,934,754
3,529,666 Carclo Engineering Group PLC ................. 10,310,606
2,103,400 Concentric PLC ............................... 4,119,674
1,470,000 Courtaulos Textiles Ord ...................... 8,674,243
766,369 Diageo PLC ................................... 9,018,792
4,222,839 Dowding & Mills PLC .......................... 4,948,319
1,408,668 Dyson (J&J) PLC, Class A, Non-voting ......... 2,747,196
50,860 EIS Group PLC ................................ 241,371
1,741,019 Elementis PLC ................................ 4,036,532
803,000 Folkes Group PLC ............................. 873,744
427,800 Glaxo Wellcome PLC Units, ADR ................ 23,154,675
1,668,000 Glynwed International PLC .................... 7,902,011
850,479 Hardys & Hansons PLC ......................... 3,367,052
515,000 Intercare Group PLC .......................... 706,930
350,000 Johnston Group PLC ........................... 1,625,871
4,545,154 McAlpine (Alfred) PLC ........................ 13,010,676
1,553,545 Molins PLC ................................... 7,190,749
13,012 Nycomed, ASA, ADR, Class B ................... 468,432
258,011 Nycomed, Class A ............................. 9,648,872
543,641 Nycomed, Class B ............................. 19,566,169
584,000 Partridge Fine Art Ord ....................... 777,204
12,093,000 Pilkington PLC ............................... 24,697,274
3,493,490 Sherwood Group PLC ........................... 2,397,720
369,200 SmithKline Beecham, PLC Units, ADR ........... 23,098,075
779,500 Swan Hill Group PLC .......................... 1,109,150
175,000 Thistle Hotels PLC ........................... 517,056
600,000 Union PLC+ ................................... 688,014
1,495,000 Watmoughs Holdings PLC ....................... 8,346,265
--------------
259,975,951
--------------
UNITED STATES--14.1%
221,000 American Express Company ..................... 20,290,563
75,700 American National Insurance Company .......... 7,442,256
257,400 Chase Manhattan Corporation .................. 34,716,825
81,500 Coca-Cola Bottling Company ................... 4,709,172
232,200 Comerica, Inc. ............................... 24,569,663
313,000 Darden Restaurants Inc. ...................... 4,871,063
230,400 Federal Home Loan Mortgage Corporation ....... 10,929,600
240,000 Fingerhut Companies, Inc. .................... 6,225,000
205,616 First Chicago Corporation .................... 18,119,910
35,000 GATX Corporation ............................. 2,730,000
31,590 Great Atlantic & Pacific Tea Company ......... 955,598
200,000 Harland (John H.) Company .................... 3,112,500
129,462 Hasbro Inc. .................................. 4,571,627
65,700 Household International Inc. ................. 9,050,175
125,000 Kmart Stores+ ................................ 2,085,938
505,400 Lehman Brothers Holdings Inc. ................ 37,841,825
383,800 McDonald's Corporation ....................... 23,028,000
73,125 Mercantile Bancorporation, Inc. .............. 4,008,164
150,000 NAC Re Corporation ........................... 7,865,625
319,600 Philip Morris Companies Inc. ................. 13,323,325
460,000 PNC Bank Corporation ......................... 27,571,250
298,000 Popular, Inc. ................................ 17,488,875
169,000 Ryland Group Inc. ............................ 4,668,624
118,400 Standard Motor Products, Inc. ................ 2,271,800
185,000 Sun Healthcare Group Inc.+ ................... 3,445,625
160,000 Syms Corporation+ ............................ 2,260,000
294,600 Transatlantic Holdings Inc. .................. 22,279,125
20,000 Tremont Corporation+ ......................... 1,162,500
551,000 UST Inc. ..................................... 17,769,750
52,500 Wells Fargo & Company ........................ 17,390,625
--------------
356,755,003
--------------
TOTAL COMMON STOCKS
(COST $1,657,704,061) ........................ 2,161,176,332
--------------
PREFERRED STOCK--0.6% (COST $14,666,725)
113,662 Villeroy & Boch AG ........................... 16,397,544
--------------
COMMON STOCK WARRANTS--0.0% (COST $748)++
206,795 Semi-Tech (Global) Ltd., Expires 7/31/98+ .... 267
--------------
FACE
VALUE
-----
CONVERTIBLE CORPORATE BONDS--0.0%
(COST $104,110)++
JPY 9,000,000 Shikoku Coca-Cola Bottling, 2.400%
due 3/29/02 .................................. 72,837
--------------
COMMERCIAL PAPER--5.2%
$ 20,000,000 Ford Motor Company, 6.000% due 4/1/98 ........ 20,000,000
112,066,000 General Electric Capital Corporation,
6.120% due 4/1/98 ............................ 112,066,000
--------------
TOTAL COMMERCIAL PAPER
(COST $132,066,000) .......................... 132,066,000
--------------
U.S. TREASURY BILL--0.5% (COST $12,576,249)
3,000,000 5.576%** due 7/23/98 ......................... 2,950,916
10,000,000 5.111%** due 1/7/99 .......................... 9,625,333
--------------
12,576,249
--------------
MARKET
FACE VALUE
VALUE (NOTE 1)
----- --------
REPURCHASE AGREEMENT--4.7%
(COST $120,000,000)
$120,000,000 Agreement with UBS Securities, Inc., 5.930%
dated 3/31/98, to be repurchased at
$120,019,767 on 4/1/98, collateralized by
$96,095,000 U.S. Treasury Bonds, 10.000% due
5/15/10 (market value $122,160,769) .......... $ 120,000,000
--------------
TOTAL INVESTMENTS (COST $1,937,117,893*) ................ 96.6% 2,442,289,229
OTHER ASSETS AND LIABILITIES (NET) ...................... 3.4 85,651,513
----- --------------
NET ASSETS .............................................. 100.0% $2,527,940,742
===== ==============
- ------------
* Aggregate cost for Federal tax Abbreviations:
purposes was $1,939,533,007. ADR--American Depository Receipt
** Rate represents annualized yield JPY--Japanese Yen
at date of purchase. Ord--Ordinary Share
+ Non-income producing security.
++ Amount represents less than 0.1%
of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- ----------------------------------------------------------------------------
Portfolio of Investments
- ----------------------------------------------------------------------------
March 31, 1998
PERCENTAGE OF MARKET VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 1)
- ---------------------- ------------- -------------
COMMON STOCKS:
Food and Beverages ...................... 10.4% $ 262,763,666
Pharmaceuticals ......................... 9.9 250,616,201
Banking ................................. 9.8 246,586,145
Financial Services ...................... 6.9 173,552,966
Printing and Publishing ................. 5.9 149,005,983
Manufacturing ........................... 4.2 106,319,730
Chemicals ............................... 3.0 75,298,600
Retail .................................. 2.8 70,651,377
Machinery ............................... 2.8 70,568,492
Insurance ............................... 2.6 64,854,096
Transportation .......................... 2.5 63,447,419
Consumer Non-Durables ................... 2.4 61,031,334
Autos ................................... 2.3 58,458,459
Tobacco ................................. 2.3 58,439,127
Consumer Durables ....................... 2.2 56,187,902
Engineering and Construction ............ 1.9 46,988,631
Holdings ................................ 1.4 36,512,083
Forest Products ......................... 1.4 35,256,420
Electronics ............................. 1.4 34,591,959
Textiles ................................ 1.3 32,918,658
Glass Products .......................... 1.2 31,217,516
Building Materials ...................... 1.1 29,058,882
Restaurants ............................. 1.1 27,899,063
Mining and Metal Fabrication ............ 0.9 23,453,448
Leisure ................................. 0.6 15,120,046
Telecommunications ...................... 0.6 14,647,501
Real Estate ............................. 0.5 13,733,993
Construction Materials .................. 0.5 11,418,354
Wholesale ............................... 0.4 10,768,333
Health Care ............................. 0.3 7,868,012
Other ................................... 1.0 21,941,936
----- --------------
TOTAL COMMON STOCKS ..................... 85.6 2,161,176,332
----- --------------
PREFERRED STOCK ......................... 0.6 16,397,544
COMMON STOCK WARRANTS ................... 0.0++ 267
CONVERTIBLE CORPORATE BONDS ............. 0.0++ 72,837
COMMERCIAL PAPER ........................ 5.2 132,066,000
U.S. TREASURY BILL ...................... 0.5 12,576,249
REPURCHASE AGREEMENT .................... 4.7 120,000,000
OTHER ASSETS AND LIABILITIES (NET) ...... 3.4 85,651,513
----- --------------
NET ASSETS .............................. 100.0% $2,527,940,742
===== ==============
- ----------
++ 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, 1998
CONTRACT MARKET
VALUE VALUE
CONTRACTS DATE (NOTE 1)
--------- ------- ---------
FORWARD EXCHANGE CONTRACTS TO BUY
1,761,890 Canadian Dollar ............... 6/15/98 $ 1,244,279
1,320,315 Great Britain Pound Sterling .. 4/1/98 2,210,206
2,071,112 Great Britain Pound Sterling .. 4/2/98 3,467,050
314,848 Great Britain Pound Sterling .. 4/6/98 527,076
110,939 Great Britain Pound Sterling .. 4/7/98 185,722
10,201,133 Hong Kong Dollar .............. 4/1/98 1,316,496
3,966,766 Hong Kong Dollar .............. 4/2/98 511,927
1,500,000 Irish Pound ................... 4/30/98 2,037,421
205,219,042 Japanese Yen .................. 4/1/98 1,539,239
45,441,635 Japanese Yen .................. 4/2/98 340,841
128,575,851 Japanese Yen .................. 4/3/98 964,439
49,626,000 Japanese Yen .................. 4/16/98 373,082
2,816,550 Netherlands Guilder ........... 4/30/98 1,351,859
3,637,951 New Zealand Dollar ............ 5/29/98 2,052,244
70,495,000 Norwegian Krone ............... 7/15/98 9,277,433
18,201,250 Norwegian Krone ............... 9/15/98 2,401,549
11,203,500 Norwegian Krone ............... 9/30/98 1,479,112
114,960,000 Spanish Peseta ................ 4/30/98 732,229
567,440,000 Spanish Peseta ................ 5/29/98 3,617,932
200,268 Swiss Franc ................... 4/1/98 131,298
--------------
TOTAL FORWARD EXCHANGE CONTRACTS TO BUY
(CONTRACT AMOUNT $37,180,505) ................. $ 35,761,434
==============
FORWARD EXCHANGE CONTRACTS TO SELL
150,871 Australian Dollar ............. 12/24/98 $ (98,323)
34,122,000 Belgian Franc ................. 4/6/98 (893,763)
27,656,000 Belgian Franc ................. 5/15/98 (726,154)
44,070,000 Belgian Franc ................. 6/15/98 (1,159,034)
34,675,000 Belgian Franc ................. 7/15/98 (913,424)
29,690,500 Belgian Franc ................. 12/15/98 (788,409)
36,860,000 Belgian Franc ................. 3/5/99 (982,661)
9,608,900 Canadian Dollar ............... 5/15/98 (6,781,224)
9,510,900 Canadian Dollar ............... 5/22/98 (6,713,129)
1,761,890 Canadian Dollar ............... 6/15/98 (1,244,279)
1,352,600 Canadian Dollar ............... 7/15/98 (955,865)
8,750,950 Canadian Dollar ............... 8/28/98 (6,189,911)
3,408,750 Canadian Dollar ............... 9/30/98 (2,412,741)
821,100 Canadian Dollar ............... 10/13/98 (581,337)
10,927,800 Canadian Dollar ............... 11/16/98 (7,742,190)
7,465,700 Canadian Dollar ............... 11/23/98 (5,290,080)
5,551,200 Canadian Dollar ............... 12/15/98 (3,935,202)
2,094,600 Canadian Dollar ............... 12/23/98 (1,485,077)
2,827,000 Canadian Dollar ............... 12/24/98 (2,004,389)
4,324,200 Canadian Dollar ............... 2/12/99 (3,068,826)
1,399,100 Canadian Dollar ............... 3/12/99 (993,679)
4,198,500 Canadian Dollar ............... 3/29/99 (2,982,076)
7,844,640 Danish Krona .................. 12/23/98 (1,125,660)
4,914,500 Finnish Markka ................ 4/14/98 (876,026)
22,459,500 Finnish Markka ................ 4/30/98 (4,007,798)
5,039,000 Finnish Markka ................ 5/15/98 (899,955)
22,344,750 Finnish Markka ................ 6/15/98 (3,997,589)
55,441,100 Finnish Markka ................ 7/15/98 (9,935,583)
25,543,500 Finnish Markka ................ 9/15/98 (4,593,330)
21,202,000 Finnish Markka ................ 9/30/98 (3,815,726)
38,137,400 Finnish Markka ................ 10/13/98 (6,868,510)
33,759,300 Finnish Markka ................ 11/16/98 (6,091,339)
19,084,600 Finnish Markka ................ 11/23/98 (3,444,830)
10,227,800 Finnish Markka ................ 12/15/98 (1,848,350)
36,238,300 Finnish Markka ................ 12/23/98 (6,551,744)
10,502,400 Finnish Markka ................ 12/28/98 (1,899,297)
24,537,150 Finnish Markka ................ 1/19/99 (4,442,440)
16,176,000 Finnish Markka ................ 2/12/99 (2,932,239)
26,931,500 Finnish Markka ................ 3/12/99 (4,888,756)
49,074,300 Finnish Markka ................ 3/26/99 (8,914,415)
21,802,800 Finnish Markka ................ 3/29/99 (3,961,165)
64,556 French Franc .................. 4/1/98 (10,411)
74,675 French Franc .................. 4/2/98 (12,044)
18,419,610 French Franc .................. 4/6/98 (2,971,052)
5,544,500 French Franc .................. 4/14/98 (894,909)
8,431,500 French Franc .................. 4/3098 (1,362,353)
36,130,250 French Franc .................. 5/29/98 (5,847,112)
45,410,400 French Franc .................. 7/15/98 (7,367,872)
39,662,000 French Franc .................. 8/14/98 (6,445,713)
8,729,250 French Franc .................. 9/15/98 (1,421,070)
30,139,000 French Franc .................. 9/30/98 (4,910,334)
45,982,500 French Franc .................. 10/13/98 (7,496,758)
186,307,800 French Franc .................. 11/16/98 (30,428,758)
41,998,360 French Franc .................. 11/23/98 (6,861,875)
14,159,500 French Franc .................. 12/15/98 (2,316,057)
5,725,000 French Franc .................. 12/23/98 (936,815)
23,290,000 French Franc .................. 12/24/98 (3,811,272)
17,602,500 French Franc .................. 1/4/99 (2,882,171)
111,536,500 French Franc .................. 1/19/99 (18,276,594)
41,902,000 French Franc .................. 2/12/99 (6,874,503)
29,930,000 French Franc .................. 3/5/99 (4,915,538)
17,856,600 French Franc .................. 3/12/99 (2,933,693)
30,125,500 French Franc .................. 3/26/99 (4,952,815)
54,126,000 French Franc .................. 3/29/99 (8,900,082)
9,463 German Mark ................... 4/2/98 (5,113)
2,463,000 German Mark ................... 4/14/98 (1,331,857)
9,189,675 German Mark ................... 4/30/98 (4,974,531)
3,353,400 German Mark ................... 5/15/98 (1,816,775)
9,547,380 German Mark ................... 5/29/98 (5,176,280)
4,927,800 German Mark ................... 6/15/98 (2,674,247)
8,600,000 German Mark ................... 9/15/98 (4,690,795)
3,570,600 German Mark ................... 9/30/98 (1,949,121)
5,451,000 German Mark ................... 10/13/98 (2,977,681)
5,155,500 German Mark ................... 11/16/98 (2,821,382)
2,573,850 German Mark ................... 11/23/98 (1,409,080)
2,736,000 German Mark ................... 12/23/98 (1,500,217)
6,217,400 German Mark ................... 3/5/99 (3,421,393)
6,277,600 German Mark ................... 3/29/99 (3,458,580)
1,554,533 Great Britain Pound Sterling .. 4/14/98 (2,602,923)
3,707,709 Great Britain Pound Sterling .. 4/30/98 (6,210,339)
4,028,509 Great Britain Pound Sterling .. 5/15/98 (6,749,369)
2,771,960 Great Britain Pound Sterling .. 5/29/98 (4,645,126)
4,014,576 Great Britain Pound Sterling .. 7/15/98 (6,732,850)
12,905,162 Great Britain Pound Sterling .. 9/15/98 (21,665,825)
8,561,430 Great Britain Pound Sterling .. 9/30/98 (14,376,876)
9,483,396 Great Britain Pound Sterling .. 10/13/98 (15,928,281)
8,191,244 Great Britain Pound Sterling .. 10/29/98 (13,761,339)
4,117,573 Great Britain Pound Sterling .. 11/16/98 (6,919,395)
6,268,021 Great Britain Pound Sterling .. 11/23/98 (10,534,205)
3,027,551 Great Britain Pound Sterling .. 12/23/98 (5,090,374)
8,622,814 Great Britain Pound Sterling .. 12/24/98 (14,498,191)
3,042,658 Great Britain Pound Sterling .. 1/4/99 (5,116,609)
4,022,402 Great Britain Pound Sterling .. 2/12/99 (6,767,527)
19,880,716 Great Britain Pound Sterling .. 2/26/99 (33,454,181)
6,180,088 Great Britain Pound Sterling .. 3/12/99 (10,401,229)
10,805,804 Great Britain Pound Sterling .. 3/26/99 (18,189,354)
15,177,271 Great Britain Pound Sterling .. 3/29/99 (25,548,982)
7,763,500 Hong Kong Dollar .............. 4/30/98 (1,001,587)
69,795,000 Hong Kong Dollar .............. 5/29/98 (8,995,540)
23,290,500 Hong Kong Dollar .............. 6/15/98 (2,999,753)
97,411,250 Hong Kong Dollar .............. 7/31/98 (12,514,551)
68,819,100 Hong Kong Dollar .............. 10/29/98 (8,777,992)
41,698,400 Hong Kong Dollar .............. 11/16/98 (5,310,537)
13,370,500 Hong Kong Dollar .............. 11/23/98 (1,701,757)
41,237,500 Hong Kong Dollar .............. 12/15/98 (5,237,944)
20,550,000 Hong Kong Dollar .............. 1/4/99 (2,605,157)
118,093,750 Hong Kong Dollar .............. 3/12/99 (14,862,879)
23,828,400 Hong Kong Dollar .............. 3/29/99 (2,993,348)
4,178,183 Irish Punt .................... 4/30/98 (5,675,145)
2,307,489 Irish Punt .................... 6/15/98 (3,133,945)
592,632 Irish Punt .................... 12/15/98 (802,029)
647,757 Irish Punt .................... 12/24/98 (876,397)
542,495 Irish Punt .................... 1/19/99 (733,522)
431,096 Irish Punt .................... 2/12/99 (582,544)
49,850,000 Italian Lira .................. 4/1/98 (27,326)
332,237,500 Italian Lira .................. 4/2/98 (182,123)
97,200,000 Italian Lira .................. 4/3/98 (53,282)
1,709,300,000 Italian Lira .................. 4/14/98 (936,989)
14,500,150,000 Italian Lira .................. 4/30/98 (7,948,968)
6,894,040,000 Italian Lira .................. 5/15/98 (3,779,840)
5,050,500,000 Italian Lira .................. 5/29/98 (2,769,627)
13,527,200,000 Italian Lira .................. 6/15/98 (7,420,221)
2,561,400,000 Italian Lira .................. 7/15/98 (1,405,950)
5,184,000,000 Italian Lira .................. 9/15/98 (2,851,164)
10,800,000,000 Italian Lira .................. 9/30/98 (5,943,490)
33,352,500,000 Italian Lira .................. 10/29/98 (18,375,726)
9,133,125,000 Italian Lira .................. 11/16/98 (5,035,894)
23,771,190,000 Italian Lira .................. 11/23/98 (13,111,345)
13,490,800,000 Italian Lira .................. 12/15/98 (7,448,958)
6,105,750,000 Italian Lira .................. 1/4/99 (3,374,462)
7,145,400,000 Italian Lira .................. 2/12/99 (3,955,832)
10,662,300,000 Italian Lira .................. 3/5/99 (5,908,665)
44,557,500,000 Italian Lira .................. 3/29/99 (24,719,968)
2,051,932 Japanese Yen .................. 4/1/98 (15,390)
1,368,176 Japanese Yen .................. 4/2/98 (10,262)
1,368,176 Japanese Yen .................. 4/3/98 (10,263)
2,198,110,000 Japanese Yen .................. 4/6/98 (16,491,946)
2,902,375,000 Japanese Yen .................. 4/14/98 (21,810,012)
1,960,488,750 Japanese Yen .................. 4/30/98 (14,772,895)
2,154,780,000 Japanese Yen .................. 5/15/98 (16,269,420)
3,037,500,000 Japanese Yen .................. 5/22/98 (22,954,012)
1,749,760,000 Japanese Yen .................. 6/30/98 (13,292,748)
2,098,590,000 Japanese Yen .................. 7/31/98 (16,014,060)
3,742,550,000 Japanese Yen .................. 8/14/98 (28,617,030)
1,894,820,000 Japanese Yen .................. 9/30/98 (14,589,101)
1,313,820,000 Japanese Yen .................. 10/13/98 (10,135,499)
1,060,836,500 Japanese Yen .................. 10/29/98 (8,203,704)
943,550,000 Japanese Yen .................. 11/16/98 (7,316,786)
712,350,000 Japanese Yen .................. 12/15/98 (5,548,751)
2,222,035,000 Japanese Yen .................. 12/24/98 (17,332,552)
2,849,355,000 Japanese Yen .................. 1/19/99 (22,308,098)
4,788,000,000 Japanese Yen .................. 2/26/99 (37,685,577)
7,629,930,000 Japanese Yen .................. 3/5/99 (60,112,319)
709,890,000 Japanese Yen .................. 3/12/99 (5,598,286)
367,440,000 Japanese Yen .................. 3/29/99 (2,904,581)
17,718,750 Malaysian Ringgit ............. 12/24/98 (4,688,660)
4,260,000 Malaysian Ringgit ............. 2/12/99 (1,120,598)
14,262,500 Malaysian Ringgit ............. 3/12/99 (3,739,623)
214,355 Netherlands Guilder ........... 4/3/98 (102,685)
5,578,200 Netherlands Guilder ........... 4/6/98 (2,672,482)
2,816,550 Netherlands Guilder ........... 4/30/98 (1,351,859)
12,241,400 Netherlands Guilder ........... 5/15/98 (5,880,768)
11,118,000 Netherlands Guilder ........... 5/29/98 (5,345,287)
7,399,600 Netherlands Guilder ........... 6/15/98 (3,561,118)
1,888,300 Netherlands Guilder ........... 7/15/98 (910,351)
28,109,700 Netherlands Guilder ........... 8/28/98 (13,585,984)
5,823,600 Netherlands Guilder ........... 10/29/98 (2,824,380)
19,233,000 Netherlands Guilder ........... 11/16/98 (9,336,915)
7,729,200 Netherlands Guilder ........... 11/23/98 (3,753,659)
17,159,400 Netherlands Guilder ........... 12/15/98 (8,343,195)
5,591,490 Netherlands Guilder ........... 12/23/98 (2,719,828)
16,064,000 Netherlands Guilder ........... 2/12/99 (7,833,824)
8,012,000 Netherlands Guilder ........... 2/26/99 (3,909,799)
6,007,800 Netherlands Guilder ........... 3/5/99 (2,932,744)
6,030,300 Netherlands Guilder ........... 3/12/99 (2,944,705)
6,073,800 Netherlands Guilder ........... 3/26/99 (2,967,896)
1,457,938 New Zealand Dollar ............ 4/14/98 (809,162)
3,637,951 New Zealand Dollar ............ 5/29/98 (2,052,244)
3,021,604 New Zealand Dollar ............ 8/28/98 (1,750,944)
785,793 New Zealand Dollar ............ 9/30/98 (459,075)
1,617,599 New Zealand Dollar ............ 11/16/98 (955,697)
7,104,515 New Zealand Dollar ............ 11/23/98 (4,204,007)
1,631,854 New Zealand Dollar ............ 12/15/98 (970,220)
10,680,250 New Zealand Dollar ............ 12/23/98 (6,360,491)
3,516,174 New Zealand Dollar ............ 3/12/99 (2,126,090)
12,435,601 New Zealand Dollar ............ 3/26/99 (7,537,267)
70,495,000 Norwegian Krone ............... 7/15/98 (9,277,433)
18,201,250 Norwegian Krone ............... 9/15/98 (2,401,549)
11,203,500 Norwegian Krone ............... 9/30/98 (1,479,112)
20,896,500 Norwegian Krone ............... 11/16/98 (2,763,578)
10,506,000 Norwegian Krone ............... 12/23/98 (1,391,183)
1,413,000 Singapore Dollar .............. 4/14/98 (874,300)
1,412,900 Singapore Dollar .............. 4/30/98 (872,969)
2,840,400 Singapore Dollar .............. 5/15/98 (1,754,348)
1,404,500 Singapore Dollar .............. 6/15/98 (867,313)
2,101,950 Singapore Dollar .............. 8/14/98 (1,297,191)
726,250 Singapore Dollar .............. 9/30/98 (448,147)
4,501,500 Singapore Dollar .............. 10/13/98 (2,777,306)
1,514,400 Singapore Dollar .............. 10/29/98 (934,175)
3,183,000 Singapore Dollar .............. 12/15/98 (1,962,571)
8,740,000 Singapore Dollar .............. 12/24/98 (5,388,496)
4,273,750 Singapore Dollar .............. 1/4/99 (2,634,382)
2,772,000 Singapore Dollar .............. 1/19/99 (1,708,156)
8,662,500 Singapore Dollar .............. 2/26/99 (5,333,562)
6,788,000 Singapore Dollar .............. 3/12/99 (4,178,084)
4,990,500 Singapore Dollar .............. 3/26/99 (3,070,699)
571,600,000 Spanish Peseta ................ 4/14/98 (3,639,384)
114,960,000 Spanish Peseta ................ 4/30/98 (732,229)
144,420,000 Spanish Peseta ................ 5/14/98 (920,302)
567,440,000 Spanish Peseta ................ 5/29/98 (3,617,932)
568,680,000 Spanish Peseta ................ 6/15/98 (3,628,140)
289,040,000 Spanish Peseta ................ 7/15/98 (1,846,308)
370,075,000 Spanish Peseta ................ 8/28/98 (2,368,750)
440,730,000 Spanish Peseta ................ 11/16/98 (2,832,115)
431,692,500 Spanish Peseta ................ 12/15/98 (2,778,074)
218,340,000 Spanish Peseta ................ 12/23/98 (1,405,661)
297,080,000 Spanish Peseta ................ 12/24/98 (1,912,684)
151,370,000 Spanish Peseta ................ 3/12/99 (978,240)
303,620,000 Spanish Peseta ................ 3/12/99 (1,962,166)
764,350,000 Spanish Peseta ................ 3/29/99 (4,943,757)
75,152,000 Swedish Krona ................. 4/14/98 (9,396,789)
23,018,400 Swedish Krona ................. 5/15/98 (2,881,201)
48,906,000 Swedish Krona ................. 5/29/98 (6,123,919)
18,871,250 Swedish Krona ................. 6/15/98 (2,364,159)
26,754,700 Swedish Krona ................. 8/28/98 (3,359,209)
39,267,500 Swedish Krona ................. 9/30/98 (4,935,209)
39,676,000 Swedish Krona ................. 10/13/98 (4,988,289)
22,499,700 Swedish Krona ................. 10/29/98 (2,829,979)
33,651,000 Swedish Krona ................. 11/16/98 (4,234,528)
14,961,800 Swedish Krona ................. 12/15/98 (1,884,096)
34,151,850 Swedish Krona ................. 12/23/98 (4,301,474)
27,328,000 Swedish Krona ................. 1/4/99 (3,443,071)
60,187,500 Swedish Krona ................. 2/26/99 (7,593,546)
9,634,800 Swedish Krona ................. 3/12/99 (1,216,007)
23,798,400 Swedish Krona ................. 3/26/99 (3,004,659)
31,452,000 Swedish Krona ................. 3/29/99 (3,971,298)
5,595,200 Swiss Franc ................... 4/6/98 (3,669,207)
7,682,400 Swiss Franc ................... 4/14/98 (5,044,540)
6,302,475 Swiss Franc ................... 4/30/98 (4,147,388)
14,063,000 Swiss Franc ................... 5/15/98 (9,269,965)
22,743,600 Swiss Franc ................... 5/22/98 (15,003,285)
24,949,100 Swiss Franc ................... 6/30/98 (16,530,509)
10,988,800 Swiss Franc ................... 7/31/98 (7,306,815)
9,586,500 Swiss Franc ................... 8/14/98 (6,384,603)
13,213,550 Swiss Franc ................... 8/28/98 (8,814,287)
14,477,000 Swiss Franc ................... 9/30/98 (9,693,396)
10,845,200 Swiss Franc ................... 10/29/98 (7,285,557)
10,772,800 Swiss Franc ................... 12/15/98 (7,275,350)
20,304,750 Swiss Franc ................... 12/23/98 (13,725,018)
15,163,500 Swiss Franc ................... 12/24/98 (10,250,928)
34,782,500 Swiss Franc ................... 1/4/99 (23,542,108)
10,076,500 Swiss Franc ................... 1/19/99 (6,831,187)
23,953,000 Swiss Franc ................... 2/12/99 (16,280,216)
25,203,600 Swiss Franc ................... 3/5/99 (17,168,325)
33,720,750 Swiss Franc ................... 3/12/99 (22,987,011)
42,810,000 Swiss Franc ................... 3/26/99 (29,225,833)
45,894,400 Swiss Franc ................... 3/29/99 (31,342,297)
---------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(CONTRACT AMOUNT $1,695,933,714) .............. $(1,616,351,213)
===============
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
March 31, 1998
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $1,937,117,893) (Note 1)
See accompanying schedule ........................ $2,442,289,229
Cash and foreign currency (Cost $2,394,804) .......... 2,299,242
Net unrealized appreciation of forward exchange
contracts
(Note 1) ........................................... 78,163,430
Receivable for Fund shares sold ...................... 13,425,129
Dividends and interest receivable .................... 6,961,742
Receivable for investment securities sold ............ 3,628,410
Unamortized organization costs (Note 5) .............. 3,785
Prepaid expenses ..................................... 7,771
--------------
TOTAL ASSETS ..................................... 2,546,778,738
--------------
LIABILITIES
Payable for investment securities purchased .......... $14,823,097
Payable for Fund shares redeemed ..................... 1,521,566
Investment advisory fee payable (Note 2) ............. 1,648,779
Transfer agent fees payable (Note 2) ................. 141,483
Custodian fees payable (Note 2) ...................... 154,439
Accrued expenses and other payables .................. 548,632
-----------
TOTAL LIABILITIES ................................ 18,837,996
------------
NET ASSETS ............................................... $2,527,940,742
==============
NET ASSETS CONSIST OF
Undistributed net investment income .................. $ 16,475,676
Accumulated net realized gain on securities, forward
exchange contracts and foreign currencies .......... 61,515,113
Net unrealized appreciation of securities, forward
exchange contracts, foreign currencies and net
other assets ....................................... 583,195,359
Par value ............................................ 13,320
Paid-in capital in excess of par value ............... 1,866,741,274
------------
TOTAL NET ASSETS ................................. $2,527,940,742
==============
NET ASSET VALUE, offering and redemption price per share
($2,527,940,742 / 133,197,435 shares of common stock
outstanding) ......................................... $18.98
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Statement of Operations
- -------------------------------------------------------------------------------
For the Year Ended March 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $5,085,836) .............. $ 38,322,693
Interest (net of foreign withholding taxes of $92) ...................... 8,593,019
------------
TOTAL INVESTMENT INCOME ............................................. 46,915,712
------------
EXPENSES
Investment advisory fee (Note 2) ...................... $23,717,001
Administration fee (Note 2) ........................... 820,141
Custodian fees (Note 2) ............................... 830,400
Transfer agent fees (Note 2) .......................... 556,099
Legal and audit fees .................................. 92,767
Amortization of organization costs (Note 5) ........... 22,286
Directors' fees and expenses (Note 2) ................. 24,878
Other ................................................. 1,018,098
Waiver of fees by administrator (Note 2) .............. (86,035)
-----------
TOTAL EXPENSES ...................................................... 26,995,635
------------
NET INVESTMENT INCOME ....................................................... 19,920,077
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3):
Net realized gain (loss) on:
Securities ............................................................ 85,939,033
Forward exchange contracts ............................................ 97,491,059
Foreign currencies and net other assets ............................... (462,935)
------------
Net realized gain on investments during the year ........................ 182,967,157
------------
Net change in unrealized appreciation of:
Securities ............................................................ 340,589,403
Forward exchange contracts ............................................ 15,699,783
Foreign currencies and net other assets ............................... 144,365
------------
Net unrealized appreciation on investments during the year .............. 356,433,551
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ............................. 539,400,708
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $559,320,785
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
3/31/98 3/31/97
-------------- --------------
<S> <C> <C>
Net investment income ............................... $ 19,920,077 $ 8,308,612
Net realized gain on securities, forward exchange
contracts and currency transactions during the year 182,967,157 120,005,899
Net unrealized appreciation of securities,
forward exchange contracts, foreign currencies and
net other assets during the year .................. 356,433,551 54,898,049
-------------- --------------
Net increase in net assets resulting from operations 559,320,785 183,212,560
DISTRIBUTIONS:
Dividends to shareholders from net investment
income .......................................... (87,707,202) (14,614,831)
Dividends in excess of net investment income ...... (8,964,368) (28,673,453)
Distributions to shareholders from net realized
gain on investments ............................. (54,368,991) (44,555,478)
Net increase in net assets from Fund share
transactions (Note 4) ............................. 678,450,026 394,930,728
-------------- --------------
Net increase in net assets .......................... 1,086,730,250 490,299,526
NET ASSETS
Beginning of year ................................... 1,441,210,492 950,910,966
-------------- --------------
End of year (including undistributed net investment
income of $16,475,676 and $11,956,516,
respectively) ..................................... $2,527,940,742 $1,441,210,492
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
3/31/98 3/31/97 3/31/96(a) 3/31/95 3/31/94(a)(b)
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ................ $ 15.46 $ 14.28 $ 11.52 $ 12.26 $ 10.00
---------- ---------- -------- -------- --------
Income from investment
operations:
Net investment income
(loss)(c) .............. 0.26 0.12 0.15 0.10 (0.00)(d)
Net realized and
unrealized gain (loss)
on investments ......... 4.62 2.18 2.81 (0.68) 2.26
---------- ---------- -------- -------- --------
Total from investment
operations ......... 4.88 2.30 2.96 (0.58) 2.26
---------- ---------- -------- -------- --------
DISTRIBUTIONS:
Dividends from net
investment income .... (0.79) (0.19) -- -- --
Dividends in excess of
net investment income (0.08) (0.36) -- -- --
Distributions from net
realized gains ....... (0.49) (0.57) (0.05) (0.06) --
Distributions in excess
of net realized gains -- -- (0.15) (0.10) --
---------- ---------- -------- -------- --------
Total distributions .. (1.36) (1.12) (0.20) (0.16) --
---------- ---------- -------- -------- --------
Net asset value, end of
period.................. $ 18.98 $ 15.46 $ 14.28 $ 11.52 $ 12.26
========== ========== ======== ======== ========
Total return(e) .......... 33.09% 16.66% 25.88% (4.74)% 22.60%
========== ========== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year
(in 000's) ............. $2,527,941 $1,441,210 $950,911 $655,035 $297,434
Ratio of operating
expenses to average net
assets(f) .............. 1.42% 1.58% 1.60 % 1.65% 1.73%(g)
Ratio of net investment
income (loss) to average
net assets ............. 1.05% 0.73% 1.15 % 1.08% (0.00)%(g)(h)
Portfolio turnover rate .. 16% 20% 17 % 16% 14%
Average commission rate
(per share of
security)(i) ........... $ 0.0142 $ 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 (loss) for a Fund share outstanding, before the waiver of fees by the administrator and/or investment
adviser for the years ended March 31, 1998, and 1997 and for the 7.5-month period ended March 31, 1994 were $0.26, $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 advisor for the years ended March
31, 1998, and 1997, and for the 7.5-month period ended March 31, 1994 were 1.43%, 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, by the Investment Adviser or at fair
value as determined by or under the direction of the Company's Board of
Directors. Portfolio securities or other assets, listed on a U.S. national
securities exchange or through any system providing for same day publication of
actual prices (and not subject to restrictions against sale by the Fund on such
exchange or system) are valued at the last quoted sale price prior to the close
of regular trading. Portfolio securities and other assets listed on a foreign
exchange or through any system providing for same day publication of actual
prices are valued at the last quoted sale price available before the time when
assets are valued. Portfolio securities and other assets for which there are no
reported sales on the valuation date are valued at the mean between the last
asked price and the last bid price prior to the close of regular trading. When
the Investment Adviser determines that the last sale price prior to valuation
does not reflect current market value, the Investment Adviser will determine the
market value of those securities or assets in accordance with industry practice
and other factors considered relevant by the Investment Adviser. All other
securities and assets for which current market quotations are not readily
available and those securities which are not readily marketable due to
significant legal or contractual restrictions will be valued by the Investment
Adviser or at fair value as determined by or under the direction of the Board of
Directors. Debt securities with a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market value, or by reference to
other factors (i.e. pricing services or dealer quotations) by the Investment
Adviser.
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 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, OTHER RELATED PARTY TRANSACTIONS, AND
ADMINISTRATION FEE
The Company, on behalf of the Fund, has entered into an investment advisory
agreement (the "Advisory Agreement") with Tweedy, Browne Company LLC ("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 $31.1 million of their own money invested in the Fund.
The Company, on behalf of the Fund, has entered into an administration
agreement (the "Administration Agreement") with First Data Investor Services
Group, Inc. ("the Administrator"), a wholly owned subsidiary of First Data
Corporation. Under the Administration Agreement, the Company pays the
Administrator 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, 1997 to May 15, 1997, the Administrator
voluntarily waived administration and fund accounting fees of $86,035. For the
period from May 16, 1997 to March 31, 1998, the Administrator did not waive any
administration fees.
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.
No officer, director or employee of Tweedy, Browne, the administrator 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 Fund pays each
director who is not an officer, director or employee of Tweedy, Browne, the
administrator or any of their affiliates $8,000 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 Trust, serves as the Fund's custodian pursuant to a
custody agreement (the "Custody Agreement"). On May 12, 1997, First Data
Investors Services Group, Inc. replaced Unified Advisors, 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.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, for the year ended March 31, 1998, aggregated
$748,422,268 and $263,066,996, respectively.
At March 31, 1998, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost, was
$661,020,228 and the aggregate gross unrealized depreciation for all securities,
in which there was an excess of tax cost over value, was $158,264,006.
For the year ended March 31, 1998, the Fund incurred total brokerage
commissions of $2,670,257.
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 3/31/98 YEAR ENDED 3/31/97
---------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 58,530,975 $1,007,774,368 35,117,166 $ 522,414,402
Reinvested 8,222,804 133,167,149 5,409,129 78,324,194
Redeemed (26,794,022) (462,491,491) (13,856,018) (205,807,868)
- --------------------------------------------------------------------------------------------------------------
Net increase 39,959,757 $ 678,450,026 26,670,277 $ 394,930,728
- --------------------------------------------------------------------------------------------------------------
</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 Trust, N.A. have entered into a Line of Credit
Agreement (the "Agreement") which provides the Fund with a $50 million line of
credit, primarily for temporary or emergency purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition of
securities. The Fund may borrow up to the lesser of $50 million or one-third of
its net assets. Interest is payable at the bank's money market rate plus 0.75%
on an annualized basis. Under the Agreement, the Fund is charged a facility fee
equal to 0.10% annually of the unutilized credit. The Agreement requires, among
other provisions, the Fund to maintain a ratio of net assets (not including
funds borrowed pursuant to the Agreement) to aggregated amount of indebtedness
pursuant to the Agreement of no less than three to one. For the year ended March
31, 1998, 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 the series
of Tweedy, Browne Fund Inc.) as of March 31, 1998, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the four 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, 1998, by correspondence with the custodian and
brokers, or by 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, 1998, and the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended and
financial highlights for each of the four years in the period then ended and for
the period from June 15, 1993 (commencement of operations) to March 31, 1994, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 12, 1998
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
- -------------------------------------------------------------------------------
Tax Information (unaudited)
- -------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1998
For the fiscal year ended March 31, 1998, the amount of long-term capital
gain designated by the Fund was $45,461,377, of which $24,813,397 and
$20,647,980 is taxable as 28% rate gain and 20% rate gain, respectively, for
federal income tax purposes.
Of the ordinary income (including short-term capital gain) distributions
made by the Fund during the fiscal year ended March 31, 1998, 2.04% qualify for
the dividend received deduction available to corporate shareholders.
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------
Portfolio Highlights
- -------------------------------------------------------------------------------
March 31, 1998
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN TWEEDY, BROWNE AMERICAN
VALUE FUND VS. STANDARD & POOR'S 500 STOCK INDEX 12/8/93 THROUGH 3/31/98
Tweedy, Browne Standard & Poor's
American Value Fund* Stock Index (the S&P 500)*
Dec 1993 $10,000 $10,120
Mar 1994 9,710 9,740
Jun 1994 9,820 9,780
Sep 1994 10,260 10,260
Dec 1994 9,880 10,250
Mar 1995 10,780 11,250
Jun 1995 11,980 12,320
Sep 1995 13,060 13,300
Dec 1995 13,460 14,100
Mar 1996 14,520 14,860
Jun 1996 14,990 15,530
Sep 1996 15,170 16,010
Dec 1996 16,480 17,340
Mar 1997 17,090 17,800
Jun 1997 19,770 20,660
Sep 1997 21,990 22,210
Mar 1998 24,985 26,029
- --------------------------------------------------------------------------------
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*
- -----------------------------------------------------------------------------------------------------------------------
WITHOUT YEAR ENDED INCEPTION
THE FUND ACTUAL WAIVERS** 3/31/98 12/8/93-3/31/98
- -------- ------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Inception (12/8/93) The Fund 46.14% 149.85%
through 3/31/98 23.66% 23.41% S&P 500 47.96% 160.29%
Year Ended 3/31/98 46.14% 46.11%
- ------------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
Perspective On Assessing Investment Results
- -------------------------------------------------------------------------------
March 31, 1998
In accordance with rules and guidelines set out by the Securities and
Exchange Commission, we have provided a comparison of the historical investment
results of Tweedy, Browne American Value Fund to the historical investment
results of the most appropriate broad-based securities market index, the
Standard & Poor's 500 Stock Index (the "S&P 500"). However, the historical
results of the S&P 500 in large measure represent the investment results of
stocks that we do not own. Any portfolio which does not own exactly the same
stocks in exactly the same proportions as the index to which the particular
portfolio is being compared is not likely to have the same results as the index.
The investment behavior of a diversified portfolio of undervalued stocks tends
to be correlated to the investment behavior of a broad index; i.e., when the
index is up, probably more than one-half of the stocks in the entire universe of
public companies that are included in the same index will be up, albeit, in
greater or lesser percentages than the index. Similarly, when the index
declines, probably most of the stocks in the entire universe of public companies
that are included in the index will be down in greater or lesser percentages
than the index. But it is almost a mathematical truth that "different stocks
equal different results."
Favorable or unfavorable historical investment results in comparison to an
index are not necessarily predictive of future comparative investment results.
In Are Short-Term Performance and Value Investing Mutually Exclusive?, Eugene
Shahan analyzed the investment performance of seven money managers, about whom
Warren Buffett wrote in his article, The Super Investors of Graham and
Doddsville. Over long periods of time, the seven managers significantly
outperformed the market as measured by the Dow Jones Industrial Average (the
"DJIA") or the S&P 500 by between 7.7% to 16.5% annually. (The goal of most
institutional money managers is to outperform the market by 2% to 3%.) However,
for periods ranging from 13 years to 28 years, this group of managers
underperformed the market between 7.7% to 42% of the years. Six of the seven
investment managers underperformed the market between 28% to 42% of the years.
In today's environment, they would have lost many of their clients during their
periods of underperformance. Longer term, it would have been the wrong decision
to fire any of these money managers. In examining the seven long-term investment
records, unfavorable investment results as compared to either index did not
predict the future favorable comparative investment results which occurred, and
favorable investment results in comparison to the DJIA or the S&P 500 were not
always followed by future favorable comparative results. Stretches of
consecutive annual underperformance ranged from one to six years. Mr. Shahan
concluded "Unfortunately, there is no way to distinguish between a poor
three-year stretch for a manager who will do well over 15 years, from a poor
three-year stretch for a manager who will continue to do poorly. Nor is there
any reason to believe that a manager who does well from the outset cannot
continue to do well, and consistently."
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------
Portfolio of Investments
- -------------------------------------------------------------------------------
March 31, 1998
[Graphic Omitted]
MARKET
VALUE
SHARES (NOTE 1)
------ --------
COMMON STOCKS--DOMESTIC--72.4%
ADVERTISING--0.2%
6,680 Grey Advertising Inc. ........................... $ 2,461,580
--------------
APPAREL/TEXTILES--0.1%
45,900 Chic by H.I.S. Inc.+ ............................ 415,969
9,400 Garan Inc. ...................................... 260,850
2,000 Thomaston Mills, Inc., Class A .................. 16,874
--------------
693,693
--------------
AUTOMOTIVE PARTS--0.5%
170,400 Standard Motor Products, Inc. ................... 3,269,550
23,300 Standard Products Company ....................... 767,444
5,200 Woodward Governor Company ....................... 146,575
--------------
4,183,569
--------------
BANKING--11.3%
56,700 BancFirst Corporation ........................... 2,275,088
10,200 Cape Cod Bank & Trust Company ................... 439,875
259,207 Chase Manhattan Corporation ..................... 34,960,544
75,100 Comerica, Inc. .................................. 7,946,519
4,500 Community Financial Group--Bank of Nashville .... 63,844
156,110 First Chicago NBD Corporation ................... 13,757,194
20,400 First Mortgage Corporation+ ..................... 84,150
50,850 Mercantile Bancorp, Inc. ........................ 2,787,216
42,080 Mid-America Bancorp. ............................ 1,351,820
18,000 Peoples Bank Corporation of Indianapolis ........ 679,500
246,700 PNC Bank Corporation ............................ 14,786,581
401,260 Popular, Inc. ................................... 23,548,946
36,000 Wells Fargo & Company ........................... 11,925,000
--------------
114,606,277
--------------
BASIC INDUSTRIES--2.5%
100,500 ACX Technologies Inc.+ .......................... 2,405,719
163,900 Alamo Group Inc. ................................ 2,970,688
155,000 Blessings Corporation ........................... 2,790,000
121,700 Gorman-Rupp Company ............................. 2,373,150
61,400 Monarch Machine Tool Company .................... 491,200
70,200 Sequa Corporation, Class A+ ..................... 5,194,800
16,000 Tecumseh Products Company, Class A .............. 860,000
66,100 Tecumseh Products Company, Class B .............. 3,726,388
78,000 Tremont Corporation+ ............................ 4,533,750
--------------
25,345,695
--------------
BUSINESS AND COMMERCIAL SERVICES--1.3%
716,000 Harland (John H.) Company ....................... 11,142,750
5,200 IIC Industries Inc.+ ............................ 56,305
51,000 Norwood Promotional Products, Inc.+ ............. 1,013,625
12,500 Paris Corporation+ .............................. 28,125
38,600 PriceSmart, Inc.+ ............................... 620,013
--------------
12,860,818
--------------
CHEMICALS--1.9%
680,700 Lilly Industries Inc., Class A .................. 13,443,825
232,900 Oil-Dri Corporation of America .................. 3,726,400
77,500 Stepan Chemical Company ......................... 2,354,063
--------------
19,524,288
--------------
CONSUMER NON-DURABLES--9.2%
142,400 Bairnco Corporation ............................. 1,566,400
130,400 Coca-Cola Bottling Company ...................... 7,534,675
209,200 EKCO Group Inc.+ ................................ 1,477,475
426,035 Great Atlantic & Pacific Tea Company, Inc. ...... 12,887,559
19,000 Hyde Athletic Industries Inc., Class A+ ......... 86,688
25,000 Hyde Athletic Industries Inc., Class B+ ......... 107,031
248,000 M & F Worldwide Corporation+ .................... 2,247,500
49,800 OroAmerica Inc.+ ................................ 317,475
869,470 Philip Morris Companies, Inc. ................... 36,246,031
910,900 UST Inc. ........................................ 29,376,525
57,200 Village Super Market Inc., Class A+ ............. 750,750
--------------
92,598,109
--------------
CONSUMER SERVICES--1.9%
512,900 Jones Intercable Inc., Class A+ ................. 9,328,369
406,850 Pinkerton's, Inc. ............................... 9,382,978
--------------
18,711,347
--------------
ELECTRONIC EQUIPMENT--0.0%++
8,000 Espey Manufacturing and Electronics Corporation . 123,000
--------------
ENGINEERING AND CONSTRUCTION--2.5%
12,700 Atkinson (Guy F.) Company California+ ........... 1,389
42,700 Devcon International Corporation+ ............... 162,794
107,300 Harding Lawson Associates Group+ ................ 1,005,938
150,500 Hovnanian Enterprises, Inc.+ .................... 1,589,656
22,900 Liberty Homes, Inc., Class A .................... 224,706
10,000 Liberty Homes, Inc., Class B .................... 108,750
61,300 M/I Schottenstein Homes Inc.+ ................... 1,340,938
6,120 Oilgear Company ................................. 107,483
42,000 Oriole Homes Corporation, Class A+ .............. 217,875
91,500 Oriole Homes Corporation, Class B+ .............. 451,781
459,700 Ryland Group, Inc. .............................. 12,699,213
489,300 Standard-Pacific Corporation .................... 7,431,243
55,000 Washington Homes, Inc.+ ......................... 254,375
--------------
25,596,141
--------------
FINANCIAL SERVICES--12.5%
369,030 American Express Company ........................ 33,881,567
332,300 Credit Acceptance Corporation+ .................. 3,094,544
684,380 Federal Home Loan Mortgage Corporation .......... 32,465,276
126,800 Household International Inc. .................... 17,466,700
18,600 HPSC Inc.+ ...................................... 104,625
20,800 Kent Financial Services Inc.+ ................... 122,200
345,550 Lehman Brothers Holdings Inc. ................... 25,873,056
10,000 Letchworth Independent Bancshares Corporation ... 572,500
675,900 Phoenix Duff & Phelps Corporation ............... 6,336,563
109,030 ReliaStar Financial Corporation ................. 5,022,194
29,800 Value Line Inc. ................................. 1,271,155
1,604 Whitney Holding Corporation ..................... 95,538
--------------
126,305,918
--------------
FOOD AND BEVERAGES--0.0%++
2,177 United Foods, Inc., Class A+ .................... 7,620
3,269 United Foods, Inc., Class B+ .................... 11,237
--------------
18,857
--------------
FURNITURE--0.9%
29,900 Flexsteel Industries Inc. ....................... 411,125
147,450 O'Sullivan Corporation .......................... 1,382,344
598,400 O'Sullivan Industries Holdings, Inc.+ ........... 7,629,600
--------------
9,423,069
--------------
HEALTH CARE--2.0%
33,412 Johnson & Johnson ............................... 2,449,517
877,600 Sun Healthcare Group Inc.+ ...................... 16,345,300
64,000 United Dental Care, Inc.+ ....................... 1,156,000
8,000 Wyant Corporation+ .............................. 66,875
--------------
20,017,692
--------------
INSURANCE--9.4%
15,200 Allstate Financial Corporation+ ................. 110,200
448,500 American Annuity Group Inc. ..................... 10,035,188
90,450 American General Corporation .................... 5,850,984
77,400 American Indemnity Financial Corporation ........ 948,150
115,125 American National Insurance Company ............. 11,318,227
8,260 Kansas City Life Insurance Company .............. 713,458
366,500 Leucadia National Corporation ................... 14,430,938
21,600 Merchants Group Inc. ............................ 475,200
278,500 MMI Companies, Inc. ............................. 6,701,406
83,000 National Western Life Insurance Company+ ........ 8,805,780
239,200 NAC Re Corporation .............................. 12,543,050
13,200 RLI Corporation ................................. 712,800
69,900 TransFinancial Holdings, Inc.+ .................. 655,313
282,400 Transatlantic Holdings, Inc. .................... 21,356,500
--------------
94,657,194
--------------
LEISURE AND ENTERTAINMENT--0.3%
35,100 Cable Michigan, Inc.+ ........................... 908,213
93,600 C-TEC Corporation+ .............................. 2,626,650
--------------
3,534,863
--------------
METALS AND METAL PRODUCTS--1.5%++
562,100 ASARCO Inc. ..................................... 15,001,044
--------------
OIL AND GAS--0.6%
80,000 Isramco, Inc.+ .................................. 46,250
5,600 Lufkin Industries, Inc. ......................... 182,000
41,460 Matrix Service Company+ ......................... 312,246
175,200 Penn Virginia Corporation ....................... 5,113,650
10,000 Wiser Oil Company ............................... 127,500
--------------
5,781,646
--------------
REAL ESTATE--1.3%
600,600 American Real Estate Partners Ltd. .............. 6,418,913
26,100 Arizona Land Income Corporation, Class A ........ 166,387
18,012 Atlantic Realty Trust Inc.+ ..................... 211,641
102,000 Koger Equity Inc. ............................... 2,295,000
13,200 Mays (J.W.), Inc.+ .............................. 188,100
154,400 Price Enterprises Inc. .......................... 2,957,725
3,623 Public Storage, Inc. ............................ 111,860
36,025 Ramco-Gershenson Properties ..................... 734,009
20,000 Reading Entertainment+ .......................... 263,750
--------------
13,347,385
--------------
RESTAURANT CHAINS--5.6%
766,500 Darden Restaurants Inc. ......................... 11,928,656
713,900 McDonald's Corporation .......................... 42,834,000
83,400 Vicorp Restaurants Inc.+ ........................ 1,537,688
--------------
56,300,344
--------------
RETAIL--3.8%
99,000 Burlington Coat Factory Warehouse ............... 1,720,125
1,000 Dart Group Corporation, Class A ................. 137,500
217,000 Discount Auto Parts Inc.+ ....................... 5,262,250
117,900 EZCORP Inc., Class A+ ........................... 1,392,694
432,900 Fingerhut Companies, Inc. ....................... 11,228,344
90,100 Government Technology Services, Inc. ............ 481,472
654,000 Jan Bell Marketing Inc.+ ........................ 3,229,125
164,000 Kmart Corporation+ .............................. 2,736,750
9,900 Mercantile Stores Company Inc. .................. 665,156
89,600 Penney (J.C.) Company, Inc. ..................... 6,781,600
130,100 Swiss Army Brands, Inc.+ ........................ 1,496,150
158,700 Syms Corporation+ ............................... 2,241,638
138,000 United Retail Group, Inc.+ ...................... 875,438
--------------
38,248,242
--------------
TECHNOLOGY--0.0%++
44,600 Astrosystems Inc. ............................... 91,291
--------------
TELECOMMUNICATIONS--0.7%
140,400 RCN Corporation+ ................................ 7,011,225
15,300 TCI International Inc.+ ......................... 81,281
--------------
7,092,506
--------------
TRANSPORTATION/TRANSPORTATION SERVICES--2.4%
303,200 GATX Corporation ................................ 23,649,600
53,100 KLLM Transport Services Inc.+ ................... 677,025
--------------
24,326,625
--------------
TOTAL COMMON STOCKS--DOMESTIC
(COST $498,749,771) ............................. 730,851,193
--------------
COMMON STOCKS--FOREIGN--16.7%
FINLAND--0.3%
18,300 Huhtamaki Group, Class I ....................... 994,131
15,500 Kone Corporation, Class B+ ..................... 2,098,157
--------------
3,092,288
--------------
FRANCE--0.2%
900 Bongrain SA .................................... 458,673
2,000 Compagnie Fives-Lille .......................... 138,731
2,725 Klepierre ...................................... 437,283
3,512 Lyonnaise des Eaux--Dumez+ ..................... 506,933
2,300 Peugeot SA ..................................... 396,162
--------------
1,937,782
--------------
HONG KONG--0.4%
1,210,000 CDL Hotels International Ltd. .................. 448,946
478,000 Jardine Strategic Holdings Ltd., ADR ........... 1,309,720
1,952,000 Semi-Tech (Global) Ltd. ........................ 209,088
1,300,000 South China Morning Post (Holdings) Ltd. ....... 872,404
525,000 Swire Pacific Ltd., Class B .................... 504,762
182,000 Wing Hang Bank Ltd. ............................ 540,220
--------------
3,885,140
--------------
IRELAND--0.0%++
200,000 Crean (James) PLC .............................. 415,518
--------------
ITALY--0.1%
72,100 Arnoldo Mondadori Editore SPA .................. 829,985
--------------
JAPAN--5.1%
56,000 Agro-Kanesho Company Ltd. ...................... 386,424
63,000 Aichi Electric Company Ltd. .................... 165,385
255,000 Amada Sonoike Company Ltd. ..................... 688,543
17,000 Amatsuji Steel Ball Manufacturing Company ...... 136,434
104,000 Belluna Company Ltd. ........................... 733,246
62,000 Bunka Shutter Company Ltd. ..................... 184,617
33,000 CCI Corporation ................................ 226,724
1,000 Charle Company ................................. 8,326
89,000 Chiyoda Company ................................ 620,146
221,800 Chofu Seisakusho Company ....................... 2,994,487
56,000 Credia Company Ltd. ............................ 777,049
73,000 Daido Metal Company ............................ 224,489
105,000 Danto Corporation .............................. 715,882
179,000 Denkyosha ...................................... 836,430
61,000 Denyo Company Ltd. ............................. 311,119
58,000 Dowa Fire & Marine Insurance Company ........... 186,627
101,500 Exedy Corporation .............................. 610,561
93,000 Fuji Coca-Cola Bottling Company ................ 851,003
76,800 Fuji Photo Film Company Ltd., ADR .............. 2,832,000
17,000 Fuji Photo Film Ltd. ........................... 632,440
86,000 Fujicco Company Ltd. ........................... 967,560
88,000 Fujisawa Pharmaceutical Company ................ 785,449
118,000 Fujitec Company Ltd. ........................... 772,653
262,000 Fukuda Denshi .................................. 3,163,848
310,000 Gakken Company Ltd. ............................ 660,341
160,000 Hitachi Koki ................................... 684,043
68,000 Hitachi Medical Corporation .................... 724,245
31,000 Inaba Denkisangyo Company Ltd. ................. 313,895
92,000 Katsuragawa Electric Company ................... 369,173
269,000 Kawagishi Bridge Works ......................... 746,522
130,000 Koito Manufacturing ............................ 536,284
53,000 Koyosha Inc. ................................... 274,292
251,000 Mandom Corporation ............................. 1,976,749
95,000 Matsumoto Yushi-Seiyaku Company ................ 1,802,738
19,000 Matsushita Electric Industrial Company ......... 304,969
34,000 Meito Sangyo Company ........................... 300,919
54,000 Mitsubishi Electric Corporation ................ 141,759
91,000 Mitsubishi Pencil Company Ltd. ................. 832,702
200,000 Morito ......................................... 1,080,068
58,000 Nankai Plywood Company Ltd. .................... 226,214
107,000 Nippon Cable System ............................ 722,295
118,000 Nippon Konpo Unyu Soko ......................... 721,320
45,150 Nissan Fire & Marine Insurance Company ......... 172,710
38,000 Nissin Company Ltd. ............................ 783,799
48,000 Nitto FC Company ............................... 291,618
139,000 Oak ............................................ 307,557
64,100 Osaka Steel Company Ltd. ....................... 331,738
185,000 Prospect Japan Fund Ltd., ADR .................. 797,350
119,000 Riken Vitamin .................................. 825,614
19,000 Sangetsu Company Ltd. .......................... 249,391
27,000 Sanko Sangyo Company ........................... 205,550
32,000 Sankyo Company Ltd. ............................ 888,055
73,100 Sanyo Shinpan Finance Company Ltd. ............. 2,905,907
51,500 Shikoku Coca-Cola Bottling ..................... 517,607
99,000 Shin Nikkei Company Ltd. ....................... 104,699
73,000 SK Kaken Company Ltd. .......................... 832,252
155,000 Sonton Food Industry ........................... 1,488,093
200,000 Sotoh Company Ltd. ............................. 1,365,085
139,000 Tachi-S ........................................ 765,243
17,000 Takefuji Corporation ........................... 803,300
140,000 Teikoku Hormone Manufacturing Company .......... 787,549
59,000 TENMA Corporation .............................. 663,791
90,000 Toa Medical Electronics Company ................ 762,798
66,000 Tomita Electric Company Ltd. ................... 356,422
10,000 Torii Company Ltd. ............................. 45,753
141,000 Torishima Pump Manufacturing ................... 846,053
64,000 Toso Company Ltd. .............................. 312,019
78,000 Toyo Technical Company Ltd. .................... 386,124
150,000 Tsubaki Nakashima Company Ltd.+ ................ 685,168
220,800 Tsuchiya Home Company .......................... 881,047
153,000 U-Shin ......................................... 573,786
33,000 Yomeishu Seizo Company Ltd. .................... 212,863
32,000 Zojirushi ...................................... 240,015
--------------
52,618,926
--------------
MALAYSIA--0.1%
485,000 Star Publications (Malaysia) ................... 830,479
--------------
NETHERLANDS--1.1%
21,000 European Vinyls Corporation .................... 432,564
10,000 Heineken Holdings NV, Class A .................. 1,987,976
36,500 Holdingmaatschappij De Telegraaf NV ............ 772,820
120,800 Unilever NV, ADR ............................... 8,289,900
--------------
11,483,260
--------------
SINGAPORE--0.3%
518,000 Cycle & Carriage Ltd. .......................... 2,340,699
150,000 Fraser & Neave Ltd. ............................ 636,026
94,800 Robinson and Company Ord ....................... 286,366
--------------
3,263,091
--------------
SPAIN--0.1%
7,600 Argentaria ..................................... 628,759
16,000 Unipapel SA .................................... 546,791
--------------
1,175,550
--------------
SWEDEN--3.5%
17,000 Marieberg Tidnings AB, Class A ................. 516,310
804,300 Pharmacia & Upjohn, Inc., Depository Shares..... 34,681,102
--------------
35,197,412
--------------
SWITZERLAND--2.8%
3,650 Compagnie Financiere Richemont AG .............. 4,905,592
2,000 Danzas Holding AG PC ........................... 517,931
2,000 Edipresse SA, Bearer ........................... 704,124
219,000 Nestle, ADR .................................... 20,912,180
10,666 Novartis AG, ADR ............................... 943,318
500 Swissair AG, Registered+ ....................... 697,896
--------------
28,681,041
--------------
UNITED KINGDOM--2.7%
875,000 British Steel Ord .............................. 2,079,943
359,800 BTR Ord ........................................ 1,180,517
274,000 Carclo Engineering Group PLC ................... 800,389
172,000 Concentric PLC ................................. 336,877
445,000 Dowding & Mills PLC ............................ 521,451
60,000 Elementis PLC .................................. 139,109
163,670 Glaxo Wellcome PLC, Sponsored ADR .............. 8,858,639
142,000 Hardys & Hansons PLC ........................... 562,178
189,385 McAlpine (Alfred) PLC .......................... 542,122
50,000 Molins PLC ..................................... 231,430
187,307 Nycomed ASA, ADR, Class B ...................... 6,743,052
360,000 Pilkington PLC ................................. 735,220
65,000 SmithKline Beecham, PLC Units, ADR ............. 4,066,563
150,000 Thistle Hotels PLC ............................. 443,190
--------------
27,240,680
--------------
TOTAL COMMON STOCKS--FOREIGN
(COST $138,870,967)............................. 170,651,152
--------------
FACE
VALUE
------
COMMERCIAL PAPER--3.1% (COST $31,107,000)
$31,107,000 General Electric Capital Corporation,
6.120% due 4/1/98 .............................. 31,107,000
--------------
U.S. TREASURY BILLS--0.1%
200,000 5.873%** due 4/30/98 ........................... 199,105
1,000,000 5.089%** due 1/7/99 ............................ 962,689
--------------
TOTAL U.S. TREASURY BILLS
(COST $1,161,794) .............................. 1,161,794
--------------
REPURCHASE AGREEMENT--7.1%
(COST $71,684,000)
71,684,000 Agreement with UBS Securities, Inc.,
5.930% dated 3/31/98, to be repurchased at
$71,695,808 on 4/1/98, collateralized by
$57,405,000 U.S. Treasury Bonds, 10.000% due
5/15/10 (market value $72,976,106) .............. 71,684,000
--------------
TOTAL INVESTMENTS (COST $741,573,532*) ................ 99.4% 1,005,455,139
OTHER ASSETS AND LIABILITIES (NET) .................... 0.6 5,782,581
---- --------------
NET ASSETS ............................................ 100.0% $1,011,237,720
===== ==============
- ------------
* Aggregate cost for Federal Abbreviations:
tax purposes was $741,575,365. ADR--American Depository Receipt
** Rate represents annualized Ord--Ordinary Share
yield at date of purchase.
+ Non-income producing security.
++ Amount represents less than 0.1% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------
Schedule of Forward Exchange Contracts
- -------------------------------------------------------------------------------
March 31, 1998
CONTRACT MARKET
VALUE VALUE
CONTRACTS DATE (NOTE 1)
--------- -------- ----------
FORWARD EXCHANGE CONTRACTS TO BUY
38,991,859 Japanese Yen .................... 4/1/98 $ 292,457
45,268,400 Japanese Yen .................... 4/2/98 339,542
11,928,305 Japanese Yen .................... 4/3/98 89,473
195,157 Great Britain Pound Sterling .... 4/2/98 326,693
945,239 Great Britain Pound Sterling .... 9/30/98 1,587,303
942,868 Great Britain Pound Sterling .... 10/29/98 1,584,025
6,727,742 Hong Kong Dollar ................ 4/2/98 868,241
16,588,800 Norwegian Krone ................. 10/29/98 2,192,465
-------------
TOTAL FORWARD EXCHANGE CONTRACTS TO BUY
(CONTRACT AMOUNT $7,336,282) .................. $ 7,280,199
=============
FORWARD EXCHANGE CONTRACTS TO SELL
2,994,600 Finnish Markka ................ 4/30/98 (534,373)
7,879,250 Finnish Markka ................ 10/29/98 (1,420,292)
2,156,800 Finnish Markka ................ 2/12/99 (390,965)
2,726,350 Finnish Markka ................ 3/26/99 (495,245)
8,051,715 French Franc .................. 10/29/98 (1,313,816)
1,795,800 French Franc .................. 2/12/99 (294,622)
945,239 Great Britain Pound Sterling .. 9/30/98 (1,587,303)
942,868 Great Britain Pound Sterling .. 10/29/98 (1,584,025)
6,478,959 Great Britain Pound Sterling .. 12/23/98 (10,893,400)
1,423,311 Great Britain Pound Sterling .. 2/12/99 (2,394,664)
1,358,780 Great Britain Pound Sterling .. 3/5/99 (2,286,668)
740,969 Great Britain Pound Sterling .. 3/26/99 (1,247,270)
303,545 Great Britain Pound Sterling .. 3/29/99 (510,980)
8,429,000 Hong Kong Dollar .............. 1/19/99 (1,066,930)
10,603,450 Hong Kong Dollar .............. 2/12/99 (1,338,742)
3,971,000 Hong Kong Dollar .............. 3/29/99 (498,891)
325,497 Irish Punt .................... 1/19/99 (440,113)
861,150,000 Italian Lira .................. 10/29/98 (474,455)
357,270,000 Italian Lira .................. 2/12/99 (197,792)
116,095,000 Japanese Yen .................. 4/14/98 (872,400)
83,172,250 Japanese Yen .................. 4/30/98 (626,729)
107,930,000 Japanese Yen .................. 7/15/98 (821,699)
114,850,000 Japanese Yen .................. 9/30/98 (884,284)
209,531,000 Japanese Yen .................. 10/29/98 (1,620,354)
2,765,650,000 Japanese Yen .................. 12/24/98 (21,572,915)
371,655,000 Japanese Yen .................. 1/19/99 (2,909,752)
719,880,000 Japanese Yen .................. 2/12/99 (5,655,028)
731,760,000 Japanese Yen .................. 3/5/99 (5,765,163)
490,800,000 Japanese Yen .................. 3/26/99 (3,878,003)
367,440,000 Japanese Yen .................. 3/29/99 (2,904,581)
1,968,750 Malaysian Ringgit ............. 12/24/98 (520,962)
1,256,400 Malaysian Ringgit ............. 3/26/99 (328,901)
3,968,000 Netherlands Guilder ........... 10/29/98 (1,924,435)
1,928,100 Netherlands Guilder ........... 12/23/98 (937,872)
3,947,700 Netherlands Guilder ........... 12/30/98 (1,920,944)
3,036,900 Netherlands Guilder ........... 3/26/99 (1,483,948)
2,022,700 Netherlands Guilder ........... 3/29/99 (988,536)
16,588,800 Norwegian Krone ............... 10/29/98 (2,192,465)
1,721,500 Singapore Dollar .............. 12/30/98 (1,061,258)
2,789,600 Singapore Dollar .............. 2/12/99 (1,718,113)
499,050 Singapore Dollar .............. 3/26/99 (307,070)
117,064,000 Spanish Peseta ................ 10/29/98 (751,590)
34,537,500 Swedish Krona ................. 7/15/98 (4,330,553)
14,603,300 Swedish Krona ................. 10/29/98 (1,836,781)
28,080,410 Swedish Krona ................. 12/23/98 (3,536,767)
15,597,800 Swedish Krona ................. 12/30/98 (1,964,915)
28,105,000 Swedish Krona ................. 2/12/99 (3,544,584)
19,657,500 Swedish Krona ................. 3/29/99 (2,482,061)
2,064,000 Swiss Franc ................... 7/15/98 (1,369,905)
2,794,900 Swiss Franc ................... 9/30/98 (1,871,387)
2,425,900 Swiss Franc ................... 10/29/98 (1,629,663)
2,030,475 Swiss Franc ................... 12/23/98 (1,372,502)
6,252,075 Swiss Franc ................... 12/30/98 (4,229,350)
2,879,000 Swiss Franc ................... 1/19/99 (1,951,768)
1,409,000 Swiss Franc ................... 2/12/99 (957,660)
2,854,000 Swiss Franc ................... 3/26/99 (1,948,389)
2,151,300 Swiss Franc ................... 3/29/99 (1,469,170)
-------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(CONTRACT AMOUNT $129,275,000) ............................... $(125,113,003)
=============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
March 31, 1998
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $741,573,532) (Note 1)
See accompanying schedule .......................... $1,005,455,139
Cash and foreign currency (Cost $46,826) ............... 46,408
Receivable for Fund shares sold ........................ 9,453,632
Net unrealized appreciation of forward exchange
contracts (Note 1) ................................... 4,105,914
Dividends and interest receivable ...................... 1,203,981
Unamortized organization costs (Note 5) ................ 12,980
Prepaid expenses ....................................... 2,129
--------------
TOTAL ASSETS ....................................... 1,020,280,183
--------------
LIABILITIES
Payable for investment securities purchased ............ $6,466,656
Payable for Fund shares redeemed ....................... 1,729,824
Investment advisory fee payable (Note 2) ............... 661,748
Transfer agent fees payable (Note 2) ................... 17,570
Custodian fees payable (Note 2) ........................ 16,795
Accrued expenses and other payables .................... 149,870
----------
TOTAL LIABILITIES .................................. 9,042,463
------------
NET ASSETS ................................................. $1,011,237,720
==============
NET ASSETS CONSIST OF
Undistributed net investment income .................... $ 1,863,348
Accumulated net realized gain on securities, forward
exchange contracts and foreign currencies ............ 3,396,288
Net unrealized appreciation on securities, forward
exchange contracts, foreign currencies and net other
assets ............................................... 267,988,488
Par value .............................................. 4,389
Paid-in capital in excess of par value ................. 737,985,207
------------
TOTAL NET ASSETS ................................... $1,011,237,720
==============
NET ASSET VALUE, offering and redemption price per share
($1,011,237,720 / 43,890,504 shares of common stock
outstanding) ........................................... $23.04
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------
Statement of Operations
- -------------------------------------------------------------------------------
For the Year Ended March 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $259,372) ................ $ 9,689,519
Interest ................................................................ 3,076,982
------------
TOTAL INVESTMENT INCOME ............................................. 12,766,501
------------
EXPENSES
Investment advisory fee (Note 2) ........................ $7,652,123
Administration fee (Note 2) ............................. 276,624
Transfer agent fees (Note 2) ............................ 233,519
Custodian fees (Note 2) ................................. 99,912
Legal and audit fees .................................... 36,388
Amortization of organization costs (Note 5) ............. 19,469
Directors' fees and expenses (Note 2) ................... 18,190
Other ................................................... 325,572
Waiver of fees by investment adviser and administrator
(Note 2) .............................................. (128,269)
----------
TOTAL EXPENSES ...................................................... 8,533,528
------------
NET INVESTMENT INCOME ....................................................... 4,232,973
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3)
Net realized gain (loss):
Securities ............................................................ 12,672,600
Forward exchange contracts ............................................ 2,539,174
Foreign currencies and net other assets ............................... (24,251)
------------
Net realized gain on investments during the year ........................ 15,187,523
------------
Net change in unrealized appreciation (depreciation) of:
Securities ............................................................ 200,994,165
Forward exchange contracts ............................................ 2,625,383
Foreign currencies and net other assets ............................... 31,849
------------
Net unrealized appreciation of investments during the year .............. 203,651,397
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ............................. 218,838,920
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $223,071,893
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
3/31/98 3/31/97
------------ ------------
<S> <C> <C>
Net investment income ................................. $ 4,232,973 $ 2,332,921
-------------- ------------
Net realized gain on securities, forward exchange
contracts and currency transactions during the year . 15,187,523 11,510,445
Net unrealized appreciation of securities, forward
exchange contracts, foreign currencies and net other
assets during the year .............................. 203,651,397 26,815,015
-------------- ------------
Net increase in net assets resulting from operations .. 223,071,893 40,658,381
DISTRIBUTIONS:
Distributions to shareholders from net investment
income ............................................ (5,448,502) (2,924,069)
Distributions to shareholders from net realized gain
on investments .................................... (13,982,759) (7,097,006)
Net increase in net assets from Fund share transactions
(Note 4) ............................................ 465,129,709 110,231,566
-------------- ------------
Net increase in net assets ............................ 668,770,341 140,868,872
NET ASSETS
Beginning of year ..................................... 342,467,379 201,598,507
-------------- ------------
End of year (including undistributed net investment
income of $1,863,348 and $1,039,581, respectively) .. $1,011,237,720 $342,467,379
============== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
3/31/98 3/31/97 3/31/96(a) 3/31/95(a) 3/31/94(b)
------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year . $ 16.22 $ 14.29 $ 10.71 $ 9.71 $ 10.00
------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income(c) ......... 0.11 0.13 0.15 0.13 0.01
Net realized and unrealized
gain (loss) on investments ..... 7.31 2.39 3.56 0.93 (0.30)
------------ ------------ ------------ ------------ ------------
Total from investment operations 7.42 2.52 3.71 1.06 (0.29)
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS:
Dividends from net
investment income ............ (0.17) (0.17) (0.11) (0.06) --
Distributions from
net realized gains ........... (0.43) (0.42) (0.02) -- --
------------ ------------ ------------ ------------ ------------
Total distributions .......... (0.60) (0.59) (0.13) (0.06) --
------------ ------------ ------------ ------------ ------------
Net asset value, end of year ..... $ 23.04 $ 16.22 $ 14.29 $ 10.71 $ 9.71
============ ============ ============ ============ ============
Total return(d) .................. 46.14% 17.75% 34.70% 11.02% (2.90)%
============ ============ ============ ============ ============
Ratios/Supplemental Data:
Net assets, end of year (in 000's) $ 1,011,238 $ 342,467 $ 201,599 $ 58,856 $ 16,133
Ratio of operating expenses to
average net assets(e) .......... 1.39% 1.39% 1.39% 1.74% 2.26%(f)
Ratio of net investment income
to average net assets .......... 0.69% 0.92% 1.13% 1.25% 0.64%(f)
Portfolio turnover rate .......... 6% 16% 9% 4% 0%(g)
Average commission rate
(per share of security)(h) ..... $ 0.0232 $ 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, 1998, 1997, 1996 and 1995 and the
3.75-month period ended March 31, 1994 was $0.11, $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, 1998, 1997, 1996 and 1995 and the 3.75-month period ended March 31,
1994 were 1.41%, 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, by the Investment Adviser or at fair
value as determined by or under the direction of the Company's Board of
Directors. Portfolio securities or other assets, listed on a U.S. national
securities exchange or through any system providing for same day publication of
actual prices (and not subject to restrictions against sale by the Fund on such
exchange or system) are valued at the last quoted sale price prior to the close
of regular trading. Portfolio securities and other assets listed on a foreign
exchange or through any system providing for same day publication of actual
prices are valued at the last quoted sale price available before the time when
assets are valued. Portfolio securities and other assets for which there are no
reported sales on the valuation date are valued at the mean between the last
asked price and the last bid price prior to the close of regular trading. When
the Investment Adviser determines that the last sale price prior to valuation
does not reflect current market value, the Investment Adviser will determine the
market value of those securities or assets in accordance with industry practice
and other factors considered relevant by the Investment Adviser. All other
securities and assets for which current market quotations are not readily
available and those securities which are not readily marketable due to
significant legal or contractual restrictions will be valued by the Investment
Adviser or at fair value as determined by or under the direction of the Board of
Directors. Debt securities with a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market value, or by reference to
other factors (i.e. pricing services or dealer quotations) by the Investment
Adviser.
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 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, OTHER RELATED PARTY TRANSACTIONS, AND
ADMINISTRATION FEE
The Company, on behalf of the Fund, has entered into an investment advisory
agreement (the "Advisory Agreement") with Tweedy, Browne Company LLC ("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, 1998, Tweedy, Browne voluntarily waived fees of $105,730.
The current and retired general partners and their families, as well as
employees of Tweedy, Browne, the investment adviser to the Fund, have
approximately $29.7 million of their own money invested in the Fund.
The Company, on behalf of the Fund, has entered into an administration
agreement (the "Administration Agreement") with First Data Investor Services
Group, Inc. ("the Administrator"), a wholly owned subsidiary of First Data
Corporation. Under the Administration Agreement, the Company pays the
Administrator 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, 1997 to May 15, 1997, the Administrator
voluntarily waived administration fees of $22,539. For the period from May 16,
1997 to March 31, 1998, the Administrator did not waive any administration fees.
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 for a
minimum monthly fee of $3,000 for fund accounting services for the Fund, not to
be aggregated with fees for fund administration services.
No officer, director or employee of Tweedy, Browne, the Administrator 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 Fund pays each
director who is not an officer, director or employee of Tweedy, Browne, the
Administrator or any of their affiliates $8,000 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 Trust, 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, 1998, Boston Safe did not waive any custody fees. On May 12,
1997, First Data Investors Services Group, Inc. replaced Unified Advisors, 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.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments for the year ended March 31, 1998, aggregated
$406,746,627 and $31,400,244, respectively.
At March 31, 1998, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost, was
$274,028,673 and the aggregate gross unrealized depreciation for all securities,
in which there was an excess of tax cost over value, was $10,148,899.
For the year ended March 31, 1998, the Fund incurred total brokerage
commissions of $636,393.
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:
<TABLE>
<CAPTION>
YEAR ENDED 3/31/98 YEAR ENDED 3/31/97
-----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 29,306,959 $ 598,418,949 9,381,470 $146,286,093
Reinvested 854,761 17,761,820 599,957 9,419,276
Redeemed (7,390,306) (151,051,060) (2,966,055) (45,473,803)
- ------------------------------------------------------------------------------------------------------------
Net Increase 22,771,414 $ 465,129,709 7,015,372 $110,231,566
- ------------------------------------------------------------------------------------------------------------
</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. LINE OF CREDIT
Effective October 1, 1996, the Company and Mellon Trust, N.A. have entered
into a Line of Credit Agreement (the "Agreement") which provides the Fund with a
$50 million line of credit, primarily for temporary or emergency purposes,
including the meeting of redemption requests that might otherwise require the
untimely disposition of securities. The Fund may borrow up to the lesser of $50
million or one-third of its net assets. Interest is payable at the bank's money
market rate plus 0.75% on an annualized basis. Under the Agreement, the 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, 1998, 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, 1998, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the four 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, 1998, by correspondence with the custodian and
brokers, or by 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, 1998, and the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
financial highlights for each of the four years in the period then ended and for
the period from December 8, 1993 (commencement of operations) to March 31, 1994,
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 12, 1998
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1998
For the fiscal year ended March 31, 1998, the amount of long-term capital
gain designated by the Fund was $7,211,443, of which $5,992,206 and $1,219,237
is taxable as 28% rate gain and 20% rate gain, respectively, for federal income
tax purposes.
Of the ordinary income (including short-term capital gain) distributions
made by the Fund during the fiscal year ended March 31, 1998, 59.95% qualify for
the dividend received deduction available to corporate shareholders.
<PAGE>
TWEEDY, BROWNE FUND INC.
52 Vanderbilt Avenue, NY, NY 10017
800-432-4789
