As filed with the Securities and Exchange Commission on July 29, 1998.
Securities Act File No. 33-57724
Investment Company Act File No. 811-7458
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
--
Pre-Effective Amendment No. __ __
Post-Effective Amendment No. 8 X
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
--
Amendment No. 11 X
Tweedy, Browne Fund Inc.
(Exact name of Registrant as Specified in Charter)
52 Vanderbilt Avenue, New York, NY 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 916-0600
Name and Address of Agent for Service: Copies to:
M. Gervase Rosenberger, Esq. Richard T. Prins, Esq.
Tweedy, Browne Company L.P. Skadden, Arps, Slate, Meagher & Flom
52 Vanderbilt Avenue 919 Third Avenue
New York, NY 10017 New York, NY 10022
Coleen Downs Dinneen, Esq.
First Data Investor Services Group, Inc.
One Exchange Place
Boston, MA 02109
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of the Registration Statement
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b), or
X on July 29, 1998 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1), or on
_____________ pursuant to paragraph (a)(1) 75 days after
filing pursuant to paragraph (a)(2) on _____________ pursuant
to paragraph (a)(2) of Rule 485
<PAGE>
TWEEDY, BROWNE FUND INC.
FORM N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
<S> <C> <C>
Item Number of
Part A Form N-1A Location or Caption
Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Information
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Investment Objectives and
of Registrant Policies; Global Fund;
American Fund
Item 5. Management of the Fund Why Invest in the Funds?;
Operation of the Funds;
Additional Information; Purchasing, Redeeming and Exchanging
Shares
Item 5A. Management's Discussion Not Applicable
of Fund Performance
Item 6. Capital Stock and Operation of the Funds
Other Securities
Item 7. Purchase of Securities Purchasing, Redeeming and
Being Offered Exchanging Shares
Item 8. Redemption or Repurchase Purchasing, Redeeming and
Exchanging Shares
Item 9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item Number of
Part B Form N-1A Location or Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information Not Applicable
and History
Item 13. Investment Objectives Investment Objectives
and Policies and Policies
Item 14. Management of the Fund Operation of the Funds;
Additional Information
Item 15. Control Persons and Principal Operation of the Funds
Holdings of the Fund
Item 16. Investment Advisory and Operation of the Funds;
Other Services Additional Information
Item 17. Brokerage Allocation Portfolio Transactions
and Other Practices
Item 18. Capital Stock and Operation of the Funds;
Other Securities Additional Information
Item 19. Purchase, Redemption and Net Asset Value
Pricing of Securities Being
Offered
Item 20. Tax Status Taxes
Item 21. Underwriters Operation of the Funds
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE>
The Date of this Prospectus is August 1, 1998
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
52 Vanderbilt Avenue Shareholder Services: 800-432-4789, Press 2
New York, NY 10017 Daily NAV Prices: 800-432-4789, Press 2
For Special Assistance In
Opening A New Account: 800-432-4789, Press 2
Fund Information Kit: 800-432-4789, Press 1
----------------------------------- --------------------------
[GLOBAL FUND LOGO]
Tweedy, Browne Global Value Fund (the "Global Fund")
seeks long-term growth of capital by investing throughout the world in a
diversified portfolio consisting primarily of marketable equity securities,
including common stocks, preferred stocks and securities representing the right
to acquire stocks. The Global Fund may also invest in debt instruments, although
income is an incidental consideration. The Global Fund expects to invest
primarily in foreign securities, although investments in U.S. securities are
permitted and will be made when opportunities in U.S. markets appear more
attractive.
[AMERICAN FUND LOGO]
Tweedy, Browne American Value Fund (the "American Fund") seeks long-term
growth of capital by investing in a diversified portfolio consisting primarily
of domestic equity securities of U.S. issuers, including common stocks,
preferred stocks and securities representing the right to acquire stocks. The
American Fund may invest up to 20% of its portfolio in foreign securities when
opportunities in foreign markets appear attractive.
Both the Global Fund and the American Fund (the "Funds") are diversified
series of Tweedy, Browne Fund Inc., an open-end management investment company
(the "Corporation").
---------- o ----------
The Funds are sold without any sales charges or 12b-1 fees and are
accordingly purely "no-load." The minimum initial investment for each Fund is
$2,500 ($500 for both Traditional and Roth IRAs and similar accounts) and
subsequent investments must be a minimum of $250.
The Funds' investment adviser is Tweedy, Browne Company LLC ("Tweedy,
Browne" or the "Investment Adviser") which is a successor to Tweedy & Co.
founded in 1920, which has managed assets since 1968. Tweedy, Browne currently
manages approximately $6.9 billion in client funds, including approximately $2.8
billion in foreign securities. The current Managing Directors and retired
principals and their families, as well as employees of Tweedy, Browne, have more
than $386.3 million in portfolios combined with or similar to client portfolios,
including approximately $38.3 million in the Global Fund and $32.0 million in
the American Fund.
This prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing. Please retain it for future
reference.
If you require more detailed information, a Statement of Additional
Information dated August 1, 1998 (the "Statement of Additional Information"), as
amended from time to time, may be obtained without charge by writing to the
address or calling the number above. The Statement of Additional Information,
which is incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission (the "SEC"). In addition, the SEC maintains a
web site (http://www.sec.gov) that contains information incorporated by
reference to this Prospectus and the Statement of Additional Information and
other information regarding registrants that file electronically with the SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
This information is designed to help you understand the various costs and
expenses of investing in the Global Fund and the American Fund. By reviewing
this table and those in other mutual funds' prospectuses, you can compare the
Funds' fees and expenses with those of other funds. You pay no commissions to
purchase or redeem shares of either Fund. As a result, all of your investment
goes to work for you. How to Compare the Global Fund and the American Fund to
Other Mutual Funds
1) Shareholder transaction expenses:
Expenses charged directly to your individual account in each Fund for
various transactions.
<TABLE>
<CAPTION>
<S> <C> <C>
Global Fund American Fund
Sales Commissions to Purchase Shares (sales load)............................NONE NONE
Commissions to Reinvest Dividends............................................NONE NONE
Redemption Fees..............................................................NONE NONE
2) Annual operating expenses:
Expenses paid by either Fund before it distributes its net investment
income, expressed as a percentage of the Funds' average daily net assets as
of fiscal year ended March 31, 1998.
Global Fund American Fund
Investment Advisory Fee (after voluntary fee waiver).......................1.25% 1.23%*
12b-1 Fees.................................................................NONE NONE
Other Expenses (after voluntary fee waiver)................................0.17%* 0.16%
Total Fund Operating Expenses (after voluntary fee waiver).................1.42%* 1.39%*
</TABLE>
The purpose of the above table is to assist the investor in understanding the
various costs and expenses that investors in the Global Fund and the American
Fund will bear directly or indirectly.
Without the voluntary fee waiver of the administrator, Other Expenses would have
been 0.18% for the Global Fund. Without the voluntary fee waiver, the investment
advisory fee would have been 1.25% for the American Fund. Absent the voluntary
fee waivers, Total Fund Operating Expenses would have been 1.43% and 1.41% for
the Global Fund and American Fund, respectively.
<PAGE>
"Total Fund Operating Expenses" in the table on the preceding page is based
on the Funds' fiscal year ended March 31, 1998. See "Operation of the Funds --
Investment Adviser" for further information on the investment advisory fees paid
by each Fund.
Example
Based on the level of total operating expenses listed on the preceding
page, the total expenses relating to a $1,000 investment in either Fund,
assuming a 5% annual return and redemption at the end of each period, are listed
below. Investors do not pay these expenses directly; they are paid by each Fund
before it distributes its net investment income to shareholders.
Global American
Fund Fund
One Year..............................................$....14. $ 14
Three Years...........................................$....45. $ 44
Five Years............................................$....78. $ 76
Ten Years.............................................$...170. $ 167
This example assumes reinvestment of all dividends and distributions and
that the percentage amounts listed under "Total Fund Operating Expenses" remain
the same each year. This example should not be considered a representation of
past or future expenses or returns. Actual expenses and returns vary from year
to year and may be higher or lower than those shown.
<PAGE>
FINANCIAL HIGHLIGHTS
Tweedy, Browne Global Value Fund
The following information for the fiscal year ended March 31, 1998 has been
audited by Ernst & Young LLP, independent auditors, whose report thereon appears
in the Global Fund's Annual Report, dated March 31, 1998. This information
should be read in conjunction with the financial statements and related notes
that also appear in the Global Fund's Annual Report.
- -------------------------------------------------------------------------------
TWEEDY, BROWNE GLOBAL VALUE FUND
(For a Fund share outstanding throughout each period)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
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)
3/31/97 3/31/97
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) 4.62 2.18 2.81 (0.68) 2.26
on investments
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
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 (0.08) (0.36) -- -- --
income
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
Distributions from net realized gains (0.49) (0.57) (0.05) (0.06) --
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
Distributions in excess of net realized -- -- (0.15) (0.10) --
gains
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
Total distributions (1.36) (1.12) (0.20) (0.16) --
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
Net asset value, end of year $ 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 1.42% 1.58% 1.60% 1.65% 1.73%(g)
net assets (f)
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
Ratio of net investment income (loss) 1.05% 0.73% 1.15% 1.08% (0.00)%(g)(h)
to average net assets
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
Portfolio turnover rate 16% 20% 17% 16% 14%
- ----------------------------------------- ------------- --------------- --------------- ---------------- ------------------
<FN>
(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 Fundcommenced 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 ratios 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 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.
</FN>
</TABLE>
Tweedy, Browne American Value Fund
The following information for the fiscal year ended March 31, 1998 has been
audited by Ernst & Young LLP, independent auditors, whose report thereon appears
in the American Fund's Annual Report, dated March 31, 1998. This information
should be read in conjunction with the financial statements and related notes
that also appear in the American Fund's Annual Report.
- -------------------------------------------------------------------------------
TWEEDY, BROWNE AMERICAN VALUE FUND
(For a Fund share outstanding throughout each period)
- ----------------------------------- --------------- --------------- -----------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
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)
Net asset value, beginning of year $ 16.22 $ 14.29 $ 10.71 $ 9.71 $ 10.00
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
Income from investment operations:
Net investment income (loss) (c) 0.11 0.13 0.15 0.13 0.01
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
Net realized and unrealized gain 7.31 2.39 3.56 0.93 (0.30)
(loss) on investments
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
Total from investment operations 7.42 2.52 3.71 1.06 (0.29)
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
Distributions:
Dividends from net investment (0.17) (0.17) (0.11) (0.06) --
income
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
Distributions from net realized (0.43) (0.42) (0.02) -- --
gains
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
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 1.39% 1.39% 1.39% 1.74% 2.26%(f)
average net assets (e)
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
Ratio of net investment income to 0.69% 0.92% 1.13% 1.25% 0.64%(f)
average net assets
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
Portfolio turnover rate 6% 16% 9% 4% 0%(g)
- ----------------------------------- --------------- --------------- --------------- ----------------- -----------------
<FN>
(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.
</FN>
</TABLE>
<PAGE>
PERFORMANCE OF THE FUNDS
The following chart illustrates the unaudited total returns of the Global Fund
and the American Fund for the periods specified.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------ ------------------------ --------------------
Average Annual Value of $10,000
TWEEDY, BROWNE GLOBAL VALUE FUND Total Return(1)(2) Invested at Inception
- ------------------------------------------------------------------ ------------------------ --------------------
From inception (6/15/93) to 3/31/98 18.79% $22,823
- ------------------------------------------------------------------ ------------------------ --------------------
One year period ended 3/31/98 33.09% ---
- ------------------------------------------------------------------ ------------------------ --------------------
From inception (6/15/93) to 6/30/98 17.87% $22,908
- ------------------------------------------------------------------ ------------------------ --------------------
One year period ended 6/30/98 21.33% ---
- ------------------------------------------------------------------ ------------------------ --------------------
TWEEDY, BROWNE AMERICAN VALUE FUND
- ------------------------------------------------------------------ ------------------------ --------------------
From inception (12/8/93) to 3/31/98 23.66% $24,985
- ------------------------------------------------------------------ ------------------------ --------------------
One year period ended 3/31/98 46.14% ---
- ------------------------------------------------------------------ ------------------------ --------------------
From inception (12/8/93) to 6/30/98 23.05% $25,755
- ------------------------------------------------------------------ ------------------------ --------------------
One year period ended 6/30/98 30.25% ---
- ------------------------------------------------------------------ ------------------------ --------------------
<FN>
(1) See page 17, "Performance Information," for a discussion of "total return."
These unaudited figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made by
the Fund during the period were reinvested. The performance shown
represents past performance and is not a guarantee of future results. A
Fund's share price and investment return will vary with market conditions,
and the principal value of shares, when redeemed, may be more or less than
original cost.
(2) These figures reflect waiver of fees.
</FN>
</TABLE>
WHY INVEST IN THE FUNDS?
Experienced Management. Tweedy, Browne, founded in 1920, is a registered
investment adviser and, as of June 30, 1998, managed in excess of $6.9 billion,
which includes several private investment funds. The Investment Adviser is owned
by its five Managing Directors, Christopher H. Browne, William H. Browne, John
D. Spears, Thomas H. Shrager and Robert Q. Wyckoff, Jr. and a wholly-owned
subsidiary of Affiliated Managers Group, Inc. ("AMG"). AMG's subsidiary
purchased a majority interest in, and became the manager member of, Tweedy,
Browne in October 1997. In its entire history, the Investment Adviser has had
only eleven principals, five of whom are currently active. The operations of the
Investment Adviser are managed by its Management Committee consisting of
Christopher H. Browne, William H. Browne and John D. Spears, who have been with
the Investment Adviser for nineteen to twenty-eight years and have been
principals working with each other for almost twenty years. No Managing Director
has ever left the Investment Adviser to join another investment firm.
Commitment of the Investment Adviser. Tweedy, Browne was founded as Tweedy
& Co. in 1920 and has extensive experience in selecting undervalued stocks in
U.S. domestic equity markets. Tweedy, Browne's history is grounded in
undervalued securities, first as a market maker, then as an investor and
investment adviser. The Investment Adviser does not attempt to be all things to
all people, but instead pursues a value-oriented approach to investment
management that is based on the work of the late Benjamin Graham, co-author of
the first textbook on investment research, Security Analysis (1934), and author
of The Intelligent Investor (1949). Tweedy, Browne began investing outside the
United States in 1983 by applying the same principles of value investing that it
has applied to U.S. securities for thirty-eight years.
Tweedy, Browne strongly believes in the opportunities available to value
investors on both a global and domestic basis. So much so that the current and
retired principals of Tweedy, Browne and their families and Tweedy, Browne
employees have more than $386.3 million of their personal funds invested in
portfolios combined with or similar to their clients' portfolios, including
approximately $38.3 million in the Global Fund and $32.0 million in the American
Fund. They own what their clients own.
<PAGE>
Investment Principles. The investment management principles practiced by
the Investment Adviser derive from the work of the late Benjamin Graham,
professor of investments at Columbia Business School and author of Security
Analysis and The Intelligent Investor. The Investment Adviser's research seeks
to appraise the worth of a company, what Graham called "intrinsic value", by
determining its acquisition value, or by estimating the collateral value of its
assets and/or cash flow. The term "intrinsic value" may also be referred to as
private market value, breakup value or liquidation value. The process is more
closely related to credit analysis, for as Will Rogers once said, "I'm more
concerned about the return of my money than the return on my money". Investments
are made at a significant discount to intrinsic value, normally 40% to 50%,
which Graham called an investor's "margin of safety". Investments are sold as
the market price approaches intrinsic value, with the proceeds reinvested in
other situations offering a greater discount to intrinsic value. These
principles result in a contrarian approach to investment, forcing the purchase
of securities in generally declining stock markets, conversely forcing sales as
stock markets or individual companies achieve new highs.
Most investments in Tweedy, Browne portfolios have one or more of the
following investment characteristics: low stock price in relation to book value,
low price-to-earnings ratio, low price-to-cash-flow ratio, above average
dividend yield, low price-to-sales ratio as compared to other companies in the
same industry, low corporate leverage, low share price, purchases of a company's
own stock by the company's officers and directors, company share repurchases, a
stock price that has declined significantly from its previous high price and/or
small market capitalization. Academic research and studies have indicated an
historical statistical correlation between each of these investment
characteristics and above average investment rates of return over long
measurement periods.
Tweedy, Browne has compiled a complimentary booklet, included with this
prospectus, entitled WHAT HAS WORKED IN INVESTING. We encourage all current and
prospective shareholders to read it. It describes 44 academic studies of certain
investment criteria that have produced high rates of return. In the 44 studies
included in WHAT HAS WORKED IN INVESTING, exceptional returns were found for
stocks with one or more of the following investment characteristics: low stock
price in relation to book value, net current assets, earnings, cash flow,
dividends or previous share price; small market capitalization; and a
significant pattern of stock purchases by one or more insiders (officers and
directors), or by the company itself. The study periods ranged from 1 to 55
years; indicated annual returns ranged from 12.1% to 49.6% and indicated annual
returns in excess of the market index used in the studies ranged from 2.7% to
33.5% for the various characteristics and historical periods that were examined.
Approximately one-half of the studies examined in the booklet focused on U.S.
stocks and the balance focused on mature foreign stock markets. The investment
characteristics explained in this booklet, which are "value" oriented
characteristics, have been the core of Tweedy, Browne's investment philosophy
and stock selection decision making process for more than 30 years, and are the
basis for the management of the American Fund and the Global Fund.
The returns from the American Fund and the Global Fund will differ from
those indicated by these studies for a number of reasons. Tweedy, Browne does
not make its portfolio decisions in accordance with any one particular academic
study or computer model, but instead uses empirical studies of historically
successful investment characteristics as a framework for its stock selection
screening and decision making process. In addition, Tweedy, Browne assesses and
weighs qualitative information concerning specific companies that meet its
initial screening criteria. Finally, the studies analyze only historical data
and generally assume an equal dollar investment in each stock and calculate
returns without any reduction for advisory fees or other investment expenses,
which are incurred by the American Fund and the Global Fund.
Managing Directors of the Investment Adviser. The following is a brief
biography of each of the Managing Directors of Tweedy, Browne:
Christopher H. Browne has been with the Investment Adviser since 1969 and
is a member of the firm's Management Committee. He is a Managing Director of
Tweedy, Browne Company LLC, and a general partner of TBK Partners, L.P. and
Vanderbilt Partners, L.P., both private investment partnerships. Mr. Browne is
on the Board of Directors of Tweedy, Browne Fund Inc. Mr. Browne is a Trustee of
the University of Pennsylvania and sits on its Investment Board. He is also a
Trustee and a member of The Council of The Rockefeller University. Mr. Browne
holds a B.A. degree from the University of Pennsylvania.
William H. Browne has been with the Investment Adviser since 1978 and is a
member of the firm's Management Committee. He is a Managing Director of Tweedy,
Browne Company LLC, and of TBK Partners, L.P. and Vanderbilt Partners, L.P.,
both private investment partnerships. Mr. Browne is an officer of Tweedy, Browne
Fund Inc. He also serves as a Director of Fairchild Aerospace Corp. and Dornier
Luftfahrt GmbH. Additionally, he is a Trustee of Colgate University. Mr. Browne
holds the degrees of B.A. from Colgate University and M.B.A. from Trinity
College in Dublin, Ireland.
John D. Spears joined the Investment Adviser in 1974 and is a member of the
firm's Management Committee. He is a Managing Director of Tweedy, Browne Company
LLC, and a general partner of TBK Partners, L.P. and Vanderbilt Partners, L.P.,
both private investment partnerships. Mr. Spears is an officer of Tweedy, Browne
Fund Inc. Previously, he had been in the investment business for five years with
Berger, Kent Associates; Davic Associates; and Hornblower & Weeks-Hemphill,
Noyes & Co. Mr. Spears studied at the Babson Institute of Business
Administration, Drexel Institute of Technology and the University of
Pennsylvania -- The Wharton School.
Thomas H. Shrager has been associated with the Investment Adviser since
1989 and is a Managing Director of Tweedy, Browne Company LLC. Previously he had
worked in mergers and acquisitions at Bear, Stearns, and as a consultant for
Arthur D. Little. He received a B.A. and a Masters in International Affairs from
Columbia University.
Robert Q. Wyckoff, Jr. has been associated with the Investment Adviser
since 1991 and is a Managing Director of Tweedy, Browne Company LLC. Prior to
joining the Investment Adviser, he held positions with Bessemer Trust, C.J.
Lawrence, J&W Seligman, and Stillrock Management. He received a B.A. from
Washington & Lee University, and a J.D. from the University of Florida School of
Law.
Reducing Currency Risk Through Currency Hedging. Both the Global Fund's and
the American Fund's share price will tend to reflect the movements of the
different securities markets in which they are invested and, to the degree not
hedged, the foreign currencies in which investments are denominated. Tweedy,
Browne intends to hedge both Funds' foreign securities investments back to the
U.S. dollar where practicable except when, in its judgment, currency movements
affecting particular investments are likely to improve the performance of the
Funds. Possible losses from changes in currency exchange rates are primarily a
risk of investing unhedged in foreign stocks. While a stock may perform well on
the London Stock Exchange, if the pound declines against the dollar, gains can
disappear or become losses. Currency fluctuations are more extreme than stock
market fluctuations. In the more than thirty-eight years in which the Managing
Directors of Tweedy, Browne have been investing, the Standard & Poor's Index of
500 stocks has declined on an annual basis more than 20% only once, in 1974. By
contrast, the dollar/pound/deutsche mark relationship has moved more than 20% on
numerous occasions. In the last twenty years, there was a four to five-year
period, during 1979-1984, when the U.S. dollar value of British, French, German
and Dutch currency declined by 45% to 58%. Accordingly, the strength or weakness
of the U.S. dollar against these foreign currencies may account for part of the
Funds' investment performance although both the Global Fund and the American
Fund intend to minimize currency risk through hedging activities.
Pursuit of Long-Term Capital Growth. The Managing Directors of Tweedy,
Browne believe that there are substantial opportunities for long-term capital
growth from professionally managed portfolios of securities selected from
foreign and domestic equity markets. A security's long-term capital growth based
on a value-oriented investment approach is generally realized over a three-year
period, although this period may be significantly shorter or longer depending on
the circumstances. Investments in the Global Fund will focus on those markets
around the world where Tweedy, Browne believes value is more abundant.
Investments in the American Fund will focus on those issues in the U.S. market
that Tweedy, Browne believes will provide greater value. With both Funds,
Tweedy, Browne will consider all market capitalization sizes for investment with
the result that a significant portion of the two portfolios may be invested in
smaller (generally under $1 billion as defined by the SEC) and medium (up to $5
billion as defined by Morningstar) capitalization companies. Tweedy, Browne
believes smaller and medium capitalization companies can provide enhanced
long-term investment results in part because the possibility of a corporate
acquisition may be greater than with large, multinational companies.
Associated Risk Factors. The Funds' investment techniques involve potential
risks. These include the special economic, currency exchange and political risks
of investing in non-U.S. securities, unrated and lower credit quality debt
obligations, smaller capitalization stocks, illiquid securities and ancillary
portfolio practices such as hedging currency risk, short sales and lending of
securities. For further information regarding these and other investment
considerations, please see "Other Investments of the Funds -- Associated Risk
Factors" below and "Investment Objectives and Policies -- Risk Considerations of
the Funds" in the Statement of Additional Information. As with any long-term
investment, the value of the Funds' shares when sold may be higher or lower than
when purchased. Investment in shares of either Fund should not be considered a
complete investment program, which for many investors may include cash or fixed
income investments.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Except as otherwise indicated, the Funds' investment objectives and
policies are not fundamental and thus may be changed without shareholder votes.
There can be no assurance that the Funds' respective investment objectives will
be achieved.
[GLOBAL FUND LOGO]
The Global Fund. The Global Fund seeks long-term growth of capital by
investing throughout the world in a diversified portfolio consisting primarily
of marketable equity securities, including common stocks, preferred stocks and
securities representing the right to acquire stocks. The Global Fund may also
invest in debt securities, although income is an incidental consideration. The
Global Fund expects to invest primarily in foreign securities although
investments in U.S. securities are permitted and will be made when opportunities
in U.S. markets appear more attractive.
Global Fund's Worldwide Opportunities. The Global Fund was formed for
investors who would like to participate in a diversified fund which seeks
undervalued investment opportunities wherever they may be in the developed
world. Although economies around the world are becoming more integrated, local
variances in economic and stock market cycles can lead to a greater or lesser
number of investment opportunities in different stock markets or different
times. For this reason, the ability to invest on a global basis may provide
increased opportunities to the value investor than a fund which is restricted to
one country. Investing globally also increases the number of potential
investment opportunities that would meet Tweedy, Browne's investment criteria,
which are discussed below. For temporary defensive purposes, the Fund may be
invested 100% in U.S. issues, although under normal circumstances it is expected
that the Fund's portfolio will consist primarily of foreign investments.
Through the years, Tweedy, Browne has developed an understanding of the
different reporting and accounting procedures characteristic of non-U.S.
companies and has acquired financial databases that permit it to screen more
than 10,000 companies in much the same way that it screens U.S. companies. The
ability to screen so many non-U.S. companies is the key to Tweedy, Browne's
decision to sponsor the Global Fund since they are now able to research and
analyze many small and medium capitalization companies rather than concentrate
on the more obvious large capitalization, multinational corporations.
[AMERICAN FUND LOGO]
The American Fund. The American Fund seeks long-term growth of capital by
investing in a diversified portfolio of U.S. equity securities consisting
primarily of common stocks, preferred stocks and securities representing the
right to acquire stocks. The American Fund expects to invest primarily in
domestic equity securities although it may invest up to 20% of its assets in
foreign securities when opportunities in foreign markets appear attractive. The
American Fund may also invest in debt securities, although income is an
incidental consideration.
The American Fund invests in domestic companies of varying sizes that the
Fund's Investment Adviser believes are selling at a substantial discount to the
underlying value of the assets, earning power or private market value. It is
expected that investments will be spread broadly throughout U.S. equity markets.
Tweedy, Browne believes that its extensive investment experience in the U.S.
domestic equity markets, guided by investment principles that feature
undervalued stock selection and portfolio diversification, offers value
investors a sensible strategy for long-term profits.
American Fund's Domestic Opportunities. The American Fund was formed for
long-term value investors who desire to invest primarily in the United States.
The equity capitalization of the United States is the largest in the world,
comprising more than one-third of the Morgan Stanley Capital International
(MSCI) World Index. The American Fund offers investors the opportunity to invest
in a diversified portfolio of primarily domestic, undervalued securities whose
market price may be well below the stock's intrinsic value. The American Fund's
portfolio consists of many of the same securities which are owned by the
separate accounts and private investment funds managed by the Managing Directors
of Tweedy, Browne, including those in which they participate.
OTHER INVESTMENTS OF THE FUNDS
The Global Fund and the American Fund generally invest in equity
securities of established companies (i.e., companies with at least three years'
business operations) listed on U.S. or foreign securities exchanges, but also
may invest in securities traded over-the-counter or privately. Equity securities
include common stock, preferred stock, securities representing the right to
acquire stock (such as convertible debentures, options and warrants) and
depository receipts for any of the above. Depository receipts are utilized to
make investing in a particular foreign security more convenient for U.S.
investors. Depository receipts that are not sponsored by the issuer may be less
liquid and there may be less readily available public information about the
issuer.
Both the Global Fund and the American Fund may also invest in
non-convertible debt instruments of governments, government agencies,
supranational agencies and companies when the Investment Adviser believes the
potential for appreciation will equal or exceed the total return available from
investments in equity securities. These debt instruments will be predominantly
investment-grade securities, that is, those rated Aaa, Aa, A or Baa by Moody's
Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB by Standard & Poor's
Ratings Services, a division of McGraw-Hill Companies, Inc. ("S&P") or those of
equivalent quality as determined by the Investment Adviser. Each Fund may not
invest more than 15% of its total assets in debt securities rated below Baa by
Moody's, or below BBB by S&P or deemed by the Investment Adviser to be of
comparable quality. Each Fund may invest in securities which are rated as low as
C by Moody's or D by S&P at the time of purchase. Securities rated D may be in
default with respect to payment of principal or interest. Securities rated below
BBB or Baa are typically referred to as "junk bonds" and have speculative
characteristics.
For liquidity and flexibility, each Fund may also invest in cash or
investment grade short-term securities. The Funds may also engage in strategic
transactions as described below for hedging purposes and to seek to increase
gain.
For further information regarding these investments, see "Associated Risk
Factors" below and the Statement of Additional Information.
Other Portfolio Transactions
As a means of earning income for periods as short as overnight, both
the Global Fund and the American Fund may enter into repurchase agreements with
selected banks and broker/dealers. Under a repurchase agreement, the Funds
acquire securities, subject to the seller's agreement to repurchase at a
specified time and price. Each Fund does not expect to utilize repurchase
agreements with respect to more than 5% of its assets except for short-term
investment of excess cash. The Funds may also sell securities short or lend
portfolio securities to dealers or others with respect to up to 25% of its
assets and may buy securities on a when-issued basis and enter into delayed
delivery and forward commitment transactions.
Strategic Transactions
The Global Fund and the American Fund may, but are not required to, utilize
various other investment strategies as described below. Such strategies are
generally accepted as modern portfolio management techniques and are regularly
utilized by many mutual funds and other institutional investors. Techniques and
instruments may change over time as new instruments and strategies are developed
or regulatory changes occur.
In the course of pursuing these investment strategies, each Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Borrowing
The Global Fund and the American Fund each may borrow up to one-third of
its total assets from banks for use in connection with Strategic Transactions,
as a temporary measure for extraordinary or emergency purposes, in connection
with clearance of transactions or to pay for redemptions. Except when borrowing
in connection with Strategic Transactions, a Fund will not purchase any security
when any borrowings are outstanding. The Funds' borrowings in connection with
Strategic Transactions will be limited to the purchase of liquid high grade
securities to post as collateral or satisfy segregation requirements with
respect to such transactions. The Funds do not enter into any of such borrowings
for the purpose of earning incremental returns in excess of borrowing costs from
investments made with such funds.
<PAGE>
Associated Risk Factors
The Global Fund's and the American Fund's risks are determined by the
nature of the securities each holds and the portfolio management strategy for
each used by Tweedy, Browne. The following are descriptions of certain risks
related to the investment policies and techniques that the Funds are permitted
to use from time to time.
Foreign Securities. Investing in foreign securities involves economic and
political considerations not typically found in U.S. markets. These
considerations include changes in exchange rates and exchange rate controls
(which may include suspension of the ability to transfer currency from a given
country), costs incurred in conversions between currencies, non-negotiable
brokerage commissions, less publicly available information, different accounting
standards, lower trading volume, delayed settlements and greater market
volatility, the difficulty of enforcing obligations in other countries, less
securities regulation, different tax provisions (including withholding on
dividends paid to each Fund), war, expropriation, political and social
instability and diplomatic developments.
These considerations generally are more of a concern in developing
countries, inasmuch as their economic systems are generally smaller and less
diverse and mature and their political systems less stable than those in
developed countries. The Funds seek to mitigate the risks associated with these
considerations through diversification and active professional management.
Strategic Transactions. Strategic Transactions have risks associated with
them including possible default by the other party to the transaction,
illiquidity and, to the extent the Investment Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. The
use of currency transactions can result in the Funds' incurring losses as a
result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency.
Small Capitalization Companies. The equity securities of small
capitalization companies often exhibit more volatile trading patterns than
securities of larger companies. Often they are less established companies and
may have a more highly leveraged capital structure, less experienced management,
greater dependence on a few customers and similar factors that make their
performance susceptible to greater fluctuation.
Illiquid Securities. Disposition of illiquid securities often takes more
time than for more liquid securities, may result in higher selling expenses and
may not be able to be made at desirable prices or at the prices at which such
securities have been valued by the Fund.
Other Portfolio Transactions. If the seller under a repurchase agreement
becomes insolvent, the Fund's right to dispose of the securities may be
restricted or delayed. Lending of securities can result in a failure to deliver
the original securities by the borrower, and similar risks with respect to
disposition of collateral. When issued and delayed delivery securities
transactions and forward commitments involve potential loss to the Funds if the
counterparty fails to perform. If one of the Funds sells securities short, the
Fund will incur a loss if the security does not decrease in value by more than
the cost of maintaining the short position.
Redemptions-in-Kind. The Funds are authorized to pay for redemptions
in-kind on redemptions in excess of $250,000 by any one shareholder in any
three-month period. A shareholder receiving securities upon redemption will
incur additional expenses in disposing of such securities.
Further Information. Various investment policies and techniques that one or
both of the Funds intend to use and some of their risks are described more fully
in the Statement of Additional Information.
OPERATION OF THE FUNDS
Structure of the Funds
Both the Global Fund and the American Fund are diversified series of
Tweedy, Browne Fund Inc., an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Corporation was
organized as a Maryland corporation on January 28, 1993.
The Corporation's activities are supervised by its Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Corporation is not required to and has no current
intention of holding annual shareholder meetings, although special meetings may
be called for purposes such as electing or removing Directors, or changing
fundamental investment policies. Shareholders will be assisted in communicating
with other shareholders in connection with any effort to remove a Director.
Investment Adviser
The Corporation, on behalf of both Funds, retains Tweedy, Browne to manage
each of the Fund's daily investment and business affairs subject to the policies
established by the Board of Directors. Tweedy, Browne is owned by its Managing
Directors, Christopher H. Browne, William H. Browne, John D. Spears, Thomas H.
Shrager and Robert Q. Wyckoff, Jr., and a subsidiary of AMG, which owns a
majority interest in the Investment Adviser. The Management Committee, which
consists of Messrs. Christopher and William Browne and John Spears, manages the
day-to-day operations of Tweedy, Browne and the Funds and makes all investment
management decisions. Neither AMG nor its subsidiary manages the day-to-day
operations of, nor participates in the investment process at, Tweedy, Browne.
AMG is a publicly traded company which acquires interests in investment
management firms. Tweedy, Browne's management discussion and analysis, and
additional performance information regarding the Funds during the fiscal year
ended March 31, 1998, is included in the Annual Report for each Fund.
Tweedy, Browne is entitled to receive investment advisory fees for each
Fund in an amount equal to 1.25% of each Fund's average daily net assets on an
annual basis. The fee is payable monthly, provided that each Fund makes such
interim payments as may be requested by the Investment Adviser not to exceed 75%
of the amount of the fee then accrued on the applicable Fund's books and unpaid.
For the fiscal year ended March 31, 1998, Tweedy, Browne as investment
adviser received advisory fees equal to 1.25% of the value of the average daily
net assets of the Global Fund and advisory fees equal to 1.23% of the value of
the average daily net assets of the American Fund after voluntary waivers by the
investment adviser, Tweedy, Browne of $105,730.
In addition to the fees of the Investment Adviser, each Fund is
responsible for the payment of all its other expenses incurred in the operation
of the Fund, which include, among other things, expenses for legal and
independent auditor's services, charges of its custodian, transfer agent and
dividend paying agent and any other persons hired by the Fund, securities
registration fees, fees and expenses of unaffiliated Directors, accounting and
printing costs for reports and similar materials sent to shareholders,
membership fees in trade organizations, fidelity bond and liability coverage for
the Corporation's Directors, officers and employees, interest, brokerage and
other trading costs, taxes, expenses of qualifying the Fund for sale in various
jurisdictions, expenses of personnel performing shareholder servicing functions,
litigation and other extraordinary or nonrecurring expenses and other expenses
properly payable by the Funds.
The Investment Adviser is located at 52 Vanderbilt Avenue, New York,
New York 10017.
Administrator and Transfer Agent
First Data Investor Services Group, Inc. ("Investor Services Group"), P.O.
Box 5160, Westboro, MA 01581, is responsible for providing administrative
services to the Global Fund and American Fund for a fee equal to .09% of the
average daily net assets of each Fund on an annual basis. The fee is subject to
reduction at certain asset levels and fee minimums. Investor Services Group is
the Funds' transfer, shareholder servicing and dividend paying agent.
Custodian
Boston Safe Deposit and Trust Company is the Funds' custodian.
Underwriter
Tweedy, Browne, which is also a registered broker-dealer, is the Funds'
principal underwriter.
<PAGE>
Taxation
The Global Fund and the American Fund intend to qualify each year as
regulated investment companies under Subchapter M of the Internal Revenue Code
of 1986, as amended. As a result, the Funds generally will not be liable for
U.S. federal income or excise taxes with respect to net investment income and
net capital gains that have been distributed to shareholders. The Funds could be
subject to U.S. federal income tax on a portion of their income if they invest
in passive foreign investment companies. See the Statement of Additional
Information for more information regarding U.S. federal income tax consequences.
Investors are urged to consult with their tax advisors concerning the tax
consequences of an investment in the Funds.
ADDITIONAL INFORMATION
No-Load Funds. The Funds are true no-load funds. There are no commissions
or fees for purchasing or redeeming shares, and no "12b-1" fees which many funds
charge to support their marketing efforts. The minimum investment is $2,500 for
individual accounts and $500 for IRAs and similar accounts. Subsequent
investments must be a minimum of $250.
Dividend Reinvestment Plan. Dividends and distributions are automatically
reinvested in additional shares unless shareholders request otherwise by
telephone or in writing.
Shareholder Statements. Shareholders will receive a detailed account
statement every time there is a purchase or redemption of shares of either Fund.
All statements should be retained in order to keep track of account activity and
the cost of shares for tax purposes.
Shareholder Reports. In addition to account statements, shareholders will
receive periodic shareholder reports highlighting relevant information,
including investment results and a review of portfolio changes.
To reduce the volume of mail received by shareholders, only one copy of
each report will be mailed to your household (household is identified by tax
identification number and zip code). Please call shareholder services at
1-800-432-4789, press 2 if you wish to receive additional shareholder reports.
Change of address. All address changes must be submitted in writing and
sent by mail to shareholder services c/o First Data Investor Services Group,
Inc., P.O. Box 5160, Westboro, MA 01581.
PURCHASING, REDEEMING AND EXCHANGING SHARES
Purchasing Shares
If you would like assistance in purchasing shares of either the Global Fund
or the American Fund or in providing us with the appropriate information, please
feel free to call shareholder services between 9:00 a.m. and 5:00 p.m. Eastern
time at 1-800-432-4789, press 2 and we will be happy to assist you.
Purchases are executed at the net asset value per share next calculated
after the Funds' transfer agent receives the purchase request in good order. A
purchase request will not be considered in good order unless it is accompanied
or preceded by a completed and signed application and a check or guaranteed
payment procedures acceptable to Tweedy, Browne. Purchases are made in full and
fractional shares. (See "Share Price" below.)
By check. You may open an account or purchase additional shares by mailing
a check to the Funds, c/o First Data Investor Services Group, Inc., P.O. Box
5160, Westboro, MA 01581. Accounts cannot be opened without a completed, signed
application form. If you purchase shares of either Fund with a check that does
not clear, your purchase will be cancelled and you will be subject to any losses
or fees incurred in the transaction. Checks must be drawn on or payable through
a U.S. bank or savings institution and payable to the Fund. If you purchase
shares by check and request to redeem them within seven business days of
purchase, either Fund may hold redemption proceeds until the purchase check has
cleared, which may take up to seven business days. If you purchase shares by
federal wire, you may avoid this delay. Redemption requests by telephone prior
to the expiration of the seven-day period will not be accepted.
By the Automated Clearing House ("ACH"). You may use ACH to purchase
additional shares. ACH is the electronic transfer of money directly from your
bank account to either Fund or vice versa. If you want to use the ACH service,
complete the Systematic Purchase and Redemption Form and allow at least two
weeks for preparation before using ACH. Monies sent via ACH take approximately
two business days to clear. The transaction will be processed at clearance date.
Your bank may charge you a transaction fee. When you are ready to make a
purchase, call the Funds' transfer agent at 1-800-432-4789, press 2.
By wire. To open a new account by wire, first call shareholder services at
1-800-432-4789, press 2 to obtain information with regard to procedures for
faxing a completed and signed application. A representative will provide an
account number which must be included on your application. Accounts cannot be
opened without a completed, signed application form. The application must be
faxed and the original mailed to Investor Services Group. Your account will be
subject to withholding and redemption of shares will be prohibited until an
original application is received by Investor Services Group. Contact your bank
to arrange a wire transfer to the transfer agent.
Give your bank:
the name and number of the bank account from which you wish to send funds
the amount you wish to send
the name(s) of the account holder(s) exactly as will appear on your application
the following instructions:
For Global Fund
Boston Safe Deposit & Trust Co.
Boston, MA
Account of Tweedy, Browne Global Value Fund
Account #138-517
ABA # 011001234
For further credit to [give the name(s) you want for your Fund's
account and the account number provided to you].
For American Fund
Boston Safe Deposit & Trust Co.
Boston, MA
Account of Tweedy, Browne American Value Fund
Account #138-517
ABA #011001234
For further credit to [give the name(s) you want for your Fund's
account and the account number provided to you].
The account will be established at the net asset value per share next
calculated after the wire transfer is made. Wires must be received by 4:00 p.m.
to receive that day's price. You will not be able to redeem your shares,
however, until your application is received in good order.
You may also make additional investments of $250 or more to your existing
account by following the same procedures. Subsequent purchases by
telephone order. If you are already a shareholder, you may purchase shares
of either Fund at a certain
day's price by calling shareholder services at 1-800-432-4789, press 2 before
the regular close of the New York Stock Exchange, Inc. (the "Exchange"),
normally 4 p.m. Eastern time, on that day. Orders must be for $250 or more and
cannot be for an amount greater than four times the value of your account at the
time the order is placed. You must include with your payment the order number
given to you at the time the order is placed. A confirmation with complete
purchase information will be sent shortly after your payment is received. If
payment by check or wire is not received within three business days, the order
will be cancelled and you will be responsible for any loss to the Funds
resulting from this cancellation. Redeeming Shares
Both the Global Fund and the American Fund allow you to redeem shares
(i.e., sell them back to the Funds) without redemption fees or deferred sales
charges of any kind. Redemptions are made at net asset value per share next
calculated after a redemption request in good order is received by the Funds'
transfer agent.
By telephone. This is the quickest and easiest way to sell either Fund's
shares. If you elected telephone redemption on your application, you can call to
request the check be mailed to the address of record or to request a federal
wire be sent to your authorized bank account or to request the proceeds to be
transferred by ACH. ACH takes two business days to settle at your bank. (See
page 14 for additional details with respect to ACH procedures. See page 16
"Share Price" with respect to certain delayed redemptions.) The Funds and the
transfer agent will not be liable for following telephone instructions
reasonably believed to be genuine. In this regard, the Funds and the transfer
agent require personal identification information before accepting a telephone
redemption. If the Funds or the transfer agent fail to use reasonable
procedures, the Funds might be liable for losses due to fraudulent instructions.
Any payment instructions not previously authorized in writing may not be
accepted over the telephone; they must be submitted in writing (see "By Mail"
below). If your bank cannot receive federal wires, redemptions will be mailed to
your bank.
If you open an account by wire, you cannot redeem shares by telephone until
the Funds' transfer agent has received your completed and signed application.
In the event that you are unable to reach a Fund by telephone, you should
write to the Funds c/o First Data Investor Services Group, Inc., P.O. Box 5160,
Westboro, MA 01581.
By mail. A shareholder may redeem shares by mailing a written request to
Tweedy, Browne Fund Inc., c/o First Data Investor Services Group, Inc., P.O. Box
5160, Westboro, MA 01581. Written requests must state the shareholder's name,
the name of the Fund, the account number and the shares or dollar amount to be
redeemed and must be signed exactly as the shares are registered. Shareholders
requesting a redemption of $25,000 or more, or a redemption of any amount
payable to a person other than the shareholder of record, or to be sent to an
address other than that on record with the Fund, must have all signatures
Medallion guaranteed. (The Corporation on behalf of both Funds reserves the
right, however, to require a signature guarantee for all redemptions.) You can
obtain a signature guarantee from most banks, credit unions or savings
associations, or from broker/dealers, municipal securities broker/dealers,
government securities broker/dealers, national securities exchanges, registered
securities associations, or clearing agencies deemed eligible by the SEC.
Signature guarantees by a notary public are not acceptable. Redemption
requirements for corporations, other organizations, trusts, fiduciaries, agents,
institutional investors and retirement plans may be different from those for an
individual's account. For more information, please call shareholder services at
1-800-432-4789, press 2.
Exchanging Shares
Shares held in either the Global Fund or the American Fund which have been
registered in a shareholder's name for at least 5 days may be exchanged for
shares of the other Fund. Exchanges of shares between Funds are made at net
asset value per share calculated after an exchange request in good order is
received by the Funds' transfer agent. If any portion of the shares requested to
be exchanged between Funds represents an investment made by personal check for
which collection of payment has not yet been received, the transfer agent and
the Funds reserve the right not to honor the exchange until collection of
payment is reasonably satisfied, which could take up to seven business days. A
shareholder who anticipates the need for more immediate access to his or her
investment should purchase shares by federal wire or by certified or cashier's
check. The exchange privilege may be modified or terminated at any time subject
to shareholder notification. The Funds reserve the right to limit the number of
times an investor may exercise the exchange privilege.
By telephone. If you elected telephone exchange on your application, you
can call to request that an exchange of shares between the Funds be made on your
behalf. To exchange shares by telephone, you must contact the transfer agent at
1-800-432-4789, press 2. The transfer agent will not be liable for following
telephone instructions reasonably believed to be genuine. In this regard, the
transfer agent requires personal identification information before accepting a
telephone exchange. If the Funds or the transfer agent fail to use reasonable
procedures, the Funds might be liable for losses due to fraudulent instructions.
By mail. If you did not elect telephone exchange on your application, you
can exchange shares by mail by sending a letter to the transfer agent with the
appropriate account information. For your protection and to prevent fraudulent
exchanges, on written exchange requests in excess of $25,000, we require a
signature and a signature guarantee for each person in whose name the account is
registered. (The Corporation on behalf of both Funds reserves the right,
however, to require a signature guarantee for all exchanges.) Institutions
granting signature guarantees for purposes of redemption can also perform the
same function for exchanges of shares. Signature guarantees by notaries public
are not acceptable. Exchange requirements for corporations, other organizations,
trusts, fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. For more information, please call
shareholder services at 1-800-432-4789, press 2.
Share Price
Purchases and redemptions, including exchanges, are made at net asset
value. The Funds' administrator determines net asset value per share as of the
close of regular trading on the Exchange, normally 4 p.m. Eastern time, on each
day the Exchange is open for trading. Net asset value per share is calculated by
dividing the current market value of total assets, less all liabilities, by the
total number of shares outstanding. The Funds will normally send your redemption
proceeds within one business day following the redemption request, but may take
up to seven business days. Short-Term Trading
Purchases and sales should be made for long-term investment purposes only.
The Corporation, on behalf of both Funds, and the distributor, Tweedy, Browne,
each reserve the right to restrict purchases of either Funds' shares when a
pattern of frequent purchases and sales made in response to short-term
fluctuations in either Funds' share price appears evident.
Tax Information
A redemption of shares of either Fund is a sale of shares and may result in
a gain or loss for income tax purposes. An exchange of shares between Funds
pursuant to the exchange privilege is treated as a sale for Federal income tax
purposes and, depending upon the circumstances, a capital gain or loss may be
realized. Any loss realized on a sale of shares of either Fund will be
disallowed to the extent that shares disposed of are replaced within a 61-day
period beginning 30 days before and ending 30 days after the disposition of the
shares.
Be sure to complete the Tax Identification Number section in each Fund's
application when you open an account. Federal tax law requires the Funds to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a Social Security or tax identification number and certain other
certified information or upon notification from the IRS or a broker that
withholding is required. Both Funds reserve the right, following 30 days' notice
to shareholders, to redeem all shares in accounts that still do not have a
Social Security or tax identification number.
Minimum Balances
Shareholders should maintain a share account balance worth at least $2,500
($500 for retirement plans), which amount may be changed by the Directors. Both
Funds reserve the right, following 30 days' written notice to shareholders, to
redeem all shares in sub-minimum accounts, including accounts of new investors,
where a reduction in value has occurred due to a redemption out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. Each Fund will mail the proceeds of a redeemed account
to the shareholder. The shareholder may restore the account balance to the
requisite amount or more during the 30-day notice period and must maintain it at
no lower than that minimum to avoid involuntary redemption.
<PAGE>
Third Party Transactions
If purchases and redemptions of either Fund's shares are arranged and
settlement is made at an investor's election through a member of the National
Association of Securities Dealers, Inc., other than the distributor, that member
may, at its discretion, charge a fee for that service.
Redemptions-in-Kind
The Corporation on behalf of both Funds reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for redemption
in excess of $250,000 by making payment in whole or in part in readily
marketable securities chosen by the Funds and valued as they are for purposes of
computing the Funds' net asset value (a redemption-in-kind). If payment is made
in securities, a shareholder may incur transaction expenses in converting these
securities to cash.
DISTRIBUTIONS
Each Fund intends to make distributions of substantially all of its net
investment income and any net realized capital gains after utilization of
capital loss carryforwards, if any, annually in December. Any dividends or
capital gains distributions declared in October, November or December with a
record date in such a month and paid during the following January will be
treated by shareholders for federal income tax purposes as if received on
December 31 of the calendar year declared. Distributions will be reinvested in
additional shares of each Fund unless an investor elects to receive
distributions in cash. If an investment is in the form of a retirement plan, all
dividends and capital gains distributions must be reinvested into the
shareholder's account.
Tax Information
Generally, dividends from net investment income (including short-term
gains) of the Funds are taxable to shareholders as ordinary income. The Funds
will seek to maximize gains which qualify for long-term capital gains treatment.
Long-term capital gains distributions, if any, are taxable as long-term capital
gains regardless of the length of time shareholders have owned their shares. A
portion of dividends from net investment income may qualify for the
dividends-received deduction for corporations. Shareholders may be able to claim
a credit or reduction on their income tax returns for their pro rata portions of
qualified taxes paid by the Funds to foreign countries.
Each Fund will send to its shareholders detailed tax information about the
amount and type of its distributions made during each calendar year and any
foreign income tax payments or credits.
PERFORMANCE INFORMATION
From time to time, quotations of each Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in a Fund for a specified period. "Average annual total return"
refers to the average annual compound rate of return of an investment in a Fund
assuming that the investment has been held for the indicated period as of a
stated ending date or for the life of the Fund to the extent it has not been in
existence for any such periods. "Cumulative total return" represents the
cumulative change in value of an investment in a Fund for various periods. These
calculations assume that dividends and capital gains distributions were
reinvested. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but not reinvestment of
dividends. Performance will vary based upon, among other things, changes in
market conditions and the level of the Funds' expenses.
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1998
This Statement of Additional Information is not itself a Prospectus and should
be read in conjunction with the Prospectus of Tweedy, Browne Global Value Fund
and Tweedy, Browne American Value Fund also dated August 1, 1998, as amended
from time to time, copies of which may be obtained without charge by writing to
Tweedy, Browne Global Value Fund and/or Tweedy, Browne American Value Fund, c/o
First Data Investor Services Group, Inc., P.O. Box 5160, Westboro, Massachusetts
01581 or by calling 800-432-4789.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Investment Objectives and Policies........................................................................ 1
Performance Information................................................................................... 18
Operation of the Funds.................................................................................... 21
Taxes..................................................................................................... 29
Portfolio Transactions.................................................................................... 34
Net Asset Value........................................................................................... 35
Additional Information.................................................................................... 37
Financial Statements...................................................................................... 37
Appendix A................................................................................................ A-1
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
.........Tweedy, Browne Fund Inc., a Maryland corporation of which Tweedy,
Browne Global Value Fund (the "Global Fund") and Tweedy, Browne American Value
Fund (the "American Fund") (collectively, the "Funds") are separate series, is
referred to herein as the "Corporation." The Corporation is a no-load, open-end,
management investment company which continuously offers and redeems its shares.
The Corporation is a company of the type commonly known as a mutual fund. The
Funds are diversified series of the Corporation. Tweedy, Browne Company LLC is
the investment adviser of the Global Fund and the American Fund and is referred
to herein as "Tweedy, Browne" or the "Adviser."
.........The Funds' objectives and policies, except as otherwise stated,
are not fundamental and may be changed without shareholder votes. The Global
Fund seeks long-term growth of capital by investing throughout the world in a
diversified portfolio of marketable equity securities. The American Fund seeks
long-term growth of capital by investing in a diversified portfolio of domestic
equity securities. Both Funds are permitted to invest in debt securities. There
can be no assurance that the Funds will achieve their respective objectives.
Risk Considerations of the Funds
Global Fund. The Global Fund is intended to provide individual and institutional
investors with an opportunity to invest a portion of their assets in a globally
oriented portfolio, according to the Fund's objective and policies, and is
designed for long-term investors who can accept international investment risk.
Investment in shares of the Global Fund is not intended to provide a complete
investment program for an investor. The Global Fund expects to invest primarily
in foreign securities although investments in U.S. securities are permitted and
will be made when opportunities in U.S. markets appear attractive. The Global
Fund may also invest in debt instruments, although income is an incidental
consideration. Tweedy, Browne believes that allocation of assets on a global
basis decreases the degree to which events in any one country, including the
United States, will affect an investor's entire investment holdings. As with any
long-term investment, the value of the Global Fund's shares when sold may be
higher or lower than when purchased.
.........Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
favorably or unfavorably affect the Global Fund's performance. As foreign
companies are not generally subject to uniform standards, practices and
requirements with respect to accounting, auditing and financial reporting to the
same degree as are domestic companies, there may be less or less helpful
publicly available information about a foreign company than about a domestic
company. Many foreign securities markets, while growing in volume of trading
activity, have substantially less volume than the U.S. market, and securities of
most foreign issuers are less liquid and more volatile than securities of
comparably sized domestic issuers. Similarly, volume and liquidity in most
foreign bond markets is less than in the United States and volatility of price
is often greater than in the United States. Further, foreign markets have
different clearance and settlement procedures and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions making it difficult to conduct such transactions. Delays
in settlement could result in temporary periods when assets of the Global Fund
are uninvested and no return is earned thereon. The inability of the Global Fund
to make intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result in losses to the
Global Fund due to subsequent declines in value of the portfolio security. Fixed
commissions on some foreign securities exchanges and bid to asked spreads in
some foreign bond markets are higher than negotiated commissions on U.S.
exchanges and bid to asked spreads in the U.S. bond market. Further, the Global
Fund may encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts.
.........In foreign countries, there is generally less government supervision
and regulation of business and industry practices, securities exchanges,
securities traders, brokers and listed companies than in the United States. It
may be more difficult for the Global Fund's agents to keep currently informed
about corporate actions such as stock dividends or other matters which may
affect the prices of portfolio securities. Communications between the United
States and foreign countries are often less reliable than within the United
States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. In addition, with
respect to certain foreign countries, there is the possibility of expropriation
or confiscatory taxation, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, at any particular time, individual foreign economies may differ
favorably or unfavorably from the United States economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. The Adviser seeks to
mitigate the risks associated with the foregoing considerations through
continuous professional management.
.........Investments in foreign securities usually will involve currencies
of foreign countries. Because of the considerations discussed above, the value
of the assets of the Global Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversions between various currencies. Although the Global Fund values its
assets daily in terms of U.S. dollars, it does not intend to convert its
holdings of foreign currencies into U.S. dollars on a daily basis. The Global
Fund will engage in currency conversions when it shifts holdings from one
country to another. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Global Fund at one
rate, while offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer. The Global Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward or futures contracts (or options thereon) to purchase or sell foreign
currencies. The Global Fund may, for hedging purposes, purchase foreign
currencies in the form of bank deposits.
.........Because the Global Fund may be invested in both U.S. and foreign
securities markets, changes in the Fund's share price may have a low correlation
with movements in the U.S. markets. The Global Fund's share price will tend to
reflect the movements of both the different stock and bond markets in which it
is invested and, to the extent it is unhedged, of the currencies in which the
investments are denominated; the strength or weakness of the U.S. dollar against
foreign currencies may account for part of the Fund's investment performance.
Foreign securities such as those purchased by the Global Fund may be subject to
foreign government taxes which could reduce the yield on such securities,
although a shareholder of the Fund may, subject to certain limitations, be
entitled to claim a credit or deduction for U.S. federal income tax purposes for
his or her proportionate share of such foreign taxes paid by the Fund (see
"Taxes"). U.S. and foreign securities markets do not always move in step with
each other, and the total returns from different markets may vary significantly.
The Global Fund invests in many securities markets around the world in an
attempt to take advantage of opportunities wherever they may arise.
American Fund. The American Fund is intended to provide individual and
institutional investors with an opportunity to invest a portion of their assets
in a domestic equity portfolio, according to the Fund's objective and policies
and is designed for long-term investors who can accept domestic investment risk.
The American Fund will be invested largely in U.S. equity securities although it
may allocate up to 20% of its portfolio assets to foreign equity securities when
Tweedy, Browne believes that economic conditions warrant foreign investment. The
Fund may also invest in debt instruments, although income is an incidental
consideration. Tweedy, Browne believes that a value oriented investment strategy
offers investors profitable investment in undervalued domestic equity securities
whose prices may be below intrinsic worth, private market value or previously
high stock prices. As with any long-term investment, the value of the American
Fund's shares when sold may be higher or lower than when purchased.
.........Investments in a fund which purchases value oriented stocks as its
guiding principle involve special considerations. The equity capitalization of
the United States is the largest in the world comprising more than one-third of
the Morgan Stanley Capital International (MSCI) World Index. The American Fund
offers investors the opportunity to invest in a diversified portfolio of
primarily domestic undervalued securities whose market price may be well below
the stock's intrinsic value.
.........The American Fund cannot guarantee a gain or eliminate the risk of
loss. The net asset value of the American Fund's shares will tend to increase or
decrease with changes in the value of U.S. equity markets. To the extent the
American Fund invests in foreign securities, comparable risk factors discussed
above with regard to the Global Fund will apply. There is no assurance that the
American Fund's objectives will be achieved. Investment in shares of the
American Fund is not intended to provide a complete investment program for an
investor.
Investments and Investment Techniques
Euro-Denominated Securities. On January 1, 1999, the European Monetary Union
("EMU") plans to implement a new currency unit, the Euro, which is expected to
reshape financial markets, banking systems and monetary policies in Europe and
other parts of the world. The countries initially expected to convert to the
Euro include Austria, Belgium, France, Germany, Luxembourg, the Netherlands,
Ireland, Finland, Italy, Portugal and Spain.
.........Beginning January 1, 1999, financial transactions and market
information including share quotations and company accounts, in participating
countries will be denominated in Euros. Approximately 46% of the stock exchange
capitalization of the total European market may be reflected in Euros, and
participating governments will issue their bonds in Euros. Monetary policy for
participating countries will be uniformly managed by a new central bank, the
European Central Bank (ECB).
.........Although it is not possible to predict the impact of the Euro on
the Funds, the transition may change the economic environment and behavior of
investors, particularly in European markets. In addition, investors may begin to
view those countries participating in the EMU as a single entity. In the opinion
of the Investment Adviser, there will be no fundamental change in the investment
philosophy of the Funds with the advent of the Euro, nor will the Funds alter
their policies to hedge exposure to foreign currency back to the U.S. dollar. It
is expected that a foreign forward currency market will be established in the
Euro once it enters general circulation. The process of implementing the Euro
also may adversely affect financial markets world-wide and may result in changes
in the relative strength and value of the U.S. dollar or other major currencies,
as well as possible adverse tax consequences as a result of currency conversions
to the Euro.
Repurchase Agreements. Both the Global Fund and the American Fund may enter into
repurchase agreements with member banks of the Federal Reserve System, any
foreign bank or with any domestic or foreign broker/dealer which is recognized
as a reporting government securities dealer, if the creditworthiness of the bank
or broker/dealer has been determined by the Adviser to be at least as high as
that of other obligations the Funds may purchase.
.........A repurchase agreement provides a means for each Fund to earn
income on funds for periods as short as overnight. It is an arrangement under
which the purchaser (i.e., one of the Funds) acquires a debt security
("Obligation") and the seller agrees, at the time of sale, to repurchase the
Obligation at a specified time and price. Securities subject to a repurchase
agreement are held in a segregated account and the value of such securities is
kept at least equal to the repurchase price (plus any interest accrued if
interest will be paid in cash) on a daily basis. The repurchase price may be
higher than the purchase price, the difference being income to the Fund, or the
purchase and repurchase prices may be the same, with interest at a stated rate
due to the Fund together with the repurchase price upon repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the Obligation
itself. Obligations will be physically held by the Fund's custodian or in the
Federal Reserve Book Entry system.
.........For purposes of the Investment Company Act of 1940, as amended
(the "1940 Act"), a repurchase agreement is deemed to be a loan from the Fund to
the seller of the Obligation subject to the repurchase agreement. It is not
clear whether a court would consider the Obligation purchased by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the Obligation before repurchase of the Obligation under a repurchase
agreement, a Fund may encounter delay and incur costs before being able to sell
the security. Delays may involve loss of interest or decline in price of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the security. It is
possible that the Fund will be unsuccessful in seeking to enforce the seller's
contractual obligation to deliver additional securities.
Fixed Income Obligations. Each Fund may also invest without limitation in
fixed income obligations including cash equivalents (such as bankers'
acceptances, certificates of deposit, commercial paper, short-term government
and corporate obligations and repurchase agreements) for temporary defensive
purposes when the Investment Adviser believes market conditions so warrant and
for liquidity.
Debt Securities. The Funds may purchase "investment grade" bonds, which are
those rated Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's") or
AAA, AA, A or BBB by Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc., ("S&P") or, if non-rated, judged to be of
equivalent credit quality by the Adviser. Bonds rated Baa or BBB may have
speculative elements as well as investment-grade characteristics.
High Yield, High Risk Securities. Both Funds may also invest up to 15% of
net assets in securities rated lower than the foregoing and in non-rated
securities of equivalent credit quality in the Adviser's judgment. The Funds may
invest in debt securities which are rated as low as C by Moody's or D by S&P.
Securities rated D may be in default with respect to payment of principal or
interest. Below investment-grade securities (those rated Ba and lower by Moody's
and BB and lower by S&P) or non-rated securities of equivalent credit quality
carry a high degree of risk (including a greater possibility of default or
bankruptcy of the issuers of such securities), generally involve greater
volatility of price, and may be less liquid, than securities in the higher
rating categories and are considered speculative. The lower the ratings of such
debt securities, the greater their risks render them like equity securities. See
the Appendix to this Statement of Additional Information for a more complete
description of the ratings assigned by ratings organizations and their
respective characteristics.
.........As occurred during the 1990-1992 period, an economic downturn can
disrupt the high yield market and impair the ability of issuers to repay
principal and interest. Also, an increase in interest rates is likely to have a
greater adverse impact on the value of such obligations than on higher quality
debt securities. During an economic downturn or period of rising interest rates,
highly leveraged issuers may experience financial stress which would adversely
affect their ability to service their principal and interest payment
obligations. Prices and yields of high yield securities will fluctuate over time
and, during periods of economic uncertainty, volatility of high yield securities
may adversely affect a Fund's net asset value. In addition, investments in high
yield zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater fluctuations
in value due to changes in interest rates.
.........The trading market for high yield securities may be thin to the
extent that there is no established retail secondary market or because of a
decline in the value of such securities. A thin trading market may limit the
ability of the Funds to value accurately high yield securities in the Funds'
portfolios and to dispose of those securities. Adverse publicity and investor
perceptions may decrease the values and liquidity of high yield securities.
These securities may also involve special registration responsibilities,
liabilities and costs.
.........It is the policy of the Adviser not to rely exclusively on ratings
issued by established credit rating agencies, but to supplement such ratings
with its own independent and on-going review of credit quality. If the rating of
a portfolio security is downgraded by one or more credit rating agencies, the
Adviser will determine whether it is in the best interest of a Fund to retain or
dispose of such security.
Zero Coupon and Structured Securities. The Funds may invest in zero coupon
securities which pay no cash income and are sold at substantial discounts from
their value at maturity although they currently have no intention to invest in
such securities. When held from issuance to maturity, their entire income, which
consists of accretion of discount, comes from the difference between the issue
price and their value at maturity. Zero coupon securities are subject to greater
market value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current cash distributions of interest.
Structured securities, particularly mortgage backed securities, are usually
subject to some degree of prepayment risk which can vary significantly with
various economic and market factors. Depending on the nature of the structured
security purchased, a change in the rate of prepayments can have the effect of
enhancing or reducing the yields to a Fund from such investment and expose the
Fund to the risk that any reinvestment will be at a lower yield.
Convertible Securities. The Funds may invest in convertible securities, that is,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into or exchangeable for another security, usually common stock.
Investments in convertible securities can provide an opportunity for capital
appreciation and/or income through interest and dividend payments by virtue of
their conversion or exchange features.
.........The convertible securities in which the Funds may invest are either
fixed income or zero coupon debt securities which may be converted or exchanged
at a stated or determinable exchange ratio into underlying shares of common
stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stock declines, convertible
securities tend to trade increasingly on a yield basis, and so usually do not
experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the
prices of the convertible securities tend to rise as a reflection of the value
of the underlying common stock, although usually not as much as the underlying
common stock.
.........As debt securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all debt securities, there can be no assurance of income or principal
payments because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.
.........Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.
Other Rights to Acquire Securities
.........The Funds may also invest in other rights to acquire securities,
such as options and warrants. These securities represent the right to acquire a
fixed or variable amount of a particular issue of securities at a fixed or
formula price either during specified periods or only immediately prior to
termination. These securities are generally exercisable at premiums above the
value of the underlying security at the time the right is issued. These rights
are more volatile than the underlying stock and will result in a total loss of
the Funds' investment if they expire without being exercised because the value
of the underlying security does not exceed the exercise price of the right.
Strategic Transactions
.........The Funds may, but are not required to, utilize various other
investment strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or duration of
fixed-income securities, or to enhance potential gain. Such strategies are
generally accepted by modern portfolio managers and are regularly utilized by
many mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur.
.........In the course of pursuing these investment strategies, the Funds may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions"). Strategic
Transactions may be used to attempt to protect against possible changes in the
market value of securities held in or to be purchased for a Fund's portfolio
resulting from securities markets or currency exchange rate fluctuations, to
protect a Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of a Fund's portfolio, or to establish a position
in the derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of a Fund's assets will be committed to
initial margin on instruments regulated by the Commodity Futures Trading
Commission ("CFTC") in Strategic Transactions entered into for non-hedging
purposes. Any or all of these investment techniques may be used at any time and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. A Fund's ability to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Each Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.
.........Strategic Transactions have risks associated with them including
possible default by the other party to the transaction, illiquidity and, to the
extent the Adviser's view as to certain market movements is incorrect, the risk
that the use of such Strategic Transactions could result in losses greater than
if they had not been used. Purchase of put and call options may result in losses
to a Fund or limit the amount of appreciation a Fund can realize on its
investments. The use of currency transactions can result in a Fund incurring
losses as a result of a number of factors including the imposition of exchange
controls, suspension of settlements, or the inability to deliver or receive a
specified currency. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of a Fund creates the possibility that losses on the hedging instrument
may be greater than gains in the value of a Fund's position. In addition,
futures and options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets, a
Fund might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of a hedged position, at the same time they tend to limit any potential gain
which might result from an increase in value of such position. Finally, the
daily variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of a Fund's assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
.........A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the issuer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, a Fund's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
a Fund the right to sell such instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the issuer the obligation to sell, the underlying instrument at the
exercise price. A Fund's purchase of a call option on a security, financial
future, index, currency or other instrument might be intended to protect the
Fund against an increase in the price of the underlying instrument that it
intends to purchase in the future by fixing the price at which it may purchase
such instrument. An American style put or call option may be exercised at any
time during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. The Funds
are authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below regarding exchange listed options uses the OCC as a paradigm,
but is also applicable to other financial intermediaries.
.........Each Fund's ability to close out its position as a purchaser or
seller of an OCC or exchange listed put or call option is dependent, in part,
upon the liquidity of the option market. Among the possible reasons for the
absence of a liquid option market on an exchange are: (i) insufficient trading
interest in certain options; (ii) restrictions on transactions imposed by an
exchange; (iii) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities
including reaching daily price limits; (iv) interruption of the normal
operations of the OCC or an exchange; (v) inadequacy of the facilities of an
exchange or OCC to handle current trading volume; or (vi) a decision by one or
more exchanges to discontinue the trading of options (or a particular class or
series of options), in which event the relevant market for that option on that
exchange would cease to exist, although outstanding options on that exchange
would generally continue to be exercisable in accordance with their terms.
.........The hours of trading for listed options may not coincide with the
hours during which the underlying financial instruments are traded. To the
extent that the option markets close before the markets for the underlying
financial instruments, significant price and rate movements can take place in
the underlying markets that cannot be reflected in the option markets.
.........OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties.
.........Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund may lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Funds will engage in OTC option transactions only with United
States government securities dealers recognized by the Federal Reserve Bank of
New York as "primary dealers," or broker dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any other nationally recognized
statistical rating organization ("NRSRO").
.........If a Fund sells (i.e., issues) a call option, the premium that it
receives may serve as a partial hedge, to the extent of the option premium,
against a decrease in the value of the underlying securities or instruments in
its portfolio, or will increase the Fund's income. The sale of put options can
also provide income.
.........All calls sold by the Funds must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the calls) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it against
loss, a call sold by one of the Funds exposes that Fund during the term of the
option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or instrument and may require the Fund to hold
a security or instrument which it might otherwise have sold.
General Characteristics of Futures. The Funds may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by a Fund, as seller, to deliver to the buyer
the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
.........The Funds' use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the CFTC and will be entered into only for bona
fide hedging, risk management (including duration management) or other portfolio
management purposes. Typically, maintaining a futures contract or selling an
option thereon requires a Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of an
option on financial futures involves payment of a premium for the option without
any further obligation on the part of the purchaser. If one of the Funds
exercises an option on a futures contract, it will be obligated to post initial
margin (and potential subsequent variation margin) for the resulting futures
position just as it would for any position. Futures contracts and options
thereon are generally settled by entering into an offsetting transaction but
there can be no assurance that the position can be offset prior to settlement at
an advantageous price, nor that delivery will occur.
.........Neither Fund will enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of that Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. The Funds also
may purchase and sell call and put options on securities indices and other
financial indices and in so doing can achieve many of the same objectives they
would achieve through the sale or purchase of options on individual securities
or other instruments. Options on securities indices and other financial indices
are similar to options on a security or other instrument except that, rather
than settling by physical delivery of the underlying instrument, they settle by
cash settlement, i.e., an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the excess of the closing price of the index over the exercise price
of the option, which also may be multiplied by a formula value. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. The Funds may engage in currency transactions with
counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. The Funds may enter into currency transactions with
counterparties which have received (or the guarantors of the obligations of
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
currency options) are determined to be of equivalent credit quality by the
Adviser.
.........The Funds' dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps generally
will be limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of a Fund, which will generally arise
in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
.........The Funds generally will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging as described below.
.........The Funds may also cross-hedge currencies by entering into
transactions to purchase or sell one or more currencies that are expected to
decline in value relative to other currencies to which the Funds have or in
which the Funds expect to have portfolio exposure.
.........To reduce the effect of currency fluctuations on the value of
existing or anticipated holdings of portfolio securities, the Funds may also
engage in proxy hedging. Proxy hedging is often used when the currency to which
a Fund's portfolio is exposed is difficult to hedge or to hedge against the U.S.
dollar. Proxy hedging entails entering into a forward contract to sell a
currency whose changes in value are generally considered to be linked to a
currency or currencies in which some or all of a Fund's portfolio securities are
or are expected to be denominated, and to buy U.S. dollars. The amount of the
contract would not exceed the value of the Fund's securities denominated linked
currencies. For example, if the Adviser considers that the Austrian schilling is
linked to the German deutsche mark (the "D-mark"), a Fund holds securities
denominated in schillings and the Adviser believes that the value of schillings
will decline against the U.S. dollar, the Adviser may enter into a contract to
sell D-marks and buy U.S. dollars.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived linkage
between various currencies may not be present or may not be present during the
particular time when a Fund is engaging in proxy hedging. If a Fund enters into
a currency hedging transaction, the Fund will comply with the asset segregation
requirements described below.
Short Sales. Each Fund may make short sales of securities traded on domestic or
foreign exchanges. A short sale is a transaction in which a Fund sells a
security it does not own in anticipation that the market price of that security
will decline. The Fund may make short sales to hedge positions, for duration and
risk management, in order to maintain portfolio flexibility or to enhance income
or gain.
.........When a Fund makes a short sale, it must borrow the security sold
short and deliver it to the broker-dealer through which it made the short sale
as collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
.........A Fund's obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealer, usually cash, U.S.
government securities or other high grade liquid securities. The Fund will also
be required to segregate similar collateral with its custodian to the extent, if
any, necessary so that the aggregate collateral value is at all times at least
equal to the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the security
regarding payment over any payments received by the Fund on such security, the
Fund may not receive any payments (including interest) on its collateral
deposited with such broker-dealer.
.........If the price of the security sold short increases between the time
of the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although the Fund's gain is limited to the price at which
it sold the security short, its potential loss is theoretically unlimited.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of that Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Funds may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Funds expect to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Funds anticipate purchasing at a later date. Each Fund intends to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
.........The Funds will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with a Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Funds believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. Neither Fund will enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from an NRSRO or is determined to be of equivalent credit quality by the
Adviser. If there is a default by the counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Funds may make investments in instruments that are
U.S. dollar-denominated futures contracts or options thereon which are linked to
the London Interbank Offered Rate ("LIBOR"). Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds and sellers to obtain
a fixed rate for borrowings. The Funds might use Eurodollar futures contracts
and options thereon to hedge against changes in LIBOR, to which many interest
rate swaps and fixed income instruments are often linked.
Risks of Strategic Transactions Outside the United States. When conducted
outside the United States, Strategic Transactions may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors; (ii) delays in
a Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States; (iii) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (iv) lower trading volume and liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Funds segregate liquid assets
with its custodian to the extent the Funds' obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. Liquid assets include equity and debt securities so long as they are
readily marketable. The Adviser, subject to oversight by the Board of Directors,
is responsible for determining and monitoring the liquidity of securities in
segregated accounts on a daily basis. In general, either the full amount of any
obligation by a Fund to pay or deliver securities or assets must be covered at
all times by the securities, instruments or currency required to be delivered,
or, subject to any regulatory restrictions, an amount of cash or liquid
securities at least equal to the current amount of the obligation must be
segregated with the custodian. The segregated account may consist of notations
on the books of the custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. For example, a call option written by a Fund
will require the Fund to hold the securities subject to the call (or securities
convertible into the needed securities without additional consideration) or to
segregate liquid securities sufficient to purchase and deliver the securities if
the call is exercised. A call option sold by a Fund on an index will require the
Fund to own portfolio securities which correlate with the index or to segregate
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by a Fund requires the Fund to segregate
liquid assets equal to the exercise price.
.........A forward currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
securities denominated in that currency equal to the Fund's obligations or to
segregate liquid assets equal to the amount of the Fund's obligations unless the
contract is entered into to facilitate the purchase or sale of a security
denominated in a particular currency or for hedging currency risks of one or
more of a Fund's portfolio investments.
.........OTC options entered into by the Funds, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
options, will generally provide for cash settlement. As a result, when one of
the Funds sells these instruments, the Fund will only segregate an amount of
assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by a Fund, or the in-the-money amount
plus any sell-back formula amount in the case of a cash-settled put or call. In
addition, when a Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC issued and exchange listed options sold by the Funds other than
those above generally settle with physical delivery, and the seller will
segregate an amount of assets equal to the full value of the option. OTC options
settling with physical delivery, or with an election of either physical delivery
or cash settlement will be treated the same as other options settling with
physical delivery.
.........In the case of a futures contract or an option thereon, a Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
.........With respect to swaps, the Funds will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid securities
having a value equal to the accrued excess. Caps, floors, and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
.........Strategic Transactions may be covered by other means when
consistent with applicable regulatory policies. In the case of portfolio
securities which are loaned, collateral values of the loaned securities will be
continuously maintained at not less than 100% by "marking to market" daily. A
Fund may also enter into offsetting transactions so that its combined position,
coupled with any segregated assets, equals its net outstanding obligation in
related options and Strategic Transactions. For example, a Fund could purchase a
put option if the strike price of that option is the same or higher than the
strike price of a put option sold by the Fund. Moreover, instead of segregating
assets if the Fund held a futures or forward contract, it could purchase a put
option on the same futures or forward contract with a strike price as high or
higher than the price of the contract held. Other Strategic Transactions may
also be offset in combinations. If the offsetting transaction terminates at the
time of or after the primary transaction no segregation is required, but if it
terminates prior to such time, assets equal to any remaining obligation would
need to be segregated.
.........The Funds' activities involving Strategic Transactions may be
limited by the requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), for qualification as a regulated investment
company (see "TAXES").
Borrowing for Strategic Transactions
.........Both Funds may borrow money in order to purchase liquid high grade
assets for segregation or margin purposes in connection with Strategic
Transactions. Although neither Fund expects that the interest rate differential
between its borrowing costs and the yield on such securities will be
significant, such borrowings could result in net interest expense for the Fund
and also expose the Fund to risk of loss from loss of market value due to
adverse interest rate, credit quality or currency exchange rate changes.
Investment Restrictions
.........The policies set forth below are fundamental policies of the Global
Fund and the American Fund and may not be changed with respect to a Fund without
approval of a majority of the outstanding voting securities of that Fund. As
used in this Statement of Additional Information a "majority of the outstanding
voting securities of a Fund" means the lesser of (1) 67% or more of the voting
securities present at such meeting, if the holders of more than 50% of the
outstanding voting securities of the Funds are present or represented by proxy;
or (2) more than 50% of the outstanding voting securities of the Funds.
.........As a matter of fundamental policy, neither Fund may:
1........borrow money, except to obtain liquid securities for use in connection
with Strategic Transactions conducted by the Funds in connection with its
portfolio activities or as a temporary measure for extraordinary or emergency
purposes, in connection with the clearance of transactions or to pay for
redemptions, in each case subject to applicable U.S. government limitations;
2........purchase or sell real estate (other than securities representing
interests in real estate or fixed income obligations directly or indirectly
secured by real estate and other than real estate acquired upon exercise of
rights under such securities) or purchase or sell physical commodities or
contracts relating to physical commodities (other than currencies and specie to
the extent they may be considered physical commodities) or oil, gas or mineral
leases or exploration programs;
3. act as underwriter of securities issued by others, except to the extent
that it may be deemed an underwriter in connection with the disposition of
portfolio securities of the Fund;
4. make loans to other persons, except (a) loans of portfolio securities, and
(b) to the extent the entry into repurchase agreements and the purchase of debt
obligations may be deemed to be loans;
5. issue senior securities, except as appropriate to evidence
borrowings of money, and except that Strategic Transactions
conducted by the Fund in connection with its portfolio
activities are not considered to involve the issuance of
senior securities for purposes of this restriction;
6. purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase
to be invested in the same industry; or
7. with respect to 75% of its total assets taken at market value,
purchase more than 10% of the voting securities of any one
issuer or invest more than 5% of the value of its total assets
in the securities of any one issuer, except in each case
securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and securities of other
investment companies.
In addition, the Board of Directors has adopted the following policy (among
others) which may be changed without a shareholder vote: neither Fund may invest
more than 15% of its net assets in securities which are not readily marketable.
These include securities subject to contractual or legal resale restrictions in
their primary trading market (such as OTC options, including floors, caps,
collars and swaps, securities of private companies and longer-term repurchase
agreements).
If a percentage restriction on investment or utilization of assets as set forth
under "Investment Restrictions" above is adhered to at the time an investment is
made, a later change in percentage resulting from changes in the value or the
total cost of the Funds' assets will not be considered a violation of the
restriction.
Share Certificates
Due to the desire of the Funds to keep purchase and redemption of
shares simple, generally, certificates will not be issued to indicate ownership
in either of the Funds.
PERFORMANCE INFORMATION
From time to time, each Fund may calculate its performances
for inclusion in advertisements, sales literature or reports to shareholders or
prospective investors. These performance figures are calculated by the Funds in
the manner described in the section below.
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of return for
the periods of one year and the life of a Fund, each ended on the last day of a
recent calendar quarter. Average annual total return quotations reflect changes
in the price of a Fund's shares and assume that all dividends and capital gains
distributions during the respective periods were reinvested in the Fund's
shares. Average annual total return is calculated by computing the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)1/n - 1
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the beginning of
the applicable period.
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the period were reinvested in
the Fund's shares. Cumulative total return is calculated by computing the
cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the
value, at the end of the applicable period, of a
hypothetical $1,000 investment made at the beginning
of the applicable period.
Total Return
Total Return is the rate of return on an investment for a specified period of
time calculated in the same manner as cumulative total return.
Capital Change
Capital Change measures the return from invested capital including reinvested
capital gains distributions. Capital change does not include the reinvestment of
income dividends.
Quotations of a Fund's performance are historical, show the performance
of a hypothetical investment, and are not intended to indicate future
performance. An investor's shares when redeemed may be worth more or less than
their original cost. Performance of each Fund will vary based on changes in
market conditions and the level of the Fund's expenses.
Comparison of Portfolio Performance
Comparison of the quoted non-standardized performance of various
investments is valid only if performance is calculated in the same manner or the
differences are understood. Investors should consider the methods used to
calculate performance when comparing the performance of either Fund with the
performance of other investment companies or other types of investments.
In connection with communicating its performance to current or
prospective shareholders, either Fund also may compare these figures to
unmanaged indices which may assume reinvestment of dividends or interest but
generally do not reflect deductions for operational, administrative and
management costs.
Because normally most of the Global Fund's investments are denominated
in foreign currencies, the strength or weakness of the U.S. dollar against these
currencies will account for part of the Global Fund's investment performance
except to the extent hedged to the U.S. dollar. Historical information on the
value of the dollar versus foreign currencies may be used from time to time in
advertisements concerning the Global Fund.
Such historical information is not indicative of future performance.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations. When
these organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk.
Since the assets in funds are always changing, either Fund may be
ranked within one asset-size class at one time and in another asset-size class
at some other time. In addition, the independent organization chosen to rank a
Fund in fund literature may change from time to time depending upon the basis of
the independent organization's categorizations of mutual funds, changes in the
Fund's investment policies and investments, the Fund's asset size and other
factors deemed relevant. Footnotes in advertisements and other marketing
literature will include the organization issuing the ranking, time period and
asset-size class, as applicable, for the ranking in question.
Evaluations of a Fund's performance made by independent sources may
also be used in advertisements concerning that Fund, including reprints of, or
selections from, editorials or articles about the Fund.
<PAGE>
OPERATION OF THE FUNDS
Structure of the Funds
Both the Global Fund and the American Fund are separate series of
Tweedy, Browne Fund Inc., a Maryland corporation organized on January 28, 1993.
Costs incurred by each Fund in connection with the organization and
initial registration of the Corporation and each Fund will be amortized over a
five year period beginning at the commencement of the operation of the
applicable Fund.
The authorized capital stock of the Corporation consists of one billion
shares with $0.0001 par value, 600 million shares of which are allocated to the
Global Fund and 400 million shares of which are allocated to the American Fund.
Each share has equal voting rights as to each other share of that series as to
voting for Directors, redemption, dividends and liquidation. Shareholders have
one vote for each share held. The Directors have the authority to issue
additional series of shares and to designate the relative rights and preferences
as between the different series. All shares issued and outstanding are fully
paid and non-assessable, transferable, and redeemable at net asset value at the
option of the shareholder. Shares have no preemptive or conversion rights.
The shares have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so, and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
Directors will not be able to elect any person or persons to the Board of
Directors.
Maryland corporate law provides that a Director of the Corporation
shall not be liable for actions taken in good faith, in a manner he or she
reasonably believes to be in the best interests of the Corporation and with the
care that an ordinarily prudent person in a like position would use under
similar circumstances. In so acting, a Director shall be fully protected in
relying in good faith upon the records of the Corporation and upon reports made
to the Corporation by persons selected in good faith by the Directors as
qualified to make such reports. The By-Laws provide that the Corporation will
indemnify Directors and officers of the Corporation against liabilities and
expenses reasonably incurred in connection with litigation in which they may be
involved because of their positions with the Corporation, to the fullest extent
permitted by Maryland corporate law, as amended from time to time. However,
nothing in the Articles of Incorporation or the By-Laws protects or indemnifies
a Director or officer against any liability to which he or she would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
Investment Adviser
Tweedy, Browne acts as investment adviser to both the Global Fund and
the American Fund. The Adviser is registered with the Securities and Exchange
Commission (the "SEC") as an investment adviser and as a broker/dealer and is a
member of the National Association of Securities Dealers.
Tweedy, Browne was founded in 1920 and began managing money for the account
of persons other than its principals and their families in 1968. Tweedy, Browne
began investing in foreign securities in 1983. Tweedy, Browne is owned by its
Managing Directors, Christopher H. Browne, William H. Browne, John D. Spears,
Thomas H. Shrager and Robert Q. Wyckoff, Jr., and a wholly-owned subsidiary of
Affiliated Managers Group, Inc. ("AMG"), which owns a majority interest in
Tweedy, Browne. Messrs. Browne are brothers. The Management Committee, which
consists of Messrs. Christopher and William Browne and John D. Spears, manages
the day-to-day operations of Tweedy, Browne and the Funds and makes all
investment management decisions. Neither AMG nor its subsidiary manages the
day-to-day operations of, nor participates in the investment process at, Tweedy,
Browne.
Certain investments may be appropriate for one or both of the Funds and
also for other clients advised by the Adviser. Investment decisions for each
Fund and other clients are made with a view to achieving their respective
investment objectives and after consideration of such factors as their current
holdings, availability of cash for investment and the size of their investments
generally. Frequently, a particular security may be bought or sold for only one
client or in different amounts and at different times for more than one but less
than all clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security. In addition,
purchases or sales of the same security may be made for two or more clients on
the same day. In such event, such transactions will be allocated among the
clients in a manner believed by the Adviser to be equitable to each. In some
cases, this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a Fund. Purchase and sale orders for the Funds
may be combined with those of other clients of the Adviser in the interest of
most favorable net results to a particular Fund.
The Adviser renders services to the Global Fund and the American Fund
pursuant to Investment Advisory Agreements dated as of July 30, 1998 (the
"Agreements"). Each Agreement will remain in effect for an initial two year term
and thereafter, from year to year upon the annual approval by the vote of a
majority of those Directors who are not parties to such Agreement or interested
persons of the Adviser or the Corporation, cast in person at a meeting called
for the purpose of voting on such approval, and either by vote of the
Corporation's Directors or of the outstanding voting securities of the Fund.
Each Agreement may be terminated at any time without payment of penalty by
either party on sixty days written notice, and automatically terminates in the
event of its assignment.
Under both Agreements, the Adviser regularly provides the Funds with
continuing investment management for the Funds' portfolios consistent with the
Funds' investment objectives, policies and restrictions and determines what
securities shall be purchased for the portfolios of the Funds, what portfolio
securities shall be held or sold by the Funds, and what portion of the Funds'
assets shall be held uninvested, subject always to the provisions of the
Corporation's Articles of Incorporation and By-Laws, the 1940 Act and the Code
and to the Funds' investment objectives, policies and restrictions, and subject,
further, to such policies and instructions as the Directors of the Corporation
may from time to time establish.
Under both Agreements, the Adviser also renders significant
administrative services (not otherwise provided by third parties) necessary for
the Funds' operations as open-end investment companies including, but not
limited to: preparing reports and notices to the Directors and shareholders,
supervising, negotiating contractual arrangements with, and monitoring various
third-party service providers to the Funds (such as the Funds' transfer agent,
pricing agents, custodians, accountants and others); preparing and making
filings with the SEC and other regulatory agencies; assisting in the preparation
and filing of the Funds' federal, state and local tax returns; assisting in
preparing and filing the Funds' federal excise tax returns; assisting with
investor and public relations matters; monitoring the valuation of securities
and the calculation of net asset value; monitoring the registration of shares of
the Funds under applicable federal and state securities laws; maintaining the
Funds' books and records; assisting in establishing accounting policies of the
Funds; assisting in the resolution of accounting and legal issues; establishing
and monitoring the Funds' operating budgets; processing the payment of the
Funds' bills; assisting the Funds in, and otherwise arranging for, the payment
of distributions and dividends and otherwise assisting each Fund in the conduct
of its business, subject to the direction and control of the Directors.
Subject to the ability of the Adviser upon approval of the Board to
obtain reimbursement for the administrative time spent on the Funds' operations
(other than investment advisory matters) by employees of the Adviser, the
Adviser pays the compensation and expenses of all Directors, officers and
executive employees of the Corporation affiliated with the Adviser and makes
available, without expense to the Funds, the services of such Directors,
officers and employees as may duly be elected officers, subject to their
individual consent to serve and to any limitations imposed by law, and provides
the Funds' office spaces and facilities.
For the Adviser's investment advisory services to the Global Fund and
the American Fund, the Adviser is entitled to receive an annual fee equal to
1.25% of each Fund's average daily net assets. The fee is payable monthly in
arrears, provided that each 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 such Fund and unpaid.
Under the Agreements, each Fund is responsible for all of its other
expenses including organization expenses; fees and expenses incurred in
connection with membership in investment company organizations; broker's
commissions; legal, auditing and accounting expenses; taxes and governmental
fees; net asset valuation; the fees and expenses of the transfer agent; the cost
of preparing share certificates or any other expenses, including clerical
expenses of issue, redemption or repurchase of shares of capital stock; the
expenses of and the fees for registering or qualifying securities for sale; the
fees and expenses of the Directors, officers and employees who are not
affiliated with the Adviser and, to the extent described above, employees of the
Adviser; the cost of printing and distributing reports and notices to
shareholders; and the fees and disbursements of custodians. The Corporation may
arrange to have third parties assume all or part of the expenses of sale,
underwriting and distribution of shares of the Funds. Each Fund is also
responsible for its expenses incurred in connection with litigation, proceedings
and claims and the legal obligation it may have to indemnify the Adviser and its
Directors and officers with respect thereto.
Each Agreement also provides that the applicable Fund and the
Corporation may use any name utilizing or derived from the name "Tweedy, Browne"
only as long as the Agreement or any extension, renewal or amendment thereof
remains in effect.
Each Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement and indemnifies the
Adviser and its employees, officers and partners against any cost or expense in
any circumstance in which the Adviser is not liable to the Fund.
Prior to July 30, 1998, the Adviser served pursuant to investment
advisory agreements dated October 9, 1997, and was entitled to an annual fee
equal to 1.25% of each Fund's average daily net assets. Prior to October 9, 1997
Tweedy, Browne Company L.P. was the Funds' investment adviser pursuant to
investment advisory agreements dated June 2, 1993 and December 8, 1993 for the
Global Fund and American Fund, respectively. Tweedy, Browne Company L.P., as
investment adviser was entitled to receive an annual fee equal to 1.25% of each
Fund's average daily net assets.
For the fiscal years ended March 31, 1998, March 31, 1997 and March 31,
1996, the Global Fund incurred $23,717,001, $14,318,034 and $9,864,278,
respectively, in investment advisory fees.
For the fiscal years ended March 31, 1998, March 31, 1997 and March 31,
1996, the American Fund incurred $7,546,393, $2,892,275 and $1,518,122,
respectively, in investment advisory fees after voluntary waivers of $105,730,
$284,262 and $192,301, respectively.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian banks. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
None of the Directors or officers may have dealings with the Funds as
principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Funds.
Administrator
First Data Investor Services Group, Inc. (the "Administrator" or
"Investor Services Group") provides administrative services for the Global Fund
for a fee equal to .09% of the Global Fund's average daily net assets on an
annual basis, subject to specified minimum fee levels and subject to reductions
as low as .03% on average assets in excess of $1 billion. For the fiscal years
ended March 31, 1998 and March 31, 1997, the Global Fund incurred $734,106 and
$1,313,340, respectively, in administration fees after voluntary waivers of
$86,035 and $84,934, respectively. For the fiscal year ended March 31, 1996, the
Global Fund incurred $1,116,971 in administration fees.
Prior to February 15, 1997, the Company paid Investor Services Group an
administrative fee equal to .12% of the Global Fund's average daily net assets
on an annual basis, subject to specified minimum fee levels and subject to
reductions as low as .08% on average assets in excess of $500 million.
The Administrator also provides administrative services for the
American Fund for a fee equal to .09% of the American Fund's average daily net
assets on an annual basis, subject to specified minimum fee levels and subject
to reductions as low as .03% on average assets in excess of $1 billion. For the
fiscal year ending March 31, 1998, the American Fund incurred $254,085 in
administration fees, after a voluntary waiver of $22,539. For the fiscal year
ended March 31, 1997, the American Fund incurred $296,867 in administration
fees, after voluntary waivers of $32,914 for the period April 1, 1996 through
February 14, 1997 and $21,979 for the period February 15, 1997 through March 31,
1997. For the fiscal year ended March 31, 1996, the American Fund incurred
$156,669 (after voluntary waiver of $54,000) in administration fees.
Prior to February 15, 1997, the Company paid Investor Services Group an
administrative fee equal to .10% of the American Fund's average daily net assets
on an annual basis, subject to specified minimum fee levels and subject to
reductions as low as .06% on average assets in excess of $500 million.
Under the Administration Agreement for each Fund, the Administrator is
required to provide office facilities, clerical, legal and administrative
services, accounting and record keeping, internal auditing, valuing a Fund's
assets, preparing SEC and shareholder reports, preparing, signing and filing tax
returns, monitoring 1940 Act compliance and providing other mutually agreeable
services. Subject to certain conditions, the Administration Agreement has a term
of three years until February 15, 2000 and thereafter shall automatically renew
for successive terms of one year unless terminated and is terminable on 60 days
notice by either party.
<PAGE>
Directors and Executive Officers
The Directors and executive officers of the Corporation, together with
information as to their principal business occupations during the past five
years are shown below. Each Director who is an "interested person" of the
Corporation, as defined in the 1940 Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Position with Corporation Principal Occupation**
- --------------------------------- --------------------------------- ------------------------------------------------
Bruce A. Beal, Age 62 Director Partner and Officer of various real estate
The Beal Companies development and investment companies. Real
177 Milk Street estate consultant.
Boston, MA 02109
Christopher H. Browne*, President, Director Managing Director of Investment Adviser and
Age 52 Distributor
Arthur Lazar, Age 86 Director President of Lazar Brokerage (insurance
Lazar Brokerage brokerage)
355 Lexington Avenue
New York, NY 10017
Richard Salomon, Director Partner in Christy & Viener
Age 51 (law firm)
Christy & Viener
620 5th Avenue
New York, NY 10020
Anthony H. Meyer, Director Retired
Age 67
Box 1980
Edgartown, MA 02539
William H. Browne, Treasurer Managing Director of Investment Adviser and
Age 53 Distributor
M. Gervase Rosenberger, Vice President General Counsel for Investment Adviser and
Age 47 and Secretary Distributor
John D. Spears, Age 50 Vice President General Partner of Investment Adviser and
Distributor
<FN>
* Mr. Christopher Browne is considered by the Corporation to be a Director who is an "interested person"
of the Adviser or of the Corporation (within the meaning of the 1940 Act).
** Unless otherwise stated, all the Directors and officers have been
associated with their respective companies for more than five years.
</FN>
</TABLE>
Except as stated, the address of each such person is the same as the
Adviser's. Each of the Directors who is not affiliated with the Adviser will be
paid by the Corporation on behalf of the Funds. Effective October 1, 1997, each
Fund pays each of these unaffiliated Directors an annual Director's fee of
$8,000 and fees of $500 for attending each Directors meeting. Prior to October
1, 1997 each unaffiliated Director received an annual Director's fee of $2,000
and fees of $500 for each Directors Meeting attended. The officers are paid by
the Adviser or the Administrator.
The following table sets forth certain information regarding the
compensation of the Corporation's Directors for the fiscal year ended March 31,
1998. No executive officer or person affiliated with the Funds received
compensation from the Funds. No Director receives pension or retirement benefits
from the Funds.
<TABLE>
<CAPTION>
<S> <C> <C>
COMPENSATION TABLE
TOTAL COMPENSATION FROM THE CORPORATION
AGGREGATE COMPENSATION FROM THE AND COMPLEX PAID
NAME OF PERSON CORPORATION TO DIRECTORS
AND POSITION
Christopher H. Browne $0 $0
Chairman of the Board and
President
Bruce A. Beal $7,000 $7,000
Director
Arthur Lazar $7,000 $7,000
Director
Daniel J. Loventhal* $1,500 $1,500
Director
Richard Salomon $7,000 $7,000
Director
</TABLE>
Effective May 12, 1998, Anthony H. Meyers was elected a Director of the Company.
* Daniel J. Loventhal is no longer a Director of the Company.
<PAGE>
Control Persons and Principal Holders of Securities
As of June 30, 1998, the following persons owned 5% or more of the
outstanding shares of the Global Fund and the American Fund:
<TABLE>
<CAPTION>
<S> <C> <C>
Percent of Total
Shares
Fund Name Name and Address Outstanding
Tweedy, Browne Global Value Fund Charles Schwab & Co., Inc. 23.9%
101 Montgomery Street
San Francisco, CA 94104
Tweedy, Browne Global Value Fund National Financial Services Corp. 8.8%
P.O. Box 3908
Church Street Station
New York, NY 10008
Tweedy, Browne Global Value Fund Donaldson Lufkin & Jenrette 6.06%
P.O. Box 2052
Jersey City, NJ 07303
Tweedy, Browne American Value Fund Charles Schwab & Co., Inc. 23.04%
101 Montgomery Street
San Francisco, CA 94104
Tweedy, Browne American Value Fund National Financial Services Corp. 19.9%
P.O. Box 3908
Church Street Station
New York, NY 10008
Tweedy, Browne American Value Fund Donaldson Lufkin & Jenrette 5.7%
P.O. Box 2052
Jersey City, NJ 07303
</TABLE>
The Corporation believes that such ownership is of record only and is
not aware that any person owns beneficially 5% or more of the shares of the
Global Fund or American Fund.
As of July 12, 1998, the Directors and officers of the Corporation
beneficially owned 1.4% of the outstanding common stock of the Global Fund and
3.1% of the outstanding common stock of the American Fund.
<PAGE>
Distributor
The Corporation has distribution agreements with the Adviser to act as
distributor (the "Distributor") for the Global Fund and American Fund each dated
as of July 30, 1998 (the "Distribution Agreements"). Each Distribution Agreement
will remain in effect from year to year upon the annual approval by a majority
of the Directors who are not parties to such agreements or interested persons of
any such party and either by vote of a majority of the Board of Directors or a
majority of the outstanding voting securities of the Corporation.
Under the Distribution Agreements, the Corporation is responsible for:
the payment of all fees and expenses in connection with the preparation and
filing with the SEC of the Corporation's registration statement and a Fund's
prospectus (including this Statement of Additional Information) and any
amendments and supplements thereto, the registration and qualification of shares
for sale in the various states, including registering the Corporation as a
broker/dealer in various states; the fees and expenses of preparing, printing
and mailing prospectuses annually to existing shareholders, notices, proxy
statements, reports or other communications to shareholders of the Funds; the
cost of printing and mailing confirmations of purchases of shares and any
prospectuses accompanying such confirmations; any issue taxes or any initial
transfer taxes; shareholder toll-free telephone charges and expenses of
shareholder service representatives, the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
that portion of any equipment, service or activity which is primarily intended
to result in the sale of shares issued by the Corporation.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of a Fund to the public.
The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, as well as the sales related portion of any equipment, service or activity
which is primarily intended to result in the sale of shares issued by the
Corporation.
As agent, the Distributor currently offers each Fund's shares on a
continuous basis to investors. The Distribution Agreements provide that the
Distributor accepts orders for shares at net asset value as no sales commission
or load is charged to the investor.
TAXES
Each Fund intends to qualify each year and elect to be treated as a
regulated investment company under Subchapter M of the Code. To qualify as a
regulated investment company, a Fund must comply with certain requirements of
the Code relating to, among other things, the sources of income and
diversification of assets. If the Fund fails to qualify for treatment as a
regulated investment company for any taxable year, the Fund would be taxed as an
ordinary corporation on taxable income for that year (even if that income was
distributed to its shareholders), and all distributions out of earnings and
profits would be taxable to shareholders as dividends (that is, ordinary
income).
A regulated investment company qualifying under the Code is required to
distribute each year to its shareholders at least 90% of its investment company
taxable income (generally including dividends, interest and net short-term
capital gain but not net capital gain, which is the excess of net long-term
capital gains over net short-term capital losses) and generally is not subject
to federal income tax to the extent that it distributes annually its investment
company taxable income and net capital gains in the manner required under the
Code. Each Fund intends to distribute at least annually all of its investment
company taxable income and net capital gains and therefore generally does not
expect to pay federal income taxes.
Each Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of a Fund's ordinary income for the calendar year, at
least 98% of its capital gain net income realized during the one-year period
ending October 31 during such year, and all ordinary income and capital gain net
income for prior years that were not previously distributed. For purposes of the
excise tax, any ordinary income or capital gain net income retained by, and
subject to federal income tax in the hands of, the Funds will be treated as
having been distributed.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income. Dividends from domestic corporations are
expected to comprise some portion of each Fund's gross income. To the extent
that such dividends constitute a portion of a Fund's investment company taxable
income, a portion of the income distributions of that Fund may be eligible for
the deduction for dividends received by corporations. Shareholders will be
informed of the portion of dividends which may so qualify. Distributions of net
capital gains are taxable to shareholders as long-term capital gain, regardless
of the length of time the shares of the distributing Fund have been held by such
shareholders. Such distributions are not eligible for the dividends-received
deduction discussed above. Any loss realized upon the redemption of shares held
at the time of redemption for six months or less from the date of their purchase
will be treated as a long-term capital loss to the extent of any amounts treated
as distributions of long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders receiving distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the distribution date.
All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares may result in tax consequences (discussed below) to the
shareholder and are also subject to these reporting requirements.
Distributions by a Fund results in a reduction in the net asset value
of the Fund's shares. Should distributions reduce the net asset value below a
shareholder's cost basis, such distributions would nevertheless be taxable to
the shareholder as ordinary income or capital gain as described above, even
though, from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should consider the tax implications of buying
shares just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will then receive a partial return of capital upon the
distribution which will nevertheless be taxable to them.
Each Fund intends to qualify for and may make the election permitted
under Section 853 of the Code so that shareholders may (subject to limitations)
be able to claim a credit or deduction on their federal income tax returns for,
and may be required to treat as part of the amounts distributed to them, their
pro rata portion of qualified taxes paid by that Fund to foreign countries
(which taxes relate primarily to investment income). A shareholder who does not
itemize deductions may not claim a deduction for such taxes. Each Fund may make
an election under Section 853 of the Code, provided that more than 50% of the
value of the total assets of the Fund at the close of the taxable year consists
of stocks or securities in foreign corporations. The foreign tax credit
available to shareholders is subject to certain limitations imposed by the Code.
Each Fund will notify each shareholder within 60 days after the close of the
Fund's taxable year as to whether the taxes paid by the Fund to foreign
countries will qualify for the treatment discussed above for that year, and if
they do, such notification will designate (i) each shareholders' pro rata
portion of the qualified taxes paid and (ii) the portion of the distributions
that represents income derived from foreign sources.
Generally, a foreign tax credit is subject to the limitation that it
may not exceed the shareholder's U.S. tax (before the credit) attributable to
the shareholder's total taxable income from foreign sources. For this purpose,
the shareholder's proportionate share of dividends paid by the Fund that
represents income derived from foreign sources will be treated as foreign source
income. The Fund's gains and losses from the sale of securities, and certain
currency gains and losses, generally will be treated as being derived from U.S.
sources. The limitation on the foreign tax credit applies separately to specific
categories of foreign source income, including "passive income," a category that
includes the portion of dividends received from each Fund that qualifies as
foreign source income. The foregoing limitation may prevent a shareholder from
claiming a credit for the full amount of his proportionate share of the foreign
income taxes paid by each Fund.
Equity options (including options on stocks and options on narrow-based
stock indices) and over-the-counter options on debt securities written or
purchased by a Fund are subject to Section 1234 of the Code. In general, no loss
is recognized by a Fund upon payment of a premium in connection with the
purchase of a put or call option. The character of any gain or loss recognized
(i.e., long-term or short-term) will generally depend, in the case of a lapse or
sale of the option, on a Fund's holding period for the option and, in the case
of an exercise of the option, on the Fund's holding period for the underlying
stock. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock or substantially identical stock in the Fund's portfolio. If
the Fund sells a put or call option, no gain is recognized upon its receipt of a
premium. If the option lapses or is closed out, any gain or loss is treated as a
short-term capital gain or loss. If a call option sold by the Fund is exercised,
any resulting gain or loss is a short-term or long-term capital gain or loss
depending on the holding period of the underlying stock. The exercise of a put
option sold by the Fund is not a taxable transaction for the Fund.
Many of the futures contracts (including foreign currency futures
contracts) entered into by a Fund, certain forward foreign currency contracts,
and all listed non-equity options written or purchased by the Fund (including
options on debt securities, options on futures contracts, options on securities
indices and certain options on broad-based stock indices) will be governed by
Section 1256 of the Code. Absent a tax election to the contrary, gain or loss
attributable to the lapse, exercise or closing out of any such position
generally will be treated as 60% long-term and 40% short-term capital gain or
loss. In addition, on the last trading day of the Fund's fiscal year, all
outstanding Section 1256 positions will be marked to market (i.e., treated as if
such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term capital
gain or loss. Under certain circumstances, entry into a futures contract to sell
a security may constitute a short sale for federal income tax purposes, causing
an adjustment in the holding period of the underlying security or a
substantially identical security in the Fund's portfolio. Under Section 988 of
the Code, discussed below, certain foreign currency gain or loss from foreign
currency related forward contracts, certain futures and similar financial
instruments entered into or acquired by the Fund will be treated as ordinary
income or loss.
Positions of each Fund which consist of at least one stock and at least
one stock option with respect to such stock or substantially identical stock or
securities or other position with respect to substantially similar or related
property which substantially diminishes a Fund's risk of loss with respect to
such stock could be treated as a "straddle" which is governed by Section 1092 of
the Code, the operation of which may cause deferral of losses, adjustments in
the holding periods of stock or securities and conversion of short-term capital
losses into long-term capital losses. In addition, the Fund will not be allowed
to currently deduct interest and carry costs properly attributable to the
straddle position. The Fund may make certain elections to mitigate the operation
of the rules discussed above. An exception to these straddle rules exists for
any "qualified covered call options" on stock written by the Fund.
Straddle positions of a Fund which consist of at least one position not
governed by Section 1256 and at least one futures contract or forward contract
or non-equity option governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such other position will be treated as a
"mixed straddle." Although mixed straddles are subject to the straddle rules of
Section 1092 of the Code, certain tax elections exist for them which reduce or
mitigate the operation of these rules. Each Fund will monitor its transactions
in options and futures and may make certain tax elections in connection with
these investments.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues interest or other
receivables, or accrues expenses or other liabilities, denominated in a foreign
currency and the time the Fund actually collects such interest or receivables,
or pays such expenses or liabilities, generally is treated as ordinary income or
ordinary loss. Similarly, gains or losses from dispositions of foreign
currencies, debt securities denominated in a foreign currency and certain
futures and forward contracts, attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the currency or security or
contract and the date of disposition are also treated as ordinary gain or loss.
These gains or losses may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.
If a Fund owns shares in a foreign corporation that constitutes a
"passive foreign investment company" for U.S. federal income tax purposes and
the Fund does not elect to treat the foreign corporation as a "qualified
electing fund" within the meaning of the Code, the Fund may be subject to U.S.
federal income tax on a portion of any "excess distribution" it receives from
the foreign corporation or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend by the Fund to
its U.S. shareholders. Each Fund may also be subject to additional tax in the
nature of an interest charge with respect to deferred taxes arising from such
distributions or gains. Any tax paid by a Fund as a result of its ownership of
shares in a "passive foreign investment company" will not give rise to any
deduction or credit to the Fund or any shareholder. If the Fund owns shares in a
"passive foreign investment company" and the Fund elects to treat the foreign
corporation as a "qualified electing fund" under the Code, the Fund may be
required to include in its income each year a portion of the ordinary income and
net capital gains of the foreign corporation, even if this income is not
distributed to the Fund. Any such income would be subject to the distribution
requirements described above, even if the Fund does not receive any funds to
distribute.
A portion of the difference between the issue price of zero coupon
securities and their face value ("original issue discount") is considered to be
income to the Fund each year, even though the Fund will not receive cash
interest payments from these securities. This original issue discount imputed
income will comprise a part of the investment company taxable income of the Fund
which must be distributed to shareholders in order to maintain the qualification
of the Fund as a regulated investment company and to avoid federal income tax at
the level of the Fund.
Each Fund will be required to report to the Internal Revenue Service
(the "IRS") all distributions of investment company taxable income and capital
gains as well as gross proceeds from the redemption or exchange of the Fund's
shares, except in the case of certain exempt shareholders. Under the backup
withholding provisions of Section 3406 of the Code, distributions of investment
company taxable income and capital gains and proceeds from the redemption or
exchange of the shares of a regulated investment company may be subject to
withholding of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish either Fund with their taxpayer identification
numbers and with required certifications regarding their status under the
federal income tax law. Withholding may also be required if either Fund is
notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder is incorrect
or that the shareholder has previously failed to report interest or dividend
income. If the withholding provisions are applicable, any such distributions and
proceeds, whether taken in cash or reinvested in additional shares, will be
reduced by the amounts required to be withheld.
Redeeming shareholders will recognize gain or loss in an amount equal
to the difference between the basis in their redeemed shares and the amount
received. If such shares are held as a capital asset, the gain or loss will be a
capital gain or loss and will be long-term if such shares have been held for
more than one year. Any loss realized upon a taxable disposition of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any capital gain dividends received with respect to such shares.
Shareholders of each Fund may be subject to state and local taxes on
distributions received from either Fund and on redemptions of each Fund's
shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Corporation issues to
each shareholder a statement of the federal income tax status of all
distributions.
The foregoing general discussion of U.S. federal income tax law relates
solely to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Funds, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 31% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
The Adviser conducts all of the trading operations for both the Global
Fund and the American Fund. The Adviser places portfolio transactions with or
through issuers, underwriters and other brokers and dealers. In its capacity as
a broker-dealer, the Adviser reserves the right to receive a ticket charge from
each Fund for such service although it currently does not engage in this
practice.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for each Fund's portfolio is to obtain the most favorable
net results, taking into account such factors as price, commission, where
applicable, (which is negotiable in the case of U.S. national securities
exchange transactions but which is generally fixed in the case of foreign
exchange transactions), size of order, difficulty of execution and skill
required of the executing broker/dealer. The Adviser reviews on a routine basis
commission rates, execution and settlement services performed, making internal
and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
brokers and dealers who supply market quotations to the custodian of the Funds
for appraisal purposes, or who supply research, market and statistical
information to either Fund or the Adviser. The term "research, market and
statistical information" includes advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is not authorized when placing portfolio transactions for either
Fund to pay a brokerage commission in excess of that which another broker might
have charged for executing the same transaction solely on account of the receipt
of research, market or statistical information. The Adviser does not place
orders with brokers or dealers on the basis that the broker or dealer has or has
not sold a Fund's shares. Except for implementing the policy stated above, there
is no intention to place portfolio transactions with particular brokers or
dealers or groups thereof. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless it appears that more favorable results are available
otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Funds and to the Adviser, it is the
opinion of the Adviser, that such information is only supplementary to its own
research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the Adviser
in providing services to clients other than the Funds, and not all such
information is useful to the Adviser in providing services to the Funds. For the
fiscal years ended March 31, 1998, March 31, 1997 and March 31, 1996, the Global
Fund incurred brokerage commissions of $2,670,257, $2,167,248 and $1,135,039,
respectively. For the fiscal years ended March 31, 1998, March 31, 1997 and
March 31, 1996, the American Fund incurred brokerage commissions of $636,393,
$223,652 and $210,767, respectively. The increase in commission payments is
attributable to the increased size of the Funds.
Average annual portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio securities
owned during the year, excluding from both the numerator and the denominator all
securities with maturities at the time of acquisition of one year or less. For
the fiscal years ended March 31, 1998 and March 31, 1997, the Global Fund's
portfolio turnover rates were 16% and 20%, respectively. For the fiscal years
ended March 31, 1998 and March 31, 1997, the American Fund's portfolio turnover
rates were 6% and 16%, respectively.
NET ASSET VALUE
The net asset value of shares for both the Global Fund and the American
Fund will be computed as of the close of regular trading on the New York Stock
Exchange, Inc. (the "Exchange") on each day during which the Exchange is open
for trading. The Exchange is normally closed on the following national holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. Net
asset value per share for the Funds is determined by dividing the value of the
total assets, less all liabilities, by the total number of shares outstanding.
In valuing a Fund's assets, a security listed on an exchange or through
any system providing for same day publication of actual prices (and not subject
to restrictions against sale by the Fund on such exchange or system) will be
valued at its last 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 Adviser
determines that the last sale price prior to valuation does not reflect current
market value, the Adviser will determine the market value of those securities or
assets in accordance with industry practice and other factors considered
relevant by the 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 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
Adviser.
The value of a security which is not readily marketable and which
accordingly is valued by or under the direction of the Directors is valued
periodically on the basis of all relevant factors which may include the cost of
such security to the Fund, the market price of unrestricted securities of the
same class at the time of purchase and subsequent changes in such market price,
potential expiration or release of the restrictions affecting such security, the
existence of any registration rights, the fact that the Fund may have to bear
part or all of the expense of registering such security, any potential sale of
such security by or to another investor as well as traditional methods of
private security analysis.
Following the calculation of security values in terms of the currency in
which the market quotation used is expressed ("local currency"), the valuing
agent will calculate these values in terms of U.S. dollars on the basis of the
conversion of the local currencies (if other than U.S.) into U.S. dollars at the
2:00 p.m. New York time spot rate. Foreign currency exchange contracts are
valued using the relevant 2:00 p.m. New York time spot rate and future rate on
foreign currency contracts.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business on each business day in New York (i.e., a day on which the Exchange is
open). In addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business days in New York
and on which a Fund's net asset value is not calculated. Each Fund generally
calculates net asset value per share, and therefore effects sales, redemptions
and repurchases of its shares, as of the regular close of the Exchange on each
day on which the Exchange is open. Such calculation does not take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. If events materially affecting
the value of such securities occur between the time when their price is
determined and the time when that Fund's net asset value is calculated, such
securities will be valued at fair value as determined in good faith by the Board
of Directors.
ADDITIONAL INFORMATION
Experts
The financial statements and schedules of investments of Tweedy, Browne
Global Value Fund and Tweedy, Browne American Value Fund at March 31, 1998 and
for each of the periods indicated therein appearing in this Statement of
Additional Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing. Other Information
The Corporation employs Boston Safe Deposit and Trust Company as
custodian and First Data Investor Services Group, Inc. as transfer agent for
both the Global Fund and the American Fund.
The Prospectus and the Statement of Additional Information omit certain
information contained in the Registration Statement which the Corporation has
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration Statement for further information with respect to the Funds
and the securities offered hereby. The Registration Statement is available for
inspection by the public at the SEC in Washington, D.C. In addition, the SEC
maintains a web site (http://www.sec.gov) that contains the Statement of
Additional Information, information incorporated by reference to this Statement
of Additional Information and the Prospectus and other information regarding
registrants that file electronically with the SEC.
Financial Statements
The Funds' Annual Report for the fiscal year ended March 31, 1998 is
included herein.
<PAGE>
<PAGE>
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[graphic omitted]
TWEEDY, BROWNE
GLOBAL VALUE FUND
ANNUAL
MARCH 31, 1998
--------------
[graphic omitted]
TWEEDY, BROWNE
AMERICAN VALUE FUND
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<PAGE>
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.
- -------------------------------------------------------------------------------
<PAGE>
TWEEDY, BROWNE FUND INC.
- -------------------------------------------------------------------------------
Investment Manager's Report
- -------------------------------------------------------------------------------
[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
<PAGE>
84
193099.02-New YorkS5A
APPENDIX A
The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds.
Ratings of Municipal and Corporate Bonds
S&P:
Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. Debt rated AA
has a very strong capacity to pay interest and repay principal and differs from
the highest rated issues only in small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. Debt rated BBB is regarded as
having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned and actual or
implied B or B- rating. The rating CC typically is applied to debt subordinated
to senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or maintenance of other terms of the contract over any long period of
time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
to a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
List all financial statements and exhibits as part of the
Registration Statement.
(a) Financial Statements (included in Part A)
(i) Financial Highlights for The Tweedy, Browne
Global Value Fund for the period June 15,
1993 (commencement of operations) to March
31, 1998 (audited).
(ii) Financial Highlights for The Tweedy, Browne
American Value Fund for the period December
8, 1993 (commencement of operations) to
March 31, 1998 (audited).
(b) Financial Statements (included in Part B):
Audited Financial Statements as of March 31,
1998 for the Tweedy Browne Global Value Fund
and Tweedy Browne American Value Fund:
Portfolio Highlights Perspective on
Assessing Investment Results Portfolio of
Investments Schedule of Forward Exchange
Contracts Statement of Assets and
Liabilities Statement of Operations
Statement of Changes in Net Assets Financial
Highlights Notes to Financial Statements
Report of Ernst & Young LLP, Independent
Auditors
<TABLE>
<CAPTION>
<S> <C> <C>
(b) Exhibits:
(1) (a) Articles of Incorporation is incorporated by reference to Exhibit 1
to Pre-Effective Amendment No. 2 to the Registration Statement
("Pre-Effective Amendment No. 2").
(1) (b) Articles Supplementary is incorporated by reference to Exhibit 1 to
Post-Effective Amendment No. 1 to the Registration Statement
("Post-Effective Amendment No. 1").
(2) By-Laws is incorporated by reference to Exhibit 2 to Pre-Effective
Amendment No. 2.
(3) None.
(4) (a) Specimen Certificate for the
Tweedy, Browne Global Value Fund is
incorporated by reference to Exhibit
4 to Pre-Effective Amendment No.
2.
(4) (b) Specimen Certificate for the Tweedy, Browne American Value Fund is
incorporated by reference to Exhibit 4 to Post-Effective Amendment
No. 3 to the Registration Statement ("Post-Effective Amendment No.
3").
(5) (a) Advisory Agreement between Registrant and Tweedy, Browne Company L.P.
dated June 2, 1993 relating to the Tweedy, Browne Global Value Fund
is incorporated by reference to Exhibit 5 to Pre-Effective Amendment
No. 2.
(5) (b) Advisory Agreement between Registrant and Tweedy, Browne Company L.P.
dated December 8, 1993 relating to the Tweedy, Browne American Value
Fund is incorporated by reference to Exhibit 5(b) to the Registration
Statement ("Post-Effective Amendment No. 5").
(5) (c) Advisory Agreement between
Registrant and Tweedy, Browne
Company LLC dated October 9, 1997
relating to the Tweedy, Browne
Global Value Fund is filed herein.
(5) (d) Advisory Agreement between
Registrant and Tweedy, Browne
Company LLC dated October 9, 1997
relating to the Tweedy, Browne
American Value Fund is filed herein.
(5) (e) Form of Advisory Agreement
between Registrant and Tweedy,
Browne Company LLC relating to the
Tweedy, Browne Global Value Fund and
Tweedy, Browne American Value Fund
if filed herein.
(6) (a) Distribution Agreement between Registrant and Tweedy, Browne Company
L.P. dated June 3, 1993 relating to the Tweedy, Browne Global Value
Fund is incorporated by reference to Exhibit 6 to Pre-Effective
Amendment No. 2.
(6) (b) Distribution Agreement between Registrant and Tweedy, Browne Company
L.P. dated December 8, 1993 relating to the Tweedy, Browne American
Value Fund is incorporated by reference to Exhibit 6(b) to
Post-Effective Amendment No. 5.
(6) (c) Distribution Agreement
between Registrant and Tweedy,
Browne Company LLC dated October 9,
1997 relating to the Tweedy, Browne
Global Value Fund is filed herein.
(6) (d) Distribution Agreement
between Registrant and Tweedy,
Browne Company LLC dated October 9,
1997 relating to the Tweedy, Browne
American Value Fund is filed herein.
(7) None.
(8) (a) Custody Agreement between Registrant and Boston Safe Deposit and
Trust Company dated June 2, 1993 relating to the Tweedy, Browne
Global Value Fund is incorporated by reference to Exhibit 8 to
Pre-Effective Amendment No. 2.
(8) (b) Amended and Restated Custody Agreement between Registrant and Boston
Safe Deposit and Trust Company relating to the Tweedy, Browne Global
Value Fund and the Tweedy, Browne American Value Fund dated December
8, 1993 is incorporated by reference to Exhibit 8(b) to
Post-Effective Amendment No. 3.
(8) (c) First Amendment to the Amended and Restated Custody Agreement between
Registrant and Boston Safe Deposit & Trust Company relating to the
Tweedy, Browne Global Value Fund and the Tweedy, Browne American
Value Fund dated December 31, 1996 is incorporated by reference to
Exhibit 8(c) to Post-Effective Amendment No. 7.
(9) (a) Transfer Agent Agreement between Registrant and Unified Advisers,
Inc. dated June 2, 1993 relating to the Tweedy, Browne Global Value
Fund is incorporated by reference to Exhibit 9 to Pre-Effective
Amendment No. 2.
(9) (b) Transfer Agent Agreement between Registrant and Unified Advisers,
Inc. relating to the Tweedy, Browne Value Fund is incorporated by
reference to Exhibit 9(b) to Post-Effective Amendment No. 3.
(9) (c) Transfer Agent Agreement between Registrant and First Data Investor
Services Group, Inc. dated May 9, 1997, relating to the Tweedy,
Browne Global Value Fund and the Tweedy, Browne American Value Fund
is incorporated by reference to Exhibit 9(c) to Post-Effective
Amendment No. 7.
(9) (d) Administration Agreement between Registrant and The Boston Company
Advisors, Inc. dated June 2, 1993 relating to the Tweedy, Browne
Global Value Fund is incorporated by reference to Exhibit 9 to
Pre-Effective Amendment No. 2.
(9) (e) Amended and Restated Administration Agreement between Registrant and
The Boston Company Advisors, Inc. relating to the Tweedy, Browne
Global Value Fund and the Tweedy, Browne American Value Fund dated
December 8, 1993 is incorporated by reference to Exhibit 9(d) to
Post-Effective Amendment No. 3.
(9) (f) Amendment No. 1 to the Amended and Restated Administration Agreement
between Registrant and First Data Investor Services Group, Inc.
relating to the Tweedy, Browne Global Value Fund and the Tweedy,
Browne American Value Fund dated February 15, 1997 is incorporated by
reference to Exhibit 9(f) to Post-Effective Amendment No. 7.
(10) Opinion and Consent of Miles & Stockbridge is incorporated by
reference to Exhibit 10 to Post-Effective Amendment No. 1.
(11) Consent of Ernst & Young LLP, independent auditors is filed herein.
(12) Not Applicable.
(13) (a) Purchase Agreement dated June 2, 1993 relating to the initial capital
for the Tweedy, Browne Global Value Fund is incorporated by reference
to Exhibit 13 to Post-Effective Amendment No. 3.
(13) (b) Purchase Agreement relating to
the initial capital for the Tweedy,
Browne American Value Fund is
incorporated by reference to Exhibit
13 to Post-Effective Amendment No. 4
to the Registration Statement.
(14) None.
(15) None.
(16) None.
(17) Financial Data Schedules are filed herein.
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
No person is controlled by the Registrant.
Item 26. Number of Holders of Securities.
As of June 30, 1998:
(1) (2)
Title of Class Number of Record Holders
Tweedy, Browne Global
Value Fund Stock
par value $.0001 per share.......... 34,379
Tweedy, Browne American
Value Fund Stock
par value $.0001 per share.......... 17,864
<PAGE>
Item 27. Indemnification.
.........Under Registrant's Articles of Incorporation and By-Laws, as
amended, the Directors and officers of Registrant will be indemnified to the
fullest extent allowed and in the manner provided by Maryland law and applicable
provisions of the Investment Company Act of 1940, as amended, including
advancing of expenses incurred in connection therewith. Indemnification shall
not be provided however to any officer or director against any liability to the
Registrant or its security holders to which he or she would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
.........Article 2, Section 405.2 of the Maryland General Corporation
Law provides that the Articles of Incorporation of a Maryland corporation may
limit the extent to which directors or officers may be personally liable to the
Corporation or its stockholders for money damages in certain instances. The
Registrant's Articles of Incorporation, as amended, provide that, to the fullest
extent permitted by Maryland law, as it may be amended or interpreted from time
to time, no Director or officer of the Registrant shall be personally liable to
the Registrant or its stockholders. The Registrant's Articles of Incorporation,
as amended, also provide that no amendment of the Registrant's Articles of
Incorporation, as amended, or repeal of any of its provisions shall limit or
eliminate any of the benefits provided to Directors and officers in respect of
any act or omission that occurred prior to such amendment or repeal.
.........The Investment Advisory Agreements and Distribution Agreements
contain provisions requiring indemnification of the Registrant's investment
advisor and principal underwriter by the Registrant.
.........Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended may be permitted to directors, officers and
controlling persons of the Registrant and the investment advisor and distributor
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer, or controlling person of the Registrant and the
Distributor in connection with the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such Director, officer or
controlling person or the Distributor in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser.
.........See "Why Invest in the Funds?" in the Prospectus regarding the
business of Tweedy, Browne Company LLC (the "Investment Adviser"). The
Investment Adviser also acts as the adviser for the following investment
company: Tweedy, Browne Global Value Fund, Inc. The address of the Investment
Adviser is 52 Vanderbilt Avenue, New York, New York 10017. Set forth below is a
list of each Managing Director of the Investment Adviser.
<TABLE>
<CAPTION>
<S> <C>
NAME EMPLOYMENT
Christopher H. Browne Associated with the Investment Adviser since 1969. He is a managing
director of the Investment Adviser, and a general partner of TBK
Partners, L.P. and Vanderbilt Partners, L.P. Mr. Browne serves as a
Trustee of the University of Pennsylvania and sits on its Investment
Committee; he is a member of The Board of Trustees of The
Rockefeller University. He also serves on the Faculty Advisory
Committee of The Kennedy School at Harvard University's program in
behavioral finance; and is a Director of Tweedy, Browne Fund Inc.
He is a frequent speaker on behavioral psychology and financial
decision making as it relates to international investing. Mr.
Browne holds a B.A. degree from the University of Pennsylvania.
William H. Browne Associated with the Investment Adviser since 1978. He is a managing
director of the Investment Adviser, and a general partner of TBK
Partners, L.P. and Vanderbilt Partners, L.P., both private
investment partnerships. He also serves as a Director of Fairfield
Aerospace Corp. and Dornier Lufthart GmbH. Additionally, he is a
Trustee of Colgate University. Mr. Browne holds the degrees of B.A.
from Colgate University and M.B.A. from Trinity College in Dublin,
Ireland.
John D. Spears Associated with the Investment Adviser since 1974. He is a
managing director of the Investment Adviser, and a general partner
of TBK Partners, L.P. and Vanderbilt Partners, L.P. Previously, he
had been in the investment business for five years with Berger, Kent
Associates; Davic Associates; and Hornblower & Weeks-Hemphill, Noyes
& Co. Mr. Spears studied at the Babson Institute of Business
Administration, Drexel Institute of Technology and the University of
Pennsylvania - The Wharton School.
Thomas H. Shrager Associated with the Investment Adviser since 1989. He is a managing
director of the Investment Adviser. Previously, he worked in
mergers and acquisitions at Bear Stearns, and as a consultant for
Arthur D. Little. Mr. Shrager holds the degrees of B.A. and M.I.A.
from Columbia University.
Robert Q. Wyckoff, Jr. Associated with the Investment Adviser since 1991. He is a managing
director of the Investment Adviser. Prior to joining the Investment
Adviser, he held positions with Bessemer Trust, C.J. Lawrence, J&W
Seligman, and Stillrock Management. Mr. Wyckoff received a B.A.
from Washington & Lee University and a J.D. from the University of
Florida School of Law.
</TABLE>
Item 29. Principal Underwriters.
(a) Tweedy, Browne Value Fund (SICAV) offshore fund series
not offered to U.S. persons.
(b) Not Applicable.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
.........All accounts, books and other documents required to be
maintained by Registrant by Section 31(a) of the Investment Company Act of 1940,
as amended, and the rules thereunder will be maintained at the offices of the
Administrator at One Exchange Place, Boston, Massachusetts 02109 or at the
offices of the Adviser at 52 Vanderbilt Avenue, New York, New York 10017.
Item 31. Management Services.
.........Not Applicable.
Item 32. Undertakings.
.........
.........(a) Not Applicable.
.........(b) Not Applicable due to Rule changes.
.........(c) The Registrant will furnish each person to whom a
prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.
.........(d) The Registrant hereby undertakes to call a meeting of its
shareholders for the purpose of voting upon the question of
removal of a trustee or trustees of the Registrant when requested
in writing to do so by the holders of at least 10% of the
Registrant's outstanding shares. The Registrant undertakes
further, in connection with the meeting, to comply with the
provisions of Section 16(c) of the 1940 Act, as amended, relating
to communications with the shareholders of certain common-law
trusts.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that this Post-Effective Amendment No. 8 to the Registration Statement meets the
requirements for effectiveness pursuant to Rule 485(b) of the Securities Act of
1933, as amended, and the Registrant has duly caused this Post-Effective
Amendment No. 8 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the State of
New York on the 29th day of July, 1998.
TWEEDY, BROWNE FUND INC.
By: CHRISTOPHER H. BROWNE
Christopher H. Browne
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 8 to the Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
CHRISTOPHER H. BROWNE Chairman of the Board, July 29, 1998
- ----------------------------------------
- ----------------------------------------
Christopher H. Browne President and Director
WILLIAM H. BROWNE Treasurer and Director July 29, 1998
- ----------------------------------------
- ----------------------------------------
William H. Browne
BRUCE A. BEAL Director July 29, 1998
- ----------------------------------------
- ----------------------------------------
Bruce A. Beal
ARTHUR LAZAR Director July 29, 1998
- ----------------------------------------
- ----------------------------------------
Arthur Lazar
RICHARD B. SOLOMON Director July 29, 1998
- ----------------------------------------
Richard B. Salomon
ANTHONY H. MEYER Director July 29, 1998
- ----------------------------------------
Anthony H. Meyer
</TABLE>
EXHIBIT INDEX
Exhibit # Description
<TABLE>
<CAPTION>
<S> <C> <C>
(5) (c) Advisory Agreement between Registrant and Tweedy, Browne Company LLC dated October 9,
1997 relating to the Tweedy, Browne Global Value Fund
(5) (d) Advisory Agreement between Registrant and Tweedy, Browne Company LLC dated October 9,
1997 relating to the Tweedy, Browne American Value Fund
(5) (e) Form of Advisory Agreement between Registrant and Tweedy, Browne Company LLC relating
to the Tweedy, Browne Global Value Fund and Tweedy, Browne American Value Fund
(6) (c) Distribution Agreement between Registrant and Tweedy, Browne Company LLC dated October
9, 1997 relating to the Tweedy, Browne Global Value Fund
(6) (d) Distribution Agreement between Registrant and Tweedy, Browne Company LLC dated October
9, 1997 relating to the Tweedy, Browne American Value Fund
11 Consent of Ernst & Young LLP, independent auditors
17 Financial Data Schedules
</TABLE>
Exhibit 5(c)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated October 9, 1997, between Tweedy, Browne
Fund Inc. (the "Company"), a Maryland corporation, and Tweedy, Browne Company
LLC (the "Adviser"), a Delaware limited liability company.
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as investment
adviser to the Company with respect to the investment of the assets of the
Company allocated to Tweedy, Browne Global Value Fund (the "Fund").
2. Duties and obligations of the Adviser with respect to investments of
assets of the Fund
(a) Subject to the succeeding provisions of this paragraph and subject to
the direction and control of the Company's Board of Directors, the Adviser shall
act as investment adviser for and supervise and manage the investment and
reinvestment of the Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Fund
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Fund.
(b) In the performance of its duties under this Agreement, the Adviser
shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940 (the "Act"), and of any rules or regulations in
force thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Articles of Incorporation and By-Laws of the Company, as such
documents are amended from time to time; (iv) the investment objective, policies
and restrictions applicable to the Fund as set forth from time to time in the
Company's Registration Statement on Form N-1A and any prospectus or statement of
additional information used by the Fund and provided to the Adviser; and (v) any
policies and determinations of the Board of Directors of the Company with
respect to the Fund.
(c) The Adviser will seek to provide qualified personnel to fulfill its
duties hereunder and will bear all costs and expenses (including any overhead
and personnel costs) incurred in connection with its duties hereunder and shall
bear the costs of any salaries or directors fees of any officers or directors of
the Company who are affiliated persons (as defined in the Act) of the Adviser.
If in any fiscal year the Fund's aggregate expenses (excluding interest, taxes,
distribution expenses, brokerage commissions and extraordinary expenses) exceed
the most restrictive expense limitation imposed by the securities law of any
state in which the shares of the Fund are registered or qualified for sale
(currently 2.5% of the first $20 million in assets, 2.0% of the next $50 million
and 1.5% of the excess), the Adviser will reimburse the Company for the amount
of such excess up to the amount of fees accrued for such fiscal year thereunder.
The amount of such reimbursement shall be calculated monthly and an appropriate
amount shall be held back or released to the Adviser each month so that the
aggregate amount held back at any particular time shall equal the net amount of
the reimbursement on a cumulative year-to-date basis. As of the end of the year
the final amount of the total reimbursement shall be calculated and the
appropriate amount released to the Fund or the Adviser or paid to the Fund by
the Adviser. Subject to the foregoing, the Company shall be responsible for the
payment of all the Fund's other expenses; including (i) payment of the fees
payable to the Adviser under paragraph 4 hereof; (ii) organizational expenses;
(iii) brokerage fees and commissions and the costs of arranging for portfolio
transactions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
liability insurance or fidelity bond coverage for the Company officers and
employees, and directors' and officers' errors and omissions insurance coverage;
(vii) legal, auditing and accounting fees and expenses; (viii) charges of the
Fund's administrator, custodian, transfer agent and dividend disbursing agent;
(ix) the Fund's pro rata portion of dues, fees and charges of any trade
association of which the Company is a member; (x) the expenses of printing,
preparing and mailing proxies, stock certificates and reports, including the
Fund's prospectuses and statements of additional information, and notices to
shareholders; (xi) filing fees for the registration or qualification of the
Fundand its shares under federal or state securities laws; (xii) the fees
andexpenses involved in registering and maintaining registration of the Fund's
shares with the Securities and Exchange Commission; (xiii) the expenses of
holding shareholder meetings; (xiv) the compensation, including fees, of any of
the Company's directors, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing the Fund's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Fund's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions; and (xvii) litigation and
other extraordinary or non-recurring expenses and other expenses properly
payable by the Fund.
(d) The Adviser shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder, but neither the Adviser nor any of its
officers, directors, employees, agents or controlling persons shall be liable
for any act or omission or for any loss sustained by the Fund in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement; provided, however, that the foregoing shall not constitute
a waiver of any rights which the Company may have which may not be waived under
applicable law.
(e) Nothing in this Agreement shall prevent the Adviser or any director,
officer, employee or other affiliate thereof from acting as investment adviser
for any other person, firm or corporation, or from engaging in any other lawful
activity, and shall not in any way limit or restrict the Adviser or any of its
directors, officers, employees or agents from buying, selling or trading any
securities for its or their own accounts or for the accounts of others for whom
it or they may be acting.
3. Portfolio Transactions
In the course of the Adviser's execution of portfolio transactions for the
Fund, it is agreed that the Adviser shall employ securities brokers and dealers
which, in its judgment, will be able to satisfy the policy of the Fund to seek
the best execution of its portfolio transactions at reasonable expenses. For
purposes of this agreement, "best execution" shall mean prompt, efficient and
reliable execution at the most favorable price obtainable. Under such conditions
as may be specified by the Company's Board of Directors in the interest of its
shareholders and to ensure compliance with applicable law and regulations, the
Adviser may (a) pay commissions to brokers other than its affiliate which are
higher than might be charged by another qualified broker to obtain brokerage
and/or research services considered by the Adviser to be useful or desirable in
the performance of its duties hereunder and for the investment management of
other advisory accounts over which it or its affiliates exercise investment
discretion; and (b) consider sales by brokers other than the Adviser of shares
of the Fund and any other mutual fund for which it or its affiliates act as
investment adviser, as a factor in its selection of brokers and dealers for Fund
portfolio transactions.
4. Compensation of the Adviser
(a) Subject to paragraph 2(a), the Company agrees to pay to the Adviser out
of the Fund's assets and the Adviser agrees to accept as full compensation for
all services rendered by or through the Adviser a fee computed daily and payable
monthly in arrears in an amount equal to an annualized basis to 1.25% of the
Fund's daily average net asset value. For any period less than a month during
which this Agreement is in effect, the fee shall be pro rated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be. Such payments shall be made in arrears; provided, however, that
if the Adviser so requests, the Company will pay as often as weekly an amount
equal to 75% of the amount of fees then accrued and not yet paid with the
balance at the end of the month.
(b) For purposes of this Agreement, the net asset value of the Fund shall
be calculated pursuant to the procedures adopted by resolutions of the Directors
of the Company for calculating the net asset value of the Fund's shares.
5. Ownership of Names
The names "Tweedy, Browne Fund Inc." and "Tweedy, Browne Global Value Fund"
belong to the Adviser.
6. Indemnity
(a) The Company hereby agrees to indemnify the Adviser and each of the
Adviser's directors, officers, employees, and agents (including any individual
who serves at the Adviser's request as director, officer, partner, trustee or
the like of another corporation) and controlling persons (each such person being
an "indemnitee") against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees (all as provided in accordance with applicable corporate law) reasonably
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which he may be or may have been
involved as a party or otherwise or with which he may be or may have been
threatened, while acting in any capacity set forth above in this paragraph or
thereafter by reason of his having acted in any such capacity, except with
respect to any matter as to which he shall have been adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the Company and furthermore, in the case of any criminal proceeding,
so long as he had no reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no indemnitee shall be indemnified hereunder against
any liability to the Company or its shareholders or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii)
gross negligence or (iv) reckless disregard of the duties involved in the
conduct of his position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to herein as "disabling conduct"), (2) as to any
matter disposed of by settlement or a compromise payment by such indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interest of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that his action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee and (3) with respect to any
action, suit or other proceeding voluntarily prosecuted by any indemnitee as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such indemnitee was authorized by a majority
of the full Board of the Company. Notwithstanding the foregoing the Company
shall not be obligated to provide any such indemnification to the extent such
provision would waive any right which the Company cannot lawfully waive.
(b) The Company shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Company receives a written affirmation of the indemnitee's good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Company unless it is subsequently
determined that he is entitled to such indemnification and if the directors of
the Company determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be
met: (A) the indemnitee shall provide a security for his undertaking, (B) the
Company shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of directors of the Company who are
neither "interested persons" of the Company (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Directors") or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification hereunder shall be
made (1) by a final decision on the merits by a court or other body before whom
the proceeding was brought that such indemnitee is not liable by reason of
disabling conduct or, (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-Party Directors of the Company, or
(ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
The rights accruing to any indemnitee under these provisions shall not
include any other right to which he may be lawfully entitled.
7. Duration and Termination
This Agreement shall become effective on the date hereof and shall continue
in effect for a period of two years and thereafter from year to year, but only
so long as such continuation is specifically approved at least annually in
accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without penalty
upon giving the Company sixty-days' written notice (which notice may be waived
by the Company) and may be terminated by the Company at any time without penalty
upon giving the Adviser sixty-days' notice (which notice may be waived by the
Adviser), provided that such termination by the Company shall be directed or
approved by the vote of a majority of the Directors of the Company in office at
the time or by the vote of the holders of a "majority of the voting securities"
(as defined in the Act) of the Fund at the time outstanding and entitled to vote
and provided further, that the provisions of Paragraph 5 shall survive any
termination of this Agreement. This Agreement shall terminate automatically in
the event of its assignment (as "assignment" is defined in the Act and the rules
thereunder.)
8. Notices
Any notice under this Agreement shall be in writing to the other party at
such address as the other party may designate from time to time for the receipt
of such notice and shall be deemed to be received on the earlier of the date
actually received or on the fourth day after the postmark, if such notice is
mailed first class, postage prepaid.
9. Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York for contracts to be performed entirely therein and in accordance
with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers, all as of the day and the year
first above written.
TWEEDY, BROWNE FUND INC.
By: CHRISTOPHER H. BROWNE
Name: Christopher H. Browne
Title: President
TWEEDY, BROWNE COMPANY LLC
By: WILLIAM H. BROWNE
Name: William H. Browne
Title: Member, Managing Director
Exhibit 5(d)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated October 9, 1997, between Tweedy, Browne
Fund Inc. (the "Company"), a Maryland corporation, and Tweedy, Browne Company
LLC (the "Adviser"), a Delaware limited liability company.
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as investment
adviser to the Company with respect to the investment of the assets of the
Company allocated to Tweedy, Browne American Value Fund (the "Fund").
2. Duties and obligations of the Adviser with respect to investments of
assets of the Fund
(a) Subject to the succeeding provisions of this paragraph and subject to
the direction and control of the Company's Board of Directors, the Adviser shall
act as investment adviser for and supervise and manage the investment and
reinvestment of the Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Fund
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Fund.
(b) In the performance of its duties under this Agreement, the Adviser
shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940 (the "Act"), and of any rules or regulations in
force thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Articles of Incorporation and By-Laws of the Company, as such
documents are amended from time to time; (iv) the investment objective, policies
and restrictions applicable to the Fund as set forth from time to time in the
Company's Registration Statement on Form N-1A and any prospectus or statement of
additional information used by the Fund and provided to the Adviser; and (v) any
policies and determinations of the Board of Directors of the Company with
respect to the Fund.
(c) The Adviser will seek to provide qualified personnel to fulfill its
duties hereunder and will bear all costs and expenses (including any overhead
and personnel costs) incurred in connection with its duties hereunder and shall
bear the costs of any salaries or directors fees of any officers or directors of
the Company who are affiliated persons (as defined in the Act) of the Adviser.
If in any fiscal year the Fund's aggregate expenses (excluding interest, taxes,
distribution expenses, brokerage commissions and extraordinary expenses) exceed
the most restrictive expense limitation imposed by the securities law of any
state in which the shares of the Fund are registered or qualified for sale
(currently 2.5% of the first $20 million in assets, 2.0% of the next $50 million
and 1.5% of the excess), the Adviser will reimburse the Company for the amount
of such excess up to the amount of fees accrued for such fiscal year thereunder.
The amount of such reimbursement shall be calculated monthly and an appropriate
amount shall be held back or released to the Adviser each month so that the
aggregate amount held back at any particular time shall equal the net amount of
the reimbursement on a cumulative year-to-date basis. As of the end of the year
the final amount of the total reimbursement shall be calculated and the
appropriate amount released to the Fund or the Adviser or paid to the Fund by
the Adviser. Subject to the foregoing, the Company shall be responsible for the
payment of all the Fund's other expenses; including (i) payment of the fees
payable to the Adviser under paragraph 4 hereof; (ii) organizational expenses;
(iii) brokerage fees and commissions and the costs of arranging for portfolio
transactions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
liability insurance or fidelity bond coverage for the Company officers and
employees, and directors' and officers' errors and omissions insurance coverage;
(vii) legal, auditing and accounting fees and expenses; (viii) charges of the
Fund's administrator, custodian, transfer agent and dividend disbursing agent;
(ix) the Fund's pro rata portion of dues, fees and charges of any trade
association of which the Company is a member; (x) the expenses of printing,
preparing and mailing proxies, stock certificates and reports, including the
Fund's prospectuses and statements of additional information, and notices to
shareholders; (xi) filing fees for the registration or qualification of the
Fundand its shares under federal or state securities laws; (xii) the fees
andexpenses involved in registering and maintaining registration of the Fund's
shares with the Securities and Exchange Commission; (xiii) the expenses of
holding shareholder meetings; (xiv) the compensation, including fees, of any of
the Company's directors, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing the Fund's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Fund's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions; and (xvii) litigation and
other extraordinary or non-recurring expenses and other expenses properly
payable by the Fund.
(d) The Adviser shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder, but neither the Adviser nor any of its
officers, directors, employees, agents or controlling persons shall be liable
for any act or omission or for any loss sustained by the Fund in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement; provided, however, that the foregoing shall not constitute
a waiver of any rights which the Company may have which may not be waived under
applicable law.
(e) Nothing in this Agreement shall prevent the Adviser or any director,
officer, employee or other affiliate thereof from acting as investment adviser
for any other person, firm or corporation, or from engaging in any other lawful
activity, and shall not in any way limit or restrict the Adviser or any of its
directors, officers, employees or agents from buying, selling or trading any
securities for its or their own accounts or for the accounts of others for whom
it or they may be acting.
3. Portfolio Transactions
In the course of the Adviser's execution of portfolio transactions for the
Fund, it is agreed that the Adviser shall employ securities brokers and dealers
which, in its judgment, will be able to satisfy the policy of the Fund to seek
the best execution of its portfolio transactions at reasonable expenses. For
purposes of this agreement, "best execution" shall mean prompt, efficient and
reliable execution at the most favorable price obtainable. Under such conditions
as may be specified by the Company's Board of Directors in the interest of its
shareholders and to ensure compliance with applicable law and regulations, the
Adviser may (a) pay commissions to brokers other than its affiliate which are
higher than might be charged by another qualified broker to obtain brokerage
and/or research services considered by the Adviser to be useful or desirable in
the performance of its duties hereunder and for the investment management of
other advisory accounts over which it or its affiliates exercise investment
discretion; and (b) consider sales by brokers other than the Adviser of shares
of the Fund and any other mutual fund for which it or its affiliates act as
investment adviser, as a factor in its selection of brokers and dealers for Fund
portfolio transactions.
4. Compensation of the Adviser
(a) Subject to paragraph 2(a), the Company agrees to pay to the Adviser out
of the Fund's assets and the Adviser agrees to accept as full compensation for
all services rendered by or through the Adviser a fee computed daily and payable
monthly in arrears in an amount equal to an annualized basis to 1.25% of the
Fund's daily average net asset value. For any period less than a month during
which this Agreement is in effect, the fee shall be pro rated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be. Such payments shall be made in arrears; provided, however, that
if the Adviser so requests, the Company will pay as often as weekly an amount
equal to 75% of the amount of fees then accrued and not yet paid with the
balance at the end of the month.
(b) For purposes of this Agreement, the net asset value of the Fund shall
be calculated pursuant to the procedures adopted by resolutions of the Directors
of the Company for calculating the net asset value of the Fund's shares.
5. Ownership of Names
The names "Tweedy, Browne Fund Inc." and "Tweedy, Browne American Value
Fund" belong to the Adviser.
6. Indemnity
(a) The Company hereby agrees to indemnify the Adviser and each of the
Adviser's directors, officers, employees, and agents (including any individual
who serves at the Adviser's request as director, officer, partner, trustee or
the like of another corporation) and controlling persons (each such person being
an "indemnitee") against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees (all as provided in accordance with applicable corporate law) reasonably
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which he may be or may have been
involved as a party or otherwise or with which he may be or may have been
threatened, while acting in any capacity set forth above in this paragraph or
thereafter by reason of his having acted in any such capacity, except with
respect to any matter as to which he shall have been adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the Company and furthermore, in the case of any criminal proceeding,
so long as he had no reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no indemnitee shall be indemnified hereunder against
any liability to the Company or its shareholders or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii)
gross negligence or (iv) reckless disregard of the duties involved in the
conduct of his position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to herein as "disabling conduct"), (2) as to any
matter disposed of by settlement or a compromise payment by such indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interest of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that his action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee and (3) with respect to any
action, suit or other proceeding voluntarily prosecuted by any indemnitee as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such indemnitee was authorized by a majority
of the full Board of the Company. Notwithstanding the foregoing the Company
shall not be obligated to provide any such indemnification to the extent such
provision would waive any right which the Company cannot lawfully waive.
(b) The Company shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Company receives a written affirmation of the indemnitee's good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Company unless it is subsequently
determined that he is entitled to such indemnification and if the directors of
the Company determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be
met: (A) the indemnitee shall provide a security for his undertaking, (B) the
Company shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of directors of the Company who are
neither "interested persons" of the Company (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Directors") or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification hereunder shall be
made (1) by a final decision on the merits by a court or other body before whom
the proceeding was brought that such indemnitee is not liable by reason of
disabling conduct or, (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-Party Directors of the Company, or
(ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
The rights accruing to any indemnitee under these provisions shall not
include any other right to which he may be lawfully entitled.
7. Duration and Termination
This Agreement shall become effective on the date hereof and shall continue
in effect for a period of two years and thereafter from year to year, but only
so long as such continuation is specifically approved at least annually in
accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without penalty
upon giving the Company sixty-days' written notice (which notice may be waived
by the Company) and may be terminated by the Company at any time without penalty
upon giving the Adviser sixty-days' notice (which notice may be waived by the
Adviser), provided that such termination by the Company shall be directed or
approved by the vote of a majority of the Directors of the Company in office at
the time or by the vote of the holders of a "majority of the voting securities"
(as defined in the Act) of the Fund at the time outstanding and entitled to vote
and provided further, that the provisions of Paragraph 5 shall survive any
termination of this Agreement. This Agreement shall terminate automatically in
the event of its assignment (as "assignment" is defined in the Act and the rules
thereunder.)
8. Notices
Any notice under this Agreement shall be in writing to the other party at
such address as the other party may designate from time to time for the receipt
of such notice and shall be deemed to be received on the earlier of the date
actually received or on the fourth day after the postmark, if such notice is
mailed first class, postage prepaid.
9. Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York for contracts to be performed entirely therein and in accordance
with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers, all as of the day and the year
first above written.
TWEEDY, BROWNE FUND INC.
By: CHRISTOPHER H. BROWNE
Name: Christopher H. Browne
Title: President
TWEEDY, BROWNE COMPANY LLC
By: WILLIAM H. BROWNE
Name: William H. Browne
Title: Member, Managing Director
Exhibit 5(e)
FORM OF
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated , between Tweedy, Browne Fund Inc. (the
"Company"), a Maryland corporation, and Tweedy, Browne Company LLC (the
"Adviser"), a Delaware limited liability company.
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as investment
adviser to the Company with respect to the investment of the assets of the
Company allocated to [Tweedy, Browne Global Value Fund] (the "Fund").
2. Duties and obligations of the Adviser with respect to investments of
assets of the Fund
(a) Subject to the succeeding provisions of this paragraph and subject to
the direction and control of the Company's Board of Directors, the Adviser shall
act as investment adviser for and supervise and manage the investment and
reinvestment of the Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Fund
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Fund.
(b) In the performance of its duties under this Agreement, the Adviser
shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940 (the "Act"), and of any rules or regulations in
force thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Articles of Incorporation and By-Laws of the Company, as such
documents are amended from time to time; (iv) the investment objective, policies
and restrictions applicable to the Fund as set forth from time to time in the
Company's Registration Statement on Form N-1A and any prospectus or statement of
additional information used by the Fund and provided to the Adviser; and (v) any
policies and determinations of the Board of Directors of the Company with
respect to the Fund.
(c) The Adviser will seek to provide qualified personnel to fulfill its
duties hereunder and will bear all costs and expenses (including any overhead
and personnel costs) incurred in connection with its duties hereunder and shall
bear the costs of any salaries or directors fees of any officers or directors of
the Company who are affiliated persons (as defined in the Act) of the Adviser.
If in any fiscal year the Fund's aggregate expenses (excluding interest, taxes,
distribution expenses, brokerage commissions and extraordinary expenses) exceed
the most restrictive expense limitation imposed by the securities law of any
state in which the shares of the Fund are registered or qualified for sale
(currently 2.5% of the first $20 million in assets, 2.0% of the next $50 million
and 1.5% of the excess), the Adviser will reimburse the Company for the amount
of such excess up to the amount of fees accrued for such fiscal year thereunder.
The amount of such reimbursement shall be calculated monthly and an appropriate
amount shall be held back or released to the Adviser each month so that the
aggregate amount held back at any particular time shall equal the net amount of
the reimbursement on a cumulative year-to-date basis. As of the end of the year
the final amount of the total reimbursement shall be calculated and the
appropriate amount released to the Fund or the Adviser or paid to the Fund by
the Adviser. Subject to the foregoing, the Company shall be responsible for the
payment of all the Fund's other expenses; including (i) payment of the fees
payable to the Adviser under paragraph 4 hereof; (ii) organizational expenses;
(iii) brokerage fees and commissions and the costs of arranging for portfolio
transactions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
liability insurance or fidelity bond coverage for the Company officers and
employees, and directors' and officers' errors and omissions insurance coverage;
(vii) legal, auditing and accounting fees and expenses; (viii) charges of the
Fund's administrator, custodian, transfer agent and dividend disbursing agent;
(ix) the Fund's pro rata portion of dues, fees and charges of any trade
association of which the Company is a member; (x) the expenses of printing,
preparing and mailing proxies, stock certificates and reports, including the
Fund's prospectuses and statements of additional information, and notices to
shareholders; (xi) filing fees for the registration or qualification of the
Fundand its shares under federal or state securities laws; (xii) the fees
andexpenses involved in registering and maintaining registration of the Fund's
shares with the Securities and Exchange Commission; (xiii) the expenses of
holding shareholder meetings; (xiv) the compensation, including fees, of any of
the Company's directors, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing the Fund's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Fund's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions; and (xvii) litigation and
other extraordinary or non-recurring expenses and other expenses properly
payable by the Fund.
(d) The Adviser shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder, but neither the Adviser nor any of its
officers, directors, employees, agents or controlling persons shall be liable
for any act or omission or for any loss sustained by the Fund in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement; provided, however, that the foregoing shall not constitute
a waiver of any rights which the Company may have which may not be waived under
applicable law.
(e) Nothing in this Agreement shall prevent the Adviser or any director,
officer, employee or other affiliate thereof from acting as investment adviser
for any other person, firm or corporation, or from engaging in any other lawful
activity, and shall not in any way limit or restrict the Adviser or any of its
directors, officers, employees or agents from buying, selling or trading any
securities for its or their own accounts or for the accounts of others for whom
it or they may be acting.
3. Portfolio Transactions
In the course of the Adviser's execution of portfolio transactions for the
Fund, it is agreed that the Adviser shall employ securities brokers and dealers
which, in its judgment, will be able to satisfy the policy of the Fund to seek
the best execution of its portfolio transactions at reasonable expenses. For
purposes of this agreement, "best execution" shall mean prompt, efficient and
reliable execution at the most favorable price obtainable. Under such conditions
as may be specified by the Company's Board of Directors in the interest of its
shareholders and to ensure compliance with applicable law and regulations, the
Adviser may (a) pay commissions to brokers other than its affiliate which are
higher than might be charged by another qualified broker to obtain brokerage
and/or research services considered by the Adviser to be useful or desirable in
the performance of its duties hereunder and for the investment management of
other advisory accounts over which it or its affiliates exercise investment
discretion; and (b) consider sales by brokers other than the Adviser of shares
of the Fund and any other mutual fund for which it or its affiliates act as
investment adviser, as a factor in its selection of brokers and dealers for Fund
portfolio transactions.
4. Compensation of the Adviser
(a) Subject to paragraph 2(a), the Company agrees to pay to the Adviser out
of the Fund's assets and the Adviser agrees to accept as full compensation for
all services rendered by or through the Adviser a fee computed daily and payable
monthly in arrears in an amount equal to an annualized basis to 1.25% of the
Fund's daily average net asset value. For any period less than a month during
which this Agreement is in effect, the fee shall be pro rated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be. Such payments shall be made in arrears; provided, however, that
if the Adviser so requests, the Company will pay as often as weekly an amount
equal to 75% of the amount of fees then accrued and not yet paid with the
balance at the end of the month.
(b) For purposes of this Agreement, the net asset value of the Fund shall
be calculated pursuant to the procedures adopted by resolutions of the Directors
of the Company for calculating the net asset value of the Fund's shares.
5. Ownership of Names
The names "Tweedy, Browne Fund Inc." and ["Tweedy, Browne Global Value
Fund"] belong to the Adviser.
6. Indemnity
(a) The Company hereby agrees to indemnify the Adviser and each of the
Adviser's directors, officers, employees, and agents (including any individual
who serves at the Adviser's request as director, officer, partner, trustee or
the like of another corporation) and controlling persons (each such person being
an "indemnitee") against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees (all as provided in accordance with applicable corporate law) reasonably
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which he may be or may have been
involved as a party or otherwise or with which he may be or may have been
threatened, while acting in any capacity set forth above in this paragraph or
thereafter by reason of his having acted in any such capacity, except with
respect to any matter as to which he shall have been adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the Company and furthermore, in the case of any criminal proceeding,
so long as he had no reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no indemnitee shall be indemnified hereunder against
any liability to the Company or its shareholders or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii)
gross negligence or (iv) reckless disregard of the duties involved in the
conduct of his position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to herein as "disabling conduct"), (2) as to any
matter disposed of by settlement or a compromise payment by such indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interest of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that his action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee and (3) with respect to any
action, suit or other proceeding voluntarily prosecuted by any indemnitee as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such indemnitee was authorized by a majority
of the full Board of the Company. Notwithstanding the foregoing the Company
shall not be obligated to provide any such indemnification to the extent such
provision would waive any right which the Company cannot lawfully waive.
(b) The Company shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Company receives a written affirmation of the indemnitee's good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Company unless it is subsequently
determined that he is entitled to such indemnification and if the directors of
the Company determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be
met: (A) the indemnitee shall provide a security for his undertaking, (B) the
Company shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of directors of the Company who are
neither "interested persons" of the Company (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Directors") or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification hereunder shall be
made (1) by a final decision on the merits by a court or other body before whom
the proceeding was brought that such indemnitee is not liable by reason of
disabling conduct or, (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-Party Directors of the Company, or
(ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
The rights accruing to any indemnitee under these provisions shall not
include any other right to which he may be lawfully entitled.
7. Duration and Termination
This Agreement shall become effective on the date hereof and shall continue
in effect for a period of two years and thereafter from year to year, but only
so long as such continuation is specifically approved at least annually in
accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without penalty
upon giving the Company sixty-days' written notice (which notice may be waived
by the Company) and may be terminated by the Company at any time without penalty
upon giving the Adviser sixty-days' notice (which notice may be waived by the
Adviser), provided that such termination by the Company shall be directed or
approved by the vote of a majority of the Directors of the Company in office at
the time or by the vote of the holders of a "majority of the voting securities"
(as defined in the Act) of the Fund at the time outstanding and entitled to vote
and provided further, that the provisions of Paragraph 5 shall survive any
termination of this Agreement. This Agreement shall terminate automatically in
the event of its assignment (as "assignment" is defined in the Act and the rules
thereunder.)
8. Notices
Any notice under this Agreement shall be in writing to the other party at
such address as the other party may designate from time to time for the receipt
of such notice and shall be deemed to be received on the earlier of the date
actually received or on the fourth day after the postmark, if such notice is
mailed first class, postage prepaid.
9. Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York for contracts to be performed entirely therein and in accordance
with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers, all as of the day and the year
first above written.
TWEEDY, BROWNE FUND INC.
By
Name:
Title:
TWEEDY, BROWNE COMPANY LLC
By
Name:
Title:
Exhibit 6(c)
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated October 9, 1997, between Tweedy,
Browne Fund Inc., a Maryland corporation (the "Company"), and Tweedy, Browne
Company LLC., a Delaware limited liability company (the "Distributor"). The
Company is registered as an investment company under the Investment Company Act
of 1940 (the "1940 Act"), and an indefinite number of shares (the "Shares") of
Tweedy, Browne Global Value Fund Stock (the "Fund"), par value $.0001 per share
(the "Shares"), have been registered under the Securities Act of 1933 (the "1933
Act") to be offered for sale to the public in a continuous public offering in
accordance with terms and conditions set forth in the Prospectus and Statement
of Additional Information (the "Prospectus") of the Fund included in the
Company's Registration Statement on Form N-lA as such documents may be amended
from time to time.
In this connection, the Company desires that the Distributor
act as its exclusive sales agent and distributor for the sale and distribution
of Shares. The Distributor has advised the Company that it is willing to act in
such capacities, and it is accordingly agreed between them as follows:
1. The Company hereby appoints the Distributor as exclusive sales agent and
distributor for the sale and distribution of Shares pursuant to the aforesaid
continuous public offering of Shares, and the Company further agrees from and
after the commencement of such continuous public offering that it will not,
without the Distributor's consent, sell or agree to sell any Shares otherwise
than through the Distributor, except the Company may issue Shares in connection
with a merger, consolidation or acquisition of assets on such basis as may be
authorized or permitted under the 1940 Act.
2. The Distributor hereby accepts such appointment and agrees to use
commercially reasonable efforts to sell such Shares, provided, however, that
when requested by the Company at any time for any reason the Distributor will
suspend such efforts. The Company may also withdraw the offering of Shares at
any time when required by the provisions of any statute, order, rule or
regulation of any governmental body having jurisdiction. It is understood that
the Distributor does not undertake to sell all or any specific portion of the
Shares.
3. The Distributor represents that it is a member in good standing of the
National Association of Securities Dealers, Inc. and agrees that it will use all
reasonable efforts to maintain such status and to abide by the Rules of Fair
Practice, the Constitution and the Bylaws of the National Association of
Securities Dealers, Inc., and all other rules and regulations that are now or
may become applicable to its performance hereunder. The Distributor will
undertake and discharge its obligations hereunder as an independent contractor
and it shall have no authority or power to obligate or bind the Company by its
actions, conduct or contracts except that it is authorized to accept orders for
the purchase or repurchase of Shares as the Company's agent and subject to its
approval. The Company reserves the right to reject any order in whole or in
part. The Distributor may appoint sub-agents or distribute through dealers or
otherwise as it may determine from time to time pursuant to agreements approved
by the Company, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase of Shares on
behalf of the Company or otherwise act as the Company's agent for any purpose.
The Distributor shall not utilize any materials in connection with the sale or
offering of Shares except the then current Prospectus and such other materials
as the Company shall provide or approve in writing.
4. Shares may be sold by the Distributor only at prices and terms described in
the then current Prospectus relating to the Shares and may be sold either
through persons with whom it has selling agreements in a form approved by the
Company's Board of Directors or directly to prospective purchasers. To
facilitate sales, the Company will furnish the Distributor with the net asset
value of its Shares promptly after each calculation thereof.
5. The Company has delivered to the Distributor a copy of the current Prospectus
for the Fund. It agrees that it will use its best efforts to continue the
effectiveness of its Registration Statement filed under the 1933 Act and the
1940 Act. The Company further agrees to prepare and file any amendments to its
Registration Statement as may be necessary and any supplemental data in order to
comply with such Acts. The Company will furnish the Distributor at the
Distributor's expense with a reasonable number of copies of the Prospectus and
any amended Prospectus for use in connection with the sale of Shares.
6. At the Distributor's request, the Company will take such steps at its own
expense as may be necessary and feasible to qualify Shares for sale in states,
territories or dependencies of the United States of America and in the District
of Columbia in accordance with the laws thereof, and to renew or extend any such
qualification; provided, however, that the Company shall not be required to
qualify Shares or to maintain the qualification of Shares in any state,
territory, dependency or district where it shall deem such qualification
disadvantageous to the Fund.
7. The Distributor agrees that:
1. It will furnish to the Company any pertinent information required to be
inserted with respect to the Distributor as exclusive sales agent and
distributor within the purview of Federal and state securities laws in
any reports or registrations required to be filed with any government
authority;
2. It will not make any representations inconsistent with the information
contained in the Registration Statement or Prospectus filed under the
Securities Act of 1933, as in effect from time to time;
3. It will not use or distribute or authorize the use or distribution of
any statements other than those contained in the Fund's then current
Prospectus or in such supplemental literature or advertising as may be
authorized by the Company; and
4. The Distributor will bear the costs and expenses of printing and
distributing any copies of any prospectuses and annual and interim
reports of the Fund (after such items have been prepared and set in
type) which are used in connection with the offering of Shares, and the
costs and expenses of preparing, printing and distributing any other
literature used by the Distributor or furnished by the Distributor for
use in connection with the offering of the Shares and the costs and
expenses incurred by the Distributor in advertising, promoting and
selling Shares of the Fund to the public.
8. The Company will pay its legal and auditing expenses and the cost of
composition of any prospectuses of annual or interim reports of the Fund.
9. The Company agrees to indemnify, defend and hold the Distributor, its
officers, directors, employees and agents and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from any and all liabilities and expenses,
including costs of investigation or defense (including reasonable counsel fees)
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
indemnitee may be or may have been involved as a party or otherwise or with
which he may be or may have been threatened, while the Distributor was active in
such capacity or by reason of the Distributor having acted in any such capacity
or arising out of or based upon any untrue statement of a material fact
contained in the then-current Prospectus relating to the Shares or arising out
of or based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such claims, demands, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information furnished
in writing by the Distributor to the Company expressly for use in any such
Prospectus; provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Company or the shareholders of the Fund
or any expense of such indemnitee with respect to any matter as to which such
indemnitee shall have been adjudicated not to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company or
arising by reason of such indemnitee's willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement ("disabling conduct"), or (2)
as to any matter disposed of by settlement or a compromise payment by such
indemnitee, no indemnification shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee. Notwithstanding the
foregoing the Company shall not be obligated to provide any such indemnification
to the extent such provision would waive any right which the Company cannot
lawfully waive.
The Distributor agrees to indemnify, defend and hold the
Company, its Directors, officers, employees and agents and any person who
controls the Company within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense shall arise out of or be based upon any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor of the Company expressly for use in a Prospectus or
any alleged omission to state a material fact in connection with such
information required to be stated therein or necessary to make such information
not misleading or arising by reason of disabling conduct by such indemnitee or
any person selling Shares pursuant to an agreement with the Distributor.
The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Company receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Company
unless it is subsequently determined that he is entitled to such indemnification
and if the directors of the Company determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Company shall be insured against losses arising by reason
of any lawful advances, or (C) a majority of a quorum of directors of the
Company who are neither "interested persons" of the Company (as defined in
Section 2(a)(19) of the Act) nor parties to the proceeding ("Disinterested
Non-Party Directors") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such indemnitee is not liable by
reason of disabling conduct or, (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-party Directors of the
Company, or (ii) if such a quorum is not obtainable or even, if obtainable, if a
majority vote of such quorum so directs, independent legal counsel in a written
opinion.
10. This Agreement shall become effective on the date first set forth above and
shall remain in effect for two years from such date and thereafter from year to
year provided such continuance is specifically approved at least annually prior
to each anniversary of such date by (a) the approval of a majority of a quorum
of directors of the Company or by vote at a meeting of shareholders of the Fund
of the lesser of (i) 67 per cent of the Shares present or represented by proxy
and (ii) 50 per cent of the outstanding Shares and (b) by the approval of a
majority of a quorum of directors of the Company who are not "interested
persons" of the Company (as defined in Section 2(a)(19) of the Act).
11. This Agreement may be terminated (a) by the Distributor at any time without
penalty by giving sixty (60) days' written notice to the Company (which notice
may be waived by the Company); or (b) by the Company at any time without penalty
upon sixty (60) days' written notice to the Distributor (which notice may be
waived by the Distributor); provided, however, that any such termination by the
Company shall be directed or approved in the same manner as required for
continuance of this Agreement by Section 10.
12. This Agreement may not be amended or changed except in writing signed by
each of the parties hereto and approved in the same manner as provided for
continuance of this Agreement in Section 10. Any such amendment or change shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors, but this Agreement shall not be assigned by either party
and shall automatically terminate upon assignment (as such term is defined in
the 1940 Act and the rules thereunder).
13. This Agreement shall be construed in accordance with the laws of the State
of New York applicable to agreements to be performed entirely therein and in
accordance with applicable provisions of the 1940 Act.
14. If any provision of this Agreement shall be held or made invalid or
unenforceable by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
TWEEDY, BROWNE FUND INC.
By: CHRISTOPHER H. BROWNE
Name: Christopher H. Browne
Title: President
TWEEDY, BROWNE COMPANY LLC
By: WILLIAM H. BROWNE
Name: William H. Browne
Title: Member, Managing Director
Exhibit 6(d)
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated October 9, 1997, between Tweedy, Browne
Fund Inc., a Maryland corporation (the "Company"), and Tweedy, Browne Company
LLC, a Delaware limited liability company (the "Distributor"). The Company is
registered as an investment company under the Investment Company Act of 1940
(the "1940 Act"), and an indefinite number of shares (the "Shares") of Tweedy,
Browne Value Fund Stock (the "Fund"), par value $.0001 per share (the "Shares"),
have been registered under the Securities Act of 1933 (the "1933 Act") to be
offered for sale to the public in a continuous public offering in accordance
with terms and conditions set forth in the Prospectus and Statement of
Additional Information (the "Prospectus") of the Fund included in the Company's
Registration Statement on Form N-1A as such documents may be amended from time
to time.
In this connection, the Company desires that the Distributor act as its
exclusive sales agent and distributor for the sale and distribution of Shares.
The Distributor has advised the Company that it is willing to act in such
capacities, and it is accordingly agreed between them as follows:
1. The Company hereby appoints the Distributor as exclusive sales agent
and distributor for the sale and distribution of Shares pursuant to the
aforesaid continuous public offering of Shares, and the Company further agrees
from and after the commencement of such continuous public offering that it will
not, without the Distributor's consent, sell or agree to sell any Shares
otherwise than through the Distributor, except the Company may issue Shares in
connection with a merger, consolidation or acquisition of assets on such basis
as may be authorized or permitted under the 1940 Act.
2. The Distributor hereby accepts such appointment and agrees to use
commercially reasonable efforts to sell such Shares, provided, however, that
when requested by the Company at any time for any reason the Distributor will
suspend such efforts. The Company may also withdraw the offering of Shares at
any time when required by the provisions of any statute, order, rule or
regulation of any governmental body having jurisdiction. It is understood that
the Distributor does not undertake to sell all or any specific portion of the
Shares.
3. The Distributor represents that it is a member in good standing of
the National Association of Securities Dealers, Inc. and agrees that it will use
all reasonable efforts to maintain such status and to abide by the Rules of Fair
Practice, the Constitution and the Bylaws of the National Association of
Securities Dealers, Inc., and all other rules and regulations that are now or
may become applicable to its performance hereunder. The Distributor will
undertake and discharge its obligations hereunder as an independent contractor
and it shall have no authority or power to obligate or bind the Company by its
actions, conduct or contracts except that it is authorized to accept orders for
the purchase or repurchase of Shares as the Company's agent and subject to its
approval. The Company reserves the right to reject any order in whole or in
part. The Distributor may appoint sub-agents or distribute through dealers or
otherwise as it may determine from time to time pursuant to agreements approved
by the Company, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase of Shares on
behalf of the Company or otherwise act as the Company's agent for any purpose.
The Distributor shall not utilize any materials in connection with the sale or
offering of Shares except the then current Prospectus and such other materials
as the Company shall provide or approve in writing.
4. Shares may be sold by the Distributor only at prices and terms
described in the then current Prospectus relating to the Shares and may be sold
either through persons with whom it has selling agreements in a form approved by
the Company's Board of Directors or directly to prospective purchasers. To
facilitate sales, the Company will furnish the Distributor with the net asset
value of its Shares promptly after each calculation thereof.
5. The Company has delivered to the Distributor a copy of the current
Prospectus for the Fund. It agrees that it will use its best efforts to continue
the effectiveness of its Registration Statement filed under the 1933 Act and the
1940 Act. The Company further agrees to prepare and file any amendments to its
Registration Statement as may be necessary and any supplemental data in order to
comply with such Acts. The Company will furnish the Distributor at the
Distributor's expense with a reasonable number of copies of the Prospectus and
any amended Prospectus for use in connection with the sale of Shares.
6. At the Distributor's request, the Company will take such steps at
its own expense as may be necessary and feasible to qualify Shares for sale in
states, territories or dependencies of the United States of America and in the
District of Columbia in accordance with the laws thereof, and to renew or extend
any such qualification; provided, however, that the Company shall not be
required to qualify Shares or to maintain the qualification of Shares in any
state, territory, dependency or district where it shall deem such qualification
disadvantageous to the Fund.
7. The Distributor agrees that:
a. It will furnish to the Company any pertinent information
required to be inserted with respect to the Distributor as exclusive
sales agent and distributor within the purview of Federal and state
securities laws in any reports or registrations required to be filed
with any government authority;
b. It will not make any representations inconsistent with the
information contained in the Registration Statement or Prospectus filed
under the Securities Act of 1933, as in effect from time to time;
c. It will not use or distribute or authorize the use or
distribution of any statements other than those contained in the Fund's
then current Prospectus or in such supplemental literature or
advertising as may be authorized by the Company; and
d. The Distributor will bear the costs and expenses of
printing and distributing any copies of any prospectuses and annual and
interim reports of the Fund (after such items have been prepared and
set in type) which are used in connection with the offering of Shares,
and the costs and expenses of preparing, printing and distributing any
other literature used by the Distributor or furnished by the
Distributor for use in connection with the offering of the Shares and
the costs and expenses incurred by the Distributor in advertising,
promoting and selling Shares of the Fund to the public.
8. The Company will pay its legal and auditing expenses and the cost of
composition of any prospectuses of annual or interim reports of the Fund.
9. The Company agrees to indemnify, defend and hold the Distributor,
its officers, directors, employees and agents and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from any and all liabilities and expenses,
including costs of investigation or defense (including reasonable counsel fees)
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
indemnitee may be or may have been involved as a party or otherwise or with
which he may be or may have been threatened, while the Distributor was active in
such capacity or by reason of the Distributor having acted in any such capacity
or arising out of or based upon any untrue statement of a material fact
contained in the then-current Prospectus relating to the Shares or arising out
of or based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such claims, demands, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information furnished
in writing by the Distributor to the Company expressly for use in any such
Prospectus; provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Company or the shareholders of the Fund
or any expense of such indemnitee with respect to any matter as to which such
indemnitee shall have been adjudicated not to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company or
arising by reason of such indemnitee's willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement ("disabling conduct"), or (2)
as to any matter disposed of by settlement or a compromise payment by such
indemnitee, no indemnification shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee. Notwithstanding the
foregoing the Company shall not be obligated to provide any such indemnification
to the extent such provision would waive any right which the Company cannot
lawfully waive.
The Distributor agrees to indemnify, defend and hold the Company, its
Directors, officers, employees and agents and any person who controls the
Company within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense shall arise out of or be based upon any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor of the Company expressly for use in a Prospectus or
any alleged omission to state a material fact in connection with such
information required to be stated therein or necessary to make such information
not misleading or arising by reason of disabling conduct by such indemnitee or
any person selling Shares pursuant to an agreement with the Distributor.
The Company shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Company receives a written affirmation of the indemnitee's good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Company unless it is subsequently
determined that he is entitled to such indemnification and if the directors of
the Company determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be
met: (A) the indemnitee shall provide a security for his undertaking, (B) the
Company shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of directors of the Company who are
neither "interested persons" of the Company (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Directors") or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
All determinations with respect to indemnification hereunder shall be
made (1) by a final decision on the merits by a court or other body before whom
the proceeding was brought that such indemnitee is not liable by reason of
disabling conduct or, (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-Party Directors of the Company, or
(ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
10. This Agreement shall become effective on the date first set forth
above and shall remain in effect for two years from such date and thereafter
from year to year provided such continuance is specifically approved at least
annually prior to each anniversary of such date by (a) the approval of a
majority of a quorum of directors of the Company or by vote at a meeting of
shareholders of the Fund of the lesser of (i) 67 per cent of the Shares present
or represented by proxy and (ii) 50 per cent of the outstanding Shares and (b)
by the approval of a majority of a quorum of directors of the Company who are
not "interested persons" of the Company (as defined in Section 2(a)(19) of the
Act).
11. This Agreement may be terminated (a) by the Distributor at any time
without penalty by giving sixty (60) days' written notice to the Company (which
notice may be waived by the Company); or (b) by the Company at any time without
penalty upon sixty (60) days' written notice to the Distributor (which notice
may be waived by the Distributor); provided, however, that any such termination
by the Company shall be directed or approved in the same manner as required for
continuance of this Agreement by Section 10.
12. This Agreement may not be amended or changed except in writing
signed by each of the parties hereto and approved in the same manner as provided
for continuance of this Agreement in Section 10. Any such amendment or change
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, but this Agreement shall not be assigned by either
party and shall automatically terminate upon assignment (as such term is defined
in the 1940 Act and the rules thereunder).
13. This Agreement shall be construed in accordance with the laws of
the State of New York applicable to agreements to be performed entirely therein
and in accordance with applicable provisions of the 1940 Act.
14. If any provision of this Agreement shall be held or made invalid or
unenforceable by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
TWEEDY, BROWNE FUND INC.
By: CHRISTOPHER H. BROWNE
Name: Christopher H. Browne
Title: President
TWEEDY, BROWNE COMPANY LLC
By: WILLIAM H. BROWNE
Name: William H. Browne
Title: Member, Managing Director
Exhibit 11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Experts" in the Statement of Additional
Information and to the use of our reports dated May 12, 1998 on the financial
statements and financial highlights of Tweedy, Browne Global Value Fund and
Tweedy, Browne American Value Fund, the portfolios of Tweedy, Browne Fund Inc.,
included in Post-Effective Amendment No. 8 to the Registration Statement (Form
N-1A, No. 33-57724).
ERNST & YOUNG LLP
Ernst & Young LLP
Boston, Massachusetts
July 27, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> TWEEDY, BROWNE GLOBAL VALUE FUND
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<PERIOD-END> MAR-31-1998
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<NET-ASSETS> 2,527,940,742
<DIVIDEND-INCOME> 38,322,693
<INTEREST-INCOME> 8,593,019
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<EXPENSES-NET> 26,995,635
<NET-INVESTMENT-INCOME> 19,920,077
<REALIZED-GAINS-CURRENT> 182,967,157
<APPREC-INCREASE-CURRENT> 356,433,551
<NET-CHANGE-FROM-OPS> 559,320,785
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<DISTRIBUTIONS-OF-INCOME> (96,671,570)
<DISTRIBUTIONS-OF-GAINS> (54,368,991)
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<SHARES-REINVESTED> 8,222,804
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<ACCUMULATED-NII-PRIOR> 11,956,516
<ACCUMULATED-GAINS-PRIOR> 23,644,999
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23,717,001
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,081,670
<AVERAGE-NET-ASSETS> 1,897,359,368
<PER-SHARE-NAV-BEGIN> 15.46
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 4.62
<PER-SHARE-DIVIDEND> (0.87)
<PER-SHARE-DISTRIBUTIONS> (0.49)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.98
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES> 02
<NUMBER> 02
<NAME> TWEEDY, BROWNE AMERICAN VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 741,573,532
<INVESTMENTS-AT-VALUE> 1,005,455,139
<RECEIVABLES> 10,657,613
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 4,167,431
<TOTAL-ASSETS> 1,020,280,183
<PAYABLE-FOR-SECURITIES> 6,466,656
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,575,807
<TOTAL-LIABILITIES> 9,042,463
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 737,989,596
<SHARES-COMMON-STOCK> 43,890,504
<SHARES-COMMON-PRIOR> 21,119,090
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<ACCUMULATED-NET-GAINS> 3,396,288
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 267,988,488
<NET-ASSETS> 1,011,237,720
<DIVIDEND-INCOME> 9,689,519
<INTEREST-INCOME> 3,076,982
<OTHER-INCOME> 0
<EXPENSES-NET> 8,533,528
<NET-INVESTMENT-INCOME> 4,232,973
<REALIZED-GAINS-CURRENT> 15,187,523
<APPREC-INCREASE-CURRENT> 203,651,397
<NET-CHANGE-FROM-OPS> 223,071,893
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,448,502)
<DISTRIBUTIONS-OF-GAINS> (13,982,759)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,306,959
<NUMBER-OF-SHARES-REDEEMED> (7,390,306)
<SHARES-REINVESTED> 854,761
<NET-CHANGE-IN-ASSETS> 668,770,341
<ACCUMULATED-NII-PRIOR> 1,039,581
<ACCUMULATED-GAINS-PRIOR> 5,415,390
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,652,123
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,661,797
<AVERAGE-NET-ASSETS> 612,161,208
<PER-SHARE-NAV-BEGIN> 16.22
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 7.31
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> (0.43)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 23.04
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
