TWEEDY, BROWNE
GLOBAL VALUE FUND
ANNUAL
MARCH 31, 1999
TWEEDY, BROWNE
AMERICAN VALUE FUND
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Tweedy, Browne Fund Inc.
Investment Manager's Report............................................ 1
Tweedy, Browne Global Value Fund:
Portfolio Highlights................................................. 20
Perspective On Assessing Investment Results.......................... 21
Portfolio of Investments............................................. 23
Schedule of Forward Exchange Contracts............................... 32
Statement of Assets and Liabilities.................................. 37
Statement of Operations.............................................. 38
Statements of Changes in Net Assets.................................. 39
Financial Highlights................................................. 40
Notes to Financial Statements........................................ 41
Report of Ernst & Young LLP, Independent Auditors.................... 49
Tax Information (unaudited).......................................... 50
Tweedy, Browne American Value Fund:
Portfolio Highlights................................................. 51
Perspective On Assessing Investment Results.......................... 52
Portfolio of Investments............................................. 54
Schedule of Forward Exchange Contracts............................... 62
Statement of Assets and Liabilities.................................. 64
Statement of Operations.............................................. 65
Statements of Changes in Net Assets.................................. 66
Financial Highlights................................................. 67
Notes to Financial Statements........................................ 68
Report of Ernst & Young LLP, Independent Auditors.................... 75
Tax Information (unaudited).......................................... 76
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. Investors should refer to the accompanying prospectus for
description of risk factors associated with investments in securities held by
both Funds. Additionally, investing in foreign securities involves economic and
political considerations not typically found in U.S. markets, including currency
fluctuations, political uncertainty and differences in financial standards.
Tweedy, Browne Company LLC is a member of the NASD and is the Distributor of the
Company.
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TWEEDY, BROWNE FUND INC.
Investment Manager's Report
[PHOTO APPEARS HERE]
Chris Browne, John Spears and Will Browne (seated L to R)
Bob Wyckoff and Tom Shrager (back row L to R)
To Our Shareholders:
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, 1999.
However, while we are pleased with the long-term investment returns of both
Funds since their inceptions in 1993, there is not much to be pleased about this
year concerning the building of our and our shareholders' wealth. We think it is
realistic to expect that good long-term returns will be formed by a somewhat
random pattern of good and not-so-good annual investment returns. The current
Managing Directors and retired principals and their families, as well as
employees of Tweedy, Browne, have more than $388.3 million in portfolios
combined with or similar to client portfolios, including approximately $40.7
million in the Global Value Fund and $31.3 million in the American Value Fund.
With our own money and with clients' money, we plan to stick with the value
investment approach that, on average (but not every year), has worked so
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well for us over the past 24 years. The underlying intrinsic value of most of
the companies that the Funds own increased more than their share prices, laying
the ground work, we believe (and hope), for good returns in the future. The net
asset value of shares of Tweedy, Browne Global Value Fund increased 3.03%*,
after adding back the calendar year-end dividend. The net asset value of shares
of Tweedy, Browne American Value Fund declined 1.09%*, after adding back the
calendar year-end dividend. It was a very strange year in that the stocks that
did well were few in number. And those that did well, by and large, did very
well. Internet stocks and technology stocks, which we do not own, did extremely
well, appearing to defy all forms of fundamental financial gravity, while large
value stocks and most mid-cap and small cap stocks did poorly. Our performance*
for various periods ended March 31, 1999, and that of the various indices to
which we compare ourselves, is set forth in the following chart:
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Morningstar Morningstar
World Foreign
Tweedy, Browne MSCI EAFE(1) Stock Funds Stock Funds
Global Value US $ Hedged Average(2) Average(3)
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1 Year 3.03% 6.06% 4.78% 0.15% (0.25)%
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3 Years 16.95 8.47 14.90 11.62 8.70
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5 Years 13.91 8.75 12.30 11.53 7.69
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Since Inception(9) 15.91 9.14 11.98 12.36 9.63
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Morningstar Morningstar
Mid-Cap Domestic
Tweedy, Browne S&P Mid-Cap Russell Value Funds Stock Funds
American Value 500(4) 400(5) 2000(6) Average(7) Average(8)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year (1.09)% 18.49% 0.46% (16.25)% (9.79)% 3.65%
- --------------------------------------------------------------------------------------------
3 Years 19.39 28.05 18.30 7.73 12.71 17.18
- --------------------------------------------------------------------------------------------
5 Years 20.54 26.21 18.21 11.23 14.38 17.92
- --------------------------------------------------------------------------------------------
Since Inception(9) 18.57 23.78 17.10 10.60 13.31 16.60
- --------------------------------------------------------------------------------------------
</TABLE>
See page 19 for footnotes 1 through 9, which describe the indices and inception
dates of the Funds.
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* Past performance is not a guarantee of future results, and total return and
principal value of investments will fluctuate with market changes. Shares, when
redeemed, may be worth more or less than their original cost.
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The difference between the performance of the Standard & Poor's 500 Stock
Index ("S&P 500"), and the Russell 2000 Index ("Russell 2000") at 3,474 basis
points (34.74%) is perhaps greater than we can ever recall. The S&P 500 is an
index of large cap stocks and the Russell 2000 is an index of mid and smaller
cap stocks. (The 1,000 largest stocks are excluded from the Russell 2000). In
calendar year 1998, 15 stocks, a mere 3% of the issues in the Index, accounted
for 52% of the performance of the S&P 500. Of these 15 stocks, nine were either
technology or communications companies. If you owned those stocks, you had a
great 1998. Most value investors did not own those stocks. The trailing twelve-
month price/earnings ratio at the end of 1998 for those stocks was 47.7 times.
The projected price/earnings ratio for the group for 1999 is 44.8 times. These
are not value statistics. In the first quarter of 1999, the stock market has
gotten even narrower. Just five stocks accounted for more than 52% of the S&P
500's gain of 5%, and the entire gain was accounted for by only eighteen
stocks. The other 482 stocks in the S&P 500 produced no net return.
In a year such as the one just past, the performance of a particular index
may not be indicative of the performance of stocks in general. In calendar year
1998, the performance of the average stock in the S&P 500 was less than one-half
the performance of the Index. The same phenomenon occurred in stock markets
outside the U.S. The Morgan Stanley Capital International (MSCI) Europe,
Australasia and Far East Index (EAFE) gained 6.06% for the year ended March 31,
1999. For the same period, EAFE Small Cap was down 8.40%. Technology stocks are
less of a factor in Europe and Asia than they are in the U.S. In Europe,
telecommunication stocks were the big movers. Anyone who has tried to order a
phone system in Europe or has paid a phone bill there will understand why there
is so much potential for growth in European telecommunication stocks.
Stock market commentators refer to this as narrowness. When market
performance is "narrow", a small number of stocks account for the performance of
an index and may not be representative of how stocks in general have performed.
Most of the time a rising tide lifts all boats. This was not the case in 1998.
Last year was the narrowest year since the 1989-1990 period when a small number
of large cap consumer product companies like food and pharmaceuticals masked
what was otherwise a pretty bad year for stocks. Much of the effect stems from
the fact that the popular stock market indexes are capitalization weighted. The
larger the market capitalization of a company, the greater is its contribution
to the calculation of the performance of an index. In the S&P 500, about 50
stocks, 10% of the issues in the Index, generally account for approximately one-
half of the Index's weighting. The NASDAQ Composite Index ("NASDAQ Index") is
even more skewed towards a handful of large companies. Out of more than 4,700
issues
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in the NASDAQ Index, just five account for 50% of the performance calculation.
While indexes in general are a reasonable barometer of stock market performance,
capitalization weighting can distort the picture. Although the size of different
stock positions within a portfolio or mutual fund can vary, generally they do
not vary as much as they do in an index. For example, the market capitalization
of the largest stock in the S&P 500 is 1,239 times greater than the smallest. It
is rare that a money manager would build a stock portfolio with such disparities
in the size of its positions.
The skewing of the indexes to large companies is further compounded by a
concentration in large technology companies. The S&P 500 was historically an
index of industrial America. Today, it is increasingly concentrated in
technology stocks, which for the time being are measured by a different
valuation model. Potential future earnings are much more important than current
earnings. The NASDAQ Index is even more skewed. The five largest stocks are all
technology issues. Again, stock portfolios are generally built around
diversification, not concentration. A typical portfolio will have stocks in many
industries; it will generally not have one-half of the assets invested in one
industry. This is done for the purpose of lowering risk. While a concentrated
portfolio could outperform, it could also seriously underperform if the area of
concentration goes out of favor.
Last year, funds that were heavily invested in large capitalization growth
stocks did best. Smaller stocks and "value" stocks in particular did poorly. In
1998, large value stocks underperformed technology stocks, but still had
positive returns. Small and mid cap value stocks posted primarily negative
returns. These negative returns were not a result of the companies themselves
doing badly. These stocks were just ignored or sold as money flowed to where the
gains were being made in technology and Internet stocks.
Internet stock valuations are particularly difficult for us to comprehend.
In our opinion, these issues are truly the cork on the champagne bottle. As a
group they have little or no earnings and no near term prospects for earnings
that could justify their sky high stock prices. We feel as though we are sitting
on the sidelines watching a wild party going on and wondering if we are missing
out on all the fun. However, we remember that, at best, these parties end with a
hangover or are brought to an abrupt end when the police show up and cart
everyone off to jail. These parties have occurred in the past. We remember the
great personal computer party of the early 1980s. The industry leaders in those
days were Atari, Commodore and Tandy, names that are barely remembered today.
The same happened with biotechnology companies in 1991. True financial history
buffs can recall the tulip mania of the 17th Century, the railroad mania of the
late 19th Century, and the birth of the automobile industry in the first part of
this century.
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Railroads, autos and personal computers all grew to be large, important
industries. However, the stocks one could buy to pa rticipate in these great
growth industries for the most part were bad investments. A friend of ours who
also manages money told us of a report he read which showed that if you had
invested an equal amount of money in every personal computer manufacturer in
1980, your annually compounded rate of return over the next 18 years would have
been a disappointing 4%.
Great growth industries often have the common characteristic of ease of
entry with low capital requirements. Despite the fact that the auto industry
today is a highly capital-intensive business, the opposite was the case in the
early part of this century. The same may be said for the Internet. Add to this
the fact that the pace of technological change today is so rapid, what is
cutting edge technology one day can be passe the next. Ease of entry and low
capital requirements draw competition and while competition is good for
consumers, it is bad for profits. Most Internet companies do not have any
profits other than the profits reaped by selling stock to the public. Brand
recognition is also important for companies selling products to the consumer. To
some extent, Amazon.com has brand recognition. However, when it only takes a
point and a click to compare prices at Borders or Barnes & Noble, the only
reason to buy from one versus the others is price. The book is the same; price
is the only difference and the price will be set by the company that is willing
to accept the lowest profit margin. Companies will therefore compete on price
for more customers hoping that a significant market share will ultimately lead
to profits. Unless one of the competitors has a sustainable cost advantage over
the others, this is not the formula for a good business.
Although we are enthusiastic users of technology and information technology
in particular, we are not very good guides to what is happening in Internet
technology. When we look at a company like America Online, we cannot understand
the investment model which places a value of $120 billion on a company with $2.6
billion in revenues and $92 million in profits in its latest fiscal year. It may
ultimately grow enough to justify its current valuation, but what about a higher
value from this point forward? There is nothing particularly unique about what
AOL does. There are other Internet access providers, some of which have less of
the obnoxious advertising that keeps popping up on our computer screens. It has
no patent protection and while it does have brand recognition, that alone does
not guarantee its future survival. A Packard was once one of the best cars you
could buy. AOL's current price/earnings ratio exceeds 600 times. Were it to sell
at a more normal, yet rich, growth stock multiple of 35 times, its earnings must
increase 17 fold. Again, it may happen, but history is full of examples of
companies that never reached such great expectations. A portfolio of stocks with
these characteristics has never been a formula for good investment performance.
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There is a lot of talk lately about a new "paradigm" for stock valuations.
One needs a new paradigm to rationally justify the valuations of stocks that
soar merely by virtue of the fact that someone has added ".com" to the end of
their name. A lot of money has been made in most of these issues and a lot of
people are sorry they have missed out on all the fun. We even hear the
occasional complaint asking why we have not invested in these new technologies.
Some people may even be thinking that our time has passed, and that we are not
open to new ideas and avenues of profit in the stock market. It is true we do
not go mountain biking on the weekends to train for the rigors of stock
investing on Monday mornings. Of course we have not heard that Warren Buffett
has enrolled in karate classes either, and he seems to do okay. New ideas come
and go, and it has been our experience that when they go, a lot of money is
usually lost. We do not enjoy risk and we do not enjoy losing money. If history
tells us that investing in new paradigms at sky high prices eventually leads to
big losses, we pass. We are perfectly happy with our performance over the past
three years, five years and thirty years. And after thirty years in this
business doing the same thing, we are still players in the game. We see little
reason to apologize and no reason to change our stripes.
We recently participated in The Program on Investment Decisions and
Behavioral Finance at the Kennedy School of Government at Harvard University, as
we have twice a year for the past several years. The speakers are some of the
most prominent behavioral economists in the country along with a few investment
practitioners like ourselves. We feel honored to be included. The economists are
the theorists who perform all the empirical studies on people's investment
behavior. We are the lab rats who put the theories into practice. We either come
away with some new insights each time or feel as if we have been to a refresher
course in rational behavior as it relates to investing. One insight we picked up
this year was that in the investment world, ideas are dangerous. This may sound
strange at first, but it is actually true. Most investment ideas are based on
intuition or hunches and usually lack any empirical substantiation. Most
investment ideas are derived from whatever has worked well in the recent past.
What else could explain the euphoria surrounding Internet and technology
stocks? However, what has worked best most recently may not always work well for
long. As Ben Graham said, "In the short run, the stock market is a voting
machine. In the long run, it is a weighing machine."
Meanwhile, Internet stocks continue to soar with periodic plunges. Overall,
the game is still continuing. These stocks have Internet chat rooms where all
sorts of information and misinformation is exchanged by day traders. Traders
brag about how much money they made trading
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Whatever.com, and others are suckered into the game. Stocks are bought merely
because they have gone up and the approach becomes self-fulfilling. Little or no
consideration is given to whether there is any investment value underlying the
price that is being paid. Value does not count for anything in the new paradigm.
What is forgotten is that not everyone can get out if and when the game ends.
There will be just as many shares outstanding and someone will own them when the
day of reckoning comes.
Perhaps as money managers, we should be smart enough to know when to jump
on board these fads and when to leave. Perhaps we should be able to determine at
the beginning of each year which stocks or group of stocks will be the ones that
will outperform the market over the next six months or year. Would we have said
let's start with the group of stocks that have no earnings and maybe no assets?
Has it ever been proven that investing in stocks with no earnings and no assets
has been a long-term winning investment strategy? Perhaps this explains why so
many money managers today are portrayed as top athletes, building stamina on the
weekends for when the stock market opens. This may also explain why the opening
bell on The New York Stock Exchange is covered on television as if it were the
opening kick off at the Super Bowl. You need a lot of stamina to attempt to do
something that is not humanly possible long term. Many analysts and money
managers bought Internet stocks and made a lot of money. However, we think they
may be confusing luck with skill. That is often the case with investment fads
that work for a period of time.
We view this type of investing as another form of market timing. Many
people in our business market time, and the vast majority do not beat the
market. The behavioral psychologists and economists call this the over-
confidence factor. We suppose that if money managers did not think they could
beat the market, they would not try. Therefore, they believe they can beat the
market. The behavioralists have another term, "calibrated confidence", which
means knowing what you can do and what you cannot do. It requires being
comfortable with the knowledge of how limited your abilities really are. In a
paper written by Brad Barber and Terrance Odean of the Graduate School of
Management at the University of California, Davis, the authors found that over-
confident investors trade more and make less. The greater the trading volume,
the poorer the returns. In another study of 100,000 individual stock trades,
they found that the stocks investors sold "on average" outperformed the stocks
they bought by 3.4% after one year. It seems logical that a money manager who
turns over his portfolio at a high rate must have confidence that all the
individual investment decisions he or she is making must be right. A lack of
confidence in one's abilities usually results in a lack of activity and low
activity levels have been proven to produce better returns. Odean and Barber
also found that investors who trade at a high
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rate buy riskier stocks. Perhaps all those investors who are trading Internet
stocks realize they are riskier than most stocks but are confident they can get
out before the game is over. We wish them luck.
In the February 1, 1999 issue of Peter L. Bernstein's newsletter, Economics
and Portfolio Strategy, Jason Zweig, mutual fund columnist of Money Magazine,
wrote an excellent piece entitled The Velocity of Learning and the Future of
Active Management. In this article, Mr. Zweig comments on the current speed of
information and its influence on money management. He reports that in 1959, the
turnover rate for the average mutual fund was 16.4% which equates to a six-year
holding period. By 1979, the turnover rate had increased to 63.3%. Today, it
exceeds 83%. And this is the average. Many funds have significantly higher
turnover rates, indicating that a day trading mentality is not solely an
individual investor phenomenon. While this may be great news for stockbrokers
and the Internal Revenue Service, it is probably not good news for investors.
Mr. Zweig points out that as the flow of data "makes the future seem closer and
more knowable", investment managers make ever shorter-term bets. Pressure is
exerted on money managers to abandon long-term investment principles in favor of
short-term strategies, which have less risk of producing performance that
deviates from whatever benchmark is used to measure performance. This behavior
is understandable. Money flows into funds that have had the best recent
performance, and in general future performance suffers under the weight of these
ballooning assets. This is not a problem we and most of our value brethren have
at this time, but it is something we think about. When "value" returns to favor,
we prefer a manageable inflow of money to a flood.
Performance is now measured and graded over shorter and shorter periods of
time. An entire industry based on performance measurement has grown to the point
where it influences the allocation of trillions of dollars. The yardsticks used
in this industry are all based on relative performance, not absolute
performance. The main yardstick is "tracking error"; e.g., how much did the
manager's performance deviate from the chosen benchmark. As Mr. Zweig points
out, the performance measurement industry can now track performance on a daily
basis. We are sure that some participant in this industry will soon offer hourly
tracking and provide this information to subscribers over the Internet. But is
it of any value? Years ago, psychologists performed an experiment on
kindergarten children where each child was given a marshmallow. They were told
the teacher would leave the room for ten minutes. When the teacher returned, any
child who had not eaten his or her marshmallow would be given a second one. The
majority of children could not resist the temptation to eat their marshmallow
before the teacher returned to the classroom. The psychologists then followed
the lives of these children into adulthood. They observed that the children who
were able to
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wait until the teacher returned to the classroom before eating their
marshmallow, in general were more successful in life. These children were able
to make better long-term choices as adults.
Our investment principles have remained constant over a long period of time
and we are very pleased with the result. We think in terms of long-term absolute
and relative performance, not short-term relative performance. If that means
that money flows away from us and into growth stock funds in a period of
relative underperformance, we have to accept that. We know that our method of
investing has outperformed the indices over the last 24 years, with our stocks
underperforming one-third of the years and outperforming two-thirds of the
years. (Please see "Is Underperforming an Index 30% to 40% of the Time a Normal
Part of Long-Term Investment Success?" in our booklet 10 Ways to Beat an Index.)
We are one-at-a-time-stock-pickers, not market forecasters. We could not have
assembled at the beginning of last year and successfully predicted that
technology stocks and Internet stocks would be stellar performers over the next
12 months.
While some money managers may think they can time the stock markets or
segments of the stock markets, we have a much lower opinion of our
prognosticating abilities. In fact, we readily accept the fact we cannot
forecast stock markets. Sorry, but if that is what you are looking for, you have
invested in the wrong Funds. We know one manager whose employer measures his
performance against the relevant benchmark weekly. Consequently, this individual
is primarily concerned with whether his stocks are up at every point in time,
and he trades in and out of stocks depending on very short-term price movements.
We wonder if there is any time left for basic stock research. For our part, we
do not even take credit for coming up with the investment principles that have
produced rather good results over time. That credit goes foremost to Ben Graham,
who in the 1930s was the first to articulate the principles of value investing,
and who such great investors as Warren Buffett and Walter Schloss credit with
much of their success.
While our investment principles have remained constant over time, our
methods have evolved principally through the addition of new, and we believe
valid, measurements of value criteria. In the 1960s and early 1970s, we invested
mostly in stocks selling at a discount to book value, or a discount to net
current assets (current assets less all liabilities). There were plenty of those
kinds of stocks in those days. At a time when manufacturing dominated the
economy, book value or current assets were a significant measure of value. They
still are. However, there is also value in consumer franchises and businesses
that have some degree of control over their markets or the pricing of their
products.
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The most obvious example was in television stations in the late 1970s. When
Jim Clark joined us in 1976, he came from an investment firm that owned
television stations. Before his arrival, we never invested in companies that
owned television stations because they had no tangible book value. Jim taught us
that they had franchise value instead. TV stations are a semi-monopoly such as
the CBS affiliate in Miami or Chicago. Moreover, stations change hands rather
frequently and at fairly consistent multiples of cash flow. It is actually
easier to determine the value of a TV station than it is a manufacturing company
selling at one-half of book value that is not earning a reasonable return on its
capital.
One of the companies we bought at that time was Storer Broadcasting, which
was selling at about one-half of 10 times cash flow, the industry standard for
acquisitions. In addition, Storer had one of the lowest profit margins in the
industry, which meant that a good operator, as opposed to its underperforming
operators, might be able to improve the bottom line. The values might even be
greater. (Legend has it that when Warren Buffett bought into The Washington Post
Company, he explained to Katherine Graham that she owned monopolies and could
therefore raise prices for advertisements and improve earnings.) After we bought
shares of Storer, we explained the acquisition pricing of TV stations to a
takeover group, and the hidden value in Storer. We did not hear back from this
group, but they accumulated a position in Storer and "put it in play". To our
delight, the company was ultimately acquired at a significant premium to our
cost. We learned the principle of appraising business values. We went on to make
other successful investments in ABC and then Capital Cities Broadcasting. In the
mid-1980s, we discovered the acquisition pricing model for food companies and
consumer product companies, which lead to profitable investments in stocks such
as General Foods, Rothmans Tobacco and Distillers Corporation, among others. We
had expanded our universe of cheap stocks.
We continued to buy stocks with low price/earnings ("P/E") ratios and low
price-to-book value ratios, but had added stocks with low price-to-enterprise
value ratios. Many of our value brethren only buy a slice of the value menu.
Some only buy low P/E stocks, which leads to a portfolio of aluminum companies,
auto companies and other typically cyclical businesses. Over time this strategy
has performed well. In some cases because of the amount of assets under
management, it has been their only alternative. Other value managers have
migrated to buying only "better businesses" at reasonable prices. Our menu is
more diverse. In 1998, the "better business" managers performed better. Some
years, "the not-so-good businesses but cheap-on-book or earnings" guys do
better, but not in 1998. We are a combination of several value biases. Why else
would we own
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Johnson & Johnson, Glaxo-Wellcome, American Express and Freddie Mac? But we also
own some pretty doggie companies, or at least they were when we bought them:
ASARCO, ACX Technologies, British Mohair, EZCORP, etc. There is more than one
standard for cheap. Why should we limit ourselves to just one category?
The other area where some money managers constrain themselves is market
cap. We do not. Some managers only buy large cap stocks, which may be more a
function of their assets under management. The more money one manages, the less
impact a small or medium cap stock can have on your results because you can
never own enough to make a difference. We are still of such a size in terms of
assets under management that small and medium cap stocks can have an impact on
performance. In 1998 that impact was negative. Usually, in our experience, the
impact is positive. Money managers who restrict themselves to small and mid-cap
stocks probably had a bad experience in 1998. Our large cap stocks, generally,
carried the day last year. However, stocks that did not perform well in a given
time measurement period are not necessarily bad investments. In markets when
only a few segments get all the attention, perfectly good stocks may do nothing
or even decline. Our experience has been that if the value is there, ultimately
it is recognized.
Jason Zweig speaks to this issue in the same article we mentioned above.
Along with forcing money managers to focus on the short term, the performance
measurement industry also forces money managers into "style boxes". Are we
value, growth, large cap or small cap? Whatever you are, just be sure you only
buy stocks that fit your style. The "style police" are more active in the
institutional money management business where changes in a portfolio can be seen
daily. More often than not, institutional money managers are selected because
they fit into some asset allocation model the client has adopted. This could be
1/3 large cap value, 1/3 large cap growth, 1/6 small cap value and 1/6 small cap
growth. Add mid cap, international, market neutral strategies, arbitrage, etc.,
and the permutations can be mind boggling. If you find a perfectly good stock
that you think is dirt cheap, you cannot buy it if it does not also fall into
your style box. We prefer to think out of the box while maintaining a consistent
set of values. As we have said, cheap is a different number depending on the
business. To judge Alcoa and Johnson & Johnson on the same P/E and price/book
value criteria just does not make any sense. It is more important that someone
have sound values, honesty and integrity, than it is the particular religion
which taught them those values. The same can be said for money managers.
We believe that the downside of our approach to investment management is
underperformance, not the risk of permanent capital loss. We do not
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own "air ball" stocks that can dissolve overnight such as what is available in
the Internet arena. We also do not invest such a great percentage of our assets
in any one issue so that if we are wrong and the company goes belly-up we have
significantly impaired our net worth. Many managers who have underperformed
their benchmark have still delivered rates of return that have exceeded
inflation and increased the wealth of their clients. In the long run, one of the
greatest risks to your net worth is not owning stocks. Bonds do not grow. They
can only return their face value at maturity. Although inflation is currently at
historically low levels, it still exists. Inflation is a silent, insidious tax
which erodes your net worth. Within our lifetimes, having a million dollars was
considered a fortune. Also in our lifetimes, college cost $2,500 a year, an
expensive car cost $8,000 and $100,000 bought a luxurious house. Our
grandparents can remember going to the movies for a nickel. One of the problems
with living a long time is that your point of reference for the cost of
something is cheaper. Fortunately, there is an easy way to keep pace with and
even beat inflation and that is equities. Historically, over time an index fund
always beats inflation.
There is a great deal of talk about index funds these days, especially in a
year when, according to Morgan Stanley, 86% of U.S. equity mutual funds
underperformed the S&P 500. It is an alternative, and the S&P 500 is as good a
barometer of equities as anything out there. However, today you have to ask what
you are buying in an S&P 500 Index fund. On December 31, 1998, the 12-month
trailing price/earnings ratio of the S&P 500 stood at 30.3 times. The dividend
yield was barely above 1% and the price-to-book value ratio was at an historical
high. These are not the fundamental financial characteristics of a portfolio of
stocks that we are comfortable owning. If we go back to 1982 or even 1990, these
basic ratios were quite cheap. Today, they are not. Fortunately, not every stock
carries the same price-to-book value ratio. The median P/E is 20.8 which means
one-half of the stocks in the S&P 500 have lower P/Es. Furthermore, the S&P 500
is a small percentage of all the stocks from which we have to choose. In terms
of market cap, the 10 largest companies in the S&P 500 have an average P/E of
40.6 times. Microsoft now has the largest market cap in the S&P 500 and its
trailing P/E was a lofty 61.6 times. Five years ago, Microsoft was not even
among the top ten. Recently, Venator Group (the old F.W. Woolworth) was dropped
from the S&P 500 and replaced with America Online which sells at more than 600
times earnings. The days when the S&P 500 was dominated by the large industrial
cyclical companies are gone. There has been a migration to companies that at
least for the time being have higher growth rates and returns on capital, which
in some measure accounts for the higher P/E ratios. Nevertheless, P/E ratios of
this magnitude do not leave much room for disappointment. Furthermore,
historically, stocks that sell at these levels eventually return to earth with
unpleasant consequences.
12
<PAGE>
The overall financial ratios of the S&P 500 have not gone unnoticed in
institutional investor circles. The response of many has been to seek
"alternative investment strategies". These alternatives run the gamut from
venture capital, to risk arbitrage and hedge funds, to leverage buyout funds.
The overall returns from these investment vehicles have not provided value added
over an S&P 500 Index fund. The average performance of the managers in the top
quartile has outperformed each of these types of investments. So has the top
quartile of plain vanilla equity money managers. The problem with the best
alternative investment pools is getting into them. So much money has been
chasing after venture capital lately that the firms with top records will not
take your money. They don't need it. Many will not even take all the money their
existing clients are willing to give them when they open a new fund. They ration
investments in their funds. This has also enabled several to raise their fees
from a 1% flat fee plus 20% of the gain to a 2% flat fee plus 30% of the gain.
Generally, when too much money chases too few deals, the rates of return
decline. Much the same could be said for leverage buyout funds.
Hedge funds are a bit different. At least here you can get your money back
sooner than 8 or 10 years. In general, investors in hedge funds can exit once a
year. In between, they may have little idea of what the hedge fund manager is
doing with their money. This became painfully apparent in the collapse of Long
Term Capital Management last September. No one, including the bankers who had
lent these self-styled geniuses more than $100 billion, knew they were leveraged
more than 25 to 1. Their strategy was bulletproof and they had the data and two
Nobel Prize Laureates to prove it. Yet, somehow, in a matter of a few short
weeks the whole thing dissolved in a cloud of smoke. Again, before the collapse,
many investors were begging them to take their money. Long Term Capital
Management had a black box strategy, a purely quantitative way of investing that
was much more dependent on computers than humans. Most hedge funds depend on the
manager and his or her ability to time markets. They go both long and short in
their portfolios so that theoretically they will prosper irrespective of the
direction of the conventional equity markets. They have also moved beyond doing
this with just stocks to all sorts of financial instruments, some of which were
probably created by brokers just for them. They can trade in currencies,
interest rate futures, commodities and foreign debt, like Russian bonds. They go
in and out of things we cannot even begin to comprehend.
13
<PAGE>
We see several problems with hedge funds. First, the manager is basically
making market timing bets in a whole range of financial instruments.
Conventional wisdom holds that with plain old stocks you cannot successfully
time the markets. How then can a hedge fund manager time a whole range of
markets? To our way of thinking there is a disconnect in the logic. Second,
hedge funds use leverage, and in many cases the investor does not know how much
They now have a word for this: transparency. Most hedge funds are blind pools of
capital; you cannot see what they own or how much leverage they are employing.
We are even told some will de-lever (i.e., reduce their borrowings), as their
fiscal year end approaches to give their investors some comfort. We do not
believe in deceiving our clients no matter how much more we think we know than
they do. The hedge fund managers claim they need this secrecy so that no one can
see where they have placed their bets and mess up their strategies. However, you
also cannot tell how leveraged they are, as was the case with Long Term Capital
Management. So long as a portfolio has some reasonable degree of
diversification, be it even just ten stocks, it is unlikely to blow up unless it
is leveraged. In our experience, when we have read about funds that crashed into
a wall, they were always riding on leverage. Third, and this only affects those
of us who must pay taxes, the gains are nearly always short term, which means
they are taxed at the highest rates, sometimes up to 50%, depending upon where
you live. Every dollar of gain from long-term capital gains, which is taxed at
20% at the Federal level, requires $1.31 of ordinary gain taxed at the top
Federal rate of 39% to yield the same after tax profit of 80 cents. For any
gains in a given year that are unrealized, the amount you would have had to pay
in taxes can continue to compound for your benefit in subsequent years. The
deferral of gains and continuing investment of capital that would otherwise be
paid currently to the Internal Revenue Service can have a very significant
impact on your net worth.
Funds that invest in risk arbitrage, mergers and acquisitions, have the
same tax hurdles to overcome and the problem of too much money chasing too few
deals, which narrows the spread or profit margin. If Company A is going to
acquire Company B and the transaction is expected to close in three months, you
could earn an annualized rate of return of 20% if Company B's stock sells for 5%
less than what you will be paid at closing. However, if another investor is
willing to accept a 15% annualized rate of return, that is all you will get. The
guy who is willing to accept the lowest rate of return sets the price. The more
money that flows into this type of investment, the lower the rate of return.
Many managers who practice risk merger arbitrage were complaining last year that
Long Term Capital Management was driving spreads down to very narrow levels. Why
would they do this? Leverage. If they could leverage these investments ten-to-
one and borrowed money costs
14
<PAGE>
5%, they could make 20% on their equity with an annualized rate of return of
only 7%. On an unleveraged basis, such returns are not appealing. This is
exactly what Long Term Capital Management was doing, or as one observer stated,
"They were picking up dimes in from of a steam roller." What they were doing was
ruining the game for everyone else. Now that they are gone, the risk arbs (as
they are called) claim that spreads are wider and offer acceptable rates of
return. This will be true only until the next guy comes along who is willing to
settle for less profit, or leverage more to make that profit. Sooner or later,
those guys always come along.
Investing is not difficult when you take the time to think about a few
basic principles of success and stick with them. Sticking with them is sometimes
difficult because even the best ones do not work every year. Maintaining a long-
term perspective is key. It is also easier if you invest for the long term.
Money managers who turn their portfolios over two and three times a year must
have a harder time adhering to investment principles because they are attempting
to beat the market in every time period they are measured, be it quarterly or
annually. Trying to determine which group of stocks will perform best in every
quarter or even every year is well beyond our capabilities. In a study by Morgan
Stanley, they found that in 1998 the breadth of the stock market's performance
was narrower than in any of the past ten years, with the exception of 1990. This
means that rather than stocks in general rising, only a very small number of
stocks performed well. We remember 1990 very well. Most value managers were down
in the mid to high teens, including us, despite the fact that the S&P 500 was
only down 3.2%. That year, a small number of large consumer product companies,
pharmaceuticals, etc. did well, which in a weighted index was enough to make it
appear that the stock market did not have such a bad year. Financial stocks in
particular were a disaster in 1990, and most value managers were heavily
invested in financial stocks. Morgan Stanley further found that last year, the
100 largest stocks in the S&P 500 produced 85% of the return. The other 80% of
the stocks in the S&P 500 only produced 15% of the return. We still believe a
long-term perspective works best. Look at Warren Buffett. It seems every stock
he buys, he plans to hold for the rest of his life. He does okay without
worrying about short-term performance. Last year the stocks that performed best
for us were our larger cap holdings. Our small and mid-cap stocks, in which we
have a significant portion of your and our assets invested, did not do much for
our net worth. We also made some mistakes. We are not perfect, but we know it.
Our results with international stocks in the Tweedy, Browne Global Value Fund
were not dissimilar from our experience with U.S. stocks. Japan was particularly
disappointing. In local currency terms, Japanese stocks were down 8.9% in 1998.
Much of what we have invested in Japan is in small and
15
<PAGE>
medium cap stocks. Overall, the values are compelling, and a number of our
stocks were bought at discounts to net cash. We got the business for free.
However, that did not prevent these stocks from getting even cheaper in 1998.
Lately, smaller Japanese stocks have shown some signs of life. This often
happens when we least expect it. Fortunately, we do not invest in emerging
markets except to a tiny extent. In 1998, the Morgan Stanley Capital
International Emerging Markets Free Index was down 27.5%. Generally, we do not
invest in emerging markets because the financial disclosure is often poor, the
stocks are growth stocks trading at high multiples, and we cannot hedge the
currency back into the dollar at any reasonable rate. The collapse of the
Russian stock market last summer was especially dramatic and acute. In the two
or three years prior, the Russian stock market had increased five-fold. In a
much shorter period of time, it dropped 80%. During its rise, there was talk of
a "new paradigm," and many investors were lured in as they observed the profits
being made. It was a great party. However, the end came so quickly, almost like
an earthquake and with similar results, that probably few were able to avoid the
crash. We never profited from the rise of the Russian market, but we also never
had to give it all back as so many investors did.
Many investors invest internationally because they believe world markets
are not correlated. This means if U.S. stocks go down, maybe European or
Japanese stocks will go up. This is no longer completely true. In the past
several years, U.S. and European stocks have shown a high degree of correlation.
Japan and the emerging markets have not. As world markets, both stock and trade,
continue on the path of globalization, correlation will increase. It has become
impossible to remain isolated. That is good. It creates a discipline that makes
politicians pursue economic policies that must compete. If something can be made
cheaper in another country, it will. Trade barriers which brought on the Great
Depression will no longer work. We began investing internationally for a
different reason. We did it because we more than doubled the number of companies
we could screen for investment opportunities. Unlike many international
investors, currency devaluations are good for us. When a country devalues its
currency, its stock market usually goes up because its native companies have a
new price advantage selling into world markets. By hedging the currency, we
avoid the pain of the devaluation and enjoy the rise in the stock market. And,
to the list of other things we know we cannot predict, we must add currency
fluctuations. We invest internationally simply because it just about doubles the
number of stocks from which we can choose in our search for value. One exercise
we perform periodically is to look at the rankings of U.S. European and Japanese
stocks on the price-to-book value basis and a P/E basis. Using data from
Bloomberg, we rank all stocks in these three geographic areas with market
capitalizations greater than $100 million into deciles. The bottom
16
<PAGE>
decile of price-to-book in the U.S. begins at 1.07 times; Europe starts at .93
times; and Japan begins at .60 times. On a P/E basis, the bottom 10% in the U.S.
starts at 10.2 times; Europe is 8 times; and Japan is at 14.3 times. On an
earnings basis, the data for Japan may be misleading for two reasons. Because
Japan is in recession, corporate earnings are lower than they would be in more
normal economic times. In addition, many Japanese companies hold large stock and
bond portfolios. If these cash items were deducted from the share price, the
resulting P/E ratio would be much lower.
The portfolio characteristics of the Tweedy, Browne Funds as of March 31,
1999 are as follows:
- --------------------------------------------------------------------------------
TWEEDY, BROWNE GLOBAL VALUE FUND
- --------------------------------------------------------------------------------
Price/Book Value 0.87 Based on 24.92% Cheaper than 94% of the 8,427 stocks
of portfolio in the Bloomberg database with a
assets market capitalization above $100
million in those countries where the
Global Value Fund has investments
- -------------------------------------------------------------------------------
Price/Earnings 11.82x Based on 44.7% Cheaper than 86% of the 8,427 stocks
of portfolio in the Bloomberg database with a
assets market capitalization above $100
million in those countries where the
Global Value Fund has investments
- -------------------------------------------------------------------------------
TWEEDY, BROWNE AMERICAN VALUE FUND
- -------------------------------------------------------------------------------
Price/Book Value 0.76 Based on 18.14% Cheaper than 97% of the 3,814 stocks
of portfolio in the Bloomberg database with a
assets market capitalization above $100
million that are based in the United
States
- -------------------------------------------------------------------------------
Price/Earnings 11.51x Based on 49.22% Cheaper than 84% of the 3,814 stocks
of portfolio in the Bloomberg database with a
assets market capitalization above $100
million that are based in the United
States
- -------------------------------------------------------------------------------
In both Funds, the balance of the assets is either cash awaiting investment
or is invested in companies that are mostly better businesses that should and
often do trade at higher P/E ratios, or are stocks that have risen in price and
thus P/E ratio, but are still short of our sell price targets. Overall we are
comfortable with the basic fundamental financial characteristics of both
portfolios. We believe both portfolios have less risk than stocks in general and
Internet and technology stocks in particular. We also believe our stocks have
significant potential for future gains. If only we could control the realization
of those gains, we would not have to worry about being compared to the latest
hot stock group. Unfortunately, stocks do not always do what they are told to do
when they are told to do it. A stock doesn't know you own it--it doesn't care.
However, it has been our experience that over time they do respond and provide
more than acceptable rates of return.
17
<PAGE>
Little has changed at Tweedy, Browne this past year. We added one analyst
to our staff who was formerly an investigative reporter for The Wall Street
Journal. We have long believed that investment research is much like
investigative reporting. It requires a nose for truth and a healthy dose of
scepticism. Our goal is to stay small. We enjoy managing money, yours and ours.
We do not like managing people. We give people a job and leave them alone to do
it. We also enjoy promoting from within, which is happening at an increasing
rate. Already, people in the firm are complaining about other departments
"poaching" their best people. Our Managing Directors all started at the bottom.
We believe others should have the same opportunity to advance if they have the
talent.
The Year 2000. In closing, we'd like to update you on our Year 2000
progress. As we mentioned in our last letter to shareholders, we engaged an
outside vendor to assist us in our applications conversion, hardware and
software evaluation and testing, and survey and certification of all third party
vendors and service providers. To date we are on target with our project plan.
Testing of all hardware and software has been completed. Noncompliant hardware
and software has been replaced.
We are regularly contacting all vendors and business associates to assess
their Y2K readiness. Our critical vendors, such as the Funds' custodian,
transfer agent, and fund administration and accounting providers, are all on
schedule for Y2K compliance and will be participating in industry wide testing
through the second quarter of 1999. Although we do not believe that we or our
mission critical vendors will have any operational difficulties on January 1,
2000 or thereafter, we cannot provide any guarantees that all systems effecting
the funds will be free of operational difficulties. Accordingly, we are
developing a contingency plan that should minimize any adverse consequences to
our or our critical vendors' respective business processes in the event of a
temporary disruption.
Our website, which has been under construction for some time longer than we
anticipated, should be available in the latter part of June. Please visit us at
www.tweedy.com. In closing, let us say there has been no diminution in our
efforts on our common behalf. We are here, we are working and we hope it pays
off.
Sincerely,
TWEEDY, BROWNE COMPANY LLC
Christopher H. Browne
William H. Browne
John D. Spears
Thomas H. Shrager
Robert Q. Wyckoff, Jr.
Managing Directors
18
<PAGE>
Footnotes to Table on page 2
(1) MSCI EAFE US $ is an unmanaged capitalization-weighted index of companies
representing the stock markets of Europe, Australasia and the Far East. MSCI
EAFE Hedged consists of the results of the MSCI EAFE Index hedged 100% back
into U.S. dollars and accounts for interest rate differentials in forward
currency exchange rates. Results for both indexes are inclusive of dividends
and net of foreign withholding taxes.
(2) Morningstar World Stock Funds Average consists of the average returns of all
mutual funds in the Morningstar Universe that invest throughout the world
while maintaining a percentage of assets (normally 25% - 50%) in the U.S.
(3) Morningstar Foreign Stock Funds Average consists of the average returns of
all mutual funds in the Morningstar Universe that invest primarily in equity
securities of issuers located outside the U.S.
(4) S&P 500 is an unmanaged capitalization-weighted 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.
(5) S&P Mid-Cap 400 is an unmanaged capitalization-weighted index, which assumes
reinvestment of dividends and is generally considered representative of the
mid-range sector of the U.S. stock market.
(6) Russell 2000 is an unmanaged capitalization-weighted index, which assumes
reinvestment of dividends for most periods, that is comprised of the
smallest 2000 companies in the Russell 3000 Index and is generally
considered representative of U.S. small capitalization stocks.
(7) Morningstar Mid-Cap Value Funds Average consists of the average returns of
all mutual funds in the Morningstar Universe classified as value funds with
median market capitalizations greater than or equal to $1 billion but less
than or equal to $5 billion.
(8) Morningstar Domestic Stock Funds Average consists of the average returns of
all domestic equity mutual funds in the Morningstar Universe.
(9) Inception dates for the Global Value Fund and the American Value Fund were
June 15, 1993 and December 8, 1993, respectively. Index information is
available at month end only; therefore the closest month end to inception
date of the Funds, May 31, 1993 and November 30, 1993, respectively, were
used except for the Morningstar Domestic Stock Funds Average where the
closest date with data available was December 31, 1993.
19
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio Highlights
March 31, 1999
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) and
Morningstar World Stock Funds ("MWSF") Average
6/15/93 through 3/31/99
[graph here??]
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.
MWSF Average consists of the average returns of all mutual funds in the
Morningstar Universe that invest throughout the world while maintaining a
percentage of assets (normally 25% - 50%) in the U.S.
Index and Average information is available at month end only; therefore, the
closest month end to inception date of the Fund, May 31, 1993, has been used.
AVERAGE ANNUAL TOTAL RETURN* AGGREGATE TOTAL RETURN*
______________________________ _____________________________________
Year Inception
Without Ended (6/15/93)-
The Fund Actual Waivers** 3/31/99 3/31/99
_________ ______ _________ _______ _______
Inception (6/15/93)
through 3/31/99 15.91% 15.88% The Fund 33.08% 135.14%
Year Ended 3/31/99 3.03% 3.03% MSCI EAFE in
(U.S. Dollar) 6.06% 66.64%
MSCI EAFE (Hedged) 4.79% 93.65%
MWSF 0.15% 97.37%
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.
20
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Perspective On Assessing Investment Results
March 31, 1999
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 indexes, including 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 Standard & Poor's 500 Stock Index (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
21
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Perspective On Assessing Investment Results
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."
22
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-95.5%
Australia-0.0%++
96,353 Carillon Development Ltd................... $ 106,012
-----------
Belgium-0.1%
2,726 Spadel SA.................................. 3,217,898
3,252 Uco Textiles SA............................ 344,703
-----------
3,562,601
-----------
Canada-1.0%
72,400 Canadian Western Bank...................... 971,249
260,700 Melcor Developments Ltd.................... 2,979,182
1,391,000 National Bank of Canada, Toronto........... 20,319,013
258,600 Shirmax Fashions Ltd.+..................... 509,662
785,883 Westfield Minerals Ltd.+................... 728,875
-----------
25,507,981
-----------
Denmark-0.3%
11,390 Nordvestbank............................... 1,043,374
114,800 Unidanmark A/S, Series A................... 7,845,407
-----------
8,888,781
-----------
Finland-2.5%
568,027 Huhtamaki Group, Class I................... 20,253,865
6,200 Huhtamaki Group, Class K................... 221,070
1,036,900 Kesko Oyj.................................. 15,405,101
257,555 Kone Corporation, Class B.................. 27,550,543
-----------
63,430,579
-----------
France-2.7%
28,459 Bongrain SA................................ 10,682,538
5,229 Christian Dior SA.......................... 671,778
128,228 Compagnie Financiere de Paribas............ 14,326,114
35,044 Compagnie Fives-Lille...................... 2,480,161
57,700 Compagnie Lebon SA......................... 2,581,078
188,692 Dollfus-Mieg & Cie SA+..................... 1,235,524
35,155 Financiere Marc de Lacharriere SA.......... 3,608,575
57,292 Fonciere, Financiere et de Participation... 3,305,676
5,229 LVMH Moet Hennessey........................ 1,296,661
21,145 Mecelec SA................................. 240,581
36,372 NSC Groupe................................. 3,085,047
18,699 Precia+.................................... 168,706
69,000 PSA Peugeot Citroen........................ 9,930,664
994,617 Rhodia SA+................................. 14,938,110
9,340 Signaux Girod.............................. 200,828
-----------
68,752,041
-----------
Germany-1.1%
61,660 Kaufring AG................................ 1,998,710
61,140 Lindner Holding............................ 1,109,838
332,075 Moebel Walther AG.......................... 5,740,915
37,085 Sinn Leffers AG............................ 5,609,851
15,018 Springer (Axel) Verlag AG, Class A......... 14,441,992
-----------
28,901,306
-----------
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS
Hong Kong-3.8%
15,811,309 Asean Resources Holdings Ltd.+............. $ 1,203,777
26,823,000 CDL Hotels International Ltd............... 8,307,013
1,236,000 Dickson Concepts International Ltd.+....... 1,004,813
1,674,000 Fountain Set Holdings...................... 226,815
1,004,000 Grand Hotel Holdings Ltd................... 129,557
4,602,000 Harbour Ring International Holdings........ 172,214
5,404,000 Jardine International Motor Holdings Ltd... 2,074,573
13,622,500 Jardine Strategic Holdings Ltd............. 23,022,025
38,873,000 South China Morning Post (Holdings) Ltd.... 21,569,637
24,204,500 Swire Pacific Ltd., Class B................ 16,553,823
9,034,500 Wing Hang Bank Ltd......................... 24,015,833
-----------
98,280,080
-----------
Ireland-1.5%
2,733,087 Crean (James) PLC.......................... 3,248,412
7,252,955 Independent Newspapers PLC................. 32,914,649
1,105,000 Unidare PLC................................ 2,984,883
-----------
39,147,944
-----------
Italy-3.0%
741,850 Banco di Sardegna Risp..................... 13,105,658
472,500 Bassetti SPA............................... 2,859,004
1,530,230 Burgo (Cartiere) SPA....................... 10,747,193
323,000 Cementerie di Barletta..................... 1,165,666
1,156,450 Cristalleria Artistica..................... 3,548,707
276,925 IMI SPA.................................... 4,503,225
469,862 Industrie Zignago.......................... 4,721,481
1,150,500 Maffei SPA................................. 1,529,033
237,000 Marangoni SPA.............................. 806,648
1,782,500 Mondadori (Arnoldo) Editore SPA............ 26,674,992
8,072,735 Montefibre SPA............................. 4,753,814
493,000 Vincenzo Zucchi SPA........................ 3,648,904
-----------
78,064,325
-----------
Japan-19.2%
220,000 Agro-Kanesho Company Ltd................... 1,672,085
634,000 Aichi Electric Company Ltd................. 1,017,270
582,480 Aiful Corporation.......................... 39,696,099
477,000 Amatsuji Steel Ball Manufacturing Company.. 4,028,206
323,000 Belluna Company Ltd........................ 4,337,035
47,000 CCI Corporation............................ 301,651
101,000 Charle Company............................. 938,226
555,500 Chiyoda Company............................ 4,597,305
774,040 Chofu Seisakusho Company................... 9,857,301
206,200 Cosel Company Ltd.......................... 2,298,560
270,000 Credia Company Ltd......................... 4,742,642
349,000 Daido Metal Company........................ 1,022,700
1,356,000 Danto Corporation.......................... 6,469,957
526,000 Denkyosha.................................. 2,332,053
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS
Japan-(Continued)
189,000 Denyo Company Ltd......................................$ 1,236,963
1,765,000 Dowa Fire & Marine Insurance Company................... 6,036,609
127,100 Fidelity Japan OTC & Regional Market Fund Ltd.+........ 1,060,014
650,000 Fidelity Japanese Values Trust+........................ 512,747
1,095,000 Fuji Coca-Cola Bottling Company........................ 13,685,766
618,000 Fuji Photo Film Ltd.................................... 23,380,822
1,664,000 Fujisawa Pharmaceutical Company........................ 26,207,491
2,208,000 Fujitec Company Ltd.................................... 17,937,727
624,000 Fukuda Denshi.......................................... 10,117,637
544,000 Gakken Company Ltd.+................................... 643,162
2,431,000 Hitachi Koki Company Ltd............................... 7,164,793
585,000 Hitachi Medical Corporation............................ 6,575,476
48,000 Idec Izumi Corporation................................. 241,591
126,000 Inaba Denkisangyo Company Ltd.......................... 1,298,146
39,900 Kahma Company Ltd...................................... 240,583
1,418,000 Kansai Paint Company Ltd............................... 3,760,098
185,000 Kansui Kosiado Company Ltd............................. 1,204,535
150,000 Kato Sangyo Company Ltd................................ 899,379
318,000 Katsuragawa Electric Company........................... 1,799,265
193,000 Kawagishi Bridge Works................................. 503,626
3,000 Kinki Coca-Cola Bottling Company....................... 40,713
155,100 Kita Kyushu Coca-Cola Bottling......................... 6,562,099
1,591,000 Koito Manufacturing.................................... 7,604,662
312,000 Kokura Enterprise Company.............................. 1,659,925
180,000 Koyosha Inc............................................ 585,230
764,000 Mandom Corporation..................................... 8,903,602
111,000 Matsumoto Yushi-Seiyaku Company........................ 2,230,967
1,941,000 Matsushita Electric Industrial Company................. 37,864,375
371,000 Meito Sangyo Company................................... 3,571,676
278,000 Mitsubishi Pencil Company Ltd.......................... 1,922,746
495,000 Morito................................................. 2,215,513
385,000 Nankai Plywood Company Ltd............................. 1,648,398
342,000 Nippon Broadcasting System Inc......................... 13,891,990
1,155,000 Nippon Cable System.................................... 8,924,756
1,060,000 Nippon Konpo Unyu Soko................................. 7,474,560
90,000 Nissei Plastic Industrial Company Ltd.................. 554,068
242,500 Nissin Company Ltd..................................... 7,126,631
409,000 Nittetsu Mining........................................ 1,122,535
551,000 Nitto FC Company....................................... 1,907,782
342,000 Oak.................................................... 456,327
319,600 Osaka Steel Company Ltd................................ 1,171,358
287,103 Prospect Japan Fund Ltd................................ 1,955,171
867,000 Riken Vitamin.......................................... 9,152,134
16,000 Rock Paint............................................. 92,555
452,000 Sangetsu Company Ltd................................... 7,252,460
232,000 Sanko Sangyo Company................................... 1,763,290
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ -----------
COMMON STOCKS
Japan-(Continued)
32,000 Sanyo Coca-Cola Bottling Company Ltd...........$ 702,614
689,960 Sanyo Shinpan Finance Company Ltd.............. 29,366,199
213,000 Sasakura Engineering Company Ltd............... 717,705
173,000 Shaddy Company Ltd............................. 1,709,327
760,600 Shikoku Coca-Cola Bottling..................... 11,561,711
455,000 Shingakukai.................................... 1,387,113
461,800 Shinki Company Ltd............................. 7,760,689
3,431,000 Shionogi & Company Ltd......................... 30,133,345
452,000 SK Kaken Company Ltd........................... 6,756,239
712,000 Sonton Food Industry........................... 6,493,772
405,000 Sotoh Company Ltd.............................. 2,052,105
252,200 Sysmex Corporation............................. 3,918,828
337,000 Tachi-S........................................ 1,565,258
183,000 Taisei Fire & Marine Insurance Company......... 384,808
8,100 Takano Company Ltd............................. 62,931
263,200 Takefuji Corporation........................... 20,226,492
377,000 Takigami Steel Construction Company Ltd........ 974,218
261,000 Teikoku Hormone Manufacturing Company.......... 2,160,030
269,000 TENMA Corporation.............................. 3,589,241
59,000 Tomita Electric Company Ltd.................... 201,790
387,000 Torii Company Ltd.............................. 1,209,222
997,000 Torishima Pump Manufacturing................... 3,898,248
145,000 Toso Company Ltd............................... 428,577
524,000 Toyo Technical Company Ltd..................... 3,097,581
890,500 Tsubaki Nakashima Company Ltd.................. 5,978,529
232,100 Tsuchiya Home Company.......................... 931,026
793,000 U-Shin......................................... 2,517,992
356,000 Zojirushi...................................... 2,284,846
-----------
497,543,479
------------
Malaysia-0.2%
610,000 Sapura Telecommunications Berhad............... 117,956
5,928,000 Star Publications (Malaysia)................... 5,567,735
1,833,000 Tractor Malaysia Holdings Berhad............... 438,840
-----------
6,124,531
-----------
Mexico-0.0%++
43,000 Grupo Continental SA........................... 121,999
-----------
Netherlands-6.3%
815,100 Akzo NV Ord.................................... 30,208,558
132,815 Arnhemsche Maatschaappij....................... 1,478,119
7,250 Crown Van Gelder Gemeenschappelijk Bezit NV.... 113,588
747,858 European Vinyls Corporation International NV... 5,414,008
873,324 Holdingmaatschappij de Telegraaf NV............ 22,033,692
1,053,614 Koninklijke Bols Wessanen NV................... 14,230,381
42,425 Koninklijke Grolsch NV......................... 960,353
69,637 Koninklijke Pakhoed NV+........................ 1,689,201
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS
Netherlands-(Continued)
386,002 Twentsche Kabel Holding....................... $ 11,678,110
828,400 Unilever NV CVA............................... 57,598,825
1,139,976 Wegener Arcade NV............................. 17,306,013
------------
162,710,848
------------
New Zealand-1.9%
17,078,509 Air New Zealand Ltd........................... 29,686,933
5,742,400 Carter Holt Harvey Ltd........................ 5,405,527
3,388,000 Independent Newspaper Ltd..................... 14,134,161
164,600 Radio Pacific Ltd............................. 466,592
------------
49,693,213
------------
Norway-0.6%
1,269,100 Schibsted ASA................................. 15,118,115
------------
Singapore-6.6%
6,334,500 Cycle & Carriage Ltd.......................... 26,783,580
8,271,000 Fraser & Neave Ltd............................ 29,462,294
9,801,000 Overseas Union Bank Ltd....................... 34,628,497
3,509,000 Robinson and Company Ord...................... 9,349,204
4,033,800 Singapore Press Holdings Ltd.*................ 44,625,346
767,000 Times Publishing Ltd.......................... 1,155,054
3,765,000 United Overseas Bank Ltd...................... 23,551,694
------------
169,555,669
------------
South Africa-0.6%
3,906,770 Sappi Ltd..................................... 16,548,334
------------
Spain-0.3%
31,598 Indo Internacional SA......................... 1,529,546
80,898 Prim SA....................................... 869,733
376,152 Unipapel SA................................... 4,877,189
------------
7,276,468
------------
Sweden-5.2%
149,885 BRIO AB, Class B+............................. 894,237
204,000 Lundbergforetagen AB, Class B................. 2,670,157
2,049,100 Pharmacia & Upjohn Inc., Depository Shares.... 128,988,762
138,400 VLT AB, Class B............................... 1,238,573
------------
133,791,729
------------
Switzerland-12.4%
33 Bank of International Settlements America..... 185,939
35,528 Banque Cantonale Vaudoise..................... 10,460,020
4,283 Bobst SA, Bearer.............................. 5,072,927
250 Bobst SA, Registered.......................... 150,592
300 Bucher Holding AG, Bearer..................... 247,716
44,480 Compagnie Financiere Richemont AG............. 74,058,071
3,765 Daetwyler Holding AG, Bearer.................. 6,396,041
85,175 Edipresse SA, Bearer.......................... 19,600,338
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS
Switzerland-(Continued)
15,460 Forbo Holding AG.................................... $ 6,435,127
2,200 Golay Buchel Holding SA, Bearer..................... 1,459,222
10,780 Helvetia Patria Holding, Registered................. 8,397,821
29,327 Loeb Holding AG..................................... 5,756,230
57,089 Nestle SA, Registered............................... 103,900,048
6,698 Novartis AG, Bearer................................. 10,925,333
10,329 Novartis AG, Registered............................. 16,785,062
50,900 Safra Republic Holdings SA.......................... 2,144,518
45,175 SAirGroup, Registered............................... 9,738,232
9,811 Sarna Kunsstoff Holding AG, Registered.............. 12,417,306
21,161 SIG Schweizerishe................................... 12,173,841
384 Societe Europeenne de Communication SA, Class A, ADR+ 4,728
3,451 Societe Europeenne de Communication SA, Class B, ADR+ 43,568
3,355 Vetropack Holding AG, Bearer........................ 408,731
19,135 Zehnder Holding, Bearer............................. 8,029,577
9,854 Zschokke Holding AG, Registered+.................... 2,274,257
6,950 ZZ Holding AG....................................... 5,056,684
--------------
322,121,929
--------------
Thailand-0.0%++
132,300 S & J Enterprises Public Company Ltd................ 81,025
--------------
United Kingdom-13.1%
1,866,739 Alumasc Group PLC................................... 2,756,817
5,787,000 Arjo Wiggins Appleton PLC........................... 12,982,896
2,147,400 Bernard Matthews PLC................................ 4,471,013
455,000 British Mohair Holdings PLC......................... 598,511
7,412,341 British Steel Ord................................... 15,283,387
4,069,445 BTR PLC............................................. 17,947,281
458,000 Burtonwood Brewery PLC.............................. 1,142,082
11,431,603 Caradon PLC......................................... 25,185,066
3,979,658 Carclo Engineering Group PLC........................ 7,482,987
1,470,000 Courtaulds Textiles PLC............................. 3,641,908
181,905 Diageo PLC.......................................... 2,043,418
7,369,666 Dowding & Mills PLC................................. 5,352,586
1,408,668 Dyson (J&J) PLC, Class A, Non-voting................ 1,762,031
4,544,753 Elementis PLC....................................... 6,821,762
173,269 Ellis & Everard PLC................................. 514,567
1,933,000 European Motor Holdings PLC......................... 2,027,909
803,000 Folkes Group PLC.................................... 693,382
427,800 Glaxo Wellcome PLC, Units, Sponsored ADR............ 28,635,863
3,079,000 Glynwed International PLC........................... 9,591,142
1,098,479 Hardys & Hansons PLC................................ 4,441,225
976,239 HSBC Holdings....................................... 31,087,554
101,733 HSBC Holdings PLC................................... 3,280,656
515,000 Intercare Group PLC................................. 610,939
350,000 Johnston Group PLC.................................. 1,821,802
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS
United Kingdom-(Continued)
4,545,154 McAlpine (Alfred) PLC................... $ 12,470,987
6,900,000 Mirror Group PLC........................ 23,498,214
1,777,545 Molins PLC.............................. 3,944,814
3,027,120 Nycomed Amersham PLC.................... 26,383,154
584,000 Partridge Fine Art Ord.................. 692,793
19,107,025 Pilkington PLC.......................... 25,441,946
1,947,500 Regal Hotel Group PLC................... 895,830
4,562,511 Rexam PLC............................... 15,132,792
3,493,490 Sherwood Group PLC...................... 1,409,623
277,100 SmithKline Beecham PLC, Units, ADR...... 19,812,650
779,500 Swan Hill Group PLC..................... 754,867
153,509 Thistle Hotels PLC...................... 415,004
3,001,672 Time Products PLC....................... 4,190,662
1,200,000 Union PLC............................... 406,728
1,537,500 Wolverhampton & Dudley Breweries PLC.... 12,134,651
37,500 Young & Company's Brewery PLC, Class A.. 459,990
--------------
338,221,489
--------------
United States-13.1%
221,000 American Express Company................ 25,967,500
75,700 American National Insurance Company..... 5,048,245
333,097 Bank One Corporation.................... 18,341,154
514,800 Chase Manhattan Corporation............. 41,859,675
81,500 Coca-Cola Bottling Company.............. 4,513,063
348,300 Comerica, Inc........................... 21,746,981
230,400 Federal Home Loan Mortgage Corporation.. 13,161,600
70,000 GATX Corporation........................ 2,305,625
200,000 Harland (John H.) Company............... 2,587,500
197,100 Household International Inc............. 8,992,688
454,000 MBIA Inc................................ 26,332,000
73,125 Mercantile Bancorp Inc.................. 3,473,438
79,700 NAC Re Corporation...................... 4,278,894
2,679,334 Panamerican Beverages Inc., Class A..... 47,055,803
319,600 Philip Morris Companies Inc............. 11,245,925
460,000 PNC Bank Corporation.................... 25,558,750
596,000 Popular Inc............................. 18,420,125
118,400 Standard Motor Products Inc............. 2,449,400
74,100 Syms Corporation+....................... 551,119
294,600 Transatlantic Holdings Inc.............. 22,095,000
20,000 Tremont Corporation..................... 352,500
551,000 UST Inc................................. 14,394,875
525,000 Wells Fargo & Company................... 18,407,813
--------------
339,139,673
--------------
TOTAL COMMON STOCKS
(Cost $2,058,323,719)................... 2,472,690,151
--------------
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
<TABLE>
<CAPTION>
Market
Value
Shares (Note 1)
------ PREFERRED STOCKS-0.8% --------
<S> <C> <C>
23,044 KSB AG...................................................$ 2,987,887
136,187 Moebel Walther AG........................................ 2,339,687
160,556 Villeroy & Boch AG....................................... 15,786,757
-----------
TOTAL PREFERRED STOCKS
(Cost $26,907,456)....................................... 21,114,331
----------
Face
Value
-----
CONVERTIBLE CORPORATE BOND-0.0%++
(Cost $104,039)
JPY 9,000,000 Shikoku Coca-Cola Bottling, 2.400% due 3/29/02........... 103,365
----------
COMMERCIAL PAPER-1.6%
(Cost $40,000,000)
$ 40,000,000 General Electric Capital Corporation, 5.060% due 4/1/99.. 40,000,000
----------
U.S. TREASURY BILLS-0.5%
3,000,000 5.330%** due 7/22/99..................................... 2,959,110
10,000,000 4.501%** due 1/6/00...................................... 9,656,200
----------
TOTAL U.S. TREASURY BILLS
(Cost $12,618,764)....................................... 12,615,310
----------
REPURCHASE AGREEMENT-1.8%
(Cost $47,659,000)
47,659,000 Agreement with UBS Securities Inc., 4.880% dated 3/31/99, to
be repurchased at $47,665,460 on 4/1/99, collateralized by
$36,933,000 U.S. Treasury Notes, 11.750% due 2/15/10
(market value $48,347,605)............................... 47,659,000
----------
TOTAL INVESTMENTS (Cost $2,185,612,978*)................ 100.2% 2,594,182,157
OTHER ASSETS AND LIABILITIES (Net)...................... (0.2) (4,608,186)
----- --------------
NET ASSETS.............................................. 100.0% $2,589,573,971
===== ==============
- ----------------
* Aggregate cost for Federal tax purposes was $2,215,192,866.
** Rate represents annualized yield at date of purchase (unaudited).
+ Non-income producing security.
++ Amount represents less than 0.1% of net assets.
Abbreviations:
ADR American Depository Receipt
JPY Japanese Yen
Ord Ordinary Share
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
30
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Portfolio of Investments
March 31, 1999
Percentage of Market Value
Sector Diversification Net Assets (Note 1)
- ---------------------- ------------- ------------
COMMON STOCKS:
Food and Beverages..................... 12.5% $ 324,605,165
Banking................................ 12.1 313,026,481
Pharmaceuticals........................ 11.2 290,031,690
Printing and Publishing................ 10.3 266,505,575
Financial Services..................... 8.3 214,308,368
Manufacturing.......................... 3.9 101,653,882
Tobacco................................ 3.4 88,452,946
Machinery.............................. 3.0 77,237,753
Chemicals.............................. 3.0 76,907,093
Consumer Non-Durables.................. 2.6 66,502,427
Retail................................. 2.5 64,878,388
Consumer Durables...................... 2.4 63,167,943
Autos.................................. 2.4 61,662,453
Holdings............................... 2.0 52,424,851
Forest Products........................ 2.0 50,674,728
Engineering and Construction........... 1.8 46,924,113
Transportation......................... 1.8 46,899,725
Insurance.............................. 1.6 41,962,482
Building Materials..................... 1.5 39,665,285
Glass Products......................... 1.1 29,399,384
Mining and Metal Fabrication........... 0.9 22,184,606
Electronics............................ 0.9 21,823,636
Construction Materials................. 0.7 18,852,433
Wholesale.............................. 0.7 17,700,015
Textiles............................... 0.6 16,526,759
Radio.................................. 0.6 14,358,582
Leisure................................ 0.4 10,813,856
Health Care............................ 0.3 8,105,022
Real Estate............................ 0.3 6,342,721
Medical Research and Supplies.......... 0.2 5,399,500
Other.................................. 0.5 13,692,289
----- --------------
Total Common Stocks.................... 95.5 2,472,690,151
Preferred Stocks....................... 0.8 21,114,331
Convertible Corporate Bond............. 0.0++ 103,365
Commercial Paper....................... 1.6 40,000,000
U.S. Treasury Bills.................... 0.5 12,615,310
Repurchase Agreement................... 1.8 47,659,000
Other Assets and Liabilities (Net)..... (0.2) (4,608,186)
----- --------------
Net Assets.............................100.0% $2,589,573,971
===== ==============
- ---------------
++ Amount represents less than 0.1% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Schedule of Forward Exchange Contracts
March 31, 1999
Contract Market
Value Value
Contracts Date (Note 1)
--------- -------- --------
FORWARD EXCHANGE CONTRACTS TO BUY
2,574,000 Canadian Dollar................... 5/6/99 $ 1,705,395
956,410 Canadian Dollar................... 7/23/99 633,923
12,300,000 Danish Krona...................... 7/2/99 1,796,293
5,069,250 Danish Krona...................... 7/23/99 741,121
4,782,375 European Economic Union Euro...... 4/6/99 5,168,619
20,526,608 European Economic Union Euro...... 4/12/99 22,192,531
2,039,920 European Economic Union Euro...... 5/6/99 2,208,657
18,790,845 European Economic Union Euro...... 6/8/99 20,383,730
89,724 Great Britain Pound Sterling...... 4/9/99 144,803
23,991,000 Hong Kong Dollar.................. 4/12/99 3,095,064
19,833,750 Hong Kong Dollar.................. 4/23/99 2,558,059
53,127,650 Hong Kong Dollar.................. 5/6/99 6,850,078
38,947,625 Hong Kong Dollar.................. 6/1/99 5,018,886
3,354,454 New Zealand Dollar................ 5/6/99 1,794,904
15,500,000 Norwegian Krone................... 8/27/99 1,997,582
22,700,000 South African Rand................ 6/8/99 3,618,687
12,864,000 Singapore Dollar.................. 5/6/99 7,473,504
10,378,800 Singapore Dollar.................. 5/25/99 6,039,329
22,454,900 Singapore Dollar.................. 6/8/99 13,081,660
1,262,800 Singapore Dollar.................. 6/17/99 736,231
2,620,200 Singapore Dollar.................. 7/2/99 1,529,495
13,987,800 Swiss Franc....................... 4/12/99 9,477,825
32,754,990 Swiss Franc....................... 5/17/99 22,278,850
15,577,650 Swiss Franc....................... 6/8/99 10,620,039
38,899,350 Swiss Franc....................... 7/23/99 26,646,638
--------------
TOTAL FORWARD EXCHANGE CONTRACTS TO BUY
(Contract Amount $187,770,563).................. $ 177,791,903
==============
FORWARD EXCHANGE CONTRACTS TO SELL
153,971 Australian Dollar.................12/23/99 $ (97,827)
2,574,000 Canadian Dollar................... 5/6/99 (1,705,395)
15,104,775 Canadian Dollar................... 5/17/99 (10,008,066)
7,920,550 Canadian Dollar................... 6/1/99 (5,248,290)
1,754,400 Canadian Dollar................... 7/2/99 (1,162,655)
956,410 Canadian Dollar................... 7/23/99 (633,923)
8,267,860 Canadian Dollar...................12/23/99 (5,488,130)
2,250,750 Canadian Dollar................... 3/27/00 (1,495,595)
4,517,400 Canadian Dollar................... 3/29/00 (3,001,816)
67,890,000 Danish Krona...................... 7/2/99 (9,914,664)
5,069,250 Danish Krona...................... 7/23/99 (741,121)
9,366,000 Danish Krona......................12/23/99 (1,381,003)
9,496 European Economic Union Euro...... 4/1/99 (10,261)
55,781 European Economic Union Euro...... 4/8/99 (60,293)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
32
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Schedule of Forward Exchange Contracts
March 31, 1999
Contract Market
Value Value
Contracts Date (Note 1)
--------- -------- --------
FORWARD EXCHANGE CONTRACTS TO SELL
22,687 European Economic Union Euro.... 4/9/99 $ (24,523)
24,672,350 European Economic Union Euro.... 4/12/99 (26,674,738)
10,044,334 European Economic Union Euro.... 4/23/99 (10,866,801)
10,250,555 European Economic Union Euro.... 5/6/99 (11,098,459)
19,205,407 European Economic Union Euro.... 5/17/99 (20,807,169)
5,360,415 European Economic Union Euro.... 5/25/99 (5,810,148)
18,377,028 European Economic Union Euro.... 6/1/99 (19,926,838)
20,133,741 European Economic Union Euro.... 6/8/99 (21,840,463)
22,158,655 European Economic Union Euro.... 6/17/99 (24,049,424)
11,490,619 European Economic Union Euro.... 7/2/99 (12,482,007)
15,806,432 European Economic Union Euro.... 7/15/99 (17,184,108)
8,271,479 European Economic Union Euro.... 8/2/99 (9,002,507)
1,700,382 European Economic Union Euro.... 8/13/99 (1,851,929)
6,861,561 European Economic Union Euro.... 8/27/99 (7,479,608)
14,005,616 European Economic Union Euro....10/27/99 (15,327,457)
23,462,883 European Economic Union Euro.... 11/5/99 (25,692,808)
10,029,764 European Economic Union Euro....11/12/99 (10,988,156)
4,003,750 European Economic Union Euro....11/15/99 (4,387,210)
17,009,988 European Economic Union Euro....11/22/99 (18,647,872)
17,767,622 European Economic Union Euro....12/10/99 (19,501,955)
19,649,003 European Economic Union Euro....12/23/99 (21,585,749)
8,868,601 European Economic Union Euro....12/31/99 (9,747,967)
2,531,815 European Economic Union Euro.... 1/4/00 (2,783,601)
9,630,684 European Economic Union Euro.... 1/18/00 (10,598,350)
21,620,687 European Economic Union Euro.... 2/11/00 (23,831,200)
39,268,184 European Economic Union Euro.... 2/25/00 (43,323,379)
19,715,028 European Economic Union Euro.... 3/27/00 (21,795,903)
16,197,246 European Economic Union Euro.... 3/29/00 (17,909,222)
910,747 Great Britain Pound Sterling.... 5/6/99 (1,469,458)
8,098,679 Great Britain Pound Sterling.... 5/25/99 (13,065,911)
13,083,297 Great Britain Pound Sterling.... 6/8/99 (21,106,571)
11,990,408 Great Britain Pound Sterling.... 7/2/99 (19,341,799)
24,843,949 Great Britain Pound Sterling.... 7/23/99 (40,075,910)
9,319,664 Great Britain Pound Sterling.... 8/27/99 (15,033,592)
17,925,430 Great Britain Pound Sterling....10/20/99 (28,923,471)
4,866,180 Great Britain Pound Sterling.....11/5/99 (7,853,287)
4,276,637 Great Britain Pound Sterling....11/15/99 (6,902,672)
3,644,094 Great Britain Pound Sterling....11/22/99 (5,882,209)
5,442,671 Great Britain Pound Sterling....12/31/99 (8,789,494)
19,680,197 Great Britain Pound Sterling.... 2/11/00 (31,797,833)
12,503,126 Great Britain Pound Sterling.... 2/25/00 (20,204,995)
12,309,965 Great Britain Pound Sterling.... 3/13/00 (19,896,856)
12,174,337 Great Britain Pound Sterling.... 3/27/00 (19,680,905)
14,729,348 Great Britain Pound Sterling.... 3/29/00 (23,811,878)
23,991,000 Hong Kong Dollar................ 4/12/99 (3,095,064)
19,833,750 Hong Kong Dollar................ 4/23/99 (2,558,059)
53,127,650 Hong Kong Dollar................ 5/6/99 (6,850,077)
77,895,250 Hong Kong Dollar................ 6/1/99 (10,037,772)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Schedule of Forward Exchange Contracts
March 31, 1999
Contract Market
Value Value
Contracts Date (Note 1)
--------- ---- --------
FORWARD EXCHANGE CONTRACTS TO SELL
30,765,500 Hong Kong Dollar.......... 7/2/99 $ (3,961,548)
32,712,400 Hong Kong Dollar.......... 7/23/99 (4,208,334)
93,345,500 Hong Kong Dollar.......... 8/2/99 (12,003,255)
35,110,757 Hong Kong Dollar.......... 9/14/99 (4,506,286)
158,880,000 Hong Kong Dollar..........10/20/99 (20,346,784)
56,100,100 Hong Kong Dollar.......... 11/5/99 (7,176,314)
127,448,000 Hong Kong Dollar..........11/12/99 (16,295,091)
55,548,500 Hong Kong Dollar.......... 1/18/00 (7,068,746)
31,663,200 Hong Kong Dollar.......... 3/6/00 (4,015,573)
94,668,000 Hong Kong Dollar.......... 3/27/00 (11,988,146)
3,972,040 Japanese Yen.............. 4/1/99 (33,543)
3,633,718 Japanese Yen.............. 4/2/99 (30,686)
45,628,893 Japanese Yen.............. 4/5/99 (385,514)
3,416,175,000 Japanese Yen.............. 4/12/99 (28,895,014)
3,714,900,000 Japanese Yen.............. 4/23/99 (31,476,551)
4,131,270,000 Japanese Yen.............. 5/6/99 (35,069,969)
3,815,400,000 Japanese Yen.............. 5/25/99 (32,466,625)
5,156,000,000 Japanese Yen.............. 6/1/99 (43,913,134)
2,475,605,000 Japanese Yen.............. 6/8/99 (21,103,136)
379,288,000 Japanese Yen.............. 7/2/99 (3,243,157)
4,761,792,500 Japanese Yen.............. 7/15/99 (40,790,653)
2,407,984,000 Japanese Yen.............. 8/2/99 (20,679,363)
2,302,420,000 Japanese Yen.............. 8/13/99 (19,803,179)
2,235,400,000 Japanese Yen..............11/12/99 (19,475,158)
466,720,000 Japanese Yen..............11/15/99 (4,067,878)
2,919,000,000 Japanese Yen..............12/10/99 (25,532,327)
559,500,000 Japanese Yen..............12/24/99 (4,903,646)
329,130,000 Japanese Yen.............. 1/4/00 (2,889,104)
544,050,000 Japanese Yen.............. 2/16/00 (4,804,735)
1,275,010,000 Japanese Yen.............. 2/25/00 (11,274,406)
7,505,550,000 Japanese Yen.............. 3/6/00 (66,461,833)
2,684,405,000 Japanese Yen.............. 3/13/00 (23,793,818)
2,810,250,000 Japanese Yen.............. 3/29/00 (24,965,714)
3,354,454 New Zealand Dollar........ 5/6/99 (1,794,903)
12,514,440 New Zealand Dollar........ 6/8/99 (6,698,677)
1,829,268 New Zealand Dollar........ 7/2/99 (979,417)
9,914,733 New Zealand Dollar........ 8/2/99 (5,309,959)
2,067,825 New Zealand Dollar........ 8/27/99 (1,107,696)
1,359,487 New Zealand Dollar........ 9/14/99 (728,370)
7,517,384 New Zealand Dollar........10/27/99 (4,029,066)
6,753,497 New Zealand Dollar........ 11/5/99 (3,619,926)
9,293,680 New Zealand Dollar........11/12/99 (4,981,779)
28,790,787 New Zealand Dollar........12/23/99 (15,438,376)
3,723,008 New Zealand Dollar........ 3/13/00 (1,997,749)
12,025,902 New Zealand Dollar........ 3/27/00 (6,454,592)
96,660,880 Norwegian Krone........... 8/27/99 (12,457,294)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
34
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Schedule of Forward Exchange Contracts
March 31, 1999
Contract Market
Value Value
Contracts Date (Note 1)
--------- -------- --------
FORWARD EXCHANGE CONTRACTS TO SELL
11,738,250 Norwegian Krone......12/23/99 $ (1,512,077)
26,956,300 Norwegian Krone...... 2/11/00 (3,472,408)
347,625 Singapore Dollar..... 4/5/99 (201,401)
219,154 Singapore Dollar..... 4/7/99 (126,993)
12,864,000 Singapore Dollar..... 5/6/99 (7,473,503)
10,378,800 Singapore Dollar..... 5/25/99 (6,039,329)
22,454,900 Singapore Dollar..... 6/8/99 (13,081,660)
1,262,800 Singapore Dollar..... 6/17/99 (736,231)
2,620,200 Singapore Dollar..... 7/2/99 (1,529,495)
56,464,000 Singapore Dollar..... 7/15/99 (32,992,019)
32,740,200 Singapore Dollar..... 8/2/99 (19,155,980)
48,300,000 Singapore Dollar.....10/20/99 (28,419,315)
12,796,000 Singapore Dollar..... 11/5/99 (7,536,604)
16,337,000 Singapore Dollar.....11/15/99 (9,628,206)
14,447,700 Singapore Dollar.....11/22/99 (8,518,475)
32,456,000 Singapore Dollar.....12/10/99 (19,157,834)
5,667,200 Singapore Dollar.....12/23/99 (3,347,898)
29,745,000 Singapore Dollar..... 1/18/00 (17,600,358)
33,900,000 Singapore Dollar..... 2/25/00 (20,106,375)
28,210,000 South African Rand... 6/8/99 (4,497,056)
35,490,000 South African Rand... 6/17/99 (5,644,608)
19,600,000 South African Rand... 8/2/99 (3,084,874)
5,865,840 South African Rand... 8/27/99 (918,193)
21,966,000 South African Rand...11/12/99 (3,383,966)
20,160,000 South African Rand... 3/29/00 (3,022,829)
31,834,000 Swedish Krona........ 4/12/99 (3,878,245)
78,088,000 Swedish Krona........ 4/23/99 (9,519,158)
22,860,000 Swedish Krona........ 5/25/99 (2,791,771)
34,749,450 Swedish Krona........ 6/1/99 (4,245,454)
26,928,000 Swedish Krona........ 6/17/99 (3,292,872)
23,613,000 Swedish Krona........ 7/2/99 (2,889,980)
37,240,450 Swedish Krona........ 7/23/99 (4,563,511)
41,257,000 Swedish Krona........ 8/27/99 (5,066,189)
84,808,900 Swedish Krona........11/12/99 (10,463,605)
24,066,900 Swedish Krona........11/22/99 (2,971,212)
11,893,050 Swedish Krona........12/23/99 (1,471,140)
38,448,500 Swedish Krona........ 1/18/00 (4,763,755)
32,340,000 Swedish Krona........ 3/29/00 (4,024,762)
154,507 Swiss Franc.......... 4/6/99 (104,620)
13,987,800 Swiss Franc.......... 4/12/99 (9,477,825)
1,454,300 Swiss Franc.......... 4/23/99 (986,616)
32,754,990 Swiss Franc.......... 5/17/99 (22,278,850)
31,281,800 Swiss Franc.......... 6/1/99 (21,310,575)
15,577,650 Swiss Franc.......... 6/8/99 (10,620,039)
5,892,000 Swiss Franc.......... 7/2/99 (4,027,053)
38,899,350 Swiss Franc.......... 7/23/99 (26,646,638)
64,250,000 Swiss Franc..........10/27/99 (44,464,362)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
35
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Schedule of Forward Exchange Contracts
March 31, 1999
Contract Market
Value Value
Contracts Date (Note 1)
--------- -------- --------
FORWARD EXCHANGE CONTRACTS TO SELL
22,207,100 Swiss Franc......... 11/5/99 $ (15,383,177)
19,731,000 Swiss Franc.........11/12/99 (13,678,107)
18,706,800 Swiss Franc.........12/10/99 (13,006,633)
18,785,200 Swiss Franc.........12/31/99 (13,090,163)
10,496,000 Swiss Franc......... 1/18/00 (7,327,866)
18,305,300 Swiss Franc......... 3/6/00 (12,844,625)
18,292,300 Swiss Franc......... 3/13/00 (12,844,923)
42,141,000 Swiss Franc......... 3/27/00 (29,634,744)
35,362,500 Swiss Franc......... 3/29/00 (24,872,922)
----------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(Contract Amount $1,977,528,730)... $(1,969,502,506)
================
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Statement of Assets and Liabilities
March 31, 1999
ASSETS
Investments, at value (Cost $2,185,612,978) (Note 1)
See accompanying schedule..................... $2,594,182,157
Cash and foreign currency (Cost $3,336,516)..... 4,155,388
Dividends and interest receivable............... 8,984,646
Receivable for investment securities sold....... 4,762,849
Receivable for Fund shares sold................. 4,371,980
Prepaid expenses................................ 18,321
--------------
Total Assets........................... 2,616,475,341
--------------
LIABILITIES
Payable for Fund shares redeemed................ $14,247,746
Payable for investment securities purchased..... 8,148,969
Net unrealized depreciation of forward
exchange contracts (Note 1)................... 1,952,436
Investment advisory fee payable (Note 2)........ 1,786,317
Transfer agent fees payable (Note 2)............ 137,206
Custodian fees payable (Note 2)................. 96,500
Accrued expenses and other payables............. 532,196
-----------
Total Liabilities...................... 26,901,370
--------------
NET ASSETS........................................ $2,589,573,971
==============
NET ASSETS consist of
Undistributed net investment income............. $ 7,038,576
Accumulated net realized gain on securities,
forward exchange contracts
and foreign currencies........................ 111,916,063
Net unrealized appreciation of securities,
forward exchange contracts, foreign
currencies and net other assets............... 406,590,505
Par value....................................... 14,324
Paid-in capital in excess of par value.......... 2,064,014,503
--------------
Total Net Assets....................... $2,589,573,971
==============
NET ASSET VALUE, offering and redemption price per
share ($2,589,573,971 / 143,236,350 shares of common
stock outstanding).............................. $18.08
======
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Statement of Operations
For the Year Ended March 31, 1999
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $7,003,850).. $ 57,247,952
Interest (net of foreign withholding taxes of $176)......... 9,513,420
--------------
Total Investment Income............................ 66,761,372
--------------
EXPENSES
Investment advisory fee (Note 2)............... $31,308,970
Custodian fees (Note 2)........................ 1,237,622
Administration fee (Note 2).................... 1,042,815
Transfer agent fees (Note 2)................... 767,007
Legal and audit fees........................... 103,500
Directors' fees and expenses (Note 2).......... 49,783
Amortization of organization costs (Note 5).... 3,785
Other.......................................... 721,493
-----------
Total Expenses........................ 35,234,975
--------------
NET INVESTMENT INCOME............................ 31,526,397
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3):
Net realized gain on:
Securities................................................ 140,754,141
Forward exchange contracts................................ 52,729,457
Foreign currencies and net other assets................... 3,682,421
--------------
Net realized gain on investments during the year............ 197,166,019
--------------
Net change in unrealized appreciation (depreciation) of:
Securities................................................ (96,602,157)
Forward exchange contracts................................ (80,115,865)
Foreign currencies and net other assets................... 113,168
--------------
Net unrealized depreciation of investments during the year.. (176,604,854)
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............... 20,561,165
--------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................. $ 52,087,562
==============
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
Ended Ended
3/31/99 3/31/98
-------------- --------------
<S> <C> <C>
Net investment income............................................... $ 31,526,397 $ 19,920,077
Net realized gain on securities, forward exchange contracts
and currency transactions during the year......................... 197,166,019 182,967,157
Net unrealized appreciation (depreciation) of securities,
forward exchange contracts, foreign currencies and
net other assets during the year.................................. (176,604,854) 356,433,551
-------------- --------------
Net increase in net assets resulting from operations................ 52,087,562 559,320,785
Distributions:
Dividends to shareholders from net investment income.............. (51,902,775) (87,707,202)
Dividends in excess of net investment income...................... -- (8,964,368)
Distributions to shareholders from net realized gain on
investments..................................................... (135,825,791) (54,368,991)
Net increase in net assets from Fund share transactions (Note 4).... 197,274,233 678,450,026
-------------- --------------
Net increase in net assets.......................................... 61,633,229 1,086,730,250
NET ASSETS
Beginning of year................................................... 2,527,940,742 1,441,210,492
-------------- --------------
End of year (including undistributed net investment income
of $7,038,576 and $16,475,676, respectively)...................... $2,589,573,971 $2,527,940,742
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Financial Highlights
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
3/31/99 3/31/98 3/31/97 3/31/96(a) 3/31/95
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 18.98 $ 15.46 $ 14.28 $ 11.52 $ 12.26
---------- ---------- ---------- -------- --------
Income from investment operations:
Net investment income (b).................... 0.23 0.26 0.12 0.15 0.10
Net realized and unrealized gain
(loss) on investments...................... 0.24 4.62 2.18 2.81 (0.68)
---------- ---------- ---------- -------- --------
Total from investment operations.... 0.47 4.88 2.30 2.96 (0.58)
---------- ---------- ---------- -------- --------
Distributions:
Dividends from net investment income........ (0.38) (0.79) (0.19) -- --
Dividends in excess of net
investment income......................... -- (0.08) (0.36) -- --
Distributions from net realized gains....... (0.99) (0.49) (0.57) (0.05) (0.06)
Distributions in excess of net
realized gains.............................. -- -- -- (0.15) (0.10)
---------- ---------- ---------- -------- --------
Total distributions.................. (1.37) (1.36) (1.12) (0.20) (0.16)
---------- ---------- ---------- -------- --------
Net asset value, end of year.................. $ 18.08 $ 18.98 $ 15.46 $ 14.28 $ 11.52
========== ========== ========== ======== ========
Total return (c).............................. 3.03% 33.09% 16.66% 25.88% (4.74)%
========== ========== ========== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (in 000's)............ $2,589,574 $2,527,941 $1,441,210 $950,911 $655,035
Ratio of operating expenses to
average net assets (d)...................... 1.41% 1.42% 1.58% 1.60% 1.65%
Ratio of net investment income
to average net assets....................... 1.26% 1.05% 0.73% 1.15% 1.08%
Portfolio turnover rate....................... 23% 16% 20% 17% 16%
- ------------
</TABLE>
(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) Net investment income for a Fund share outstanding, before the waiver of
fees by the administrator for the years ended March 31, 1998 and 1997 were
$0.26 and $0.11, respectively.
(c) Total return represents aggregate total return for the periods indicated.
(d) Annualized expense ratio before the waiver of fees by the administrator for
the years ended March 31, 1998 and 1997 were 1.43% and 1.58%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
40
<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 and 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 I nvestment 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
41
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Notes to Financial Statements
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 see
ks to assert its rights. The Fund's Investment Adviser, acting under the
supervision of the Company's Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks.
Foreign Currency. The books and records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of the
period, and purchases and sales of investment securities, income and expenses
are translated on the respective dates of such transactions. Unrealized gains
and losses which result from changes in foreign currency exchange rates have
been included in the unrealized appreciation (depreciation) of currencies and
net other assets. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investments, securities transactions, foreign
currency transactions
42
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Notes to Financial Statements
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 exc hange 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.
43
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Notes to Financial Statements
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 Investment Adviser not to exceed 75% of the amount of the fee
then accrued on the books of the Fund and unpaid.
44
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Notes to Financial Statements
The current and retired general partners and their families, as well as
employees of Tweedy, Browne, the Investment Adviser to the Fund, have
approximately $40.7 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 Million 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%
---------------------------------------------------------------------------
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. From time to time, the
Administrator may voluntarily waive a portion of its fee otherwise payable to
it. For the year ended March 31, 1999, the Administrator did not waive any
administrative fees.
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.
45
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Notes to Financial Statements
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"). First Data Investor Services Group,
Inc. serves as the Fund's transfer agent. Tweedy, Browne also serves as the
distributor to the Fund and pays all distribution fees. No distribution fees are
paid by the Fund.
3. Securities Transactions
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, for the year ended March 31, 1999, aggregated
$818,186,260 and $545,726,790, respectively.
At March 31, 1999, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost, was
$590,050,617 and the aggregate gross unrealized depreciation for all securities,
in which there was an excess of tax cost over value, was $211,061,326.
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:
--------------------------------------------------------------
Year Ended 3/31/99 Year Ended 3/31/98
--------------------------------------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Sold 68,156,263 $ 1,217,805,048 58,530,975 $1,007,774,368
Reinvested 10,128,684 170,060,040 8,222,804 133,167,149
Redeemed (68,246,032) (1,190,590,855) (26,794,022) (462,491,491)
- -------------------------------------------------------------------------------
Net increase 10,038,915 $ 197,274,233 39,959,757 $ 678,450,026
- -------------------------------------------------------------------------------
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-
46
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Notes to Financial Statements
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. At March 31, 1999, all such costs
have been fully amortized.
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
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 and
the Tweedy, Browne American Value 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 one-third of its net assets; however, the
total credit available to the Fund and the Tweedy, Browne American Value Fund is
$50 million. Interest is payable at the bank's money market rate plus 0.75% on
an annualized basis. Under the Agreement, the Fund and the Tweedy, Browne
American Value Fund pay a facility fee equal to 0.10% annually of the unutilized
credit. The Agreement requires, among other provisions, the Fund to maintain a
47
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Notes to Financial Statements
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, 1999, the Fund did not borrow under
this Agreement.
48
<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 liablities,
including the portfolio of investments and the schedule of forward exchange
contracts, of Tweedy, Browne Global Value Fund (the "Fund") (a series of Tweedy,
Browne Fund Inc.) as of March 31, 1999, 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 five
years in the period then ended. 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, 1999 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 significant 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 the
Tweedy, Browne Global Value Fund, a series of Tweedy, Browne Fund Inc., at March
31, 1999, 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 five years in the period then ended, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 7, 1999
49
<PAGE>
TWEEDY, BROWNE GLOBAL VALUE FUND
Tax Information (unaudited)
Year Ended March 31, 1999
For the fiscal year ended March 31, 1999, the amount of long-term capital
gain designated by the Fund was $106,373,560, which is taxable as a 20% rate
gain 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, 1999, 6.06% qualify for
the dividend received deduction available to corporate shareholders.
50
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio Highlights
March 31, 1999
Hypothetical Illustration of $10,000 Invested in
Tweedy, Browne American Value Fund vs.
Standard & Poor's 500 Stock Index ("S&P 500") and
Morningstar Mid-Cap Value Funds ("MMCV") Average
12/8/93 through 3/31/99
[GRAPH GOES HERE]
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.
MMCV Average consists of the average returns of all mutual funds in the
Morningstar Universe classified as value funds with median market
capitalizations greater than or equal to $1 billion but less than or equal to $5
billion.
Index and Average information is available at month end only; therefore,
the closest month end to inception date of the Fund, November 30, 1993, has been
used.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN* AGGREGATE TOTAL RETURN*
---------------------------- ----------------------
Year Inception
Without Ended (12/8/93)-
The Fund Actual Waivers** 3/31/99 3/31/99
- -------- ------ --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Inception (12/8/93)
through 3/31/99 18.57% 18.37% The Fund (1.09)% 147.15%
Year Ended 3/31/99 (1.09)% (1.11)% S&P 500 18.49% 212.14%
MMCV (9.79)% 94.70%
- ---------------------------------------------------------------------------------------------------
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>
51
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Perspective On Assessing Investment Results
March 31, 1999
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 indexes, including
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
52
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Perspective On Assessing Investment Results
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."
53
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-DOMESTIC-74.6%
Advertising-0.2%
6,680 Grey Advertising Inc.............................. $ 2,317,543
------------
Apparel/Textiles-0.0%++
45,900 Chic by H.I.S. Inc.+.............................. 109,013
------------
Automotive Parts-1.7%
739,000 Dollar Thrifty Automotive Group Inc.+............. 12,747,750
170,400 Standard Motor Products Inc....................... 3,525,150
95,300 Standard Products Company......................... 1,548,625
5,200 Woodward Governor Company......................... 129,838
------------
17,951,363
------------
Banking-11.8%
45,300 BancFirst Corporation............................. 1,585,500
252,898 Bank One Corporation.............................. 13,925,196
20,400 Cape Cod Bank & Trust Company..................... 331,500
541,814 Chase Manhattan Corporation....................... 44,056,251
112,650 Comerica Inc...................................... 7,033,584
4,500 Community Financial Group-Bank of Nashville....... 57,656
20,400 First Mortgage Corporation+....................... 89,250
50,850 Mercantile Bancorp Inc............................ 2,415,375
43,342 Mid-America Bancorp............................... 1,064,588
18,000 Peoples Bank Corporation of Indianapolis.......... 654,750
246,700 PNC Bank Corporation.............................. 13,707,269
802,520 Popular Inc....................................... 24,802,884
118,000 Republic New York Corporation..................... 5,442,750
360,000 Wells Fargo & Company............................. 12,622,500
------------
127,789,053
------------
Basic Industries-4.5%
298,600 ACX Technologies Inc.+............................ 3,919,125
219,200 Alamo Group Inc................................... 1,726,200
141,700 Gorman-Rupp Company............................... 2,214,063
724,000 Rayonier Inc...................................... 29,005,250
70,200 Sequa Corporation, Class A+....................... 3,527,550
66,000 Tecumseh Products Company, Class A................ 3,339,188
66,100 Tecumseh Products Company, Class B................ 3,061,256
78,000 Tremont Corporation............................... 1,374,750
------------
48,167,382
------------
Business and Commercial Services-1.3%
716,000 Harland (John H.) Company......................... 9,263,250
24,400 HUB Group Inc., Class A+.......................... 579,500
5,200 IIC Industries Inc.+.............................. 55,250
12,500 Paris Corporation................................. 27,734
198,000 Wallace Computer Services Inc..................... 3,922,875
------------
13,848,609
------------
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-DOMESTIC
Chemicals-1.4%
680,700 Lilly Industries Inc., Class A.................... $ 10,508,306
232,900 Oil-Dri Corporation of America.................... 3,391,606
77,500 Stepan Chemical Company........................... 1,724,375
------------
15,624,287
------------
Consumer Non-Durables-6.1%
142,400 Bairnco Corporation............................... 676,400
130,400 Coca-Cola Bottling Company........................ 7,220,900
209,200 EKCO Group Inc.+.................................. 706,050
347,500 M & F Worldwide Corporation+...................... 2,432,500
869,470 Philip Morris Companies Inc....................... 30,594,476
910,900 UST Inc........................................... 23,797,263
57,200 Village Super Market Inc., Class A+............... 818,675
------------
66,246,264
------------
Consumer Services-1.9%
512,900 Jones Intercable Inc., Class A+................... 20,227,494
------------
Electronic Equipment-0.2%
100,000 Regal Beloit...................................... 1,806,250
------------
Engineering and Construction-1.9%
42,700 Devcon International Corporation+................. 70,055
107,300 Harding Lawson Associates Group Inc.+............. 764,513
150,500 Hovnanian Enterprises Inc., Class A+.............. 1,128,750
22,900 Liberty Homes Inc., Class A....................... 226,138
10,000 Liberty Homes Inc., Class B....................... 113,750
51,300 M/I Schottenstein Homes Inc....................... 910,575
162,800 Oakwood Homes Corporation......................... 2,289,375
13,700 Oriole Homes Corporation, Class A+................ 27,400
64,437 Oriole Homes Corporation, Class B+................ 118,806
269,000 RDO Equipment Company, Class A+................... 2,421,000
309,621 Ryland Group Inc.................................. 7,837,282
271,300 Standard-Pacific Corporation...................... 3,492,988
158,000 Washington Homes Inc.+............................ 809,750
------------
20,210,382
------------
Financial Services-17.5%
382,230 American Express Company.......................... 44,912,025
885,300 Credit Acceptance Corporation+.................... 5,062,809
789,380 Federal Home Loan Mortgage Corporation............ 45,093,333
543,500 Household International Inc....................... 24,797,188
41,600 Kent Financial Services Inc.+..................... 156,000
30,000 Letchworth Independent Bancshares Corporation..... 406,875
632,700 MBIA Inc.......................................... 36,696,600
142,000 Morgan, (J.P.) & Company Inc...................... 17,519,250
756,000 Phoenix Duff & Phelps Corporation................. 6,520,500
109,030 ReliaStar Financial Corporation................... 4,647,404
29,800 Value Line Inc.................................... 1,029,031
39,004 Whitney Holding Corporation....................... 1,439,491
------------
188,280,506
------------
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-DOMESTIC
Food and Beverages-1.5%
950,050 Panamerican Beverages Inc., Class A............... $ 16,685,253
------------
Furniture-1.1%
29,900 Flexsteel Industries Inc.......................... 396,175
75,000 HON Industries Inc................................ 1,645,313
152,350 O' Sullivan Corporation........................... 1,256,888
598,400 O' Sullivan Industries Holdings Inc.+............. 8,265,400
------------
11,563,776
------------
Health Care-0.7%
158,500 Angelica Corporation.............................. 2,219,000
33,412 Johnson & Johnson................................. 3,130,287
45,300 Sola International Inc............................ 546,431
106,600 Spacelabs Medical Inc.+........................... 1,775,556
10,666 Wyant Corporation+................................ 25,998
------------
7,697,272
------------
Insurance-8.7%
15,200 Allstate Financial Corporation+................... 65,550
463,500 American Annuity Group Inc........................ 10,081,125
77,400 American Indemnity Financial Corporation.......... 967,500
155,125 American National Insurance Company............... 10,344,898
8,260 Kansas City Life Insurance Company................ 677,320
488,000 Leucadia National Corporation..................... 14,762,000
21,600 Merchants Group Inc............................... 456,300
389,500 MMI Companies Inc................................. 5,988,563
100,500 NAC Re Corporation................................ 5,395,593
102,500 National Western Life Insurance Company, Class A+. 10,807,344
31,500 Navigators Group Inc.+............................ 442,969
16,500 RLI Corporation................................... 482,624
201,000 SCPIE Holdings Inc................................ 5,464,688
379,700 Transatlantic Holdings Inc........................ 28,477,500
------------
94,413,974
------------
Investment Companies-0.1%
190,500 Ampal-American Israel Corporation, Class A+....... 773,906
10,000 PEC Israel Economic Corporation+.................. 301,250
5,000 Pilgrim America Capital Corporation+.............. 95,000
------------
1,170,156
------------
Metals and Metal Products-1.3%
724,100 ASARCO Inc........................................ 9,956,375
88,700 Lawson Products Inc............................... 1,818,350
11,900 Mestek Inc.+...................................... 226,100
165,000 Schnitzer Steel Industies Inc..................... 1,974,844
------------
13,975,669
------------
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-DOMESTIC
Oil and Gas-0.3%
5,600 Lufkin Industries Inc............................ $ 92,400
41,460 Matrix Service Company+.......................... 136,041
175,200 Penn Virginia Corporation........................ 3,060,525
------------
3,288,966
------------
Real Estate-1.6%
716,500 American Real Estate Partners L.P.+.............. 5,866,344
26,100 Arizona Land Income Corporation, Class A......... 159,863
596,700 Castle & Cooke Inc.+............................. 7,980,863
85,800 Echelon International Corporation Inc.+.......... 1,683,825
102,000 Koger Equity Inc................................. 1,370,625
13,200 Mays (J.W.) Inc.+................................ 99,000
36,025 Ramco-Gershenson Properties Trust................ 574,147
------------
17,734,667
------------
Restaurant Chains-4.7%
1,106,800 McDonald's Corporation........................... 50,151,875
------------
Retail-1.9%
217,000 Discount Auto Parts Inc.+........................ 4,665,500
117,900 EZCORP Inc., Class A............................. 810,562
90,100 Government Technology Services Inc.+............. 318,166
654,000 Jan Bell Marketing Inc.+......................... 2,779,500
39,600 Penney (J.C.) Company Inc........................ 1,603,800
130,100 Swiss Army Brands Inc.+.......................... 1,268,475
182,700 Syms Corporation+................................ 1,358,831
765,600 Value City Department Stores Inc.+............... 7,464,600
------------
20,269,434
------------
Technology-0.0%++
44,600 Astrosystems Inc.+............................... 132,406
------------
Telecommunications-1.2%
93,600 Commonwealth Telephone Enterprises Inc.+......... 3,460,275
280,800 RCN Corporation+................................. 9,433,125
15,300 TCI International Inc.+.......................... 43,748
------------
12,937,148
------------
Transportation/Transportation Services-3.0%
636,400 GATX Corporation................................. 20,961,425
53,100 KLLM Transport Services Inc.+.................... 331,874
53,600 Maritrans Inc.................................... 308,200
800,000 Wisconsin Central Transportation Corporation+.... 10,625,000
------------
32,226,499
------------
TOTAL COMMON STOCKS-DOMESTIC
(Cost $648,732,414).............................. 804,825,241
------------
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-FOREIGN-19.8%
Finland-0.2%
18,300 Huhtamaki Group, Class I.......................... $ 652,514
15,500 Kone Corporation, Class B......................... 1,658,028
------------
2,310,542
------------
France-0.0%++
900 Bongrain SA....................................... 337,829
------------
Hong Kong-0.3%
1,210,000 CDL Hotels International Ltd...................... 374,734
478,000 Jardine Strategic Holdings Ltd.................... 807,820
1,506,000 South China Morning Post (Holdings) Ltd........... 835,641
525,000 Swire Pacific Ltd., Class B....................... 359,055
182,000 Wing Hang Bank Ltd................................ 483,799
------------
2,861,049
------------
Ireland-0.0%++
202,592 Crean (James) PLC................................. 240,791
------------
Japan-7.4%
56,000 Agro-Kanesho Company Ltd.......................... 425,622
63,000 Aichi Electric Company Ltd........................ 101,084
93,600 Aiful Corporation................................. 6,378,854
67,000 Amatsuji Steel Ball Manufacturing Company......... 565,807
104,000 Belluna Company Ltd............................... 1,396,445
33,000 CCI Corporation................................... 211,797
1,000 Charle Company.................................... 9,289
89,000 Chiyoda Company................................... 736,562
247,700 Chofu Seisakusho Company.......................... 3,154,428
70,500 Credia Company Ltd................................ 1,238,357
131,000 Daido Metal Company............................... 383,879
140,000 Danto Corporation................................. 667,990
179,000 Denkyosha......................................... 793,607
61,000 Denyo Company Ltd................................. 399,232
93,000 Fuji Coca-Cola Bottling Company................... 1,162,353
76,800 Fuji Photo Film Company Ltd., ADR................. 2,889,600
17,000 Fuji Photo Film Ltd............................... 643,162
326,000 Fujitec Company Ltd............................... 2,648,414
293,000 Fukuda Denshi..................................... 4,750,749
275,000 Gakken Company Ltd+............................... 325,127
206,000 Hitachi Koki Company Ltd.......................... 607,136
78,000 Hitachi Medical Corporation....................... 876,730
109,000 Inaba Denkisangyo Company Ltd..................... 1,123,000
16,000 Kansai Paint Company Ltd.......................... 42,427
112,000 Katsuragawa Electric Company...................... 633,704
262,000 Kawagishi Bridge Works............................ 683,680
130,000 Koito Manufacturing............................... 621,374
53,000 Koyosha Inc....................................... 172,318
389,000 Mandom Corporation................................ 4,533,378
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-FOREIGN
Japan-(Continued)
95,000 Matsumoto Yushi-Seiyaku Company................... $ 1,909,386
19,000 Matsushita Electric Industrial Company............ 370,646
44,000 Meito Sangyo Company.............................. 423,595
91,000 Mitsubishi Pencil Company Ltd..................... 629,388
200,000 Morito............................................ 895,157
58,000 Nankai Plywood Company Ltd........................ 248,330
107,000 Nippon Cable System............................... 826,796
118,000 Nippon Konpo Unyu Soko............................ 832,074
19,000 Nissie Plastic Industrial Company Ltd............. 116,970
48,300 Nissin Company Ltd................................ 1,419,449
52,000 Nitto FC Company.................................. 180,045
72,000 Oak............................................... 96,069
116,000 Osaka Steel Company Ltd........................... 425,149
185,000 Prospect Japan Fund Ltd........................... 1,259,850
119,000 Riken Vitamin..................................... 1,256,175
19,000 Sangetsu Company Ltd.............................. 304,860
31,000 Sanko Sangyo Company.............................. 235,612
130,600 Sanyo Shinpan Finance Company Ltd................. 5,558,620
63,800 Shikoku Coca-Cola Bottling........................ 969,810
82,000 Shinki Company Ltd................................ 1,378,034
192,000 Shionogi & Company Ltd............................ 1,686,273
73,000 SK Kaken Company Ltd.............................. 1,091,162
220,000 Sonton Food Industry.............................. 2,006,503
196,000 Sotoh Company Ltd................................. 993,117
125,900 Sysmex Corporation................................ 1,956,306
186,000 Tachi-S........................................... 863,911
103,700 Takefuji Corporation.............................. 7,969,176
1,000 Takigami Steel Construction Company Ltd........... 2,584
141,000 Teikoku Hormone Manufacturing Company............. 1,166,913
111,000 Tomita Electric Company Ltd....................... 379,639
10,000 Torii Company Ltd................................. 31,246
162,000 Torishima Pump Manufacturing...................... 633,417
64,000 Toso Company Ltd.................................. 189,165
78,000 Toyo Technical Company Ltd........................ 461,090
188,000 Tsubaki Nakashima Company Ltd..................... 1,262,171
220,800 Tsuchiya Home Company............................. 885,699
214,000 U-Shin............................................ 679,509
45,000 Zojirushi......................................... 288,815
------------
80,058,816
------------
Malaysia-0.1%
485,000 Star Publications (Malaysia)...................... 455,525
------------
Netherlands-1.6%
218,600 Akzo Nobel NV, Sponsored ADR...................... 8,115,525
21,000 European Vinyls Corporation International NV...... 152,026
36,500 Holdingmaatschappij de Telegraaf NV............... 920,885
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Value
Shares (Note 1)
------ --------
COMMON STOCKS-FOREIGN
Netherlands-(Continued)
120,800 Unilever NV, ADR.................................. $ 8,025,650
------------
17,214,086
------------
Singapore-0.4%
518,000 Cycle & Carriage Ltd.............................. 2,190,211
264,000 Fraser & Neave Ltd................................ 940,400
266,000 Overseas Union Bank Ltd........................... 939,820
94,800 Robinson and Company Ord.......................... 252,580
------------
4,323,011
------------
Spain-0.0%++
32,000 Unipapel SA....................................... 414,912
------------
Sweden-4.7%
804,300 Pharmacia & Upjohn Inc., Depository Shares........ 50,629,867
------------
Switzerland-3.0%
3,650 Compagnie Financiere Richemont AG................. 6,077,157
2,000 Edipresse SA, Bearer.............................. 460,237
269,000 Nestle SA, Registered, ADR........................ 24,478,542
10,666 Novartis AG, ADR.................................. 866,635
------------
31,882,571
------------
United Kingdom-2.1%
875,000 British Steel Ord................................. 1,804,148
315,000 Caradon PLC....................................... 693,979
274,000 Carclo Engineering Group PLC...................... 515,205
445,000 Dowding & Mills PLC............................... 323,203
61,145 Elementis PLC..................................... 91,780
163,670 Glaxo Wellcome PLC, Units, Sponsored ADR.......... 10,955,661
142,000 Hardys & Hansons PLC.............................. 574,116
41,711 HSBC Holdings..................................... 1,328,254
189,385 McAlpine (Alfred) PLC............................. 519,634
50,000 Molins PLC........................................ 110,962
508,505 Pilkington PLC.................................... 677,099
93,333 Rexam PLC......................................... 309,564
63,800 SmithKline Beecham PLC, Units, ADR................ 4,561,700
131,579 Thistle Hotels PLC................................ 355,717
------------
22,821,022
------------
TOTAL COMMON STOCKS-FOREIGN
(Cost $156,723,872)............................... 213,550,021
------------
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Portfolio of Investments
March 31, 1999
Market
Face Value
Value (Note 1)
----- --------
COMMERCIAL PAPER-1.9%
(Cost $20,000,000)
$20,000,000 General Electric Capital Corporation,
5.060% due 4/1/99.............................. $ 20,000,000
---------------
U.S. TREASURY BILL-0.1%
(Cost $966,594)
1,000,000 4.501%** due 1/6/00............................ 965,620
---------------
REPURCHASE AGREEMENT-1.6%
(Cost $17,230,000)
17,230,000 Agreement with UBS Securities Inc., 4.880%
dated 3/31/99, to be repurchased at
$17,232,336 on 4/1/99, collateralized by
$17,209,000 U.S. Treasury Notes,
6.000% due 2/15/26 (market value
$17,483,268)................................... 17,230,000
---------------
TOTAL INVESTMENTS (Cost $843,652,880*)............. 98.0% 1,056,570,882
OTHER ASSETS AND LIABILITIES (Net)................. 2.0 21,643,609
----- ---------------
NET ASSETS......................................... 100.0% $ 1,078,214,491
===== ===============
- -----------
* Aggregate cost for Federal tax purposes was $849,570,415.
** Rate represents annualized yield at date of purchase (unaudited).
+ Non-income producing security.
++ Amount represents less than 0.1% of net assets.
Abbreviations:
ADR American Depository Receipt
Ord Ordinary Shares
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Schedule of Forward Exchange Contracts
March 31, 1999
Contract Market
Value Value
Contracts Date (Note 1)
--------- -------- -------------
FORWARD EXCHANGE CONTRACTS TO BUY
1,234,088 European Economic Union Euro.... 4/23/99 $ 1,335,140
894,964 European Economic Union Euro.... 6/8/99 970,829
442,945 European Economic Union Euro.... 6/17/99 480,741
339,067 European Economic Union Euro.... 8/27/99 435,013
1,299,206 European Economic Union Euro.... 11/5/99 1,422,683
5,075,350 European Economic Union Euro.... 12/10/99 5,570,765
558,989 Great Britain Pound Sterling.... 7/23/99 901,708
172,000,000 Japanese Yen.................... 5/6/99 1,460,092
1,925,298 New Zealand Dollar.............. 6/8/99 1,030,567
928,333 New Zealand Dollar.............. 1/18/00 497,906
TOTAL FORWARD EXCHANGE CONTRACTS TO BUY ------------
(Contract Amount $14,502,408)................. $ 14,105,444
============
FORWARD EXCHANGE CONTRACTS TO SELL
1,234,088 European Economic Union Euro.... 4/23/99 $ (1,335,140)
894,964 European Economic Union Euro.... 6/8/99 (970,829)
442,945 European Economic Union Euro.... 6/17/99 (480,741)
339,067 European Economic Union Euro.... 8/27/99 (435,013)
1,299,206 European Economic Union Euro.... 11/5/99 (1,422,683)
5,075,350 European Economic Union Euro.... 12/10/99 (5,570,765)
840,401 European Economic Union Euro.... 12/23/99 (923,237)
1,792,275 European Economic Union Euro.... 3/27/00 (1,981,446)
373,808 Great Britain Pound Sterling.... 6/8/99 (603,045)
614,893 Great Britain Pound Sterling.... 7/2/99 (991,887)
558,989 Great Britain Pound Sterling.... 7/23/99 (901,708)
4,788,699 Great Britain Pound Sterling.... 12/23/99 (7,732,646)
968,230 Great Britain Pound Sterling.... 1/18/00 (1,563,951)
1,537,515 Great Britain Pound Sterling.... 2/11/99 (2,484,206)
1,240,156 Great Britain Pound Sterling.... 3/6/00 (2,004,324)
306,861 Great Britain Pound Sterling.... 3/29/00 (496,081)
5,553,450 Hong Kong Dollar................ 4/23/99 (716,257)
7,935,500 Hong Kong Dollar................ 1/18/00 (1,009,821)
5,160,675 Hong Kong Dollar................ 2/11/00 (655,599)
3,946,500 Hong Kong Dollar................ 3/29/00 (499,693)
4,070,240 Japanese Yen.................... 4/1/99 (34,373)
681,065,000 Japanese Yen.................... 4/23/99 (5,770,701)
1,877,850,000 Japanese Yen.................... 5/6/99 (15,940,895)
912,065,000 Japanese Yen.................... 6/8/99 (7,774,840)
361,530,000 Japanese Yen.................... 7/23/99 (3,100,422)
168,735,000 Japanese Yen.................... 11/5/99 (1,468,579)
817,320,000 Japanese Yen.................... 12/10/99 (7,149,051)
559,500,000 Japanese Yen.................... 12/23/99 (4,902,951)
685,503,000 Japanese Yen.................... 2/11/99 (6,049,707)
692,820,000 Japanese Yen.................... 3/6/99 (6,134,938)
1,679,400,000 Japanese Yen.................... 3/27/99 (14,915,116)
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Schedule of Forward Exchange Contracts
March 31, 1999
Contract Market
Value Value
Contracts Date (Note 1)
--------- -------- --------------
FORWARD EXCHANGE CONTRACTS TO SELL
337,230,000 Japanese Yen............ 3/29/00 $ (2,995,886)
1,925,298 New Zealand Dollar...... 6/8/99 (1,030,566)
928,333 New Zealand Dollar...... 1/18/00 (497,906)
1,381,840 Singapore Dollar........ 6/8/99 (805,025)
1,599,500 Singapore Dollar........ 11/5/99 (942,075)
1,622,800 Singapore Dollar........ 12/10/99 (957,892)
1,322,000 Singapore Dollar........ 1/18/00 (782,238)
842,150 Singapore Dollar........ 3/27/00 (500,386)
2,376,000 Swedish Krona........... 6/17/99 (290,547)
43,579,250 Swedish Krona........... 7/23/99 (5,340,279)
14,027,380 Swedish Krona........... 8/27/99 (1,722,504)
32,084,000 Swedish Krona........... 12/10/99 (3,965,466)
13,875,225 Swedish Krona........... 12/23/99 (1,716,330)
24,133,500 Swedish Krona........... 1/4/00 (2,987,505)
15,379,400 Swedish Krona........... 1/18/00 (1,905,502)
27,097,350 Swedish Krona........... 2/11/00 (3,362,409)
20,212,500 Swedish Krona........... 3/29/00 (2,515,476)
1,745,160 Swiss Franc............. 4/23/99 (1,183,939)
5,381,370 Swiss Franc............. 6/8/99 (3,668,742)
2,201,850 Swiss Franc............. 7/23/99 (1,508,300)
2,672,400 Swiss Franc............. 12/10/99 (1,858,090)
8,050,800 Swiss Franc............. 12/31/99 (5,610,070)
10,496,000 Swiss Franc............. 1/18/00 (7,327,867)
8,150,400 Swiss Franc............. 2/11/00 (5,704,656)
3,511,750 Swiss Franc............. 3/27/00 (2,469,562)
2,121,750 Swiss Franc............. 3/29/00 (1,492,375)
-------------
TOTAL FORWARD EXCHANGE CONTRACTS TO SELL
(Contract Amount $170,158,834)............ $(169,162,238)
=============
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Statement of Assets and Liabilities
March 31, 1999
ASSETS
Investments, at value (Cost $843,652,880) (Note 1)
See accompanying schedule........................... $ 1,056,570,882
Cash and foreign currency (Cost $14,541,433).......... 14,542,119
Receivable for investment securities sold............. 7,696,792
Dividends and interest receivable..................... 2,035,095
Receivable for Fund shares sold....................... 1,269,537
Net unrealized appreciation of forward exchange
contracts (Note 1)................................... 599,632
Prepaid expenses........................................ 7,396
---------------
Total Assets................................... 1,082,721,453
---------------
LIABILITIES
Payable for Fund shares redeemed...............$ 2,545,220
Payable for investment securities purchased.... 971,250
Investment advisory fee payable (Note 2)....... 641,953
Transfer agent fees payable (Note 2)........... 77,091
Custodian fees payable (Note 2)................ 13,000
Accrued expenses and other payables............ 258,448
-----------
Total Liabilities.............................. 4,506,962
---------------
NET ASSETS.............................................. $ 1,078,214,491
===============
NET ASSETS consist of
Undistributed net investment income................... $ 29,374
Accumulated net realized gain on securities, forward
exchange contracts and foreign currencies........... 22,346,297
Net unrealized appreciation of securities, forward
exchange contracts, foreign currencies and net other
assets.............................................. 213,523,309
Par value............................................. 4,814
Paid-in capital in excess of par value................ 842,310,697
Total Net Assets............................... $ 1,078,214,491
===============
NET ASSET VALUE, offering and redemption price per
share ($1,078,214,491 / 48,136,058 shares of common
stock outstanding).................................... $ 22.40
===============
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Statement of Operations
For the Year Ended March 31, 1999
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $349,281).... $ 16,835,642
Interest.................................................... 4,243,339
---------------
Total Investment Income............................ 21,078,981
---------------
EXPENSES
Investment advisory fee (Note 2)............... $ 13,594,779
Administration fee (Note 2).................... 437,177
Transfer agent fees (Note 2)................... 466,894
Custodian fees (Note 2)........................ 204,656
Legal and audit fees........................... 70,087
Directors' fees and expenses (Note 2).......... 27,815
Amortization of organization costs (Note 5).... 12,980
Other.......................................... 444,616
Waiver of fees by investment adviser (Note 2).. (121,000)
------------
Total Expenses..................................... 15,138,004
---------------
NET INVESTMENT INCOME.......................................... 5,940,977
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3)
Net realized gain:
Securities.............................................. 29,526,022
Forward exchange contracts.............................. 1,132,217
Foreign currencies and net other assets................. 66,414
--------------
Net realized gain on investments during the year............ 30,724,653
--------------
Net change in unrealized appreciation (depreciation) of:
Securities.............................................. (50,963,605)
Forward exchange contracts.............................. (3,506,282)
Foreign currencies and net other assets................. 4,708
--------------
Net unrealized depreciation of investments during the year.. (54,465,179)
--------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS................ (23,740,526)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $ (17,799,549)
==============
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
Ended Ended
3/31/99 3/31/98
------- -------
<S> <C> <C>
Net investment income................................................ $ 5,940,977 $ 4,232,973
Net realized gain on securities, forward exchange contracts
and currency transactions during the year................... 30,724,653 15,187,523
Net unrealized appreciation (depreciation) of securities,
forward exchange contracts, foreign currencies and
net other assets during the year............................ (54,465,179) 203,651,397
--------------- --------------
Net increase (decrease) in net assets resulting from operations...... (17,799,549) 223,071,893
Distributions:
Dividends to shareholders from net investment income........ (7,030,923) (5,448,502)
Distributions to shareholders from net realized gain on
investments........................................ (12,518,672) (13,982,759)
Net increase in net assets from Fund share transactions (Note 4)..... 104,325,915 465,129,709
--------------- --------------
Net increase in net assets........................................... 66,976,771 668,770,341
NET ASSETS
Beginning of year.................................................... 1,011,237,720 342,467,379
--------------- --------------
End of year (including undistributed net investment income
of $29,374 and $1,863,348, respectively)........................ $ 1,078,214,491 $ 1,011,237,720
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Financial Highlights
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
3/31/99 3/31/98 3/31/97 3/31/96(a) 3/31/95(a)
------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.........$ 23.04 $ 16.22 $ 14.29 $ 10.71 $ 9.71
------- ---------- --------- -------- ---------
Income from investment operations:
Net investment income (b).................. 0.12 0.11 0.13 0.15 0.13
Net realized and unrealized gain (loss)
on investments........................ (0.37) 7.31 2.39 3.56 0.93
------- ---------- --------- -------- ---------
Total from investment operations.. (0.25) 7.42 2.52 3.71 1.06
------- ---------- --------- -------- ---------
Distributions:
Dividends from net investment income.. (0.14) (0.17) (0.17) (0.11) (0.06)
Distributions from net realized gains. (0.25) (0.43) (0.42) (0.02)
------- ---------- --------- -------- ---------
Total distributions............... (0.39) (0.60) (0.59) (0.13) (0.06)
------- ---------- --------- -------- ---------
Net asset value, end of year...............$ 22.40 $ 23.04 $ 16.22 $ 14.29 $ 10.71
======= ========== ========= ======== =========
Total return (c)........................... (1.09)% 46.14% 17.75% 34.70% 11.02
======== ========== ========= ======== =========
Ratios/Supplemental Data:
Net assets, end of year (in 000's)....... $1,078,214 $1,011,238 $342,467 $201,599 $58,856
Ratio of operating expenses to average
net assets (d)...................... 1.39% 1.39% 1.39% 1.39% 1.74%
Ratio of net investment income to average
net assets.......................... 0.55% 0.69% 0.92% 1.13% 1.25%
Portfolio turnover rate.................. 16% 6% 16% 9% 4%
</TABLE>
- ---------------------
(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) Net investment income 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, 1999, 1998, 1997, 1996 and 1995 were $0.12, $0.11,
$0.11, $0.12 and $0.11, respectively.
(c) Total return represents aggregate total return for the periods indicated.
(d) Annualized expense ratios before the waiver of fees by the investment
adviser and/or administrator and/or custodian for the years ended March 31,
1999, 1998, 1997, 1996 and 1995 were 1.40%, 1.41%, 1.52%, 1.61% and 1.94%,
respectively.
67
<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 and 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
68
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Notes to Financial Statements
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 see
ks to assert its rights. The Fund's Investment Adviser, acting under the
supervision of the Company's Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks.
Foreign Currency. The books and records of the Fund are maintained in U.S.
dollars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of the
period, and purchases and sales of investment securities, income and expenses
are translated on the respective dates of such transactions. Unrealized gains
and losses which result from changes in foreign currency exchange rates have
been included in the unrealized appreciation (depreciation) of currencies and
net other assets. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investments, securities transactions, foreign
currency transactions
69
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Notes to Financial Statements
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.
70
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Notes to Financial Statements
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 Investment Adviser not to exceed 75% of the amount of the fee
then accrued on the books of the Fund and unpaid. From time to
71
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Notes to Financial Statements
time, Tweedy Browne may voluntarily waive a portion of its fee otherwise payable
to it. For the year ended March 31, 1999, Tweedy, Browne voluntarily waived fees
of $121,000.
The current and retired general partners and their families, as well as
employees of Tweedy, Browne, the Investment Adviser to the Fund, have
approximately $31.3 million of their own money invested in the Fund.
The Company, on behalf of the Fund, has entered into an administration
agreement (the "Administration Agreement") with First Data Investor Services
Group, Inc. (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 Million 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%
- --------------------------------------------------------------------------------
Under the terms of the Administration Agreement, the Company will pay for
fund administration services a minimum fee of $40,000 per annum, not to be
aggregated with fees for fund accounting services. The Company will pay a
minimum monthly fee of $3,000 for fund accounting services for the Fund, not to
be aggregated with fees for fund administration services.
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
72
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Notes to Financial Statements
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, 1999, Boston Safe did not waive any custody fees. First Data
Investor Services Group, Inc. serves as the Fund's transfer agent. Tweedy,
Browne also serves as the distributor to the Fund and pays all distribution
fees. No distribution fees are paid by the Fund.
3. Securities Transactions
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, for the year ended March 31, 1999, aggregated
$299,601,595 and $161,292,069, respectively.
At March 31, 1999, the aggregate gross unrealized appreciation for all
securities, in which there was an excess of value over tax cost, was
$263,849,104 and the aggregate gross unrealized depreciation for all securities,
in which there was an excess of tax cost over value, was $56,848,637.
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 3/31/99 Year Ended 3/31/98
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------
Sold 24,992,421 $ 560,483,799 29,306,959 $ 598,418,949
Reinvested 771,582 17,467,680 854,761 17,761,820
Redeemed (21,518,449) (473,625,564) (7,390,306) (151,051,060)
- ----------------------------------------------------------------------------------------
Net Increase 4,245,554 $ 104,325,915 22,771,414 $ 465,129,709
- ----------------------------------------------------------------------------------------
</TABLE>
73
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TWEEDY, BROWNE AMERICAN VALUE FUND
Notes to Financial Statements
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. At March 31, 1999, all such costs have
been fully amortized.
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 and
the Tweedy, Browne Global Value 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 one-third of its net assets; however, the
total credit available to the Fund and the Tweedy, Browne Global Value Fund is
$50 million. Interest is payable at the bank's Money Market Rate plus 0.75% on
an annualized basis. Under the Agreement, the Fund and the Tweedy, Browne Global
Value Fund pay 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, 1999, the Fund did not borrow under
this Agreement.
74
<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 liablities,
including the portfolio of investments and the schedule of forward exchange
contracts, of Tweedy, Browne American Value Fund (the "Fund") (a series of
Tweedy, Browne Fund Inc.) as of March 31, 1999, 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 five years in the period then ended. 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, 1999, 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 significant 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 the
Tweedy, Browne American Value Fund, a series of Tweedy, Browne Fund Inc., at
March 31, 1999, 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 five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Earnst & Young LLP
Boston, Massachusetts
May 7, 1999
75
<PAGE>
TWEEDY, BROWNE AMERICAN VALUE FUND
Tax Information (unaudited)
Year Ended March 31, 1999
For the fiscal year ended March 31, 1999, the amount of long-term capital
gain designated by the Fund was $10,442,851, which is taxable as a 20% rate gain
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, 1999, 76.68% qualify for
the dividend received deduction available to corporate shareholders.
76
<PAGE>
TWEEDY, BROWNE FUND INC.
52 Vanderbilt Avenue, NY, NY 10017
800-432-4789
