Exhibit (h)(4)
TWEEDY, BROWNE FUND INC.
CODE OF ETHICS*
I. Introduction
A. Applicability
This Code of Ethics ("Code") establishes rules of conduct for
"Covered Persons" (as defined herein) of the above-named registered
investment company (the "Fund"), Tweedy, Browne Company LLC, (the
"Investment Adviser") and any subsidiary of or affiliated company
controlled by the Investment Adviser (the Fund, the Investment Adviser and
any such subsidiaries and affiliated companies are referred to as
"Company") and is designed to govern the personal investment activities of
Covered Persons.
For purposes of this Code of Ethics, "Covered Person" shall mean any of the
following persons and "Advisory Person" means any of the persons described
in items 1-3:
1. Any director, officer or employee of the Investment Adviser or a
Company who in the ordinary course of his or her business makes,
participates in or obtains current information regarding the
purchase or sale of securities by the Fund or whose functions or
duties as part of the ordinary course of his or her business
relate to the making of any recommendation to the Fund regarding
the purchase or sale of securities;
2. Any natural person in a control relationship to the Investment
Adviser who obtains current information concerning recommendations
made to the Fund with regard to the purchase or sale of a
security; and
3. The Investment Adviser and any subsidiary or controlled affiliate
thereof.
4. Any director or officer of the Fund, regardless of whether such
director or officer is an Advisory Person;
provided, however, that an employee of a service provider that is unaffiliated
with the Fund's Investment Adviser who is an officer or employee of the Fund
shall not be a Covered Person if such employee is covered by an appropriate code
of ethics of the service provider.
*As amended and supplemented through May 10, 2000.
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For purposes of this Article I, a person shall not be deemed to be an
Advisory Person or a Covered Person simply by virtue of normally assisting
in the preparation of public reports, but not receiving information about
current recommendations or trading, or engaging in other ministerial
activities.
B. General Principles
Tweedy, Browne Company LLC's success depends upon its reputation for
integrity, quality and professionalism. Tweedy, Browne Company LLC values
and seeks to protect the confidence and trust placed in it by its clients.
This Code of Ethics is designed to govern the personal securities
investment and other business-related activities of Covered Persons and
reflects the Investment Adviser's and the Fund's principles as fiduciaries
to (1) always place the interests of the Fund's shareholders first; (2) to
ensure that all personal securities investment and other business-related
activities of its Covered Persons are consistent with this Code of Ethics
and, (3) to avoid overreaching or inappropriate conduct by a Covered Person
in connection with his or her personal securities investment and other
business-related activities.
This Code of Ethics is designed to prevent Covered Persons from:
1. Employing any device, scheme or artifice to defraud the Company;
2. Making to the Company any untrue statement of a material fact or
omitting to state to the Company a material fact necessary in
order to make the statements made, in light of the circumstances
under which they are made, not misleading;
3. Engaging in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Company;
or
4. Engaging in any manipulative practice with respect to the Company.
II. Restrictions on Personal Investing Activities
A. Prohibition on Investing Activities
If either Tweedy, Browne Global Value Fund ("TBGVF") or Tweedy,
Browne American Value Fund ("TBAVF") (each a "Fund" and collectively
the "Funds") has a purchase or sale order pending, or the Investment
Adviser has any such order under active consideration for either
Fund, no Advisory Person may buy or sell the same security, or any
related security (such as an option, warrant or convertible
security), for an Advisory Person's account, other than an
investment advisory account managed by the Investment Adviser in
accordance with the Investment Adviser's allocation procedures, a
copy of which is attached hereto as Exhibit D. Any such investment
advisory account is referred to herein as an "Excepted Account".
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B. Blackout Period
An Advisory Person shall not purchase or sell any security for the
account of any Advisory Person, other than an Excepted Account,
until seven (7) calendar days after the later of the most recent
trade by either Fund in that security or any related security, or
the withdrawal of a purchase or sale order for such security or any
related security.
C. Initial Public Offerings
No Advisory Person shall acquire securities in an initial public
offering for an Advisory Person's account.
D. Pre-Clearance of Personal Securities Transactions
If Paragraphs A (including because the account in question is not an
Excepted Account), B and C above do not apply, it is permissible for
an Advisory Person to buy or sell a security for an Advisory
Person's account, but only if (i) the Advisory Person obtains prior
approval from a supervisory person designated by the Investment
Adviser (the "Designated Supervisory Person"), or, in the absence of
the Designated Supervisory Person, from a managing director member
of the Executive Committee of the Investment Adviser; (ii) the
approved transaction is completed on the same day approval is
received; and, (iii) the Designated Supervisory Person or a managing
director member of the Executive Committee of the Investment Adviser
does not rescind such approval prior to execution of the
transaction. (See Section IV for details of the Prior Approval
Process.)
E. Private Placements
The Designated Supervisory Person will not approve a purchase or
sale of securities that are not publicly traded, unless the Advisory
Person provides full details of the proposed transaction (including
written certification that the investment opportunity did not arise
by virtue of such person's activities on behalf of the Fund) and the
Designated Supervisory Person concludes, after consultation with one
or more of the Investment Adviser's general partners, that the Fund
would have no foreseeable interest in investing in such security.
F. Gifts
No Advisory Person shall accept any gift or other item of more than
de minimis value from any person or entity that does business with
or on behalf of the Fund.
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G. Service as a Director
No Advisory Person shall serve on the Board of Directors of a
publicly traded company without prior authorization from the
Compliance Committee based upon a determination that the Board
service would not be inconsistent with the interests of the Fund and
its shareholders. The Compliance Committee shall be composed of the
Designated Supervisory Person and at least two of the managing
director members of the Executive Committee of Tweedy, Browne
Company LLC.
III. Exempt Transactions
A. For purposes of this Code of Ethics, the term "security" shall not
include the following:
1. securities issued or guaranteed as to principal or interest by
the Government of the United States or its instrumentalities;
2. bankers' acceptances;
3. bank certificates of deposit;
4. commercial paper;
5. High quality short-term debt instruments, including repurchase
agreements; and
6. shares of registered open-end investment companies.
B. For purposes of Sections II, A, B and C of this Code of Ethics, the
term "security" shall not include the following:
1. non-convertible fixed income securities rated at least "A";
2. securities comprising the S&P 500 Index, the Nikkei 225 Index,
CAC 40 Index, DAX Index; SMI Index; and FTSE 100 Index, or any
successor index thereof; and
3. municipal securities.
C. For purposes of Sections II and IV, an Advisory Person shall not be
prohibited from, or required to obtain prior approval for,
reinvestments of dividends, participation on an on-going basis in an
issuer's stock purchase plan or any transaction over which no
Advisory Person had any direct or indirect influence or control.
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IV. Prior Approval Procedures
A. An account for an Advisory Person, other than an Excepted Account,
includes all accounts in which one or more Advisory Persons and/or
one or more members of the Advisory Person's immediate family have a
substantial proportionate economic interest. Immediate family
includes an Advisory Person's spouse and minor children living with
the Advisory Person. A substantial proportionate economic interest
will generally be 10% of the principal amount in the case of any
single Advisory Person or 25% of the principal amount in the case of
accounts in which more than one Advisory Person have an interest,
whichever is applicable.
B. Managed Accounts
All managed accounts, other than Excepted Accounts, managed by the
Investment Adviser for an Advisory Person and his or her immediate
family are frozen. Trading for these accounts must adhere to the
above policy and to the procedures set forth below for non-managed
accounts.
C. Non-Managed Accounts
1. The Trading Approval Form, attached as Exhibit A, must be
completed and submitted to the Designated Supervisory Person for
approval prior to entry of an order.
2. After reviewing the Fund's investment interest, trading and
anticipated cash flows, the Designated Supervisory Person shall
approve (or disapprove) an Advisory Person's trading order as
expeditiously as possible.
3. Once an Advisory Person's trading order request is approved, the
approval form shall be forwarded to the Trading Desk for
execution on the same day. If the Advisory Person's trading
order request is not approved, or is not executed on the same
day it is approved, such trading order request may be
resubmitted at a later date.
4. In the absence of the Designated Supervisory Person, the
Advisory Person may submit his or her Trading Approval Form to
a managing director member of the Executive Committee of the
Investment Adviser. In the case of trading approval for a
managing director member of the Executive Committee of the
Investment Adviser, if the Designated Supervisory Person is not
available, such managing director must obtain prior approval
from another managing director member of the Executive
Committee of the Investment Adviser. In no case may a managing
director member of the Executive Committee of the Investment
Adviser approve his own trading. Prior trading approval for the
Designated Supervisory Person's own account must be obtained
from one of the managing director member of the Executive
Committee of the Investment Adviser. In no case will the
Trading Desk accept an order from an Advisory Person for an
Advisory Person unless it is accompanied by a signed Trading
Approval Form.
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5. With respect to an account over which an Advisory Person has no
direct or indirect influence or control, the Designated
Supervisory Person must review the terms and conditions of such
account and determine that it qualifies under the Section III, C
exemption before the Advisory Person can utilize such exemption
for transactions in such account.
V. Reporting
A. Covered Persons (including Non-Interested Directors)
All Covered Persons shall submit a report, in the form attached
hereto as Exhibit B, to the Fund's Investment Adviser showing all
security transactions in which the person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership2
and which is required to be reported under this Code of Ethics.
However, each director who is not an "interested person" (as defined
under the Investment Company Act of 1940) of the Funds is required
to file a report only for a transaction in a security where he knew
at the time of the transaction or, in the ordinary course of
fulfilling his official duties as a director, should have known that
during the 15 day period immediately preceding or after the date of
the transaction, such security is or was purchased or sold, or
considered for purchase or sale, by the Fund. Transactions in
securities described in Section III, B, above, are reportable.
Transactions in securities described in Section III, A above, are
not reportable. No report is required if the director had no direct
or indirect influence or control over the transaction.
B. Advisory Persons
All Advisory Persons shall be required to submit the same report as
required under Paragraph A above, and attached as Exhibit B, showing
all security transactions in which the Advisory Person has, or by
reason of such transaction acquires, any direct or indirect
beneficial ownership. No report is required if such Advisory Person
had no direct or indirect influence or control over the transaction.
C. All directors who are non-interested persons of the Funds and all
other Advisory Persons required to file a report shall file such
report no later than ten (10) days after the end of each calendar
quarter, but need not show transactions over which such person had no
direct or indirect influence or control or which would duplicate
information recorded pursuant to Rules 204-2(a)(12) and (13) under
the Investment Advisers Act of 1940.
<PAGE>
D. Any report submitted to comply with the requirements of this Section
V may contain a statement that the report shall not be construed as
an admission by the Advisory Person making such report that he or she
has any direct or indirect beneficial ownership in the security to
which the report relates.
E. The receipt by the Designated Supervisory Person of duplicate
brokerage statements or confirmations received prior to the tenth day
after the end of each calendar quarter will be deemed to serve as
compliance with the requirements of this Section V with respect to
all transactions for which such statements or confirmations provide
the information required by Exhibit B.
VI. Sanctions
Upon discovering that an Advisory Person has not complied with the
requirements of this Code, the Designated Supervisory Person shall
submit her findings to the Compliance Committee. The Compliance
Committee may impose on the Advisory Person whatever sanctions the
Compliance Committee deems appropriate, including, among other things,
disgorgement of profit, censure, suspension or termination of
employment. The sanction taken shall be reported to the Board of
Directors in conjunction with Section VII, C, 3, below.
VII. Additional Compliance Procedures
A. Disclosure of Personal Holdings -Initial and Annual Holdings Reports
Initial Holdings Report. No later than 10 days after a person
becomes an Advisory Person, the following information shall be
submitted to the Designated Supervisory Person:
1. The title, number of shares and principal amount of
all securities owned directly or indirectly by the
Advisory Person when the Advisory Person became an
Advisory Person;
2. The name of any broker, dealer or bank with whom the
Advisory Person maintained an account in which any
securities were held for the benefit of the Advisory
Person as of the date the person became an Advisory
Person; and
3. The date that the report is submitted by the Advisory
Person.
Annual Holdings Report. Each Advisory Person shall submit to
the Designated Supervisory Person the information listed in
VII A(1), (2) and (3) above on an annual basis, which
information shall not be more than 30 days old.
B. Upon commencement of employment with the Investment Adviser, any new
Advisory Person shall be required to disclose his or her current
personal securities holdings within ten (10) days by filing an
Initial Holdings Report.
C. Annually each Covered Person must certify that he or she has read and
understood the Funds' Code of Ethics and recognizes that he or she is
subject to such Code. In addition, annually each Covered Person must
certify that he or she has disclosed or reported all personal
securities transactions required to be disclosed or reported under
the Code of Ethics.
D. At least annually (or quarterly in the case of Items 3 and 4 below),
the Fund's Investment Adviser shall report to the Board of Directors:
1. All existing procedures concerning Covered Persons' personal
trading activities and any procedural changes made during the
past year;
2. A description of issues that arose under the Code of Ethics or
procedures during the previous year or any recommended changes
to the Funds' Code of Ethics or procedures;
3. Any material violations which occurred during the past quarter
and sanctions imposed in response to the material violations;
and
4. Any exceptions to any provisions of this Code of Ethics as
determined under Section VIII, below.
E. Certification of Adequacy. The Fund and the Investment Adviser shall
each provide to the Board of Directors of the Fund, no less
frequently than annually, a written certification that each,
respectively, has adopted procedures reasonably necessary to prevent
Covered Persons from violating the Code of Ethics.
VIII. The Compliance Committee reserves the right to meet to decide, on a
case-by-case basis, exceptions to any provisions under this Code of
Ethics. Any exceptions made hereunder will be maintained in writing by
the Compliance Committee and presented to the Board of Directors at its
next scheduled meeting.
IX. This Code, a copy of each report by an Covered Person, any written
report made hereunder by the Fund's Investment Adviser or the
Designated Supervisory Person, and lists of all persons required to
make reports, shall be preserved with the Fund's records for the period
required by Rule 17j-1.
X. Confidentiality
All information obtained from any Covered Person hereunder shall be
kept in strict confidence, except to the extent such reports are
required to be presented to the Board of Directors under Section VII
above and as such reports of securities transactions are required to be
made available to the Securities and Exchange Commission or any other
regulatory or self-regulatory organization.
XI. Other Laws, Rules and Statements of Policy
Nothing contained in this Code of Ethics shall be interpreted as
relieving any Covered Person from acting in accordance with the
provision of any applicable law, rule or regulation or any other
statement of policy or procedure governing the conduct of such Covered
Person adopted by the Investment Adviser, its affiliates and
subsidiaries.
XII. Amendments
Any material change to this Code of Ethics must be approved by the
Board of Directors of the Fund (including a majority of the
non-interested Directors) within six months of such change.
XIII. Further Information
If any person has any questions with regard to the applicability of the
provisions of this Code of Ethics generally or with regard to any
securities transactions, he or she should consult the Designated
Supervisory Person.
Amended and Restated May 10, 2000
THE BOARD OF DIRECTORS
TWEEDY, BROWNE FUND INC.
Tweedy, Browne Global Value Fund
Tweedy, Browne American Value Fund
[Adopted 5/10/00]
<PAGE>
Exhibit A
EMPLOYEE TRADING APPROVAL FORM
General Rules - Please refer to the Tweedy, Browne Company LLC Employee
Trading Procedures and Tweedy, Browne Fund Inc. Code of Ethics for a
complete record of applicable rules.
I. No employee trading is permitted if either Fund has a pending
order for the same security or if the security is under active
consideration for either Fund.
II. A 7-day blackout period applies after the Funds' last trade or
withdrawal of a Funds' order, unless the security is exempt.
A. Exempt securities include other mutual funds,
securities that comprise the S&P 500 Index and
similar Foreign indexes; i.e., the Nikkei 225 Index,
CAC 40 Index, DAX Index, SMI Index and FT30 Index,
and may be traded as follows:
1. Market cap of $1 billion and more: 1-day blackout
2. Market cap of less than $1 billion but more than $500
million: 3-day blackout; 3. Market cap of less than $500
million:
a. Buy orders are permitted only if the Funds
would not buy the security at more than 90%
of current price levels.
b. Sell orders are permitted ONLY IF,
(i) the Funds' do not own the same
security and are not Actively
considering the purchase or sale of
the same security; OR
(ii) the employee is selling the security
for a noteworthy reason (e.g., tax
loss, buying a house, charitable
donation, etc.); OR
(iii) the employee's sale takes place 3
days after the Funds have completed
selling their positions.
<PAGE>
Employee:
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Title of Account/Accounts No.:
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Security:
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Number of Shares:
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Buy or Sell:
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Price:
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Market Cap:
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Foreign: ________________ Domestic: ________________
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MUST Be Filled Out Completely Prior to Submission to Supervisory Person
1. Exempt security Yes
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No - 7 day wait
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Date of last trade by the Fund(s)
If Yes, please check one box:
A. 1-day blackout because market cap is more than $1 billion.
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B. 3-day blackout because market cap is less than $1 billion
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and more than $500 million.
C. Market cap of less than $500 million. Employees should be
aware of difficult restrictions for trading small cap stocks.
You will be permitted to sell once you buy it only if the
Funds do not own it. See Procedures Memo for complete details.
2. If checked C, answer the following questions:
FOR PURCHASE ORDERS
B. Do the Funds currently have an interest in purchasing
this security at more than 90% of current price
levels?
<PAGE>
____________Yes - Employee may not purchase security
____________No- Employee may purchase security
Please fill out the information below as it pertains to the Funds activity in
the security:
<TABLE>
<CAPTION>
<S><C> <C> <C> <C>
Pending order for TBGVF TBAVF NEITHER
Under active consideration for TBGVF TBVF NEITHER
Date and Price of TBGVF $
Most Recent Execution
------------------
------------------
TBAVF $
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Date of withdrawal of purchase or
sale order
TBGVF
------------------
------------------
TBAVF
------------------
Known and identified cash
inflows or outflows TBGVF $ Date:
------------------ ---------------------
------------------ ---------------------
TBAVF $ Date:
------------------ ---------------------
</TABLE>
Approved:
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Disapproved:
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Date:
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<PAGE>
Exhibit B
TWEEDY, BROWNE FUND INC.
TWEEDY, BROWNE GLOBAL VALUE FUND
TWEEDY, BROWNE AMERICAN VALUE FUND
SECURITIES TRANSACTION REPORT
FOR THE CALENDAR QUARTER ENDED
-----------------------
(mo./day/yr.)
1. During the quarter referred to above, the following
transactions were effected in securities of which I had, or by reason of such
transaction acquired, direct or indirect beneficial ownership, and which are
required to be reported pursuant to the Fund's Code of Ethics:
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C>
Nature of Broker/Dealer
Transaction Number of Shares or or Bank
Security and Date of (Purchase, Sale, Principal Dollar Through Whom
CUSIP No. Transaction Gift, Other) Amount of Transaction Price/Unit Effected
</TABLE>
This report excludes (i) transactions with respect to which I had
no direct or indirect influence or control, (ii) transactions not required to be
reported per the Fund's Code of Ethics, (iii) transactions already reported by a
means permitted by the Code of Ethics, and (iv) is not an admission that I have
or had any direct or indirect beneficial ownership in the securities listed
above.
2. During the quarter referred to above, the following are new
accounts with all brokers, dealers or banks with which I hold securities whether
or not transactions in such securities are reportable under the Fund's Code of
Ethics:
Date: Signature:_________________________________
<PAGE>
Exhibit C
BENEFICIAL OWNERSHIP
For purposes of the attached Code of Ethics, "beneficial ownership" shall be
interpreted in the same manner as it would be in determining whether a person is
subject to the provisions of Section 16 of the Securities Exchange Act of 1934
and the rules and regulations thereunder, except that the determination of
direct or indirect beneficial ownership shall apply to all securities that a
Covered Person has or acquires. The term "beneficial ownership" of securities
would include not only ownership of securities held by a Covered Person for his
own benefit, whether in bearer form or registered in his name or otherwise, but
also ownership of securities held for his benefit by others (regardless of
whether or how they are registered) such as custodians, brokers, executors,
administrators, or trustees ( including trusts in which he has only a remainder
interest), and securities held for his account by pledges, securities owned by a
partnership in which he is a member if he may exercise a controlling influence
over the purchase, sale or voting of such securities, and securities owned by
any corporation or similar entity in which he owns securities if the shareholder
is a controlling shareholder of the entity and has or shares investment control
over the entity's portfolio.
Ordinarily, this term would not include securities held by executors or
administrators in estates in which a Covered Person is a legatee or beneficiary
unless there is a specified legacy to such person of such securities or such
person is the sole legatee or beneficiary and there are other assets in the
estate sufficient to pay debts ranking ahead of such legacy, or the securities
are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by a Covered Person where such person enjoys "financial
benefits substantially equivalent to ownership." The Securities and Exchange
Commission has said that although the final determination of beneficial
ownership is a question to be determined in the light of the facts of the
particular case, generally a person is regarded as the beneficial owner of
securities held in the name of his or her spouse and their minor children.
Absent special circumstances such relationship ordinarily results in such person
obtaining financial benefits substantially equivalent to ownership, e.g.,
application of the income derived from such securities to maintain a common
home, or to meet expenses that such person otherwise would meet from other
sources, or the ability to exercise a controlling influence over the purchase,
sale or voting of such securities.
A Covered Person also may be regarded as the beneficial owner of
securities held in the name of another person, if by reason of any contract,
understanding, relationship, agreement, or other agreement, he obtains therefrom
financial benefits substantially equivalent to those of ownership.
A Covered Person also is regarded as the beneficial owner of securities
held in the name of a spouse, minor children or other person, even though he
does not obtain therefrom the aforementioned benefits of ownership, if he can
vest or revest title in himself at once or at some future time.
<PAGE>
Exhibit D
Principles of the Allocation Process
The primary objective of the order allocation process is to achieve for
all accounts managed by the advisor approximately the same level of aggregate
investment in a diversified pool of the securities selected by the advisor for
investment in a manner that is fair and equitable to all clients.
The aggregate investment level currently sought is 90%-100% of assets.
Diversification is achieved through minimum number of positions (generally 50),
maximum exposure to any single issuer (generally 4% of assets at cost) and
exposure to multiple capitalization segments and industries and (in the case of
international and global accounts) multiple countries.
Securities that satisfy the advisor's criteria for purchase or sale at
a particular time are viewed by the advisor as fungible. Accordingly, although
the allocation procedures utilize percentage-of-the-account targets with regard
to particular securities, these are guidelines and it is not an objective that
each account own any particular security in approximately the same or any
particular percentage of the account.
The allocation process is designed to operate on an automatic basis
within a set of parameters that may be adjusted as often as daily for each
security being purchased or sold. The parameters are designed to enable the
advisor to satisfy the primary objective stated above while taking into account
the great disparity in account size and investable cash among the accounts.
Thus, although the process is designed to reduce the degree of underinvestment
by comparatively underinvested accounts, it is able to do so without providing
an unfair advantage to large, growing accounts in comparison to small accounts.
The allocation procedures described are intended to apply to securities
selected for current purchase or sale on a general basis. Where new clients or
existing clients adding substantial funds do not specifically request that the
advisor invest only in new selections as they are made, the advisor will
generally utilize a substantial portion of the client's funds outside of the
allocation process to acquire a broad spectrum of securities that are already
held by other accounts and that the advisor believes continue to satisfy its
investment criteria. The advisor will also sell securities outside of the
general allocation process to satisfy withdrawal requests.
The advisor seeks to manage taxable client accounts in a manner
sensitive to after-tax return and may exclude all taxable accounts or, in
certain cases, particular taxable accounts from purchase or sale allocations of
particular securities. Conversely, the advisor may decide to sell securities
from only certain accounts in order to offset realized losses or gains.
The advisor is responsive to client direction regarding matters such as
the percentage of the account to remain invested in cash equivalents, particular
industries or issuers in which the client does not wish to invest and similar
matters, which may affect allocations to such accounts.
A record of the establishment of each parameter for each security, each
adjustment in a parameter for a security and each written explanation of an
intraday adjustment will be preserved for a minimum of five years in an easily
accessible place, at least the first two of which shall be the offices of the
advisor.
The advisor will periodically review the operation of these allocation
procedures and make such adjustments from time to time as it concludes are
appropriate.
The Allocation Process
Each account is classified as being entirely domestic, entirely
international or entirely global.
Each security being purchased or sold on a general basis will be
categorized as domestic, international or global.
Domestic accounts will only be allocated transactions in domestic and
global securities and international accounts will only be allocated transactions
in international and global securities. Global accounts may be allocated
transactions in all securities.
When a security is selected for purchase or sale by the advisor, one or
more of the Managing Directors will direct the Trading Department to buy or sell
the security, and will specify at that time each of the allocation parameters
for each security that is to be bought or sold. These parameters are
periodically reviewed and may be adjusted for various reasons, including
changing market conditions, availability of alternative securities, price
changes in the security and the sale of other securities. Without concurrence by
the compliance department, a Managing Director may make adjustments for the
purpose of achieving the objective of the order allocation process prior to
10:00 p.m. with respect to transactions that night in the Asian markets, prior
to 8:30 a.m. with respect to transactions that day in the European markets and
prior to 10:00 a.m. with respect to transactions that day in American markets.
Other adjustments must be concurred in by the compliance department in writing
as being fair and equitable to the clients with an attached explanation within
one hour after opening of trading in the U.S. markets on the trading day
following the day such adjustment is made.
The parameters are as follows:
1. The percentage of account size currently targeted for that security.
The minimum percentage in the case of purchases or sales will generally be .25%.
The selection of any percentage other than .25% will be the percentage which the
advisor believes, in light of its trading experience and available market
information that it can acquire up to or sell down to within a reasonable time
frame without significant price change in the security due to the impact of its
trading.
2. The percentage of account invested above or below which no
allocation for that security will be made to an account. Selection of this
parameter enables the advisor to address severe or chronic underinvestment or to
assure that accounts that are substantially invested and might not otherwise
receive any allocation receive an appropriate allocation of some new securities.
<PAGE>
3. Minimum lot size for that security. Selection of this parameter
enables the advisor to avoid allocations so small that the transaction costs
could materially affect investment performance. An allocation will not be made
to an account that day for that security if the allocation would be less than
the minimum lot size selected.
4. For international accounts, the percentage of account size currently
targeted for the country in which the issuer of that security is principally
located. Selection of this parameter assists the advisor in avoiding excess
country concentration among international accounts.
5. Which accounts will not participate due to tax considerations.
Once the parameters have been selected, securities purchased will be
allocated among the eligible accounts in declining order of uninvested cash as a
percentage of account size until one of the parameters is satisfied and
securities sold will be allocated among the eligible accounts in declining order
of invested assets as a percentage of account size until one of the parameters
is satisfied. Notwithstanding the foregoing, on any day on which a security is
bought or sold in an amount insufficient to satisfy item 1 above for all
eligible accounts, the Tweedy Browne American Value Fund or the Tweedy Browne
Global Value Fund, as the case may be, will not receive an allocation greater
than (i) in the case of a domestic or international security, the product of the
number of shares purchased or sold times a fraction the numerator of which is
the amount of assets of such fund in the category (domestic or international) in
which such security falls and the denominator of which is the total assets under
management by the adviser in eligible international or domestic accounts, as the
case may be; and (ii) in the case of a global security, the product of the
number of shares purchased or sold times a fraction the numerator of which is
the amount of assets of such fund and the denominator of which is the total
assets under management by the adviser.
As an example of an allocation of a global security, if (i) the
percentage of account size target were 1.00% for a particular global security on
a particular day, which equated to 7,000,000 shares and $70 million across an
assumed $7 billion in domestic, international and global eligible accounts, (ii)
1,000,000 shares were acquired that day at $10 per share and (iii) two $50
million eligible accounts were 75% invested, the American Value Fund were $1.7
billion in domestic, international and global securities and 90% invested, and
Tweedy, Browne Global Value Fund were $3.0 billion in domestic, international
and global securities and 90% invested, and all other domestic, international
and global accounts were more than 90% invested, the two most underinvested
accounts would each receive their full 1.00% of assets allotment of 50,000
shares (or 100,000 shares total) and the American Value Fund would receive an
allotment of 242,857 shares (1,000,000 shares x $1,700m/$7,000m = 242,857) and
the Global Value Fund would receive an allotment of 428,571 shares (1,000,000
shares x $3,000m/$7,000m = 428,571), rather than all the remaining shares in
partial fulfillment of both funds' percentage of assets target of 4,700,000
shares (at the $10 price) and one or more other accounts would receive up to
their 1.00% of assets target amount in declining order of available cash as a
percentage of assets. If, for example, the next two least invested accounts were
a $100 million account that was 92% invested and $250,000 account that was 92%
invested, each of these accounts would receive its full 1.00% of assets
allocation of 100,000 shares and 250 shares. Because the percentage of account
size target had not been satisfied across all accounts, the target would likely
remain the same the next day and purchases would be allocated among both funds
and other clients that had not yet received any of the security.
As an example of an allocation of a domestic security, if (i) the
percentage of account size target were .50% for a particular domestic security
on a particular day, which equated to 1,000,000 shares and $20 million across an
assumed $4 billion in domestic eligible accounts (ii) 300,000 shares were
acquired on that day at $20 per share and (iii) two $50 million eligible
accounts were 75% invested, the American Value Fund were $1.5 billion in
domestic securities and 90% invested and all other domestic eligible accounts
were more than 90% invested, the two most underinvested accounts would each
receive their full .50% of assets allotment of 12,500 shares, the American Value
Fund would receive an allotment of 112,500 shares (300,000 shares x ($1.5
billion / $4 billion)) rather than all the remaining shares in partial
fulfillment of its percentage of assets target of 375,000 shares (at the $20
price) and one or more other accounts would receive up to their .50% of assets
target amount in declining order of available cash as a percentage of assets.
If, for example, the next two least invested accounts were a $100 million
account that was 91% invested and a $250,000 account that was 92% invested, each
of these accounts would receive its full .50% of assets allocation of 25,000
shares and 62 shares. However, if the minimum lot size were 100 shares, the
$250,000 account would not receive an allocation until the percentage of assets
target was raised to 1%. Because the percentage of account size target had not
been satisfied across all eligible accounts, the target would likely remain the
same the next day and purchases would be allocated among the American Value Fund
and other clients that had not yet received any of the security.
Unless a specific circumstance intervenes (such as a client direction
to use a particular broker for its account), all lots of a particular security
acquired or sold on a particular day in the U.S. securities markets will be
price averaged over all participating accounts and all lots of a particular
security acquired or sold through a single broker or dealer in a non-U.S.
securities market will be price averaged over all accounts participating in
transactions through that broker or dealer. All participating accounts will pay
brokerage transactions based on the firm's standard brokerage commission
policies, which are based on the size of the account.
Client accounts subject to the advisor's Code of Ethics or its Employee
Trading Policies will be eligible to participate in the foregoing allocations.
However, on any given day the advisor may treat any such account as being an
ineligible account if it believes such treatment is appropriate to prevent any
allocation in favor of such an account that would or might be perceived to be
unfair to the other accounts managed by the advisor.
1 The SEC staff will interpret "high quality short-term debt instrument" to mean
any instrument that has a maturity at issuance of less than 366 days and that is
rated in one of the two highest rating categories by a nationally recognized
rating organization 2 See the attached Exhibit C for the definition of
"Beneficial Ownership."
