BRANDYWINE FUND, INC.
MANAGED BY FRIESS ASSOCIATES, INC.
SEMI-ANNUAL REPORT
MARCH 31, 1997
DEAR FELLOW SHAREHOLDERS:
We are grateful that your Fund held well in the first quarter ended March
despite the hostile environment for the stocks comprising your portfolio. All
major indices declined from their peaks -- the S&P 500 dropped 7.2 percent, the
Nasdaq Industrials slipped 13 percent and the Russell 2000 sagged 7.6 percent.
The Montgomery Securities 500 index was off its high by 21.2 percent.
The 2.7 percent return for the S&P 500 during the quarter masks the performance
of the broader market. As was the case in 1996, the S&P's performance has been
driven by fewer and fewer stocks. Of the 97 mutual funds that Morningstar
categorizes as growth funds, 24 posted losses in excess of 10 percent for the
quarter. -----------------------
Of the 23 funds comprising the Investor's Business Daily Mutual Fund Index, only
THREE increased and each by only 2 percent. The 20 others declined, some by as
much as 19 to 21 percent. (See chart on p.3).
The overall IBD index dropped 8.3 percent, the Hambrecht and Quist Growth index
declined 19.3 percent, and the Nasdaq Industrials slid more than
8 percent.
Your backtracking of 2.1 percent represents an outstanding job by your research
team by comparison.
We are mindful, however, that some of you are new shareholders and have only
experienced this market downdraft. We are particularly committed to getting you
to new highs in the months ahead.
Thanks to urging from your research team members Mark Lapolla and Bill D'Alonzo,
you moved to higher-than-normal cash positions during the quarter as some of
your huge gainers were harvested. Diane Hakala's Intel yielded a profit of
nearly $200 million, Andy Graves' Cisco Systems created a $118 million gain, and
Jon Fenn's Nike brought in $79 million.
It took weeks to select the best new ideas, but the decision to cement these
gains in advance of finding the new ideas served you well and helps account for
your good relative performance.
Exiting networking stocks, resulting from the intensive research efforts with
customers of those companies by your researcher Andy Graves and consultant Hank
Bannister, was particularly timely. Your gigantic winner Cisco was sold at $67.
It has since declined 29 percent to $48. The Investor's Business Daily index for
Local Networks dropped 33 percent during the quarter while the S&P
Computers/Network index skidded 37 percent from its January peak!
Maintaining your portfolio value in backtracking markets is as important, if not
more so, as creating advances in up markets. When the inevitable retracements
occur, it is relevant to look at results from a longer term perspective than a
few weeks. Since January 1995, your Fund is up 66 percent.
Many continue to recognize the validity of a long-term growth objective as
additional investments of $216 million came into your Fund by new and existing
shareholders during the quarter.
For the last five years your Fund is up 137 percent, an average annualized gain
of 18.8 percent, compared to just 114 percent for the S&P 500 and only 51
percent for the Nasdaq Industrials.
MOST RECENT FIVE YEARS
NASDAQ IND. 50.6%
IBD*<F1> 65.0%
LIPPER GROWTH 87.2%
S&P 500*<F1> 113.7%
YOUR FUND*<F1> 136.6%
*<F1>TOTAL RETURN
IBD = INVESTOR'S BUSINESS DAILY MUTUAL FUND INDEX
For the trailing twelve months which include the current market backtracking, as
well as last July's downturn, you are up 15.2 percent.
And, your ten year return of 334 percent, 15.8 percent annualized, wallops the
S&P 500's 250 percent gain. Those of you who have been with us for the last two
years enjoy an average annualized gain of 24 percent, or 54 percent cumulative.
The uncertainty of the interest rate environment cleared at the end of the
quarter when the Federal Reserve Board's Open Market Committee raised the
discount rate by 1/4 percent. This is the first action the Fed has taken in more
than one year and the first rate hike since early 1995. The increase was
construed as a preemptive strike against future inflation. It may not be the
last.
The increased volatility in the technology area allowed you to repurchase shares
of networking, computer and software companies at "ON SALE!" prices. Probable
positive earnings surprises, reasonable price/earnings ratios, and above all,
dynamic products and services that will drive investor confidence going forward
create enthusiasm among your research team for your new purchases.
Your biggest dollar gainer during the quarter was semiconductor manufacturer
Advanced Micro Devices purchased in January by David Harrington. Already, it has
brought in more than $40 million, rising 22 percent.
Some of your biggest percentage gainers during the quarter were John Ragard's
Healthsource, up 59 percent and Mark Lapolla's Kellstrom Industries which
increased 34 percent. Jon Fenn's Burlington Coat Factory and Hollywood
Entertainment, recommended by consultant Pete Steelman, both rose 32 percent.
Carl Gates' ESC Medical Systems, increased 31 percent and the suggestion from
your Tulsa-based consultant Conrad Doenges of Goodys Clothing, rose 29 percent.
We are encouraged that the companies you own experienced earnings growth
averaging 49 percent for the latest 12 months and 51 percent in the most recent
quarter. This compares to 13 percent and 17 percent for the S&P 500. You
purchased these companies at price/earnings ratios of about 18, virtually equal
to the market as measured by William O'Neil and Company, the publishers of
Investor's Business Daily.
COMPANY GROWTH
AVERAGE INCREASE LATEST 12 MOS. EARNINGS
YOUR COMPANIES 49%
S&P 500 13%
AVERAGE INCREASE LATEST QUARTERLY EARNINGS
YOUR COMPANIES 51%
S&P 500 17%
ALL S&P FIGURES ARE UNWEIGHTED. ANALYSIS BY WILLIAM O'NEIL & CO., INC. MARCH 28,
1997.
We remain steadfast to our credo "Never Invest in the Stock Market, Invest in
Individual Companies." Your research team of over thirty professionals continues
to use its ever growing information network to create an edge over other
investment management firms.
This network includes corporate managements and suppliers, competitors and
customers of the companies that you own.
We appreciate the fact that you are an important part of that network as well.
Please e-mail Kelli Fazler at [email protected] or fax her at 302-656-9015 if you
see developments in companies that we should know about.
Conditions in the U.S. economy remain healthy for a continuation of the current
expansion, and therefore increasing corporate profits. This expansion can
continue without a major resurgence in inflation due in large part to the
cautious actions of the Fed.
We appreciate the partnership that we forged with you, as we remain invested
right along with you having over $40 million in the Fund from Friess Associates
and family members.
One of your largest and longest standing fellow shareholders, the Nobel
Foundation, continues the relationship that has spanned more than two decades.
Nobel has been in your Fund nearly since its inception on December 31, 1985.
Since that date, your Fund has enjoyed a 560 percent cumulative increase in
value, 18.3 percent annualized.
SINCE INCEPTION
IBD*<F2> 207.4%
NASDAQ IND. 208.3%
LIPPER GROWTH 312.5%
S&P 500*<F2> 404.7%
YOUR FUND*<F2> 560.4%
*<F2>TOTAL RETURN
We are pleased to remain No. 1 by Lipper Analytical for the last ten years ended
March 31, 1997 among no-load growth funds still available to new investors. This
inspires us to greater efforts in the next ten years.
We look forward to being able to create the same growth for all of you, and are
grateful for the chance we have to put our strategy to work to grow your assets.
Thank you for entrusting to us this significant responsibility and for your
continued confidence in our abilities throughout good and bad markets. We
appreciate your sharing our long-term perspective.
God Bless!
/s/ Foster Friess
Foster Friess
President
April 3, 1997
MARCH QUARTER PERFORMANCE OF BRANDYWINE FUND
AND OTHER FUNDS IN IBD'S MUTUAL FUND INDEX
- -21%
- -20%
- -19%
- -16%
- -16%
- -14%
- -14%
- -13%
- -12%
- -12%
- -11%
- -10%
- -7%
- -5%
- -2%
- -2%
- -2%
- -2%
0%
0%
2%
2%
2%
- -8.3 ---average % decline of 23 Funds
HIGHLIGHTS . . .
APPAREL & SHOES
With such well-known labels as Jones New York, Evan-Picone and Lauren by Ralph
Lauren, JONES APPAREL GROUP, INC. enjoys a reputation for a high-quality,
stylish product. These top lines offer the consumer high profile clothing at
affordable prices benefiting from strong career and casual offerings for women.
As Chief Financial Officer Wes Carl tells us, Jones Apparel's advancement lies
in part because the company successfully landed the Lauren line in 1996 and
ended the year with Lauren in 275 stores, with sales of $50 million.
Customers like department stores Dillards and Nordstrom love your NYSE-listed
company's consistent, fashionable product and continue to give Jones more retail
selling space, accelerating growth.
During the recent December quarter, revenues rose 40 percent to $258 million, up
from $185 million last year. Earnings, in turn, jumped 36 percent to $.30 from
$.22.
Purchased in December of '95 at $20, your shares are up 85 percent to $37.
COMPUTERS & RELATED
If you want to print color copies from your PC, you'll need the server made by
SPLASH TECHNOLOGY HOLDINGS, INC. Your company develops, produces, and markets
open-platform color servers that link desktop computers and digital color laser
copiers. As the color copying business grows 35-40 percent per year, your
company is flourishing.
For the December quarter, revenues escalated 114 per-cent, jumping to $15
million from $7 million. Earnings came in at $.29 compared to just $.02 last
year!
The biggest name in copying -- Xerox -- is one of your company's largest
customers, along with Fuji Xerox in Japan.
Splash's servers connect computers to copiers, allowing graphic artists,
architects, illustrators, and other color users to edit, manipulate, and print
color documents. Industry experts expect the color server market to grow from
$400 million in '96 to $1 billion by 2000.
Most businesses use the Windows 95 environment found in IBM compatible
computers. Chief Financial Officer Joan Platt recently told us that Splash is
developing plans to accommodate the Windows NT environment and will be releasing
products for Windows this year. Splash already makes products for Macintosh
which many individual artists use.
Soaring 127 percent, your shares are now worth $25, up from their October $11
purchase price.
HEALTHCARE
In the last five years, GENESIS HEALTH VENTURES, INC. has been recognized
numerous times for its excellent healthcare services to the elderly with awards
from such well-known organizations as Merrill Lynch, Temple University, Modern
Healthcare, and Inc. Magazine.
Your company's extensive healthcare network, located primarily in the eastern
United States, includes everything from geriatric care facilities and clinics to
pharmacies and medical supply distribution centers.
What differentiates your company from many competitors is that it provides high-
quality medical services in a patient's home. Chief Financial Officer George
Hager explains that the new system, Genesis ElderCare Net Link, coordinates all
these home services on-line, resulting in lower operating costs.
Revenues in the recent December quarter exploded 95 percent to $259 million from
$133 million, driving earnings to $.33 from $.25, a 30 percent climb.
Your shares rose 15 percent to $31.25 from their September purchase price of
$27.
SPECIALTY RETAILING
A spin-off of Melville Corporation, FOOTSTAR, INC. is debt-free, is consistently
beating earnings expectations, and yet only now is gaining recognition on Wall
Street.
Relatively undiscovered, this retailer of both athletic and discount footwear
through its two operating divisions, Footaction, which sells brand name athletic
footwear and apparel, and Meldisco, which sells discounted footwear within Kmart
stores, presented a great investment opportunity for your Fund.
Your NYSE-listed company now attracts more investors since Merrill Lynch and
Alex Brown both initiated coverage in March with buy ratings, and it's still
trading at a discount compared to its peer companies.
We recently learned from CFO Carlos Alberini that due to the success of the
Footaction stores, your company's growth in new square footage for 1997 will be
more than 26 percent.
The December quarter showed earnings rising 23 percent from $.64 last year to
$.79. Analysts predict that earnings will increase 67 percent in the March
quarter.
Since purchase in October at $21, your shares jumped 41 percent and now sell at
$30.
SEMICONDUCTORS & RELATED
Large computer and telecommunications companies such as IBM, Intel and Toshiba
use SEMTECH CORPORATION'S semiconductor products, including its voltage
suppressors and regulators.
According to David Franz, CFO, demand among personal computer companies for
Semtech's products increased as the "mother board" -- the brain of the computer
- -- now needs two voltage regulators instead of just one for the earlier
generations of computers.
For the fiscal year 1997, revenues climbed 21 percent to $65 million. Analysts
expect earnings to rise 30 percent in the upcoming April quarter, coming in at
$.39 compared to $.30 last year.
Selling today at $20.25, your shares are up 55 percent from their purchase price
of $13 in September.
FELLOW SHAREHOLDER . . .
When one thinks "family portraits," there is probably one name that comes to
mind for many Americans more than any other -- Olan Mills. We are thrilled to
have both the company and the man, Olan Mills II, as fellow shareholders in
Brandywine and Brandywine Blue Fund.
Olan is currently Chairman of the Board at Olan Mills, after serving for many
years as the company's President and Chief Executive Officer. He is still active
in the business, meeting often with the new President and CEO (who is the first
outside the family to hold this position).
In Tuscaloosa, Alabama, Olan's father started the business when he took over an
old studio. The company began as a reproduction operation where Olan, Senior
would take old prints and return them as higher quality photos. An artist who
he met while reproducing these prints later became his wife, and together they
built Olan Mills Incorporated.
During the depths of the Depression, in 1932, many banks closed and so did the
itinerate reproduction business. But, after finding a bankrupt studio, Olan,
Senior launched a straight photography business. He traveled to small towns
bringing first class photography services and marketing his product door to
door.
He would sell a photo sitting to a family, the photographer would go to the home
and take the pictures, make the proofs overnight, show them to the family for
their selection, and then send the finished portrait through the mail. The
business continued in this fashion until the 1950's, when studios started
opening in various major U.S. cities.
Today, with headquarters in Chattanooga, Tennessee, Olan Mills operates more
than 1,000 portrait studios in the United States, Canada, and England with
13,000 employees, and is one of the foremost producers of church directories in
the U.S.
The younger Olan joined the family business in 1956 as Manager of Olan Mills of
Tennessee, following more than two years in the Army, during which he served in
Korea as a helicopter pilot. Prior to his Army service, Olan attended Princeton
University where he studied Public and International Affairs. In 1971 he assumed
management of Olan Mills U.S.
Introduced to Brandywine Fund about two years ago, Olan describes the
relationship as refreshing. "The communications are excellent, and the
information they contain is very helpful. The letters and quarterly reports
Foster spends the time to send lend a personalized feel to a business where that
often gets lost."
Olan and his wife Norma have three sons who all live in the Chattanooga area.
Given that Olan and Norma just became grandparents five weeks ago, having the
family close is a real blessing, allowing for frequent visits!
Serving on the Boards of The McCallie School, First Tennessee Bank of
Chattanooga, and the Public Education Foundation, Olan still finds the time to
enjoy reading, jogging, skiing, and traveling.
- -Rebecca Buswell
ED . . .
Looking back over his first year in the trading operation at Friess Associates,
Ed Abrams can point to a long list of changes. "We have moved the entire trading
operation, added two traders, installed a new telephone system and implemented a
more powerful version of our trading system -- Merrin. During the same period of
time the assets under management have almost doubled." Certainly, Ed's extensive
experience was instrumental in our ability to accommodate this growth.
Before joining the Friess team, Ed managed the trading operation in Philadelphia
for Lehman Brothers for five years. Prior to that, he spent two years at First
Boston following a seven-year stint as Associate Managing Director at Schroeder
Wertheim.
In the financial markets, brokerage firms are described as the "sell side" of
the business and investment firms like Friess Associates are called the "buy
side." Ed brings his broad background on the "sell side" to our "buy side"
trading desk.
Ed's job is intense and technical, but he says, in more simple terms, "My task
is essentially to move in and out of large blocks of stock at prices favorable
to our clients and shareholders." His greatest satisfaction comes from
accomplishing a large trade without disturbing the marketplace.
"In the thirty years I have been on Wall Street I have never experienced the
wonderful camaraderie that exists here at Friess Associates," is Ed's assessment
of the past year.
Ed grew up on Long Island where he attended Chaminade High School before
graduating from Mount Saint Mary's College in Maryland. He has two grown sons,
Michael, a Managing Director at Prudential Insurance, and Gary, who has followed
in his father's footsteps as a trader at Delaware Investment Management.
An all-around athlete, Ed's tennis, golf, and skiing have been severely limited
by a recent broken ankle. Considering the pace of his first 14 months at
Friess, Ed probably needed some time with his feet up.
- -Margaret Barton
ON THE CUTTING EDGE . . .
FALLING ASLEEP AT THE WHEEL?
Precision Control Design, Inc. in Fort Walton Beach, Florida has developed the
Sleep Watch to help truckers and railroad engineers manage fatigue, a leading
cause of accidents. Inside the cab, a motion detector and a microprocessor
monitor wrist movements, which are markedly different when a person is asleep.
The Sleep Watch can alert the wearer when he is not alert enough to fly a plane
or drive a truck. The device is in the early stages of production.
HEATED WALLS
French inventors have come up with a way to heat the walls of a room to 68TF in
a few minutes by mixing conductive tin and antimony oxides into a paint and then
hooking up electrodes to a 12-volt battery. This "electric paint" is similar to
the rear window defrosters on automobiles and may someday replace your
radiators.
PEGGY . . .
In November 1994, Margaret "Peggy" Barton came on board to get Friess Associates
on the Internet and to make sure that the researchers were covering all the
important financial magazines and trade journals. Peggy reads and recaps
articles and magazines for your team, researches and writes articles for this
report, and handles a myriad of other projects.
Last spring Peggy organized a small conference for various retail company
executives and members of your research team, and this past December she
assisted Lynn Friess in planning the Friess Associates Christmas gathering,
which, given the growth of the company, is now a mammoth undertaking.
Peggy explains, "I really enjoy the variety of projects I work on, and it is
rewarding to know I have delivered useful information to our researchers and,
through the quarterly report, directly to our shareholders. Whether I am
condensing materials, organizing events, or tackling special projects for
Foster, I know I am leveraging his and the researchers' effectiveness, thereby
increasing the value of our clients' and shareholders' portfolios."
A graduate of Mount Holyoke College, Peggy has a degree in Art History. She and
her husband Randy, a scientist with the DuPont Company, have one son who was
just married in June.
One of Peggy's favorite pastimes is gardening, so she is an enthusiastic
participant in her garden club. In 1989 this group resolved to improve the
appearance of Wilmington's downtown Rodney Square area. Eventually the group
rallied the support of both the private and public sectors and raised $2.5
million for the project. "I am very pleased to be a small part of this
restoration project and to see the difference it is making in our city."
Another special interest of Peggy's, the Delaware Antiques Show, supports the
children's educational programs at Winterthur. Held annually two weekends before
Thanksgiving, the show draws the finest dealers in American antiques.
To get the energy she needs for her busy life, Peggy starts most days with an
early morning aerobics class. In her spare time she enjoys tennis, paddle
tennis, and is taking up golf.
- -Rebecca Buswell
ALL IS NOT ROSES . . .
It's important to share with you those stocks that didn't perform as well as we
had hoped during the quarter. There were six companies that gave up more than
$15 million each.
3Com Corp was your biggest disappointment dropping back by nearly $47 million.
Toys R Us lost $20 million, Staples backtracked $19 million, Chesapeake Energy
and CompUSA retraced $17 million apiece, while Seagate Technology lost $16
million. You no longer hold Chesapeake, Toys R Us, or 3Com. The latter was sold
at a profit of $19 million despite its decline. It subsequently dropped $23 a
share, a 42 percent decline, after your sale.
The good news is, your top gainers for the quarter were Advanced Micro Devices
with a $41 million gain, Intel's $37 million rise, Dell Computer's $26 million,
Schlumberger with $20 million, Conseco with $16 million and Nike and Cisco with
$15 million each.
Together, your six top gainers exceeded by $18 million your six biggest
retreaters.
GROWING YOUR FUND . . .
Each quarter, we are pleased to introduce you to one of the many contributors at
the companies in which we invest. It is their talents and skills which create
profits in their companies which in turn add value to your Fund.
This quarter, meet J. R. Caton of Quorum Health Group, a company which offers
leadership, education, and strategic planning to small, independent hospitals.
J. R. is the CEO of Logan Hospital and Medical Center in Guthrie, Oklahoma, a 50
bed hospital in a community of 11,000 good Americans.
Quorum Health Group owns and operates 18 hospitals, but it also manages 260
additional hospitals in 44 states, such as the hospital in Guthrie. J. R. has
worked for Quorum since 1988, and before coming to Guthrie 14 months ago, he
headed the hospital in Atoka, Oklahoma.
As the director of a small medical center, J. R. wears many hats. He tackles
public relations and customer complaints while overseeing the staff and
reporting to the board. On the day we spoke with him, J. R. had started his day
at 7:00 AM with a staff meeting and was hoping to get home by 9:00 PM after a
Chamber of Commerce meeting.
J.R. has implemented changes at Logan which have converted an annual loss of a
quarter of a million dollars to a profit of one million dollars.
J. R. is a modest man, but he reflected, "In my job you realize how important it
is to be a contributing member of society. I really believe that I make a
difference. I think Atoka is in good shape, but I thought Guthrie needed help
and I wanted to try to improve it.
"Years ago people were skeptical about outside management teams. Now, because of
our reputation and our ability to turn around regional hospitals, we are
enjoying their respect. I am pleased I work for this company."
- -Margaret Barton
HUBIE . . .
In October, 1987, Hubie Selz responded to an ad in the paper for a driver at
Friess Associates thinking he'd "try it out" if he were hired. Now, nearly ten
years later, Hubie is still here and says, "I've never had a more enjoyable ten
years in my work. Everyday there's something new. With Foster and everyone at
Friess, each day brings the unexpected."
Hubie is part of a four-man team responsible for driving your researchers to
company meetings, to client presentations, and to the airport and train station
for their many out of town trips.
He also picks up visiting clients and brings them to our offices and has had the
opportunity to meet with many CFO's and CEO's as well as dignitaries such as
Baron Stig Ramel, former President of the Nobel Foundation which is one of your
longest standing and largest fellow shareholders. Last year, Hubie's most famous
passenger was Charlton Heston!
"Being part of the mission to grow the assets entrusted to us is such a
privilege," Hubie explains. "Knowing that the researchers are able to focus more
closely on their work rather than having to fret about how they'll get from one
meeting to the next and how they'll make their flight is rewarding."
Senior researcher Bill D'Alonzo relates, "Hubie's work is invaluable to all of
us. We never have to worry about any of the travel details because he's always
there to handle it. We can get in the van and keep right on working." Each
Friess Associates van is equipped with a fax and telephone.
Before joining Friess, Hubie worked for 30 years at DuPont as a research
technician. He started in the Engineering Department and then went to the
Central Research Department. His focus was on fiber wear and friction studies.
Hubie grew up in Cincinnati, and right after graduating from high school, he
enlisted in the Navy and fought in World War II. After boot camp in Newport,
Rhode Island, he was assigned to the USS Quincy CA39 and went through the
Caribbean and the Panama Canal to San Diego and finally to Guadal-canal. While
there, the Japanese sunk his 1200-man ship and Hubie clung to a liferaft for
hours before being rescued. Nearly 600 men aboard perished.
Following his discharge in 1945, Hubie began his studies at Ohio University
earning a Bachelor of Fine Arts in Commercial Art & Advertising. While there,
he met Nancy, who later became his wife and the mother of his two children,
Randy and Cheryl.
Hubie is an avid golfer, playing three or four times a week during the warmer
months. He was the senior champion at the DuPont Country Club in 1983, '86, and
'92 and laments that his then 3 or 4 handicap is now more like 8 or 9!
- -Rebecca Buswell
KERRY . . .
When Kerry Polini came to Friess Associates through an agency to fulfill a
temporary staffing requirement in the Fall of 1994, she had no idea that in
April 1995 she would once again be called back to fulfill another temporary
need. That second temporary spot turned permanent, and Kerry came on board full
time in September 1995.
Kerry's superb organizational skills and attention to details made her the
perfect candidate to augment your operations team's ability to meet the demands
of our increasing growth.
She assumed the responsibilities of handling shareholder inquiries, assembling
materials for client and potential client meetings, maintaining all office
supplies -- from paper to printers -- and tracking the whereabouts of all Friess
team-mates in each of our four offices.
The very same qualities that fueled Kerry's success in operations led to her
leaving that area and moving into research to become Jack Fraser's research
manager. Jack recognized Kerry's quick thinking and thorough follow through and
believed they would make a good team.
"Kerry is a terrific resource for me. She keeps track of all that I'm handling
and she never lets anything fall through the cracks. In short, she manages me!"
Jack exclaims.
Kerry enjoys the daily challenges that are part of having more than $11 billion
under management. "Knowing that my efforts in working with Jack -- making sure
he can concentrate on research and management -- help to grow the assets
entrusted to us makes this job very rewarding."
Born and raised in Delaware, Kerry attended the University of Delaware and
earned a BA in Psychology. She worked at MBNA and Olsten Staffing Services
before joining Friess Associates.
Kerry's favorite spot is the beach. She spent her summers on Delaware's coast
with her family throughout much of her childhood and once June rolls around, she
still grabs every chance she can to get there on the weekends. Cooking, reading,
and traveling are other activities Kerry enjoys, and she's a regular at the YMCA
three times a week for her workout!
- -Rebecca Buswell
FUND ADVISER . . .
With close to 10,000 mutual funds to choose from in the marketplace, selecting
the right one can seem an overwhelming task. Thankfully, there are firms out
there like Wetherby Asset Management with money managers like Bill Vlahos who
know the industry well and can offer sound investment advice to its clients.
Founded in 1990, San Francisco-based Wetherby Asset Management has $170 million
under management with 70 percent of its clientele made up of individuals, and
the remaining 30 percent comprised of small institutional accounts including
endowments and pension plans.
Bill explains the selection process is two-fold: the client's perspective --
individual objectives, tax situation, risk tolerance, and cash flow requirements
- -- and the mutual fund's characteristics -- risk adjustment returns, volatility,
and performance relative to major indices like the S&P 500. Once he has this
information established, Bill can narrow the choices for his client's portfolio
down to the correct fund.
"We talk with managers to determine more about their style, and what makes them
buy and sell companies," Bill relates. "A strong track record is an especially
important factor for us. Managers must show solid performance for at least ten
years and be in the top quartile to attract our attention."
Brandywine Fund caught Bill's eye back in 1992. "Few managers know their
companies as well as Brandywine Fund does, and what is particularly impressive
to us is that even as Brandywine's assets have grown, the Fund's returns
continue to be at the top. Performance hasn't deteriorated," says Bill.
According to Bill, last year was a tough year for mid-cap stocks, yet
Brandywine, with a high concentration in mid-cap stocks, still garnered solid
results.
Bill earned a BA in Political Science from UCLA, and took several courses in
economics as he has always been interested in investment management. Other than
scouring the mutual fund universe, Bill enjoys skiing, tennis, and lacrosse. He
is also active in a group called the Guardsmen, which works to raise funds to
send underprivileged kids to summer camp.
- -Rebecca Buswell
TOP TEN . . .
You saw considerable changes in your Top Ten Industry Groups in the second
quarter of your fiscal year. Last quarter's number two group, Computers &
Related, surpassed Specialty Retailing for the number one spot. It grew from
12.8 percent of the portfolio to 15 percent aided by increases in value in
Banctec, Inc., Innovex, Inc., and Data General Corp. of 24 percent, 19 percent
and 17 percent.
New to your portfolio are Lexmark, Inc. and Seagate Technology. A combined $35
million gain in your Dell Computer, EMC Corp., and Quantum Corp. positions also
helped increase this category.
Oil/Gas Field Services was number three in your December quarter with 12.3
percent. It is now number seven with 4.9 percent. BJ Services, Global Marine,
Inc., Marine Drilling, Reading & Bates, and Schlumberger Ltd. were all sold from
your portfolio with nearly $104 million in gains.
Moving up from number six last quarter to become your second largest industry
group is Semiconductors & Related. Purchases in Advanced Micro Devices, LSI
Logic, Jabil Circuit, Inc., Micron Electronics, Inc., and Xilinx fueled this
sector's growth to 11.7 percent of your portfolio.
The addition to your National Semiconductor holding and its subsequent $8.5
million gain was also a factor. Thanks to David Harrington's pick of Advanced
Micro Devices you gained $40.7 million since your purchase, thus this sector's
more meaningful position.
Timely sales in Networking removed that group completely from your Top Ten this
quarter. Healthcare with 3.1 percent now occupies the number ten spot.
TOP TEN INDUSTRY GROUPS
Cash 13.5%
Healthcare 3.1%
Communications 4.0%
Department Stores 4.4%
Oil/Gas Field Services 4.9%
Apparel & Shoes 5.2%
Financial/Business Services 5.9%
Software 6.4%
Specialty Retailing 11.4%
Semiconductors & Related 11.7%
Computers & Related 15.0%
All Others 19.0%
KUDOS FOR YOUR FUND . . .
O MONEY -- Brandywine Fund named as one of "11 Superior Funds to Buy Now. No
matter what your investing goals are (or what happens in '97), you'll win in the
long run by investing in the rare stars that consistently outshine their peers."
February 1997
- -------------
O LOUIS RUKEYSER'S MUTUAL FUNDS -- Brandywine called " . . . an impressively
consistent high performer . . ." February 1997
-------------
o ENTREPRENEUR -- "Over time, the fund (Brandywine) has been more rewarding than
almost any other offering with a similar investment style . . . Brandywine has
typically outperformed most rivals." March 1997
----------
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
March 31, 1997
(Unaudited)
QUOTED
MARKET
SHARES COST VALUE
- ------ ---- -------
COMMON STOCKS - 86.5% (A)<F4>
APPAREL & SHOES - 5.2%
125,800 Authentic Fitness Corp. $1,894,614 $1,855,550
60,000 Brown Group, Inc. 1,024,500 997,500
281,400 Farah Inc.*<F3> 2,388,769 2,814,000
780,000 Fruit of the Loom, Inc.*<F3> 27,984,546 32,370,000
336,200 Genesco Inc.*<F3> 2,997,606 3,782,250
1,389,600 Gucci Group, N.V. 99,677,049 100,224,900
1,013,500 Intimate Brands, Inc. 18,630,261 19,129,812
1,027,400 Jones Apparel Group, Inc.*<F3> 20,555,815 38,142,225
2,091,200 Liz Claiborne, Inc. 59,394,005 91,228,600
1,002,300 Russell Corp. 37,862,593 35,832,225
263,500 St. John Knits, Inc. 11,776,931 11,396,375
81,400 Timberland Co.*<F3> 3,574,626 3,571,425
279,600 Vans, Inc.*<F3> 4,024,593 3,285,300
446,000 The Warnaco Group, Inc. 12,585,122 13,268,500
------------- -------------
304,371,030 357,898,662
THIS SECTOR IS 17.6% ABOVE YOUR FUND'S COST.
AUTOMOTIVE & RELATED - 0.5%
194,500 Arvin Industries, Inc. 4,607,921 4,546,437
550,700 MascoTech, Inc. 11,477,769 11,289,350
47,100 Quaker State Corp. 737,191 724,163
413,800 SPX Corp. 11,606,318 18,776,175
------------- -------------
28,429,199 35,336,125
THIS SECTOR IS 24.3% ABOVE YOUR FUND'S COST.
BUILDING & RELATED - 0.1%
181,400 Kaufman & Broad Home Corp. 2,523,868 2,403,550
150,000 Pacific Greystone Corp.*<F3> 1,673,330 1,875,000
------------- -------------
4,197,198 4,278,550
THIS SECTOR IS 1.9% ABOVE YOUR FUND'S COST.
COMMUNICATIONS - 4.0%
448,000 ACC Corp.*<F3> 14,454,050 9,968,000
924,300 Andrew Corp.*<F3> 30,850,290 33,390,337
924,300 Andrew Corp. Rights (attached)*<F3> 0 0
1,278,900 Ascend Communications, Inc.*<F3> 63,506,673 52,115,175
692,600 Aspect Telecommunications Corp.*<F3> 18,697,124 13,505,700
412,000 Boston Technology, Inc.*<F3> 10,601,492 7,776,500
558,500 CellStar Corp.*<F3> 11,912,657 11,868,125
70,200 Dycom Industries, Inc.*<F3> 832,913 851,175
372,000 Dynatech Corp.*<F3> 12,676,674 11,160,000
87,100 Interlink Computer Sciences,Inc.*<F3> 1,077,862 925,437
546,000 MasTec, Inc.*<F3> 11,352,728 15,424,500
132,100 MICROS Systems, Inc.*<F3> 4,194,879 4,606,988
295,200 Olicom A/S*<F3> 5,237,968 4,538,700
1,627,200 Scientific-Atlanta, Inc. 30,155,470 24,814,800
2,242,700 Tellabs, Inc.*<F3> 42,601,334 81,017,538
147,400 Transcrypt International Inc.*<F3> 1,215,448 1,068,650
------------- -------------
259,367,562 273,031,625
THIS SECTOR IS 5.3% ABOVE YOUR FUND'S COST.
COMPUTERS & RELATED - 15.0%
1,400,000 Adaptec, Inc.*<F3> 27,416,669 50,050,000
1,249,800 American Power Conversion Corp.*<F3> 19,857,406 27,026,925
150,000 APEX PC Solutions,Inc.*<F3> 1,377,500 1,275,000
182,700 BancTec, Inc.*<F3> 3,904,989 4,658,850
135,000 CHS Electronics, Inc.*<F3> 2,102,500 2,750,625
2,213,600 Compaq Computer Corp.*<F3> 124,344,982 169,617,100
982,000 Data General Corp.*<F3> 13,966,931 16,694,000
3,351,400 Dell Computer Corp.*<F3> 137,577,926 226,638,425
3,493,700 EMC Corp. (Mass.)*<F3> 104,716,110 124,026,350
66,900 Innovex, Inc. 1,373,989 1,639,050
151,300 Interface, Inc. 3,597,570 3,792,032
289,100 Iomega Corp.*<F3> 4,229,706 4,697,875
976,700 Lexmark International Group, Inc.*<F3>27,651,973 23,684,975
160,000 Pomeroy Computer Resource, Inc.*<F3> 3,975,957 3,160,000
175,000 Procom Technology, Inc.*<F3> 1,629,220 1,837,500
1,444,400 Quantum Corp.*<F3> 57,482,119 55,789,950
518,600 Read-Rite Corp.*<F3> 13,627,228 13,094,650
235,000 SBS Technologies, Inc.*<F3> 6,237,750 3,583,750
4,010,100 Seagate Technology, Inc.*<F3> 196,464,637 179,953,237
140,000 Splash Technology, Inc.*<F3> 1,543,060 3,500,000
485,400 Stratus Computer, Inc.*<F3> 11,467,158 15,047,400
1,630,700 Western Digital Corp.*<F3> 59,193,182 92,338,388
------------- -------------
823,738,562 1,024,856,082
THIS SECTOR IS 24.4% ABOVE YOUR FUND'S COST.
COMPUTER SYSTEMS - 0.1%
249,200 Sequent Computer Systems, Inc.*<F3> 3,603,801 3,738,000
THIS SECTOR IS 3.7% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 4.4%
342,000 Ames Department Stores, Inc.*<F3> 2,823,563 3,120,750
1,605,500 Consolidated Stores Corp.*<F3> 44,146,521 56,593,875
546,900 Family Dollar Stores, Inc. 11,129,981 12,783,787
6,111,400 Federated Department Stores, Inc.*<F3>199,726,916 200,912,275
222,800 Proffitt's Inc.*<F3> 5,052,446 8,410,700
659,800 Saks Holdings Inc.*<F3> 18,961,370 18,969,250
------------- -------------
281,840,797 300,790,637
THIS SECTOR IS 6.7% ABOVE YOUR FUND'S COST.
DISTRIBUTION - 0.8%
214,000 Black Box Corp.*<F3> 6,203,491 5,751,250
318,800 InaCom Corp.*<F3> 9,241,993 7,252,700
481,100 MicroAge, Inc.*<F3> 7,089,896 6,494,850
541,800 Tech Data Corp.*<F3> 8,288,779 13,070,925
1,011,300 U.S. Office Products Co.*<F3> 33,062,692 25,029,675
------------- -------------
63,886,851 57,599,400
THIS SECTOR IS 9.8% BELOW YOUR FUND'S COST.
ELECTRICAL EQUIPMENT MANUFACTURERS - 0.4%
399,500 AAR Corp. 9,793,793 11,985,000
455,300 BE Aerospace, Inc.*<F3> 10,175,055 11,154,850
115,900 Precision Castparts Corp. 6,000,281 5,910,900
------------- -------------
25,969,129 29,050,750
THIS SECTOR IS 11.9% ABOVE YOUR FUND'S COST.
ELECTRONICS - 1.8%
337,200 AVX Corp. 7,661,081 7,039,050
165,500 Berg Electronics Corp.*<F3> 4,638,055 4,716,750
409,800 KEMET Corp.*<F3> 9,226,983 7,683,750
153,000 Reptron Electronics, Inc.*<F3> 2,505,375 3,117,375
1,198,400 SCI Systems, Inc.*<F3> 49,787,709 60,669,000
124,600 Technitrol, Inc. 2,607,263 2,336,250
540,200 Tektronix, Inc. 26,971,233 27,280,100
388,300 Waters Corp.*<F3> 11,394,782 10,387,025
------------- -------------
114,792,481 123,229,300
THIS SECTOR IS 7.3% ABOVE YOUR FUND'S COST.
FABRIC/TEXTILES - 0.6%
172,600 Kellwood Co. 3,649,600 4,315,000
200,000 Pluma Inc.*<F3> 2,456,347 2,400,000
375,900 Unifi, Inc. 11,829,322 11,464,950
648,200 WestPoint Stevens Inc.*<F3> 21,143,980 24,712,625
------------- -------------
39,079,249 42,892,575
THIS SECTOR IS 9.8% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 5.9%
383,200 Aames Financial Corp. 8,881,304 7,759,800
569,100 AmeriCredit Corp.*<F3> 9,812,912 9,888,112
54,600 AmeriTrade Holding Corp.*<F3> 1,115,386 853,125
822,800 AMRESCO, Inc.*<F3> 17,718,813 13,781,900
365,100 BA Merchant Services Inc.*<F3> 5,633,006 5,020,125
259,100 Comdisco, Inc. 7,842,820 8,064,487
202,200 Consolidated Graphics,Inc.*<F3> 4,892,225 5,787,975
4,379,800 Conseco, Inc. 115,788,782 156,030,375
517,500 COREStaff Inc.*<F3> 11,902,978 10,220,625
615,900 Credit Acceptance Corp.*<F3> 11,765,092 10,932,225
85,000 Data Processing Resources Corp.*<F3> 1,533,438 1,593,750
998,700 Diebold, Inc. 36,263,532 37,576,087
813,300 FIRSTPLUS FINANCIAL*<F3> 25,983,974 24,500,662
185,000 Metro Information Services,Inc.*<F3> 3,130,000 2,335,625
112,800 MGIC Investment Corp. 7,048,804 7,980,600
453,300 The Money Store, Inc. 11,798,347 9,519,300
1,129,100 Nationwide Financial Services Inc.*<F3>30,190,170 29,074,325
249,000 Personnel Group of America, Inc.*<F3> 3,773,595 4,886,625
361,900 The PMI Group, Inc. 16,464,310 18,140,238
160,200 Pre-Paid Legal Services, Inc.*<F3> 2,562,146 2,382,975
250,500 Provident American Corp.*<F3> 3,313,750 2,348,438
116,300 RemedyTemp, Inc.*<F3> 1,614,462 1,802,650
308,900 StaffMark, Inc.*<F3> 4,048,746 4,054,313
235,000 Ugly Duckling Corp.*<F3> 4,363,938 4,318,125
692,700 United Companies Financial Corp. 18,748,398 14,286,938
46,900 US Rental,Inc.*<F3> 847,638 850,062
320,200 Valassis Communications, Inc.*<F3> 5,929,859 7,164,475
135,000 Warrantech Corp.*<F3> 1,074,375 1,215,000
------------- -------------
374,042,800 402,368,937
THIS SECTOR IS 7.6% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 0.6%
388,300 CKE Restaurants, Inc. 3,285,258 8,591,137
585,000 Cracker Barrel Old Country
Store, Inc. 16,387,793 15,283,125
697,000 Food Lion Cl A 5,434,353 5,707,036
353,400 Food Lion CL B 2,747,196 2,838,155
104,500 JP Foodservice, Inc.*<F3> 2,384,663 2,886,813
376,550 ShowBiz Pizza Time, Inc.*<F3> 7,054,644 6,589,625
------------- -------------
37,293,907 41,895,891
THIS SECTOR IS 12.3% ABOVE YOUR FUND'S COST.
HEALTHCARE - 3.1%
2,328,600 Beverly Enterprises, Inc.*<F3> 33,781,953 33,182,550
550,000 Cardinal Health, Inc. 33,112,301 29,906,250
1,534,500 Columbia/HCA Healthcare Corp. 65,761,582 51,597,562
357,500 Genesis Health Ventures, Inc.*<F3> 9,677,465 11,171,875
2,005,900 HEALTHSOUTH Corp.*<F3> 35,007,375 38,362,838
317,500 Medical Manager Corporation*<F3> 3,502,437 3,016,250
1,046,892 MedPartners, Inc.*<F3> 20,553,529 22,246,455
182,000 Multicare Companies Inc.*<F3> 3,388,270 3,435,250
267,700 Orthodontic Centers of America Inc.*<F3>3,479,371 3,613,950
327,200 Quorum Health Group, Inc.*<F3> 7,847,270 10,102,300
150,000 Specialty Care Network*<F3> 1,200,000 1,500,000
------------- -------------
217,311,553 208,135,280
THIS SECTOR IS 4.2% BELOW YOUR FUND'S COST.
HOME/OFFICE & RELATED - 0.6%
790,800 Apogee Enterprises, Inc. 13,635,848 15,618,300
572,200 Heilig-Meyers Co. 9,588,528 9,083,675
145,000 Mail-Well, Inc.*<F3> 3,016,637 2,863,750
186,100 Rowe Furniture Corp. 1,760,340 1,465,537
75,000 Samsonite Corp.*<F3> 3,150,000 3,243,750
410,000 Windmere-Durable Holdings Inc. 6,281,596 5,791,250
------------- -------------
37,432,949 38,066,262
THIS SECTOR IS 1.7% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 1.4%
526,000 Action Performance Cos. Inc.*<F3> 6,260,651 10,257,000
586,000 Callaway Golf Co. 18,847,721 16,774,250
25,000 CapStar Hotels Co.*<F3> 704,000 700,000
249,000 Doubletree Corp.*<F3> 9,199,182 8,839,500
466,650 Hasbro, Inc. 12,182,235 12,774,544
313,800 Interstate Hotels Company*<F3> 7,431,911 8,864,850
1,354,500 La Quinta Inns, Inc. 29,320,037 27,767,250
35,000 MIDWAY GAMES, Inc.*<F3> 562,100 581,875
160,000 Steiner Leisure LTD*<F3> 2,133,130 3,880,000
240,000 Vistana Inc.*<F3> 2,902,500 2,700,000
------------- -------------
89,543,467 93,139,269
THIS SECTOR IS 4.0% ABOVE YOUR FUND'S COST.
MACHINERY/CONSTRUCTION & MISCELLANEOUS MANUFACTURING - 1.8%
1,498,900 AGCO Corp. 43,200,558 41,407,112
215,400 Applied Power Inc. 6,789,397 9,046,800
806,500 Coltec Industries Inc.*<F3> 13,224,120 14,920,250
151,200 DT Industries, Inc. 5,149,998 3,969,000
613,800 JLG Industries, Inc. 1,417,988 12,045,825
225,000 OmniQuip International, Inc.*<F3> 3,168,437 3,262,500
261,250 PAXAR Corp.*<F3> 4,277,214 5,061,719
157,300 RDO Equipement Co.*<F3> 2,645,800 2,752,750
146,000 The Shaw Group, Inc.*<F3> 3,090,888 3,339,750
511,000 Stewart & Steveson Services,Inc. 14,110,397 10,220,000
278,000 Watts Industries, Inc. 6,067,985 6,463,500
497,000 Wyman-Gordon Co.*<F3> 10,983,329 10,126,375
------------- -------------
114,126,111 122,615,581
THIS SECTOR IS 7.4% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SUPPLIES - 1.3%
407,800 ADAC Laboratories 8,764,200 8,512,825
105,000 Advanced Polymer Systems, Inc.*<F3> 968,124 813,750
213,400 Ballard Medical Products 4,063,970 4,454,725
1,577,500 Biomet, Inc.*<F3> 26,810,644 26,620,312
229,300 Hologic, Inc.*<F3> 5,375,304 5,589,188
285,000 Medical Resources, Inc.*<F3> 2,906,309 3,099,375
556,500 STERIS Corp.*<F3> 14,720,140 13,564,688
289,700 Sybron International Corp.*<F3> 8,164,887 8,039,175
420,000 Twin Laboratories, Inc.*<F3> 5,040,000 5,670,000
380,000 UROHEALTH Systems, Inc.*<F3> 3,531,750 3,657,500
258,000 Vital Signs, Inc. 6,442,051 5,805,000
------------- -------------
86,787,379 85,826,538
THIS SECTOR IS 1.1% BELOW YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 4.9%
66,500 Cliffs Drilling Co.*<F3> 4,808,871 3,948,437
753,100 Cooper Cameron Corp.*<F3> 51,767,583 51,587,350
235,200 Energy Ventures, Inc.*<F3> 6,185,195 14,494,200
705,600 Ensco International Inc.*<F3> 29,685,400 34,750,800
135,000 Lone Star Technologies, Inc.*<F3> 2,393,750 2,565,000
139,200 Maverick Tube Corp.*<F3> 2,453,938 2,470,800
2,604,300 Noble Drilling Corp.*<F3> 31,614,486 44,924,175
63,600 Nuevo Energy Co.*<F3> 2,503,653 2,440,650
510,600 Offshore Logistics, Inc.*<F3> 8,402,689 8,169,600
50,000 Oryx Energy Co.*<F3> 713,515 962,500
305,400 Pool Energy Services Co.*<F3> 5,044,988 4,504,650
507,300 Precision Drilling Corp.*<F3> 22,579,174 21,433,425
668,300 Pride Petroleum Services, Inc.*<F3> 10,821,254 13,867,225
1,294,200 Rowan Companies, Inc.*<F3> 22,696,805 29,281,275
211,300 Smith International, Inc.*<F3> 8,926,499 9,640,563
210,500 Swift Energy Co.*<F3> 5,052,746 4,973,063
1,247,200 Tidewater Inc. 61,682,593 57,371,200
178,000 Trico Marine Services, Inc.*<F3> 7,088,876 8,455,000
456,800 United Meridian Corp.*<F3> 16,587,053 13,761,100
140,000 Veritas DGC Inc.*<F3> 2,855,454 2,765,000
61,400 Wiser Oil Company 1,293,050 1,082,175
------------- -------------
305,157,572 333,448,188
THIS SECTOR IS 9.3% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 0.5%
159,300 Medicis Pharmaceutical Corp.*<F3> 5,040,471 4,739,175
400,000 Roberts Pharmaceutical Corp.*<F3> 5,503,513 5,100,000
140,000 Serologicals Corp.*<F3> 2,444,867 2,100,000
647,200 Watson Pharmaceuticals Inc.*<F3> 27,505,414 23,137,400
------------- -------------
40,494,265 35,076,575
THIS SECTOR IS 13.4% BELOW YOUR FUND'S COST.
SEMICONDUCTORS & RELATED - 11.7%
5,481,800 Advanced Micro Devices, Inc.*<F3> 186,767,220 227,494,700
45,000 CFM Technologies, Inc.*<F3> 1,350,000 1,333,125
250,900 Dallas Semiconductor Corp.*<F3> 6,691,456 6,648,850
222,500 Digital Microwave Corp.*<F3> 5,632,343 4,283,125
2,053,700 Intel Corp. 304,291,394 285,721,012
383,200 Jabil Circuit, Inc.*<F3> 15,183,202 17,268,142
342,000 Lattice Semiconductor Corp.*<F3> 16,643,700 15,646,500
1,657,600 LSI Logic Corp.*<F3> 54,604,711 57,601,600
1,397,300 Micron Electronics, Inc.*<F3> 26,147,971 26,723,363
158,200 Microsemi Corp.*<F3> 1,841,023 1,957,725
3,846,600 National Semiconductor Corp.*<F3> 94,079,010 105,781,500
216,700 QLogic Corp.*<F3> 4,615,972 4,279,825
156,300 Semtech Corp.*<F3> 2,047,212 3,165,075
122,400 Sipex Corp.*<F3> 3,303,542 3,580,200
160,000 Supertex, Inc.*<F3> 2,146,414 1,880,000
671,100 Xilinx, Inc.*<F3> 30,341,897 32,716,125
------------- -------------
755,687,067 796,080,867
THIS SECTOR IS 5.3% ABOVE YOUR FUND'S COST.
SOFTWARE - 6.4%
248,800 Activision, Inc.*<F3> 3,841,551 2,799,000
1,311,700 Autodesk, Inc. 44,094,259 40,662,700
2,521,800 BMC Software, Inc.*<F3> 114,889,715 116,318,025
520,400 Cognos Inc.*<F3> 9,032,636 13,530,400
990,000 Compuware Corp.*<F3> 37,717,577 62,122,500
231,000 Datastream Systems, Inc.*<F3> 4,704,820 3,696,000
977,900 Electronic Arts Inc.*<F3> 29,475,755 26,036,587
855,600 Electronics for Imaging, Inc.*<F3> 31,740,265 34,117,050
271,000 IKOS Systems, Inc.*<F3> 3,624,501 4,640,875
1,123,300 Parametric Technology Corp.*<F3> 62,281,266 50,688,913
538,447 Ross Systems, Inc.*<F3> 3,540,731 2,389,628
775,000 Sterling Commerce Inc.*<F3> 22,475,000 22,475,000
666,800 Sterling Software, Inc. 21,089,654 18,420,350
455,700 Structural Dynamics Research Corp.*<F3>10,187,121 9,455,775
1,608,800 Symantec Corp.*<F3> 25,472,009 22,925,400
180,900 Viewlogic Systems, Inc.*<F3> 2,773,893 2,521,384
------------- -------------
426,940,753 432,799,587
THIS SECTOR IS 1.4% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 11.4%
111,400 Abercrombie & Fitch Co.*<F3> 1,781,777 1,698,850
1,169,500 AnnTaylor Stores Corp.*<F3> 23,971,636 23,828,562
769,200 Borders Group, Inc. 13,673,533 14,518,650
1,217,400 Claire's Stores, Inc. 20,105,391 20,391,450
1,556,300 CompUSA Inc.*<F3> 28,385,137 24,511,725
3,019,800 Costco Companies, Inc.*<F3> 86,751,697 83,421,975
2,153,700 CVS Corporation 81,683,099 99,339,412
750,000 Dollar General Corp. 19,326,953 23,437,500
457,500 Dress Barn, Inc.*<F3> 6,200,720 7,720,313
408,000 Eagle Hardware & Garden, Inc.*<F3> 8,839,990 7,344,000
237,500 The Finish Line, Inc.*<F3> 6,131,172 5,284,375
923,000 Footstar, Inc.*<F3> 19,351,896 27,343,875
425,000 French Fragrances Inc.*<F3> 2,550,000 3,293,750
1,074,700 General Nutrition Companies, Inc.*<F3>19,975,100 21,762,675
220,000 Goody's Family Clothing, Inc.*<F3> 3,200,502 5,060,000
376,800 Gymboree Corp.*<F3> 9,495,673 10,126,500
631,000 Hollywood Entertainment Corp.*<F3> 13,283,752 15,380,625
450,600 Linens'n Things, Inc.*<F3> 7,081,197 10,532,775
368,200 Mac Frugal's Bargainso
Close-outs Inc.*<F3> 8,120,023 9,757,300
170,000 Paul Harris Stores, Inc.*<F3> 1,970,653 2,635,000
805,400 Payless ShoeSource, Inc.*<F3> 25,109,309 33,726,125
244,500 Petco Animal Supplies, Inc.*<F3> 6,390,429 5,745,750
974,800 Pier 1 Imports, Inc. 13,419,754 17,180,850
1,395,800 Ross Stores, Inc. 34,454,032 35,418,425
567,600 Stage Stores, Inc.*<F3> 11,000,915 12,487,200
5,623,500 Staples, Inc.*<F3> 132,200,381 113,172,938
65,000 Stein Mart, Inc.*<F3> 1,746,875 1,852,500
785,900 Tiffany & Co. 28,009,518 29,864,200
2,521,300 TJX Companies, Inc. 76,364,962 107,785,575
119,400 Tuesday Morning Corp.*<F3> 3,342,685 3,820,800
------------- -------------
713,918,761 778,443,675
THIS SECTOR IS 9.0% ABOVE YOUR FUND'S COST.
TRANSPORTATION & RELATED - 1.5%
91,200 AirNet Systems Inc.*<F3> 1,316,013 1,459,200
983,400 America West Holdings*<F3> 15,232,070 15,365,625
70,500 Atlantic Coast Airlines Inc.*<F3> 982,266 951,750
90,000 Celadon Group, Inc.*<F3> 932,955 945,000
506,500 Comair Holdings, Inc. 11,318,024 11,016,375
238,000 Kellstrom Industries Inc.*<F3> 2,418,740 3,242,750
956,100 Southwest Airlines Co. 22,802,375 21,153,713
95,200 Triumph Group, Inc.*<F3> 1,956,918 2,391,900
1,601,400 US Airways Group, Inc.*<F3> 29,720,974 39,234,300
205,000 Werner Enterprises, Inc. 3,512,500 3,843,750
------------- -------------
90,192,835 99,604,363
THIS SECTOR IS 10.4% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 2.5%
71,100 American Precision Industries Inc. 1,416,846 1,208,700
1,110,300 The B.F. Goodrich Company 46,861,455 40,664,737
371,900 Calpine Corp.*<F3> 5,950,400 6,740,687
1,820,100 Corning Inc. 80,694,537 80,766,938
1,047,100 The Dial Corp. 15,706,029 16,884,488
415,000 Ogden Corp. 8,754,079 8,766,875
324,200 RPM, INC. 5,445,268 5,389,825
324,300 TETRA Technologies, Inc.*<F3> 9,020,185 7,134,600
------------- -------------
173,848,799 167,556,850
THIS SECTOR IS 3.6% BELOW YOUR FUND'S COST.
WARRENTS - 0.0%
43 Sound Advice, Inc.
Warrants*<F3>, 06/14/99 0 0
THIS SECTOR IS 0.0% BELOW YOUR FUND'S COST.
------------- -------------
Total common stocks 5,412,054,077 5,887,759,569
QUOTED
PRINCIPAL MARKET
AMOUNT COST VALUE
- ------ ---- -------
SHORT-TERM INVESTMENTS - 13.65 (A)<F4>
COMMERCIAL PAPER - 13.3%
$25,000,000 Banc One Corp., $25,000,000 $25,000,000
due 04/01/97, discount of 5.33%
100,000,000 Ford Credit Co., 100,000,000 100,000,000
due 04/01/97, discount of 5.52%
50,000,000 Ford Motor Credit Co. of Puerto Rico, 50,000,000 50,000,000
due 04/01/97, discount of 5.70%
20,000,000 EI Dupont de Nemours, 19,997,056 19,997,056
due 04/02/97, discount of 5.30%
25,000,000 EI Dupont de Nemours, 24,996,326 24,996,326
due 04/02/97, discount of 5.29%
54,000,000 Merrill Lynch & Co., Inc., 53,991,690 53,991,690
due 04/02/97, discount of 5.54%
1,250,000 Norfolk Southern Corp., 1,249,807 1,249,807
due 04/02/97, discount of 5.56%
1,070,000 Norfolk Southern Corp., 1,069,841 1,069,841
due 04/02/97, discount of 5.34%
25,000,000 Smith Barney, 24,996,292 24,996,292
due 04/02/97, discount of 5.34%
20,330,000 Allied Signal Inc., 20,323,935 20,323,935
due 04/03/97, discount of 5.37%
50,000,000 Deere & Company, 49,985,000 49,985,000
due 04/03/97, discount of 5.40%
5,300,000 IBM Credit Corp., 5,298,433 5,298,433
due 04/03/97, discount of 5.32%
25,000,000 Smith Barney, 24,992,583 24,992,583
due 04/03/97, discount of 5.34%
45,000,000 American General Finance Corp., 44,980,013 44,980,013
due 04/04/97, discount of 5.33%
50,000,000 Budget Funding, Inc., 49,977,583 49,977,583
due 04/04/97, discount of 5.38%
52,000,000 Ford Motor Credit Co. of Puerto Rico, 51,976,730 51,976,730
due 04/04/97, discount of 5.37%
36,000,000 Goldman Sachs, 35,982,330 35,982,330
due 04/04/97, discount of 5.89%
14,000,000 Budget Funding, Inc., 13,987,447 13,987,447
due 04/07/97, discount of 5.38%
20,500,000 Budget Funding, Inc., 20,480,867 20,480,867
due 04/07/97, discount of 5.60%
50,000,000 IBM Credit Corp., 49,955,000 49,955,000
due 04/07/97, discount of 5.40%
$20,000,000 Smith Barney, 19,982,067 19,982,067
due 04/07/97, discount of 5.38%
50,000,000 American General Finance Corp., 49,946,722 49,946,722
due 04/08/97, discount of 5.48%
50,000,000 Household Finance Corp., 49,945,556 49,945,556
due 04/08/97, discount of 5.60%
45,000,000 Budget Funding, Inc., 44,943,000 44,943,000
due 04/09/97, discount of 5.70%
50,000,000 Deere & Company, 49,938,556 49,938,556
due 04/09/97, discount of 5.53%
17,000,000 Norwest Financial, Inc., 16,978,844 16,978,844
due 04/09/97, discount of 5.60%
6,000,000 Firestone, 5,991,675 5,991,675
due 04/10/97, discount of 5.55%
------------- -------------
Total commercial paper 906,967,353 906,967,353
VARIABLE RATE DEMAND NOTES - 0.3%
15,907,985 Johnson Controls, Inc. 15,907,985 15,907,985
807,000 Wisconsin Electric Power Co. 807,000 807,000
------------- -------------
Total variable rate demand notes 16,714,985 16,714,985
------------- -------------
Total short-term investments 923,682,338 923,682,338
------------- -------------
Total investments $6,335,736,415 6,811,441,907
==============
LIABILITIES, LESS CASH AND
RECEIVABLES (0.1%) (A)<F4> (3,659,750)
--------------
NET ASSETS $6,807,782,157
==============
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($6,807,782,157 / 206,379,503
shares outstanding) $32.99
======
*<F3>Non-income producing security.
(a)<F4>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
CAPITAL GAINS WATCH . . .
The upcoming October distribution may be six months away, but we want to let you
know what we're anticipating. As of 3/31/97, the net realized capital gains
------------ ------- --------
amounts were:
$2.40 in long term capital gains
$2.00 in short term capital gains (treated as ordinary income)
- -----
$4.40 total potential distribution per share
There remain unrealized gains of $3.45 and unrealized losses of $1.30 as of
3/31/97. -- --
- -------
It's important to remember that if you have a taxable account, you will have to
pay income tax next April on this distribution, but you will not have to pay a
gain on this same amount when your shares are eventually redeemed.
Here's why. The value of your existing shares will be reduced by the per share
amount of the distribution. For example, if shares purchased at $20 per share
become worth $30, you have a potential taxable gain of $10 per share. However,
if a $3.00 distribution is made, the share value will drop to an ex-dividend
price of $27. This leaves only $7 instead of $10 as the potential future capital
gain.
BRANDYWINE FUND, INC.
STATEMENT OF OPERATIONS
For the Period Ended March 31, 1997
(Unaudited)
INCOME:
Dividends $8,695,876
Interest 16,854,396
-----------
Total income 25,550,272
-----------
EXPENSES:
Management fees 33,398,750
Custodian fees 494,403
Transfer agent fees 328,176
Printing and postage expense 327,932
Administrative services 188,500
Registration fees 184,729
Professional fees 21,824
Other expenses 35,204
-----------
Total expenses 34,979,518
-----------
NET INVESTMENT LOSS (9,429,246)
-----------
NET REALIZED GAIN ON INVESTMENTS 990,029,137
NET DECREASE IN UNREALIZED APPRECIATION
ON INVESTMENTS (723,162,026)
-----------
NET GAIN ON INVESTMENTS 266,867,111
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $257,437,865
============
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended March 31, 1997 (Unaudited)
and For the Year Ended September 30, 1996
1997 1996
---- ----
OPERATIONS:
Net investment loss $(9,429,246) $(20,035,250)
Net realized gain on investments 990,029,137 214,708,928
Net (decrease) increase in unrealized
appreciation on investments (723,162,026) 362,502,998
------------- -----------
Net increase in net assets
resulting from operations 257,437,865 557,176,676
------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains
($1.347376 and $3.84486 per share,
respectively) (250,675,101) (479,170,817)*
<F5>
------------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (32,108,529 and
68,912,081 shares, respectively) 1,102,011,653 2,054,823,129
Net asset value of shares issued in
distributions (7,103,385 and 15,557,840
shares, respectively) 233,816,261 439,669,031
Cost of shares redeemed (16,758,376 and
22,514,291 shares, respectively) (573,109,198) (671,681,532)
------------- -----------
Net increase in net assets derived from
Fund share activities 762,718,716 1,822,810,628
------------- -----------
TOTAL INCREASE 769,481,480 1,900,816,487
NET ASSETS AT THE BEGINNING OF THE PERIOD 6,038,300,677 4,137,484,190
------------- -----------
NET ASSETS AT THE END OF THE PERIOD $6,807,782,157 $6,038,300,677
============= =============
*<F5>Total distribution includes $386,543,539 of ordinary income, of which 3% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE FUND, INC.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each year)
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MARCH 31,
1997 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1996 1995 1994 1993 1992 1991
-------------- ------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $32.83 $33.92 $24.77 $28.04 $19.36 $20.52 $15.79
Income from investment operations:
Net investment (loss) income (0.03) (0.08)(1) (0.10) 0.03 (0.02) 0.04 0.27
Net realized and unrealized gains (losses) <F6>
on investments 1.54 2.83 10.70 (0.43) 9.25 1.04 5.74
------- ------- ------ ------ ------ ------ ------
Total from investment operations 1.51 2.75 10.60 (0.40) 9.23 1.08 6.01
Less distributions:
Dividends from net investment income -- -- -- -- (0.01) (0.13) (0.28)
Distributions from net realized gains (1.35) (3.84) (1.45) (2.87) (0.54) (2.11) (1.00)
------- ------- ------ ------ ------ ------ ------
Total from distributions (1.35) (3.84) (1.45) (2.87) (0.55) (2.24) (1.28)
------- ------- ------ ------ ------ ------ ------
Net asset value, end of period $32.99 $32.83 $33.92 $24.77 $28.04 $19.36 $20.52
------- ------- ------ ------ ------ ------ ------
------- ------- ------ ------ ------ ------ ------
Total Investment Return 9.5%+<F8> 10.0% 45.5% (1.4%) 48.6% 5.9% 41.4%
Ratios/Supplemental Data:
Net assets, end of period (in 000's $) 6,807,782 6,038,301 4,137,484 2,240,554 1,413,253 695,128 527,808
Ratio of expenses to average net assets 1.05%+<F8> 1.06% 1.07% 1.09% 1.08% 1.10% 1.09%
Ratio of net investment (loss) income
to average net assets (0.3%)+<F8> (0.4%) (0.4%) 0.1% (0.1%) 0.2% 1.5%
Portfolio turnover rate 190.0%+<F8> 202.8% 193.7% 190.2% 150.4% 188.9% 187.9%
Average commission rate paid*<F7> $0.0597 $0.0599
YEARS ENDED SEPTEMBER 30,
1990 1989 1988 1987
----- ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $17.87 $12.89 $17.00 $11.01
Income from investment operations:
Net investment (loss) income 0.11 0.03 0.06 (0.02)
Net realized and unrealized gains (losses)
on investments (1.48) 4.99 (3.29) 6.04
------- ------ ------ ------
Total from investment operations (1.37) 5.02 (3.23) 6.02
Less distributions:
Dividends from net investment income (0.03) (0.04) -- (0.03)
Distributions from net realized (0.68) -- (0.88) --
------- ------ ------ ------
Total from distributions (0.71) (0.04) (0.88) (0.03)
------- ------ ------ ------
Net asset value, end of period$15.79 $17.87 $12.89 $17.00
------- ------ ------ ------
------- ------ ------ ------
Total Investment Return (7.9%) 39.0% (17.6%) 54.8%
Ratios/Supplemental Data:
Net assets, end of period (in 000's $) 271,856 169,745 122,863 127,777
Ratio of expenses to average net assets 1.12% 1.13% 1.16% 1.18%
Ratio of net investment (loss) income
to average net assets 0.9% 0.2% 0.3% (0.2%)
Portfolio turnover rate 157.7% 91.0% 107.4% 146.8%
(1)<F6>Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for book and tax differences.
*<F7>Disclosure required for fiscal years beginning after September 1,
1995.
+<F8>Annualized
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
BRANDYWINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of Brandywine
Fund, Inc. (the "Fund"), which is registered under the Investment Company Act of
1940. The Fund was incorporated under the laws of Maryland on October 9, 1985.
The investment objective of the Fund is to produce long-term capital
appreciation principally through investing in common stocks.
(a) Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the latest bid price. Securities which
are traded over-the-counter are valued at the latest bid price. Securities for
which quotations are not readily available are valued at fair value as
determined by the investment adviser under the supervision of the Board of
Directors. Short-term investments are valued at amortized cost which
approximates quoted market value. Investment transactions are recorded no later
than the first business day after the trade date.
(b) Net realized gains and losses on common stock are computed on the
basis of the cost of specific certificates.
(c) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all net investment company taxable income and net
capital gains to its shareholders and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(e) The Fund has investments in short-term variable rate demand notes,
which are unsecured instruments. The Fund may be susceptible to credit risk with
respect to these notes to the extent the issuer defaults on its payment
obligation. The Fund's policy is to monitor the creditworthiness of the issuer
and does not anticipate nonperformance by these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to capital stock. At
March 31, 1997 the Fund had no such permanent differences.
(g) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES
The Fund has a management agreement with Friess Associates, Inc. (the
"Adviser"), with whom certain officers and directors of the Fund are affiliated,
to serve as investment adviser and manager. Under the terms of the agreement,
the Fund will pay the Adviser a monthly management fee at the annual rate of one
percent (1%) on the daily net assets of the Fund. Also, the Adviser is
reimbursed for administrative services rendered to the Fund by a consultant
paid by the Adviser.
(3) DISTRIBUTION TO SHAREHOLDERS
Net investment income and net realized gains are distributed to
shareholders.
(4) INVESTMENT TRANSACTIONS
For the period ended March 31, 1997, purchases and proceeds of sales of
investment securities (excluding short-term investments) were $5,644,100,580 and
$6,012,484,378, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of March 31, 1997, liabilities of the Fund included the following:
Payable to brokers for
investments purchased $21,139,825
Payable to Adviser for management fees 5,987,369
Other liabilities 601,407
(6) SOURCES OF NET ASSETS
As of March 31, 1997, the sources of net assets were as follows:
Fund shares issued and outstanding $5,409,738,156
Net unrealized appreciation
on investments 475,705,492
Undistributed net realized gains
and losses 922,338,509
-------------
$6,807,782,157
=============
Aggregate net unrealized appreciation as of March 31, 1997 consisted of the
following:
Aggregate gross
unrealized appreciation $739,467,500
Aggregate gross unrealized
depreciation (263,762,008)
------------
Net unrealized appreciation $475,705,492
============
MARKET CAP . . .
Your large cap companies, those greater than $5 billion, moved from 41 percent
of the portfolio in December to 29 percent currently as a result of harvesting
some of your major gainers. Positions in networking holdings Cisco Systems and
3Com Corp, the retailing giant Sears Roebuck, and familiar brand names of Gap
and Nike, were all sold during the quarter nailing down solid gains.
Cisco Systems grew $117 million thanks to your researcher Andy Graves' timely
sale at $67. Cisco subsequently succumbed to as low as $48, down 29 percent from
your sale. 3Com added $19.2 million. Oil exploration company Schlumberger Ltd.
created a $47 million profit, and $17 million came from the specialty chemical
company Praxair. You enjoyed a $15 million gain from Sears. Nike and Gap gained
$19 million and $26 million.
Those companies in the mid-cap category comprise 42 percent of your March
portfolio compared to 41 per-cent in December. Your small cap companies, under
$1 billion, remain at 16 percent of your portfolio.
YOUR COMPANIES' MARKET CAPITALIZATION
CASH 13.5%
SMALL CAP 16.3%
MID CAP 42%
LARGE CAP 29.2%
BOARD OF DIRECTORS
John E. Burris
Chairman
Burris Foods, Inc.
Milford, Delaware
Foster S. Friess
President
Friess Associates, Inc.
Jackson, Wyoming
Stig Ramel
Former President
Nobel Foundation
Stockholm, Sweden
(800) 656-3017 [email protected]
Investment Adviser: FRIESS ASSOCIATES, INC.
Custodian, Transfer Agent: FIRSTAR TRUST COMPANY
Independent Accountants: PRICE WATERHOUSE LLP
Legal Counsel: FOLEY & LARDNER
OFFICERS: Foster S. Friess, President and Treasurer; Clarke Adams, Vice
President; William F. D'Alonzo, Vice President; Carl S. Gates, Vice President;
Paul R. Robinson, Vice President; and Lynda J. Campbell, Secretary
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of Brandywine Fund unless accompanied or preceded by the
Fund's current prospectus. Past performance is not indicative of future
performance. Investment return and principal value of an investment may
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
Report editor: Lynda J. Campbell Report Staff: Margaret Barton,
Rebecca A. Buswell, Paul R. Robinson, Jennifer Weldon
