(BRANDYWINE FUND, INC. LOGO)
MANAGED BY FRIESS ASSOCIATES, INC.
QUARTERLY REPORT
DECEMBER 31, 1996
DEAR FELLOW SHAREHOLDERS:
We're delighted with your Fund's strong finish for '96, jumping nearly 3 percent
in the last two weeks to complete the quarter with a 6.9 percent rise. You
finished the year up 24.9 percent nicely outpacing the 17.5 percent gain posted
by Lipper Analytical's Growth Fund index.
Your results also beat out the 23 percent increase in the S&P 500, the Nasdaq
Industrials' 15 percent climb, and almost doubled the IBD's Mutual Fund Index
growth of 12.9 percent.
This is particularly satisfying in view of the fact that most of the progress in
the market in general this year was in the larger cap stocks. Your portfolio
holds only about one third of its assets in big cap companies.
If you eliminate the 100 largest over-the-counter Nasdaq companies, those
remaining Nasdaq stocks increased only 5.5 percent!
Brandywine Fund earned some notoriety in the January 1 New York Times for its
1996 return. The ranking showed your Fund as the number one fund for the year
among the largest mid-cap funds they listed and it was also the best performer
for the last three years with its 19.3 percent annualized increase.
We are grateful for Morningstar's highest five-star rating.
Your five year figure is also impressive at 140.4 percent, 19.2 percent
annualized, compared to just a 102.9 percent increase for the S&P 500 and the
65.9 percent rise in the Nasdaq Industrials.
MOST RECENT FIVE YEARS
NASDAQ IND. 65.9%
IBD*<F1> 73.7%
S&P MIDCAP 74.4%
LIPPER GROWTH 84.9%
S&P 500*<F1> 102.9%
YOUR FUND*<F1> 140.4%
*<F1>TOTAL RETURN (Past performance is not indicative of future performance.)
IBD = INVESTOR'S BUSINESS DAILY MUTUAL FUND INDEX
Our mantra of "Never Invest in the Stock Market, Invest in Individual Companies"
was supported by the performance on January 3 of Diane Hakala's Intel pick. It
surged 8 points in a single day for a six percent move while ESS Technology,
selected thanks to advice from your consultant Jon Evans, jumped seven percent!
Both, as well as other technology stocks, had been under pressure as leading
computer retailer CompUSA reported disappointing monthly sales.
This was perceived as a slow-down in the entire PC industry, but your Friess
Associates research team determined that the weakness was primarily on the
consumer end. Buyers were deferring purchases awaiting the introduction in the
weeks ahead of the powerful MMX chip from Intel which will provide a broader
range of multi-video capabilities. Business PC demand remains robust.
Continued strength in the Networking arena benefits companies which show a
consistent ability to deliver new products and services and allows the strong to
get stronger. During the quarter, David Harrington's 3Com brought in $35.4
million, Andy Graves' Cisco Systems added $7.5 million, while Carl Gates'
Uniphase gained $2.7 million.
Some particularly strong gainers for you during the quarter were Jon Fenn's
American Power Conversion up 67 percent, AJ Berk's Bio-Technology General which
rose 65 percent, Clarke Adams' Metzler Group which jumped 60 percent, and John
Ragard's USAir pick, up 42 percent.
Conditions in the U.S. remain good for sustaining a growing economy and
expanding corporate profits. Commentators continue to speculate about the need
for an increase in the discount rate because of the strengthening economy (or
did they say THIS WEEK we need a decrease because the economy is weakening?).
Most visible measures of inflation remain in check, thanks in large part to the
consistent hand of the Federal Reserve.
The volatility in the bond market resulting from these weekly gyrations in the
economic outlook again underscores the value of the Friess Associates approach
which focuses on the progress of the COMPANY.
An analysis by William O'Neil shows that your companies are experiencing growth
greater than those companies in the S&P 500.
COMPANY GROWTH
AVERAGE INCREASE
LATEST 12 MOS. EARNINGS
YOUR COMPANIES 51%
S&P 500 13%
AVERAGE INCREASE
LATEST QUARTERLY EARNINGS
YOUR COMPANIES 58%
S&P 500 13%
ALL S&P FIGURES ARE UNWEIGHTED. ANALYSIS BY WILLIAM O'NEIL & CO., INC. DECEMBER
27, 1996.
The fourth quarter of 1996 witnessed falling interest rates, reflecting
subsiding fears that inflation will accelerate materially in the near future.
Alan Greenspan's recent suggestion that action may need to be taken if there
were "irrational exuberance" in the stock market purged many weak holders from
the market -- making room for future advances. With the continuous decline in
interest rates during the last nine years, it's easy to forget that the long
term Treasury bond's rate has declined by almost 50 percent in the past decade.
The extended economic expansion we've experienced has created concerns that
labor costs are escalating as the economy reaches full employment. In many
businesses, it remains very difficult to raise prices due to aggressive
competition. This combination can cause profit margins to decline unless
companies increase productivity. Fortunately, many businesses are doing just
that.
Continued expansion of investments in communications and computing technologies
is creating a dramatic increase in labor productivity. The Bank Credit Analyst
states manufacturing unit labor costs have stayed flat for the last five years
due to a dramatic increase in information processing equipment investments --
many created by your companies.
Your research team remains comfortable that near term interest rates will
continue to provide an environment where the stock market will focus on the
dynamic fundamentals your companies are experiencing.
Since your Fund's inception our investment strategy has remain unchanged,
creating an annualized gain of 19 percent compared to the S&P 500's 15.6 percent
annualized return. Over the last ten years, your Fund is up 479 percent or 19.2
percent annualized.
MOST RECENT TEN YEARS
IBD*<F2> 190.7%
NASDAQ IND. 217.7%
LIPPER GROWTH 258.1%
S&P 500*<F2> 314.1%
YOUR FUND*<F2> 479.3%
*<F2>TOTAL RETURN (Past performance is not indicative of future performance.)
Others continue to discover the value of this strategy as $75 million in new
assets were entrusted to us during the quarter. Your Friess team is equally
committed with more than $35 million invested with you, and the Nobel Foundation
remains one of your largest fellow shareholders.
As your statement from Firstar will reflect, your final distribution for the
year totaling $0.278871 was made on December 27 -- $0.22106 in short term
capital gains and $0.057811 in long term capital gains. The reinvestment price
was $34.12.
We are grateful for the many kind comments hundreds of you sent along with your
Christmas or seasonal greetings. We are encouraged by your thoughtful remarks.
Sharing them with the rest of our team inspires all of us to continue working
hard for you.
We're excited about the new beginning January 1 brings us. Equally exhilarating
was the finale of our year as Lynn and I experienced the joy of seeing
scientific, economic, and literary excellence recognized at the Nobel Award
ceremonies December 10.
We enjoyed dining with the King and Queen of Sweden and 1,750 of their closest
friends in the Stockholm City Hall banquet room afterwards. It is SOME event!
We look forward to a happy and prosperous new year and remain committed to
managing your assets enthusiastically and prudently.
God Bless!
/s/ Foster Friess
Foster Friess
President
January 6, 1997
All of us at Brandywine Fund were saddened by the terrible tragedy at Wyman-
Gordon's plant in Houston last month. We extend our heartfelt condolences to
the families and friends who lost their loved ones in that fatal explosion.
We always marvel at the many people at all the companies comprising your
portfolio whose efforts day in and day out are what create the successes we all
enjoy. Without their hard work, in whatever capacity, these companies would not
be generating their excellent products and technologies.
The eight people at Wyman-Gordon sacrificed their lives laboring to do their
jobs successfully. We salute their efforts and honor their memory.
It is with our deepest sympathy and sincere appreciation that we are making a
donation of $10,150 as a result of a collection from all the teammates at Friess
Associates on behalf of all Brandywine shareholders to the Wyman-Gordon Employee
Relief Fund, Cameron Credit Union, PO Box 41308, Houston, TX 77241-1308.
HIGHLIGHTS...
APPAREL & SHOES
CEO Paul Charron of LIZ CLAIBORNE simply won't rest on his laurels. Despite a
rising stock price and increasing revenues and margins in the competitive
women's apparel business, he recently told us he must strive for improvement.
"There are always new or existing competitors waiting for us to stumble or those
getting an early jump on a new fashion trend." That attitude has shaped a
resurgence at your company.
Mr. Charron and a new staff of aggressive managers and buyers took the reins
early in 1995, and made a series of dramatic changes at your company.
The number of clothing items offered were pared back, lowering inventory risk to
Liz Claiborne's key department store customers. Fast-growing smaller brands
within the company, such as the Sport and Dana Buchman lines, helped add some
pizzazz to your company's fashions.
Finally, Liz Claiborne cut $65 million in overhead costs since early 1995, with
another $35 million in savings planned for 1997. The last quarter showed a 22
percent increase in earnings from $.64 to $.78.
Jumping 36 percent since purchase, your shares sell today at $39, a modest 15
times expected 1997 earnings.
COMPUTERS & RELATED
Have you ever been working on your PC when a sudden power outage causes you to
lose all the information you had just labored over? Then you know how
frustrating that can be. AMERICAN POWER CONVERSION CORPORATION is the world's
largest manufacturer of uninterruptible power supplies for computer equipment,
making products which ensure this kind of inconvenience doesn't happen, and, if
it does, that no damage ensues.
Servers are fast becoming critical equipment in the operations of most
businesses and often require an uninterruptible power supply for protection from
brownouts and power surges.
American Power won recent contracts with NEC Corp. and Western Digital. Sun
Microsystems and Electronic Data Systems are other major customers of your
company.
In the September quarter, revenues were $194 million, up 36 percent from last
year's $142 million, driving earnings per share up 66 percent from $.18 to $30.
Don Muir, Chief Financial officer told us that he is particularly excited about
your company's international opportunities. Many developing nations have
unreliable power supplies and experience more brownouts and blackouts than we do
in the United States, creating strong demand for your company's product in less
developed countries.
Your shares sell at $27 today, up 77 percent from their August purchase price of
$15.
What good is a computer if it cannot save the information you've inputted? The
products made by WESTERN DIGITAL enable personal computers to store this
valuable data. Your company is the third largest manufacturer of hard disk
drives with customers like AT&T, Toshiba, and IBM.
With the number of Internet users growing steadily, the demand for more
sophisticated storage capabilities is increasing. During 1995 and 1996, Western
Digital invested heavily in producing new high speed, high reliability products
with higher margins to meet this need. That move is paying off.
The recent September quarter saw earnings per share explode to $.70, more than
four times the $.16 reported last year. Revenues were up 58 percent for the
quarter.
Western Digital's WD Enterprise line of disk drives has capacities up to 4.2
gigabytes and is designed for LAN (local area network) servers and multi-user
systems. We learned recently from VP of Finance Dustin Williams that many
Western Digital products remain on allocation to customers.
Your shares now sell at $57, up 133 percent since their April purchase price of
$24.
DISTRIBUTION
When you're looking to get a complete computer set-up, it's likely that no
matter what reseller you go to in the U.S., Canada, or South America, you'll
purchase products supplied through TECH DATA, one of the world's largest
wholesale distributors of a full line of computer goods including software,
hardware, and supplies. Your company sells merchandise from more than 350
manufacturers, including Compaq, IBM, Microsoft, and Hewlett-Packard.
Value services like advertising assistance, favorable credit terms, and product
support -- a team of engineers providing technical advice by phone -- allow Tech
Data to continue to gain market share.
We learned recently from CFO Geoff Howells that your company continues to see
further market share growth from the major computer overhaul made a year ago,
bringing in such efficiencies as bar-coding every product. The MIS (Management
Information Systems) now in place enables Tech Data to offer a quick turnaround
on merchandise. Customers can get products in one day from Tech Data, whereas
from others in the industry, they would wait a week.
Last quarter earnings soared 111 percent from $.18 to $.38 on a revenue increase
of 47 percent.
Since purchase last February, your shares have grown 69 percent to $27.
MACHINERY/CONSTRUCTION & MISCELLANEOUS
Small lighting devices used in cars, appliances, and computers often contain as
many as ten parts -- including cable, sockets, wiring, plugs and bulbs. CHICAGO
MINIATURE LAMP designs, manufactures and assembles these parts into a single
unit for its customers thereby saving them time and money.
Your company offers a final product specifically designed to meet the customer's
designated guidelines which is installed directly into the car's dashboard --
whether it be a Ford, Mercedes, GM, or BMW -- a Black & Decker coffee maker, or
a Compaq computer. Other major customers like AT&T and Cabletron use Chicago
Miniature products for their telephones and networking systems.
We learned from CEO Frank Ward that Chicago Miniature is always developing new
products to reduce their customers' cost in lighting assemblies. This focus on
innovative, value-added products helps your company continue to gain market
share.
Earnings zoomed 77 percent during the recent August quarter to $.20 from $.11.
Revenues leapt 72 percent from $25 million from $15 million during the period.
Your shares are more than double their June purchase price of $18 selling today
at $41.50.
OIL/GAS FIELD SERVICES
In the Gulf of Mexico, there are areas known to be rich with natural gas but not
yet exploited. With its fleet of 14 mobile, jack-up drilling rigs that can drill
to depths of 20,000 to 30,000 feet in water up to 300 feet deep, MARINE DRILLING
COMPANIES, INC. is well equipped to handle the demand which major oil and gas
companies are creating in this area.
Exxon, Shell Offshore, Seagull Energy E&P, and the Mexican national oil company,
Petroleos Mexicanos, each utilize your company's drilling services.
Contracting exclusively on a day-rate basis, Marine Drilling benefits from the
low supply worldwide of mobile rigs. The cost of building a new rig is twice the
daily rental cost, so there isn't much incentive for most customers to build new
drilling machinery. This shortage causes rates at your company to rise almost
daily.
In the recent September quarter revenues soared 93 percent to nearly $30 million
from $15.5 million, driving earnings to $.15 from a loss a year ago.
Recently your low-debt (less than 10 percent of equity) company adopted a
shareholder rights plan. According to Chief Financial Officer William Flores the
reason for this move was that management felt it was good for the company to
have its shareholders become more fully invested.
Growing 87 percent since purchase in June, your shares now trade at $20.
POLLUTION CONTROL
No one likes the idea of burying refuse or setting it out to sea on a barge,
particularly if it is hazardous waste, which is often very expensive to dispose
of. PHILIP ENVIRONMENTAL can recycle industrial waste to create new, useable raw
materials for its customers. Your NYSE-listed company can actually save money
while also saving the environment.
Comprising 42 percent of revenues in 1995 is Philip's metals recovery process.
Philip recycles copper from old wire and cable for Bell Atlantic and other
telephone companies. Alan Fracassi, Chief Executive Officer, told us that the
company recently added second and third electrostatic separators to improve upon
the 80 percent yields from this process.
Major customer Ford Motor Company now uses 5 percent less new paint for each
new car made by using materials derived from Philip's paint recycling process.
Earnings in 1995 were up 20 percent from 1994's figures on revenue growth of 25
percent. For the recent September quarter, revenues rose 24 percent from $117
million to $145 million driving earnings up 19 percent from $.16 to $.19.
Purchased for you in October at $11, your shares climbed 35 percent to $14.50.
SOFTWARE
Prospering from offering its products via the Internet, MCAFEE ASSOCIATES
developed some of the first and best anti-virus software well before the term
anti-virus became a household word.
Unlike its top competitor Symantec, McAfee sells its products primarily
electronically, allowing network administrators and at-home computer whizzes to
download the software via modem, try it out for a month for FREE, and THEN pay
for it. A key advantage to this strategy? More people trying it out than if
users had to buy pre-packaged software at the computer store.
In the most recent quarter ended September 30, McAfee's sales jumped 85 percent
to $47 million pushing earnings up 60 percent to $.24 versus $.15.
A recent conversation with CEO Bill Larson outlined McAfee's strategy of an
Internet "cafeteria line" of software products. "We want our traditional anti-
virus users to try our other products and then convince network administrators,
who buy thousands of copies at once, of our depth of network software
offerings."
Purchased for you in July at $35, your shares increased 26 percent to $44.
FELLOW SHAREHOLDER . . .
"To build a better world, start in your own community." That's the slogan found
on the letterhead of Lehman Communications Corporation, a publishing company
which runs three daily community newspapers in Colorado. Chief Executive Officer
and Publisher Ed Lehman illustrates the slogan in everything he does -- not just
in business, but in his personal life as well.
Ed began his career as a lawyer. He was a trial lawyer for three years in the
Denver District Attorney's office handling his share of difficult cases -- nine
of them murder trials -- and then spent two years as a partner in a law firm.
However, law could not keep him from the career he most enjoyed -- journalism.
While attending Denver University's law school at night, he got his first taste
of the newspaper business working at the Rocky Mountain News and the Denver Post
during the day.
In 1957, he and his wife Ruth, bought a majority share of the Longmont Daily
Times-Call and Ed became Editor and Publisher of the newspaper. Ruth and Ed
then acquired the Loveland Reporter-Herald and the Canon City Daily Record and
the company assumed its current name.
Ed enjoys his work. "Being responsible for the overall operation of the three
papers gives me the opportunity to interact closely with three distinctly
different communities, defining their individual objectives, addressing their
problems and devising solutions," Ed reflects.
"We also focus on development issues including the political perspective and the
various leaders who have an effect on the community." Each paper has been in
circulation for more than a century.
Serving since 1986 as a Trustee of Boettcher Foundation, a Friess Associates
client, Ed was introduced to the Friess strategy. "The Foundation really
appreciates this association," Ed explains. "It's as if we're investment
partners with the firm in addition to being a valued client."
Seeing first-hand that Friess Associates grew Boettcher's assets, Ed and Ruth
decided to invest their personal assets and are shareholders in Brandywine and
Brandywine Blue.
According to Ed, investing is a challenge for most business people because they
find they are too busy with their jobs to devote anything more than a part-time
effort toward the stock market.
"Successful investing really requires a full throttle approach, and Ruth and I
can no more work on just LOCATING the right stock let alone knowing when to buy
or sell it. Brandywine Fund handles those important details for us."
Along with Boettcher, Ed has served with many other groups including being
President of the University of Denver National Alumni Association, the Colorado
State Press Association, and The Inland Press Association. He also served as a
member of the Colorado House of Representatives.
Married for 46 years, Ed and Ruth have two children and two grandchildren, all
of whom live in Colorado, making for frequent family visits.
- -Rebecca Buswell
RUSS . . .
"Every day another situation arises to remind us how fortunate we are to have
Russ Boone on board," explains Doug McMinn. "Russ has been consulting with us
for about four years, and I've never seen a computer problem that he can't
solve."
No one has been more instrumental in the technological growth of Friess
Associates than Russ. When he first came on the scene, the Jackson office had
just recently opened and it housed only two full-time teammates. Now, your
Friess team operates out of four offices each with anywhere from six to 20
people, who can communicate with one another instantaneously via computer. Russ
is largely responsible for designing and maintaining that system.
In April, when the Delaware operations and trading team moved to a new building,
Russ spent the weekend transporting the entire computer system -- which supports
more than 60 computer stations -- to the new location. With the complex set-up
Friess Associates has, it's amazing that the move occurred without a hitch so
that on Monday morning in the new office, everything was in top-notch working
order. That's just the kind of task Russ handles with ease.
Not only is Russ skilled in the hardware end, he can also figure out any glitch
that might arise in a software package. In fact, there are times when a
bottleneck occurs in a newly installed software program that even the support
people can't fix. Russ alleviates the problem and then instructs the company how
it was done.
"As our growth advanced from $5 billion to $6 billion in just three months, and
then to nearly $11 billion in the next 18 months, Russ has made sure that the
infrastructure we have set up grows with us," Doug relates. "We have more than a
dozen software programs and Russ sees that they work together to help us in our
obligations to our clients and shareholders."
Russ enjoys making the virtual office concept a reality. "It is exciting to help
Friess Associates implement the many technological advances that exist to
improve communications between the teammates wherever they are located."
A master in Lotus Notes, Russ creates numerous databases including the Research
Tracking Database which enables your research team to monitor the companies in
your portfolio. Every time a call is placed to one of your holdings, an entry is
made and that entry is immediately accessible to every researcher. Russ also
designed a laptop for every researcher so that while they're traveling visiting
your companies they can easily make updates to the system in one simple step.
Aside from dissecting and fixing computer systems, Russ enjoys outdoor
activities like camping, white-water rafting and canoeing. He also loves to
travel. Two years ago he went to Africa and spent a month in Zimbabwe studying
sustainable wildlife management.
- -Rebecca Buswell
KEEPING IN TOUCH . . .
A big thanks to all of you who continually share your remarks with us. Your
feedback about our management of the Fund is appreciated and helps us find ways
to better serve your investment needs.
Please don't hesitate to email me at [email protected] or at [email protected],
fax me at (302) 656-9015, or write to P.O. Box 4166, Greenville, DE 19807, with
any of your ideas. I'll pass your comments along to the team and get answers for
you.
- -Kelli Fazler
UNCLE SAM'S TIME IS HERE . . .
and Firstar will once again be sending your 1099 form to you in mid-January for
your tax filing purposes. Please remember to consult your tax adviser for any
additional assistance you may need.
DIANE . . .
Gains of more than $250 million from such big names as Compaq, Sun Microsystems,
Dell Computer, and Hewlett-Packard were picked by your Delaware-based
researcher, David Harrington. David could not have made these picks without the
daily assistance provided him by his research manager, Diane McGonagle.
Diane first started at Friess in Fall 1994. Her previous experience at McDonnell
& Company, a Philadelphia brokerage house, prepared Diane well for her
responsibilities to help grow the assets in Brandywine Fund. The quick pace of
getting orders to the trading floor in a timely fashion showed Diane how hectic
the investment business can be.
"Even though my current role isn't in trading, my function here is just as
crucial -- perhaps even more so -- because I contribute to the management of
more than $10 billion that many people and organizations are counting on to
reach their financial goals," Diane explains. "It is my job to see that David
knows what's going on with his companies." Diane sifts through the barrage of
information David receives from Wall Street and forwards to him only what will
be most helpful.
David says Diane is invaluable to him. "She puts me in touch with the key people
at the company." Daily, Diane hunts for any breaking news on the stocks he
follows and as the preliminary filter, she ensures that David's time is spent
most efficiently on making the buy and sell decisions that ultimately create the
gains you experience. David continues, "Most importantly, Diane is always
pleasant and eager to help. A positive attitude is everything in this
business."
Diane and her husband of 29 years, Bob, have three grown children, Denise, Tara
and Keith, who all live in the general vicinity of Diane's hometown,
Philadelphia. The McGonagles also support a young girl from Bolivia whom they
sponsor through the Save the Children Foundation. Communicating through letters
and receiving photos, Diane learns about the girl's struggles and says, "We feel
fortunate that we are able to give this small but much needed help to a child."
Covenant House in New York City is another organization Diane and Bob sponsor.
Many runaway teens who have stayed at the halfway house through the years have
written letters expressing gratitude for the support folks like Diane and Bob
give which helped them in turning their lives around.
Avid about keeping physically fit, Diane walks four miles every day and makes
time three times a week to attend her step aerobics class. She also enjoys
playing tennis and skiing with her family.
This year Diane undertook a new challenge -- coaching a soccer team for girls
under age 8. "I had such a good time with these kids who were so eager to learn
and work together as a team," Diane explains. "We even won our division the
first time around!"
- -Rebecca Buswell
GROWING YOUR FUND . . .
We want to note the contributions of workers at the companies in which we
invest. It is their energy and talents which create profits in their companies
which in turn add value to your investment.
This month we highlight Mark Murray, a Customer Relations Representative at the
Sears Repair Service Unit in Raleigh, North Carolina. Mark fields incoming
calls from customers with problems ranging from service delays to billing mix-
ups. Being such a positive person, Mark enjoys the challenge the diverse calls
create. "Customers are what keep us in business, so we just have to do whatever
it takes to make them happy. If we have broken a promise to them, we have to
make it right."
Mark started at Sears at the Teleservice Center in Greensboro answering the 800
number before he was transferred to a local service unit. Most of the problems
are handled at the teleservice center, so if someone calls the local unit Mark
says, "We are the last stop and we have to take care of the problem."
The new trainees are sometimes surprised to see Mark, the trainer in the unit,
working on his computer with the monitor turned off. Mark forgets to turn it on
because he is totally blind.
Modern technology converts the screen display into a Braille display, a system
Mark learned when he worked for Holiday Inns. With this aid, Mark says,
"Anything you can do with sight, I can do. Sears is great about hiring blind
people and giving us a shot. They have found we make good employees."
At the age of two, Mark developed cancer of the optic nerve and lost his sight.
Crediting his parents for raising him like a normal kid, a great school for the
blind where he lived and studied, and his early training from Goodwill
Industries, Mark leads an independent life with many interests, including
basketball with a beeper on the ball, cooking, and bowling.
"We had a bowling lane at the blind school and we enjoyed it so much we started
a bowling league." Mark remembers. His current bowling league competes with
blind leagues in others cities and the team is going to Pittsburgh for the
Nationals.
"Thanksgiving Day was my second anniversary at Sears. I have found a home here
and really enjoy what I do." We congratulate Mark and Sears, Roebuck & Co. for
forging an employee-management relationship that gets the job done.
- -Margaret Barton
FUND BROKER . . .
Buying a stock is just one side of the investment equation in your Fund. Bear
Stearns broker Michael Needleman explains that knowing when to sell is key to
your portfolio's success. Michael looks at the valuation of the stock, its
expectations, and other issues to determine if it might be time to sell.
"A telltale sign can be finding a weak link within the industry that will likely
affect most related companies," Michael says. "I also look at whether there are
additional buyers of the stock and if there is much new information out there
about the company. Those two factors can drive the stock price up which often
makes maintaining the position a wise move."
For Michael, finding a company that meets Friess Associates criteria for
Brandywine Fund is based on analysts' comments and feedback as well as
observations from contact with the company management. Additionally, Michael
pinpoints the company's catalyst for growth and scrutinizes the company further,
looking at distribution cycles and marketing patterns.
With a four year football scholarship, Michael attended Northeast Louisiana
University, earning a double BS in Marketing and Management. He and wife, Jill,
reside in Dix Hills on New York's Long Island with their two young sons, Ethan
and Joshua who are four and two.
Michael works closely with research teammates John Ragard and A.J. Berk and your
consultants Hank Bannister and Mike Davis. When he has an idea -- whether it be
a buy or a sell -- he filters his information to your team who makes the final
decision on whether to act. Just as your three research locations in Wilm-
ington, Jackson, and Phoenix are tied together through Lotus Notes, so are all
your preferred brokers connected. Michael sends his ideas through email using a
form which he had a hand in creating.
John Ragard is impressed with Michael's abilities. "Working directly with us for
only a year, Michael has been quick to pick up on what we are looking for in new
stock ideas that fit our approach. He is idea driven and digs deep into issues
that others might miss."
Praxair, Kinetic Concepts and IMC Mortgage were all companies Michael worked on
for your Fund. Together they've brought you more than $5 million in gains.
"The dynamics of the Friess Associates organization fit well with my own skills
and work patterns," relates Michael. "The firm's objective is well defined and
their process is no-nonsense, emphasizing how everyone personally contributes to
that mission."
- -Rebecca Buswell
MARKET CAP . . .
Your mid cap companies -- those between $1 billion and $5 billion -- shifted the
most this quarter. Moving back from 43.4 percent of the portfolio in September,
they now comprise 41.2 percent of your holdings. You captured gains of $54
million by selling Associates First Capital, Tommy Hilfiger, ADC Telecom,
Pennzoil, and Beneficial Corp.
Your large cap holdings grew slightly from 40 percent in September to 41.1
percent. More than $233 million in gains from Intel, Schlumberger Ltd., Cisco
Systems, 3Com, Dell Computer, Tellabs, and Gap contributed to this increase.
You also purchased Toys R Us, EMC Corp., and USX Marathon Group.
New to your small cap stocks this quarter are Metzler Group, already up 60
percent, Paul Harris Stores, up 53 percent, Benchmarq Microelectronics climbing
52 percent and Qlogic, rising 51 percent This category grew from September's
15.7 percent to 16.0 percent currently.
YOUR COMPANIES' MARKET CAPITALIZATION
CASH 1.7%
SMALL CAP 16.0%
MID CAP 41.2%
LARGE CAP 41.1%
ALL IS NOT ROSES . . .
Stocks go up and stocks go down. Happily, we can report that the gainers greatly
outnumbered those that went down during this quarter.
You saw six stocks dropping back more than $10 million over the last three
months, with Toys R Us, Informix Corp., and Computer Associates each losing more
than $25 million. CompUSA and Iomega Systems gave up $14.5 million each, while
SCI Systems fell back $12 million. SCI Systems still remains a good gainer for
you overall with nearly $5 million in gains since purchase. You no longer hold
Iomega and Informix.
Your top two winners for the quarter -- Intel with $92 million and Dell Computer
with $47 million -- together brought in nearly $12 million more than the above
six companies gave up. Other big performers during the quarter were 3Com Corp.
at $35 million, Schlumberger with $34 million, Adaptec gaining $31 million, TJX
Companies bringing in $26 million, Compaq with $24 million, and Oryx Energy and
Western Digital each adding $20 million.
Conseco, Global Marine, Noble Drilling, American Power Conversion, BJ Services,
EMC Corp, USAir, Marine Drilling, and Tellabs gained more than $10 million
apiece, giving you 18 companies which exceeded the $10 million mark this
quarter.
ON THE CUTTING EDGE . . .
MORE THAN JUST DIRECTIONS
The 1997 Cadillac DeVille features OnStar, a navigational system that wows us.
If the driver becomes lost, a human being will provide directions which are
recorded for instant replay. Through the use of satellites, the exact location
of the car is always known, a great theft deterrent. If an air bag is deployed,
emergency assistance is immediate. Locked out of the car? A satellite will
unlock it from outer space. Need to make hotel, airline, or restaurant
reservations? Need to find the nearest ATM for cash? OnStar will take care of
that, too.
JUST LIKE BEING AT THE MOVIES -- AT HOME
The Federal Communications Commission has approved a plan to deliver crisp,
movie-quality pictures and CD-quality sound in a format called high definition
television. It could appear as early as 1998. The FCC's action marks a crucial
step in implementing higher-quality digital TV in the U.S. and harkens the
biggest change to television since the advent of color in 1953.
FLUENT SOUNDING SPANISH, FRENCH, GERMAN, ENGLISH -- FROM YOUR PC
A University of Chicago linguist, John Goldsmith, is working with Microsoft to
make computers pronounce text -- any text -- naturally. If a computer sounds
humanlike now, it's because someone recorded the message. This new technology
will be a completely computer-generated, human-sounding voice. Goldsmith's
program has a computer speak in rounded Midwestern tones.
X-RAY VISION ANYWHERE
A compact mobile X-ray unit developed by Naval Research Lab is battery-operated
and weighs just 26 pounds. Combine it with an X-ray detector of the type used
for dental X-rays, control it all with a notebook computer, and you have an
instrument to use in remote or confined spaces for X-ray inspection, security
surveillance, and medical applications. Conventional X-ray generators use rack-
mounted power supplies and can weigh hundreds of pounds. Researchers have
working models and estimate it will take about a year to make a production
model.
TOP TEN . . .
Your Software holdings experienced the biggest top ten shift this quarter,
moving down from the number 3 spot in September to number 9 currently. You sold
Cheyenne Software, Project Software Development, Structural Dynamics, and
Vanstar while securing $5.6 million in gains.
To better define your Fund's holdings, we have split Retailing (which was No. 1
in September) into Retailing - Specialty and Retailing - Department Stores.
Retailing - Specialty retains the number 1 position with 13.1 percent as CVS
Corp., Paul Harris Stores, MacFrugal, Footstar, Dress Barn and Linens 'N Things
were all added during the quarter. Already these companies together have gained
more than $15 million.
Department Stores alone is in the top ten with 3.3 percent of your portfolio,
with the growth you've enjoyed in Sears Roebuck & Co., Consolidated Stores and
Proffitts, combined bringing in nearly $20 million.
Coming in at number 6 with 6.7 percent is Semiconductors & Related moving up
from number 9 last quarter at 4.6 percent. ESS Technology, VLSI Technology,
SIPEX Corp., and National Semiconductor are all new to your portfolio this
quarter.
TOP TEN INDUSTRY GROUPS
Retailing - Specialty 13.1%
Computers & Related 12.8%
Oil/Gas Field Services 12.3%
Financial/Business Services 7.2%
Networking 6.8%
Semiconductors & Related 6.7%
Communications 6.6%
Apparel & Shoes 5.4%
Software 5.4%
Department Stores 3.3%
Cash 1.7%
All Others 18.7%
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
December 31, 1996
(Unaudited)
QUOTED
MARKET
SHARES COST VALUE (B)<F4>
------ ---- ------
COMMON STOCKS - 98.3% (A)<F3>
APPAREL & SHOES - 5.4%
780,000 Fruit of the Loom, Inc. $27,984,546 $29,542,500
336,200 Genesco Inc. 2,997,606 3,109,850
892,800 Gucci Group, N.V. 66,798,510 57,027,600
1,027,400 Jones Apparel Group, Inc. 20,555,815 38,399,075
2,091,200 Liz Claiborne, Inc. 59,394,005 80,772,600
2,163,300 NIKE, Inc. Cl B 50,346,711 129,257,175
287,600 Unifi, Inc. 8,982,274 9,239,150
403,800 The Warnaco Group, Inc. 11,361,128 11,962,575
------------ -----------
248,420,595 359,310,525
THIS SECTOR IS 44.6% ABOVE YOUR FUND'S COST.
AUTOMOTIVE & RELATED - 0.3%
179,700 Arvin Industries, Inc. 4,288,833 4,447,575
294,700 SPX Corp. 6,641,336 11,419,625
108,000 Tower Automotive, Inc. 2,670,549 3,375,000
------------ -----------
13,600,718 19,242,200
THIS SECTOR IS 41.5% ABOVE YOUR FUND'S COST.
BUILDING & RELATED - 0.5%
362,800 Dal-Tile International Inc. 5,077,476 7,392,050
155,000 Hughes Supply, Inc. 5,495,523 6,684,375
150,000 Pacific Greystone Corp. 1,673,330 1,650,000
476,000 U.S. Industries, Inc. 12,651,853 16,362,500
141,600 Watsco, Inc. 3,712,483 4,088,700
------------ -----------
28,610,665 36,177,625
THIS SECTOR IS 26.4% ABOVE YOUR FUND'S COST.
COMMUNICATIONS - 6.6%
448,000 ACC Corp. 14,454,050 13,552,000
561,200 Andrew Corp. 28,040,473 29,778,955
480,000 Aspect Telecommunications Corp. 26,449,151 30,480,000
297,000 Dynatech Corp. 10,045,426 13,142,250
224,600 LCC International, Inc. 3,756,715 4,155,100
478,700 MasTec, Inc. 15,264,198 25,371,100
105,100 MICROS Systems, Inc. 3,216,128 3,231,825
295,200 Olicom A/S 5,237,968 5,553,598
235,000 Periphonics Corp. 4,368,751 6,873,750
3,993,400 Tellabs, Inc. 76,471,438 150,251,675
2,046,300 U.S. Robotics Corp. 148,220,171 147,333,600
------------ -----------
335,524,469 429,723,853
THIS SECTOR IS 28.1% ABOVE YOUR FUND'S COST.
COMPUTERS & RELATED - 12.9%
2,787,600 Adaptec, Inc. 59,065,604 111,504,000
945,300 American Power Conversion Corp. 13,819,569 25,759,425
646,700 Auspex Systems, Inc. 10,221,638 7,517,887
182,700 BancTec, Inc. 3,904,990 3,768,188
75,000 CHS Electronics, Inc. 947,500 1,284,375
2,504,600 Compaq Computer Corp. 145,310,709 185,966,550
260,800 Control Data Systems, Inc. 6,096,553 5,737,600
973,200 Data General Corp. 13,834,403 14,111,400
2,505,000 Dell Computer Corp. 40,389,751 133,078,125
132,700 Donnelley Enterprise Solutions Inc. 3,370,055 3,251,150
2,796,200 EMC Corp. (Mass.) 81,556,301 92,624,125
1,798,100 Gateway 2000, Inc. 70,347,113 96,311,630
196,800 Mastech Systems Corporation 3,194,719 3,739,200
158,500 MicroTouch Systems, Inc. 2,856,115 3,804,000
93,150 Pomeroy Computer Resource, Inc. 1,871,895 3,423,263
175,000 Procom Technology, Inc. 1,629,220 1,662,500
1,130,200 Quantum Corp. 29,917,429 32,351,975
816,100 Read-Rite Corp. 20,642,549 20,606,525
188,000 SBS Technologies, Inc. 4,821,375 6,956,000
249,200 Sequent Computer Systems, Inc. 3,603,801 4,423,300
140,000 Splash Technology, Inc. 1,543,060 3,010,000
323,200 StorMedia, Inc. 5,707,260 5,211,600
505,400 Stratus Computer, Inc. 11,972,943 13,772,150
1,120,000 Western Digital Corp. 26,888,807 63,700,000
------------ -----------
563,513,359 843,574,968
THIS SECTOR IS 49.7% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 3.3%
1,102,500 Consolidated Stores Corp. 27,538,718 35,555,625
241,100 Family Dollar Stores, Inc. 4,781,222 4,912,411
222,800 Proffitt's Inc. 5,052,445 8,215,750
3,535,800 Sears, Roebuck and Co. 150,043,389 163,088,775
190,000 Value City Dept. Stores Inc. 2,439,702 1,995,000
------------ -----------
189,855,476 213,767,561
THIS SECTOR IS 12.6% ABOVE YOUR FUND'S COST.
DISTRIBUTION - 0.8%
210,100 Black Box Corp. 4,995,874 8,666,625
67,500 Gulf South Medical Supply, Inc. 1,584,000 1,729,687
435,000 MicroAge, Inc. 6,535,348 8,700,000
230,800 Olympic Steel Inc. 5,533,418 5,856,550
541,800 Tech Data Corp. 8,288,779 14,831,775
472,100 U.S. Office Products Co. 17,074,127 16,110,413
------------ -----------
44,011,546 55,895,050
THIS SECTOR IS 27.0% ABOVE YOUR FUND'S COST.
ELECTRICAL EQUIPMENT MANUFACTURERS - 1.2%
281,500 AAR Corp. 6,652,043 8,515,375
455,300 BE Aerospace, Inc. 10,175,054 12,350,012
475,000 Precision Castparts Corp. 19,962,010 23,571,875
847,200 Sundstrand Corp. 29,823,606 36,006,000
------------ -----------
66,612,713 80,443,262
THIS SECTOR IS 20.8% ABOVE YOUR FUND'S COST.
ELECTRONICS - 1.8%
337,200 AVX Corp. 7,661,081 7,249,800
165,500 Berg Electronics Corp. 4,638,055 4,861,562
376,000 Computer Products, Inc. 7,973,715 7,332,000
424,700 GenRad, Inc. 9,015,431 9,874,275
501,400 KEMET Corp. 11,374,710 11,657,550
153,000 Reptron Electronics, Inc. 2,505,375 3,155,625
1,076,400 SCI Systems, Inc. 43,034,020 48,034,350
440,200 Tektronix, Inc. 21,885,694 22,560,250
60,000 Veeco Instruments Inc. 1,133,125 1,320,000
------------ -----------
109,221,206 116,045,412
THIS SECTOR IS 6.2% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 7.2%
1,362,700 AccuStaff Inc. 35,489,674 28,787,037
569,100 AmeriCredit Corp. 9,812,912 11,666,550
226,600 Amerin Corp. 4,832,545 5,834,950
742,800 AMRESCO, Inc. 16,670,782 19,869,900
238,200 CMAC Investment Corp. 6,883,556 8,753,850
209,100 Comdisco, Inc. 6,238,870 6,638,925
101,100 Consolidated Graphics,Inc. 4,892,225 5,661,600
2,189,900 Conseco, Inc. 115,788,782 139,606,125
139,000 Consumer Portfolio Services, Inc. 1,900,212 1,563,750
517,500 COREStaff Inc. 11,902,978 12,258,540
25,400 CORT Business Services Corp. 476,250 523,875
527,900 Credit Acceptance Corp. 9,962,923 12,405,650
550,800 Diebold, Inc. 29,320,501 34,631,550
896,000 Employee Solutions, Inc. 16,295,475 18,368,000
528,300 Metromail Corporation 10,770,446 9,641,475
783,100 MGIC Investment Corp. 50,607,478 59,515,600
344,450 The Money Store, Inc. 5,637,605 9,515,431
417,200 Norrell Corp. 4,654,826 11,368,700
249,000 Personnel Group of America, Inc. 3,773,595 6,007,125
367,100 The PMI Group, Inc. 16,719,422 20,328,163
149,200 Pre-Paid Legal Services, Inc. 2,390,986 2,722,900
397,700 Prime Service, Inc. 9,644,616 10,936,750
250,500 Provident American Corp. 3,313,750 3,507,000
155,400 RemedyTemp, Inc. 2,188,396 2,680,650
209,400 Southern Pacific Funding Corp. 6,374,460 6,517,575
308,900 StaffMark, Inc. 4,048,746 3,861,250
235,000 Ugly Duckling Corp. 4,363,938 4,582,500
163,200 Ultrak, Inc. 3,619,110 4,977,600
243,200 Valassis Communications, Inc. 4,368,108 5,137,600
135,000 Warrantech Corp. 1,074,375 1,552,500
------------ -----------
404,017,542 469,423,121
THIS SECTOR IS 16.2% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 1.6%
285,900 CKE Restaurants, Inc. 4,059,087 10,292,400
43,000 The Earthgrains Company 2,108,255 2,246,750
397,000 Food Lion Cl A 3,148,728 3,883,057
488,000 Food Lion CL B 3,827,230 4,941,000
205,000 Foodmaker, Inc. 2,153,365 1,819,375
104,500 JP Foodservice, Inc. 2,384,663 2,912,938
1,615,000 The Kroger Co. 70,965,200 75,097,500
100,000 Prosource Distribution Services 1,400,000 1,187,500
147,000 Sonic Corp. 3,191,718 3,748,500
------------ -----------
93,238,246 106,129,020
THIS SECTOR IS 13.8% ABOVE YOUR FUND'S COST.
HEALTHCARE - 2.2%
37,100 Curative Health Services Inc. 852,544 1,027,225
357,500 Genesis Health Ventures, Inc. 9,677,465 11,127,187
363,200 HealthCare COMPARE Corp. 16,601,051 15,390,600
1,380,500 HEALTHSOUTH Corp. 48,483,891 53,321,813
1,046,892 MedPartners, Inc. 20,553,529 21,984,732
519,400 OrNda HealthCorp 13,190,658 15,192,450
517,700 Orthodontic Centers of America Inc. 6,931,777 8,283,200
321,300 Physicians Resource Group, Inc. 8,206,391 5,703,075
327,200 Quorum Health Group, Inc. 7,847,270 9,734,200
------------ -----------
132,344,576 141,764,482
THIS SECTOR IS 7.1% ABOVE YOUR FUND'S COST.
HOME/OFFICE & RELATED - 1.5%
395,400 Apogee Enterprises, Inc. 13,635,848 15,717,150
185,100 In Focus Systems, Inc. 3,745,225 4,002,787
1,633,900 Lowe's Companies, Inc. 62,670,396 58,003,450
243,300 Herman Miller, Inc. 8,016,078 13,776,863
410,000 Windmere-Durable Holdings Inc. 6,281,596 5,278,750
------------ -----------
94,349,143 96,779,000
THIS SECTOR IS 2.6% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 0.3%
526,000 Action Performance Cos. Inc. 6,260,651 9,468,000
313,800 Interstate Hotels Company 7,431,911 8,864,850
160,000 Steiner Leisure LTD 2,133,130 3,220,000
------------ -----------
15,825,692 21,552,850
THIS SECTOR IS 36.2% ABOVE YOUR FUND'S COST.
MACHINERY/CONSTRUCTION & MISCELLANEOUS MANUFACTURING - 1.1%
173,600 Applied Power Inc. 5,167,139 6,878,900
249,300 Chicago Miniature Lamp, Inc. 4,513,977 10,345,950
945,500 Coltec Industries Inc. 15,781,558 17,846,312
214,200 DT Industries, Inc. 7,322,373 7,497,000
613,800 JLG Industries, Inc. 1,417,988 9,820,800
261,250 PAXAR Corp. 4,277,215 4,506,563
146,000 The Shaw Group, Inc. 3,090,888 3,412,750
278,000 Watts Industries, Inc. 6,067,985 6,637,250
337,000 Wyman-Gordon Co. 7,532,080 7,498,250
------------ -----------
55,171,203 74,443,775
THIS SECTOR IS 34.9% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SUPPLIES - 2.1%
495,800 ADAC Laboratories 10,974,642 11,837,225
148,000 Advanced Technology
Laboratories, Inc. 4,800,147 4,588,000
480,000 AmeriSource Health Corp. 15,034,002 23,160,000
213,400 Ballard Medical Products 4,063,970 3,974,575
613,500 ESC Medical Systems Ltd. 15,935,371 15,644,250
626,800 Guidant Corp. 32,128,567 35,727,600
229,300 Hologic, Inc. 5,375,304 5,675,175
84,500 Marquette Medical Systems Inc. 1,817,000 1,869,563
285,000 Medical Resources, Inc. 2,906,308 3,241,875
316,000 Physio-Control International
Corp. 7,026,812 7,110,000
289,700 Sybron International Corp. 8,164,887 9,560,100
480,000 Twin Laboratories, Inc. 5,760,000 5,820,000
253,000 Vital Signs, Inc. 6,315,801 6,578,000
------------ -----------
120,302,811 134,786,363
THIS SECTOR IS 12.0% ABOVE YOUR FUND'S COST.
NETWORKING - 6.8%
2,435,400 3Com Corp. 112,470,510 178,697,475
3,991,200 Cisco Systems Inc. 146,916,167 253,940,100
193,500 Uniphase Corp. 3,179,084 10,158,750
------------ -----------
262,565,761 442,796,325
THIS SECTOR IS 68.6% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 12.3%
325,500 Apache Corp. 9,430,417 11,514,562
398,000 Benton Oil and Gas Co. 10,247,819 9,004,750
816,400 BJ Services Co. 27,272,486 41,636,400
1,059,600 Chesapeake Energy Corporation 62,567,861 58,940,250
188,000 Diamond Offshore Drilling, Inc. 7,131,723 10,716,000
235,200 Energy Ventures, Inc. 6,185,195 11,965,800
705,600 Ensco International Inc. 29,685,400 34,221,600
3,066,000 Global Marine Inc. 44,916,313 63,236,250
1,091,500 Marine Drilling Companies, Inc. 11,505,152 21,489,452
2,779,100 Noble Drilling Corp. 34,396,596 55,234,613
156,600 Nuevo Energy Co. 6,278,795 8,143,200
410,600 Offshore Logistics, Inc. 6,293,628 7,955,375
2,897,100 Oryx Energy Co. 47,321,807 71,703,225
532,700 Phillips Petroleum Co. 22,114,319 23,571,975
668,300 Pride Petroleum Services, Inc. 10,821,254 15,537,975
938,500 Reading & Bates Corp. 11,560,459 24,870,250
1,500,000 Rowan Companies, Inc. 27,252,777 33,937,500
2,197,800 Schlumberger Ltd. 191,712,892 219,505,275
416,300 Smith International, Inc. 11,868,332 18,681,463
328,600 Swift Energy Co. 7,927,108 9,816,925
178,000 Trico Marine Services, Inc. 7,088,876 8,544,000
972,600 USX-Marathon Group 23,936,704 23,220,825
222,800 Veritas DGC Inc. 5,351,885 4,121,800
464,600 Vintage Petroleum, Inc. 10,516,057 16,028,700
61,400 Wiser Oil Company 1,293,050 1,212,650
------------ -----------
634,676,905 804,810,815
THIS SECTOR IS 26.8% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 2.0%
641,000 Bio-Technology General Corp. 5,253,920 8,413,125
207,200 Jones Medical Industries, Inc. 7,350,079 7,588,700
139,400 Medicis Pharmaceutical Corp. 6,107,670 6,133,600
100,000 Serologicals Corp. 2,619,500 3,537,500
1,548,600 Teva Pharmaceutical
Industries Ltd. ADR 69,251,676 77,817,150
547,200 Watson Pharmaceuticals Inc. 23,205,414 24,590,074
------------ -----------
113,788,259 128,080,149
THIS SECTOR IS 12.6% ABOVE YOUR FUND'S COST.
RETAILING-SPECIALTY - 13.1%
145,000 American Eagle Outfitters, Inc 2,920,103 1,141,875
1,169,500 AnnTaylor Stores Corp. 23,971,636 20,466,250
384,600 Borders Group, Inc. 13,673,533 13,797,525
88,500 Burlington Coat Factory
Warehouse Corp. 1,071,726 1,150,500
2,323,600 CompUSA Inc. 31,258,488 47,924,250
94,000 Creative Computers, Inc. 974,081 693,250
2,153,700 CVS Corporation 81,683,099 89,109,337
508,900 Dollar General Corp. 16,438,181 16,284,800
509,500 Dress Barn, Inc. 6,941,288 7,642,500
923,000 Footstar, Inc. 19,351,896 22,959,625
425,000 French Fragrances Inc. 2,550,000 3,293,750
5,498,000 Gap, Inc. 131,404,148 165,627,250
656,700 General Nutrition Companies, Inc. 12,470,060 11,081,813
220,000 Goody's Family Clothing, Inc. 3,200,502 3,932,500
631,000 Hollywood Entertainment Corp. 13,283,752 11,673,500
450,600 Linens'n Things, Inc. 7,081,197 8,843,025
368,200 Mac Frugal's Bargainso
Close-outs Inc. 8,120,023 9,619,225
170,000 Paul Harris Stores, Inc. 1,970,653 3,017,500
1,191,200 Payless ShoeSource, Inc. 38,000,420 44,670,000
974,800 Pier 1 Imports, Inc. 13,419,754 17,180,850
545,400 Ross Stores, Inc. 26,829,658 27,270,000
892,700 The Sports Authority, Inc. 19,559,870 19,416,225
567,600 Stage Stores, Inc. 11,000,915 10,358,700
599,100 The Stride Rite Corp. 5,281,336 5,991,000
426,300 Tiffany & Co. 15,101,929 15,613,238
2,232,400 TJX Companies, Inc. 63,055,117 105,759,950
5,672,200 Toys 'R' Us, Inc. 199,824,428 170,166,000
------------ -----------
770,437,793 854,684,438
THIS SECTOR IS 10.9% ABOVE YOUR FUND'S COST.
SEMICONDUCTORS & RELATED - 6.7%
123,000 BENCHMARQ
Microelectronics, Inc. 1,727,833 2,629,125
300,000 Chips & Technologies, Inc. 6,860,826 5,475,000
367,000 Digital Microwave Corp. 7,611,832 10,230,125
261,000 ESS Technology Inc. 6,155,754 7,340,625
127,400 Flextronics International Ltd. 3,752,670 3,535,350
2,430,300 Intel Corp. 174,865,750 318,218,621
10,000 Micrion Corp. 185,000 217,500
158,200 Microsemi Corp. 1,841,023 2,254,350
2,523,600 National Semiconductor Corp. 58,651,123 61,512,750
110,000 QLogic Corp. 1,877,144 2,832,500
156,300 Semtech Corp. 2,047,212 2,676,638
122,400 Sipex Corp. 3,303,542 3,947,400
337,000 Tower Semiconductor Ltd. 3,723,714 3,538,500
518,600 VLSI Technology, Inc. 12,188,251 12,381,575
------------ -----------
284,791,674 436,790,059
THIS SECTOR IS 53.4% ABOVE YOUR FUND'S COST.
SOFTWARE - 5.4%
837,000 Adobe Systems Inc. 30,200,523 31,282,875
1,146,200 BMC Software, Inc. 17,969,582 47,424,025
827,450 Cadence Design Systems, Inc. 11,356,098 32,891,138
332,000 Cellular Technical Services
Co., Inc. 6,177,111 6,640,000
244,000 Cognos Inc. 2,478,551 6,862,500
1,259,500 Computer Associates Int'l, Inc. 67,203,243 62,660,125
917,000 Compuware Corp. 34,071,814 45,964,625
427,800 Electronics for Imaging, Inc. 31,740,265 35,186,550
271,000 IKOS Systems, Inc. 3,624,500 5,420,000
180,000 Insight Enterprises, Inc. 5,009,418 5,040,000
924,450 McAffee Associates, Inc. 32,249,222 40,675,800
208,400 Parametric Technology Corp. 9,173,990 10,706,550
145,200 QuadraMed Corporation 1,787,016 1,669,800
323,447 Ross Systems, Inc. 2,085,593 3,113,177
666,800 Sterling Software, Inc. 21,089,654 21,087,550
------------ -----------
276,216,580 356,624,715
THIS SECTOR IS 29.1% ABOVE YOUR FUND'S COST.
TRANSPORTATION & RELATED - 0.9%
244,900 AirNet Systems Inc. 3,648,347 3,612,275
90,000 Celadon Group, Inc. 932,955 990,000
848,400 Miller Industries, Inc. 5,954,985 16,968,000
95,200 Triumph Group, Inc. 1,956,918 2,272,900
53,400 UNC Inc. 592,003 640,800
1,601,400 USAir Group, Inc. 29,720,974 37,432,725
------------ -----------
42,806,182 61,916,700
THIS SECTOR IS 44.6% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 2.3%
6,900 American Precision Industries Inc. 134,439 138,000
774,800 The B.F. Goodrich Company 33,765,513 31,379,400
371,900 Calpine Corp. 5,950,400 7,438,000
122,000 The Carbide/Graphite Group, Inc. 2,373,500 2,394,250
208,700 Fairfield Communities, Inc. 3,681,383 5,165,325
171,800 The Metzler Group, Inc. 3,401,231 5,454,650
803,000 Philip Environmental Inc. 8,600,075 11,643,500
1,381,300 Praxair, Inc. 44,681,143 63,712,462
324,200 RPM, INC. 5,445,268 5,511,400
461,300 United Waste Systems, Inc. 8,931,662 15,857,188
------------ -----------
116,964,614 148,694,175
THIS SECTOR IS 27.1% ABOVE YOUR FUND'S COST.
WARRANTS - 0.0%
43 Sound Advice, Inc.
Warrants, 06/14/99 0 0
------------- -------------
Total common stocks 5,016,867,728 6,433,456,443
QUOTED
MARKET
SHARES OR PRINCIPAL AMOUNT COST VALUE (B)<F4>
- -------------------------- ---- ---------
SHORT-TERM INVESTMENTS - 0.7%(A)<F3>
COMMERCIAL PAPER - 0.6%
$20,000,000 CIT Group Holdings, Inc., 19,996,833 19,996,833
due 1/02/97, discount of 5.70%
10,000,000 Prudential Funding Corp., 9,987,556 9,987,556
due 1/09/97, discount of 5.60%
10,000,000 CIT Group Holdings, Inc., 9,986,325 9,986,325
due 1/10/97, discount of 5.47%
------------ -----------
Total commercial paper 39,970,714 39,970,714
VARIABLE RATE DEMAND NOTES - 0.1%
972,308 American Family Financial Services 972,308 972,308
8,275,000 Johnson Controls, Inc. 8,275,000 8,275,000
388,000 Wisconsin Electric Power Company 388,000 388,000
------------ -----------
Total variable rate demand notes 9,635,308 9,635,308
------------ -----------
Total short-term investments 49,606,022 49,606,022
-------------------------
Total investments $5,066,473,750 6,483,062,465
=============
Cash and receivables, less
liabilities 1.0% (a)<F3> 63,880,029
-------------
NET ASSETS $6,546,942,494
=============
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($6,546,942,494 / 194,309,112
shares outstanding) $33.69
=====
(a)<F3>Percentages for the various classifications relate to net assets.
(b)<F4>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. Short-term
investments are valued at amortized cost which approximates quoted market value.
KUDOS FOR YOUR FUND . . .
o KIPLINGER'S -- Brandywine named among the top five long-term growth funds for
its five year average return of 21.6 percent. September 1996
--------------
o INVESTOR'S BUSINESS DAILY -- Brandywine listed among the top five growth funds
for its three month performance and received an A ranking for its three year
return. October 1996
------------
o MUTUAL FUNDS MAGAZINE -- Brandywine earned the highest five-star ranking and
called". . . truly a Cadillac of growth funds." November 1996
-------------
o MONEY -- Brandywine one of only six "10-year champ funds" with its 17.2
percent average annualized gain compared to the S&P 500's 13.4 percent return.
November 1996
- -------------
o SMART MONEY -- Brandywine named as one of Morningstar's picks for funds that
"Stick to their chosen style and still manage to outperform." November 1996
-------------
o THE NEW YORK TIMES -- Of the ten largest mid-capitalization stock funds,
Brandywine ranked as the Number One performing fund for both its one year and
three year performance as of 1996 year end. January 1, 1997.
---------------
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.
Report editor: Lynda J. Campbell
Report Staff: Margaret Barton, Rebecca A. Buswell, Paul R. Robinson, Jennifer
Weldon
