BRANDYWINE FUND, INC.
MANAGED BY FRIESS ASSOCIATES, INC.
ANNUAL REPORT
SEPTEMBER 30, 1997
DEAR FELLOW SHAREHOLDERS:
We were excited to open up the October 3 Wall Street Journal and see the ranking
of the nation's 45 largest growth and balanced funds in America. Your Fund was
the 38th ranked at $8.8 billion. We are particularly pleased to see that while
the five year performance of the funds larger than Brandywine ranged from 91 to
187 percent, your Fund gained 227 percent, a full 40 percent ahead of the second
best of the 38 largest.
On an average annualized basis, your Fund gained 26.7 percent compared to only
20.8 percent per year for the S&P 500.
MOST RECENT FIVE YEARS
NASDAQ IND. 121.5%
IBD*<F1> 125.1%
S&P MIDCAP 129.6%
RUSSELL 2000 135.2%
S&P 500*<F1> 156.7%
YOUR FUND*<F1> 226.6%
*<F1>TOTAL RETURN
IBD = Investor's Business Daily Mutual Fund Index
The 19.0 percent performance for this quarter surpassed all those on the list
and more than doubled the 7.5 percent gain in the S&P 500 to finish the fiscal
year up 39.3 percent!
For the previous four quarters, the S&P 500 outperformed the Nasdaq Industrials
by nearly 20 percent cumulatively. It is refreshing to see small and mid-cap
companies outperforming larger companies this quarter. The Russell 2000, S&P
Midcap, and Nasdaq Industrials grew 14.5, 15.7, and 16.3 percent, respectively.
Our investment credo "Never Invest in the Stock Market, Invest in Individual
Businesses" caused Forbes to rank the Brandywine Funds family as the #1
performer with assets over $1 billion for the last 10 years as we reported to
you a few weeks ago.
The Forbes ranking highlights the long-term benefits of sticking to our time-
---------
tested strategy of investing in dynamic companies of all sizes that are
experiencing dramatic earnings growth. The latest quarter's surge in your Fund,
also noted by USA Today, provides a very good answer when people say "What have
you done for us lately?"
Your research team continues to garner kudos from professional investment
consultants, financial advisors, and financial planners who compare us to other
mutual fund managers for our ability to manage our growth and capitalize on the
resources this growth has provided.
We believe the secret to this success is organizing into small hard-hitting
teams which allows our forced displacement (Pigs at the Trough) theory to work
more effectively and also to maintain accountability on a very basic level. At
the end of the day, each one of your researchers clearly knows his or her reward
system is linked to how the stocks under each of their watchful eyes perform --
no committee system here!
Your companies' earnings grew 45 percent in the latest 12 months and 46 percent
in the most recent quarter, three times the S&P 500's companies' earnings growth
of 15 percent.
Based on next year's earnings estimates, your companies' average p/e ratio of 20
versus 19 for the S&P as measured by William O'Neil & Company, publishers of
Investor's Business Daily, gives superior growth for virtually the same p/e
level. We also expect these com-panies to do better than Wall Street's current
------
estimates.
COMPANY GROWTH
AVERAGE INCREASE LATEST 12 MOS. EARNINGS
YOUR COMPANIES 45%
S&P 500 15%
AVERAGE INCREASE LATEST QUARTERLY EARNINGS
YOUR COMPANIES 46%
S&P 500 15%
All S&P figures are unweighted. Analysis by William O'Neil & Co., Inc. September
25, 1997.
One of your current biggest gainers, identified by researcher David Harrington,
is Compaq Computer, which gained over 87 percent in this quarter alone providing
shareholders with over $197 million in gains. Phoenix-based researcher Diane
Hakala contributed EMC Corporation which added over $97 million to your Fund.
Mark Lapolla's Conseco, Inc., Clarke Adams' Teradyne, Inc., and Jon Fenn's
CompUSA combined to provide over $128 million this quarter.
Carl Gates selected DSP Group which leapt over 161 percent for the quarter and
John Ragard garnered a 157 percent return in Friede Goldman. A.J. Berk's
purchase of J. Ray McDermott gained 69 percent and Jackson-based researcher Andy
Graves picked Paul Harris Stores which vaulted over 67 percent.
Contributions were spread across your research team. In fact, I don't have
enough room to recognize everyone but I can tell you that 37 separate holdings
had gains of over 50 percent for you during the quarter! Many of the big gainers
were smaller companies which are benefiting from a number of trends.
The perceived negative impact a strong U.S. dollar could have on earnings of
mega-cap, multi-national companies like Coca-Cola, Proctor & Gamble and
McDonalds moves investor interest back to smaller and mid-cap companies that
conduct the vast majority of their business here in the U.S. and therefore don't
suffer from currency exchange issues. The dollar in recent months rose 8 percent
against the yen and nearly 5 percent against the pound.
The reduction of the maximum capital gains rate could unleash gains of large cap
companies which have experienced huge price earnings expansion over the last
couple of years. Individual investors who have been in large cap companies may
be more inclined to realize their gains.
Smaller cap stocks provide their return through price appreciation (capital
gain) rather than dividends (taxed as ordinary income). Additionally, in the
past 24 months the large companies of the S&P 500 soared 69 percent while the
smaller companies of the Russell 2000 and Nasdaq Industrials grew only 40 and 46
percent, respectively. These two factors auger well for possible better
performance from the more dynamic companies comprising your portfolio.
We are very encouraged by the new, lower capital gains tax rate and its impact
on those of you who have entrusted your hard-earned assets to us to manage. I am
a strong supporter of empowering individuals, and any legislation leaving more
money in your hands as opposed to the government's is a step in the right
direction.
Fortunately, this legislation will have no impact on our investment process. We
will continue to buy and hold companies that have outstanding appreciation
potential until we are able to identify other companies that have MORE
appreciation potential to displace the original company. This sell discipline
has been a cornerstone of our process since Friess Associates was launched in
1974.
Along with the tax legislation there has been other news in Washington. The
Federal Reserve Board stood pat at their September 30 meeting in light of few
tangible signs of inflation. The Fed funds rate remains at 5.5 percent where it
has stayed since March 25.
Economic growth allowed the Congressional Budget Office to announce early in
September that the budget deficit for fiscal 1997 would be only $34 billion
versus the previously expected $115 billion and that there was a projected
surplus in 2002. When is the last time you heard budget surplus in the same
breath as government?
Thank you for your ongoing confidence. We are grateful for it. We are keenly
aware that it is what we do for you in the future that counts. We strive to
provide you the type of returns that all of our long-term shareholders,
including the Nobel Foundation, have experienced.
Nobel has been in the Fund nearly since its inception, and enjoys a 416 percent
gain for the last ten years, 17.8 percent annualized, outpacing the 295 percent
growth in the S&P 500. Since inception, your Fund is up 779 percent, 20.3
percent annualized, compared to just 537 for the S&P 500 -- almost a nine-fold
increase!
SINCE INCEPTION
LIPPER GROWTH*<F2> 250.6%
IBD* <F2> 305.8%
NASDAQ IND. 316.5%
S&P 500*<F2> 536.9%
YOUR FUND*<F2> 778.8%
*<F2>TOTAL RETURN
We continue to be committed to the same investment strategy that provided these
returns, and are invested right along with you, having our Friess Associates
pension plan, and all of Lynn's and my equity assets in either Brandywine or
Brandywine Blue Funds.
Over $40 million of "insider" investments keep us ever focused on dedicating
each working day to growing your hard-earned assets. During the quarter, $240
million was entrusted to the Fund, increasing our desire to always warrant the
trust you've placed in us.
We look forward to a continuing long-term relationship. Please let us know how
we can serve you better. Thanks for the opportunity to work for you.
God Bless!
/s/ Foster Friess
President
October 7, 1997
HIGHLIGHTS . . .
COMMUNICATIONS
Cellular-phone giants Ericsson, Motorola, NEC and Nokia use CELLSTAR CORP., the
#1 distributor of cellular phones in the world, to get their phones to
retailers, carriers, exporters and dealers in the U.S. and abroad.
Over the last five years, your company built the strongest distribution system
in the U.S. and international markets, particularly China and South America.
We learned from CEO Dick Gozia that CellStar is the first company to be
authorized by the Chinese government to sell wireless products there. It has
joint ventures with HANBO, which is completely owned by the Shenzen Telephone
Co.
In the recent May quarter, revenues climbed 67 percent to $378 million, up from
$226 million, catapulting earnings to $.48 compared to a loss last year.
Your shares are already up an amazing 227 percent selling at $46.50, from their
January purchase price of $14.
Competing against computer giant IBM may seem like a daunting task. OLICOM USA,
Inc., does so successfully, with earnings rising 136 percent during the June
quarter to $.33 from $.14 last year on revenue growth of 32 percent.
Olicom provides a switch solution for Token Ring networks, a type of network
introduced by IBM more than 10 years ago. In a Token Ring setup, every computer
is networked into a ring. If the ring is "broken" by one computer being
disconnected, the entire network becomes non-functional and can no longer
communicate. Your company's product enables its customers with Token Ring
networks, such as Fortune 1000 British Telecom, to transmit information more
quickly.
President Michael Camp and CFO Boje Rinhart explain that there is a general move
in the industry from Routers to Switches, and IBM and Madge Networks are the
only other companies which offer Switches for Token Rings. Olicom is the low-
cost provider of these Switches.
Even with expected earnings growth of 110 percent for calendar 1997, very few on
the Street covered Olicom when purchased for you last October. Since then, your
shares soared 63 percent to $29.
DEPARTMENT STORES
Providing convenience, value, and customer service, AMES DEPARTMENT STORES, INC.
continues to compete with larger retail peers Wal-Mart, Kmart, and Target. Often
called the Wal-Mart of the east, Ames operates over 300 stores in several
northeastern states.
Your company is the 5th largest discount retailer in the U.S. offering brand-
name merchandise ranging from family apparel and accessories to electronics and
home furnishings.
In a recent conversation with CEO Joe Ettore, we learned that by December 1998,
your company will remodel five to fifteen existing stores and open five to ten
new stores featuring a "customer-friendly" layout. All of these stores will have
soft corners in which key merchandise is displayed on diagonals at the corners
of the store, and zigzag aisles which allow for more merchandise displays and
create more browsing.
Even in the competitive northeastern market, Ames excels with its targeted
merchandising programs such as the 55 Gold Card which gives senior citizens a 10
percent discount every Tuesday.
Earnings jumped 48 percent during the most recent quarter to $.31 from $.21 on
revenues of $504 million.
Ames was not well followed on Wall Street when pur-chased for you in February.
Now drawing Street attention, your shares are up 82 percent selling at $15.
After suffering from increased competition from specialty retailers and sluggish
retail sales in California and the Pacific Northwest during 1995-1996,
NORDSTROM, INC. is staging a strong comeback this year. Driven by a more
fashion-conscious consumer, better sales of higher priced shoes, accessories,
and designer labels have propelled both same-store sales and margins.
Your company operates 86 stores in 18 states, with sales in the last 12 months
of over $4.6 billion. Nordstrom slowed store expansion when sales growth
weakened in the mid-1990s, but is now opening new stores at a faster clip than
most other full-line department store chains.
Dan Nordstrom, President, recently explained that the Garden City, NJ, West
Hartford, CT and Cleveland store openings in August and September will help
bring total square footage growth to 6 percent for 1997, with another 8-10
percent growth planned for 1998.
In the July quarter, Nordstrom expanded earnings 38 percent to $.76 on a 9
percent gain in revenues.
Purchased at $46 in May, your shares are at $64, a 39 percent increase.
MEDICAL/DENTAL PRODUCTS AND SUPPLIES
MEDICAL RESOURCES, INC. operates and manages several diagnostic imaging centers
in New York, New Jersey, Florida, Illinois, Maryland, California, and
Pennsylvania, providing such common services as MRIs and mammograms.
From Bill Freeman, president and COO, we learned that Medical Resources
continues to make high-quality, immediately-profitable acquisitions, having
purchased 56 centers since year-end 1996. Your company's sales and marketing
team targets well-run, profitable centers to add to its base. With
geographically clustered locations, Medical Resources can integrate its
marketing tactics to make these new acquisitions immediately positive to
earnings and profit margins.
During the most recent quarter revenues soared 173 percent, driving earnings up
19 percent.
Since purchase last December, your shares are up 90 percent.
OIL/GAS FIELD SERVICES
J. RAY MCDERMOTT is the largest marine construction company in the world. With
over 50 percent of the total market, your company designs, constructs, moves,
and installs platforms and pipelines for offshore oil and gas production in
Southeast Asia, the Middle East, the North Sea, and West Africa. Currently, most
of its projects are in the Gulf of Mexico.
With total backlog in primary contracts and joint ventures at approximately $4.2
billion and an exclusive, two-year contract with Shell for deep-water projects
approaching 3,000 feet, J. Ray dominates the industry.
A new management team led by CEO Roger Tetrault outlined a four-point program to
lead J. Ray to increased profitability through cost controls and more lucrative
levels of engineering from existing and new contracts. Roger tells us that
operating expenses will be cut back to $48 million in fiscal 1999 compared to
$67 million for fiscal 1997.
Earnings were up 44 percent last quarter from $.09 to $.13 and revenues climbed
19 percent to $465 million.
Your shares sell today at $49, a price 69 percent higher than when you purchased
it in June.
SOFTWARE
INSIGHT ENTERPRISES, INC. is a direct marketer of computers, hardware, and
software. Just call them, place your order, and they will ship you a brand-name
product at a discounted price. The company buys directly from manufacturers such
as IBM and Compaq and uses its electronic link with FedEx to get the merchandise
out the door in as little as 15 minutes.
Initially your company advertised in computer magazines, but in the last two
years has become one of the top marketers on the Internet. In addition to
fielding in-bound calls, Insight maintains a knowledgeable direct sales force
which concentrates on reaching small businesses and developing long-term
relationships with these customers.
CEO Eric Crown told us Insight used the money from a secondary stock offering to
beef up its infrastructure. With a new office and sales facility in Tempe,
Arizona and a greatly expanded sales force, the necessary investment is in
place. Your company is well positioned to grow its business.
For the last quarter, revenues were up 38 percent while earnings climbed 35
percent to $.42 up from $.31.
Your shares, bought in June at $21 have increased 61 percent to $33.
What do Chuck Yeager and Michael Jordan have in common? They're both part of a
creative consultant team which helps design such video games as Wing Commander
III, NBA Live '97, Road Rash, PGA Tour Golf, Madden Football and NHL Hockey for
entertainment software company, ELECTRONIC ARTS INC.
Operating much like a movie studio, your company works with producers who
coordinate artists, writers, animators, sound engineers, musicians, set
designers, and programmers to produce the games. This setup allows for quick
turnaround on all its products.
Electronic Arts products operate on PC's, Macs, SEGA, Saturn, Nintendo 64 and
Sony Playstation. The accelerating sales of Playstation particularly fuels sales
of EA's games.
In the recent June quarter, revenues were $118 million, rising 46 percent from
last year and earnings grew to $.03 versus $.01.
Electronic Arts is gaining market share. Stan McGee, CFO, told us about the
recent acquisition of Maxis and that once EA's distribution, sales, and
marketing functions are integrated and functioning there, your company should
benefit.
Jumping 34 percent since purchase in January, your shares are at $39 today.
SPECIALTY RETAILING
Walk into almost any mall and you're bound to find high-spending, 16-to-30-year-
old shoppers heading to ABERCROMBIE & FITCH CO. for their purchases. Your NYSE-
listed company was once the premiere sporting goods store of New York City, but
is now the Ralph Lauren for a younger generation, selling top-quality clothing
at more reasonable prices. Unlike other retailers which use trends and constant
sales to attract customers, Abercrombie needs only its popular brand to draw in
the "Generation X" clientele.
This strategy is successful, as Abercrombie has had twenty consecutive quarters
of same-store sales and earnings growth. The recent July quarter showed earnings
up to $.04 from $.01 last July. Revenues jumped 52 percent.
Abercrombie's management integrated a new sophisticated merchandising format
over the last six months to give all the stores a consistent look. Existing
locations are being remodeled to enhance brand image, increasing customer
loyalty to your company's timeless, preppy-sporty look.
Bought in February, at $16, your shares are now up more than 64 percent.
TRANSPORTATION
During the recent UPS strike, a direct competitor to the shut-down company, RPS,
handled a record number of shipments. This small-package business-to-business
carrier is an operating unit of your company CALIBER SYSTEM, INC. Other
divisions include Viking Freight, a domestic carrier of shipments less than
10,000 pounds, and Roberts Express, which transports high-security, hazardous,
and fragile shipments.
New management, including Lou Valerio, CFO, improved on-time delivery of its RPS
unit after shutting down the less profitable operations of the company.
Caliber's largest subsidiary, Roadway Express, which dealt in the long-haul LTL
(less-than-truckload) business, was spun off in late 1995.
In the June quarter, earnings vaulted to $.62 versus only $.01 last year. For
calendar '97, analysts anticipate earnings to be ten times the $.25 posted for
'96.
Your shares finished the quarter at $54, up 37 percent since purchase in June.
As we go to press today, we learned that yesterday Federal Express announced
that it would buy the company in a stock swap. Caliber closed at $59.25 as a
result.
SEMICONDUCTORS & RELATED
Your answering machine may well contain integrated circuits and software from
DSP GROUP, INC. This Santa Clara, California-based company is a global leader in
digital speech processing and telephone answering devices. Recently, Chairman
Igal Kohavi told us that 35 percent of the world's answering machines use DSP
chips.
It is possible to make telephone calls over computer networks and the Internet,
but sending "sound" is slow going. By compressing speech, sometimes down to
1/40th its original size, your company's products enable real-time, two-way
telephone calls between personal computers.
Microsoft, Intel, and U.S. Robotics are among the more than 100 companies who
license DSP Group's audio compression technology. Its TrueSpeech technology is
earning acceptance as the industry standard for voice communications on the
Internet.
Both royalties from licensing agreements and processor sales are growing, while
cost reductions and improved margins have boosted net income. Last quarter's
earnings were $.23 versus $.03 the previous year on sales of $14.6 million
versus $13 million.
Purchased in May at $13, your shares have zoomed up 194 percent to $39.
FELLOW SHAREHOLDER . . .
In 1993 at a charity event in Palm Springs, Orville Krieger met Foster Friess,
and was so impressed by their discussion about Brandywine Fund, that Orv did
some investigating on the Fund's performance on his own. "My only regret," Orv
laments, "is that I did not meet Foster earlier. I am extremely pleased with my
results and have made many new friends by telling them about Brandywine."
Orv is a real estate guru, particularly in the hospitality property business. He
and his wife, Mary, founded Krieger Nationwide Real Estate in 1960, a company
dealing exclusively in the brokerage of hospitality properties throughout the
U.S.
In 1982, they moved to Phoenix where Orv formed a partnership with Jay Snyder to
launch Krieger & Snyder Nationwide Real Estate, nationally recognized brokers of
fine hotels and resorts.
"IT IS MY FERVENT DESIRE TO HELP MATCHPOINT GO NATIONWIDE AND TO SPEND THE REST
OF MY LIFE SERVING HIM IN THIS MANNER."
Noted for his business acumen, it didn't take long for Orv to also be recognized
for his commitment to the Christian principles by which he lives.
In 1976, seizing a good opportunity, Orv purchased a 140-unit Holiday Inn just
minutes from the airport in Spokane, Washington. Others in the industry
applauded Orv's keen business sense until they learned he would close the
hotel's primary money maker -- the bar.
He didn't feel comfortable running a business that so strongly conflicted with
his own personal beliefs. In its first five years of operation under Orv's
leadership, the hotel's food sales went up 20 per-cent while room bookings rose
30 percent. And, while the business could thrive even more from alcohol sales,
Orv doesn't mind as he grins and says, "Beliefs aren't worth much if a fella's
not ready to live by them."
Orv continues to follow this credo. His latest project, MatchPoint, is a perfect
example. After two years of planning, MatchPoint was launched last spring and
seeks to stop the cycle of crime by intervening when a life of crime just
begins, in adolescence.
So many children today -- particularly those in the inner-cities -- lack the
parental guidance they need to develop into mature, responsible adults. These
rebellious, angry, lonely, misguided youth often come from poor, abusive,
single-parent homes, and they are looking for a role model who will be a friend,
confidant, advisor, and listener. Oftentimes, the only example these children
have is a drug-addicted parent, shackled by the pain that comes from living in
and out of prison.
MatchPoint takes these at-risk children (ages 8-13) and pairs them up with a
kind, caring, dependable adult mentor in hopes to provide them with support,
encouragement, and a sense of self-worth. MatchPoint feels that the single most
effective way to change the negative course in a child's life is the presence of
one committed adult.
A ministry of Prison Fellowship, MatchPoint exists just in Phoenix currently,
but plans are underway to expand nationally. Orv is committed to this cause. "It
is my fervent desire to help MatchPoint go nationwide and to spend the rest of
my life serving Him in this manner."
We applaud Orv for his desire to help others, and we are honored to have the
chance to grow his assets, which, in turn, will help this worthwhile effort.
- - Rebecca Buswell
DIANE . . .
You currently have the U.S. national champion female stunt pilot picking stocks
for your Fund! Phoenix-based researcher, Diane Hakala, is a member of the United
States Aerobatic Team and most recently won the United States National
Championship in Sherman, Texas! Prior to this her best performance was a 2nd
second place finish at the International Aerobatic Club Championships held in
Fond du Lac, Wisconsin in August. Last year she flew to a 4th place finish among
women and 14th overall at the World Championships.
An ace in the air, Diane is also an expert in selecting companies for you and
sees similarities between her flying and stock-picking. "Central to our
investment strategy is finding those companies that are performing better than
others expect. To do that, I have to analyze and combine critical information
quickly, just as I do in flight. And, I have to be confident enough to make
decisions fast."
"CENTRAL TO OUR INVESTMENT STRATEGY IS FINDING THOSE COMANIES THAT ARE
PERFORMING BETTER THAN OTHERS EXPECT."
Never was that more important in her flying experience than three years ago when
her plane's engine failed completely and Diane had ten seconds to decide her
course of action. She landed the plane without power, completely destroying her
craft but emerging with just a fractured ankle.
Diane joined Friess Associates' Delaware office in 1991, but in 1993 when we
opened an office in Phoenix, she eagerly moved there to enjoy the open desert
spaces perfect for practicing her flying maneuvers. Before Friess, she worked at
International Telephone and Telegraph as a computer programmer and at Morgan
Stanley & Co. as a systems analyst. Her knack for picking computer stocks comes
from this experience.
Some of the big winners she's chosen include EMC Corp., BMC Software, Bay
Networks, Autodesk and Texas Instruments, together bringing in more than $290
million in gains.
Originally from central Massachusetts, Diane stayed in New England for college
and attended Wesleyan University, graduating Cum Laude with a BA in History.
During college and high school, Diane became an accomplished trumpeter and
played with the Worcester Symphony Orchestra and the Greater Boston Youth
Symphony.
When she's not working, you can find Diane out on the golf course or in a karate
studio. But, looking to bring home the Gold for the United States next July,
you're most likely to see Diane in the air practicing her moves!
- -Rebecca Buswell
We were thrilled to receive postcards and notes from over 2,500 of our fellow
shareholders whose investments are handled through such organizations as Charles
Schwab and Fidelity. Thanks for your comments, and welcome to the family. We
would love to hear from the rest of you. If you invest through an intermediary,
please allow us to include you in our database by sending your name and address
to Jenni Weldon at the P.O. Box or Internet address listed on the back page.
PAUL . . .
Coming to Friess Associates from Texas, Paul Hopkins joined your trading desk
nearly a year ago, bringing with him more than ten years experience. Just prior
to making trades for your Fund, Paul spent seven years as the head trader at the
$48 billion Texas Teachers' Retirement System in Austin.
Paul graduated with a BBA in Finance and Accounting from Texas A&M University in
1984. Following graduation, he returned to his native Houston and began his
career in the investment business with AIM Management as an account
administrator on the money market desk. After only a year, Paul moved to the
equity desk. Paul then headed for Austin to join TRS which turned out to be a
wise move as he met and married his wife, Carol, who also worked there.
"My role at Friess Associates is to buy and sell large blocks of stock as
discreetly and efficiently as possible for the benefit of our shareholders and
clients," Paul explains. "Accomplishing that task depends on our ability to
prioritize and process the vast amount of information we receive every day. The
price, the position and the timing have to be right, and the teamwork atmosphere
on the desk enables us to facilitate this part of the job rather smoothly."
"HIS GRASP OF THE ELECTRONIC TRADING NETWORKS INSTINET & POSIT HAS BROUGHT A
NEW DIMENSION TO OUR FIRM..."
Executing buy orders from researcher Carl Gates, Paul was able to secure
relatively low (between $13 and $14) average cost prices for CellStar and DSP
Group, whose prices are now approaching $40. And, when researcher Mark Lapolla
determined it was time to get out of ESS Technology, Paul completed selling it
at $22 before it subsequently dropped to $13. These buy and sell decisions are
made by the research team, but it is Paul and the rest of the traders that
actually implement them for you.
Not only are Paul's trading skills impressive, but he also knows very well the
computer programs that our trading team now uses daily. Fellow trader Pat Kealey
applauds Paul, saying, "His grasp of the electronic trading networks INSTINET &
POSIT has brought a new dimension to our firm that directly benefits our
shareholders and clients. These networks allow for complete trading anonymity.
Our trades take place around the last listed executions without any real market
impact. Paul has been instrumental in our ability to use and master these
networks."
Paul's favorite time is spent with Carol and their two-year-old daughter,
Alison. But, you'll also find him enjoying sports, especially basketball and
golf, as well as camping, and working in the yard.
- - Rebecca Buswell
"EXTERNAL" RESEARCH RESOURCE . . .
When Greg Cote joined Robertson Stephens, he also joined the external research
resource network for Friess Associates. This year alone, such top winners as
Texas Instruments, Compaq Computer, DSC Communications, and Cisco Systems were
all in your Fund thanks to Greg's work.
"What sets Friess Associates apart from the rest of Wall Street is their ability
to anticipate change. My role with Friess is to help the research team manage
inflection points of the stocks they follow," Greg explains. "Those changing
points could be caused by a shift in the fundamentals, a new product, or
modified earnings numbers. I try to be on the lookout for these changes so Andy,
David, Diane, or any of the Friess research team can sell or buy at the right
time."
"GREG LOOKS AT THE ENTIRE INDUSTRY, INCLUDING COMPETITORS, WHICH ALLOWS HIM TO
ASSESS PITFALLS THAT MIGHT LIE AHEAD."
David Harrington, who selected Compaq, says Greg is an excellent idea generator.
"His interaction with company managements affords him the opportunity to better
understand how a company adapts to a particular product cycle or transition
within their industry," relates David. "Greg looks at the entire industry,
including competitors, which allows him to assess pitfalls that might lie
ahead."
Greg gleans this information for your Fund by attending conferences, following
road shows, and visiting with company managements. Oftentimes a Friess
researcher will join him at these conferences and it was on just such an
occasion that Greg met his wife, Mary Jo. He was at a technology conference in
Las Vegas with a few of your research team. So, Greg's affinity for working with
your researchers goes beyond sharing a knack for picking great stocks -- they
were around when he picked his wife!
Before Greg moved to San Francisco to launch his career with Robertson Stephens,
he worked at C.J. Lawrence, which is now DMG. Prior to that he was an investment
banker. Greg earned a BS in Finance from Lehigh University.
Born and raised in New Jersey, Greg is a transplanted westerner, but likes
living out West mainly because it puts him in close proximity to the Rockies
where he enjoys hitting the slopes. When Greg travels to Jackson Hole and visits
with our research team there, he tacks on a few extra days in order to get in
some skiing.
- -Rebecca Buswell
TOP TEN . . .
There were a couple of minor shifts in your Top Ten this quarter. Riding the
$197 million in gains in Compaq Computer which grew 87 percent in the quarter,
Computers & Related moved from number three in June to the top spot currently.
Purchases in Creative Technology, Sun Microsystems, and Unisys and their
subsequent net gains of nearly $7 million, also bumped up this group.
Your second largest group was Semiconductors & Related at 11.7 percent, moving
up from number five at 6.4 percent last quarter. You purchased Analog Devices,
Applied Materials, Atmel, KLA, and Texas Instruments which together have already
netted more than $29 million in gains.
You've added Cadence Design, up $3.3 million, Computer Associates, with $8
million, and Synopsys with $6.8 million, to increase your Software holdings to
9.1 percent currently. It stays at the number four position.
With gains of more than $3 million from new holdings Avis Rent A Car, Kellstrom
Industries, Ugly Duckling Corp., and Eagle USA Airfrieght, Transportation &
Related rounds out the Top Ten with 3.8 percent, replacing Department Stores. A
$5.4 million increase in MotivePower Industries also helped grow this category.
TOP TEN INDUSTRY GROUPS
Computers & Related 13.1%
Semiconductors & Related 11.7%
Specialty Retailing 9.9%
Software 9.1%
Oil/Gas Field Services 7.6%
Networking 6.5%
Financial/Business Services 5.6%
Communications 4.7%
Electronics 4.6%
Transportation & Related 3.8%
Cash 2.8%
All Others 20.6%
KUDOS FOR YOUR FUND . . .
FORBES - Brandywine is the #1 performing fund family for the last ten years
for all those managing more than $1 billion in assets. August 1997
----
MONEY - Out of a total of 368 funds, Brandywine Fund named among those that
"Refuse to Lose." One of only ten funds that made money every calendar
year for the last ten years, Brandywine's ten and five year returns outpaced
the other nine funds listed. May 1997
--------
THE WALL STREET JOURNAL - For the five years ended May 31, 1997, Brandywine
is the #1 performer of the 45 largest U.S. equity mutual funds with its 189
percent return which outdistanced the closest competitor by 25 percentage
points. June 1997
---------
WORTH - Brandywine is dubbed an "Emerging Fund Family . . . having ranked
in the top 5 percent of their peer group over five years." May 1997
--------
MUTUAL FUNDS MAGAZINE - Brandywine picked as one of 13 funds to choose if
you want to "Get the Most Bang for Your Buck." April 1997
----------
ALL IS NOT ROSES . . .
Or is it? This quarter was a banner one for you, with 15 stocks gaining more
than $20 million apiece, while only ONE holding dropped back by that amount.
That sole holding was Corning, Inc., which was sold to preserve a gain of $6
million in your Fund since purchase.
There were three stocks which lost more than $10 million this quarter -- Western
Digital, General Signal Corp., and Advanced Micro Devices. You've sold General
Signal, but still own the other two.
Your largest gainer this quarter was Compaq Computer, bringing in nearly $200
million! The next big winner was EMC Corp. with $97 million, followed by Dell
Computer's $73 million gain. Conseco and National Semiconductor brought in $47
million each, while SCI Systems, Teradyne, and CompUSA gained more than $40
million apiece.
Bay Networks, 3Com, Nordstrom, Cooper Cameron, BMC Software, Noble Drilling
Corp., and Cisco Systems rounded out the over $20 million gainers, and there
were 25 other companies that rose more than $10 million this quarter.
MARKET CAP . . .
Your mid-cap holdings, between $1 and $5 billion, grew from 37.6 percent in June
to 46.7 percent today. New to your portfolio are Office Depot, Accustaff, and
Watson Pharmaceutical, each rising more than $10 million since purchase. You
also saw a $12 million gain from other new purchases Atmel Corp., Tandy Corp.,
KLA-Tencor, and Unisys Corp. Growth in some of your existing mid-cap stocks
contributed as well. Nordstrom rose 30 percent, Staples was up 19 percent,
Teradyne gained 35 percent, and SCI Systems jumped 55 percent.
Dropping only slightly, your large cap companies above $5 billion comprise 37.6
percent of the portfolio, down from 39.6 percent in June. Warner Lambert was
sold, securing a $46 million profit. You also sold Corning and HBO & Co. locking
in gains of $6 million and $8 million since purchase, and pared back much of
your position in Federated Department Stores, nailing down gains of $14 million.
Stocks under $1 billion market valuation went from 15.4 percent last quarter to
12.9 percent.
YOUR COMPANIES' MARKET CAPITALIZATION
CASH 2.8%
SMALL CAP 12.9%
MID CAP 46.7%
LARGE CAP 37.6%
DISTRIBUTION AND A DISCREPENCY . . .
You had an excellent year! And, that means the fast approaching October
distribution will be big. As of September 30, the APPROXIMATE amount is $7.08
per share, $2.68 in short term gains and $4.40 long term gains. These amounts
may change slightly before the distribution is made on October 27, 1997. All
shareholders of record as of October 24, 1997 will receive the distribution.
With the new tax bill signed this summer including a maximum 20 percent tax rate
on some of those gains, there are sure to be differences in how much tax you'll
actually have to pay. Updated data will be sent with 1997 Form 1099s to enable
you to have accurate information to complete your 1997 Schedule D to be included
with your income tax returns.
Thanks for your comments regarding last quarter's quick turn-around on the
report. In "All Is Not Roses," we said you no longer held Compaq Computer, when
in fact, at quarter end you did. Compaq was sold at one point during the June
quarter, but repurchased before the quarter closed. Good thing, too, because
it's your largest gainer this time, with nearly $200 million in gains!
Please continue emailing us your comments. You can write us at
[email protected]. Lynda Campbell, Al Kirchner, Jenni Weldon, or I will be glad
to answer your emails. We look forward to hearing from you!
Rebecca Buswell
BRANDWINE FUND, INC.
STATEMENT OF NET ASSETS
September 30, 1997
SHARES QUOTED
OR PRINCIPAL MARKET
AMOUNT COST VALUE
------ ----- -------
LONG-TERM INVESTMENTS - 97.2% (A)<F4>
COMMON STOCKS - 97.2% (A)<F4>
APPAREL & SHOES - 1.8%
421,000 Cato Corp. $2,969,002 $3,841,625
1,013,500 Intimate Brands, Inc. 18,630,260 23,627,725
1,852,600 Liz Claiborne, Inc. 50,730,498 101,778,139
131,400 The Men's Wearhouse Inc.*<F3> 4,791,721 4,894,650
322,100 Nautica Enterprises Inc.*<F3> 7,818,734 9,059,063
155,000 Novel Denim Holdings LTD.*<F3> 3,383,285 4,185,000
143,600 Quiksilver, Inc.*<F3> 3,566,976 5,241,400
77,000 Timberland Co.*<F3> 3,375,468 6,140,750
507,200 The Warnaco Group, Inc. 14,423,894 16,103,600
------------ ------------
109,689,838 174,871,952
THIS SECTOR IS 59.4% ABOVE YOUR FUND'S COST.
AUTOMOTIVE & RELATED - 0.5%
714,900 Federal-Mogul Corp. 21,684,063 26,540,662
90,000 Keystone Automotive
Industries, Inc.*<F3> 1,481,250 1,901,250
25,600 Motorcar Parts & Accessories, Inc.*<F3> 493,975 516,813
500,000 Quaker State Corp. 7,780,000 8,531,500
188,800 Special Devices, Inc.*<F3> 4,991,978 5,310,000
------------ ------------
36,431,266 42,800,225
THIS SECTOR IS 17.5% ABOVE YOUR FUND'S COST.
COMMUNICATIONS - 4.7%
335,300 Allen Telecom Inc.*<F3> 8,540,963 9,556,050
589,200 Boston Technology, Inc.*<F3> 15,775,191 19,959,150
176,500 Cable Design Technologies Corp.*<F3> 6,016,058 6,718,119
837,750 CellStar Corp.*<F3> 11,912,657 38,955,375
615,400 Comverse Technology, Inc.*<F3> 29,785,970 32,462,350
3,852,000 DSC Communications Corp.*<F3> 112,129,648 103,765,176
573,300 DSP Communications, Inc.*<F3> 7,699,671 12,003,755
82,500 Dycom Industries, Inc.*<F3> 982,026 1,830,510
764,800 ECI Telecom Ltd. 20,519,915 24,760,400
315,700 Essex International, Inc.*<F3> 12,021,632 12,154,450
790,900 General Cable Corporation*<F3> 17,791,300 28,076,950
280,000 Glasgal Communications, Inc.*<F3> 1,946,561 1,995,000
238,500 LCC International, Inc.*<F3> 3,504,997 5,217,188
222,100 MICROS Systems, Inc.*<F3> 8,503,500 11,105,000
235,800 NICE-Systems Ltd. ADR*<F3> 8,791,183 13,263,750
108,500 Olicom A/S*<F3> 1,841,922 3,146,500
2,163,600 Tellabs, Inc.*<F3> 43,158,209 111,425,400
355,400 World Access Inc.*<F3> 6,741,503 11,550,500
------------ ------------
317,662,906 447,945,623
THIS SECTOR IS 41.0% ABOVE YOUR FUND'S COST.
COMPUTERS & RELATED - 13.1%
311,250 CHS Electronics, Inc.*<F3> 6,631,867 8,520,469
5,657,750 Compaq Computer Corp.*<F3> 235,930,737 422,916,812
161,000 Cotelligent Group, Inc.*<F3> 2,953,962 3,300,500
1,952,600 Creative Technology Ltd.*<F3> 45,586,046 49,914,314
525,100 Data General Corp.*<F3> 7,145,837 13,980,787
688,500 Dell Computer Corp.*<F3> 5,323,850 66,698,438
568,800 Diamond Multimedia Systems, Inc.*<F3> 6,293,242 6,967,800
5,035,600 EMC Corp. (Mass.)*<F3> 164,970,369 293,953,150
243,000 Pomeroy Computer Resource, Inc.*<F3> 6,545,496 10,388,250
175,000 Procom Technology, Inc.*<F3> 1,629,220 2,756,250
711,900 Sequent Computer Systems, Inc.*<F3> 14,196,021 17,664,375
2,542,300 Silicon Graphics, Inc.*<F3> 67,305,114 66,735,375
171,200 STB Systems, Inc.*<F3> 7,278,900 6,248,800
2,476,800 Sun Microsystems, Inc.*<F3> 115,703,362 115,946,438
393,700 Symbol Technologies, Inc. 16,785,800 17,298,391
2,400,000 Unisys Corporation*<F3> 33,488,400 36,751,200
2,830,400 Western Digital Corp.*<F3> 131,623,087 113,394,315
------------ ------------
869,391,310 1,253,435,664
THIS SECTOR IS 44.2% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 3.6%
342,000 Ames Department Stores, Inc.*<F3> 2,823,563 5,130,000
1,302,750 Family Dollar Stores, Inc. 18,965,886 29,719,636
3,012,500 Federated Department Stores,Inc.*<F3>128,157,517 129,914,062
584,600 Fred Meyer, Inc.*<F3> 26,076,919 31,129,950
2,151,200 Nordstrom, Inc. 98,839,528 137,139,000
222,800 Proffitt's Inc.*<F3> 5,052,446 13,200,900
------------ ------------
279,915,859 346,233,548
THIS SECTOR IS 23.7% ABOVE YOUR FUND'S COST.
DISTRIBUTION - 0.8%
331,000 Central Garden & Pet Co.*<F3> 8,250,156 10,178,250
505,800 Kent Electronics Corp.*<F3> 16,702,180 19,979,100
481,100 MicroAge, Inc.*<F3> 7,089,896 13,951,900
205,100 Pioneer-Standard Electronics, Inc. 3,100,080 3,525,259
643,600 Tech Data Corp.*<F3> 11,311,191 29,605,600
------------ ------------
46,453,503 77,240,109
THIS SECTOR IS 66.3% ABOVE YOUR FUND'S COST.
ELECTRONICS - 4.6%
399,100 ALTRON INC.*<F3> 8,121,792 6,635,037
60,000 Barringer Technologies Inc.*<F3> 692,812 637,500
37,000 Berg Electronics Corp.*<F3> 1,437,523 1,988,750
160,000 The DII Group Inc.*<F3> 4,535,605 5,244,960
60,200 Electro Scientific Industries,Inc.*<F3>2,014,825 3,672,200
83,300 General Scanning Inc.*<F3> 1,868,538 2,899,923
514,000 KEMET Corp.*<F3> 14,352,250 15,612,750
112,800 Kuhlman Corp. 3,691,882 4,060,800
150,000 Level One Communications Inc.*<F3> 5,537,188 6,037,500
799,800 Microchip Technology Inc.*<F3> 25,700,202 36,115,769
80,000 RadiSys Corporation*<F3> 3,519,376 4,020,000
153,000 Reptron Electronics, Inc.*<F3> 2,505,375 2,801,889
2,342,100 SCI Systems, Inc.*<F3> 48,228,963 116,081,502
124,600 Technitrol, Inc. 2,607,263 4,960,700
2,799,700 Teradyne, Inc.*<F3> 113,879,301 150,660,256
527,100 Varian Associates, Inc. 31,681,889 32,746,087
298,000 Veeco Instruments Inc.*<F3> 15,242,883 18,830,024
475,700 Waters Corp.*<F3> 14,766,317 21,020,232
63,500 WPI Group, Inc.*<F3> 725,875 769,938
------------ ------------
301,109,859 434,795,817
THIS SECTOR IS 44.4% ABOVE YOUR FUND'S COST.
FABRIC/TEXTILES - 0.3%
172,600 Kellwood Co. 3,649,600 6,116,599
375,900 Unifi, Inc. 11,829,322 15,388,594
211,300 WestPoint Stevens Inc.*<F3> 6,369,669 8,716,125
------------ ------------
21,848,591 30,221,318
THIS SECTOR IS 38.3% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 5.6%
2,664,600 AccuStaff Inc.*<F3> 73,172,171 83,934,900
124,800 Advanced Health Corp.*<F3> 2,993,578 2,745,600
752,600 AmeriCredit Corp.*<F3> 13,896,823 21,449,100
1,040,300 AMRESCO, Inc.*<F3> 28,831,428 38,621,137
438,800 BA Merchant Services Inc.*<F3> 6,608,014 8,117,800
63,400 Big Flower Press Holdings Inc.*<F3> 1,376,010 1,470,119
202,200 Consolidated Graphics, Inc.*<F3> 4,892,225 10,059,450
105,000 CORT Business Services Corp.*<F3> 2,505,206 4,193,490
722,200 Danka Business Systems PLC ADR 30,152,685 32,137,900
292,800 Finova Group, Inc. 27,490,246 27,706,200
813,300 FIRSTPLUS Financial Group, Inc.*<F3> 25,983,974 45,646,462
533,800 First Union Corporation (N.C.) 26,103,996 26,723,629
760,900 FIserv, Inc.*<F3> 29,992,273 33,384,487
142,900 Hagler Bailly, Inc.*<F3> 2,768,587 3,626,088
241,400 Hooper Holmes, Inc. 3,242,849 2,942,183
589,600 IMC Mortgage Co.*<F3> 7,721,788 9,065,100
98,000 Interim Services Inc.*<F3> 2,433,898 2,756,250
175,900 ITI Technologies, Inc.*<F3> 5,065,754 5,013,150
76,000 Jackson Hewitt Inc.*<F3> 1,767,538 2,907,000
344,800 Knoll, Inc.*<F3> 5,945,706 11,550,800
219,800 MAXIMUS, Inc.*<F3> 4,624,705 6,360,572
75,000 META Group, Inc.*<F3> 1,565,625 1,856,250
159,100 Herman Miller, Inc. 7,112,699 8,511,850
459,600 NS Group, Inc.*<F3> 10,916,600 14,879,550
134,000 Ocwen Financial Corp.*<F3> 5,913,305 5,644,750
714,500 Ogden Corp. 15,045,375 16,880,063
249,000 Personnel Group of America, Inc.*<F3> 3,773,595 8,528,250
932,700 Providian Financial Corporation 32,157,348 37,016,998
630,000 Servico, Inc.*<F3> 9,144,000 10,788,750
70,500 Sirrom Capital Corp. 3,085,905 3,657,188
308,900 StaffMark, Inc.*<F3> 4,048,746 11,776,813
565,600 United Companies Financial Corp. 17,687,815 17,816,400
357,000 Valassis Communications, Inc.*<F3> 8,568,000 11,379,375
------------ ------------
426,588,467 529,147,654
THIS SECTOR IS 24.0% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 1.3%
360,000 Apple South, Inc. 5,789,380 6,930,000
588,600 Brinker International, Inc.*<F3> 9,958,052 10,484,732
996,800 CKE Restaurants, Inc. 25,529,097 41,865,600
736,000 Foodmaker, Inc.*<F3> 13,695,150 13,846,368
219,000 Landry's Seafood Restaurants, Inc.*<F3>5,976,068 6,433,125
116,800 Logan's Roadhouse, Inc.*<F3> 2,538,265 3,036,800
109,500 Morton's Restaurant Group, Inc.*<F3> 2,257,262 2,682,750
642,500 Outback Steakhouse, Inc.*<F3> 15,933,930 17,749,062
179,600 Richfood Holdings, Inc. 4,547,932 4,658,465
55,000 Star Buffet, Inc.*<F3> 753,750 866,250
271,700 Suiza Foods Corp.*<F3> 10,766,465 13,992,550
------------ ------------
97,745,351 122,545,702
THIS SECTOR IS 25.4% ABOVE YOUR FUND'S COST.
HEALTHCARE - 1.0%
1,737,300 Beverly Enterprises, Inc.*<F3> 24,993,922 30,185,587
90,000 Curative Health Services Inc.*<F3> 2,738,750 2,801,250
412,700 FPA Medical Management, Inc.*<F3> 7,155,359 14,186,563
848,300 HEALTHSOUTH Corp.*<F3> 14,721,688 22,639,430
655,700 Integrated Health Services, Inc. 23,293,604 21,925,297
170,000 Physician Support Systems, Inc.*<F3> 2,077,121 2,868,750
139,000 Renal Care Group Inc.*<F3> 4,484,386 5,004,000
------------ ------------
79,464,830 99,610,877
THIS SECTOR IS 25.4% ABOVE YOUR FUND'S COST.
HOME/OFFICE & RELATED - 1.4%
795,800 Maytag Corp. 25,144,360 27,156,675
4,693,200 Office Depot, Inc.*<F3> 80,541,648 94,746,322
270,000 Rent-Way, Inc.*<F3> 3,222,874 5,703,750
410,000 Windmere-Durable Holdings Inc. 6,281,596 9,763,330
------------ ------------
115,190,478 137,370,077
THIS SECTOR IS 19.3% ABOVE YOUR FUND'S COST.
INSURANCE - 1.9%
3,466,100 Conseco, Inc. 86,432,196 169,190,739
412,400 John Alden Financial Corp. 11,618,982 12,784,400
------------ ------------
98,051,178 181,975,139
THIS SECTOR IS 85.6% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 2.1%
70,700 Ballantyne of Omaha, Inc.*<F3> 1,193,062 1,360,975
770,700 Callaway Golf Co. 24,487,523 26,878,162
324,800 CapStar Hotel Co.*<F3> 9,238,590 10,901,262
100,000 Doubletree Corp.*<F3> 5,000,625 4,825,000
618,650 Fairfield Communities, Inc.*<F3> 14,689,235 23,238,350
62,400 Hospitality Worldwide Services*<F3> 639,600 819,000
1,354,500 La Quinta Inns, Inc. 29,320,036 31,916,084
1,200,000 Polaroid Corp. 55,962,234 61,425,600
382,000 Prime Hospitality Corp.*<F3> 6,234,478 8,619,066
484,700 Promus Hotel Corporation*<F3> 22,395,139 21,720,861
44,100 Signature Resorts, Inc.*<F3> 1,721,202 2,094,750
78,200 Trendwest Resorts, Inc.*<F3> 1,433,104 1,837,700
------------ ------------
172,314,828 195,636,810
THIS SECTOR IS 13.5% ABOVE YOUR FUND'S COST.
MACHINERY/CONSTRUCTION & MISCELLANEOUS MANUFACTURING - 2.3%
37,600 Applied Power Inc. 2,235,965 2,366,469
452,500 Aviall, Inc.*<F3> 6,519,778 6,929,132
101,400 Carpenter Technology Corp. 4,357,485 5,019,300
751,400 Cincinnati Milacron Inc. 20,201,285 20,193,875
1,639,000 Coltec Industries Inc.*<F3> 30,532,227 35,443,375
569,000 Dana Corp. 26,341,410 28,094,375
120,000 GENICOM Corp.*<F3> 1,439,063 1,320,000
806,100 Rohr, Inc.*<F3> 17,322,823 24,939,122
924,000 Trinity Industries, Inc. 36,311,374 44,583,000
947,500 Tubos de Acero de Mexico SA ADR*<F3> 22,475,822 21,970,630
104,300 Varlen Corp. 3,423,580 4,119,850
878,400 Wyman-Gordon Co.*<F3> 21,530,909 23,058,000
------------ ------------
192,691,721 218,037,128
THIS SECTOR IS 13.2% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SERVICES - 0.7%
60,000 Box Hill Systems Corp.*<F3> 900,000 1,050,000
292,700 Cooper Companies, Inc.*<F3> 8,258,402 10,756,725
658,200 ESC Medical Systems Ltd.*<F3> 22,596,497 24,764,775
257,500 Medical Resources, Inc.*<F3> 2,609,623 4,989,063
144,800 Patterson Dental Co.*<F3> 5,046,099 5,864,400
500,000 VIVUS, Inc.*<F3> 17,409,864 18,750,000
------------ ------------
56,820,485 66,174,963
THIS SECTOR IS 16.5% ABOVE YOUR FUND'S COST.
NETWORKING - 6.5%
4,179,500 3Com Corp.*<F3> 152,771,319 214,199,375
3,999,700 Bay Networks, Inc.*<F3> 113,850,509 154,488,412
3,377,900 Cisco Systems Inc.*<F3> 208,895,984 246,799,508
253,100 Digi International Inc.*<F3> 3,787,235 3,606,675
------------ ------------
479,305,047 619,093,970
THIS SECTOR IS 29.2% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 7.6%
197,500 Basin Exploration, Inc.*<F3> 3,200,513 3,308,125
249,800 Bellwether Exploration Company*<F3> 3,572,962 3,497,200
817,200 BJ Services Co.*<F3> 38,587,003 60,677,100
1,200,000 Chesapeake Energy Corporation 12,156,510 13,650,000
1,104,700 Cooper Cameron Corp.*<F3> 37,856,192 79,331,821
870,300 Ensco International Inc. 28,345,281 34,322,891
578,800 EVI, Inc.*<F3> 13,605,015 37,043,200
521,700 J. Ray McDermott, S.A.* <F3> 15,150,422 25,563,300
80,000 Layne Christensen Co.*<F3> 1,360,000 1,680,000
346,000 Lone Star Technologies, Inc.*<F3> 7,544,753 18,057,048
1,028,000 Marine Drilling Companies, Inc.*<F3> 19,511,388 32,125,000
721,600 McDermott International, Inc. 20,163,543 26,338,400
2,332,600 Noble Drilling Corp.*<F3> 27,474,048 75,226,350
321,200 Nuevo Energy Co.*<F3> 11,609,261 15,377,450
592,100 Oceaneering International, Inc.*<F3> 12,326,189 14,099,677
50,000 Oryx Energy Co.*<F3> 713,515 1,271,900
348,100 Parker Drilling Co.*<F3> 3,293,642 5,286,943
221,800 Precision Drilling Corp.*<F3> 9,934,377 14,167,475
768,300 Pride International, Inc.*<F3> 13,558,754 26,122,200
1,343,500 Rowan Companies, Inc.*<F3> 23,617,972 47,862,188
100,000 Santa Fe International Corporation 2,850,000 4,650,000
188,100 Smith International, Inc.*<F3> 14,282,290 14,613,113
277,900 Snyder Oil Corp. 6,211,920 6,304,995
350,000 Superior Energy Services, Inc.*<F3> 2,939,063 3,237,500
340,500 Trico Marine Services, Inc.*<F3> 7,695,191 11,832,375
47,600 UNIFAB International, Inc.*<F3> 856,800 1,558,900
710,500 USX-Marathon Group 24,590,301 26,422,074
760,100 Varco International, Inc.*<F3> 22,407,629 36,864,850
417,200 Veritas DGC Inc.*<F3> 10,321,348 17,757,284
445,800 Vintage Petroleum, Inc. 14,087,096 21,955,650
909,600 Weatherford Enterra Inc.*<F3> 37,692,814 48,493,505
------------ ------------
447,515,792 728,698,514
THIS SECTOR IS 62.8% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 1.3%
100,000 Andrx Corp.*<F3> 3,559,688 4,550,000
1,483,900 Bio-Technology General Corp.*<F3> 18,538,620 22,258,500
105,000 IMPATH, Inc.*<F3> 2,427,500 3,071,250
97,100 Kendle International Inc.*<F3> 1,447,354 1,820,625
1,625,600 Mylan Laboratories Inc. 35,277,747 36,475,213
919,300 Watson Pharmaceuticals Inc.*<F3> 44,258,714 54,928,175
------------ ------------
105,509,623 123,103,763
THIS SECTOR IS 16.7% ABOVE YOUR FUND'S COST.
SEMICONDUCTORS & RELATED - 11.7%
3,209,100 Advanced Micro Devices, Inc.*<F3> 101,340,959 104,497,923
54,800 Aetrium Inc.*<F3> 1,363,075 1,363,150
598,600 Altera Corp.*<F3> 32,708,623 30,678,250
1,220,500 Analog Devices, Inc.*<F3> 39,041,098 40,886,750
2,208,800 Applied Materials, Inc.*<F3> 203,935,225 210,388,200
276,600 ASM International, N.V.*<F3> 4,661,323 5,566,575
1,405,500 Atmel Corp.*<F3> 47,048,382 51,213,609
137,300 Cerprobe Corporation*<F3> 3,065,680 3,449,662
120,000 CFM Technologies, Inc.*<F3> 3,458,125 4,702,560
204,400 Continental Circuits Corp.*<F3> 3,645,088 3,858,050
171,500 C. P. Clare Corp.*<F3> 2,651,480 3,387,125
244,100 Credence Systems Corp.*<F3> 8,895,191 11,899,875
225,400 Cypress Semiconductor Corp.*<F3> 3,246,293 3,493,700
270,600 Digital Microwave Corp.* <F3> 6,951,966 12,109,350
197,500 DSP Group, Inc.*<F3> 2,639,356 7,751,875
273,300 Exar Corp.*<F3> 5,440,357 7,242,450
444,800 International Rectifier Corp.*<F3> 7,580,499 10,397,200
705,300 KLA-Tencor Corp.*<F3> 43,836,518 47,652,184
1,375,200 LSI Logic Corp.*<F3> 45,098,104 44,178,300
322,000 MEMC Electronic Materials, Inc.*<F3> 9,232,320 9,660,000
900,000 Micron Electronics, Inc.*<F3> 16,942,874 15,750,000
4,531,600 National Semiconductor Corp.*<F3> 113,844,581 185,795,600
281,200 Sipex Corp.*<F3> 4,294,480 8,928,100
1,809,000 Texas Instruments Inc. 229,784,348 244,441,125
1,285,700 VLSI Technology, Inc.*<F3> 29,233,366 44,598,362
------------ ------------
969,939,311 1,113,889,975
THIS SECTOR IS 14.8% ABOVE YOUR FUND'S COST.
SOFTWARE - 9.1%
135,000 Activision, Inc.*<F3> 1,600,003 2,025,000
1,308,500 Autodesk, Inc. 43,979,319 59,373,187
3,194,000 BMC Software, Inc.*<F3> 145,461,862 206,811,500
143,200 Broderbund Software, Inc.*<F3> 4,340,915 4,868,800
1,376,400 Cadence Design Systems, Inc.*<F3> 70,374,920 73,637,400
614,100 Citrix Systems, Inc.*<F3> 31,970,334 30,916,250
2,202,100 Computer Associates
International, Inc. 150,159,601 158,139,407
1,142,600 Compuware Corp.*<F3> 20,746,243 69,127,300
1,151,000 Electronic Arts Inc.*<F3> 33,030,024 44,457,375
855,600 Electronics for Imaging, Inc.*<F3> 31,740,265 43,635,600
177,000 Insight Enterprises, Inc.*<F3> 3,636,781 5,863,125
237,300 Legato Systems, Inc.*<F3> 4,078,185 8,424,150
188,000 MAPICS, Inc.*<F3> 1,692,000 2,444,000
515,900 McAfee Associates, Inc.*<F3> 31,411,390 27,342,700
134,000 Natural MicroSystems Corp.*<F3> 4,547,375 5,092,000
75,000 OrCAD, Inc.*<F3> 907,035 1,092,225
158,100 Project Software &
Development, Inc.* <F3> 4,282,036 3,616,538
160,000 QAD Inc.*<F3> 3,053,854 2,980,000
122,900 QuadraMed Corporation*<F3> 2,054,925 2,120,025
150,000 Rogue Wave Software*<F3> 1,837,500 2,062,500
1,142,500 Sterling Software, Inc.*<F3> 36,578,147 40,987,188
1,399,800 Symantec Corp.*<F3> 21,994,566 31,845,450
792,900 Synopsys, Inc.*<F3> 26,867,349 33,698,250
155,000 System Software Associates, Inc.*<F3> 1,532,051 2,286,250
180,900 Viewlogic Systems, Inc.*<F3> 2,773,893 4,307,772
------------ ------------
680,650,573 867,153,992
THIS SECTOR IS 27.4% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 9.9%
111,400 Abercrombie & Fitch Co.*<F3> 1,781,777 2,924,250
25,000 American Eagle Outfitters, Inc.*<F3> 611,250 693,750
411,200 Audiovox Corp.*<F3> 3,335,558 4,189,306
1,101,400 Best Buy Co., Inc.* <F3> 17,454,499 27,191,363
769,200 Borders Group, Inc.*<F3> 13,673,533 21,153,000
100,000 Children's Place Retail Stores, Inc.* 1,490,625 1,450,000
<F3>
2,968,900 CompUSA Inc.*<F3> 59,036,167 103,911,500
1,664,200 Costco Companies, Inc.*<F3> 46,611,991 62,615,525
67,700 Creative Computers, Inc.*<F3> 917,240 854,712
464,200 Dress Barn, Inc.*<F3> 6,293,682 11,140,800
290,000 The Finish Line, Inc.*<F3> 4,854,230 5,492,020
367,000 French Fragrances Inc.*<F3> 2,202,000 4,289,496
2,031,300 Gap, Inc. 99,578,923 101,692,972
321,100 Goody's Family Clothing, Inc.*<F3> 11,312,398 10,355,475
429,000 The Home Depot, Inc. 22,312,350 22,361,625
520,600 Linens'n Things, Inc.*<F3> 8,796,197 17,440,100
368,200 Mac Frugal's Bargains
Close-outs Inc.*<F3> 8,120,023 11,230,100
467,100 Michaels Stores, Inc.*<F3> 12,160,121 14,275,977
149,000 The North Face, Inc.*<F3> 3,711,280 4,004,375
2,998,800 OfficeMax, Inc.*<F3> 46,157,528 45,545,774
142,800 Paul Harris Stores, Inc.* <F3> 1,712,579 3,944,850
100,000 Payless ShoeSource, Inc.*<F3> 2,894,219 5,968,800
1,463,500 PETsMART, Inc.*<F3> 14,370,570 15,183,813
2,533,400 Rite Aid Corp. 120,421,444 140,446,629
661,100 Stage Stores, Inc.*<F3> 14,261,727 28,509,938
3,709,700 Staples, Inc.*<F3> 85,874,746 102,480,463
183,100 Stein Mart, Inc.*<F3> 5,287,013 5,996,525
3,589,800 Tandy Corp. 119,720,069 120,707,025
785,900 Tiffany & Co. 28,009,518 33,400,750
92,000 United Auto Group, Inc.*<F3> 2,300,956 2,466,796
554,400 Zale Corp.*<F3> 13,987,148 14,380,027
------------ ------------
779,251,361 946,297,736
THIS SECTOR IS 21.4% ABOVE YOUR FUND'S COST.
TRANSPORTATION & RELATED - 3.8%
130,500 AirNet Systems Inc.*<F3> 1,990,322 3,148,312
244,300 American Freightways Corp.*<F3> 3,363,632 4,641,700
250,000 Arkansas Best Corp.*<F3> 2,737,500 2,828,250
117,500 Atlantic Coast Airlines Inc.*<F3> 1,865,574 2,526,250
163,900 Avis Rent A Car, Inc.*<F3> 3,109,634 3,913,112
105,000 Budget Group, Inc.*<F3> 3,020,463 3,465,000
1,025,000 Caliber System, Inc. 40,605,192 55,606,250
92,500 Celadon Group, Inc.*<F3> 962,017 1,341,250
1,035,100 CNF Transportation Inc. 30,526,856 45,092,061
267,400 Comair Holdings, Inc. 5,805,076 7,186,375
232,000 Eagle USA Airfreight, Inc.*<F3> 6,547,875 7,772,000
711,300 Gulfstream Aerospace Corp.*<F3> 20,470,347 20,627,700
678,600 Hertz Corp. 19,855,838 25,575,077
468,600 J. B. Hunt Transport Services, Inc. 8,208,768 7,292,822
120,000 Kellstrom Industries Inc.*<F3> 2,168,640 2,475,000
549,000 MotivePower Industries Inc.*<F3> 7,839,750 14,274,000
158,500 M.S. Carriers, Inc.*<F3> 4,053,745 4,220,063
175,000 SkyWest, Inc. 2,852,500 3,456,250
1,363,100 Southwest Airlines Co. 33,033,568 43,534,688
600,700 Ugly Duckling Corp.*<F3> 8,536,813 9,160,675
1,942,000 US Airways Group, Inc.*<F3> 52,038,119 80,350,250
440,000 Werner Enterprises, Inc. 8,041,562 10,670,000
------------ ------------
267,633,791 359,157,085
THIS SECTOR IS 34.2% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 1.6%
370,000 American Eco Corporation*<F3> 4,749,811 4,810,000
913,200 The B.F. Goodrich Company 37,331,667 41,322,300
1,646,300 The Dial Corp. 25,859,991 28,708,179
133,000 Helen of Troy Corp.*<F3> 2,102,875 2,626,750
165,000 ITEQ, Inc.*<F3> 1,813,167 2,299,770
272,400 The Lubrizol Corp. 10,184,241 11,440,800
424,200 Oregon Steel Mills, Inc. 11,421,790 11,506,425
1,285,700 Philip Services Corp.*<F3> 20,110,999 23,464,025
435,400 Precision Castparts Corp. 24,871,533 28,301,000
------------ ------------
138,446,074 154,479,249
THIS SECTOR IS 11.6% ABOVE YOUR FUND'S COST.
------------ ------------
Total common stocks 7,089,622,042 9,269,916,890
WARRANTS - 0.0% (A)<F4>
43 Sound Advice, Inc.
Warrants*<F3>, 06/14/99 0 0
------------ ------------
Total long-term investments 7,089,622,042 9,269,916,890
SHORT-TERM INVESTMENTS - 3.4% (A)<F4>
COMMERCIAL PAPER - 3.3%
$40,000,000 Ford Motor Credit Co.,
due 10/01/97, discount of 5.81% 40,000,000 40,000,000
50,000,000 Smith Barney,
due 10/01/97, discount of 5.80% 50,000,000 50,000,000
50,000,000 Ford Motor Credit Co.,
due 10/02/97, discount of 5.90% 49,991,806 49,991,806
50,000,000 Merrill Lynch & Co., Inc.,
due 10/02/97, discount of 5.62% 49,992,194 49,992,194
50,000,000 American General Finance Corp.,
due 10/03/97, discount of 5.62% 49,984,389 49,984,389
50,000,000 Smith Barney,
due 10/03/97, discount of 5.825% 49,983,819 49,983,819
25,000,000 New England Education Loan
Marketing Corp.,
due 10/06/97, discount of 5.75% 24,980,035 24,980,035
------------ ------------
Total commercial paper 314,932,243 314,932,243
VARIABLE RATE DEMAND NOTES - 0.1%
4,050,522 Johnson Controls, Inc. 4,050,522 4,050,522
3,000,000 Wisconsin Electric Power Company 3,000,000 3,000,000
------------ ------------
Total variable rate demand notes 7,050,522 7,050,522
------------ ------------
Total short-term investments 321,982,765 321,982,765
------------ ------------
Total investments $7,411,604,807 9,591,899,655
==============
LIABILITIES, LESS CASH AND
RECEIVABLES (0.6%) (A)<F4> (59,175,579)
--------------
NET ASSETS $9,532,724,076
==============
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($9,532,724,076 / 217,097,446
shares outstanding) $43.91
======
*<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.
BRANDYWINE FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1997
INCOME:
Dividends $21,881,598
Interest 34,797,621
------------
Total income 56,679,219
------------
EXPENSES:
Management fees 73,988,269
Custodian fees 1,032,934
Transfer agent fees 712,216
Printing and postage expense 611,278
Administrative services 389,475
Registration fees 386,353
Professional fees 44,663
Other expenses 98,073
------------
Total expenses 77,263,261
------------
NET INVESTMENT LOSS (20,584,042)
------------
NET REALIZED GAIN ON INVESTMENTS 1,613,667,150
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 981,427,330
------------
NET GAIN ON INVESTMENTS 2,595,094,480
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,574,510,438
==============
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1997 and 1996
1997 1996
----- -----
OPERATIONS:
Net investment loss $(20,584,042) $(20,035,250)
Net realized gain on investments 1,613,667,150 214,708,928
Net increase in unrealized appreciation
on investments 981,427,330 362,502,998
-------------- ------------
Net increase in net assets resulting
from operations 2,574,510,438 557,176,676
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains
($1.347376 and $3.84486 per share,
respectively) (250,675,102)*(479,170,817)**
-------------- ------------
<F5> <F6>
FUND SHARE ACTIVITIES:
Proceeds from shares issued (57,592,561 and
68,912,081 shares, respectively) 2,068,244,776 2,054,823,129
Net asset value of shares issued in
distributions (7,103,901 and 15,557,840
shares, respectively) 233,833,825 439,669,031
Cost of shares redeemed (31,524,981 and
22,514,291 shares, respectively) (1,131,490,538) (671,681,532)
-------------- ------------
Net increase in net assets derived from Fund
share activities 1,170,588,063 1,822,810,628
-------------- ------------
TOTAL INCREASE 3,494,423,399 1,900,816,487
NET ASSETS AT THE BEGINNING OF THE YEAR 6,038,300,677 4,137,484,190
-------------- ------------
NET ASSETS AT THE END OF THE YEAR $9,532,724,076 $6,038,300,677
============== =============
*<F5>Total distribution includes $65,792,910 of ordinary income, of which 37%
is eligible for the corporate dividends received deduction.
**<F6>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>
YEARS ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $32.83 $33.92 $24.77 $28.04 $19.36 $20.52 $15.79 $17.87 $12.89 $17.00
Income from investment operations:
Net investment (loss) income (0.07)(1) (0.08)(1) (0.10) 0.03 (0.02) 0.04 0.27 0.11 0.03 0.06
<F7> <F7>
Net realized and unrealized gains
(losses) on investments 12.50 2.83 10.70 (0.43) 9.25 1.04 5.74 (1.48) 4.99 (3.29)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations 12.43 2.75 10.60 (0.40) 9.23 1.08 6.01 (1.37) 5.02 (3.23)
Less distributions:
Dividends from net investment income -- -- -- -- (0.01) (0.13) (0.28) (0.03) (0.04) --
Distributions from net realized gains (1.35) (3.84) (1.45) (2.87) (0.54) (2.11) (1.00) (0.68) -- (0.88)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from distributions (1.35) (3.84) (1.45) (2.87) (0.55) (2.24) (1.28) (0.71) (0.04) (0.88)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of year $43.91 $32.83 $33.92 $24.77 $28.04 $19.36 $20.52 $15.79 $17.87 $12.89
====== ====== ====== ======= ======= ====== ====== ====== ====== ======
Total Investment Return 39.3% 10.0% 45.5% (1.4%) 48.6% 5.9% 41.4% (7.9%) 39.0%(17.6%)
Ratios/Supplemental Data:
Net assets, end of year
(in 000's $) 9,532,724 6,038,301 4,137,484 2,240,554 1,413,253 695,128 527,808 271,856 169,745 122,863
Ratio of expenses to average
net assets 1.04% 1.06% 1.07% 1.09% 1.08% 1.10% 1.09% 1.12% 1.13% 1.16%
Ratio of net investment (loss) income
to average net assets (0.3%) (0.4%) (0.4%) 0.1% (0.1%) 0.2% 1.5% 0.9% 0.2% 0.3%
Portfolio turnover rate 192.4% 202.8% 193.7% 190.2% 150.4% 188.9% 187.9% 157.7% 91.0% 107.4%
Average commission rate paid*<F8> $0.0595 $0.0599
(1)<F7>Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for book and tax differences.
*<F8>Disclosure required for fiscal years beginning after September 1,
1995.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(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. The cost amount of securities for Federal income tax
purposes aggregates $7,421,521,557. The difference between cost amounts for book
purposes and tax purposes is due to deferred wash losses.
(b) Net realized gains and losses on common stock are com-puted 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.
(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 consult-ant
paid by the Adviser.
(3) DISTRIBUTION TO SHAREHOLDERS
Net investment income and net realized gains are distributed to
shareholders. The Fund intends to declare a distribution of all net realized
gains to be paid on October 28, 1997 to shareholders of record of October 24,
1997.
(4) INVESTMENT TRANSACTIONS
For the year ended September 30, 1997, purchases and proceeds of sales of
investment securities (excluding short-term investments) were $13,669,854,995
and $12,983,397,747, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 1997, liabilities of the Fund included the following:
Payable to brokers for
investments purchased $165,545,661
Payable to Adviser for management fees 7,694,308
Other liabilities 636,848
(6) SOURCES OF NET ASSETS
As of September 30, 1997, the sources of net assets were as follows:
Fund shares issued and outstanding $5,817,607,503
Net unrealized appreciation
on investments 2,180,294,848
Undistributed net realized gains
and losses 1,534,821,725
---------------
$9,532,724,076
==============
Aggregate net unrealized appreciation as of September 30, 1997 consisted of
the following:
Aggregate gross
unrealized appreciation $2,239,170,581
Aggregate gross unrealized
depreciation (58,875,733)
--------------
Net unrealized appreciation $2,180,294,848
=============
(PRICE WATERHOUSE LOGO)
PRICE WATERHOUSE LLP
100 EAST WISCONSIN AVENUE
MILWAUKEE, WI 53202
REPORT OF INDEPENDENT ACCOUNTANTS
October 7, 1997
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF BRANDYWINE FUND, INC.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Brandywine Fund, Inc. (the "Fund") at September 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the ten years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1997 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
ON THE CUTTING EDGE . . .
X-RAY BY COMPUTER
Standard dental X-rays may become a thing of the past. Schick Technologies, Inc.
of Long Island City, New York has developed a technology called CDR (computed
dental radiography). The system produces digitized X-ray images that are larger
and sharper than traditional X-ray films, making diagnosis easier and more
accurate. CDR eliminates the time and cost of processing negatives, and it can
easily transmit images over phone lines to obtain a second opinion or insurance
approval.
20/20 VISION WITHOUT GLASSES, CONTACTS, OR LASER SURGERY
The University of California San Francisco is participating in large scale
clinical trials of the Intrastromal Corneal Ring Segment, a new technology to
give nearsighted people clear vision without using corrective lenses or
undergoing surgeries that cut the center of the optical zone. Two thin polymer
ring segments are inserted at the very front of the eye to reshape the cornea.
This quick out-patient procedure is reversible and adjustable; the corneal ring
cannot be felt and is about as visible as a contact lens.
INFORMATION OVERLOAD
Too many I.D. cards, too many passwords, too many pin numbers? Vissage
Technology in Littleton, Massachusetts offers one alternative -- a patented
facial recognition software for instant identification. Their system snaps a
digital picture, converts key facial features into a series of numerical values,
and stores the information on a database. Searching for one face among millions
takes only seconds. So far, seven states have converted their drivers' licenses
to the system; Massachusetts and New York's welfare agencies have started using
the system to reduce fraud.
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
P.O. Box 4166, Greenville, DE 19807
[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: Rebecca A. Buswell
Report Staff: Margaret Barton, Adam Rieger, Paul R. Robinson, Jennifer Weldon
