BRANDYWINE FUND, INC.
MANAGED BY FRIESS ASSOCIATES, INC. SEMI-ANNUAL REPORT MARCH 31, 1998
DEAR FELLOW SHAREHOLDERS:
Your Fund returned 2.8 percent this quarter held back by high cash levels
which dropped from a high of 78 percent to its current 43 percent. You
backtracked 11.6 percent the first half of fiscal '98.
Aided by the pleasant 19 percent September quarter increase, your trailing
twelve months performance of 17.7 percent normally would be embraced as a good
return. But because the market generally has been so strong, these results are
terrible. We have not served you well this quarter and we want you to know we
are very upset about that fact. We are blessed with the best clients and
shareholders in the world and you deserve better.
With daily confirmation and validations of your research team's assessment
that there would be disappointing earnings particularly in the technology
sector, why do so many stocks continue to go up? How could we be so right, and
yet so wrong, all at the same time?
It's because the market is being driven more by liquidity than by
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fundamentals. We were dead wrong in not correctly assessing the incredible
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amounts of money that would be awash in the system that had to find a home some
place. The U.S. suddenly looked like one of the best games in town. The money
supply grew an alarming 9 percent from Q4 '97 to Q1 '98. Money deposited into
equity mutual fund coffers exploded almost 50 percent higher in the early weeks
of 1998 compared to 1997.
Despite the growing signs of excessive speculation, the incredibly high PE
ratios of many stocks, and the deterioration of earnings growth in many
technology companies, the market has moved ahead. Meanwhile, the Japanese
economy, the world's second largest market, continues to deteriorate. Even Sony
Corporation chairman's shocking declaration Thursday: "We are going to have a
very, very severe 1998. Japan's economy is on the verge of collapse," seems to
have had no effect on our market.
As analysts further lowered forecasts for earnings growth to reduced levels
not seen in 8 years, stocks have continued to climb. First Call's latest S&P 500
first-quarter forecast is 0.5 percent earnings growth over last year -- down
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from 10.4 percent on January 2! Yet the S&P 500 was up 13.5 percent on this
disappointing earnings outlook. The prospect of earnings for the year are an
anemic 9.7 percent growth, down significantly from much higher expectation
levels just a month ago. In the Friess Associates investment approach lower
earnings drop stocks, growing earnings make them go up.
Let me clearly articulate our investment strategy and what it is we do for you
and what it is we don't do, so we are all on the same page, in terms of
understanding how that affects the levels of cash.
Our first criterion is to isolate very rapidly growing companies. If you look
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at our portfolio at any given time, you'll find 90 percent of the companies
growing over 15-20 percent and our average growth rate often surpassing 50
percent.
Second, we buy lower PE ratio stocks. We do not own the Home Depots, the Coca-
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Colas, Gillettes and the AOLs -- the companies selling at 35, 40, 60 times
earnings, even though they are leading companies. Again, 90 percent of your
companies would be under 25 times.
The third criterion looks for companies doing better than people expect. When
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even a company leader reports a 35 percent earnings increase, the stock can go
down because analysts were predicting 45 percent. CompUSA's 5 point drop Tuesday
to $20, down from a recent high of $35, is but one example of this phenomenon of
a high quality company being punished for slowing earnings growth. You sold the
stock months ago.
Everyday, every one of our researchers scrutinizes each investment for which
he or she is responsible. If we believe it is going down, it is sold. If we
believe it is going up, it is held. If our sales at any given time exceed
purchases of those we are excited about, the cash in the Fund builds.
Some other times when this has happened were during the fall of the Shah in
Iran and during the Arab oil embargo in late 1973. Money was made in 1974
because of this excess cash even though the S&P 500 declined 26.5 percent.
--------
After our 1990 Kuwait-invasion inspired sales, the Dow Jones dropped over 400
points.
We have stuck to our discipline. We did not go out and buy Yahoo! at a PE
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measured in the hundreds or drug stocks with PE ratios of 40 and above. This
focused approach has been out of step before.
Many sophisticated investors believe that you should never sell, pointing to
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successes like Coca-Cola or Microsoft. Friess Associates does not look at the
investment world from this perspective. For every Coke, we can point to New York
Central and Pennsylvania Railroad, two companies for which the same arguments
were made. These were "high quality" companies. Neither exists today.
Had you bought Avon Products in 1973 at its high of $70, you would have
watched it sag to under $9 in the next eleven years, and waited 24 years before
it returned to $70. Seventeen of the 30 Dow Jones stocks of 25 years ago have
been replaced because of deteriorating fundamentals.
Had we subscribed to this buy and hold theory, we probably would not have sold
your Nike at $66 which now sells in the low $40s, or your Compaq at $31 after a
50 percent gain because both are classic, powerful companies. Compaq now trades
in the mid $20s. David Harrington was shrewd to perceive from talks with many of
its customers that an inventory glut was developing in the reseller channel.
Orders were also impacted because of a shift towards the new $1,000 and under
computers.
Bottom line, we want you to know that while some have construed our heavy cash
position as being "bearish" on the market or a "market call," it evolved from
the same investment disciplines we have been implementing for 30 years.
This time-tested strategy has earned recognition from financial publications,
investment gurus, and financial advisors throughout the country. Sticking with
this proven investment discipline is how you are currently enjoying smart gains
in your recent stock selections.
A.J. Berk's Cotelligent Group pick rose 55 percent. Goodys Clothing, selected
by Tripp Rudisill, and Atlantic Coast Airlines, chosen by David Harrington, each
jumped 52 percent. Central Garden & Pet, Bill Dugdale's pick, was up 49 percent,
while John Ragard saw his ShowBiz PizzaTime gain 42 percent.
Jon Fenn's Franchise Mortgage Acceptance climbed 40 percent, Carl Gates'
Kendle International rose 39 percent, while Paul Berg's Let's Talk Cellular
increased 38 percent. And, Fiserv, Inc. which Andy Graves selected, was up 29
percent.
If you'd invested five years ago, you'd enjoy a 136 percent cumulative return,
18.7 percent average annualized. And, the ten year figure is 502 percent, or
19.7 percent on average each year.
MOST RECENT TEN YEARS
Russell 2000 238.2%
NASDAQ IND. 254.9%
IBD* <F1> 267.9%
S&P 500* <F1> 465.7%
Your Fund* <F1> 501.5%
We are grateful for Kiplinger's Mutual Funds '98 showing that Brandywine's
performance, with a 20.3 percent average annualized return, ranks us as one of
the top three no-load mutual funds in the U.S. for the ten years ended December
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31, 1997 in the Long-Term Growth category!
Jack Fraser deserves kudos for the significant new research hires and also for
enhancing our external research resources. Clarke Adams, Diane Hakala, and Mark
Lapolla are fullfilling an entrepreneurial dream launching a hedge fund which
permits short sales, options, and leverage which the Friess Associates strategy
does not utilitze.
Our 39-person research team is now in place to accomodate growth to 50 percent
before we'll need to add new people.
My 34 years of investment experience tends to side with a comment in this
week's The Economist:
"To ignore earnings and buy shares on the basis that lots of other people are
going to is another version of the greater fool theory that underpins market
bubbles."
At the end of the day, a stock is worth no more than the earnings attached to
it. Our goal over the next couple of quarters is to buy stocks that will
outperform the relevant indices AND meet our stringent earnings criteria, such
as General Cable, Maytag, Dress Barn, and Atlantic Coast Airlines, rising 102,
51, 107, and 202 percent since purchase.
With earnings estmates coming down, we are seeing more opportunities to put
your money to work now that people are altering their expectations to what your
research team predicted months ago.
For those of you who have "hung tough" and contributed nearly $500 million in
new dollars, over the quarter, we thank you for your loyalty and confidence, and
you can bet we will work as hard as ever to retain your trust.
Our morale is sustained by encouraging emails and letters like one from a
shareholder who works at Lucent Technologies. She wrote, "Brandywine is a growth
fund and most of us should look to long term. Sometimes long term cannot be
reached without short term losses. The market is not a sure thing, and I
personally don't look for all milestones to be successful. Keep up the good work
and your spirits!" It's supportive comments like this that get us to the office
early!
Our most important priority is helping you achieve your financial goals --
from our longest-term shareholders, like The Nobel Foundation, with $40 million
invested with you, to those of you who are newest on the block.
Our own pension funds, much of the investments of our close friends and
families, and all of my personal stock market investments are in Brandywine and
Brandywine Blue Funds. Our mutual success is foremost on our minds each and
every workday.
God Bless!
/s/ Foster Friess
Foster Friess
President
April 4, 1998
HIGHLIGHTS . . .
COMMUNICATIONS
With sales figures tripling from many of its top 20 customers like Home Depot,
and new relationships with such well known companies as GTE, GENERAL CABLE
CORPORATION penetrates both international and domestic markets. Your company
manufactures and markets its wire and cable products to retailers, OEMs
(original equipment manufacturers) and distributors.
Canadian sales are up 40 percent, and upcoming acquisitions in Europe and Mexico
help strengthen General Cable's international presence.
According to CEO Steve Rabinowitz, these increased sales result from your
company's "Power of One" strategy which provides a one stop shopping solution
for its customers. Key to this strategy is that General Cable offers more
products than any other cable manufacturer or distributor and provides
extraordinary customer service in education about its products (which is unusual
for a commodity business like cable distribution).
Last quarter, earnings were $.62. Analysts expect earnings growth of 31 percent
for the March quarter.
Purchased for you in May, your shares are up 102 percent to $45.
DEPARTMENT STORES
Does purchasing groceries, apparel, home electronics, garden equipment, and
sporting goods all in one store seem unlikely? Not if you live in the western
U.S. and shop at one of FRED MEYER, INC.' s 110 "multidepartment" stores. With
sales in the recent January quarter up 88 percent, it seems these superstores
have popular appeal.
Fred Meyer recently acquired Ralph's Supermarkets, a supermarket chain based in
Southern California, and Quality Food Centers, a grocery chain in the Pacific
Northwest, making it the 4th largest supermarket operator in the nation. CFO
Dave Jessick says those acquisitions are now complete and analysts expect they
will create a doubling in sales. Revenues in calendar year '98 should eclipse
$15 billion.
Your company recently beat Wall Street expectations by 5 cents when it reported
earnings for the January quarter of $.56, with same store sales rising over 10
percent. Analysts predict earnings will be $.31 next quarter, a gain of 30
percent.
Rising 107 percent since purchase in May at $22, your shares sell today at $46.
FOOD/RESTAURANTS
If you have young children, grandchildren, nieces or nephews, chances are you've
set foot in a Chuck E Cheese's once or twice. These family restaurants run by
SHOWBIZ PIZZA TIME, INC. appeal to young kids because of an arcade-like
atmosphere featuring life-sized, computer-controlled mechanical characters and
animated props, video and interactive games and rides. The menu, too, is catered
to the younger palate, offering pizza, salads, sandwiches, and desserts.
CFO Larry Page told us about ShowBiz's remodeling plans for its highest volume
stores. Excess space is eliminated in kitchens and bathrooms to create more
retail capacity. The goal is to revamp 12 units this year, which would be
equivalent to adding four new stores at a dramatically lower cost than building.
Your company is also introducing their new game package which includes kiddy
skill games and higher tech, more competitive interactive games for the entire
family to enjoy, fueling sales growth of 9.1 percent in those restaurants where
the games have been introduced.
The December quarter showed earnings more than doubling from $.12 to $.30.
Revenues rose 26 percent.
Purchased in October at $23, your shares are up 44 percent to $33 today.
HOME/OFFICE & RELATED
Quality has always been associated with the MAYTAG CORP. name. You've likely
seen the Maytag repairman advertised as the loneliest guy in the business, never
receiving calls for repair visits.
Your company, the third largest manufacturer of large appliances in the U.S., is
best known for its high and mid-range washing, cooking and cleaning machines
under the Maytag, Jenn-Air, Magic Chef, and Hoover brands. The nationally top-
selling Hoover vacuum cleaners, as well as an expanded relationship with Sears,
is driving revenues and earnings growth.
Earnings jumped 50 percent in the most recent quarter from $.36 to $.54 on sales
of $945 million.
Maytag's new Neptune line features a high-end machine using less water and
energy than the competitor's products, while laundering clothes as effectively
as if they were dry cleaned. Trade checks confirm that members of some police
forces wash their uniforms in the Neptune instead of having them professionally
cleaned.
In conversations with Leonard Hadley, Chairman and CEO, we learned factories are
now organized to maximize production efficiency, emphasizing the delivery of
higher-margin, premium-priced products that consistently beat the competition.
Purchased in September, your shares have shot up 51 percent to $48.
MEDICAL/DENTAL PRODUCTS & SERVICES
More people today are turning away from traditional treatments and looking to
"Mother Nature" and her arsenal of herbs in search of cures for common ailments.
Scientific evidence continues to authenticate the connection between diet and
good health, and TWINLAB CORPORATION benefits.
Twinlab produces over 900 nutritional supplement products including vitamins,
minerals, and sports nutrition products. Your company's herbal supplements are
marketed through the Nature's Herbs line found at Wal-Mart and various drug
stores. You'll also find Twinlab products at General Nutrition and Whole Foods
Market.
Last year, Twinlab's total revenue grew 25 percent, while its herbal supplement
sales jumped 78 percent. This suggests the recent survey by Natural Health
magazine is right on target when it indicated three in five adults expect to use
herbs as part of their daily health routine over the next few years.
On a February visit to company headquarters, we met with CEO Ross Blechman who
said that in just one quarter, the number of Nature's Herbs products offered at
Wal-Mart rose from 8 to 13. And, we learned that the company plans to nearly
triple the size of the Nature's Herbs manufacturing facility to 142,000 square
feet.
Earnings in the December quarter climbed 32 percent from $.22 to $.29 on revenue
growth of 40 percent.
Purchased in December at $31, your shares are selling today at $40 -- a 29
percent increase.
SPECIALTY RETAILING
Career-oriented, budget-conscious, style-minded women flock to DRESS BARN, INC.
for affordable, high-quality clothing. With 690 stores throughout the U.S., your
company offers women's apparel including sportswear, dresses, suits, and
accessories. Petite and plus sizes, as well as shoes, are found in larger Dress
Barn stores.
Dress Barn's brand names, Westport, Princeton, and Atrium, account for about 60
percent of sales, and CFO Armand Correia explains that the company continues to
successfully increase its product mix in these private labels which carry
substantially higher margins.
A solid domestic economy, strong employment growth, and low interest rates are
driving expendable income higher, so consumer spending is on the rise. Companies
like debt-free Dress Barn benefit from this trend.
Earnings in January were up 47 percent to $.34 from $.23 last year, on 10
percent revenue growth.
One of your longer-term holdings, your shares purchased in October '96 are up
107 percent to $29 today.
TRANSPORTATION & RELATED
Rapidly growing and relatively undiscovered, ATLANTIC COAST AIRLINES INC. offers
regional service to 42 destinations in 16 states. You can hop on a daily non-
stop flight to 39 cities throughout the U.S. including some in Maine, New York,
Ohio and Tennessee.
Your company's hub is Dulles International Airport, serving the Washington DC
and northern Virginia locals. Employing 1,300 people, it is the largest private-
sector employer in Loudoun County, Virginia.
Atlantic Coast looks to reap the rewards of a new partnership with United
Airlines. This alignment allows air travelers easy connections with one-stop
check-in on connecting flights and frequent flyer membership privileges.
Looking ahead, your company plans to double its jet capacity in '98 and increase
it another 40 percent in '99.
In the December quarter, earnings rose 13 percent to $.34 on a 25 percent gain
in revenues.
Purchased at $16 January of last year, your shares have tripled to $48.
FUND DIRECTOR . . .
Baron Stig Ramel met Foster Friess in 1972. Two years later, as the Executive
Director of The Nobel Foundation of Stockholm, Sweden, Ramel entrusted the
infant Friess Associates with $1 million of the Foundation's assets. Its first
dollar invested is now worth $120.
Throughout his distinguished career in international finance and investment,
Ramel served as chairman or director of more than twenty prestigious Swedish and
international financial and industrial companies such as Volvo, Swedish Ford,
Indusvarden, and PLM, as well as many philanthropies.
Early in his career, Stig was aide to Crown Prince Carl Gustaf, who is the
current king. We are so grateful to have his insights on the Brandywine board.
The Nobel Foundation was established in 1900 by Swedish industrialist and
inventor of dynamite Alfred Bernhard Nobel and is today led by Ramel's successor
Micha Sohlman. The Foundation bestows the most prestigious prizes in the world;
Nobel Laureates are recognized each year for promoting international peace, and
for achievements in economics, physics, chemistry, medicine, and literature.
Stig is one of those energizing, inspiring people who doesn't have the word
"retirement" in his vocabulary. After his incredible twenty year stint as head
of the Nobel Foundation, where he helped orchestrate a 175 percent increase in
the prize due to his astute investing and management, he then headed the Swedish
government's distribution of 27 billion Swedish krona in pension funds that had
been built up to be distributed in the private sector.
When that mission was completed, he leapt into the authoring of personal
memoirs entitled, The Boy in the Door, which instantly became a Swedish
bestseller. Likewise, his more recent book on G.M. Armfelt, the George
Washington of Finland, has been equally successful and will soon be available in
Finnish. Stig travels around Sweden lecturing and educating the importance of
this man in the history of the region.
Stig was born into a family occupying the Hviderup estate in southern Sweden
for 300 years and is thrilled that one of his sons has recently acquired and
begun renovations on the property after decades out of family possession. Ramel
pursued law and economics in his studies and entered the Swedish Foreign Service
in 1953 serving in Paris and then in Washington until 1960.
Returning home, Ramel became the head of the section for Maritime and Atomic
Energy Affairs and then the Council for Information about Sweden abroad. Later,
he directed the Swedish Export Council.
Stig and Ann Marie, a gourmet cook and cookbook author, have been married
since 1953. His enthusiasm for his four children and three grandchildren
challenges that of most family-oriented men.
His energy level is reflected by intense sporting interests like orienteering,
common in Sweden, where, with a map and compass, you make a cross country road-
rally navigating through brush instead of roads. It's an arduous sport requiring
deft maneuvering of the forest environment.
Unless there is a severe snowstorm, Stig is seen peddling his bike to and from
work, explaining why no one believes he is over 70 years old. On cold winter
weekends, his skates carve flawless patterns in the thick ice that encases the
Stockholm Archipelago.
-Adam Rieger
BARBARA . . .
In June, Barbara Shea will mark 12 years at Friess Associates, and as one of
the most tenured of your team, she's seen remarkable change during her time
here. Joining Susan Morgan's solo operation on the trading desk, Barbara came
from Penn Mutual Life Insurance in Philadelphia. In 1986, Barbara and Susan
handled all trades and all settlements without the benefits of the fully
computerized setup we have in place today. They pushed a lot of paper!
Barbara reflects on the summer of 1990 when Foster decided to increase cash
levels following the Iraqi invasion of Kuwait. "Susan and I sat amidst piles of
paper, working 14 and 15 hour days to get all the trades allocated and settled
properly. We'd make numerous trades by phone, but had to manually record them
for each client separately. It was quite a challenge!" From those days, she and
Susan have been rightfully dubbed as "adeptly tackling the tasks it would take
five to do!"
Today's technology adds to Barbara's, as well as the entire trading team's,
ability to execute trades more efficiently. Handling $13 billion demands top-
notch equipment and software.
In the last year or so, various programs have been added, like Instinet, where
an order is simply typed into the computer, the trade is processed, and the
execution is sent back via computer. POSIT is a "matching system" where the
traders enter stocks they want to buy or sell and five times a day a list is run
indicating other buyers and sellers of that same stock. The program "matches"
the two and the trade is completed.
Barbara's years here yield a unique perspective. She came on board when there
was just $300 million under management and 12 teammates.
Enter the trading room, and you witness the pulse of the organization. Barbara
and your six other traders field calls from various brokerage houses across the
country, receiving information on stocks, opinion changes, earnings releases,
and lists of what's available for purchase and sale. "This kind of activity
ensures there's never a dull moment in my workday," Barbara exclaims.
Trading for research team leader Andy Graves, Barbara secured solid positions
in such holdings as Fiserv, Fred Meyer, and Rite Aid at average costs of $40,
$22, and $24, which have since risen 60, 107, and 44 percent. "Her years of
experience have garnered sound relationships with key brokers on the Street,
which augment Barbara's knack for knowing where to turn, and when, for the best
price possible," Andy relates.
While Barbara is valued for her sharp sense on the trading desk, she is also
highly regarded for her upbeat, cheerful, and positive attitude. Fellow Friess
veteran, Lynda Campbell echoes this praise. "Barbara is a genuine spark of
light, inspiring everyone with her infectious laughter and great sense of humor.
Her keen wit and her spirit, combined with a true sense of caring for all of us,
shines through!" Chief among her hobbies of traveling, music, tennis, and water
aerobics is decorating her new home. A job Barbara really enjoys!
- Rebecca Buswell
ANDY . . .
Senior researcher and team leader Andy Graves moved to our Jackson
headquarters in 1993 from the Delaware office where he started at Friess in May
of '91. Attending an investor conference as an analyst for the Perritt Capital
Growth Fund, a small cap growth fund, Andy met Bill D'Alonzo and Carl Gates who
lured him away from Chicago to come back east and put his research skills to
work at Friess Associates.
"We noticed Andy in the same meetings, investigating the same stocks, and
asking the same kinds of questions we were, and knew he was someone who could
add a lot to our research effort. And what a great find he has been!" Bill
D'Alonzo compliments Andy's savvy stock-picking ability. "Andy has a great nose
for stocks, he knows what questions to ask and how to probe to get to the meat
of the issue affecting a company's performance. His 'can-do' attitude means he
will tackle whatever is thrown his way. He's a real team player."
Andy's background as a financial analyst and writer at the famed Morningstar
organization, as well as his stint as managing editor of the financial
newsletters Investment Horizons and The Mutual Fund Letter, give him a
particular perspective which was quickly recognized and utilized in our research
strategy.
Some of Andy's big winners include Cisco Systems, Tellabs, Liz Claiborne, and
Gap, which since the beginning of last year have realized more than $372 million
from purchase to sale.
While our researchers are generalists, Andy concentrates primarily on retail,
apparel, networking, telecommunications equipment, and restaurant companies.
"Through our intensive research strategy which focuses on getting to know the
managements of not only our target company, but also its customers, competitors,
and suppliers, I've been fortunate to forge relationships with many executives
in these industries," Andy explains. "Their input is invaluable to our
investigation of what companies will be solid holdings for our shareholders."
Paul Charron, CEO of Liz Claiborne, is one of Andy's close contacts and was
eager to share some remarks about his experience working with Andy. "In talking
with him, it is clear Andy has done his research and knows what questions to
ask. He can leave a 20 minute conversation with all the information he needs to
remain an intelligent investor. I've always been impressed with how hard he
works to understand the dynamics of this business rather than just looking at it
as a number on a sheet."
Paul emphasized that Andy's low-key but intense personality, and friendly,
supportive attitude, is integral to sustaining their positive relationship.
Andy spent much of his childhood in Williamsburg, Virginia, before heading to
New Hampshire for high school to attend Phillips Exeter Academy where he
graduated with honors in 1984. He then went on to earn a BA in Economics at
Davidson College in Davidson, North Carolina. His parents now live in
Wilmington, Delaware, so a trip to see them also usually means a visit to the
Delaware office for a few days' work.
Living in Jackson, Andy can enjoy the outdoor sports he loves -- golf, hiking,
running and skiing. Another favorite pastime of Andy's is vacationing abroad.
He's traveled to Europe, Australia, the Caribbean, Canada and Mexico all within
the last five years.
- Rebecca Buswell
GROWING YOUR FUND . . .
The performance of your Fund depends on bright, talented people who work at
the companies in which you are invested. Because your stake in Borders Group has
added $12.5 million of gains to your holdings, we are featuring an employee at a
Borders bookstore this quarter.
While sometimes money managers get credit for the increases in a portfolio, we
always must be cognizant that the ultimate success is dependent on the people
running the companies. Without them, there is no success. Millions of people
each day commit their lives to make our American system work. By recognizing
Henry, we acknowledge the importance of each and every worker that has created
the values that now reside in your portfolio.
Henry Torrie is the periodicals clerk at the Borders bookstore in Wilmington,
Delaware. "I run my own newsstand with the advantage that I have Borders behind
me. Our corporate buyers have the foresight and experience to know what is going
to be hot and to make sure we order sufficient copies."
While Henry carries 800 magazines and periodicals which are available at all
Borders stores, he also has the freedom to order hundreds of additional titles
based on his knowledge of what his customers want. Henry's large in-store
newsstand reflects a wide range of special interests, offering two magazines
devoted to collecting Beanie Babies, one on hooking rugs, and others for train
buffs, woodworkers, and on and on.
His own current favorite is the Fortean Times. Charles Fort was an eccentric
American writer and collector of anomalies. The pages of this magazine are
filled with accounts of extraordinary events and possible explanations for them,
a combination of science and silliness.
Henry graduated from Temple University in Philadelphia with a degree in
Anthropology, a great background for a job that certainly requires studying the
diverse social and cultural orientations of the surrounding community.
Stephen Geist, Henry's boss, says, "We hire intelligent, friendly people and
we encourage them to be individuals. No uniforms, no cookie-cutter clerks.
Because it is a great place to work, we are able to attract well-educated staff
members like Henry. Henry is open to new ideas and that keeps his newsstand
fresh and exciting. Just the way we want it to be!"
Borders encourages browsing, offers coffee and desserts, and even features
lectures, concerts, and workshops. With the "welcome mat" always out, Borders
has become more than a megabookstore. It is a destination where people can relax
and enjoy themselves. Henry always makes sure his newsstand looks inviting.
Away from work, Henry studies Buddhist teachings and works with a Tibetan monk
translating teachings into English. He has a special girlfriend and plans to be
married next year.
- Margaret Barton
FUND INFO . . .
If you're looking for the most current insights of your research team about
Brandywine, just call (800) 656-3017, and select #4. You'll hear a researcher
offering a tidbit or two!
TOP TEN . . .
There were many changes to your Top Ten industries this quarter as five new
categories joined the group. Computers & Related, Apparel & Shoes,
Communications, and Transportation & Related all saw purchases to once again
bring them into the Top Ten, while Networking was an industry re-entering your
portfolio this quarter.
Leaving the Top Ten were Pharmaceuticals, Department Stores, Home/Office &
Related, Insurance, and Electronics to make room for the new groups.
Computers & Related fills the number two slot with 5.4 percent. Purchases and
subsequent gains of nearly $4 million in Computer Sciences Corp., Diamond
Multimedia Systems, and MicroTouch Systems helped fuel this group's growth.
You added many Financial/Business Services companies this quarter to bring
this group to the top spot at 10.7 percent compared to 6.5 percent in December.
Large positions in Dime Bancorp, CMAC Investment Corporation, ContiFinancial
Corporation, Cotelligent Group, Volt Information Sciences, Franchise Mortgage
Acceptance, Staffmark, and Allied Capital Corporation were secured, and together
have gained $5 million.
3Com, Xircom, and Ascend Communications are once again part of your portfolio,
bringing Networking to number seven. Ascend has already added $5 million.
TOP TEN INDUSTRY GROUPS
Financial/Business Services (10.7%)
Computers & Related (5.4%)
Specialty Retailing (5.3%)
Apparel & Shoes (4.1%)
Software (3.5%)
Communications (3.1%)
Networking (2.8%)
Transportation & Related (2.7%)
Leisure & Entertainment (2.2%)
Oil/Gas Field Services (1.8%)
All Others (14.7%)
Cash (43.7%)
ON THE CUTTING EDGE . . .
During the process of our investment research we often find remarkable
developments, but the companies involved may not always meet our investment
criteria. Their achievements are impressive nonetheless, and we thought you'd
like to hear about them.
IMPROVED DRUG DELIVERY FOR ASTHMATICS
While vastly improved asthma drugs have been introduced in recent years, most
must still be breathed in through small devices called metered-dose inhalers
(MDIs) that are tricky to use. Patients must coordinate their breathing with
the pumping action -- a technique that 70 percent of asthmatics fail to
master -- to ensure the right dosage. Aradigm Corp. has a smart alternative -
- - an MDI with a built-in microprocessor, SmartMist. This device uses red and
green indicator lights to guide a patient's breathing and dispenses the drug
automatically once it senses the desired flow rate is reached. It also stores
data on the patient's dosage and inhalation patterns, which can be downloaded
by physicians to monitor treatment.
CLOSING THE GAP
Doctors use sutures and staples to close internal surgical wounds, but these
products do not always seal leaks, especially with wounds near tissues under
pressure such as lungs, spinal cord, and brain. Leaking wounds can lead to
longer hospital stays, pain, and infection. Focal, Inc. makes liquid surgical
sealants that are applied after a wound has been closed. About to be sold in
Europe and now in trials in the U.S., the company's FocalSeal-L lung surgery
sealant may revolutionize recovery from lung surgery. In the container, the
water-based sealant is a thick liquid, but when exposed to light it quickly
solidifies. The sealant stays flexible so that it can stretch with the
tissue, and it is absorbed by the body after the wound heals.
THE TRANSISTOR TURNS FIFTY
The basic building block of all modern electronics was invented fifty years
ago at Bell Telephone Laboratories on December 16, 1947. The transistor
replaced vacuum tubes and serves as a switch that turns electrical current on
and off and a device that can make signals, like a voice on the telephone,
louder or softer. Without this gizmo there would be no electronic age. We
would still be in the time when most important machines overheated, clanked,
groaned, wobbled, and hissed. The strangest aspect of this indispensable and
universal device is that you will never see it. It is too small!
CAPITAL GAINS UPDATE . . .
Planning your taxes? While the distribution for '98 is still six months away,
we know some of you appreciate receiving the most current information on what
we expect. As of March 31, 1998, the approximate amounts were:
-----------
$1.93 in long term capital gains
$ .00 in short term capital gains (treated as ordinary income)
- ----
$1.93 total potential distribution per share as of 3/31/98
There remain net unrealized gains of $1.66.
--
ALL IS NOT ROSES . . .
During the quarter, thirteen of your stocks declined by more than $5 million
apiece. Some of those stocks dipped because they were sold prior to the
market's strength that occurred later in the quarter. The good news is more
than twice that amount went up by more than $5 million.
Nordstrom dropped back after fears over lower same store sales for December
and January. Tandy backtracked because of Comp USA reporting disappointing
results. FIRSTPLUS Financial was hit by general concerns among the investment
community about "gain on sale" accounting, and the potential impact lower oil
prices would have on new business psychologically affected EVI Inc. and
McDermott International.
Bristol Meyers Squibb, Xilinx, SCI Systems, Veritas DGC, and Tech Data were
other backtrackers. It only took eight of your strong stocks to offset all
thirteen of your decliners.
Capital One Financial was your top gainer, leaping $32 million. Best Buy
increased $30 million, and Gap, fueled by stronger-than-expected same store
sales early this year, was your third best with a $20 million increase.
Other big gainers, between $11 million to $16 million each, were Carnival
Corp, Rite-Aid, and Sterling Software, all rising after beating street
earnings estimates last quarter, along with Safeway, Fred Meyer, Fiserv, B.F.
Goodrich, and Apple Computer.
Smaller gains, yet in excess of $8 million, were achieved by Staples, Maytag,
Federal Mogul, Steris Corp., and J.B. Hunt Transportation.
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
March 31, 1998
(Unaudited)
QUOTED
MARKET
SHARES COST VALUE
------ ---- ------
LONG-TERM INVESTMENTS - 56.3% (A)<F3>
COMMON STOCKS - 55.8% (A)<F3>
APPAREL & SHOES - 4.1%
40,000 The Buckle, Inc.*<F2> $1,368,351 $2,005,000
25,000 Candie's Inc.*<F2> 172,500 203,125
45,000 Cutter & Buck Inc.*<F2> 1,179,688 1,164,375
1,378,900 Fruit of the Loom, Inc.*<F2> 44,708,724 42,228,812
846,200 Intimate Brands, Inc. 16,528,685 22,900,711
1,491,800 Jones Apparel Group, Inc.*<F2> 81,319,154 82,142,983
207,700 Kenneth Cole Productions,
Inc.*<F2> 4,306,276 4,179,963
1,171,800 Liz Claiborne, Inc. 57,091,793 58,443,525
133,200 Payless ShoeSource, Inc.*<F2> 7,997,296 10,023,300
67,500 Quiksilver, Inc.*<F2> 2,353,437 2,413,125
25,000 Tarrant Apparel Group*<F2> 590,625 585,950
77,000 Timberland Co.*<F2> 3,375,468 5,505,500
919,800 Tommy Hilfiger Corporation*<F2> 53,846,541 55,245,947
676,600 The Warnaco Group, Inc. 20,695,003 26,556,550
35,000 The Wet Seal, Inc.*<F2> 1,321,250 1,323,455
----------- -----------
......... 296,854,791 314,922,321
THIS SECTOR IS 6.1% ABOVE YOUR FUND'S COST.
AUTOMOTIVE & RELATED - 0.8%
60,000 CSK Auto Corporation*<F2> 1,381,100 1,350,000
108,000 Delco Remy International,
Inc.*<F2> 1,697,119 1,640,304
714,900 Federal-Mogul Corp. 21,684,063 38,024,101
248,600 SPX Corp. 16,083,854 18,971,412
----------- -----------
40,846,136 59,985,817
THIS SECTOR IS 46.9% ABOVE YOUR FUND'S COST.
BUILDING & RELATED - 0.9%
964,500 Centex Corporation 35,784,060 36,771,563
62,000 Comfort Systems USA, Inc.*<F2> 1,113,136 1,340,750
463,400 D.R. Horton, Inc. 10,381,323 9,847,250
69,600 Integrated Electrical
Services, Inc.*<F2> 1,156,070 1,383,300
285,400 Lennar Corporation 8,848,767 9,828,605
51,900 Pulte Corporation 2,383,663 2,413,350
228,000 Quanta Services, Inc.*<F2> 2,702,655 3,776,364
99,000 Service Experts, Inc.*<F2> 2,742,140 3,112,362
----------- -----------
65,111,814 68,473,544
THIS SECTOR IS 5.2% ABOVE YOUR FUND'S COST.
COMMUNICATIONS - 3.1%
175,000 Applied Signal Technology,
Inc.*<F2> 2,592,678 3,150,000
623,100 General Cable Corporation 13,226,278 28,273,162
45,000 Melita International
Corporation*<F2> 795,002 821,250
1,463,000 Nokia Corp. "A" ADR 155,324,421 157,913,294
705,500 SmarTalk Teleservices,
Inc.*<F2> 18,885,777 22,532,259
1,200,200 Xylan Corporation*<F2> 28,146,843 29,254,875
----------- ------------
218,970,999 241,944,840
THIS SECTOR IS 10.5% ABOVE YOUR FUND'S COST.
COMPUTERS & RELATED - 5.4%
5,624,700 Bay Networks, Inc. 156,141,907 152,569,988
3,809,400 Computer Sciences Corp.*<F2> 206,416,120 209,517,000
505,000 Diamond Multimedia
Systems, Inc.*<F2> 7,186,635 7,511,875
183,800 IMNET Systems, Inc.*<F2> 3,572,447 4,135,500
149,000 MicroTouch Systems, Inc.*<F2> 2,479,125 2,868,250
51,300 PC Connection, Inc.*<F2> 1,086,383 1,090,125
755,600 Premiere Technologies, Inc.*<F2>18,214,010 26,162,650
264,400 STB Systems, Inc.*<F2> 5,854,917 5,288,000
173,100 Telxon Corporation 4,367,812 4,587,150
------------ -----------
405,319,356 413,730,538
THIS SECTOR IS 2.1% ABOVE YOUR FUND'S COST.
COMPUTER SYSTEMS - 1.6%
4,616,700 Apple Computer, Inc. 116,087,461 126,959,250
THIS SECTOR IS 9.4% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 1.4%
437,600 Ames Department Stores, Inc.*<F2>8,706,341 9,244,300
651,250 Family Dollar Stores, Inc. 8,769,730 24,747,500
1,169,200 Fred Meyer, Inc.*<F2> 26,076,919 54,003,010
445,600 Proffitt's Inc.*<F2> 5,052,446 16,153,000
229,800 Value City Dept
Stores Inc.*<F2> 3,290,923 3,892,352
----------- -----------
51,896,359 108,040,162
THIS SECTOR IS 108.2% ABOVE YOUR FUND'S COST.
DISTRIBUTION - 0.7%
344,400 CellStar Corporation*<F2> 11,103,670 11,020,800
370,500 Central Garden & Pet Co.*<F2> 9,334,037 14,472,841
18,700 Insight Enterprises, Inc.*<F2> 752,675 759,688
800,100 Tech Data Corp.*<F2> 36,158,718 30,803,850
200,000 U.S. Home & Garden Inc.*<F2> 1,452,012 1,362,600
----------- -----------
......... 58,801,112 58,419,779
THIS SECTOR IS 0.6% BELOW YOUR FUND'S COST.
ELECTRONICS - 0.2%
375,000 Aeroflex Incorporated*<F2> 5,297,310 4,968,750
188,900 Kuhlman Corp. 7,093,042 9,197,163
150,000 Rayovac Corporation*<F2> 2,100,000 3,534,450
----------- -----------
14,490,352 17,700,363
THIS SECTOR IS 22.2% ABOVE YOUR FUND'S COST.
FABRIC/TEXTILES - 0.3%
45,700 Interface, Inc. 1,833,961 1,899,429
97,700 Tefron Ltd.*<F2> 2,071,961 2,381,438
398,000 Unifi, Inc. 12,696,916 14,825,500
50,000 WestPoint Stevens, Inc.*<F2> 1,349,690 1,431,250
----------- -----------
......... 17,952,528 20,537,617
THIS SECTOR IS 14.4% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 10.7%
752,100 AccuStaff Incorporated*<F2> 25,093,497 25,947,450
152,000 Advance Paradigm, Inc.*<F2> 4,510,835 6,023,000
65,300 ADVO, Inc. 1,804,684 1,803,912
151,000 Allied Capital Corporation 3,832,367 4,180,888
719,900 AmeriCredit Corp.*<F2> 13,146,446 19,797,250
940,300 AMRESCO, Inc. 25,856,337 30,794,825
768,100 Avis Rent A Car, Inc.*<F2> 26,404,640 24,915,628
438,800 BA Merchant Services Inc.*<F2> 6,608,014 7,953,250
1,304,100 Capital One Financial Corp. 61,405,583 102,860,887
291,100 CMAC Investment Corporation 19,157,396 19,430,925
73,900 Consolidated Graphics,
Inc.*<F2> 1,766,412 4,276,962
804,000 Consolidated Capital
Corporation*<F2> 16,080,000 20,200,500
397,400 ContiFinancial Corporation*<F2>11,737,733 12,120,700
161,000 Cotelligent Group, Inc.*<F2> 2,953,962 4,769,625
1,770,600 Dime Bancorp, Inc. 52,723,596 53,229,548
425,300 Dollar Thrifty Automotive
Group, Inc.*<F2> 9,962,739 9,569,250
517,200 Finova Group, Inc. 24,260,819 30,450,150
581,100 First Union Corporation (N.C.) 28,338,846 32,977,425
773,700 Fiserv, Inc.*<F2> 30,659,320 49,033,238
115,000 Franchise Mortgage Acceptance
Co. LLC*<F2> 2,067,500 2,889,375
35,000 Gilman & Ciocia, Inc.*<F2> 460,625 450,625
352,400 Group Maintenance America
Corp.*<F2> 4,978,496 5,968,775
85,000 Headlands Mortgage Company*<F2> 1,302,811 1,442,365
95,800 Hooper Holmes, Inc. 1,265,088 2,047,725
198,000 Leasing Solutions, Inc.*<F2> 4,624,444 5,556,474
60,000 Medallion Financial Corp.*<F2> 1,636,250 1,627,500
87,400 StaffMark, Inc.*<F2> 2,861,007 3,583,400
75,000 SunSource Inc. 2,118,750 2,198,475
146,400 Volt Information Sciences,
Inc.*<F2> 8,005,803 8,161,800
120,600 VWR Scientific Products Corp. 2,817,437 4,258,748
60,700 Waddell & Reed Financial,
Inc.*<F2> 1,449,760 1,578,200
7,584,000 WorldCom, Inc.*<F2> 331,335,127 326,589,792
----------- -----------
......... 731,226,324 826,688,667
THIS SECTOR IS 13.1% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 1.0%
1,004,800 Apple South, Inc. 13,959,626 14,884,102
122,700 Buffets, Inc.*<F2> 1,646,772 1,687,125
1,170,620 CKE Restaurants, Inc. 28,333,689 43,020,285
651,100 Food Lion, Inc. CL B 6,955,678 7,141,916
25,000 O'Charleys Inc.*<F2> 493,750 531,250
600 Ruby Tuesday, Inc. 18,299 18,900
343,800 ShowBiz Pizza Time, Inc.*<F2> 7,941,039 11,453,010
----------- -----------
......... 59,348,853 78,736,588
THIS SECTOR IS 32.7% ABOVE YOUR FUND'S COST.
HEALTHCARE & RELATED - 1.4%
75,000 Centennial HealthCare
Corp.*<F2> 1,725,625 1,884,375
1,484,200 Columbia/HCA Healthcare Corp. 46,881,325 47,865,450
514,700 HEALTHSOUTH Corp.*<F2> 13,757,985 14,444,026
1,020,700 Integrated Health Services,
Inc. ... 39,567,223 40,126,779
332,200 NovaCare, Inc.*<F2> 4,515,848 4,941,475
88,900 PHP Healthcare Corp.*<F2> 1,485,191 1,466,850
----------- -----------
......... 107,933,197 110,728,955
THIS SECTOR IS 2.6% ABOVE YOUR FUND'S COST.
HOME/OFFICE & RELATED - 1.4%
100,000 Daisytek International
Corporation*<F2> 2,450,000 2,437,500
185,000 Furniture Brands
International, Inc.*<F2> 4,655,890 5,954,780
172,300 Knoll, Inc.*<F2> 6,135,190 6,644,405
100,000 LADD Furniture, Inc. 2,251,562 2,400,000
376,000 Mail-Well, Inc.*<F2> 13,794,740 14,241,000
881,100 Maytag Corp. 27,998,948 42,128,034
272,400 Herman Miller, Inc. 6,035,826 9,133,845
394,800 Mohawk Industries, Inc.*<F2> 10,147,158 12,436,200
95,200 Steelcase Inc. 2,864,647 3,474,800
385,200 Windmere-Durable Holdings Inc. 10,716,434 10,015,200
----------- -----------
87,050,395 108,865,764
THIS SECTOR IS 25.1% ABOVE YOUR FUND'S COST.
INSURANCE - 0.6%
415,000 Amerin Corporation*<F2> 11,441,056 12,501,875
205,800 Century Business Services,
Inc.*<F2> 3,558,482 3,640,190
441,100 Conseco, Inc. 22,830,169 24,977,288
142,000 Fidelity National
Financial, Inc. 4,207,125 5,218,500
----------- -----------
42,036,832 46,337,853
THIS SECTOR IS 10.2% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 2.2%
357,000 Action Performance Companies
Inc.*<F2> 13,009,720 12,562,116
76,500 American Coin Merchandising,
Inc.*<F2> 1,367,438 1,530,000
601,200 CapStar Hotel Company*<F2> 21,435,459 20,854,426
1,156,900 Carnival Corporation 55,587,915 80,693,775
1,128,800 Fairfield Communities,
Inc.*<F2> 13,044,162 24,904,714
62,400 Hospitality Worldwide
Services*<F2> 639,600 612,331
107,000 Midway Games Inc.*<F2> 2,543,044 2,454,366
116,000 Royal Caribbean Cruises Ltd. 5,858,637 8,127,308
630,000 Servico, Inc.*<F2>. 9,144,000 13,308,750
81,000 West Marine, Inc.*<F2> 2,335,470 2,359,125
----------- -----------
124,965,445 167,406,911
THIS SECTOR IS 34.0% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SERVICES - 0.9%
423,800 Cooper Companies, Inc. 13,475,761 17,985,224
682,200 ESC Medical Systems Ltd.*<F2> 23,457,554 23,962,275
227,000 Lifecore Biomedical, Inc.*<F2> 5,190,892 5,306,125
13,300 Mentor Corporation 349,908 367,413
85,000 Nutraceutical International
Corp.*<F2> 1,665,197 1,870,000
130,000 Ocular Sciences, Inc.*<F2> 3,972,937 4,143,750
41,400 Quest Diagnostics
Incorporated*<F2> 679,685 696,058
276,500 Twinlab Corporation*<F2> 8,652,344 11,198,250
146,700 VISX, Inc.*<F2> 4,227,156 3,667,500
----------- -----------
61,671,434 69,196,595
THIS SECTOR IS 12.2% ABOVE YOUR FUND'S COST.
NETWORKING - 2.8%
1,868,800 3Com Corp.*<F2> 68,583,609 67,160,934
3,894,200 Ascend Communications,
Inc.*<F2> 142,286,307 147,492,825
50,000 Xircom, Inc.*<F2> 712,500 690,650
----------- -----------
................... 211,582,416 215,344,409
THIS SECTOR IS 1.8% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 1.8%
578,100 Halliburton Company 30,258,083 29,013,683
233,500 J. Ray McDermott, S.A.*<F2> 6,306,270 9,836,187
344,600 McDermott International, Inc. 14,381,485 14,236,460
1,609,500 Noble Drilling Corporation*<F2>51,079,664 49,191,149
661,000 Transocean Offshore Inc. 35,562,518 34,000,518
----------- -----------
137,588,020 136,277,997
THIS SECTOR IS 1.0% BELOW YOUR FUND'S COST.
PHARMACEUTICALS - 0.4%
102,300 IMPATH, Inc.*<F2> 3,476,381 3,912,975
97,100 Kendle International Inc.*<F2> 1,447,354 2,257,575
442,000 Medicis Pharmaceutical
Corp.*<F2> 18,759,100 19,282,250
125,000 SangStat Medical
Corporation*<F2> 3,812,500 3,984,375
----------- -----------
27,495,335 29,437,175
THIS SECTOR IS 7.1% ABOVE YOUR FUND'S COST.
REAL ESTATE OPERATIONS - 0.1%
458,000 Bluegreen Corporation 3,645,366 3,835,750
40,000 Trammell Crow Company*<F2> 918,700 1,140,000
----------- -----------
......... 4,564,066 4,975,750
THIS SECTOR IS 9.0% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR & RELATED - 1.4%
449,000 3Dlabs Inc., Ltd.*<F2> 10,667,454 10,944,375
838,400 Altera Corporation*<F2> 35,185,942 31,649,600
130,000 ATMI Inc.*<F2> 3,856,429 3,932,500
368,000 Cree Research, Inc.*<F2> 6,729,588 6,118,000
442,200 DSP Communications, Inc.*<F2> 7,061,684 7,545,259
50,000 Flextronics International
Ltd.*<F2> 1,968,750 2,159,400
274,400 Integrated Device Technology,
Inc.*<F2> 3,984,130 3,858,887
230,000 SanDisk Corporation*<F2> 5,768,184 5,721,250
248,800 Semtech Corp.*<F2> 6,821,158 6,344,400
825,400 Xilinx, Inc.*<F2> 37,003,711 30,901,325
----------- -----------
......... 119,047,030 109,174,996
THIS SECTOR IS 8.3% BELOW YOUR FUND'S COST.
SOFTWARE - 3.5%
568,500 Acclaim Entertainment,
Inc.*<F2> 3,807,194 3,766,312
35,000 Applied Voice Technology,
Inc.*<F2> 1,293,850 1,365,000
75,000 Ardent Software, Inc.*<F2> 881,955 1,087,500
88,700 Avant! Corporation*<F2> 1,782,142 1,851,612
213,500 AXENT Technologies, Inc.*<F2> 6,282,506 6,511,750
330,000 Boole & Babbage, Inc.*<F2> 7,782,500 8,085,000
464,500 Citrix Systems, Inc.*<F2> 19,544,554 25,170,326
120,900 Cognos Inc.*<F2> 3,287,163 3,407,929
900,000 Computer Associates
International, Inc. 50,462,845 51,975,000
127,300 DataWorks Corporation*<F2> 2,920,713 3,357,538
658,100 Electronic Arts Inc.*<F2> 17,504,659 30,889,898
173,000 The Learning Company, Inc.*<F2> 3,859,821 4,000,625
421,600 Mercury Interactive
Corporation*<F2> 9,493,140 15,388,400
175,000 Omtool, Ltd.*<F2> 1,999,063 2,450,000
234,500 Peerless Systems Corp.*<F2> 4,224,954 4,221,000
318,000 Platinum Software
Corporation*<F2> 5,591,140 7,393,500
107,900 QuadraMed Corporation*<F2> 1,782,580 3,601,163
250,000 Software AG Systems, Inc.*<F2> 2,500,000 6,625,000
692,500 Sterling Software, Inc.*<F2> 21,728,736 39,126,250
476,000 Structural Dynamics
Research Corp.*<F2> 11,682,426 11,840,500
1,455,300 Symantec Corp.*<F2> 25,643,287 39,202,871
----------- -----------
......... 204,055,228 271,317,174
THIS SECTOR IS 33.0% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 5.3%
100,000 American Eagle Outfitters,
Inc.*<F2> 4,100,000 4,400,000
769,200 Borders Group, Inc.*<F2> 13,673,533 26,201,260
225,000 Brylane, Inc.*<F2> 10,350,000 12,614,175
436,700 Casey's General Stores, Inc. 6,831,224 6,987,200
757,800 Claire's Stores, Inc. 15,607,340 17,382,416
240,000 Cost Plus, Inc. -
California*<F2> 7,374,421 7,627,440
472,900 Dress Barn, Inc.*<F2> 6,551,235 13,595,875
144,000 Eagle Hardware & Garden,
Inc.*<F2> 2,509,718 2,538,000
11,800 French Fragrances Inc.*<F2> 167,817 200,600
402,500 Hollywood Entertainment
Corp.*<F2> 5,173,494 5,635,000
235,000 Let's Talk Cellular &
Wireless, Inc.*<F2> 3,046,704 4,200,625
701,600 Pier 1 Imports, Inc. 13,661,337 19,030,900
2,788,800 Rite Aid Corp. 64,166,904 95,516,400
2,929,200 Safeway Inc.*<F2> 87,612,002 108,198,790
148,000 Stage Stores, Inc.*<F2> 2,815,758 7,640,500
3,030,300 Staples, Inc.*<F2> 45,896,723 70,266,596
554,700 Sunglass Hut
International, Inc.*<F2> 5,159,196 5,824,350
----------- -----------
......... 294,697,406 407,860,127
THIS SECTOR IS 38.4% ABOVE YOUR FUND'S COST.
TRANSPORTATION & RELATED - 2.7%
539,200 ASA Holdings, Inc. 21,017,999 19,849,570
117,500 Atlantic Coast Airlines
Inc.*<F2> 1,865,574 5,640,000
172,800 Coach USA, Inc.*<F2> 7,668,512 7,516,800
1,221,500 Continental Airlines, Inc.
Cl B*<F2> 72,183,141 71,840,079
330,000 Covenant Transport, Inc.*<F2> 5,238,750 7,228,980
704,400 J.B. Hunt Transport
Services, Inc. 11,722,664 20,031,727
1,205,700 Kansas City Southern
Industries, Inc. 52,572,849 53,050,800
375,000 Mesa Air Group, Inc.*<F2> 3,263,747 3,445,500
549,000 MotivePower Industries,
Inc. 7,839,750 15,166,125
47,700 M.S. Carriers, Inc.*<F2> 1,178,938 1,615,838
----------- -----------
184,551,924 205,385,419
THIS SECTOR IS 11.3% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 1.1%
462,750 AAR Corp. 11,490,189 12,609,937
1,133,200 The B.F. Goodrich Company 47,176,744 57,864,592
166,400 Carpenter Technology Corp. 8,197,563 8,985,600
175,100 Dycom Industries, Inc.*<F2> 3,419,973 4,913,831
126,200 ITEQ, Inc.*<F2> 1,580,914 1,798,350
----------- -----------
71,865,383 86,172,310
THIS SECTOR IS 19.9% ABOVE YOUR FUND'S COST.
Total common stocks 3,756,010,196 4,304,620,921
REITS - 0.5% (A)<F3>
636,300 Brandywine Realty Trust 15,179,070 15,152,212
271,100 Glenborough Realty Trust,
Inc. ... 6,849,584 7,895,788
322,900 JDN Realty Corporation 10,740,372 11,039,305
----------- -----------
......... 32,769,026 34,087,305
THIS SECTOR IS 4.0% ABOVE YOUR FUND'S COST.
WARRANTS - 0.0% (A)<F3>
43 Sound Advice, Inc.*<F2>
Warrant, 06/14/99 0 0
------------- -------------
Total long-term investments 3,788,779,222 4,338,708,226
Principal Amount
- ----------------
SHORT-TERM INVESTMENTS - 47.8% (A)<F3>
COMMERCIAL PAPER - 47.8%
$25,000,000 American Express Credit Corp.,
discount of 5.58%;
due 04/01/98 25,000,000 25,000,000
25,000,000 Baker Hughes Inc.,
discount of 6.00%;
due 04/01/98 25,000,000 25,000,000
25,000,000 Cargill Financial Markets,
discount of 6.05%;
due 04/01/98 25,000,000 25,000,000
25,000,000 General Electric Co.,
discount of 6.00%;
due 04/01/98 25,000,000 25,000,000
25,000,000 The Goldman Sachs Group, LP,
discount of 6.00%;
due 04/01/98 25,000,000 25,000,000
25,000,000 John Hancock Capital Corp.,
discount of 6.05%;
due 04/01/98 25,000,000 25,000,000
25,000,000 MCI Communications Corp. BE,
discount of 6.05%;
due 04/01/98 25,000,000 25,000,000
25,000,000 New England Ed Mktg Corp.,
discount of 6.00%;
due 04/01/98 25,000,000 25,000,000
25,000,000 New Center Asset Trust,
discount of 6.05%;
due 04/01/98 25,000,000 25,000,000
$25,000,000 American Express Credit Corp.,
discount of 5.57%;
due 04/02/98 24,996,132 24,996,132
50,000,000 HFC Domestic,
discount of 5.58%;
due 04/02/98 49,992,250 49,992,250
25,000,000 Salomon Smith Barney,
discount of 5.55%;
due 04/02/98 24,996,146 24,996,146
25,000,000 Texaco Inc.,
discount of 5.54%;
due 04/02/98 24,996,153 24,996,153
25,000,000 American General Finance Corp.,
discount of 5.53%;
due 04/03/98 24,992,319 24,992,319
25,000,000 Ford Credit Europe PLC,
discount of 5.55%;
due 04/03/98 24,992,292 24,992,292
25,000,000 Ford Credit Europe PLC,
discount of 5.54%;
due 04/03/98 24,992,306 24,992,306
25,000,000 General Electric Capital Corp.,
discount of 5.57%;
due 04/03/98 24,992,264 24,992,264
25,000,000 General Motors Acceptance Corp.,
discount of 5.56%;
due 04/03/98 24,992,278 24,992,278
25,000,000 The Goldman Sachs Group, LP,
discount of 5.58%;
due 04/03/98 24,992,250 24,992,250
21,000,000 Merrill Lynch,
discount of 5.55%;
due 04/03/98 20,993,525 20,993,525
25,000,000 New Center Asset Trust,
discount of 5.59%;
due 04/03/98 24,992,236 24,992,236
50,000,000 Sears Roebuck Acceptance Corp.,
discount of 5.55%;
due 04/03/98 49,984,583 49,984,583
25,000,000 Salomon Smith Barney,
discount of 5.56%;
due 04/03/98 24,992,278 24,992,278
25,000,000 American General Finance Corp.,
discount of 5.54%;
due 04/06/98 24,980,764 24,980,764
50,000,000 Bell Atlantic Network Funding,
discount of 5.55%;
due 04/06/98 49,961,458 49,961,458
50,000,000 Chrysler Financial,
discount of 5.55%;
due 04/06/98 49,961,458 49,961,458
25,000,000 Commercial Credit Company,
discount of 5.54%;
due 04/06/98 24,980,764 24,980,764
25,000,000 Ford Credit Europe PLC,
discount of 5.54%;
due 04/06/98 24,980,764 24,980,764
25,000,000 GTE Funding Inc.,
discount of 5.55%;
due 04/06/98 24,980,729 24,980,729
50,000,000 HFC Domestic,
discount of 5.56%;
due 04/06/98 49,961,389 49,961,389
50,000,000 Texaco Inc.,
discount of 5.54%;
due 04/06/98 49,961,528 49,961,528
25,000,000 American General Corp.,
discount of 5.55%;
due 04/07/98 24,976,875 24,976,875
25,000,000 Chrysler Financial,
discount of 5.56%;
due 04/07/98 24,976,833 24,976,833
50,000,000 First Data Corp.,
discount of 5.54%;
due 04/07/98 49,953,833 49,953,833
25,000,000 Georgia Power Co.,
discount of 5.53%;
due 04/07/98 24,976,958 24,976,958
$25,000,000 General Electric Capital Corp.,
discount of 5.57%;
due 04/07/98 24,976,792 24,976,792
25,000,000 General Motors Acceptance Corp.,
discount of 5.54%;
due 04/07/98 24,976,917 24,976,917
50,000,000 IBM Credit Corp.,
discount of 5.53%;
due 04/07/98 49,953,917 49,953,917
46,000,000 Merrill Lynch,
discount of 5.55%;
due 04/07/98 45,957,450 45,957,450
25,000,000 Salomon Smith Barney,
discount of 5.56%;
due 04/07/98 24,976,833 24,976,833
25,000,000 American General Corp.,
discount of 5.54%;
due 04/08/98 24,973,069 24,973,069
25,000,000 Associates First Capital Corp.,
discount of 5.54%;
due 04/08/98 24,973,069 24,973,069
25,000,000 Bell Atlantic Financial Services,
discount of 5.53%;
due 04/08/98 24,973,118 24,973,118
50,000,000 Beneficial Corporation,
discount of 5.55%;
due 04/08/98 49,946,042 49,946,042
25,000,000 Budget Funding Corp.,
discount of 5.55%;
due 04/08/98 24,973,021 24,973,021
25,000,000 General Motors Acceptance Corp.,
discount of 5.54%;
due 04/08/98 24,973,069 24,973,069
25,000,000 JC Penney Funding,
discount of 5.54%;
due 04/08/98 24,973,069 24,973,069
25,000,000 Morgan Stanley Dean Witter Discover,
discount of 5.55%;
due 04/08/98 24,973,021 24,973,021
25,000,000 Sears Reobuck Acceptance Corp.,
discount of 5.55%;
due 04/08/98 24,973,021 24,973,021
25,000,000 Salomon Smith Barney,
discount of 5.55%;
due 04/08/98 24,973,021 24,973,021
25,000,000 Texaco Inc.,
discount of 5.54%;
due 04/08/98 24,973,069 24,973,069
50,000,000 Beneficial Corporation,
discount of 5.53%;
due 04/09/98 49,938,556 49,938,556
25,000,000 Budget Funding Corp.,
discount of 5.55%;
due 04/09/98 24,969,167 24,969,167
25,000,000 GE Financial Assurance,
discount of 5.55%;
due 04/09/98 24,969,167 24,969,167
25,000,000 General Motors Acceptance Corp.,
discount of 5.54%;
due 04/09/98 24,969,222 24,969,222
25,000,000 GTE Funding Inc.,
discount of 5.55%;
due 04/09/98 24,969,167 24,969,167
25,000,000 GTE Funding Inc.,
discount of 5.54%;
due 04/09/98 24,969,222 24,969,222
25,000,000 John Hancock Capital Corp.,
discount of 5.54%;
due 04/09/98 24,969,222 24,969,222
25,000,000 JC Penney Funding,
discount of 5.54%;
due 04/09/98 24,969,222 24,969,222
25,000,000 Morgan Stanley Dean Witter Discover,
discount of 5.55%;
due 04/09/98 24,969,167 24,969,167
25,000,000 Texaco Inc.,
discount of 5.53%;
due 04/09/98 24,969,278 24,969,278
$25,000,000 Associates First Capital Corp.,
discount of 5.55%;
due 04/13/98 24,953,750 24,953,750
50,000,000 Bell Atlantic Financial Services,
discount of 5.55%;
due 04/13/98 49,907,500 49,907,500
20,000,000 Chevron Transport Company,
discount of 5.53%;
due 04/13/98 19,963,133 19,963,133
50,000,000 General Motors Acceptance Corp.,
discount of 5.53%;
due 04/13/98 49,907,833 49,907,833
50,000,000 HFC Domestic,
discount of 5.53%;
due 04/13/98 49,907,833 49,907,833
25,000,000 IBM Credit Corp.,
discount of 5.53%;
due 04/13/98 24,953,917 24,953,917
25,000,000 JC Penney Funding,
discount of 5.54%;
due 04/13/98 24,953,833 24,953,833
25,000,000 Salomon Smith Barney,
discount of 5.53%;
due 04/13/98 24,953,917 24,953,917
25,000,000 Texaco Inc.,
discount of 5.52%;
due 04/13/98 24,954,000 24,954,000
25,000,000 Aetna Services Inc.,
discount of 5.62%;
due 04/14/98 24,949,264 24,949,264
25,000,000 American General Financial Services,
discount of 5.52%;
due 04/14/98 24,950,167 24,950,167
25,000,000 Beneficial Corporation,
discount of 5.52%;
due 04/14/98 24,950,167 24,950,167
25,000,000 Commercial Credit Company,
discount of 5.53%;
due 04/14/98 24,950,076 24,950,076
25,000,000 First Data Corp.,
discount of 5.57%;
due 04/14/98 24,949,715 24,949,715
25,000,000 IBM Credit Corp.,
discount of 5.53%;
due 04/14/98 24,950,076 24,950,076
25,000,000 JC Penney Funding,
discount of 5.54%;
due 04/14/98 24,949,986 24,949,986
50,000,000 Sears Roebuck Acceptance Corp.,
discount of 5.55%;
due 04/14/98 49,899,792 49,899,792
20,000,000 Transamerica Financial,
discount of 5.53%;
due 04/14/98 19,960,061 19,960,061
25,000,000 American Express Credit Corp.,
discount of 5.52%;
due 04/15/98 24,946,333 24,946,333
50,000,000 Banc One Funding Corp.,
discount of 5.53%;
due 04/15/98 49,892,472 49,892,472
25,000,000 Chrysler Financial,
discount of 5.53%;
due 04/15/98 24,946,236 24,946,236
50,000,000 Merrill Lynch,
discount of 5.55%;
due 04/15/98 49,892,083 49,892,083
25,000,000 PHH Corp.,
discount of 5.53%;
due 04/15/98 24,946,236 24,946,236
25,000,000 Transamerica Financial,
discount of 5.52%;
due 04/15/98 24,946,333 24,946,333
25,000,000 Aetna Services Inc.,
discount of 5.62%;
due 04/16/98 24,941,458 24,941,458
25,000,000 Beneficial Corporation,
discount of 5.53%;
due 04/16/98 24,942,396 24,942,396
$10,000,000 Chevron Transport Company,
discount of 5.53%;
due 04/16/98 9,976,958 9,976,958
25,000,000 Ford Credit,
discount of 5.53%;
due 04/16/98 24,942,396 24,942,396
50,000,000 Ford Motor Credit Co of Puerto Rico,
discount of 5.53%;
due 04/16/98 49,884,792 49,884,792
48,000,000 GE Financial Assurance,
discount of 5.55%;
due 04/16/98 47,889,000 47,889,000
25,000,000 Great Lakes Chemical,
discount of 5.54%;
due 04/16/98 24,942,292 24,942,292
50,000,000 Lehman Brothers Holdings,
discount of 5.58%;
due 04/16/98 49,883,750 49,883,750
50,000,000 Chrysler Financial,
discount of 5.55%;
due 04/17/98 49,876,667 49,876,667
25,000,000 Ford Credit Europe PLC,
discount of 5.53%;
due 04/17/98 24,938,556 24,938,556
25,000,000 Great Lakes Chemical,
discount of 5.55%;
due 04/17/98 24,938,333 24,938,333
25,000,000 Lucent Technologies Inc.,
discount of 5.57%;
due 04/17/98 24,938,111 24,938,111
50,000,000 New York Life Capital Corp.,
discount of 5.52%;
due 04/17/98 49,877,333 49,877,333
25,000,000 Sears Roebuck Acceptance Corp.,
discount of 5.54%;
due 04/17/98 24,938,444 24,938,444
25,000,000 Salomon Smith Barney,
discount of 5.56%;
due 04/17/98 24,938,222 24,938,222
25,000,000 The Allstate Corp.,
discount of 5.52%;
due 04/20/98 24,927,167 24,927,167
50,000,000 Ford Credit,
discount of 5.53%;
due 04/20/98 49,854,069 49,854,069
50,000,000 JC Penney Funding,
discount of 5.55%;
due 04/20/98 49,853,542 49,853,542
50,000,000 Prudential Funding Corp.,
discount of 5.53%;
due 04/20/98 49,854,069 49,854,069
25,000,000 Sears Roebuck Acceptance Corp.,
discount of 5.55%;
due 04/20/98 24,926,771 24,926,771
25,000,000 Florida Power & Light Group Capital,
discount of 5.53%;
due 04/21/98 24,923,194 24,923,194
25,000,000 JC Penney Funding,
discount of 5.54%;
due 04/21/98 24,923,056 24,923,056
25,000,000 MCI Communications Corp. BE,
discount of 5.55%;
due 04/21/98 24,922,917 24,922,917
25,000,000 Sears Roebuck Acceptance Corp.,
discount of 5.54%;
due 04/21/98 24,923,056 24,923,056
25,000,000 Salomon Smith Barney,
discount of 5.54%;
due 04/21/98 24,923,056 24,923,056
25,000,000 Associates First Capital Corp.,
discount of 5.55%;
due 04/22/98 24,919,063 24,919,063
$25,000,000 CIT Group,
discount of 5.53%;
due 04/22/98 24,919,354 24,919,354
25,000,000 GTE Funding Inc.,
discount of 5.57%;
due 04/22/98 24,918,771 24,918,771
25,000,000 MCI Communications Corp. BE,
discount of 5.55%;
due 04/22/98 24,919,063 24,919,063
50,000,000 Associates First Capital Corp.,
discount of 5.55%;
due 04/23/98 49,830,417 49,830,417
20,000,000 Commercial Credit Company,
discount of 5.55%;
due 04/23/98 19,932,167 19,932,167
25,000,000 Eastman Kodak Company,
discount of 5.52%;
due 04/23/98 24,915,667 24,915,667
50,000,000 General Motors Corp.,
discount of 5.58%;
due 04/24/98 49,821,750 49,821,750
25,000,000 GTE Funding Inc.,
discount of 5.57%;
due 04/24/98 24,911,035 24,911,035
50,000,000 CIT Group,
discount of 5.54%;
due 04/27/98 49,799,944 49,799,944
25,000,000 CIT Group,
discount of 5.54%;
due 04/28/98 24,896,125 24,896,125
10,000,000 Chevron Transport Company,
discount of 5.54%;
due 05/01/98 9,953,833 9,953,833
------------- -------------
Total commercial paper 3,688,881,760 3,688,881,760
VARIABLE RATE DEMAND NOTES - 0.0%
1,474,878 General Mills, Inc. 1,474,878 1,474,878
------------- -------------
Total short-term
investments 3,690,356,638 3,690,356,638
------------- -------------
Total investments $7,479,135,860 8,029,064,864
-------------
-------------
Liabilities, less cash and
receivables (4.1%) (A)<F3> (314,093,288)
--------------
NET ASSETS $7,714,971,576
--------------
--------------
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($7,714,971,576 /242,862,229
shares outstanding) $31.77
------
------
*<F2>Non-income producing security.
(a)<F3>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of
this statement.
BRANDYWINE FUND, INC.
STATEMENT OF OPERATIONS
For the Period Ended March 31, 1998
(Unaudited)
INCOME:
Dividends................................$ 12,684,686
Interest......................................88,670,400
---------------
Total income..............................101,355,086
---------------
EXPENSES:
Management fees...............................42,832,650
Printing and postage expense.....................408,690
Transfer agent fees..............................407,732
Custodian fees....................................341,91
Registration fees................................292,929
Administrative services..........................216,500
Professional fees.................................27,559
Other expenses....................................68,180
Total expenses.............................44,596,150
---------------
NET INVESTMENT INCOME ..........................56,758,936
---------------
NET REALIZED GAIN ON INVESTMENTS ..............420,796,576
NET DECREASE IN UNREALIZED APPRECIATION
ON INVESTMENTS ..........................(1,630,365,844)
---------------
NET LOSS ON INVESTMENTS ...................(1,209,569,268)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS ..............................($1,152,810,332)
---------------
---------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended March 31, 1998 (Unaudited)
and For the Year Ended September 30, 1997
1998 1997
---- ----
Operations:
Net investment income (loss)..........$ 56,758,936 $ (20,584,042)
Net realized gain on investments..........420,796,576 1,613,667,150
Net (decrease) increase in unrealized
appreciation on investments.........(1,630,365,844) 981,427,330
...................................--------------- ---------------
Net (decrease) increase in net
assets resulting from operations.(1,152,810,332) 2,574,510,438
...................................--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized
gains ($7.0234273 and $1.347376
per share, respectively)............(1,544,738,562) (250,675,102)*<F4>
...................................--------------- ---------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(37,085,349 and 57,592,561 shares,
respectively).........................1,237,540,299 2,068,244,776
Net asset value of shares issued
in distributions (45,515,656 and
7,103,901 shares, respectively).......1,441,480,822 233,833,825
Cost of shares redeemed (56,836,222
and 31,524,981 shares, respectively)(1,799,224,727) (1,131,490,538)
...................................--------------- ---------------
Net increase in net assets derived
from Fund share activities...........879,796,394 1,170,588,063
...................................--------------- ---------------
TOTAL (DECREASE) INCREASE ....... (1,817,752,500) 3,494,423,399
NET ASSETS AT THE BEGINNING OF THE PERIOD 9,532,724,076 6,038,300,677
...................................--------------- ---------------
NET ASSETS AT THE END OF THE PERIOD
(INCLUDES UNDISTRIBUTED NET
INVESTMENT INCOME OF $56,758,936
AND 0, RESPECTIVELY) ...................$ 7,714,971,576 $ 9,532,724,076
...................................--------------- ---------------
...................................--------------- ---------------
*<F4>Total distribution includes $65,792,910 of ordinary income, of which 37%
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 period)
<TABLE>
For the period
ended March 31,
1998 Years Ended September 30,
Unaudited 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $43.91 $32.83 $33.92 $24.77 $28.04 $19.36
Income from investment operations:
Net investment (loss) income 0.26 (0.07)(1) (0.08)(1)(0.10) 0.03 (0.02)
<F5> <F5>
Net realized and unrealized gains
(losses) on investments (5.38) 12.50 2.83 10.70 (0.43) 9.25
Total from investment operations (5.12) 12.43 2.75 10.60 (0.40) 9.23
Less distributions
Dividends from net investment
income -- -- -- -- -- (0.01)
Distributions from net realized
gains (7.02) (1.35) (3.84) (1.45) (2.87) (0.54)
Total from distributions (7.02) (1.35) (3.84) (1.45) (2.87) (0.55)
Net asset value, end of year $31.77 $43.91 $32.83 $33.92 $24.77 $28.04
Total Investment Return (11.6%) 39.3% 10.0% 45.5% (1.4%) 48.6%
Ratios/Supplemental Data:
Net assets, end of year
(in 000's $) 7,714,972 9,532,724 6,038,301 4,137,484 2,240,554 1,413,253
Ratio of expenses to average
net assets 1.04%+<F7> 1.04% 1.06% 1.07% 1.09% 1.08%
Ratio of net investment (loss) income
to average net assets 1.3%+<F7> (0.3%) (0.4%) (0.4%) 0.1% (0.1%)
Portfolio turnover rate 241.0%+<F7> 192.4% 202.8% 193.7% 190.2% 150.4%
Average commission rate paid*<F6> $0.0570 $0.0595 $0.0599
</TABLE>
<TABLE>
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $20.52 $15.79 $17.87 $12.89 $17.00
Income from investment operations:
Net investment (loss) income 0.04 0.27 0.11 0.03 0.06
Net realized and unrealized gains
(losses) on investments 1.04 5.74 (1.48) 4.99 (3.29)
Total from investment operations 1.08 6.01 (1.37) 5.02 (3.23)
Less distributions:
Dividends from net investment income (0.13) (0.28) (0.03) (0.04) --
Distributions from net realized gains (2.11) (1.00) (0.68) -- (0.88)
Total from distributions (2.24) (1.28) (0.71) (0.04) (0.88)
Net asset value, end of year $19.36 $20.52 $15.79 $17.87 $12.89
Total Investment Return 5.9% 41.4% (7.9%) 39.0% (17.6%)
Ratios/Supplemental Data:
Net assets, end of year (in 000's $) 695,128 527,808 271,856 169,745 122,863
Ratio of expenses to average net assets 1.10% 1.09% 1.12% 1.13% 1.16%
Ratio of net investment (loss) income
to average net assets 0.2% 1.5% 0.9% 0.2% 0.3%
Portfolio turnover rate 188.9% 187.9% 157.7% 91.0% 107.4%
(1)<F5> Net investment loss per share is calculated using ending balances prior to
consideration of adjustments for book and tax differences.
*<F6>Disclosure required for fiscal years beginning after September 1, 1995.
+<F7>Annualized
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
BRANDYWINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of Brandywine
Fund, Inc. (the "Fund"), which is registered under the Investment Company Act
of 1940. The Fund was incorporated under the laws of Maryland on October 9,
1985. The investment objective of the Fund is to produce long-term capital
appreciation principally through investing in common stocks.
(a) Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the issue
is traded, or if no sale is reported, the latest bid price. Securities
which are traded over-the-counter are valued at the latest bid price.
Securities for which quotations are not readily available are valued at
fair value as determined by the investment adviser under the supervision of
the Board of Directors. Short-term investments are valued at amortized cost
which approximates quoted market value. Investment transactions are
recorded no later than the first business day after the trade date.
(b) Net realized gains and losses on common stock are computed on the
basis of the cost of specific certificates.
(c) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all net investment company taxable income and net
capital gains to its shareholders and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(e) The Fund has investments in short-term variable rate demand notes,
which are unsecured instruments. The Fund may be susceptible to credit risk
with respect to these notes to the extent the issuer defaults on its
payment obligation. The Fund's policy is to monitor the creditworthiness of
the issuer and does not anticipate nonperformance by these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to capital stock.
(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.
(4) INVESTMENT TRANSACTIONS
For the period ended March 31, 1998, purchases and proceeds of sales of
investment securities (excluding short-term investments) were $6,701,345,310
and $10,422,736,629 respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of March 31, 1998, liabilities of the Fund included the following:
Payable to brokers for
investments purchased ..... $313,333,388
Payable to Adviser for management fees 6,721,669
Other liabilities ........... 720,809
(6) SOURCES OF NET ASSETS
As of March 31, 1998, the sources of net assets were as follows:
Fund shares issued and outstanding $6,697,403,897
Net unrealized appreciation
on investments 549,929,004
Undistributed net realized gains
and losses ............... 410,879,739
Undistributed net investment
income ................... 56,758,936
........................... --------------
........................... $7,714,971,576
........................... --------------
........................... --------------
Aggregate net unrealized appreciation as of March 31, 1998 consisted of the
following:
Aggregate gross
unrealized appreciation .. $598,651,864
Aggregate gross unrealized
depreciation ............. (48,722,860)
........................... --------------
Net unrealized appreciation $549,929,004
........................... --------------
........................... --------------
MARKET CAP . . .
As you purchased more companies and decreased your cash position this quarter,
you saw each market cap group increase. The most notable change coming in your
large cap, above $5 billion stocks which grew from just 14.4 percent in December
to 23.9 percent currently. Ascend Communications is new to your portfolio adding
a near $5 million gain. You saw another $3 million from your new position in
Computer Sciences. Nokia Corp. added more than $2 million, and Computer
Associates was bought, rising $1.5 million.
Apple Computer and its handsome $10.8 million unrealized profit was added to
your midcap companies, those between $1 and $5 billion market cap, helping grow
this group to 22.1 percent from 20.7 percent last quarter. Apparel companies Liz
Claiborne and Tommy Hilfiger find themselves once again in your portfolio, and
each is already up over $1 million.
Your small cap holdings inched up from 9.4 percent to 10.3 percent during the
quarter.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP 23.9%
MID CAP 22.1%
SMALL CAP 10.3%
CASH 43.7%
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.
Independent Accountants: PRICE WATERHOUSE LLP
Custodian, Transfer Agent: FIRSTAR TRUST COMPANY
Legal Counsel: FOLEY & LARDNER
OFFICERS: Foster S. Friess, President and Treasurer; 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
