BRANDYWINE FUND, INC.
MANAGED BY FRIESS ASSOCIATES, INC.
QUARTERLY REPORT
DECEMBER 31,1997
DEAR FELLOW SHAREHOLDERS:
To paraphrase Mark Twain, the rumors of our sale have been greatly exaggerated.
Friess Associates and the Brandywine Funds have NOT been sold.
Now that Legg Mason finalized its purchase of Brandywine Asset Management -- an
unrelated investment firm also doing business in Wilmington, Delaware -- the
erroneous reports of our being acquired will hopefully stop. We're still here!
Your current larger-than-normal cash position, 67 percent as we go to press
today, is better understood by reading the enclosed December 29, 1997 New York
Times article by Robert A. Johnson and viewing the chart that shows the lofty
levels of market valuations relative to the U.S. Gross Domestic Product over
time. The graph reflects new offerings as well as rising PE ratios.
The final quarter of '97 was affected significantly by poor reception of
disappointing earnings in the technology sector. The Pacific Stock Exchange
Index and the H&Q Technology Index declined 13.6 percent and 15.8 percent. Your
Fund finished right in line with these, declining 14.1 percent.
TECH INDECES VS. S&P 500
Performance 9/30/97 to 12/31/97
PACIFIC STOCK EXCHANGE -15.8%
H&Q TECH -14%
MORGAN STANLEY HIGH TECH -13.6%
NASDAQ IND. -11.2%
S&P 500*<F1> 2.9%
*<F1>TOTAL RETURN
We exit the year up 12 percent, out-performing the Nasdaq Industrials which rose
10 percent, while the S&P 500 turned in 33 percent as investors "fled to
quality" in response to Asian turmoil.
As more data became available, it became evident to us that the "Asian flu"
could have wider ramifications than originally thought. Extra scrutiny was
applied to each of your holdings to see how it would fare if some of the more
damaging scenarios materialized.
We feel many stocks are vulnerable directly or indirectly to a slowdown in the
Pacific Rim, but some stocks will stand to benefit.
Hertz CEO, Frank Olsen, told us last week that auto acquisition, which accounts
for 30 percent of Hertz's costs, will be lower because of more competitive
Asian-made cars brought about by the yen's weakening -- from 120 to 133 to the
dollar in the last two months.
The CEO of a major U.S. chemical company told us, on the other hand, that Asian
resin plants running at 40 percent of capacity will now gear up and flood U.S.
markets in a drive to acquire dollars. Asia's devalued currencies may make U.S.
customers more likely to purchase Asian supplies, potentially pressuring the
U.S. chemical producers' prices.
The debacle in Asian currencies as well as weakening currencies around the world
also makes it more difficult for U.S. companies to export product. Many Asian
customers of U.S. companies are unable to secure financing for purchases of U.S.
products. A U.S.-based, highly respected memory company just pre-released a
surprise loss for the December quarter citing this financing issue as a major
reason.
The investment community has not yet calculated these impacts. Lowered earnings
estimates will be the norm in the immediate months ahead. We also have not seen
the last write-off due to currency or receivable losses -- more lay ahead.
There is a widening credit crunch in Asia, and Korean interest rates are
excessively high and rising. Already more than 500 Seoul-based companies went
bankrupt in the first five days of 1998, and the IMF is revising its bailout
forecast upward.
The 1.7 percent decline in the Dow Jones Industrials and the 13.7 percent drop
in the Nasdaq Industrials from October 13 to the end of the year discounts some
of these new realities. Current buyers believe the stock market has over
discounted these developments, but we do not agree when we examine the situation
on a company-by-company basis.
Your research team has its "shopping list" poised and ready for re-entry when
the time comes, but we will only participate in the expected rallies that
typically follow the cessation of year-end selling pressures if the fundamentals
and price earnings ratios of the individual company warrant putting your money
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at risk.
The companies we'll seek for you must meet the criteria our strategy stipulates,
as illustrated by William O'Neil & Co.' s analysis which shows your companies'
earnings growing 53 percent for the last 12 months compared to just 15 percent
for the companies comprising the S&P 500. For the latest quarter, your companies
earnings growth is at 47 percent while those of the S&P 500 are at just 17
percent.
COMPANY GROWTH
AVERAGE INCREASE
LATEST 12 MOS. EARNINGS
YOUR COMPANIES 53%
S&P 500 15%
AVERAGE INCREASE
LATEST QUARTERLY EARNINGS
YOUR COMPANIES 47%
S&P 500 17%
All S&P figures are unweighted.
Analysis by William O'Neil & Co., Inc.
January 2, 1998.
Your largest percentage gainer during the quarter was Diane Hakala's Software
Artistry, up 65 percent. Andy Graves picked Quadramed Corp., which rose 59
percent, and David Harrington's Atlantic Coast Air jumped 48 percent. Trammell
Crow, isolated by Bill D'Alonzo, and Best Buy Co., chosen by Clarke Adams,
climbed 47 percent each, while Mark Lapolla's Jackson Hewitt and John Ragard's
USAirways Group gained 42 percent apiece. A.J. Berk's pick, Citrix Systems
showed a 29 percent gain for the quarter.
We are willing to underperform the market for a few months if we can insulate
you from higher- than-normal risks. It's better to forego an opportunity than to
lose money. We will see exciting opportunities in the months and years ahead;
it's important we have the money to take advantage of them.
The many of you who blessed us with your greeting cards served an important
purpose. As we enjoyed the pictures of your families and read your notes of
encouragement, it became easier for us to make the decision when we asked
ourselves, "Would we buy this XYZ stock we now own for you today at these
prices?"
Foster's 88-year-old mother and his high school basketball coach, and my 83-
year-old mother all have a large part of their savings in the Fund as well. This
made decisions easier than some abstract notion of "what percent cash should we
be holding?"
Foster began this letter to you from his laptop computer while airborne to
Tokyo, Seoul, Taipei and Hong Kong. The five-person entourage making the trip
enjoys the inclusion of Ambassador Richard McCormack, Under Secretary of State
for Economic Affairs for President Bush and the Ambassador to the Organization
of American States serving President Reagan during the Latin American debt
crisis.
Foster will be meeting with top level business, banking and government officials
including the Premier of Taiwan to assess relevance of the crisis there to your
holdings.
Reagan's National Security Advisor, Richard Allen, who helped rescue the current
Korean President from a firing squad in 1980, also helped set up very top level
contacts for your fact-finding team. Here are some of the concerns Foster's
emails and faxes to us indicate:
o There is a very strong likelihood the Mainland Chinese will devalue
their currency again and that the Hong Kong peg to the dollar will be changed.
This would exacerbate further the downward-spiraling currencies.
o Japan will undergo another massive round of bankruptcies in the next
60 to 90 days, putting pressure on the already bottom-probing Nikkei and cause
additional weakness in the yen. Retail sales plummeted in December and
confidence is razor thin.
o The banking system in Japan is a mess and this will be made more
evident in the weeks ahead.
o Mainland China in recent weeks dropped interbank rates from 7.9
percent to 1.7 percent, indicating significant internal weaknesses caused by
their high debt and non-performing loans.
o There is growing recognition of a global overcapacity in many
industries. One-third of China's industries are said to be glutted with
inventory including VCRs, bicycles, refrigerators, and black and white TVs. Too
much money drove uneconomic projects. This is now coming home to roost. Office
space vacancy rates are believed to be 32 percent in China.
Ambassador McCormack's concerns that "the U.S. will be hit by a flood of
excellent products sold in devalued currencies and American manufacturers will
have to sacrifice profits to hold on to markets in the U.S. and around the
world" were reinforced universally so far during Foster's trip.
We already see evidence of strength in companies whose earnings' prospects are
enhanced by cheaper imports. As we sort out the significance of these very major
developments of recent weeks, we are evaluating each stock individually to
isolate the best companies for your portfolio.
Statistics validate your long-term investment success through a philosophy that
emphasizes individual stock selection of companies growing rapidly at reasonable
price earnings ratios and that are intensively researched to discover the
strength of underlying fund-amentals that others have not yet fully appreciated.
Your five year return of 133 percent, 18.4 percent annualized, compared to just
68 percent for the Nasdaq Industrials illustrates the success of this strategy.
For the last ten years, your Fund is up an average of 20.3 percent each year,
532 percent cumulatively, compared to the 425 percent climb in the S&P 500 and
just a 260 percent rise in the Nasdaq Industrials.
MOST RECENT 10 YEARS
IBD*<F2> 237.6%
NASDAQ IND. 260.3%
RUSSELL 2000 262.9%
LIPPER GROWTH*<F2> 344.2%
S&P 500*<F2> 424.8%
YOUR FUND*<F2> 532.3%
*<F2>TOTAL RETURN
IBD = Investor's Business Daily Mutual Fund Index
Subsequent to the August 25th Forbes article that listed the Brandywine Funds
family as the Number One performing fund family for the last ten years of those
with more than $1 billion entrusted to them, another article appeared. This one,
in the newly launched Bloomberg magazine, detailed the pain suffered by those of
us investing in the more dynamic sector of the market -- in the midcap and
smaller cap companies -- since the summer of 1996.
Since July 15, 1996 until December 31, 1997 the S&P grew 58.6 percent while the
Nasdaq Industrials struggled to a 24.2 percent increase.
Your sister Brandywine Blue Fund rose 45 percent during that period, surpassing
the ten funds mentioned in the Bloomberg article and Brandywine Fund rose 41
percent. The worst performer mentioned dropped 20 percent. The author, after
describing the nosebleed price earnings ratios attendant to the other funds went
on to say, "That's what separates Foster Friess from other momentum players --
he can't stomach high PEs."
Your investment strategy that emphasizes lower PEs has proven itself time and
time again over the model most "momentum investors" embrace. Sure, we miss the
Home Depots and WalMarts, but the attention to modest price earnings ratios
rather than "growth at any price" continues to serve us well over the long-term.
We are grateful for the confidence and support in our strategy as reflected by
net inflows of $256 million into your Fund this quarter. One of your largest and
longest fellow shareholders, the Nobel Foundation, remains invested right along
with you with $45 million. Our Friess Associates pension plan and family and
personal savings in the Funds total over $40 million, which keeps us fervently
committed to generating healthy returns in '98 and beyond for all of us.
Everyone at Friess Associates wishes you a happy and prosperous New Year!
/s/ Bill D'Alonzo
Bill D'Alonzo
Vice President
January 10, 1998
HIGHLIGHTS ...
FINANCIAL/BUSINESS SERVICES
After many years as a diversified conglomerate, OGDEN CORP. has streamlined its
operations and is focusing on its three most successful businesses -- Ogden
Energy Group, Ogden Aviation, and Ogden Entertainment.
Ogden Energy Group provides water and wastewater services and develops power
sources. Its Aviation division offers airport services such as ground and cargo
handling, catering, and fueling throughout the globe.
Vice President Quinton Marshall told us recently that he is excited about the
large number of new aviation contract opportunities Ogden is bidding on and
winning, particularly in international markets.
One of the world's top operators of concession stands, Ogden Entertainment
serves food in stadiums of such U.S. popular teams as the Cubs at Wrigley Field
and the Mariners at the Seattle King Dome. And, if you happen to find yourself
at the World Trade Center grabbing lunch, you'll very likely come across an
Ogden stand.
Your NYSE-listed company also has interest in theme parks and just opened its
mall-based zoo, American Wilderness Experience, in Ontario, California to rave
reviews. Additional parks are planned in Tempe, Arizona, and Great Vine, Texas.
Earnings in the September quarter rose 20 percent to $.49 from $.41.
Purchased in March at $21, your shares are up 34 percent to $28.
SEMICONDUCTORS & RELATED
It's pitch black, but you can still read your cellular phone display or your
Timex Indiglo watch, thanks to the technology of SIPEX CORP.
Your company's electroluminescence products are ideal for portable communication
devices like pagers and cell phones because they require very little battery
power drain. Sipex's products also light the 3Com Palm Pilots -- a complete
calendar and address book which fits right in the palm of your hand -- the tool
your entire research team uses to keep them on schedule.
We learned in a discussion with Frank Dipietro, Chief Financial Officer, that
the recent television commercial showing the L.M. Ericsson cell phone
illuminating an entire football stadium after a black-out, was actually Sipex's
lighting display for that product, which Ericsson is not even shipping yet!
Other customers using your company's technology include Cisco Systems and IBM.
The recent September quarter saw earnings catapult to $.17 from just $.05 last
year, while revenues were up 40 percent to $13 million.
Up 98 percent since purchased for you in October '96, your shares sell today at
$30.25.
SOFTWARE
Hospitals, HMOs and Physicians need to find cost savings, improve billing to
Medicare, Medicaid and private insurance companies, and reduce their back office
staffs. QUADRAMED CORPORATION makes software which does all these things for its
customers. More than 25 percent of U.S. hospitals, as well as a number of major
HMOs, utilize your company's services.
QuadraMed writes, manufactures and installs billing, fraud detection, and
clinical software. Its products are used to manage claims and provides
contracts, diagnosis, reimbursement and documentation of patient accounts and
medical records.
The recent acquisition of rival Medicus Systems, with revenues of $18 million
per year, will increase QuadraMed's size by 50 percent. According to John
Cracchiolo, Chief Financial Officer, this acquisition will lead to a variety of
cost savings and sales synergies.
Revenues more than doubled during the recent September quarter, up from $4.4
million to $9.4 million. Earnings, in turn, jumped to $.15 from $.01 last year.
Selling at $27.50, your shares rose 65 percent since purchase in August at $17.
SPECIALTY RETAILING
If you're unsure of what the latest cellular technology, digital videodisks, and
audio equipment feature, make your purchase at BEST BUY CO. and they can tell
you.
With more than 270 stores in 32 states, your company serves over 44 percent of
the U.S. population with their home electronics and appliances purchases.
In a recent conversation with CFO Alan Lenzmier, we learned that through real-
time information management systems, Best Buy turns over its computer
inventories more than 11 times a year. Your company sells over 30 percent of its
computer systems at under $1,000 apiece, and is preparing to introduce 200 MHz
and 233 MHz systems. These new computers can drive higher margin software, and
at that price, will likely encourage increased sales and new customers.
In the recent November quarter, earnings exploded to $.57 compared with a loss
last year.
Purchased in August, your shares have shot up 133 percent to $37.
TRANSPORTATION & RELATED
Those familiar commercials depicting folks stranded at the airport, retrieving
their rental car amidst a blizzard or torrential rain storm, echoing the well-
known lament, "Well, not exactly!" have made HERTZ CORP. a household name in the
car rental business.
Your company operates a fleet of nearly 400,000 vehicles through 5,000 rental
locations in 140 countries. About 3/4 of its car-rental revenues are from
airport-pickups, so those commercials are right on target!
With car rental rates on the rise and a strong management team, Hertz enjoyed a
29 percent jump in earnings during the September quarter, up from $.68 to $.86.
We learned recently from CEO Frank Olson that Hertz's state-of-the-art MIS setup
allows the company to adjust prices by location, day, time and availability,
giving them great leverage on achieving the best prices possible for their
services.
Up 38 percent since purchase at $29 in April, your shares sell today at $40.
FELLOW SHAREHOLDER . . .
We count some amazingly dynamic people among your shareholder family, and
William E. Simon, President Nixon and Ford's Treasury Secretary, is no
exception. With 45 super successful career years under his belt, there are not
many facets of American business, public affairs, and government which Mr.
Simon's life hasn't touched.
Mr. Simon leads the John M. Olin Foundation which was established to preserve
the principles of political and economic liberty. The Foundation concentrates on
various areas of study including Constitutional law, the moral foundations of a
free society, and the relationship between religion and free institutions. Some
specific subjects which interest the Foundation are tax and regulatory policy,
foreign policy, and the effectiveness of government programs.
About $20 million is awarded annually in grants, 60 percent going to prominent
colleges and universities such as Harvard, Yale, Stanford, Columbia, and
Georgetown, and the remainder to leading think tanks, such as The Heritage
Foundation, the Hudson Institute, and The Hoover Institution.
Mr. Simon began his professional life in 1952 starting at Union Securities, and
moving next to Weeden & Company, before joining Salomon Brothers, where he
enjoyed a highly prosperous career as head of the Government and Municipal Bond
Departments. In 1972, Mr. Simon entered government service when he was appointed
by President Nixon as Deputy Secretary of the Treasury, and then later as the
first Administrator of the Federal Energy Office. President Nixon selected him
to be the 63rd Secretary of the Treasury in 1974, a position he held until the
end of President Ford's term in 1977. That year, the Treasury Department awarded
Mr. Simon its highest honor -- the Alexander Hamilton Award.
After his government service, Mr. Simon once again took up a career in business.
Since returning, he's founded three investment companies, Wesray Corporation,
WSGP International, and most recently, in 1988, William E. Simon & Sons. Mr.
Simon has served on the boards of more than thirty well-known corporations
including Xerox, Citibank, Halliburton, and Kraft. In 1986, he was honored by
the University of Rochester when the Graduate School of Management was re-named
the William E. Simon Graduate School of Business Administration.
Mr. Simon is also a sports aficionado, having served on the U.S. Olympic
Committee for more than 30 years, during which time he's been Treasurer and
President. Six years ago, he was inducted into the U.S. Olympic Hall of Fame.
He's also been involved in the National Tennis Foundation and Hall of Fame, the
Basketball Hall of Fame, and the Women's Sports Foundation.
With a firm faith in helping the less fortunate,
Mr. Simon dedicates much of his time to serving the sick and the poor. He is a
volunteer at Covenant House and also a Eucharistic Minister to patients who are
often destitute, terminally ill, or both. Hundreds of underprivileged high
school and college students are able to further their studies because of the
many scholarships Mr. Simon has created.
We are honored to have Mr. Simon and the John M. Olin Foundation invested with
us in Brandywine Fund. We enjoy playing a role in helping the Foundation achieve
its worthwhile goals.
- Rebecca Buswell
CINDY . . .
Very few can match "old-timer" Cindy Mills' track record at Friess. Only four
people in the entire firm were here before veteran Cindy, who started on April
1, 1982, bringing the Friess Associates team to five-people strong.
While attending a high school athletic event, Foster met Cindy and was so
impressed with her out-going nature and upbeat personality that he asked her to
come in for an interview. That chance meeting led to Cindy's 16-year career at
Friess Associates fulfilling a myriad of responsibilities in working to grow the
assets under management.
Cindy launched her days at Friess as the receptionist and bookkeeper. Then about
five years ago she was given the opportunity to work with senior researcher Bill
D'Alonzo as his research manager and continues to fill that role today. She
helps Bill investigate prospective companies for your portfolio by contacting
CEOs and CFOs and filtering through to him only the information that he really
needs to see.
Bill explains, "I would never get through the barrage of material I receive
through the mail, fax, phone calls, and email without Cindy's help. She makes
sure I get the most pertinent pieces of the puzzle, pitching the useless
information. Cindy is incredible with the way she keeps me organized and headed
in the right direction given my hectic schedule." Bill concludes, "There is only
one word to describe her efforts on my behalf -- awesome!"
"One of the most amazing things for me to see is the increase in our clients'
and shareholders' investments. When I started, we were managing $125 million,
and today it is nearly $14 billion," Cindy states.
"The reason we've been able to effectively handle our growth is the dynamic,
sharp group of individuals Foster and Lynn have assembled at Friess," she
continues. "These folks -- whose extensive experience in the industry range from
Morgan Guaranty Trust to J.C. Penney Financial Corp. to the DuPont Company --
carry out the same investment strategy Foster initiated more than 20 years ago
to keep your Fund on track."
Cindy's husband of 25 years, Stephen, is a senior Detective for the Child Abuse
Unit of Chester County, Pennsylvania and together they raised two sons.
Following their father's footsteps, Chad is a police officer in Fort Worth,
Texas and Stephen Jr. (a newlywed) is a police officer in Pennsylvania. "We are
fortunate to be able to get together often, which is my number one pleasure in
life."
An accomplished singer and runner, Cindy also enjoys music, exercise and
traveling which keep her occupied away from the office.
- -Rebecca Buswell
WEBSITE ON THE WAY . . .
Many of you have written in suggesting we tap the internet and launch Brandywine
Funds on the world wide web. So, we've put our computer design folks to work and
sometime in the upcoming quarter, potential and current shareholders can check
us out and pull up an application for investment with the click of a button.
Keep your eyes peeled!
DAVID . . .
In 1990, soon after Friess Associates crossed $1 billion under management, David
Harrington joined your research team, following a five-year stint at a local
financial planning firm analyzing privately-owned companies.
A native of Wilmington, David returned to Delaware after graduating from St.
Lawrence University in 1985 where he earned a Bachelor's degree in English. He
and his wife, Erin, were married eight years ago and have three young ones at
home, Andrew, 7, Lindsay, 5, and Ian, 2. In addition to spending time with his
family, David enjoys nearly any outdoor activity, particularly fishing, hunting,
boating, biking and golf.
David learned the nuances of many different kinds of businesses and what makes
them successful during his time researching private companies, and enjoys
leveraging that experience into the public markets. "Most of the management
issues that affect private companies are transferable to the publicly-traded
stocks," David states. "Our research strategy dictates that we remain in close
contact with the management of the companies we own to keep on target with
what's really happening there."
Fellow senior researcher Clarke Adams praises David's ability. "David
understands our strategy and goes after companies that are beating expectations,
selling at reasonable valuations, and have 'sizzle' to get investors excited
about their business. He's selected some big winners for Brandywine."
Several of David's holdings are tech-related, but he remains an overall
generalist as all of your researchers do. Dell Computer, Proffitt's, Borders
Group, Atlantic Coast Airlines, Compaq, Tech Data, and National Semiconductor,
are recent good picks of David's, adding $480 million in gains.
"It's been great to see Friess Associates grow nearly 14-fold since I came on
board!" exclaims David. "The resources we now have, including software,
hardware, and our internal network of researchers and traders make our process
more efficient than it's ever been."
- -Rebecca Buswell
HEADING TO LAS VEGAS?
Then you might want to make your trip in mid-April when Foster will be there
among other investment gurus at the Louis Rukeyser Investment Conference. On
April 18 and 19, join Foster at the MGM Grand Garden to hear him and others in
the business -- including Rukeyser himself -- comment on the overall economic
and financial scene as well as offer individual market insights. As a Brandywine
shareholder, you can attend at a discount rate. Please call (800) 892-9202 if
you want more information.
GROWING YOUR FUND . . .
The dedicated employees at your companies deserve recognition for the growth of
your assets. They work hard to make their companies successful, and you benefit
from that success.
Sylvia Bellamy is a Customer Service Representative for the Hertz Corporation.
She works behind the Hertz counter at McCarran International Airport in Las
Vegas assisting travelers with their rental cars, handling problems, and making
people happy. No day is "typical" for Sylvia because each one presents new
challenges and surprises. But surely the most memorable day in Sylvia's nine
years with Hertz was the day she helped save a customer's life.
Sylvia performed lifesaving CPR techniques on a man who was having a massive
heart attack. Her quick-thinking heroics saved his life. Because of first aid
and CPR training courses at Hertz, she knew exactly what to do, but looking back
on this experience she still marvels, "You just act. All my training
automatically came back to me. It was an overwhelming experience. If I don't do
anything else in life, that will put the icing on the cake!"
Away from her job, Sylvia is the summer track and field coach for the Youth
Activities Center in Las Vegas. She attended the University of Texas, El Paso
on a track scholarship and still runs competitively. After she leaves work,
she coaches a team of youngsters ranging in age from 8 to 16. Her goal is to
teach running but she also explains, "to instill discipline at a young age is
so vital."
Sylvia has a daughter, Antoinette, 11, and a son, James, 6. She serves as Den
Mother for James' Tiger Cub Scout Troop, planning activities for twelve little
boys. Amazingly, Sylvia also plans to attend the University of Las Vegas this
year to complete her Bachelor's degree in Business Management.
We asked Sylvia why she liked working for Hertz. She immediately answered,
"Because we are #1. When you deal with us you know you are dealing with
professionals. Our customer service stands out." In fact, Sylvia has made so
many friends for Las Vegas that the Chamber of Commerce recently honored her at
a luncheon with the mayor. She just smiles and says, "I genuinely love people. I
believe if you smile, it's going to be a better day, and . . . you live longer!"
- - Margaret Barton
TOP TEN . . .
It's not surprising to see substantial shifts in your top ten this quarter given
the increased cash position you've taken, 67 percent as we write this January
10. The biggest change was in your Computers & Related stocks, falling off the
top ten with just 1.4 percent from the number one spot in September with 13.1
percent. Compaq, Data General, Dell Computer, and EMC Corp. were sold, nailing
down solid profits for you since original purchase. Compaq brought $115
million, Data General $5.9 million, Dell with $38.3 million, and EMC at $90.2
million.
Also noteworthy this quarter are your Oil/Gas Field Services holdings, coming in
at number seven with 2.1 percent compared to September's 7.6 percent. You sold
BJ Services, Cooper Cameron, Noble Drilling, Ensco International, Vintage
Petroleum, Parker Drilling, and Rowan Companies for total gains of more than
$100 million since purchase.
The Electronics category finished at number ten, moving from 4.6 percent to 1.5
percent as you sold Altron, Inc., DII Group, Kemet Corp., Veeco Instruments,
Inc., Teradyne, Microchip Tech, and Varian Associates.
Pharmaceuticals joined the top ten this quarter as your number three group with
5.0 percent, primarily fueled by a substantial position in Bristol-Myers Squibb,
which has already brought you $21 million in gains. ICN Pharmaceuticals and
Jones Medical were also added to help grow this group.
TOP TEN INDUSTRY GROUPS
Specialty Retailing 8.6%
Financial/Business Services 6.5%
Pharmaceuticals 5.0%
Department Stores 3.5%
Leisure & Entertainment 2.9%
Software 2.7%
Home/Office & Related 2.1%
Oil/Gas Field Services 2.1%
Insurance 1.9%
Electronics 1.5%
All Others 9.7%
Cash 53.5%
ALL IS NOT ROSES . . .
Quarters like this suggest a title like "All is Not Thorns" for this feature!
Many of your holdings suffered setbacks since September as we all witnessed 41
stocks tumble more than $10 million apiece.
The biggest disappointment was 3Com Corp., dropping back 37 percent. The company
took measures to reduce inventories in modems but the lack of an agreed-upon
standard in the industry for new technology was detrimental, pushing modem
prices down. Texas Instruments fell 30 percent mainly because of the situation
in Asia which affected its DRAM business. While a very small part of TI's
business overall, DRAM prices declined 30 percent in the quarter creating
concerns over the outlook, which depressed the stock.
Compaq slid 17 percent due to fears that inventory levels were too high. Also,
the increased popularity in the less-than-$1,000 PC hurt Compaq's product mix
and margin picture.
Applied Materials gave up 30 percent as the Asian currency crisis will likely
affect demand for its products in that region of the world, while Teradyne lost
37 percent following concerns that financially-strapped Memory Chip makers in
South East Asia would not be able to honor their large orders for test equipment
scheduled for delivery in the first quarter of '98. The Asian picture also
affected National Semiconductor, which retraced 28 percent following a perceived
slow down in its markets in that region.
Bay Networks fell back 32 percent due to concerns that the company would miss
earnings estimates for the December quarter, but the drop was primarily just
following suit with rest of tech for the quarter. EMC Corp. slipped 12 percent
in tandem with other technology stocks in general, and Electronics for Imaging
plummeted 75 percent after a major new product, scheduled for delivery in the
December and January quarters, was found to have flaws which delayed shipping.
The silver lining amidst this market melodrama is that these companies were sold
before they declined more than $125 million further as of this writing on
January 10. Compaq, EMC Corp., and National Semiconductor remain overall gainers
for you, bringing in $115 million, $90 million and $18 million from purchase to
sale.
Despite the tumultuous environment, US Airways Group rose $35 million, Bristol-
Myers Squibb increased $21 million, and Office Depot gained $20 million. You
garnered more than $10 million each from Tandy Corp., Best Buy, Cisco Systems,
H.F. Anderson, and Fred Meyer.
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
December 31, 1997
(Unaudited)
SHARES QUOTED
OR PRINCIPAL MARKET
AMOUNT COST VALUE
----------- ---- ------
LONG-TERM INVESTMENTS - 46.5% (A)<F3>
COMMON STOCKS - 46.2% (A)<F3>
APPAREL & SHOES - 0.7%
138,200 Big Dog Holdings, Inc. $1,520,200 $777,375
40,000 The Buckle, Inc. 1,368,350 1,370,000
2,700 Gadzooks, Inc. 66,825 56,700
836,800 Intimate Brands, Inc. 16,266,272 20,135,918
133,200 Payless ShoeSource, Inc. 7,997,296 8,941,050
239,400 St. John Knits, Inc. 10,236,576 9,576,000
77,000 Timberland Co. 3,375,468 4,470,851
160,000 Tropical Sportswear Int'l Corp. 1,921,250 1,600,000
515,700 The Warnaco Group, Inc. 14,690,051 16,180,088
------------- ------------
57,442,288 63,107,982
THIS SECTOR IS 9.9% ABOVE YOUR FUND'S COST.
AUTOMOTIVE & RELATED - 0.6%
714,900 Federal-Mogul Corp. 21,684,063 28,953,450
78,000 Motorcar Parts & Accessories, Inc. 1,365,125 1,306,500
188,800 Special Devices, Inc. 4,991,978 5,522,400
234,000 SPX Corp. 14,985,184 16,146,000
------------- ------------
43,026,350 51,928,350
THIS SECTOR IS 20.7% ABOVE YOUR FUND'S COST.
COMMUNICATIONS - 1.0%
175,000 Applied Signal Technology, Inc. 2,592,678 2,406,250
220,400 Brightpoint, Inc. 3,553,846 3,058,050
687,200 DSP Communications, Inc. 9,656,273 8,246,400
82,500 Dycom Industries, Inc. 982,025 1,778,947
487,700 ECI Telecom Ltd. 11,720,158 12,436,350
233,600 Essex International, Inc. 8,876,800 6,949,600
623,100 General Cable Corporation 13,226,278 22,548,743
35,000 MICROS Systems, Inc. 997,500 1,575,000
205,900 NICE-Systems Ltd. ADR 7,576,412 8,647,800
500,300 SmarTalk Teleservices, Inc. 11,735,995 11,381,825
351,900 World Access Inc. 6,652,516 8,401,613
------------- ------------
77,570,481 87,430,578
THIS SECTOR IS 12.7% ABOVE YOUR FUND'S COST.
COMPUTERS & RELATED - 1.4%
182,500 American Management Systems, Inc. 4,139,027 3,558,750
610,400 American Power Conversion Corp. 19,185,081 14,420,700
161,000 Cotelligent Group, Inc. 2,953,962 3,079,125
143,300 Digi International Inc. 2,088,460 2,436,100
1,275,678 EMC Corp. (Mass.) 15,618,268 35,002,053
203,800 IMNET Systems, Inc. 3,998,003 3,311,750
358,400 Pomeroy Computer Resource, Inc. 6,413,870 6,361,600
755,600 Premiere Technologies, Inc. 18,214,010 20,873,450
175,000 Procom Technology, Inc. 1,629,220 2,767,275
31,400 Sequent Computer Systems, Inc. 429,863 628,000
484,000 Symbol Technologies, Inc. 20,690,050 18,271,000
281,900 Transcrypt International Inc. 6,167,844 7,012,262
35,000 Unisys Corporation 476,826 485,625
93,000 Zebra Technologies Corp. 3,104,139 2,766,750
------------- ------------
105,108,623 120,974,440
THIS SECTOR IS 15.1% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 3.5%
342,000 Ames Department Stores, Inc. 2,823,563 5,985,000
1,051,450 Family Dollar Stores, Inc. 14,835,038 30,821,154
1,168,100 Federated Department Stores, Inc. 47,997,055 50,301,890
1,169,200 Fred Meyer, Inc. 26,076,919 42,529,650
2,491,200 Nordstrom, Inc. 119,662,341 150,406,200
445,600 Proffitt's Inc. 5,052,446 12,671,973
------------- ------------
216,447,362 292,715,867
THIS SECTOR IS 35.2% ABOVE YOUR FUND'S COST.
DISTRIBUTION - 0.3%
201,600 Avnet, Inc. 12,306,093 13,305,600
398,200 Boise Cascade Office Products Corp. 7,700,714 5,948,312
45,000 CompuCom Systems Inc. 437,765 371,250
205,100 Pioneer-Standard Electronics, Inc. 3,100,080 3,127,775
------------ -----------
23,544,652 22,752,937
THIS SECTOR IS 3.4% BELOW YOUR FUND'S COST.
ELECTRONICS - 1.5%
301,700 Kuhlman Corp. 10,690,480 11,804,012
25,000 LeCroy Corporation 909,375 756,250
453,500 Level One Communications Inc. 18,028,158 12,811,375
40,600 LSI Industries Inc. 709,325 740,950
67,000 Mettler-Toledo International Inc. 938,000 1,155,750
152,500 RadiSys Corporation 6,856,877 5,680,625
150,000 Rayovac Corporation 2,100,000 2,887,500
1,969,800 SCI Systems, Inc. 38,894,680 85,810,397
155,100 Waters Corp. 4,484,284 5,835,638
------------- ------------
83,611,179 127,482,497
THIS SECTOR IS 52.5% ABOVE YOUR FUND'S COST.
FABRIC/TEXTILES - 0.3%
350,000 Dan River Inc. 5,301,810 5,753,300
97,700 Tefron Ltd. 2,071,961 2,247,100
383,000 Unifi, Inc. 12,115,984 15,583,504
------------- ------------
19,489,755 23,583,904
THIS SECTOR IS 21.0% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 6.5%
925,300 AccuStaff Inc. 24,107,142 21,281,900
152,000 Advance Paradigm, Inc. 4,510,836 4,826,000
9,100 ADVO, Inc. 189,250 177,450
719,900 AmeriCredit Corp. 13,146,446 19,932,591
1,040,300 AMRESCO, Inc. 28,831,428 31,469,075
438,800 BA Merchant Services Inc. 6,608,014 7,788,700
1,290,100 Capital One Financial Corp. 60,326,568 69,907,939
116,800 CB Commercial Real Estate
Services Group 3,899,858 3,759,558
91,600 ChoicePoint Inc. 3,867,897 4,373,900
62,000 Comfort Systems USA, Inc. 1,113,136 1,224,500
149,400 Consolidated Graphics, Inc. 3,578,413 6,965,775
804,000 Consolidated Capital Corporation 16,080,000 16,331,652
105,000 CORT Business Services Corp. 2,505,206 4,180,365
517,200 Finova Group, Inc. 24,260,819 25,698,634
759,300 FIRSTPLUS Financial Group, Inc. 24,201,974 29,138,137
1,281,100 First Union Corporation (N.C.) 62,961,468 65,656,375
768,000 FIserv, Inc. 30,325,529 37,728,000
352,400 Group Maintenance America Corp. 4,978,496 5,924,725
1,627,000 H. F. Ahmanson & Company 97,377,876 108,908,126
329,300 Hooper Holmes, Inc. 4,532,131 4,795,596
348,400 IMC Mortgage Co. 4,230,400 4,137,250
101,200 ITI Technologies, Inc. 2,899,454 2,201,100
198,000 Leasing Solutions, Inc. 4,624,444 4,727,250
136,200 Herman Miller, Inc. 6,035,826 7,431,481
228,400 Ocwen Financial Corp. 5,026,324 5,810,039
689,500 Ogden Corp. 14,504,550 19,435,626
138,200 Personnel Group of America, Inc. 1,934,800 4,560,600
106,100 PRT Group Inc. 1,379,300 1,206,888
198,300 Rural/Metro Corporation 7,048,990 6,618,263
171,600 Select Appointments Holdings ADR 3,260,400 3,131,700
630,000 Servico, Inc. 9,144,000 10,631,250
69,400 SOS Staffing Services, Inc. 1,162,450 1,309,925
20,000 Trammell Crow Company 350,000 515,000
120,600 VWR Scientific Products Corp. 2,817,437 3,406,950
------------- ------------
481,820,862 545,192,320
THIS SECTOR IS 13.2% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 0.8%
1,064,200 CKE Restaurants, Inc. 28,333,689 44,829,425
306,200 Foodmaker, Inc. 5,561,818 4,612,291
100,000 International Home Foods, Inc. 2,202,570 2,800,000
315,200 Outback Steakhouse, Inc. 7,566,655 9,062,000
110,000 Schlotzsky's, Inc. 2,028,219 1,608,750
328,600 ShowBiz Pizza Time, Inc. 7,443,087 7,557,800
------------- ------------
53,136,038 70,470,266
THIS SECTOR IS 32.6% ABOVE YOUR FUND'S COST.
HEALTHCARE - 0.3%
248,400 AmeriPath, Inc. 4,508,171 4,222,800
307,000 Capital Senior Living Corp. 4,183,387 3,204,466
761,000 Coventry Corp. 11,695,920 11,605,250
40,000 Curative Health Services Inc. 1,205,000 1,215,000
88,900 PHP Healthcare Corp. 1,485,191 1,339,101
105,900 PMR Corporation 2,321,430 2,118,000
------------- ------------
25,399,099 23,704,617
THIS SECTOR IS 6.7% BELOW YOUR FUND'S COST.
HOME/OFFICE & RELATED - 2.1%
197,600 Mail-Well, Inc. 6,884,982 8,002,800
881,100 Maytag Corp. 27,998,948 32,876,484
65,500 Meadowcraft, Inc. 875,657 769,625
5,531,800 Office Depot, Inc. 98,055,522 132,420,229
270,000 Rent-Way, Inc. 3,222,874 4,995,000
------------- ------------
137,037,983 179,064,138
THIS SECTOR IS 30.7% ABOVE YOUR FUND'S COST.
INSURANCE - 1.9%
313,900 Century Business Services, Inc. 4,490,183 5,414,775
3,337,900 Conseco, Inc. 82,379,578 151,667,500
------------- ------------
86,869,761 157,082,275
THIS SECTOR IS 80.8% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 2.9%
300,000 Action Performance Cos. Inc. 8,211,437 11,362,500
80,800 CapStar Hotel Co. 2,050,293 2,772,490
1,156,900 Carnival Corporation 55,587,915 64,063,338
558,400 Fairfield Communities, Inc. 12,779,666 24,709,200
253,200 Hasbro, Inc. 7,794,255 7,975,800
62,400 Hospitality Worldwide Services 639,600 819,000
1,746,200 Mattel, Inc. 68,269,896 65,045,950
1,225,300 Polaroid Corp. 56,349,786 59,657,407
103,100 Royal Caribbean Cruises Ltd. 5,085,315 5,496,570
100,000 T-HQ, Inc. 1,876,565 2,300,000
43,400 Trendwest Resorts, Inc. 781,200 992,775
------------- ------------
219,425,928 245,195,030
THIS SECTOR IS 11.7% ABOVE YOUR FUND'S COST.
MACHINERY/CONSTRUCTION & MISCELLANEOUS MANUFACTURING - 0.2%
89,400 Carpenter Technology Corp. 3,815,358 4,296,832
301,400 Kennametal Inc. 15,300,225 15,616,438
------------- ------------
19,115,583 19,913,270
THIS SECTOR IS 4.2% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SERVICES - 1.2%
388,800 Cooper Companies, Inc. 12,056,234 15,892,200
667,200 ESC Medical Systems Ltd. 22,938,497 25,854,000
1,112,400 STERIS Corp. 51,556,868 53,673,300
99,100 Twinlab Corporation 2,108,956 2,452,725
------------- ------------
88,660,555 97,872,225
THIS SECTOR IS 10.4% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 2.1%
124,700 Basin Exploration, Inc. 1,986,086 2,213,425
19,000 Core Laboratories N.V. 341,687 343,197
826,600 EVI, Inc. 26,718,304 42,776,550
30,500 Global Industries, Inc. 510,921 518,500
569,800 J. Ray McDermott, S.A. 17,087,475 24,501,400
1,129,400 McDermott International, Inc. 34,891,944 41,364,275
313,400 Ocean Energy, Inc. 18,044,106 15,454,694
177,600 Offshore Logistics, Inc. 4,083,825 3,796,200
26,800 Pride International, Inc. 425,450 676,700
443,500 Varco International, Inc. 6,165,460 9,507,753
495,800 Veritas DGC Inc. 13,538,706 19,584,100
296,000 Weatherford Enterra Inc. 11,297,588 12,950,000
------------- ------------
135,091,552 173,686,794
THIS SECTOR IS 28.6% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 5.0%
80,000 Andrx Corp. 2,798,022 2,740,000
1,668,900 Bio-Technology General Corp. 21,050,497 17,940,675
3,362,000 Bristol-Myers Squibb Co. 297,221,396 318,129,250
900,700 ICN Pharmaceuticals, Inc. 47,158,770 43,965,869
263,200 Jones Medical Industries, Inc. 8,908,187 10,067,400
97,100 Kendle International Inc. 1,447,354 1,626,425
1,325,600 Mylan Laboratories Inc. 28,206,576 27,755,413
------------- ------------
406,790,802 422,225,032
THIS SECTOR IS 3.8% ABOVE YOUR FUND'S COST.
SEMICONDUCTORS & RELATED - 0.6%
1,153,400 Analog Devices, Inc. 35,566,380 31,935,339
197,500 DSP Group, Inc. 2,639,356 3,950,000
263,200 NeoMagic Corporation 4,295,567 3,355,800
228,900 QLogic Corp. 7,322,713 6,752,550
281,200 Sipex Corp. 4,294,480 8,506,300
------------- ------------
54,118,496 54,499,989
THIS SECTOR IS 0.7% ABOVE YOUR FUND'S COST.
SOFTWARE - 2.7%
345,000 Borland International, Inc. 3,446,725 2,522,985
387,000 Broderbund Software, Inc. 11,278,629 9,916,875
1,000,000 Cadence Design Systems, Inc. 24,408,594 24,500,000
1,489,200 Compuware Corp. 13,338,095 47,654,400
688,100 Electronic Arts Inc. 18,429,932 26,019,125
433,200 FileNet Corp. 11,484,229 13,050,150
421,600 Mercury Interactive Corporation 9,493,140 11,277,800
122,900 QuadraMed Corporation 2,054,925 3,379,750
167,200 Simulation Sciences, Inc. 3,009,600 2,675,200
250,000 Software AG Systems, Inc. 2,500,000 3,625,000
988,500 Sterling Software, Inc. 31,479,997 40,528,500
1,137,500 Symantec Corp. 17,433,385 24,954,475
343,600 VIASOFT, Inc. 12,579,713 14,517,100
------------- ------------
160,936,964 224,621,360
THIS SECTOR IS 39.6% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 8.6%
81,000 99 Cents Only Stores 2,166,052 2,389,500
304,400 Audiovox Corp. 2,432,108 2,092,750
1,025,500 Best Buy Co., Inc. 16,146,505 37,815,312
769,200 Borders Group, Inc. 13,673,533 24,085,960
225,000 Brylane, Inc. 10,350,000 11,081,250
370,500 Central Garden & Pet Co. 9,334,037 9,725,625
356,800 Dollar Thrifty Automotive, Inc. 7,342,301 7,314,400
464,200 Dress Barn, Inc. 6,293,682 13,171,675
253,800 French Fragrances Inc. 1,522,800 2,315,925
3,046,950 Gap, Inc. 99,578,923 107,977,814
50,000 Goody's Family Clothing, Inc. 1,635,155 1,359,400
520,600 Linens'n Things, Inc. 8,796,197 22,711,175
866,600 Lowe's Companies, Inc. 39,149,317 41,326,421
197,100 Michaels Stores, Inc. 4,695,700 5,765,175
250,000 OfficeMax, Inc. 3,541,075 3,562,500
101,100 Party City Corporation 2,754,611 3,260,475
701,600 Pier 1 Imports, Inc. 13,661,337 15,873,700
44,400 Renters Choice, Inc. 999,100 910,200
1,394,400 Rite Aid Corp. 64,166,904 81,834,547
1,456,400 Safeway Inc. 87,019,900 92,117,300
199,500 Stage Stores, Inc. 3,803,755 7,456,313
3,717,100 Staples, Inc. 86,082,409 103,149,525
2,698,800 Tandy Corp. 89,785,189 104,073,824
788,800 Zale Corp. 19,781,230 18,142,400
------------- ------------
594,711,820 719,513,166
THIS SECTOR IS 21.0% ABOVE YOUR FUND'S COST.
TRANSPORTATION & RELATED - 1.1%
117,500 Atlantic Coast Airlines Inc. 1,865,574 3,730,625
557,600 CNF Transportation Inc. 15,455,462 21,397,900
330,000 Covenant Transport, Inc. 5,238,750 5,032,500
112,000 Eagle USA Airfreight, Inc. 3,151,500 3,192,000
678,600 Hertz Corp. 19,855,838 27,313,650
892,700 J.B. Hunt Transport Services, Inc. 15,102,912 16,738,125
106,300 Midway Airlines Corp. 1,740,584 1,607,787
549,000 MotivePower Industries Inc. 7,839,750 12,764,250
44,300 SkyWest, Inc. 671,885 1,312,388
------------- ------------
70,922,255 93,089,225
THIS SECTOR IS 31.3% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 0.9%
308,500 AAR Corp. 11,490,189 11,954,375
1,133,200 The B.F. Goodrich Company 47,176,744 46,957,541
86,900 C&D Technologies, Inc. 3,989,480 4,192,925
131,900 Coachmen Industries, Inc. 2,796,404 2,844,160
77,400 The Dial Corp. 1,073,731 1,610,926
218,700 Elcor Corporation 5,113,808 5,248,800
------------- ------------
71,640,356 72,808,727
------------- ------------
THIS SECTOR IS 1.6% ABOVE YOUR FUND'S COST.
Total common stocks 3,231,918,744 3,888,914,989
REITS - 0.3% (A)<F3>
636,300 Brandywine Realty Trust 15,179,070 15,987,037
250,000 Glenborough Realty Trust, Inc. 6,250,000 7,406,250
------------- ------------
21,429,070 23,393,287
THIS SECTOR IS 9.2% ABOVE YOUR FUND'S COST.
WARRANTS - 0.0% (A)<F3>
43 Sound Advice, Inc.
Warrants, 06/14/99 0 0
------------- ------------
Total long-term investments 3,253,347,814 3,912,308,276
SHORT-TERM INVESTMENTS - 46.3% (A)<F3>
COMMERCIAL PAPER - 46.2%
$50,000,000 American Express Credit Corp.,
discount of 6.25%; due 01/02/98 49,991,319 49,991,319
50,000,000 BP America Inc.,
discount of 6.35%; due 01/02/98 49,991,181 49,991,181
50,000,000 Ford Credit,
discount of 6.75%; due 01/02/98 49,990,625 49,990,625
50,000,000 GE Capital,
discount of 6.75%; due 01/02/98 49,990,625 49,990,625
10,000,000 GE Capital,
discount of 6.75%; due 01/02/98 9,998,125 9,998,125
50,000,000 American Express Credit Corp.,
discount of 6.05%; due 01/05/98 49,966,389 49,966,389
50,000,000 Nellie Mae,
discount of 6.15%; due 01/05/98 49,965,833 49,965,833
25,000,000 Bell Atlantic Network Funding,
discount of 5.95%; due 01/06/98 24,979,340 24,979,340
50,000,000 John Deere Capital Corp.,
discount of 6.08%; due 01/06/98 49,957,778 49,957,778
48,000,000 Ford Credit Europe PLC,
discount of 6.03%; due 01/06/98 47,959,800 47,959,800
50,000,000 Texaco Inc.,
discount of 5.96%; due 01/06/98 49,958,611 49,958,611
50,000,000 Allied Signal BE,
discount of 6.05%; due 01/07/98 49,949,583 49,949,583
50,000,000 Salomon Smith Barney BE,
discount of 6.02%; due 01/07/98 49,949,833 49,949,833
50,000,000 Texaco Inc.,
discount of 5.97%; due 01/07/98 49,950,250 49,950,250
40,200,000 The Washington Post Co.,
discount of 6.05%; due 01/07/98 40,159,465 40,159,465
50,000,000 Ford Motor Credit Corp.,
discount of 5.95%; due 01/08/98 49,942,153 49,942,153
25,000,000 Merrill Lynch BE,
discount of 6.05%; due 01/08/98 24,970,590 24,970,590
50,000,000 Salomon Smith Barney BE,
discount of 5.95%; due 01/08/98 49,942,153 49,942,153
50,000,000 Salomon Smith Barney BE,
discount of 6.00%; due 01/08/98 49,941,667 49,941,667
50,000,000 Ford Credit Europe PLC,
discount of 5.97%; due 01/09/98 49,933,667 49,933,667
25,000,000 Merrill Lynch BE,
discount of 6.05%; due 01/09/98 24,966,389 24,966,389
50,000,000 Salomon Smith Barney BE,
discount of 6.00%; due 01/09/98 49,933,333 49,933,333
50,000,000 Salomon Smith Barney BE,
discount of 6.00%; due 01/09/98 49,933,333 49,933,333
50,000,000 Ford Credit,
discount of 5.97%; due 01/12/98 49,908,792 49,908,792
50,000,000 Merrill Lynch BE,
discount of 5.93%; due 01/12/98 49,909,403 49,909,403
50,000,000 Salomon Smith Barney BE,
discount of 5.99%; due 01/12/98 49,908,486 49,908,486
50,000,000 Associates First Capital Corp.,
discount of 5.97%; due 01/13/98 49,900,500 49,900,500
50,000,000 John Deere Capital Corp.,
discount of 5.85%; due 01/13/98 49,902,500 49,902,500
25,000,000 Household Finance Corp.,
discount of 5.85%; due 01/13/98 24,951,250 24,951,250
25,000,000 Merrill Lynch BE,
discount of 5.93%; due 01/13/98 24,950,583 24,950,583
25,000,000 Bell Atlantic Network Funding,
discount of 6.00%; due 01/14/98 24,945,833 24,945,833
50,000,000 GE Capital,
discount of 5.97%; due 01/14/98 49,892,208 49,892,208
25,000,000 Household Finance Corp.,
discount of 5.85%; due 01/14/98 24,947,188 24,947,188
25,000,000 Merrill Lynch BE,
discount of 5.90%; due 01/14/98 24,946,736 24,946,736
50,000,000 Morgan Stanley BE,
discount of 5.95%; due 01/14/98 49,892,570 49,892,570
50,000,000 Bell Atlantic Network Funding,
discount of 6.10%; due 01/15/98 49,881,389 49,881,389
50,000,000 The CIT Group Inc.,
discount of 6.06%; due 01/15/98 49,882,167 49,882,167
50,000,000 Household Finance Corp.,
discount of 5.90%; due 01/15/98 49,885,278 49,885,278
50,000,000 American General Corp.,
discount of 5.91%; due 01/16/98 49,876,875 49,876,875
25,000,000 Chevron USA Inc.,
discount of 5.80%; due 01/16/98 24,939,583 24,939,583
35,000,000 EDS Finance PLC,
discount of 6.00%; due 01/16/98 34,912,500 34,912,500
22,200,000 IBM,
discount of 5.95%; due 01/16/98 22,144,963 22,144,963
25,000,000 Morgan Stanley BE,
discount of 5.85%; due 01/16/98 24,939,063 24,939,063
25,000,000 American Express Credit Corp.,
discount of 5.90%; due 01/20/98 24,922,153 24,922,153
50,000,000 The CIT Group Inc.,
discount of 6.00%; due 01/20/98 49,841,667 49,841,667
25,000,000 John Deere Capital Corp.,
discount of 5.85%; due 01/20/98 24,922,812 24,922,812
50,000,000 Merrill Lynch BE,
discount of 5.75%; due 01/20/98 49,848,264 49,848,264
25,000,000 Morgan Stanley BE,
discount of 5.85%; due 01/20/98 24,922,812 24,922,812
50,000,000 American Express Credit Corp.,
discount of 5.85%; due 01/21/98 49,837,500 49,837,500
25,000,000 John Deere Capital Corp.,
discount of 5.85%; due 01/21/98 24,918,750 24,918,750
50,000,000 Ford Motor,
discount of 5.81%; due 01/21/98 49,838,611 49,838,611
25,000,000 The Goldman Sachs Group LP,
discount of 5.95%; due 01/21/98 24,917,361 24,917,361
50,000,000 The CIT Group Inc.,
discount of 6.00%; due 01/22/98 49,825,000 49,825,000
50,000,000 GE Finance Assurance,
discount of 5.97%; due 01/22/98 49,825,875 49,825,875
50,000,000 The Goldman Sachs Group LP,
discount of 5.93%; due 01/22/98 49,827,042 49,827,042
25,000,000 Associates Corp. of NA,
discount of 5.90%; due 01/23/98 24,909,861 24,909,861
25,000,000 Bell Atlantic Network Funding,
discount of 5.91%; due 01/23/98 24,909,708 24,909,708
50,000,000 Ford Credit,
discount of 5.85%; due 01/23/98 49,821,250 49,821,250
25,000,000 MCI Communication Corp. BE,
discount of 6.00%; due 01/23/98 24,908,333 24,908,333
25,000,000 Morgan Stanley BE,
discount of 5.90%; due 01/23/98 24,909,861 24,909,861
50,000,000 American Express Credit Corp.,
discount of 5.80%; due 01/26/98 49,798,611 49,798,611
20,000,000 Bell Atlantic Network Funding,
discount of 5.90%; due 01/26/98 19,918,056 19,918,056
50,000,000 Household Finance Corp.,
discount of 5.90%; due 01/26/98 49,795,139 49,795,139
25,000,000 MCI Communication Corp. BE,
discount of 5.98%; due 01/26/98 24,896,181 24,896,181
50,000,000 Texaco Inc.,
discount of 5.88%; due 01/26/98 49,795,833 49,795,833
50,000,000 American Express Credit Corp.,
discount of 5.80%; due 01/27/98 49,790,556 49,790,556
20,000,000 American General Finance Corp.,
discount of 5.90%; due 01/27/98 19,914,778 19,914,778
50,000,000 Household Finance Crop.,
discount of 5.90%; due 01/27/98 49,786,944 49,786,944
20,000,000 Merrill Lynch BE,
discount of 5.65%; due 01/27/98 19,918,389 19,918,389
25,000,000 Morgan Stanley BE,
discount of 5.90%; due 01/27/98 24,893,472 24,893,472
50,000,000 Ameritech Corp. BE,
discount of 5.85%; 01/28/98 49,780,625 49,780,625
25,000,000 Bell Atlantic Financial Services,
discount of 6.03%; due01/28/98 24,886,938 24,886,938
50,000,000 Ford Credit,
discount of 5.85%; due 01/28/98 49,780,625 49,780,625
25,000,000 The Goldman Sachs Group LP,
discount of 5.95%; due 01/28/98 24,888,437 24,888,437
25,000,000 Ameritech Corp. BE,
discount of 5.85%; due 01/29/98 24,886,250 24,886,250
45,000,000 AT&T Co. BE,
discount of 5.86%; due 01/29/98 44,794,900 44,794,900
45,000,000 First Chicago,
discount of 5.95%; due 01/29/98 44,791,750 44,791,750
50,000,000 The Goldman Sachs Group LP,
discount of 5.98%; due 01/29/98 49,767,444 49,767,444
25,000,000 MCI Communication Corp. BE,
discount of 5.98%; due 01/29/98 24,883,722 24,883,722
50,000,000 Bell Atlantic Network Funding,
discount of 5.93%; due 01/30/98 49,761,153 49,761,153
20,000,000 First Chicago Financial Corp.,
discount of 5.95%; due 01/30/98 19,904,139 19,904,139
50,000,000 The Goldman Sachs Group LP,
discount of 6.00%; due 01/30/98 49,758,333 49,758,333
50,000,000 American Express Credit Corp.,
discount of 5.60%; due 02/02/98 49,751,111 49,751,111
50,000,000 Associates Corp. of NA,
discount of 5.88%; due 02/03/98 49,730,500 49,730,500
25,000,000 Associates Corp. of NA,
discount of 5.75%; due 02/04/98 24,864,236 24,864,236
25,000,000 E.I. Dupont DeNemours & Co.,
discount of 5.75%; due 02/05/98 24,860,243 24,860,243
50,000,000 Associates Corp. of NA,
discount of 5.88%; due 02/06/98 49,706,000 49,706,000
25,000,000 E.I. Dupont DeNemours & Co.,
discount of 5.75%; due 02/06/98 24,856,250 24,856,250
50,000,000 American General Finance Corp.,
discount of 5.74%; due 02/09/98 49,689,083 49,689,083
50,000,000 Beneficial Corp.,
discount of 5.74%; due 02/10/98 49,681,111 49,681,111
25,000,000 E.I. Dupont DeNemours & Co.,
discount of 5.71%; due 02/11/98 24,837,424 24,837,424
25,000,000 E.I. Dupont DeNemours & Co.,
discount of 5.71%; due 02/12/98 24,833,458 24,833,458
50,000,000 GE Financial Assurance,
discount of 5.76%; due 02/12/98 49,664,000 49,664,000
50,000,000 New Center Asset Trust,
discount of 5.75%; due 02/12/98 49,664,583 49,664,583
50,000,000 AT&T Co. BE,
discount of 5.77%; due 02/13/98 49,655,403 49,655,403
25,000,000 AT&T Co. BE,
discount of 5.77%; due 02/18/98 24,807,667 24,807,667
50,000,000 Motorola Credit Corp.,
discount of 5.72%; due 02/26/98 49,555,111 49,555,111
50,000,000 Motorola Credit Corp.,
discount of 5.72%; due 02/27/98 49,547,167 49,547,167
------------- ------------
Total commercial paper 3,887,842,391 3,887,842,391
VARIABLE RATE DEMAND NOTES - 0.1%
6,199,506 Warner-Lambert Company 6,199,506 6,199,506
700,000 Wisconsin Electric Power Company 700,000 700,000
------------- ------------
Total variable rate demand notes 6,899,506 6,899,506
------------- ------------
Total short-term investments 3,894,741,897 3,894,741,897
------------- ------------
Total investments $7,148,089,711 7,807,050,173
==============
Cash and receivables, less
liabilities 7.2% (a)<F3> 607,408,423
-----------
Net Assets $8,414,458,596
=============
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($8,414,458,596 / 272,425,045
shares outstanding) $30.89
======
(a)<F3>Percentages for the various classifications relate to net assets.
(b)<F4>Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the latest bid price. Securities which are
traded over-the-counter are valued at the latest bid price. Short-term
investments are valued at amortized cost which approximates quoted market
value.
ON THE CUTTING EDGE . . .
THE INTERNET OF TOMORROW
115 American universities, and private companies, such as MCI, Sprint, and IBM,
along with some federal agencies, are building the high-capacity computer
network expected to operate 100 times faster than the current Internet and to
support a new class of computer applications. Dubbed Internet2, the new network
is expected to be operational for academic use by the end of 1998, and for all
on-line users within three to five years.
BACTERIA-EATING BUGS
Cement-eating bacteria are among the main causes of the deterioration of bridges
and other structures. Now Lockheed Martin Idaho Technologies Co., working in
partnership with British Nuclear Fuels PLC, has put this taste for concrete to
good use. The same microbes may be used to decontaminate nuclear plants by
eating away the radioactivity from the concrete structures. The naturally-
occurring bacteria produce a chemical that dissolves concrete, loosening the
contaminated material.
This quarter we also want to acknowledge an impressive performance . . .
BIG BOARD COMPUTERS CALMLY HANDLED FRENZY
On October 28, stock markets went on a global roller-coaster ride of buying and
selling. While some markets struggled with the volume, the NYSE handled 1.2
billion shares -- 76 percent more than ever before -- without missing a beat. A
robust $2 billion computer system that includes 450 refrigerator-sized computers
linked by 200 miles of fiber-optic cables made this possible. Not resting on its
laurels, the NYSE is adding more capacity, noting, "in this business, we can't
say, 'Come back on Friday; we are a trifle busy right now.' "
MARKET CAP . . .
Your market cap groups changed significantly during the quarter, as many of your
holdings were pared back or sold completely. The most notable change is found in
your mid-cap companies, from $1 to $5 billion, cut to 21.7 percent of the
portfolio from 46.7 in September. Your positions in Noble Drilling Corp., Liz
Claiborne, Cooper Cameron, USAirways Group, and CompUSA were sold, yielding
gains of $204 million since purchase.
Large cap stocks were also trimmed down during the quarter from 37.6 percent to
just 14.4 percent currently. There are half as many companies -- just 14 -- in
this above $5 billion category today compared to last quarter. Profits of more
than $340 million were harvested when Compaq, Cisco Systems, Dell, Computer
Associates, Tellabs, Costco Companies, BMC Software, and National Semiconductor
were sold.
Your small cap companies, all those below $1 billion, decreased minimally, from
September's 12.9 percent to 10.4 percent currently.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP 14.4%
MID CAP 21.7%
SMALL CAP 10.4%
CASH 53.5%
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
