THE BRANDYWINE FUNDS
Managed by Friess Associates, Inc. Quarterly Report June 30, 1999
DEAR FELLOW SHAREHOLDERS:
Brandywine and Brandywine Blue gained 11.4 and 10.4 percent in the three months
ended June 30, bringing their respective year-to-date returns to 14.3 and 14.1
percent. A more rational investor mindset developed in the June quarter. Your
portfolio benefited as the market shifted toward rapidly growing companies
selling at reasonable price-to-earnings ratios.
Beating the S&P 500 by more than 3 percentage points in the June quarter marks
an encouraging change from recent quarters.
Year to Date Quarter to Date
S&P Midcap 6.2% 13.8%
Russell 2000 8.5% 15.1%
S&P 500 TR 12.3% 7.0%
Brandywine Blue 14.1% 10.4%
Brandywine Fund 14.3% 11.4%
Nasdaq Industrials 25.1% 17.6%
Source: Salomon Smith Barney
The disciplined, fundamentals-based approach of your team capitalized on the
dramatic shift away from the high-PE, large-cap leaders and Internet stocks that
dominated market indexes through the March quarter. Your year-to-date gain of
more than 14 percent surpassed increases of 12.3, 6.2 and 8.5 percent in the S&P
500, S&P MidCap and Russell 2000.
BRANDYWINE BRANDYWINE BLUE
CUMULATIVE % CHANGE % CHANGE
Quarter 11.4 10.4
Nine Months 35.0 35.7
One Year 9.5 8.6
Five Years 129.8 136.5
Ten Years 411.6 N/A
Inception 757.7 352.8
Annualized
Five Years 18.1 18.8
Ten Years 17.7 N/A
Inception 17.3*<F1> 19.5**<F2>
*<F1> 12/30/85
**<F2> 1/10/91
Both Funds have average price-to-earnings ratios below 24 and earnings estimates
for about 25 percent growth in 2000, compared to the S&P 500's slightly higher
PE of 26 and much slower 9 percent growth.
You may notice that a larger percentage of your companies are in the $5 billion-
and-over category this quarter. The market-cap creep is attributable to a number
of your mid-cap picks appreciating their way into the large-cap category. For
example, Gemstar International, Comverse Technology and Conexant Systems
graduated into the large-cap ranks as they gained 200, 96 and 46 percent from
their purchase prices. In addition, a number of your large-cap holdings continue
to fare very well, including Tandy, Texas Instruments and Tyco, up 34, 30 and 28
percent in the June quarter alone!
Companies driving the rapidly unfolding telecommunications revolution were big
contributors to June-quarter performance. Top telecom holdings generated roughly
one-fourth of the Funds' returns, and their outlooks remain promising. A cross
section of technology companies -- from semiconductor makers to software
developers -- also boosted results. Selected retail-related holdings performed
well, but most suffered as investors took rising interest rates as a signal that
consumer spending would slow.
The market's turn toward smaller, undervalued stocks bodes well for your team's
approach, given our price-to-earnings ratio discipline. Relatively undervalued
stocks traditionally take off after extended slumps. In five-year periods
starting in 1973, 1980 and 1990, for example, more reasonably priced stocks
outperformed the overall market by 57, 65 and 40 percent.
We'd like to thank all of you who responded to our call for insights and
contacts regarding current and potential Fund holdings in last quarter's
"Looking Forward." We were able to put our research process to work on a number
of your leads that the Wall Street analyst community overlooked.
We appreciate your continued confidence, and look forward to building on recent
gains.
God Bless!
/s/ Foster Friess
Foster Friess
President
July 2, 1999
BRANDYWINE FUND
TOP 10 HOLDINGS (representing 41.5% of the portfolio)
1. Tellabs, Inc. 6. Gemstar Int'l Group Ltd.
2. Tyco Int'l Ltd. 7. Sun Microsystems, Inc.
3. Nokia Corp. ADR 8. Dayton Hudson Corp.
4. Tandy Corp. 9. Electronic Data Systems Corp.
5. Cendant Corp. 10. EMC Corp.
EARNINGS GROWTH
FORECASTED INCREASE IN EARNINGS PER SHARE
1999 VS 1998
Your Companies 33%
S&P 500 11%
All figures are dollar weighted. Analysis by Baseline. June 30, 1999.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP $5 billion and over 66.1%
MID CAP $1 billion to $5 billion 23.7%
SMALL CAP below $1 billion 7.7%
CASH 2.5%
TOP 10 INDUSTRY GROUPS
Computer & Related 13.4%
Specialty Retailing 13.3%
Communications Equipment 13.2%
Financial/Business Services 10.1%
Semiconductor & Related 8.8%
Software 8.2%
Communications Services 5.4%
Machinery & Miscellaneous Manufacturing 5.2%
Electronics 4.3%
Leisure & Entertainment 3.8%
All Others 11.8%
Cash 2.5%
BRANDYWINE FUND
JUNE QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
- ----------------- ------------- ------ ---------------
Gemstar Int'l $77.6 70.2 Exceeded consensus revenue and
Group earnings estimates for the March
quarter on strong sales of its VCR
Plus product. The company also signed
an agreement with America Online to
incorporate its on-screen, electronic
programming guide into AOL TV. Gemstar
also generated advertising revenue
from a new division ahead of an
expected December timeframe.
Tellabs, Inc. $66.1 32.9 Demand continues to grow for the
telecommunication company's Titan
digital cross-connect product, which
helps connect incoming and outgoing
lines. Capital spending in the
industry is running ahead of
expectations, further improving
Tellabs' outlook. The company exceeded
consensus earnings expectations in the
March quarter.
Tyco Int'l Ltd. $55.9 29.3 Exceeded consensus earnings
expectations in the March quarter. Its
recent acquisition of AMP generated
unanticipated revenue growth. The
company also announced plans to
acquire Raychem in the June quarter,
which would increase Tyco's market
leading share of the electrical and
electronic components industry.
Tandy Corp. $49.3 32.4 Beat consensus earnings expectations
for the March quarter as Radio Shack
electronics retail chain showed
continued strength in same-store
sales. Enthusiasm continues to build
around new audio and video product
partnering agreements with RCA and
Thomson, as well as expectations for
increased wireless phone sales.
Cendant Corp. $33.3 21.9 The company began to restore investor
confidence in the June quarter, as it
announced it would use some of the
$5.1 billion from the sale of its
rental-car unit to continue
repurchasing shares, and grew earnings
at a better-than-expected rate in the
March quarter. Cendant exceeded
consensus earnings expectations for
the March quarter by 16 percent.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
- ---------------- ------------- ------ ---------------
Parametric $44.8 -29.8 The stock dropped during the June
Technology quarter after the company fell short
of March-quarter earnings estimates
because of unexpectedly higher costs.
Parametric appears to be tracking well
for the June quarter, during which it
has entered some high-profile
contracts in its WindChill product
line.
EMC Corp. $28.2 -14.6 Stock suffered after Hewlett-Packard
cancelled an OEM (original equipment
manufacturer) agreement with the
company. Continued fears about
technology spending in light of the
Y2K situation also contributed to the
June-quarter decline.
NCR Corp. $25.2 -19.0 Although NCR beat consensus earnings
estimates for the March quarter, its
stock fell on weaker-than-expected
data warehousing revenues. A high
profile Wall Street analyst lowered
earnings estimates for the remainder
of the year because of a faster-than
expected revenue decrease in NCR's
computer hardware business, putting
additional pressure on the stock.
Corning, Inc. $15.4 -13.6 Stock declined because of investor
concerns regarding intensifying
pricing pressure in standard fiber.
The company reported that prices fell
12 percent by the March quarter,
showing a faster pace than the 15
percent expected drop for the entire
year. There was also pressure on the
stock because of the lack of growth in
the company's photonics division.
TJX Companies $12.2 -13.1 Despite exceeding consensus earnings
expectations for the March quarter,
shares of the parent company of
discount retailers T.J. Maxx and
Marshalls fell as investors generally
cooled on the retail sector amid
interest-rate jitters.
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
June 30, 1999
(Unaudited)
SHARES QUOTED
OR PRINCIPAL MARKET
AMOUNT COST VALUE (B)<F4>
- ------------ ---- -------------
COMMON STOCKS - 97.5% (A)<F3>
APPAREL & SHOE RETAILERS - 2.0%
323,900 American Eagle Outfitters, Inc. $ 13,105,949 $ 14,737,450
223,200 bebe stores, inc. 7,242,985 7,588,800
293,600 Charming Shoppes, Inc. 1,653,238 1,789,110
127,000 Converse Inc. 547,485 460,375
20,000 Footstar, Inc. 533,700 743,750
224,600 K-Swiss Inc. 9,370,260 10,443,900
50,000 Kenneth Cole Productions, Inc. 1,238,060 1,393,750
548,500 NIKE, Inc. Cl B 28,854,491 34,726,906
522,600 Pacific Sunwear of California, Inc. 10,713,018 12,738,375
35,500 Saucony, Inc. 647,629 803,188
92,200 Urban Outfitters, Inc. 2,223,008 2,316,525
129,100 Vans, Inc. 1,287,944 1,478,595
------------ ------------
77,417,767 89,220,724
This sector is 15.2% above your Fund's cost.
COMMUNICATIONS EQUIPMENT - 13.2%
100,000 ADTRAN, Inc. 3,152,282 3,637,500
90,000 C-COR Electronics, Inc. 2,145,753 2,508,750
333,350 Comverse Technology, Inc. 9,988,964 25,167,925
1,180,600 Lucent Technologies Inc. 70,525,021 79,616,712
2,214,400 Nokia Corp. "A"ADR 85,883,416 202,756,000
1,116,300 Scientific-Atlanta, Inc. 38,168,063 40,186,800
3,415,000 Tellabs, Inc. 112,007,739 230,725,938
------------ ------------
321,871,238 584,599,625
This sector is 81.6% above your Fund's cost.
COMMUNICATIONS SERVICES - 5.4%
1,739,650 AT&T Corp. 94,165,625 97,094,216
1,283,300 MCI WorldCom Inc. 116,740,649 110,444,006
351,400 Nortel Networks Corp.
(formerly Northern Telecom Limited) 22,617,705 30,505,912
------------ ------------
233,523,979 238,044,134
This sector is 1.9% above your Fund's cost.
COMPUTER & RELATED - 13.4%
100,500 ACT Networks, Inc. 1,717,476 1,714,781
1,244,000 Adaptec, Inc. 30,157,242 43,928,750
388,100 Amdocs Limited 4,371,585 8,829,275
139,500 BISYS Group, Inc. 7,908,902 8,160,750
649,600 CSG Systems International, Inc. 24,271,567 17,011,400
2,667,900 Electronic Data Systems Corp. 153,709,008 150,903,094
2,682,600 EMC Corp. (Mass.) 53,403,062 147,543,000
91,900 Mercury Computer Systems Inc. 2,082,137 2,963,775
667,500 Microchip Technology, Inc. 28,152,019 31,622,812
274,800 National Data Corp. 11,763,505 11,747,700
250,000 The Santa Cruz Operation 1,238,850 1,632,800
2,381,200 Sun Microsystems, Inc. 57,124,997 164,005,150
------------ ------------
375,900,350 590,063,287
This sector is 57.0% above your Fund's cost.
ELECTRONICS - 4.3%
81,100 Alpha Industries, Inc. 2,809,414 3,862,387
1,364,700 Analog Devices, Inc. 41,085,324 68,490,881
94,800 Burr-Brown Corp. 3,133,915 3,472,050
78,400 CommScope, Inc. 1,508,764 2,410,800
617,400 CTS Corp. 27,376,454 43,218,000
64,800 KEMET Corp. 1,402,800 1,486,350
99,400 Millipore Corp. 3,615,292 4,031,913
301,100 Oak Industries Inc. 12,415,560 13,154,306
99,000 RF Micro Devices, Inc. 4,874,346 7,387,875
272,900 Sawtek Inc. 5,788,093 12,519,288
599,000 SCI Systems, Inc. 22,525,927 28,452,500
------------ ------------
126,535,889 188,486,350
This sector is 49.0% above your Fund's cost.
FINANCIAL/BUSINESS SERVICES - 10.1%
326,200 AmeriCredit Corp. 3,358,242 5,219,200
56,900 Arcadia Financial Ltd. 455,673 440,975
1,314,700 Bank One Corp. 78,572,416 78,306,819
9,039,600 Cendant Corp. 177,165,062 185,311,800
606,900 Charter One Financial, Inc. 17,492,449 16,879,406
205,300 Dime Bancorp, Inc. 5,158,133 4,131,662
421,600 Golden State Bancorp Inc. 9,203,565 9,275,200
494,400 Heller Financial, Inc. 13,166,435 13,750,500
892,400 Household International, Inc. 41,549,312 42,277,450
3,265,800 MedPartners, Inc. 18,832,469 24,697,613
384,100 Providian Financial Corp. 31,514,316 35,913,350
431,800 Sykes Enterprises, Inc. 9,100,069 14,411,325
28,000 TeleTech Holdings, Inc. 267,062 283,500
528,000 United Rentals
(North America), Inc. 17,103,663 15,576,000
------------ ------------
422,938,866 446,474,800
This sector is 5.6% above your Fund's cost.
FOOD/RESTAURANTS - 1.3%
103,000 Applebee's International Inc. 3,190,674 3,102,875
252,400 CEC Entertainment Inc. 5,814,177 10,663,900
286,800 Foodmaker, Inc. 7,249,325 8,137,950
95,000 NPC International, Inc. 1,604,374 1,460,625
100,000 RARE Hospitality Int'l, Inc. 1,362,500 2,550,000
96,100 Sonic Corp. 2,362,704 3,135,262
60,000 Taco Cabana, Inc. 600,378 611,250
982,600 Wendy's International, Inc. 27,447,893 27,819,863
------------ ------------
49,632,025 57,481,725
This sector is 15.8% above your Fund's cost.
LEISURE & ENTERTAINMENT - 3.8%
2,535,300 Gemstar International
Group Limited 52,846,432 165,428,325
This sector is 213.0% above your Fund's cost.
MACHINERY & MISCELLANEOUS MANUFACTURING - 5.2%
64,500 Mobile Mini, Inc. 1,121,625 1,261,781
2,309,700 Tyco International Ltd. 140,768,787 218,844,075
369,700 Wallace Computer Services, Inc. 8,956,429 9,242,500
------------ ------------
150,846,841 229,348,356
This sector is 52.0% above your Fund's cost.
MEDICAL & RELATED - 1.1%
151,500 Cytyc Corp. 3,479,616 2,954,250
583,800 Henry Schein, Inc. 16,617,149 18,499,162
1,236,600 Oxford Health Plans, Inc. 24,845,525 19,244,588
96,000 Wellpoint Health Networks Inc. 7,776,000 8,148,000
------------ ------------
52,718,290 48,846,000
This sector is 7.3% below your Fund's cost.
OIL/GAS FIELD SERVICES - 0.5%
120,000 Evergreen Resources, Inc. 2,679,937 3,022,500
564,400 McDermott International, Inc. 16,609,863 15,944,300
244,900 Precision Drilling Corp. 4,367,548 4,668,406
------------ ------------
23,657,348 23,635,206
This sector is 0.1% below your Fund's cost.
PHARMACEUTICALS - 1.1%
173,800 Alpharma Inc. 5,210,189 6,180,762
151,600 ChiRex Inc. 3,677,117 4,870,150
1,228,500 IVAX Corp. 17,012,030 17,352,563
183,200 Jones Pharma Inc. 6,143,161 7,213,500
168,000 King Pharmaceuticals, Inc. 4,098,656 4,347,000
361,700 Medicis Pharmaceutical Corp. 10,203,811 9,178,138
------------ ------------
46,344,964 49,142,113
This sector is 6.0% above your Fund's cost.
POLLUTION/CONTROL SERVICES - 2.6%
150,000 Capital Environmental
Resource, Inc. 1,650,000 2,175,000
396,700 Safety-Kleen Corp. 4,957,359 7,190,188
100,000 US Liquids Inc. 2,091,180 2,087,500
1,958,100 Waste Management, Inc. 88,557,177 105,247,875
------------ ------------
97,255,716 116,700,563
This sector is 20.0% above your Fund's cost.
SEMICONDUCTOR & RELATED - 8.8%
274,400 Conexant Systems, Inc. 10,777,327 15,932,350
165,600 Galileo Technology Ltd. 5,251,820 7,503,750
1,731,100 LSI Logic Corp. 77,234,859 79,846,987
216,700 LTX Corp. 2,549,548 2,884,819
1,113,900 Motorola, Inc. 81,309,895 105,542,025
114,200 Semtech Corp. 3,522,494 5,952,675
889,400 Texas Instruments Inc. 98,448,141 128,963,000
326,850 TranSwitch Corp. 7,686,456 15,484,519
105,800 TriQuint Semiconductor, Inc. 3,123,715 6,010,763
746,700 Unitrode Corp. 12,992,168 21,420,956
------------ ------------
302,896,423 389,541,844
This sector is 28.6% above your Fund's cost.
SOFTWARE - 8.2%
190,000 Ardent Software, Inc. 3,872,255 4,037,500
1,668,300 Citrix Systems, Inc. 43,626,745 94,258,950
4,500 Dendrite International, Inc. 102,871 162,562
1,110,500 Electronic Arts Inc. 36,045,557 60,244,625
136,700 Excalibur Technologies Corp. 2,490,296 1,947,975
83,000 FileNet Corp. 820,525 949,313
100,000 National Instruments Corp. 3,473,232 4,037,500
7,627,800 Parametric Technology Corp. 116,968,724 105,835,725
408,600 Pinnacle Systems, Inc. 10,758,272 13,739,175
1,476,600 Sterling Software, Inc. 24,191,155 39,406,763
959,200 Symantec Corp. 19,113,607 24,459,600
264,700 Verity, Inc. 10,033,594 14,343,431
------------ ------------
271,496,833 363,423,119
This sector is 33.9% above your Fund's cost.
SPECIALTY RETAILING - 13.3%
487,000 Ames Department Stores, Inc. 22,630,380 22,219,375
940,900 BJ's Wholesale Club, Inc. 20,293,982 28,285,806
2,522,700 Dayton Hudson Corp. 114,843,634 163,975,500
99,200 Electronic Boutique Holdings Corp. 1,762,797 1,413,600
1,296,200 Family Dollar Stores, Inc. 12,152,560 31,108,800
696,300 Sunglass Hut International, Inc. 10,725,297 11,967,656
4,121,800 Tandy Corp. 152,159,377 201,452,975
495,000 Tech Data Corp. 18,150,284 18,933,750
2,790,100 Toys "R" Us, Inc. 57,486,623 57,720,194
190,100 Tuesday Morning Corp. 2,938,602 4,847,550
772,400 Williams-Sonoma, Inc. 21,278,374 26,889,175
427,900 Zale Corp. 11,591,205 17,116,000
------------ ------------
446,013,115 585,930,381
This sector is 31.4% above your Fund's cost.
TEXTILES/APPAREL MANUFACTURING - 2.1%
65,500 Guess ?, Inc. 876,644 904,718
2,037,100 Jones Apparel Group, Inc. 57,217,699 69,897,994
764,500 Polo Ralph Lauren Corp. 16,881,576 14,525,500
229,550 Quiksilver, Inc. 5,178,029 5,982,647
------------ ------------
80,153,948 91,310,859
This sector is 13.9% above your Fund's cost.
TRANSPORTATION & RELATED - 0.6%
588,700 CNF Transportation Inc. 25,535,486 22,591,363
175,000 Frontier Airlines, Inc. 1,339,500 2,821,875
------------ ------------
26,874,986 25,413,238
This sector is 5.4% below your Fund's cost.
MISCELLANEOUS - 0.5%
331,000 Church & Dwight Co. 13,570,115 14,398,500
62,000 CSK Auto Corp. 1,430,995 1,674,000
25,000 Fossil, Inc. 727,813 1,209,375
110,100 Insituform Technologies, Inc. 1,966,608 2,380,913
192,400 Shorewood Packaging Corp. 3,839,013 3,547,375
------------ ------------
21,534,544 23,210,163
------------ ------------
This sector is 7.8% above your Fund's cost.
Total common stocks 3,180,459,554 4,306,300,812
SHORT-TERM INVESTMENTS - 2.0% (A)<F3>
COMMERCIAL PAPER - 1.7%
$25,000,000 Associate First Capital Corp.,
due 07/01/99, discount of 5.75% 25,000,000 25,000,000
25,000,000 Ford Motor Credit Co. of Puerto Rico,
due 07/06/99, discount of 5.26% 24,981,736 24,981,736
25,000,000 Sears Roebuck Acceptance Corp.,
due 07/07/99, discount of 5.26% 24,978,083 24,978,083
-------------- -------------
Total commercial paper 74,959,819 74,959,819
VARIABLE RATE DEMAND NOTE - 0.3%
11,403,313 Firstar Bank U.S.A., N.A. 11,403,313 11,403,313
-------------- -------------
Total short-term investments 86,363,132 86,363,132
-------------- -------------
Total investments $3,266,822,686 4,392,663,944
--------------
--------------
Cash and receivables, less
liabilities 0.5% (A)<F3> 24,201,269
-------------
NET ASSETS $4,416,865,213
--------------
--------------
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($4,416,865,213 / 127,630,156
shares outstanding) $34.61
------
------
(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.
BRANDYWINE'S REBOUND IS GRABBING ATTENTION . . .
SMARTMONEY.COM --". . . Brandywine remains among the top 20 mid-cap growth
performers of the past decade, with a 17.4 percent annualized return" through
March 31, 1999. April 16, 1999
--------------
MONEY -- Brandywine Fund named to The Money 100: The World's Best Mutual Funds
for the second consecutive year. "We think Friess and his team still have a
knack for finding fast-growing small-cap and midcap stocks that can deliver
superior long-term gains." June 1999
---------
BRANDYWINE BLUE FUND
TOP 10 HOLDINGS (representing 38.8% of the portfolio)
1. Tyco Int'l Ltd. 6. Bank One Corp.
2. Nokia Corp. ADR 7. Electronic Data Systems Corp.
3. Tandy Corp. 8. Motorola, Inc.
4. Texas Instruments Inc. 9. Gemstar Int'l Group Ltd.
5. Cendant Corp. 10. Sun Microsystems, Inc.
EARNINGS GROWTH
FORECASTED INCREASE IN EARNINGS PER SHARE
1999 VS 1998
Your Companies 24%
S&P 500 11%
All figures are dollar weighted. Analysis by Baseline. June 30, 1999.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP $5 billion and over 71.7%
MID CAP $1 billion to $5 billion 25.1%
SMALL CAP $500 million to $1 billion 0.5%
CASH 2.7%
TOP 10 INDUSTRY GROUPS
Computer & Related 12.6%
Financial/Business Services 12.3%
Specialty Retailing 12.0%
Semiconductor & Related 11.1%
Communications Equipment 10.4%
Software 8.4%
Communications Services 7.2%
Machinery & Miscellaneous Manufacturing 5.0%
Electronics 3.3%
Apparel & Shoe Retailers 3.2%
All Others 11.8%
Cash 2.7%
BRANDYWINE BLUE FUND
JUNE QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
- ----------------- ------------- ------ ---------------
Gemstar Int'l $5.1 69.4 Exceeded consensus revenue and
Group earnings estimates for the March
quarter on strong sales of its VCR
Plus product. The company also signed
an agreement with America Online to
incorporate its on-screen, electronic
programming guide into AOL TV. Gemstar
also generated advertising revenue
from a new division ahead of an
expected December timeframe.
Tyco Int'l Ltd. $4.3 27.6 Exceeded consensus earnings
expectations in the March quarter. Its
recent acquisition of AMP generated
unanticipated revenue growth. The
company also announced plans to
acquire Raychem in the June quarter,
which would increase Tyco's market
leading share of the electrical and
electronic components industry.
Tandy Corp. $3.8 34.4 Beat consensus earnings expectations
for the March quarter as Radio Shack
electronics retail chain showed
continued strength in same-store
sales. Enthusiasm continues to build
around new audio and video product
partnering agreements with RCA and
Thomson, as well as expectations for
increased wireless phone sales.
Texas Instruments $3.1 29.6 Continued growth in analog mixed
signal markets combined with fast
growing digital signal processor (DSP)
business are driving the stock. The
company has significant wireless
exposure in the booming handset
market, as handsets use both analog
mixed signal parts and DSPs. Texas
Instruments is also benefiting from a
recovery in the overall semiconductor
marketplace.
Cendant Corp. $2.4 24.2 The company began to restore investor
confidence in the June quarter, as it
announced it would use some of the
$5.1 billion from the sale of its
rental-car unit to continue
repurchasing shares, and grew earnings
at a better-than-expected rate in the
March quarter. Cendant exceeded
consensus earnings expectations for
the March quarter by 16 percent.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
- ---------------- ------------- ------ ---------------
Parametric $4.0 -28.1 The stock dropped during the June
Technology quarter after the company fell short
of March-quarter earnings estimates
because of unexpectedly higher costs.
Parametric appears to be tracking well
for the June quarter, during which it
has entered some high-profile
contracts in its WindChill product
line.
NCR Corp. $2.1 -19.6 Although NCR beat consensus earnings
estimates for the March quarter, its
stock fell on weaker-than-expected
data warehousing revenues. A high
profile Wall Street analyst lowered
earnings estimates for the remainder
of the year because of a faster-than
expected revenue decrease in NCR's
computer hardware business, putting
additional pressure on the stock.
EMC Corp. $1.8 -14.7 Stock suffered after Hewlett-Packard
cancelled an OEM (original equipment
manufacturer) agreement with the
company. Continued fears about
technology spending in light of the
Y2K situation also contributed to the
June-quarter decline.
TJX Companies $1.6 -12.9 Despite exceeding consensus earnings
expectations for the March quarter,
shares of the parent company of
discount retailers T.J. Maxx and
Marshalls fell as investors generally
cooled on the retail sector amid
interest-rate jitters.
Corning, Inc. $1.3 -14.7 Stock declined because of investor
concerns regarding intensifying
pricing pressure in standard fiber.
The company reported that prices fell
12 percent by the March quarter,
showing a faster pace than the 15
percent expected drop for the entire
year. There was also pressure on the
stock because of the lack of growth in
the company's photonics division.
BRANDYWINE BLUE FUND, INC.
STATEMENT OF NET ASSETS
June 30, 1999
(Unaudited)
SHARES QUOTED
OR PRINCIPAL MARKET
AMOUNT COST VALUE (B)<F6>
- ------------ ---- -------------
COMMON STOCKS - 97.3% (A)<F5>
APPAREL & SHOE RETAILERS - 3.2%
60,300 American Eagle Outfitters, Inc. $ 2,668,709 $ 2,743,650
122,100 NIKE, Inc. Cl B 6,512,416 7,730,456
------------ ------------
9,181,125 10,474,106
This sector is 14.1% above your Fund's cost.
COMMUNICATIONS EQUIPMENT - 10.4%
20,600 Comverse Technology, Inc. 676,294 1,555,300
135,800 Lucent Technologies Inc. 7,915,563 9,158,012
174,800 Nokia Corp. "A"ADR 6,700,029 16,005,125
120,700 Scientific-Atlanta, Inc. 3,937,073 4,345,200
40,000 Tellabs, Inc. 1,736,680 2,702,500
------------ ------------
20,965,639 33,766,137
This sector is 61.1% above your Fund's cost.
COMMUNICATIONS SERVICES - 7.2%
163,600 AT&T Corp. 8,667,789 9,130,925
109,600 MCI WorldCom Inc. 10,050,749 9,432,450
54,900 Nortel Networks Corp. (formerly
Northern Telecom Limited) 3,631,279 4,766,006
------------ ------------
22,349,817 23,329,381
This sector is 4.4% above your Fund's cost.
COMPUTER & RELATED - 12.6%
137,200 Adaptec, Inc. 3,482,099 4,844,875
90,500 Amdocs Limited 979,291 2,058,875
199,300 Electronic Data Systems Corp. 11,261,514 11,272,906
165,500 EMC Corp. (Mass.) 3,128,107 9,102,500
80,000 Microchip Technology, Inc. 3,350,331 3,790,000
143,800 Sun Microsystems, Inc. 3,393,336 9,904,225
------------ ------------
25,594,678 40,973,381
This sector is 60.1% above your Fund's cost.
ELECTRONICS - 3.3%
119,500 Analog Devices, Inc. 3,758,644 5,997,406
103,700 SCI Systems, Inc. 4,161,237 4,925,750
------------ ------------
7,919,881 10,923,156
This sector is 37.9% above your Fund's cost.
FINANCIAL/BUSINESS SERVICES - 12.3%
193,300 Bank One Corp. 11,431,770 11,513,431
596,600 Cendant Corp. 11,711,064 12,230,300
36,300 Charter One Financial, Inc. 1,100,088 1,009,594
66,800 Dime Bancorp, Inc. 1,549,419 1,344,350
106,500 Household International, Inc. 4,798,103 5,045,438
70,000 MedPartners, Inc. 444,823 529,375
54,700 Providian Financial Corp. 3,693,590 5,114,450
112,100 United Rentals
(North America), Inc. 3,647,322 3,306,950
------------ ------------
38,376,179 40,093,888
This sector is 4.5% above your Fund's cost.
FOOD/RESTAURANTS - 0.7%
80,000 Wendy's International, Inc. 2,222,788 2,265,000
This sector is 1.9% above your Funds cost.
LEISURE & ENTERTAINMENT - 3.1%
157,100 Gemstar International
Group Limited 2,863,401 10,250,775
This sector is 258.0% above your Fund's cost.
MACHINERY & MISCELLANEOUS MANUFACTURING - 5.0%
170,500 Tyco International Ltd. 10,620,440 16,154,875
This sector is 52.1% above your Fund's cost.
MEDICAL & RELATED - 0.8%
30,000 Wellpoint Health Networks Inc. 2,430,000 2,546,250
This sector is 4.8% above your Fund's cost.
OIL/GAS FIELD SERVICES - 0.6%
69,400 McDermott International, Inc. 2,031,099 1,960,550
This sector is 3.5% below your Fund's cost.
PHARMACEUTICALS - 0.3%
25,000 Jones Pharma Inc. 838,180 984,375
This sector is 17.4% above your Fund's cost.
POLLUTION/CONTROL SERVICES - 2.1%
124,500 Waste Management, Inc. 5,457,203 6,691,875
This sector is 22.6% above your Fund's cost.
SEMICONDUCTOR & RELATED - 11.1%
54,100 Conexant Systems, Inc. 2,061,083 3,141,181
193,200 LSI Logic Corp. 8,638,225 8,911,350
110,400 Motorola, Inc. 7,749,530 10,460,400
93,900 Texas Instruments Inc. 10,437,288 13,615,500
------------ ------------
28,886,126 36,128,431
This sector is 25.1% above your Fund's cost.
SOFTWARE - 8.4%
85,800 Citrix Systems, Inc. 2,085,249 4,847,700
176,500 Electronic Arts Inc. 7,489,510 9,575,125
680,100 Parametric Technology Corp. 9,653,404 9,436,387
124,600 Sterling Software, Inc. 1,883,264 3,325,263
12,500 Symantec Corp. 248,438 318,750
------------ ------------
21,359,865 27,503,225
This sector is 28.8% above your Fund's cost.
SPECIALTY RETAILING - 12.0%
171,600 BJ's Wholesale Club, Inc. 3,307,026 5,158,725
140,400 Dayton Hudson Corp. 6,324,183 9,126,000
303,600 Tandy Corp. 11,041,625 14,838,450
349,100 Toys "R" Us, Inc. 7,544,486 7,222,006
77,400 Williams-Sonoma, Inc. 2,412,607 2,694,488
------------ ------------
30,629,927 39,039,669
This sector is 27.5% above your Fund's cost.
TEXTILES/APPAREL MANUFACTURING - 3.0%
241,500 Jones Apparel Group, Inc. 6,615,957 8,286,469
84,200 Polo Ralph Lauren Corp. 1,794,439 1,599,800
------------ ------------
8,410,396 9,886,269
This sector is 17.5% above your Fund's cost.
TRANSPORTATION & RELATED - 1.2%
101,500 CNF Transportation Inc. 4,424,188 3,895,063
------------ ------------
This sector is 12.0% below your Fund's cost.
Total common stocks 244,560,932 316,866,406
SHORT-TERM INVESTMENTS - 2.8% (A)<F5>
VARIABLE RATE DEMAND NOTE
$9,197,950 Firstar Bank U.S.A., N.A. 9,197,950 9,197,950
------------ ------------
Total investments $253,758,882 326,064,356
------------
------------
Liabilities, less cash and
receivables (0.1%) (A)<F5> (278,410)
------------
NET ASSETS $325,785,946
------------
------------
Net Asset Value Per Share
($0.01 par value 100,000,000
shares authorized), offering
and redemption price
($325,785,946 / 11,020,743
shares outstanding) $29.56
------
------
(a)<F5> Percentages for the various classifications relate to net assets.
(b)<F6> 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.
ATTENTION IRA SHAREHOLDERS . . .
We continue to strive to keep Fund fees as low as possible and, as part of that
commitment, we remind all IRA shareholders that your annual $12.50 maintenance
fee is due September 15, 1999.
By nature, IRA accounts require additional time, paperwork and government
reporting, which create added costs for our custodial bank, Firstar. We applaud
the long-term investment focus of shareholders who chose to invest in the
Brandywine Funds through tax-advantaged accounts, and are glad to be able to
keep the IRA-related costs low and not pass them on to non-IRA shareholders.
For your convenience, Firstar will automatically deduct this amount from your
account or, if you prefer, you can send Firstar a check for payment by September
15. For shareholders with multiple IRA accounts, the maximum charge is $25 per
Social Security number.
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 57000 WILMINGTON, DE
POSTAGE WILL BE PAID BY ADDRESSEE
FRIESS ASSOCIATES
ATTN: LYNDA CAMPBELL
P.O. BOX 4166
GREENVILLE, DE 19807-9974
(Fold in half and seal with tape at the top; please do not staple)
--------------------
We were excited by the response generated after last quarter's report. Please
let us know how we can do a better job. We also welcome any company or industry
insights that might benefit your fellow shareholders.
- -- Lynda
Comments:----------------------------------------------------------------------
- -------------------------------------------------------------------------------
You may call me as a research contact on these companies or industries:
- -------------------------------------------------------------------------------
Name:--------------------------------------------------------------------------
Address:-----------------------------------------------------------------------
City, State, Zip:--------------------------------------------------------------
Tel: (---)-------- Fax: (---)-------- Email:----------------------------
Thank you!
BRANDYWINE CAPITAL GAINS DISTRIBUTIONS ON OCTOBER 27
All Brandywine Fund and Brandywine Blue Fund shareholders of record as of
October 26, 1999 will participate in the annual distributions to be made on
October 27, 1999. The Funds have generated strong returns so far in the fiscal
year beginning October 1, 1998, and most of the stocks sold registered gains.
While tax considerations don't drive our investment decisions, we were able to
apply most of our losing positions to offset these gains. There are virtually no
losses remaining in the portfolios.
Some losses were created as our forced displacement process directed us to new
opportunities after the steep market downturn in October. We initiated or
bolstered your holdings in many of the stocks that contributed to strong returns
in the current fiscal year such as Nokia and Sun Microsystems, which are up more
than 100 percent since last fall. Your team was able to offset a significant
portion of subsequently realized gains with losses resulting from the switching
that occurred in the volatile market environment.
Many of the gains in both Funds have yet to be realized, meaning they do not
create a current tax liability. Gains realized to date that are available for
distribution in the share value of Brandywine Fund total $0.70, all of which
would be taxed at the long-term capital gain rate. Realized gains in the share
value of Brandywine Blue Fund total $0.68, and again represent long-term gains.
Please remember these are current estimates, which will likely grow as the year
progresses. Exact figures will be available after the fiscal year is completed
on September 30, 1999, and will be included in your annual report. Shareholders
can call our representatives at (800) 656-3017 for monthly updates.
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
Marvin N. Schoenhals
Chairman
WSFS Financial Corp.
Wilmington, Delaware
P.O. Box 4166, Greenville, DE 19807
(800) 656-3017 www.brandywinefunds.com [email protected]
Investment Adviser: FRIESS ASSOCIATES, INC.
Independent Accountants: PRICEWATERHOUSECOOPERS LLP
Custodian: FIRSTAR BANK MILWAUKEE, NA
Legal Counsel: FOLEY & LARDNER
Transfer Agent: FIRSTAR MUTUAL FUND SERVICES, LLC
OFFICERS: Foster S. Friess, President and Treasurer; Lynda Campbell, Vice
President and Secretary; William D'Alonzo, Vice President; John Fraser, Vice
President; Carl Gates, Vice President; Andrew Graves, Vice President; David
Harrington, Vice President; John Ragard, Vice President; and Paul Robinson, Vice
President
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of either Brandywine Fund or Brandywine Blue Fund unless
accompanied or preceded by the Funds 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 Buswell
Report Staff: Chris Aregood, Chris Long, Adam Rieger
(BRANDYWINE FUNDS LOGO)
