THE BRANDYWINE FUNDS
MANAGED BY FRIESS ASSOCIATES, INC.
ANNUAL REPORT
SEPTEMBER 30, 1999
DEAR FELLOW SHAREHOLDERS:
Despite quarterly declines in virtually every major index -- the S&P Midcap,
Russell 2000, S&P 500 and Nasdaq Industrials fell 8.7, 6.6, 6.3 and 1.3 percent
- -- Brandywine gained 1.4 percent and Brandywine Blue declined just 0.3 percent.
------
Concerns regarding interest rates, inflation, a strengthening yen and a record
U.S. trade deficit adversely affected most stocks.
SEPTEMBER QUARTER
S&P MidCap -8.7%
Russell 2000 -6.6%
S&P 500 TR -6.3%
Nasdaq Industrials -1.3%
Brandywine Blue -0.3%
Brandywine Fund 1.4%
Brandywine and Brandywine Blue's 15.9 and 13.7 percent gains so far in 1999
outpace gains in the S&P 500 and Russell 2000 of 5.3 and 1.3 percent, as well as
the S&P Midcap's 3 percent decline. The Nasdaq Industrials, skewed by a handful
of high-PE, large-cap stocks, is up 23.4 percent this year. A Prudential
Securities study shows that just 20 companies generated 65 percent of the
index's year-to-date return through September 7. That group's weighted-average
price-to-earnings ratio is 106 based on 1999 earnings!
Brandywine and Brandywine Blue finished their respective fiscal years with gains
of 36.8 and 35.2 percent, beating gains in the S&P 500, S&P Midcap and Russell
2000 of 27.8, 24 and 17.5 percent. The exceptional 56 percent rise in the Nasdaq
Industrials was again influenced by earningless Internet companies and high-PE
large caps, which your team's strategy typically avoids.
Brandywine Brandywine Blue
Cumulative % Change % Change
--------------------- ---------- ---------------
Quarter 1.4 -0.3
Year-to-Date 15.9 13.7
One Year 36.8 35.2
Five Years/Annualized 120.5/17.1 118.7/16.9
Ten Years/Annualized 345.6/16.1 N/A
Inception/Annualized 769.6*<F1>/17.0*<F1> 351.3**<F2>/18.9**<F2>
*<F1> 12/30/85
**<F2> 1/10/91
We're grateful that the financial press, as evidenced by the enclosed Investor's
Business Daily piece, now better understands our investment disciplines.
Performance over the last five months results from a general market broadening
and a more rational investor mindset. Our research disciplines remain the same.
APRIL 30, 1999 THROUGH SEPTEMBER 30, 1999
S&P MIDCAP -3.5%
S&P 500 TR -3.4%
RUSSELL 2000 -1.3%
NASDAQ IND. 8.0%
BRANDYWINE BLUE 8.8%
BRANDYWINE FUND 11.8%
Semiconductor holdings benefited from continued demand for chips and components
used in computer, telecom and consumer electronics products. Software holdings
enjoyed renewed demand as non-Y2K-related spending picked up.
You might notice slight changes we've made in the market-cap categories we use
for your holdings in response to key mutual fund evaluators who have revised
their market-cap definitions. Small-cap is now below $2 billion rather than $1
billion; mid-cap stocks are between $2 and $9 billion; and large-cap stocks are
above $9 billion.
We continue to isolate one company at a time, seeking the rewards that strong
earnings attract while avoiding the pains that high price-to-earnings ratios
often invite. Your Friess team is grateful for your continued confidence and
grateful that you have enjoyed, along with us, the more than 65 percent rebound
in both Funds from the October 8 market low of 1998.
God Bless!
/s/ Foster Friess
Foster Friess
President October 8, 1999
BRANDYWINE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. Sun Microsystems, Inc. +287.7 16. Tandy Corp. +43.3
2. Tyco International Ltd. +73.9 17. Adobe Systems, Inc. +17.6
3. Apple Computer, Inc. +21.9 18. Tellabs, Inc. +74.4
4. Nokia Corp. A ADR +131.6 19. Providian Financial Corp. -8.9
5. Gemstar Int'l Group Ltd. +274.8 10. Motorola, Inc. +11.8
EARNINGS GROWTH
Your Companies 40%
S&P 500 9%
FORECASTED INCREASE IN EARNINGS PER SHARE 2000 vs 1999
All figures are dollar weighted and based on data from Baseline. September 30,
1999.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over 45.1%
MID CAP
$2 billion to $9 billion 35.6%
SMALL CAP
below $2 billion 16.4%
CASH 2.9%
TOP TEN INDUSTRY GROUPS
Computer & Related (13.8%)
Software (13.7%)
Communications Equipment (11.8%)
Semiconductor Manufacturing (9.7%)
Networking (7.6%)
Financial/Business Services (7.7%)
Specialty Retailing (7.3%)
Semiconductor & Related (7.3%)
Leisure & Entertainment (7.1%)
Machinery & Miscellaneous Manufacturing (5.2%)
Electronics (3.7%)
All Others (9.8%)
Cash (2.9%)
BRANDYWINE FUND
SEPTEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
- ----------------- ------------- ------ -----------------------------------
Sun Microsystems $57.4 35.0 Sun exceeded estimates with a June-
quarter earnings increase of 32
percent, as the computer hardware and
software maker furthered its
reputation as the premier supplier of
servers and other Internet
infrastructure products.
Apple Computer $39.1 20.6 Despite pre-announcing a production
related September-quarter earnings
shortfall, Apple shares gained on the
company's strong outlook. Apple made
arrangements to add a supply source of
G4 computer chips in the December
quarter to meet strong demand for this
new line of desktop and iBook laptop
computers.
Gemstar Int'l. $32.6 19.7 June-quarter earnings increased 31
percent, marking the seventh quarter
in a row that the VCR program
developer topped consensus estimates.
The company benefited from strong
acceptance of its interactive
programming guide. Customers such as
Sony and Phillips reported
accelerating sales of TVs and VCRs
incorporating technology licensed from
Gemstar.
CTS Corp. $27.8 64.3 Strong performance in the electronic
component maker's wireless business
recently acquired from Motorola helped
the company post a 67 percent earnings
increase in the June quarter, topping
estimates by 20 percent. Pricing in
its existing filters business
improved. CTS reported record results
for sales and earnings.
Adobe Systems $25.4 17.3 August-quarter earnings more than
doubled from a year ago, marking the
fourth consecutive quarter that the
maker of Photoshop and Pagemaker
software beat Wall Street
expectations. Strong demand for its
new InDesign software added to
investor enthusiasm. The company
continues to benefit from tight cost
controls amid rising sales of its
products.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
- ---------------- ------------- ------ -----------------------------------
Waste Management $37.0 -35.2 The company restated March-quarter
results, fell short of June-quarter
expectations and revised its future
outlook lower after it discovered
questionable accounting assumptions
that overstated performance. The
board of directors let a number of
high-level executives go, and
investigations into former
management's practices continue.
Tellabs, Inc. $33.0 -14.4 The company's 39 percent June-quarter
earnings increase topped estimates,
but its stock suffered after a Cisco
Systems acquisition in the optical
networking market was viewed as a
competitive threat.
Cendant Corp. $25.0 -13.5 The company topped Wall Street
estimates with a 33 percent June-
quarter earnings increase, but its
stock suffered on concerns that rising
interest rates would adversely affect
its real-estate and mortgage
businesses.
Providian
Financial $18.3 -11.3 A high-profile shortfall by credit
card issuer Bank One raised concerns
regarding the continued strength of
the consumer-lending environment.
Separately, an ongoing investigation
by the San Francisco district attorney
continues to mask the company's strong
fundamentals. Providian increased
June-quarter earnings 101 percent.
Dayton Hudson
Corp. $17.5 -10.7 Strong performance from the company's
Target division help increase July-
quarter earnings up 36 percent, but
the stock fell on concerns that rising
interest rates would dampen consumer
spending.
All gains/losses are calculated on an average cost basis
BRANDYWINE BLUE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. Apple Computer, Inc. +25.2 16. Sun Microsystems, Inc. +294.1
2. Tyco International Ltd. +69.7 17. Motorola, Inc. +15.8
3. Nokia Corp. A ADR +134.3 18. Adobe Systems, Inc. +19.2
4. Tandy Corp. +41.9 19. Electronic Arts, Inc. +70.6
5. Texas Instruments Inc. +48.2 10. Gemstar Int'l Group Ltd. +328.6
EARNINGS GROWTH
Your Companies 41%
S&P 500 9%
FORECASTED INCREASE IN EARNINGS PER SHARE 2000 vs 1999
All figures are dollar weighted and based on data from Baseline. September 30,
1999.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over 48.2%
MID CAP
$2 billion to $9 billion 48.6%
SMALL CAP
below $2 billion 0.7%
CASH 2.5%
TOP TEN INDUSTRY GROUPS
Computer & Related (14.0%)
Software (12.7%)
Semiconductor Manufacturing (11.3%)
Semiconductor & Related (11.0%)
Communications Equipment (10.9%)
Leisure & Entertainment (8.7%)
Specialty Retailing (8.3%)
Financial/Business Services (7.0%)
Machinery & Miscellaneous Manufacturing (5.1%)
Oil/Gas Field Services (3.2)
All Others (5.3%)
Cash (2.5%)
BRANDYWINE BLUE FUND
SEPTEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
- ----------------- ------------- ------ -----------------------------------
Sun Microsystems $3.5 35.0 Sun exceeded estimates with a June-
quarter earnings increase of 32
percent, as the computer hardware and
software maker furthered its
reputation as the premier supplier of
servers and other Internet
infrastructure products.
Apple Computer $3.3 24.6 Despite pre-announcing a production
related September-quarter earnings
shortfall, Apple shares gained on the
company's strong outlook. Apple made
arrangements to add a supply source of
G4 computer chips in the December
quarter to meet strong demand for this
new line of desktop and iBook laptop
computers.
Electronic Arts, Inc. $3.2 33.4 The company's growing online computer
game business generated investor
enthusiasm. Its new product line will
further increase its dominant position
as an independent entertainment
software maker. New game platforms
from customers such as Sega add to
expectations as we enter the fall
shopping season. September-quarter
earnings are expected to grow 47
percent.
Adobe Systems $2.1 19.0 August-quarter earnings more than
doubled from a year ago, marking the
fourth consecutive quarter that the
maker of Photoshop and Pagemaker
software beat Wall Street
expectations. Strong demand for its
new InDesign software added to
investor enthusiasm. The company
continues to benefit from tight cost
controls amid rising sales of its
products.
Texas Instruments $2.1 15.4 The semiconductor and electronic
component manufacturer enjoyed sharply
rising demand for digital signal
processors and related components,
boosted by especially strong European
demand for cellular phones. Earnings
increased 163 percent in the June
quarter.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
- ---------------- ------------ ------ ----------------------------------
Waste Management $2.3 -35.2 The company restated March-quarter
results, fell short of June-quarter
expectations and revised its future
outlook lower after it discovered
questionable accounting assumptions
that overstated performance. The board
of directors let a number of high-
level executives go, and
investigations into former
management's practices continue.
Wellpoint Health $2.1 -20.6 Networks New California patient rights
law raised concerns regarding the
likelihood that similar legislation
pending on the federal level would
expose health-care insurers to a rash
of lawsuits. Reports suggesting that
prominent attorneys are preparing
class-action suits against the
managed-care industry have added to
the uncertainty.
Circuit City $1.9 -17.7 The company increased August-quarter
earnings 125 percent, but its stock
suffered on concerns that higher
interest rates would slow the strong
demand for consumer electronics that
boosted results for the past year.
Providian
Financial $1.9 -14.3 A high-profile shortfall by credit
card issuer Bank One raised concerns
regarding the continued strength of
the consumer-lending environment.
Separately, an ongoing investigation
by the San Francisco district attorney
continues to mask the company's strong
fundamentals. Providian increased
June-quarter earnings 101 percent.
Jones Apparel
Group $1.8 -21.2 Lingering concerns regarding the
company's ability to integrate its
recent acquisition, Nine West,
continue to cast a cloud over Jones
Apparel's progress. June-quarter
earnings increased 33 percent,
outpacing estimates by 19 percent.
All gains/losses are calculated on an average cost basis
MANAGEMENT'S DISCUSSION OF PERFORMANCE
BRANDYWINE FUND
The Adviser's approach, focusing on earnings growth and reasonable price-to-
earnings ratios among individual companies, does not discriminate by market cap
or industry. Brandywine is not a small-, mid- or large-cap fund, per se.
However, our rapid earnings growth discipline most often leads us to smaller and
mid-cap stocks. Higher market-cap characteristics in recent quarters reflect a
short-term phenomenon driven by earnings strength among
large-cap stocks.
This market cap flexibility enabled the Fund to capitalize on a range of
opportunities, as the environment changed from quarter to quarter, favoring
various market-cap classes and industries.
The Fund gained 36.8 percent in the fiscal year, outpacing returns in the S&P
500, S&P MidCap and Russell 2000 of 27.8, 24 and 17.5 percent.
The fiscal year started on a negative note, as a financial-market crisis in the
fall led to a broad market downturn that adversely affected U.S. stocks through
October 8. From that point on, Brandywine capitalized on a generally improving
environment. The Fund gained 67.2 percent from that market low.
As concerns about the availability of capital lingered after the financial
crisis, the Adviser sold stocks from the financial sector, reducing the Fund's
position in financial stocks by half between the beginning and end of the
December quarter.
The Adviser added technology stocks -- most notably Tellabs, the eighth-largest
holding by quarter end -- for their ability to fund growth internally. Consumer-
related stocks were also added, as increased consumer-spending drove earnings
strength for retailers such as Target's parent company Dayton Hudson.
Three separate interest-rate reductions totaling three-quarters of a percentage
point by the Fed injected liquidity into the financial markets, helping them
recover from the slump that began in the summer. The Fund gained 18.1 percent in
the December quarter, despite the revival of a trend focusing on a narrow group
of stocks the Adviser's disciplines prevent it from owning, high-PE mega caps
and startup Internet companies without earnings histories.
Performance slowed in the March quarter, as investor focus narrowed further and
high-valuation stocks dominated. Just 21 stocks generated the S&P 500 index's
entire 4.9 percent March-quarter gain.
Strong returns in top, large-cap holdings such as EMC, Sun Microsystems, Nokia,
Tellabs and Dayton Hudson helped the Fund gain 2.6 percent during an otherwise
difficult quarter. The S&P MidCap and Russell 2000 fell 6.7 and 5.8 percent.
Interest-rate concerns developed early in the June quarter, creating a more
valuation-sensitive environment in which a broader range of stocks posted gains.
Long-neglected small- and mid-cap stocks benefited most, with the S&P MidCap and
Russell 2000 gaining 13.8 and 15.1 percent.
Amid interest-rate uncertainty and seasonal cooling in retail demand, the
Adviser sold a number of consumer-related stocks, reducing the sector's
portfolio representation by one-third. The Adviser increased purchases of
semiconductor and telecommunications-related stocks to benefit from earnings
gains in companies capitalizing on demand for computer, telecom and consumer
electronics products. The Fund gained 11.4 percent in the June quarter, while
the S&P 500 increased to 7 percent.
The Fed reclaimed a portion of the liquidity it injected in the fall by
increasing the discount rate by a quarter of a percentage point on June 30 to
offset potential inflation stemming from a continuously strong economy.
That move was expected, leading to a generally positive environment early in the
September quarter, though short-term economic data soon cast a new cloud of
interest-rate uncertainty that persisted until the Fed's next meeting August 24.
The Fed increased rates another quarter of a percentage point.
Throughout the quarter concerns regarding interest rates, inflation, a
strengthening yen and a record U.S. trade deficit fueled a generally negative
environment for stocks. The Fund's reasonable price-to-earnings ratio discipline
helped it weather the uncertainty better than the indexes.
The Fund gained 1.4 percent in the September quarter, compared to declines in
the S&P 500, S&P MidCap and Russell 2000 of 6.3, 8.7 and 6.6 percent.
COMPARISON OF CHANGE IN VALUE OF $25,000 INVESTMENT IN BRANDYWINE FUND, S&P 500
INDEX(1)<F3>, NASDAQ INDUSTRIALS INDEX(2)<F4> AND RUSSELL 2000 INDEX(3)<F5>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Since Inception
1-Year 5-Year 10-Year 12/30/85
------ ------ ------- ---------------
36.8% 17.1% 16.1% 17.0%
Brandywine Fund S&P 500 NASDAQ Industrials Russell 2000
9-30-89 $25,000 $25,000 $25,000 $25,000
9-30-90 23,025 22,675 20,075 18,225
9-30-91 32,557 29,795 32,160 26,408
9-30-92 34,478 33,102 33,832 28,785
9-30-93 51,235 37,405 42,527 38,312
9-30-94 50,517 38,752 42,400 38,887
9-30-95 73,503 50,300 53,551 47,987
9-30-96 80,853 60,561 60,406 54,273
9-30-97 112,628 85,210 75,024 72,292
9-30-98 81,430 92,964 56,268 58,556
9-30-99 111,397 118,808 87,778 69,741
(1)<F3> The S&P 500 Index consists of 500 stocks, mostly on the New York Stock
Exchange, selected by the Standard & Poor's Ratings Group. Each
stock's weighting is based on its relative total market value. Stocks
may be added or deleted from the Index which assumes reinvestment of
dividends.
(2)<F4> The NASDAQ Industrials is capitalization-weighted to measure the
performance of all NASDAQ stocks in the industrial sector and does not
include income.
(3)<F5> The Russell 2000, a trademark of the Frank Russell Company, is the
smallest 2,000 of the 3,000 largest publicly traded companies in the
United States equity market and includes income.
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
September 30, 1999
QUOTED
SHARES OR MARKET
PRINCIPAL AMOUNT COST VALUE
- ---------------- ---- ------
COMMON STOCKS - 97.1% (A)<F7>
APPAREL & SHOE RETAILERS - 2.5%
746,000 American Eagle Outfitters, Inc.*<F6> $31,058,886 $36,134,375
723,900 AnnTaylor Stores Corp.*<F6> 29,696,370 29,589,412
157,300 bebe stores, inc.* <F6> 5,042,992 3,794,862
53,000 Braun's Fashions Corp.* <F6> 904,406 963,938
138,000 Brown Shoe Co. Inc. 2,334,942 2,527,125
293,900 Charming Shoppes, Inc.* <F6> 1,655,207 1,506,238
85,700 Guess ?, Inc.* <F6> 1,155,701 1,151,594
50,000 Kenneth Cole Productions, Inc.*<F6> 1,238,060 1,868,750
552,100 Pacific Sunwear of
California, Inc.* <F6> 11,447,659 15,476,026
160,400 Steven Madden, Ltd.* <F6> 2,149,812 2,075,175
523,100 Too Inc.* <F6> 9,297,960 9,383,106
15,000 Urban Outfitters, Inc.* <F6> 355,616 331,875
194,500 Vans, Inc.* <F6> 2,130,830 2,334,000
-------------- --------------
98,468,441 107,136,476
THIS SECTOR IS 8.8% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT - 11.8%
501,550 Comverse Technology, Inc.* <F6> 22,019,706 47,302,434
2,214,400 Nokia Corp. "A" ADR 85,883,416 198,880,800
1,668,800 Nortel Networks Corp. 65,504,750 85,108,800
2,915,000 Tellabs, Inc.* <F6> 95,170,487 165,972,813
-------------- --------------
268,578,359 497,264,847
THIS SECTOR IS 85.1% ABOVE YOUR FUND'S COST.
COMPUTER & RELATED - 13.8%
1,244,000 Adaptec, Inc.* <F6> 30,157,242 49,371,250
3,369,900 Apple Computer, Inc.* <F6> 175,084,821 213,356,794
582,500 Gateway, Inc.* <F6> 26,125,118 25,884,844
921,800 Microchip Technology, Inc.* <F6> 42,278,150 47,357,475
203,600 Netopia, Inc.* <F6> 4,588,852 8,118,550
2,381,200 Sun Microsystems, Inc.* <F6> 57,124,997 221,451,600
326,700 Zebra Technologies Corp.* <F6> 14,640,693 14,854,624
-------------- --------------
349,999,873 580,395,137
THIS SECTOR IS 65.8% ABOVE YOUR FUND'S COST.
ELECTRONICS - 3.7%
1,234,800 CTS Corp. 27,376,454 71,001,000
51,000 The DII Group, Inc.* <F6> 1,683,000 1,794,563
123,800 KEMET Corp.* <F6> 2,794,551 3,957,725
487,600 Millipore Corp. 18,592,013 18,315,475
364,400 Power-One, Inc.* <F6> 9,155,565 9,292,200
108,700 RF Micro Devices, Inc.* <F6> 2,541,849 4,973,025
668,000 Sawtek Inc.* <F6> 9,255,488 23,380,000
1,034,100 Vishay Intertechnology, Inc.* <F6> 21,034,335 24,559,875
-------------- --------------
92,433,255 157,273,863
THIS SECTOR IS 70.1% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 7.7%
388,100 AmeriCredit Corp.* <F6> 4,133,406 5,797,244
3,355,800 Caremark Rx, Inc.* <F6> 19,538,223 18,876,375
7,083,900 Cendant Corp.* <F6> 138,030,569 125,739,225
159,900 Lason, Inc.* <F6> 7,533,866 7,120,539
147,900 Metris Companies Inc. 3,797,501 4,353,806
1,814,800 Providian Financial Corp. 157,728,804 143,709,475
506,800 Sykes Enterprises, Inc.* <F6> 11,472,695 12,511,625
220,600 TeleTech Holdings, Inc.* <F6> 2,241,928 3,143,550
-------------- --------------
344,476,992 321,251,839
THIS SECTOR IS 6.7% BELOW YOUR FUND'S COST.
FOOD/RESTAURANTS - 0.5%
162,200 Applebee's International Inc. 5,146,429 5,464,113
388,150 CEC Entertainment Inc.* <F6> 6,074,364 13,924,881
42,300 Sonic Corp.* <F6> 1,001,845 1,287,506
-------------- --------------
12,222,638 20,676,500
THIS SECTOR IS 69.2% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 7.1%
1,259,500 Carnival Corp. 56,757,715 54,788,250
2,535,300 Gemstar International
Group Ltd.* <F6> 52,846,432 198,070,312
1,020,400 Royal Caribbean Cruises Ltd. 47,088,722 45,918,000
-------------- --------------
156,692,869 298,776,562
THIS SECTOR IS 90.7% ABOVE YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 5.2%
64,500 Mobile Mini, Inc.* <F6> 1,121,625 1,410,937
2,093,500 Tyco International Ltd. 124,304,964 216,153,875
-------------- --------------
125,426,589 217,564,812
THIS SECTOR IS 73.5% ABOVE YOUR FUND'S COST.
MEDICAL & RELATED - 0.5%
197,100 Cytyc Corp.* <F6> 4,574,884 7,625,306
245,600 Eclipse Surgical
Technologies, Inc.* <F6> 3,742,157 4,052,400
22,100 Immucor, Inc.* <F6> 333,555 265,200
324,300 Mentor Corp. 8,843,306 9,242,550
-------------- --------------
17,493,902 21,185,456
THIS SECTOR IS 21.1% ABOVE YOUR FUND'S COST.
NETWORKING - 0.8%
127,500 Performance Technologies, Inc.* <F6> 3,004,905 2,876,719
673,900 Xircom, Inc.* <F6> 25,664,523 28,767,106
-------------- --------------
28,669,428 31,643,825
THIS SECTOR IS 10.4% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 2.8%
967,100 Devon Energy Corp. 40,027,946 40,074,206
298,500 Dynegy Inc. 6,737,653 6,175,219
120,000 Evergreen Resources, Inc.* <F6> 2,679,937 2,887,500
1,867,200 Nabors Industries, Inc.* <F6> 51,198,553 46,680,000
566,100 Patterson Energy, Inc.* <F6> 8,264,012 8,597,644
265,900 Precision Drilling Corp.* <F6> 4,890,434 6,165,556
292,800 UTI Energy Corp.* <F6> 6,014,214 5,691,300
-------------- --------------
119,812,749 116,271,425
THIS SECTOR IS 3.0% BELOW YOUR FUND'S COST.
PHARMACEUTICALS - 2.1%
386,100 Alpharma Inc. 12,678,970 13,634,156
151,600 ChiRex Inc.* <F6> 3,677,117 3,913,175
1,228,500 IVAX Corp.* <F6> 17,012,030 20,270,250
274,800 Jones Pharma Inc. 6,143,161 9,059,799
193,000 King Pharmaceuticals, Inc.* <F6> 4,794,292 6,755,000
409,900 Medicis Pharmaceutical Corp.* <F6> 11,363,503 11,682,150
220,700 Priority Healthcare Corp.* <F6> 7,233,654 6,814,113
486,900 Watson Pharmaceuticals Inc.* <F6> 18,534,748 14,880,881
-------------- --------------
81,437,475 87,009,524
THIS SECTOR IS 6.8% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR & RELATED - 7.3%
276,900 Credence Systems Corp.* <F6> 11,331,785 12,425,887
221,000 LTX Corp.* <F6> 2,604,105 3,024,938
1,551,400 Motorola, Inc. 122,106,606 136,523,200
297,100 Novellus Systems, Inc.* <F6> 20,019,656 20,035,681
1,585,000 Texas Instruments Inc. 87,539,381 130,366,250
120,000 Three-Five Systems, Inc.* <F6> 2,333,100 2,655,000
-------------- --------------
245,934,633 305,030,956
THIS SECTOR IS 24.0% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR MANUFACTURING - 9.7%
81,100 Alpha Industries, Inc.* <F6> 2,809,414 4,574,543
1,364,700 Analog Devices, Inc.* <F6> 41,085,324 69,940,875
1,628,100 Atmel Corp.* <F6> 56,759,884 55,050,131
1,451,600 Cypress Semiconductor Corp.* <F6> 33,501,084 31,209,400
575,300 Fairchild Semiconductor Corp.* <F6> 10,643,050 13,519,550
190,000 General Semiconductor, Inc.* <F6> 2,123,404 1,959,375
1,468,500 Integrated Device
Technology, Inc.* <F6> 25,677,948 27,167,250
312,800 International Rectifier Corp.* <F6> 4,803,593 4,770,200
2,620,300 LSI Logic Corp.* <F6> 121,232,716 134,945,450
1,495,200 National Semiconductor Corp.* <F6> 42,064,003 45,603,600
326,850 TranSwitch Corp.* <F6> 7,686,456 18,630,450
-------------- --------------
348,386,876 407,370,824
THIS SECTOR IS 16.9% ABOVE YOUR FUND'S COST.
SOFTWARE - 13.7%
1,479,000 Adobe Systems Inc. 142,749,092 167,866,500
37,000 Advent Software, Inc.* <F6> 1,659,887 2,303,250
249,600 Ardent Software, Inc.* <F6> 5,247,729 6,723,600
1,668,300 Citrix Systems, Inc.* <F6> 43,626,745 103,330,331
239,000 Corel Corp.* <F6> 1,335,025 1,770,082
1,110,500 Electronic Arts Inc.* <F6> 36,045,557 80,372,437
434,900 FileNET Corp.* <F6> 4,209,719 4,647,994
6,095,600 Parametric Technology Corp.* <F6> 90,151,809 82,290,600
908,100 Peregrine Systems, Inc.* <F6> 26,790,055 37,005,075
314,400 Pinnacle Systems, Inc.* <F6> 12,175,321 13,322,700
420,000 Remedy Corp.* <F6> 10,122,242 11,917,500
1,201,800 Symantec Corp.* <F6> 26,047,449 43,227,184
291,300 Verity, Inc.* <F6> 11,130,844 20,045,081
-------------- --------------
411,291,474 574,822,334
THIS SECTOR IS 39.8% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 7.3%
869,900 Ames Department Stores, Inc.* <F6> 36,171,712 27,728,062
940,900 BJ's Wholesale Club, Inc.* <F6> 20,293,982 27,815,356
14,000 CDW Computer Centers, Inc.* <F6> 643,191 684,250
117,000 Coldwater Creek Inc.* <F6> 2,423,420 2,340,000
564,900 Insight Enterprises, Inc.* <F6> 17,379,726 18,359,250
3,442,250 Tandy Corp. 124,153,635 177,921,297
772,400 Williams-Sonoma, Inc.* <F6> 21,278,374 37,509,675
344,600 Zale Corp.* <F6> 9,035,840 13,202,488
-------------- --------------
231,379,880 305,560,378
THIS SECTOR IS 32.1% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 0.6%
166,900 Illinova Corp. 5,509,766 4,683,631
110,100 Insituform Technologies, Inc.* <F6> 1,966,608 2,752,500
1,012,700 Shaw Industries, Inc. 20,065,314 16,076,613
-------------- --------------
27,541,688 23,512,744
-------------- --------------
THIS SECTOR IS 14.6% BELOW YOUR FUND'S COST.
Total common stocks 2,960,247,121 4,072,747,502
SHORT-TERM INVESTMENTS - 3.1% (A)<F7>
COMMERCIAL PAPER - 3.0%
$20,000,000 Household International,
due 10/01/99, discount of 5.32% 20,000,000 20,000,000
5,000,000 Prudential Funding Corp.,
due 10/01/99, discount of 5.56% 5,000,000 5,000,000
25,000,000 American General Finance ECN,
due 10/04/99, discount of 5.33% 24,988,896 24,988,896
25,000,000 Ford Motor Credit Co.,
due 10/05/99, discount of 5.35% 24,985,139 24,985,139
25,000,000 Sears Roebuck Acceptance Corp.,
due 10/06/99, discount of 5.38% 24,981,319 24,981,319
25,000,000 New Center Asset Trust,
due 10/07/99, discount of 5.37% 24,977,625 24,977,625
-------------- --------------
Total commercial paper 124,932,979 124,932,979
VARIABLE RATE DEMAND NOTE - 0.1%
5,921,499 Firstar Bank U.S.A., N.A. 5,921,499 5,921,499
-------------- --------------
Total short-term investments 130,854,478 130,854,478
-------------- --------------
Total investments $3,091,101,599 4,203,601,980
--------------
--------------
Liabilities, less cash and
receivables (0.2%) (A)<F7> (8,685,334)
--------------
NET ASSETS $4,194,916,646
--------------
--------------
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($4,194,916,646 /119,559,283
shares outstanding) $35.09
------
------
*<F6> Non-income producing security.
(a)<F7> Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
(Unaudited)
DISTRIBUTION ON THE WAY . . .
On October 27, all shareholders of record as of October 26 will receive the
year-end distribution. The amount expected is $1.47 per share for Brandywine
Fund and $0.92 for Brandywine Blue. All distributions for both Funds represent
long-term capital gains. Your account will reflect this distribution if you've
selected the reinvestment option. Otherwise, you will receive a check sent to
your address of record.
BRANDYWINE FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
INCOME:
Dividends $ 10,795,152
Interest 6,397,658
--------------
Total income 17,192,810
--------------
EXPENSES:
Management fees 44,381,056
Transfer agent fees 722,832
Printing and postage expense 516,843
Administrative services 439,790
Custodian fees 383,812
Registration fees 48,138
Board of Directors fees 43,132
Professional fees 41,139
Other expenses 32,314
--------------
Total expenses 46,609,056
--------------
NET INVESTMENT LOSS (29,416,246)
--------------
NET REALIZED GAIN ON INVESTMENTS 561,000,974
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 882,288,945
--------------
NET GAIN ON INVESTMENTS 1,443,289,919
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,413,873,673
--------------
--------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1999 and 1998
<TABLE>
1999 1998
---- ----
<S> <C> <C>
OPERATIONS:
Net investment (loss) income $ (29,416,246) $ 46,939,903
Net realized gain (loss) on investments 561,000,974 (371,495,833)
Net increase (decrease) in unrealized appreciation on investments 882,288,945 (1,950,083,412)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 1,413,873,673 (2,274,639,342)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividend from net investment income ($0.264391 per share) (46,814,793) --
Distributions from net realized gains ($0.073194 and $7.023427 per share, respectively) (12,960,206) (1,544,738,561)
-------------- --------------
Total distributions (59,774,999)* (1,544,738,561)
<F8>
-------------- --------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (15,159,346 and 47,435,909 shares, respectively) 455,819,053 1,551,435,565
Net asset value of shares issued in distributions (2,181,997 and 45,515,816 shares,
respectively) 54,571,751 1,441,485,893
Cost of shares redeemed (81,715,518 and 126,115,713 shares, respectively) (2,450,014,788) (3,925,825,675)
-------------- --------------
Net decrease in net assets derived from Fund share activities (1,939,623,984) (932,904,217)
-------------- --------------
TOTAL DECREASE (585,525,310) (4,752,282,120)
NET ASSETS AT THE BEGINNING OF THE YEAR 4,780,441,956 9,532,724,076
-------------- --------------
NET ASSETS AT THE END OF THE YEAR (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME
OF $0 AND $46,939,823, RESPECTIVELY) $4,194,916,646 $4,780,441,956
-------------- --------------
-------------- --------------
</TABLE>
*<F8> See Note 7.
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE FUND, INC.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each year)
<TABLE>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $25.99 $43.91 $32.83 $33.92 $24.77
Income from investment operations:
Net investment (loss) income (0.20)(1)<F9> 0.21 (0.07)(1)<F9> (0.08)(1)<F9> (0.10)
Net realized and unrealized gains (losses)
on investments 9.64 (11.11) 12.50 2.83 10.70
------ ------ ------ ------ ------
Total from investment operations 9.44 (10.90) 12.43 2.75 10.60
Less distributions:
Dividend from net investment income (0.27) -- -- -- --
Distributions from net realized gains (0.07) (7.02) (1.35) (3.84) (1.45)
------ ------ ------ ------ ------
Total from distributions (0.34) (7.02) (1.35) (3.84) (1.45)
------ ------ ------ ------ ------
Net asset value, end of year $35.09 $25.99 $43.91 $32.83 $33.92
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 36.8% (27.7%) 39.3% 10.0% 45.5%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 4,194,917 4,780,442 9,532,724 6,038,301 4,137,484
Ratio of expenses to average net assets 1.05% 1.04% 1.04% 1.06% 1.07%
Ratio of net investment (loss) income
to average net assets (0.7%) 0.6% (0.3%) (0.4%) (0.4%)
Portfolio turnover rate 208.7% 263.7% 192.4% 202.8% 193.7%
</TABLE>
(1)<F9> In 1999, net investment loss per share is calculated using average
shares outstanding. In prior years, net investment loss per share was
calculated using ending balances prior to consideration of adjustments
for book and tax differences.
The accompanying notes to financial statements are an integral part of this
statement.
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN BRANDYWINE BLUE FUND,
S&P 500 INDEX(1)<F10>, NASDAQ INDUSTRIALS INDEX(2)<F11> AND RUSSELL 2000
INDEX(3)<F12>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Since Inception
1-Year 5-Year 12/30/85
------ ------ ---------------
35.2% 16.9% 18.9%
BRANDYWINE FUND S&P 500 NASDAQ INDUSTRIALS RUSSELL 2000
1-10-91 $100,000 $100,000 $100,000 $100,000
9-30-91 130,800 125,100 149,900 143,900
9-30-92 136,032 138,986 157,695 156,851
9-30-93 200,783 157,054 198,222 208,769
9-30-94 206,405 162,708 197,628 211,900
9-30-95 294,747 211,195 249,604 261,485
9-30-96 320,979 254,279 281,553 295,739
9-30-97 454,506 357,771 349,689 393,925
9-30-98 334,062 390,328 262,267 319,079
9-30-99 451,652 498,839 409,136 380,023
(1)<F10> The S&P 500 Index consists of 500 stocks, mostly on the New York Stock
Exchange, selected by the Standard & Poor's Ratings Group. Each
stock's weighting is based on its relative total market value. Stocks
may be added or deleted from the Index which assumes reinvestment of
dividends.
(2)<F11> The NASDAQ Industrials is capitalization-weighted to measure the
performance of all NASDAQ stocks in the industrial sector and does not
include income.
(3)<F12> The Russell 2000, a trademark of the Frank Russell Company, is the
smallest 2,000 of the 3,000 largest publicly traded companies in the
United States equity market and includes income.
MANAGEMENT'S DISCUSSION OF PERFORMANCE
BRANDYWINE BLUE
The Adviser's approach isolates companies growing earnings at least 20 percent
year-over-year that sell at reasonable price-to-earnings ratios. Over the fiscal
year, "reasonable" was defined as below 30 times forward-12-month earnings.
Brandywine Blue does not invest in companies with market caps below $500
million, instead emphasizing larger-capitalization stocks, typically greater
than $2 billion in market cap.
The Fund's consistent focus on individual-company fundamentals proved to be an
asset in positive and negative environments for stocks during the fiscal year.
The Fund gained 35.2 percent in the year ended September 30, compared to returns
in the S&P 500, S&P MidCap and Russell 2000 of 27.8, 24 and 17.5 percent.
Fallout from a financial crisis that impacted U.S. equity markets in the
September quarter of 1998 carried into the beginning of the fiscal year,
bringing a wide range of stocks to new lows by the first or second week of
October. Fed-prompted interest rate reductions in September and October helped
stem the market's slide. A third reduction, bringing the total to three-quarters
of a percentage point between September and November, created a positive
environment for stocks, helping the Fund to post an 18.9 percent gain in the
December quarter.
Large-cap holdings in a number of technology-related industries such as Nokia,
Sun Microsystems and EMC Corp. were the biggest contributors to performance. Gap
Inc., Dayton Hudson, TJX Cos. and other retail-related holdings also posted
strong gains, as positive consumer spending trends boosted their earnings.
The Adviser purchased more consumer-related stocks in the March quarter,
increasing the representation of those stocks by 50 percent by quarter end.
Technology-related stocks held roughly the same position in the portfolio.
The same companies that drove December-quarter performance continued to climb in
the March quarter, though results slowed as a much narrower group of stocks
enjoyed gains. The Fund gained 3.4 percent in the March quarter, while the S&P
500 gained 4.9 percent. The S&P MidCap and Russell 2000 fell 6.7 and 5.8
percent.
The S&P MidCap and Russell 2000 posted gains of 13.8 and 15.1 percent in the
June-quarter, as interest-rate concerns that developed in April created a more
valuation-sensitive environment during the three-month period. The Adviser sold
a number of consumer-related holdings as rising interest rates cast doubt on
retail earnings outlooks based on optimistic consumer spending forecasts. The
Adviser added technology-related holdings, especially companies in the
semiconductor sector.
Strong sales of computer, telecommunications and consumer electronics products
boosted demand for semiconductors and electronic components, benefiting holdings
such as Texas Instruments, Analog Devices, Motorola and Lucent Technologies. The
Fund's reasonable price-to-earnings ratio discipline also worked in its favor,
as investors were less willing to assume the risk represented by higher-
valuation stocks than in previous quarters. The Fund gained 10.4 percent in the
June quarter, while the S&P 500 increased 7 percent.
The U.S. economy's robust growth showed few signs of slowing as the June quarter
ended, prompting the Fed to reclaim a portion of the liquidity it injected in
the fall of 1998. The Fed raised rates a quarter of a percentage point on June
30, then again on August 24. This created an environment of uncertainty that
negatively affected most stocks.
Strong earnings gains among technology-related holdings were rewarded, helping
offset declines in health-care and waste management holdings. The Fund's
reasonable price-to-earnings ratio discipline also helped the Fund weather the
broad downturn better than major indexes in the September quarter. The Fund
retraced 0.3 percent, versus declines in the S&P 500, S&P MidCap and Russell
2000 of 6.3, 8.7 and 6.6 percent.
BRANDYWINE BLUE FUND, INC.
STATEMENT OF NET ASSETS
September 30, 1999
QUOTED
SHARES OR MARKET
PRINCIPAL AMOUNT COST VALUE
- ---------------- ---- ------
COMMON STOCKS - 97.5% (A)<F14>
APPAREL & SHOE RETAILERS - 2.1%
134,500 American Eagle
Outfitters, Inc.*<F13> $ 6,073,153 $ 6,514,844
THIS SECTOR IS 7.3% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT - 10.9%
47,700 Comverse Technology, Inc.*<F13> 2,621,697 4,498,706
174,800 Nokia Corp. "A" ADR 6,700,029 15,699,225
155,800 Nortel Networks Corp. 5,677,167 7,945,800
103,400 Tellabs, Inc.* <F13> 5,582,283 5,887,338
------------ ------------
20,581,176 34,031,069
THIS SECTOR IS 65.4% ABOVE YOUR FUND'S COST.
COMPUTER & RELATED - 14.0%
137,200 Adaptec, Inc.* <F13> 3,482,099 5,445,125
255,700 Apple Computer, Inc.* <F13> 12,929,023 16,189,006
58,600 Gateway, Inc.* <F13> 2,628,825 2,604,038
118,200 Microchip Technology, Inc.* <F13> 5,491,256 6,072,525
143,800 Sun Microsystems, Inc.* <F13> 3,393,336 13,373,400
------------ ------------
27,924,539 43,684,094
THIS SECTOR IS 56.4% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 7.0%
70,000 Caremark Rx, Inc.* <F13> 444,822 393,750
567,600 Cendant Corp.* <F13> 11,129,328 10,074,900
142,200 Providian Financial Corp. 11,731,745 11,260,462
------------ ------------
23,305,895 21,729,112
THIS SECTOR IS 6.8% BELOW YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 8.7%
200,100 Carnival Corp. 8,983,454 8,704,350
157,100 Gemstar International
Group Ltd.* <F13> 2,863,401 12,273,437
140,000 Royal Caribbean Cruises Ltd. 6,372,060 6,300,000
------------ ------------
18,218,915 27,277,787
THIS SECTOR IS 49.7% ABOVE YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 5.1%
154,400 Tyco International Ltd. 9,393,586 15,941,800
THIS SECTOR IS 69.7% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 3.2%
74,000 Devon Energy Corp. 3,058,671 3,066,375
36,500 Dynegy Inc. 813,361 755,094
243,000 Nabors Industries, Inc.* <F13> 6,574,684 6,075,000
------------ ------------
10,446,716 9,896,469
THIS SECTOR IS 5.3% BELOW YOUR FUND'S COST.
PHARMACEUTICALS - 1.4%
37,500 Jones Pharma Inc. 838,180 1,236,326
100,000 Watson Pharmaceuticals Inc.* <F13> 3,737,407 3,056,250
------------ ------------
4,575,587 4,292,576
THIS SECTOR IS 6.2% BELOW YOUR FUND'S COST.
SEMICONDUCTOR & RELATED - 11.0%
150,400 Motorola, Inc. 11,431,294 13,235,200
109,400 Novellus Systems, Inc.* <F13> 7,298,159 7,377,663
166,300 Texas Instruments Inc. 9,227,079 13,678,175
------------ ------------
27,956,532 34,291,038
THIS SECTOR IS 22.7% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR MANUFACTURING - 11.3%
119,500 Analog Devices, Inc.* <F13> 3,758,644 6,124,375
257,000 Atmel Corp.* <F13> 8,687,767 8,689,813
212,800 Cypress Semiconductor Corp.* <F13> 4,851,240 4,575,200
210,400 LSI Logic Corp.* <F13> 9,460,521 10,835,600
166,800 National Semiconductor Corp.* <F13> 4,709,280 5,087,400
------------ ------------
31,467,452 35,312,388
THIS SECTOR IS 12.2% ABOVE YOUR FUND'S COST.
SOFTWARE - 12.7%
114,600 Adobe Systems Inc. 10,911,146 13,007,100
85,800 Citrix Systems, Inc.* <F13> 2,085,249 5,314,237
176,500 Electronic Arts Inc.* <F13> 7,489,510 12,774,188
597,100 Parametric Technology Corp.* <F13> 8,198,622 8,060,850
12,500 Symantec Corp.* <F13> 248,437 449,609
------------ ------------
28,932,964 39,605,984
THIS SECTOR IS 36.9% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 8.3%
171,600 BJ's Wholesale Club, Inc.* <F13> 3,307,026 5,072,925
56,900 CDW Computer Centers, Inc.* <F13> 2,643,821 2,780,987
279,900 Tandy Corp. 10,193,784 14,467,331
77,400 Williams-Sonoma, Inc.* <F13> 2,412,607 3,758,738
------------ ------------
18,557,238 26,079,981
THIS SECTOR IS 40.5% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 1.8%
23,700 Illinova Corp. 787,126 665,081
306,000 Shaw Industries, Inc. 6,151,894 4,857,750
------------ ------------
6,939,020 5,522,831
------------ ------------
THIS SECTOR IS 20.4% BELOW YOUR FUND'S COST.
Total common stocks 234,372,773 304,179,973
SHORT-TERM INVESTMENTS - 3.2% (A)<F14>
COMMERCIAL PAPER - 1.6%
$5,000,000 Prudential Funding Corp.,
due 10/01/99, discount of 5.56% 5,000,000 5,000,000
VARIABLE RATE DEMAND NOTE - 1.6%
5,110,860 Firstar Bank U.S.A., N.A. 5,110,860 5,110,860
------------ ------------
Total short-term investments 10,110,860 10,110,860
------------ ------------
Total investments $244,483,633 314,290,833
------------
------------
Liabilities, less cash and
receivables (0.7%) (A)<F14> (2,306,777)
------------
NET ASSETS $311,984,056
------------
------------
Net Asset Value Per Share
($0.01 par value 100,000,000
shares authorized), offering
and redemption price
($311,984,056 /10,590,061
shares outstanding) $29.46
------
------
*<F13> Non-income producing security.
(a)<F14> Percentages for the various classifications relate to net assets.
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
INCOME:
Dividends $ 897,736
Interest 475,444
------------
Total income 1,373,180
------------
EXPENSES:
Management fees 3,346,646
Administrative services 105,045
Registration fees 36,605
Printing and postage expense 31,783
Custodian fees 30,931
Professional fees 29,553
Transfer agent fees 18,375
Board of Directors fees 8,813
Other expenses 8,645
------------
Total expenses 3,616,396
------------
NET INVESTMENT LOSS (2,243,216)
------------
NET REALIZED GAIN ON INVESTMENTS 50,355,688
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 53,901,197
------------
NET GAIN ON INVESTMENTS 104,256,885
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $102,013,669
------------
------------
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE BLUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1999 and 1998
<TABLE>
1999 1998
---- ----
<S> <C> <C>
OPERATIONS:
Net investment (loss) income $ (2,243,216) $ 3,224,429
Net realized gain (loss) on investments 50,355,688 (38,397,139)
Net increase (decrease) in unrealized appreciation on investments 53,901,197 (114,271,399)
------------ ------------
Net increase (decrease) in net assets resulting from operations 102,013,669 (149,444,109)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividend from net investment income ($0.204780 per share) (3,234,784) --
Distributions from net realized gains ($0.132292 and $5.085142 per share,
respectively) (2,089,735) (88,287,212)
------------ ------------
Total distributions (5,324,519)*<F15> (88,287,212)
------------ ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (3,879,907 and 8,608,182 shares, respectively) 101,668,079 236,200,712
Net asset value of shares issued in distributions (226,167 and 3,001,160
shares, respectively) 4,828,670 81,361,466
Cost of shares redeemed (9,983,841 and 12,395,518 shares, respectively) (255,552,611) (332,841,741)
------------ ------------
Net decrease in net assets derived from Fund share activities (149,055,862) (15,279,563)
------------ ------------
TOTAL DECREASE (52,366,712) (253,010,884)
------------ ------------
NET ASSETS AT THE BEGINNING OF THE YEAR 364,350,768 617,361,652
------------ ------------
NET ASSETS AT THE END OF THE YEAR (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$0 AND $3,234,758, RESPECTIVELY) $311,984,056 $364,350,768
------------ ------------
------------ ------------
</TABLE>
*<F15> See Note 7.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
YEARS ENDED SEPTEMBER 30,
-------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $22.13 $35.78 $25.26 $24.37 $17.18
Income from investment operations:
Net investment (loss) income (0.18)(1)<F16> 0.19 (0.10)(1)<F16> (0.05)(1)<F16> (0.0)
Net realized and unrealized gains (losses)
on investments 7.85 (8.75) 10.62 2.05 7.30
------ ------ ------ ------ ------
Total from investment operations 7.67 (8.56) 10.52 2.00 7.30
Less distributions:
Dividend from net investment income (0.21) -- -- -- --
Distributions from net realized gains (0.13) (5.09) -- (1.11) (0.11)
------ ------ ------ ------ ------
Total from distributions (0.34) (5.09) -- (1.11) (0.11)
------ ------ ------ ------ ------
Net asset value, end of year $29.46 $22.13 $35.78 $25.26 $24.37
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 35.2% (26.5%) 41.6% 8.9% 42.8%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 311,984 364,351 617,362 351,459 164,943
Ratio of expenses to average net assets 1.08% 1.06% 1.08% 1.13% 1.31%
Ratio of net investment (loss) income
to average net assets (0.7%) 0.6% (0.5%) (0.4%) (0.4%)
Portfolio turnover rate 228.4% 299.5% 202.1% 196.9% 174.1%
</TABLE>
(1)<F16> In 1999, net investment loss per share is calculated using average
shares outstanding. In prior years, net investment loss per share was
calculated using ending balances prior to consideration of adjustments
for book and tax differences.
The accompanying notes to financial statements are an integral part of these
statements.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of Brandywine
Fund, Inc. (the "Brandywine Fund") and Brandywine Blue Fund, Inc. (the
"Blue Fund") (collectively the "Funds"). Each Fund is registered as a
diversified, open-end management investment company under the Investment
Company Act of 1940. The assets and liabilities of each Fund are segregated
and a shareholder's interest is limited to the Fund in which the
shareholder owns shares. The Brandywine Fund was incorporated under the
laws of Maryland on October 9, 1985. The Blue Fund was incorporated under
the laws of Maryland on November 13, 1990. The investment objective of each
Fund is to produce long-term capital appreciation principally through
investing in common stocks.
(a) Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price.
Securities which are traded over-the-counter are valued at the latest
bid price. Securities for which quotations are not readily available
are valued at fair value as determined by the investment adviser under
the supervision of the Board of Directors. Short-term investments
(securities with maturities of 60 days or less) are valued at
amortized cost which approximates quoted market value. For financial
reporting purposes, investment transactions are recorded on trade
date. Cost amounts, as reported on the statements of net assets, are
substantially the same for Federal income tax purposes.
(b) Net realized gains and losses on common stock are computed on the
identified cost basis.
(c) Provision has not been made for Federal income taxes since the Funds
have elected to be taxed as "regulated investment companies" and
intend to distribute substantially all net investment company taxable
income and net capital gains to shareholders and otherwise comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies. The Brandywine Fund has utilized $387,570,835
and the Blue Fund has utilized $38,767,824 of post-October losses to
offset current year net capital gains, as provided by tax regulations.
(d) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(e) The Funds have investments in short-term variable rate demand notes,
which are unsecured instruments. The Funds may be susceptible to
credit risk with respect to these notes to the extent the issuer
defaults on its payment obligation. The Funds' policy is to monitor
the creditworthiness of the issuer and the Funds do not anticipate
nonperformance by these counterparties.
(f) Generally accepted accounting principles require that permanent
differences between income for financial reporting and tax purposes be
reclassified in the capital accounts.
(g) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from these estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENTS AND TRANSACTIONS WITH RELATED
PARTIES
Each Fund has a management agreement with Friess Associates, Inc. (the
"Adviser"), with whom certain officers and directors of the Funds are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreements, each Fund will pay the Adviser a monthly management fee at
the annual rate of one percent (1%) on the daily net assets of such Fund.
Also, the Adviser is reimbursed for administrative services rendered to
each Fund by a consultant paid by the Adviser.
Each Director who is not affiliated with the Funds receives an annual fee
for service as a Director and is eligible to participate in a deferred
compensation plan with respect to these fees. Participants in the plan may
designate their deferred Director's fees as if invested in either of the
Funds. The value of each Director's deferred compensation account will
increase or decrease as if it were invested in shares of the selected Fund.
The Funds maintain their proportionate share of the Fund's liability for
deferred fees.
(3) DISTRIBUTION TO SHAREHOLDERS
Net investment income and net realized gains, if any, are distributed to
shareholders. The Funds intend to declare distributions of all net
investment income and net realized gains to be paid on October 28, 1999 to
shareholders of record of October 26, 1999.
(4) INVESTMENT TRANSACTIONS
For the period ended September 30, 1999, purchases and proceeds of sales of
investment securities (excluding short-term investments) for the Brandywine
Fund were $9,050,019,903 and $11,060,060,359, respectively; purchases and
proceeds of sales of investment securities (excluding short-term
investments) for the Blue Fund were $745,515,122 and $901,149,272,
respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 1999, liabilities of each Fund included the following:
Brandywine Blue
Fund Fund
-------------- ------------
Payable to brokers for
investments purchased $ 29,515,082 $ 1,746,471
Payable to Adviser for
management fees 3,502,941 265,376
Deferred compensation plan for
Directors 30,000 7,500
Payable to shareholders
for redemptions 6,356 --
Other liabilities 210,866 32,648
(6) SOURCES OF NET ASSETS
As of September 30, 1999, the sources of net assets were as follows:
Fund shares issued
and outstanding $2,915,663,056 $232,557,831
Net unrealized appreciation
on investments 1,112,500,381 69,807,200
Accumulated net
realized gains 166,753,209 9,619,025
-------------- ------------
$4,194,916,646 $311,984,056
-------------- ------------
-------------- ------------
Aggregate net unrealized appreciation as of September 30, 1999 consisted of
the following:
Brandywine Blue
Fund Fund
------------- -----------
Aggregate gross
unrealized appreciation $1,192,805,965 $77,292,172
Aggregate gross unrealized
depreciation (80,305,584) (7,484,972)
-------------- -----------
Net unrealized appreciation $1,112,500,381 $69,807,200
-------------- -----------
-------------- -----------
(7) REQUIRED FEDERAL INCOME TAX DISCLOSURES (UNAUDITED)
In early 1999, shareholders received information regarding all
distributions paid to them by the Funds during the fiscal year ended
September 30, 1999. The Funds hereby designate the following amounts as
long-term capital gains distributions.
Brandywine Blue
Fund Fund
------------- -----------
Capital gains taxed at 20% $ 12,960,377 $ 366,207
The percentage of ordinary income which is eligible for the corporate
dividend received deduction for the fiscal year ended September 30, 1999
was 40% 50%
(PRICEWATERHOUSECOOPERS LOGO)
100 EAST WISCONSIN AVENUE
SUITE 1500
MILWAUKEE, WI 53202
REPORT OF INDEPENDENT ACCOUNTANTS
October 8, 1999
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF BRANDYWINE FUND, INC. AND BRANDYWINE BLUE FUND, INC.
In our opinion, the accompanying statements of net assets of Brandywine Fund,
Inc. and Brandywine Blue Fund, Inc. (the "Funds") and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Funds at
September 30, 1999, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1999 by correspondence with the custodian and brokers and
application of alternative auditing procedures where confirmations were not
received, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
GONE, BUT NOT FORGOTTEN . . .
Our beloved American Berkshire pig Wilbur recently passed on. Wilbur, who
eventually grew to more than 700 pounds, was more than just a reminder of our
pigs-at-the-trough forced stock displacement discipline. He was instrumental in
the growth of Friess Associates. The owner of the store where his feed was
purchased became a shareholder, no doubt as a result of Wilbur's appetite.
Wilbur even oinked some investment ideas to Foster from time to time -- wish we
listened when he told us to buy Microsoft years ago!
Wilbur was a great pet, and we know our fellow shareholders will miss him like
we do. Foster is hopeful that the rumors that Wilbur will be succeeded by a
young buffalo will prove to be untrue!
KUDOS FOR YOUR FUND . . .
MORNINGSTAR -- "Through July 1999, the fund was beating the major indexes and
most of its peers for the year to date. Brandywine's strategy is working, and
still catering to investors who want aggressive growth exposure . . ." August
------
1999
- ----
MUTUAL FUNDS MAGAZINE -- "Brandywine gained 63% (from October 8, 1998) through
mid-August, eclipsing its growth-fund peers' 48% and the S&P 500's 42%. What's
more, that comeback was accomplished without the benefit of Internet plays . .
." October 1999
------------
THE WALL STREET JOURNAL -- "Morningstar reshuffles funds in 401(k) plan . . .
Brandywine remains one of the investment options." July 13, 1999
-------------
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
Custodian: FIRSTAR BANK MILWAUKEE, NA
Transfer Agent: FIRSTAR MUTUAL FUND SERVICES LLC
Independent Accountants: PRICEWATERHOUSECOOPERS LLP
Legal Counsel: FOLEY & LARDNER
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)
