(THE BRANDYWINE FUNDS LOGO)
MANAGED BY FRIESS ASSOCIATES, INC.
ANNUAL REPORT
SEPTEMBER 30, 2000
DEAR FELLOW SHAREHOLDERS:
Reduction of your technology investments from 66 percent of assets to 33 percent
in time to avoid the worst of the drubbing that sector encountered is the most
newsworthy insight to share with you this quarter. With expectations high from
previous dramatic results, many technology stocks, particularly semiconductor
companies, were vulnerable.
From March highs, the Nasdaq Composite, Philadelphia Stock Exchange
Semiconductor and Nasdaq Telecom indexes dropped 33, 40 and 46 percent.
Industry bellwether Intel, which you don't own, warned September-quarter revenue
-----
growth would fall short of expectations, mainly because of weaker demand in
Europe. Intel shares plummeted 22 percent that day and dropped 47 percent since
late-August highs, shedding $235 billion.
Your Bindview Development, Amkor, LTX and Robotic Vision Systems sales preceded
drops of 28, 28, 51 and 54 percent.
This successful repositioning held declines to roughly half of the 12.7 percent
drop in the Nasdaq Composite in September even though Apple's pre-announced
earnings shortfall blindsided us, as distributor and retailer feedback was
positive.
BRANDYWINE BRANDYWINE BLUE
CUMULATIVE % CHANGE % CHANGE
---------- -------- --------
QUARTER -3.7 -4.0
YEAR-TO-DATE 7.8 3.2
ONE YEAR 42.8 35.5
FIVE YEARS 116.4 107.6
TEN YEARS 591.0 N/A
INCEPTION 1141.9*<F1> 511.7**<F2>
ANNUALIZED
FIVE YEARS 16.7 15.7
TEN YEARS 21.3 N/A
INCEPTION 18.6*<F1> 20.5**<F2>
*<F1> 12/30/85
**<F2> 1/10/91
While Brandywine and Blue joined the S&P 500, Nasdaq Indistrials and Wilshire
5000 in negative territory in the September quarter, their 42.8 and 35.5 percent
fiscal year results compare most dramatically to the S&P 500's 13.3 percent
rise.
These results accomplish your best back-to-back fiscal years in Brandywine
history, with Brandywine and Blue growing 95.4 and 83.2 percent.
The last half of the fiscal year was especially harsh for the dot-coms,
validating your commitment to our disciplines requiring potential holdings
typically to have at least three years of earnings history and
$3 million in after-tax income. TheStreet.com Internet Index fell 55 percent
from its March peak. Former favorites Yahoo, Priceline.com and Internet Capital
Group are down 66, 94 and 94 percent from their highs!
The market also confirms your embracing our discipline of avoiding high-PE,
over-researched "big name" companies. Lucent, AT&T, Dell and Microsoft all
dropped 50 percent-plus from recent highs. J.C. Penney is down 83 percent. That
doesn't mean money can't be made in the "biggies," as evidenced by your 20
percent rise in Boeing while the S&P 500 dropped. But these giants are typically
infrequent and brief visitors to your portfolio.
You also should be commended for your commitment to "active management" in
contrast to those lured into indexing, which for a time benefited from a self-
fulfilling situation where money pouring into index funds drove the underlying
stocks regardless of exorbitant PE ratios or questionable fundamentals.
The chart below showing your 133 and 122 percent gains in the last two years
versus only 50 percent for the S&P 500, which most index funds reflect,
underscores the wisdom of sorting out the Boeings from the Lucents rather than
indiscriminately buying a basket of stocks irrespective of fundamentals or
valuations.
OCTOBER 8, 1998 THROUGH OCTOBER 8, 2000
BRANDYWINE FUND 133%
BRANDYWINE BLUE FUND 122%
S&P 500 50%
Analysts, according to the Baseline statistical service, expect the average
Brandywine holding to grow 29 percent in 2001 versus just 8 percent for the S&P
500. Perhaps more important in this volatile environment, those holdings sell at
17.4 times 2001 estimates versus 23 times for the S&P 500.
Pundits predict fewer positive earnings surprises given the changing economic
backdrop, though you wouldn't know it from your companies -- over 80 percent
beat estimates in the most recent quarter.
Ben Detwiler hangs up his research spurs after more than 13 years with Friess
Associates, capping a 37-year investment career. He'll focus on his family,
sailing and 30 or so major "to-do" items he wants to accomplish. Ben was a big
contributor to the success of the Funds, but we'll miss even more his great,
sometimes offbeat sense of humor. He had a knack for bringing smiles to his
teammates' faces whether the market was treating us well or not.
It's great to see new members of your team already contributing to your results.
Andrea Dalton's Boeing pick is the largest holding in both Funds. It gained
20 percent between your July purchase and quarter end. Linda Farquhar's PPL
Corp. pick jumped 21 percent in just over a month.
T.J. Qatato joined us in September after serving as a lead equity analyst at
USAA Investment Management, where he focused on technology stocks. He also has
experience as an analyst for the Employees Retirement System of Texas and a
Dallas-based money manager.
Your entire team and 100 percent of my stock market investments are invested in
the Funds with you. We're grateful for the opportunity to serve you.
God Bless!
/s/ Foster Friess
Foster Friess
President
October 9, 2000
CAPITAL GAINS UPDATE . . .
Brandywine and Brandywine Blue realized approximately $16.06 and $10.86 per
share in gains to be distributed to shareholders as of October 26 as they racked
up 42.8 and 35.5 percent returns in the year ended September. That includes
$9.57 a share for Brandywine and $7.46 for Blue taxable at the lower long-term
rate. These numbers are likely to change slightly between now and the
distribution date.
The Mutual Fund Buyer's Guide recently calculated Brandywine's 10-year tax
efficiency rating at 90 percent. A well-known S&P 500 index fund, an example of
a buy-and-hold approach, earned a 96 percent tax efficiency rating. That fund
grew only 11.8 percent the past year, however, versus Brandywine's 42.8 percent.
That's why we don't let the tax tail wag the investment dog.
While nobody enjoys paying the IRS, taxes are a function of making money. Not
only do the distributions represent realized gains on homerun picks this fiscal
year, but a portion of them stem from companies that also helped create gains of
36.8 percent for Brandywine and 35.2 percent for Blue in fiscal 1999. Nokia
falls into that category. If to avoid capital gains taxes you didn't sell Nokia
in June, the 446 percent increase over cost you realized by your team's timely
sale becomes an unrealized gain reduced by about one-third today!
While the distributions are taxable events for shareholders investing in the
Funds through non-tax-advantaged accounts, they reduce the Funds' net asset
values by the same amounts. That means any built-up unrealized gains you might
have to pay taxes on later on your Fund shares will be reduced by the amount of
the distribution. Please consult with your tax adviser if you have questions on
how the distribution affects your personal tax situation.
BRANDYWINE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. The Boeing Co. +19.3%
2. Tellabs, Inc. -14.4%
3. Southwest Airlines Co. +7.9%
4. The Kroger Co. +3.9%
5. National Semiconductor Corp. +2.0%
6. Safeway Inc. -9.8%
7. PeopleSoft, Inc. +26.7%
8. Integrated Device Technology +417.0%
9. Cardinal Health, Inc. +15.6%
10. Gateway, Inc. -18.3%
EARNINGS GROWTH
YOUR COMPANIES 29%
S&P 500 8%
FORECASTED INCREASE IN EARNINGS PER SHARE
2001 VS 2000
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE. SEPTEMBER 30,
2000.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
39.5%
MID CAP
$2 billion to $9 billion
34.0%
SMALL CAP
below $2 billion
21.4%
CASH
5.1%
TOP TEN INDUSTRY GROUPS
Medical Related (8.8%)
Specialty Retailing (8.8%)
Semiconductor Related (8.0%)
Oil/Gas Field Services (7.8%)
Computer Related (7.4%)
Networking (7.6%)
Aerospace (7.4%)
Oil/Gas Exploration (6.7%)
Electronics (6.4%)
Apparel & Shoe Retailers (5.2%)
Communications Equipment (5.0%)
All Others (23.4%)
Cash (5.1%)
Percentage to total net assets of $5,983,163,132.
-----
<TABLE>
BRANDYWINE FUND
SEPTEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
------------------ ------------- ------ ----------------
<S> <C> <C> <C>
The Boeing Co. $69.9 19.3 Increased commercial aircraft orders helped the world's largest aircraft
manufacturer grow earnings 24 percent in the June quarter, topping estimates
by 12 percent. Cost reductions and expansion of the company's higher-margin
service division continues to improve overall profitability.
RadioShack Corp. $60.6 32.2 Brisk sales of digital audio and video products, wireless phones and home-
satellite equipment resulted in 27 percent June-quarter earnings growth.
Analysts expect the electronic stores chain to record its fourth consecutive
month of double-digit same-store sales growth in September.
Integrated Device
Technology, Inc. $45.8 51.2 Cisco Systems announced it will use a version of the company's Internet
Protocol processors in its switches. Strong demand for Integrated Device's
communications chips helped it beat expectations by 29 percent in the June
quarter. The company earned $0.58 a share versus $0.09 a year ago.
Tyco Int'l. Ltd. $35.3 12.9 The investigation of Tyco's accounting practices ended without major findings
against the company, eliminating concerns about the probe. June-quarter
earnings per share increased to $0.58 from $0.47 a year ago, outpacing
estimates. The diversified manufacturer offered shares of its Tycom undersea
fiber-optic unit to the public.
PeopleSoft, Inc. $31.5 26.7 June-quarter earnings exceeded consensus estimates by 20 percent as software
license orders picked up following Y2K-related delays. The software developer
released PeopleSoft 8.0, the industry's first suite of enterprise resource
planning software hosted exclusively on the Internet.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------- ------ ----------------
Apple
Computer, Inc. $114.5 -50.7 Shares fell sharply on the final day of the quarter after the personal-
computer maker warned that disappointing sales for new product lines would
cause September-quarter profits to fall short of expectations. June-quarter
earnings per share increased to $0.45 from $0.35 a year ago.
Advanced Micro
Devices, Inc. $85.2 -22.7 Despite June-quarter earnings per share increasing to $0.61 from a loss of
$0.55 last year, the semiconductor maker came under selling pressure when
competitor Intel announced September-quarter sales would miss estimates due
to weaker PC demand in Europe.
Tellabs, Inc. $84.6 -28.6 Shares fell in sympathy with several well-known telecommunication companies
experiencing slowdowns in demand for wireless products and services. Strong
sales of Tellabs' flagship Titan cross-connect products that manage broadband
traffic fueled 22 percent June-quarter earnings growth and continue to drive
revenues.
National
Semiconductor
Corp. $68.1 -26.9 Shares of the semiconductor manufacturer slid as several well-known
telecommunication companies cited a slowdown in demand for wireless products
and services. August-quarter earnings jumped to $0.76 a share from $0.01 last
year, beating estimates by 17 percent. Revenues grew 33 percent to $642
million, marking the third consecutive quarter of double-digit growth.
LSI Logic Corp. $68.0 -30.3 Shares stumbled as shipment delays caused by new tracking software and a
shortage of parts for the company's computer-storage products hurt sales. The
custom semiconductor maker reported June-quarter earnings per share of $0.29
versus $0.11 a year ago.
</TABLE>
All gains/losses are calculated on an average cost basis
BRANDYWINE BLUE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. The Boeing Co. +21.5%
2. Southwest Airlines Co. +7.6%
3. The Kroger Co. +4.2%
4. Tellabs, Inc. -12.6%
5. Safeway Inc. -10.1%
6. National Semiconductor Corp. +3.0%
7. PeopleSoft, Inc. +25.5%
8. Gateway, Inc. -17.7%
9. The Limited, Inc. +0.5%
10. Cardinal Health, Inc. +16.0%
EARNINGS GROWTH
YOUR COMPANIES 26%
S&P 500 8%
FORECASTED INCREASE IN EARNINGS PER SHARE
2001 VS 2000
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE. SEPTEMBER 30,
2000.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
54.5%
MID CAP
$2 billion to $9 billion
39.6%
SMALL CAP
below $2 billion
0.4%
CASH
5.5%
Top Ten Industry Groups
Specialty Retailing (11.5%)
Aerospace (8.9%)
Computer Related (8.4%)
Software (7.3%)
Communications Equipment (7.0%)
Medical Related (6.9%)
Oil/Gas Field Services (6.5%)
Oil/Gas Exploration (5.8%)
Semiconductor Related (5.4%)
Electronics (4.8%)
All Others (22.0%)
Cash (5.5%)
Percentage to total net assets of $407,839,448.
-----
<TABLE>
BRANDYWINE BLUE FUND
SEPTEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
----------------- ------------- ------ ---------------
<S> <C> <C> <C>
The Boeing Co. $6.4 21.5 Increased commercial aircraft orders helped the world's largest aircraft
manufacturer grow earnings 24 percent in the June quarter, topping estimates
by 12 percent. Cost reductions and expansion of the company's higher-margin
service division continues to improve overall profitability.
RadioShack Corp. $5.3 33.0 Brisk sales of digital audio and video products, wireless phones and home-
satellite equipment resulted in 27 percent June-quarter earnings growth.
Analysts expect the electronic stores chain to record its fourth consecutive
month of double-digit same-store sales growth in September.
Celestica, Inc. $5.2 61.1 June-quarter earnings per share jumped to $0.30 from $0.16 the year before,
beating estimates by 30 percent. The electronics manufacturer benefits as
telecommunications equipment and computer-related companies outsource
manufacturing to cut costs.
PeopleSoft, Inc. $3.5 25.5 June-quarter earnings exceeded consensus estimates by 20 percent as software
license orders picked up following Y2K-related delays. The software developer
released PeopleSoft 8.0, the industry's first suite of enterprise resource
planning software hosted exclusively on the Internet.
Anadarko
Petroleum Corp. $2.8 35.2 Higher oil and natural gas prices compounded synergies from the company's
Union Pacific Resources Group acquisition earlier this year. June-quarter
earnings per share jumped to $0.56 from $0.06 a year ago as revenues at the
exploration and production company increased nearly 90 percent.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------- ------ ----------------
Apple
Computer, Inc. $10.5 -51.6 Shares fell sharply on the final day of the quarter after the personal-
computer maker warned that disappointing sales for new product lines would
cause September-quarter profits to fall short of expectations. June-quarter
earnings per share increased to $0.45 from $0.35 a year ago.
Tellabs, Inc. $7.1 -27.2 Shares fell in sympathy with several well-known telecommunication companies
experiencing slowdowns in demand for wireless products and services. Strong
sales of Tellabs' flagship Titan cross-connect products that manage broadband
traffic fueled 22 percent June-quarter earnings growth and continue to drive
revenues.
Advanced Micro
Devices, Inc. $6.4 -23.3 Despite June-quarter earnings per share increasing to $0.61 from a loss of
$0.55 last year, the semiconductor maker came under selling pressure when
competitor Intel announced September-quarter sales would miss estimates due
to weaker PC demand in Europe.
National
Semiconductor
Corp. $5.8 -24.4 Shares of the semiconductor manufacturer slid as several well-known
telecommunication companies cited a slowdown in demand for wireless products
and services. August-quarter earnings jumped to $0.76 a share from $0.01 last
year, beating estimates by 17 percent. Revenues grew 33 percent to $642
million, marking the third consecutive quarter of double-digit growth.
LSI Logic Corp. $4.9 -30.4 Shares stumbled as shipment delays caused by new tracking software and a
shortage of parts for the company's computer-storage products hurt sales. The
custom semiconductor maker reported June-quarter earnings per share of $0.29
versus $0.11 a year ago.
</TABLE>
All gains/losses are calculated on an average cost basis
MANAGEMENT'S DISCUSSION OF PERFORMANCE
BRANDYWINE FUND
Repeated Fed-induced interest rate tightening to reduce liquidity and slow the
U.S. economy marked the fiscal year ended September 30, 2000. As those periodic
rate hikes achieved their intended effects, the environment for U.S. stocks
became progressively challenging after what was a positive start to the year.
Earnings strength among technology companies drove an upbeat investment climate.
Technology holdings comprised about 60 percent of Fund assets at the time.
Within technology, semiconductor companies held the largest position in the
portfolio, as the industry continued to benefit from strong demand for cellular
phones, computers and an array of electronic devices. A variety of consumer-
related companies held the second-largest position in the portfolio at nearly 25
percent of assets.
The Fund gained 32.5 percent in the December quarter of 1999, its all-time best
quarterly return. Top holdings such as Nokia, Apple Computer, Motorola and
Nortel Networks posted gains ranging from 55 to over 100 percent. The S&P 500,
S&P MidCap and Russell 2000 gained 14.9, 16.8 and 18.1 percent.
Positive performance trends continued in the March quarter, with technology
holdings again leading the way. Late in the quarter, however, technology stocks
began to stumble, as investors became less willing to tolerate high price-to-
earnings ratios among former market favorites. The Adviser's investment
approach, which focuses on rapidly growing companies that sell at reasonable
price-to-earnings ratios, kept the Fund out of the worst of the late-quarter
downturn, preserving earlier gains.
Brandywine gained 18.1 percent in the March quarter, ahead of gains in the S&P
500, S&P MidCap and Russell 2000 of 2.3, 12.4 and 6.8 percent. Semiconductor
holdings such as LSI Logic, Advanced Micro Devices, Atmel and SanDisk drove
performance with gains of 111, 97, 73 and 154 percent.
The situation worsened for technology stocks in the June quarter. The Adviser,
after determining that the changing economic backdrop adversely impacted
earnings outlooks for semiconductor and other technology companies, switched out
of many of those holdings into companies in health care, energy and other
sectors with better prospects amid slower economic growth.
At the end of the June quarter, energy companies were more than 17 percent of
assets. Companies in health care and other consumer staples sub-sectors were
nearly 12 percent. Sales brought technology companies to less than half of
assets, which worked in the Fund's favor in light of the 13.3 percent June-
quarter drop in the tech-heavy Nasdaq Composite. Brandywine retraced 5.2
percent. The S&P 500, S&P MidCap and Russell 2000 fell 2.7, 3.6 and
4.1 percent.
The Adviser continued to find more promising opportunities outside the
technology sector in the September quarter, eventually reducing the portfolio
position in those stocks to roughly one-third of assets from its high around 66
percent earlier in the year. Within a generally negative September-quarter
market environment, technology stocks continued to bear the brunt of weakened
investor sentiment.
The Nasdaq Composite fell another 7.4 percent in the September quarter of 2000.
The Fund retraced 3.8 percent while the S&P 500 fell 1.0 percent and the Russell
2000 grew 0.8 percent. The S&P MidCap grew 11.8 percent.
The Adviser's investment approach, which isolates opportunities without market-
cap or industry restrictions, provided flexibility to capitalize on
opportunities and avoid major pitfalls amid changing market conditions.
Brandywine Fund's 42.8 percent fiscal-year gain outpaced increases in the S&P
500 and Russell 2000 of 13.3 and 22.0 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>
BRANDYWINE NASDAQ RUSSELL
FUND INDUSTRIALS S&P 500 2000
---------- ---------- ------- -------
9/30/90 25,000 25,000 25,000 25,000
9/30/91 35,350 40,050 32,850 36,225
9/30/92 37,436 42,133 36,496 39,485
9/30/93 55,629 52,961 41,241 52,555
9/30/94 54,851 52,802 42,726 53,343
9/30/95 79,808 66,689 55,458 65,825
9/30/96 87,788 75,225 66,771 74,449
9/30/97 122,289 93,429 93,947 99,166
9/30/98 88,415 70,072 102,496 80,324
9/30/99 120,952 109,312 130,990 95,666
9/30/00 172,731 146,446 148,346 118,042
(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.
AVERAGE ANNUAL TOTAL RETURN
Since Inception
1-Year 5-Year 10-Year 12/30/85
------ ------ ------- --------
42.8% 16.7% 21.3% 18.6%
BRANDYWINE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
ASSETS:
Investments in securities, at value (cost $5,479,531,997) $5,859,003,815
Cash 44,400
Receivable from investments sold 366,086,635
Dividends receivable 2,372,483
Receivable for fund shares sold 1,531,739
Interest receivable 67,475
--------------
Total assets 6,229,106,547
--------------
LIABILITIES:
Payable to brokers for investments purchased 217,424,647
Payable to shareholders for redemptions 22,809,836
Payable to Adviser for management fees 5,253,994
Deferred compensation plan for Directors 105,826
Other liabilities 349,112
--------------
Total liabilities 245,943,415
--------------
NET ASSETS:
Capital Stock, $0.01 par value; 500,000,000
shares authorized; 129,412,100 shares outstanding 3,522,574,105
Net unrealized appreciation on investments 379,471,818
Undistributed net realized gains on investments 2,081,117,209
--------------
Net assets $5,983,163,132
--------------
--------------
CALCULATION OF REDEMPTION PRICE:
Net asset value and redemption price per share
($5,983,163,132 3 129,412,100 shares outstanding) $46.23
------
------
The accompanying notes to financial statements are an integral part of this
statement.
BRANDYWINE FUND, INC.
SCHEDULE OF INVESTMENTS
September 30, 2000
QUOTED
MARKET
SHARES COST VALUE
------------ ------------ ------------
COMMON STOCKS - 96.9% (A)<F7>
AEROSPACE - 7.6%
426,600 BE Aerospace, Inc.*<F6> $ 5,988,162 $ 6,878,925
6,850,000 The Boeing Co. 361,666,225 431,550,000
200,000 Teledyne
Technologies Inc.*<F6> 4,007,250 5,825,000
-------------- --------------
371,661,637 444,253,925
THIS SECTOR IS 19.5% ABOVE YOUR FUND'S COST.
APPAREL & SHOE RETAILERS - 5.3%
213,900 American Eagle
Outfitters, Inc.*<F6> 6,438,371 6,737,850
1,350,000 AnnTaylor Stores Corp.*<F6> 54,323,489 51,890,625
550,000 Chico's FAS, Inc.*<F6> 14,332,996 18,700,000
138,500 Columbia Sportswear Co.*<F6> 5,366,467 6,353,687
55,800 Gadzooks, Inc.*<F6> 947,471 997,425
309,200 Kenneth Cole
Productions, Inc.*<F6> 10,773,717 10,918,625
5,350,000 The Limited, Inc. 121,074,887 118,034,375
217,500 The Men's Wearhouse, Inc.*<F6> 5,470,426 6,157,969
972,700 Pacific Sunwear of
California, Inc.*<F6> 16,984,569 18,238,125
400,000 Polo Ralph Lauren Corp.*<F6> 7,813,718 6,450,000
220,300 Quiksilver, Inc.*<F6> 4,433,709 4,240,775
600,000 Reebok International Ltd.*<F6> 11,879,563 11,287,500
100,000 Skechers U.S.A., Inc.*<F6> 1,374,398 1,512,500
275,000 Too Inc.*<F6> 6,625,510 6,531,250
3,615,000 Venator Group, Inc.*<F6> 56,573,019 44,735,625
-------------- --------------
324,412,310 312,786,331
THIS SECTOR IS 3.6% BELOW YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT - 5.1%
1,165,000 Alcatel SA ADR 87,607,761 73,249,375
500,000 Cable Design
Technologies Corp.*<F6> 12,946,199 12,156,250
100,000 Catapult Communications Corp.*<F6> 1,704,535 1,862,500
4,435,000 Tellabs, Inc.*<F6> 247,258,253 211,771,250
-------------- --------------
349,516,748 299,039,375
THIS SECTOR IS 14.4% BELOW YOUR FUND'S COST.
COMMUNICATIONS SERVICES - 0.7%
1,267,300 MasTec, Inc.*<F6> 45,709,858 39,603,125
THIS SECTOR IS 13.4% BELOW YOUR FUND'S COST.
COMPUTER RELATED - 7.6%
690,000 Affiliated Computer
Services, Inc.*<F6> 31,850,956 34,413,750
64,100 The BISYS Group, Inc.*<F6> 4,411,817 4,955,731
1,250,000 Ceridian Corp.*<F6> 33,555,560 35,078,125
4,117,900 Compaq Computer Corp. 123,620,351 113,571,682
866,200 Cray, Inc.*<F6> 5,991,532 3,870,788
2,687,500 Gateway, Inc.*<F6> 153,806,119 125,640,625
171,975 Microchip Technology, Inc.*<F6> 4,362,568 5,685,923
500,000 Micron Electronics, Inc.*<F6> 6,180,786 4,500,000
1,742,800 Quantum Corp.-DLT &
Storage Systems*<F6> 23,949,093 26,250,925
3,286,200 Silicon Storage
Technology, Inc.*<F6> 103,663,080 89,343,563
100,000 T/R Systems, Inc.*<F6> 1,085,045 887,500
-------------- --------------
492,476,907 444,198,612
THIS SECTOR IS 9.8% BELOW YOUR FUND'S COST.
ELECTRONICS - 6.5%
333,400 ACT Manufacturing, Inc.*<F6> 11,472,075 17,586,850
1,200,000 Amphenol Corp.*<F6> 63,485,459 68,325,000
1,241,800 Anixter International Inc.*<F6> 44,454,104 36,167,425
250,500 Applied Films Corp.*<F6> 5,337,958 6,794,812
742,500 APW Ltd.*<F6> 31,841,386 36,196,875
350,400 Arrow Electronics, Inc.*<F6> 12,230,924 11,935,500
1,572,800 Avnet, Inc. 49,426,047 44,628,200
424,700 C&D Technologies, Inc. 16,975,198 24,101,725
62,100 Jaco Electronics, Inc.*<F6> 1,016,470 931,500
600,000 Kent Electronics Corp.*<F6> 17,337,387 14,325,000
641,775 Molex Inc. 20,617,232 26,593,552
1,543,700 ON Semiconductor Corp.*<F6> 29,209,522 16,787,738
283,200 Pemstar Inc.*<F6> 3,115,200 5,575,500
100,000 Spectrum Control, Inc.*<F6> 1,300,000 1,606,250
2,085,900 Thermo Electron Corp.*<F6> 49,126,793 54,233,400
1,039,900 Viasystems Group, Inc.*<F6> 17,599,029 17,678,300
-------------- --------------
374,544,784 383,467,627
THIS SECTOR IS 2.4% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 3.2%
570,000 AmeriCredit Corp.*<F6> 7,963,623 16,423,125
79,200 Career Education Corp.*<F6> 3,124,058 3,524,400
725,000 First Health Group Corp.*<F6> 22,344,607 23,381,250
26,000 ITT Educational
Services, Inc.*<F6> 676,666 705,250
2,127,800 Lincoln National Corp. 89,016,952 102,400,375
1,152,300 MBNA Corp. 31,722,473 44,363,550
-------------- --------------
154,848,379 190,797,950
THIS SECTOR IS 23.2% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 2.5%
1,650,000 Brinker International, Inc.*<F6> 46,853,965 49,706,250
400,000 CEC Entertainment Inc.*<F6> 11,763,075 12,800,000
1,175,300 Darden Restaurants, Inc. 21,748,509 24,460,931
125,500 Panera Bread Co.*<F6> 2,062,106 2,619,812
322,500 RARE Hospitality
International, Inc.*<F6> 6,337,446 6,570,938
665,600 Ruby Tuesday, Inc. 6,374,498 7,488,000
100,000 Sonic Corp.*<F6> 3,095,790 3,150,000
1,900,700 Wendy's International, Inc. 34,068,880 38,132,794
-------------- --------------
132,304,269 144,928,725
THIS SECTOR IS 9.5% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 2.5%
1,455,500 Marriott International, Inc. 56,920,541 53,034,781
2,934,000 Starwood Hotels & Resorts
Worldwide, Inc. 86,032,703 91,687,500
-------------- --------------
142,953,244 144,722,281
THIS SECTOR IS 1.2% ABOVE YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 2.6%
547,500 Advanced Energy
Industries, Inc.*<F6> 26,195,513 18,067,500
2,525,000 Dover Corp. 119,284,202 118,517,187
235,700 Lone Star Technologies, Inc.*<F6> 11,403,107 10,877,555
300,000 Maverick Tube Corp.*<F6> 8,344,030 8,081,250
-------------- --------------
165,226,852 155,543,492
THIS SECTOR IS 5.9% BELOW YOUR FUND'S COST.
MEDICAL RELATED - 9.0%
106,700 Bindley Western Industries, Inc. 2,694,808 3,414,400
1,481,400 Cardinal Health, Inc. 113,025,495 130,640,962
441,400 The Cooper Companies, Inc. 15,543,391 15,614,525
850,000 DENTSPLY International Inc. 29,053,260 29,696,875
592,200 Laboratory Corporation
of America Holdings*<F6> 47,644,587 70,915,950
45,000 NexMed, Inc.*<F6> 818,906 883,125
950,000 Orthodontic Centers of
America, Inc.*<F6> 24,276,621 31,646,875
100,000 Osteotech, Inc.*<F6> 1,240,630 956,250
600,000 Owens & Minor, Inc. 10,216,969 9,450,000
161,400 Professional Detailing, Inc.*<F6> 4,457,431 9,199,800
250,000 Respironics, Inc.*<F6> 4,745,331 4,171,875
1,962,800 St. Jude Medical, Inc.*<F6> 81,091,110 100,102,800
630,000 Trigon Healthcare, Inc.*<F6> 30,545,274 33,114,375
766,500 UnitedHealth Group Inc. 56,050,956 75,691,875
267,000 Zoll Medical Corp.*<F6> 11,071,688 13,016,250
-------------- --------------
432,476,457 528,515,937
THIS SECTOR IS 22.2% ABOVE YOUR FUND'S COST.
NETWORKING - 0.8%
1,990,000 Network Associates, Inc.*<F6> 45,209,637 45,023,750
THIS SECTOR IS 0.4% BELOW YOUR FUND'S COST.
OIL/GAS EXPLORATION & PRODUCTION - 6.8%
561,100 Alberta Energy Company Ltd. 20,824,642 23,355,787
1,729,000 Anadarko Petroleum Corp. 78,570,398 114,909,340
480,100 Canadian Natural
Resources Ltd.*<F6> 16,595,226 16,083,350
232,200 Comstock Resources, Inc.*<F6> 1,785,823 2,641,275
272,000 Equitable Resources, Inc. 13,743,808 17,238,000
300,000 Hydril Co.*<F6> 5,849,250 6,825,000
1,412,100 Kerr-McGee Corp. 84,196,533 93,551,625
255,900 Mitchell Energy &
Development Corp. 11,978,966 11,931,337
1,850,000 Ocean Energy Inc.*<F6> 31,481,135 28,559,375
185,000 Pioneer Natural Resources Co.*<F6> 2,306,960 2,624,688
88,100 Spinnaker Exploration Co.*<F6> 2,312,625 3,072,488
675,000 Talisman Energy Inc.*<F6> 21,406,544 23,667,187
200,000 Tom Brown, Inc.*<F6> 4,148,905 4,900,000
1,233,400 Triton Energy Ltd.*<F6> 43,676,900 48,102,600
128,600 Unit Corp.*<F6> 2,024,091 1,896,850
-------------- --------------
340,901,806 399,358,902
THIS SECTOR IS 17.1% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 8.0%
1,660,000 ENSCO International Inc. 59,732,742 63,495,000
2,700,000 Grant Prideco, Inc.*<F6> 53,387,487 59,231,250
688,000 Helmerich & Payne, Inc. 23,844,089 24,854,000
832,400 Marine Drilling
Companies, Inc.*<F6> 21,577,773 23,775,425
810,600 Precision Drilling Corp.*<F6> 25,232,464 28,877,625
1,154,600 Pride International, Inc.*<F6> 26,402,849 30,596,900
411,100 Rowan Companies, Inc.*<F6> 11,599,794 11,921,900
909,000 Santa Fe International Corp. 31,833,053 40,961,813
2,100,000 Tidewater Inc. 95,850,867 95,550,000
21,700 TMBR/Sharp Drilling, Inc.*<F6> 266,181 303,800
300,000 UTI Energy Corp.*<F6> 13,494,292 13,387,500
1,700,000 Weatherford
International, Inc.*<F6> 67,873,690 73,100,000
-------------- --------------
431,095,281 466,055,213
THIS SECTOR IS 8.1% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 1.6%
187,500 K-V Pharmaceutical Co.*<F6> 2,548,736 6,585,938
2,551,450 King Pharmaceuticals, Inc.*<F6> 90,442,365 85,314,109
-------------- --------------
92,991,101 91,900,047
THIS SECTOR IS 1.2% BELOW YOUR FUND'S COST.
POLLUTION/CONTROL SERVICES - 0.2%
800,000 Newpark Resources, Inc.*<F6> 7,642,561 7,400,000
70,000 Stericycle, Inc.*<F6> 1,624,342 1,715,000
150,000 Waste Connections, Inc.*<F6> 3,024,329 3,843,750
-------------- --------------
12,291,232 12,958,750
THIS SECTOR IS 5.4% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR RELATED - 8.1%
246,100 C-Cube Microsystems Inc.*<F6> 4,921,608 5,045,050
1,708,000 Cirrus Logic, Inc.*<F6> 47,009,248 68,853,750
1,758,800 Fairchild Semiconductor Corp.*<F6> 48,212,865 49,466,250
1,495,900 Integrated Device
Technology, Inc.*<F6> 26,184,848 135,378,950
775,800 Integrated Silicon
Solution, Inc.*<F6> 19,960,538 11,006,662
115,000 Microsemi Corp.*<F6> 2,771,957 4,384,375
489,500 MKS Instruments, Inc.*<F6> 16,377,294 13,400,063
4,600,000 National Semiconductor Corp.*<F6> 181,432,541 185,150,000
62,000 Supertex, Inc.*<F6> 1,968,040 3,123,250
-------------- --------------
348,838,939 475,808,350
THIS SECTOR IS 36.4% ABOVE YOUR FUND'S COST.
SOFTWARE - 4.6%
160,000 AremisSoft Corp.*<F6> 4,388,141 6,000,000
2,782,700 Cadence Design Systems, Inc.*<F6> 71,462,474 71,480,606
870,000 FileNet Corp.*<F6> 14,380,145 15,823,125
10,500 Great Plains Software, Inc.*<F6> 287,045 295,313
65,000 Group 1 Software, Inc.*<F6> 1,363,019 1,332,500
505,000 Hyperion Solutions Corp.*<F6> 13,781,293 13,066,875
135,000 MSC.Software Corp.*<F6> 1,285,503 1,431,000
5,346,500 PeopleSoft, Inc.*<F6> 117,862,787 149,367,844
224,400 Rainbow Technologies, Inc.*<F6> 8,662,431 7,938,150
100,000 The Ultimate
Software Group, Inc.*<F6> 1,059,586 893,750
-------------- --------------
234,532,424 267,629,163
THIS SECTOR IS 14.1% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 9.0%
1,750,000 BJ's Wholesale Club, Inc.*<F6> 53,072,125 59,718,750
8,600,000 The Kroger Co.*<F6> 186,794,089 194,037,500
70,000 Performance Food Group Co.*<F6> 2,394,625 2,633,750
1,550,000 Pier 1 Imports, Inc. 18,562,842 21,021,875
3,582,700 Safeway Inc.*<F6> 185,403,154 167,267,306
1,375,700 Tech Data Corp.*<F6> 56,045,966 58,811,175
795,000 Zale Corp.*<F6> 32,097,455 25,787,813
-------------- --------------
534,370,256 529,278,169
THIS SECTOR IS 1.0% BELOW YOUR FUND'S COST.
TRANSPORTATION RELATED - 4.3%
200,000 Arkansas Best Corp.*<F6> 3,171,899 3,075,000
540,000 Atlas Air, Inc.*<F6> 19,890,782 22,815,000
150,000 Frontier Airlines, Inc.*<F6> 2,630,133 2,915,625
8,450,000 Southwest Airlines Co. 189,966,703 204,912,500
380,000 Teekay Shipping Corp. 15,846,304 17,836,250
-------------- --------------
231,505,821 251,554,375
THIS SECTOR IS 8.7% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 0.9%
100,000 Buckeye Technologies Inc.*<F6> 1,943,492 2,075,000
84,200 Measurement Specialties, Inc.*<F6> 2,100,778 4,062,650
1,050,000 PPL Corp. 36,210,102 43,837,500
150,000 Trammell Crow Company*<F6> 2,055,117 2,250,000
-------------- --------------
42,309,489 52,225,150
THIS SECTOR IS 23.4% ABOVE YOUR FUND'S COST.
Total common stocks 5,300,177,431 5,679,649,249
PRINCIPAL
AMOUNT COST VALUE
------------ ------------ ------------
SHORT-TERM INVESTMENTS - 3.1% (A)<F7>
COMMERCIAL PAPER - 2.9%
$15,000,000 SBC Communications,
due 10/02/00, discount of 6.70% 14,997,208 14,997,208
50,000,000 FPL Group Capital Inc.,
due 10/03/00, discount of 6.57% 49,981,750 49,981,750
25,000,000 American General Finance,
due 10/10/00, discount of 6.55% 24,959,063 24,959,063
30,000,000 Southern Co.,
due 10/11/00, discount of 6.58% 29,945,166 29,945,166
25,000,000 Southern Co.,
due 10/13/00, discount of 6.55% 24,945,417 24,945,417
25,000,000 Household International,
due 10/16/00, discount of 6.55% 24,931,771 24,931,771
-------------- --------------
Total commercial paper 169,760,375 169,760,375
VARIABLE RATE DEMAND NOTE - 0.2%
9,594,191 Firstar Bank U.S.A., N.A. 9,594,191 9,594,191
-------------- --------------
Total short-term investments 179,354,566 179,354,566
-------------- --------------
Total investments - 100% $5,479,531,997 $5,859,003,815
-------------- --------------
-------------- --------------
*<F6> Non-dividend paying security.
(a)<F7> Percentages for the various classifications relate to total
investments.
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2000
INCOME:
Dividends $ 11,709,046
Interest 13,730,491
--------------
Total income 25,439,537
--------------
EXPENSES:
Management fees 58,577,546
Transfer agent fees 781,744
Administrative services 515,600
Custodian fees 471,663
Printing and postage expense 397,826
Board of Directors fees 83,879
Professional fees 59,795
Registration fees 43,035
Other expenses 67,458
--------------
Total expenses 60,998,546
--------------
NET INVESTMENT LOSS (35,559,009)
--------------
NET REALIZED GAIN ON INVESTMENTS 2,556,358,884
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (733,028,563)
--------------
NET GAIN ON INVESTMENTS 1,823,330,321
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,787,771,312
--------------
--------------
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 2000 and 1999
<TABLE>
2000 1999
---- ----
<S> <C> <C>
OPERATIONS:
Net investment loss $ (35,559,009) $ (29,416,246)
Net realized gain on investments 2,556,358,884 561,000,974
Net (decrease) increase in unrealized appreciation on investments (733,028,563) 882,288,945
-------------- --------------
Net increase in net assets resulting from operations 1,787,771,312 1,413,873,673
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividend from net investment income ($0.264391 per share) -- (46,814,793)
Distributions from net realized gains ($3.120750 and $0.073194 per share, respectively) (380,140,682) (12,960,206)
-------------- --------------
Total distributions (380,140,682)*<F8> (59,774,999)
-------------- --------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (29,293,259 and 15,159,346 shares, respectively) 1,336,300,083 455,819,053
Net asset value of shares issued in distributions (9,483,289 and
2,181,997 shares, respectively) 360,480,596 54,571,751
Cost of shares redeemed (28,923,731 and 81,715,518 shares, respectively) (1,316,164,823) (2,450,014,788)
-------------- --------------
Net increase (decrease) in net assets derived from Fund share activities 380,615,856 (1,939,623,984)
-------------- --------------
TOTAL INCREASE (DECREASE) 1,788,246,486 (585,525,310)
NET ASSETS AT THE BEGINNING OF THE YEAR 4,194,916,646 4,780,441,956
-------------- --------------
NET ASSETS AT THE END OF THE YEAR $5,983,163,132 $4,194,916,646
-------------- --------------
-------------- --------------
</TABLE>
*<F8> See Note 7.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each year)
<TABLE>
Years Ended September 30,
----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $35.09 $25.99 $43.91 $32.83 $33.92
Income from investment operations:
Net investment (loss) income (0.25)(1)<F9> (0.20)(1)<F9> 0.21 (0.07)(1)<F9> (0.08)(1)<F9>
Net realized and unrealized gains (losses)
on investments 14.51 9.64 (11.11) 12.50 2.83
------ ------ ------ ------ ------
Total from investment operations 14.26 9.44 (10.90) 12.43 2.75
Less distributions:
Dividends from net investment income -- (0.27) -- -- --
Distributions from net realized gains (3.12) (0.07) (7.02) (1.35) (3.84)
------ ------ ------ ------ ------
Total from distributions (3.12) (0.34) (7.02) (1.35) (3.84)
------ ------ ------ ------ ------
Net asset value, end of year $46.23 $35.09 $25.99 $43.91 $32.83
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 42.8% 36.8% (27.7%) 39.3% 10.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 5,983,163 4,194,917 4,780,442 9,532,724 6,038,301
Ratio of expenses to average net assets 1.04% 1.05% 1.04% 1.04% 1.06%
Ratio of net investment (loss) income
to average net assets (0.6%) (0.7%) 0.6% (0.3%) (0.4%)
Portfolio turnover rate 244.0% 208.7% 263.7% 192.4% 202.8%
</TABLE>
(1)<F9> In 1999, net investment loss per share was calculated using average
shares outstanding. In all other 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.
MANAGEMENT'S DISCUSSION OF PERFORMANCE
BRANDYWINE BLUE FUND
The Fed tightened interest rates throughout the fiscal year ended September 30,
2000 to reduce liquidity and slow the U.S. economy to stave off inflation. The
rate hikes increasingly showed signs of achieving the Fed's objective as the end
of the year approached, contributing to a less favorable environment for stocks
than at the beginning of the year.
Earnings strength among technology companies drove a positive start to the
fiscal year. Technology holdings represented about 60 percent of Fund assets at
the time. Within technology, semiconductor companies held the largest position
in the portfolio, as the industry continued to benefit from strong demand for
cellular phones, computers and an array of electronic devices. A variety of
consumer-related companies held the second-largest position in the portfolio at
24 percent of assets.
The Fund gained 31.4 percent in the December quarter of 1999, representing its
all-time best quarterly return. Top holdings such as Nokia, Apple Computer,
Motorola and Nortel Networks posted gains ranging from 50 to over 100 percent.
The S&P 500 gained 14.9 percent.
Positive performance trends continued in the March quarter, again primarily
driven by technology holdings. Late in the quarter, however, technology stocks
began to stumble, as investors became less willing to tolerate high price-to-
earnings ratios among former market favorites. The Adviser's investment
approach, which focuses on rapidly growing companies that sell at reasonable
price-to-earnings ratios, kept the Fund from suffering the worst of the late-
quarter downturn, preserving earlier gains.
Brandywine Blue gained 17.3 percent in the March quarter, ahead of the S&P 500's
2.3 percent return. Semiconductor holdings such as LSI Logic, Advanced Micro
Devices, Atmel and SanDisk drove performance with gains of 107, 97, 75 and 168
percent.
The situation worsened for technology stocks in the June quarter. The Adviser,
after identifying adverse conditions for semiconductor and other technology
company earnings outlooks stemming from the changing economic backdrop, switched
out of many of those holdings into companies in health care, energy and other
sectors with better prospects amid slower economic growth.
At the end of the June quarter, energy companies were nearly 20 percent of
assets. Companies in health care and other consumer staples sub-sectors were
almost 11 percent. Technology companies were reduced to roughly half of assets,
which worked in the Fund's favor considering the 13.3 percent June-quarter drop
in the tech-heavy Nasdaq Composite. Brandywine Blue retraced 8.4 percent. The
S&P 500 fell 2.7 percent.
The Adviser continued to find more promising opportunities outside the
technology sector in the September quarter, eventually reducing the portfolio
position in those stocks to under one-third of assets from its high around 66
percent earlier in the year. Within a generally negative September-quarter
market environment, technology stocks continued to bear the brunt of weakened
investor sentiment.
The Nasdaq Composite fell another 7.4 percent in the September quarter of 2000.
The Fund retraced 4.0 percent while the S&P 500 fell 1.0 percent.
The Adviser's investment approach, which emphasizes larger-cap companies with
market caps above $6 billion regardless of industry, provided flexibility to
capitalize on opportunities despite an increasingly difficult environment for
large-cap stocks. Reflecting this, Brandywine Blue's 35.5 percent fiscal-year
gain outpaced by a wide margin the S&P 500's 13.3 percent return.
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>
Brandywine NASDAQ Russell
Blue Fund Industrials S&P 500 2000
--------- ----------- ------- -------
1/10/91 $100,000 $100,000 $100,000 $100,000
9/30/91 130,800 149,900 125,100 143,900
9/30/92 136,032 157,695 138,986 156,851
9/30/93 200,783 198,222 157,054 208,769
9/30/94 206,405 197,628 162,708 211,900
9/30/95 294,747 249,604 211,195 261,485
9/30/96 320,979 281,553 254,279 295,739
9/30/97 454,506 349,689 357,771 393,925
9/30/98 334,062 262,267 390,328 319,079
9/30/99 451,652 409,136 498,839 380,023
9/30/00 612,124 548,120 564,935 468,911
(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.
AVERAGE ANNUAL TOTAL RETURN
Since Inception
1-Year 5-Year 01/10/91
------ ------ --------
35.5% 15.7% 20.5%
BRANDYWINE BLUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
ASSETS:
Investments in securities, at value (cost $370,520,571) $390,535,207
Cash 488,315
Receivable from investments sold 32,131,877
Dividends receivable 247,807
Interest receivable 38,050
Other receivable 92,009
------------
Total assets 423,533,265
------------
LIABILITIES:
Payable to brokers for investments purchased 15,244,662
Payable to Adviser for management fees 381,863
Deferred compensation plan for Directors 25,530
Payable to shareholders for redemptions 17,982
Other liabilities 23,780
------------
Total liabilities 15,693,817
------------
NET ASSETS:
Capital Stock, $0.01 par value; 100,000,000 shares
authorized; 10,909,056 shares outstanding 273,034,191
Net unrealized appreciation on investments 20,014,636
Undistributed net realized gains on investments 114,790,621
------------
Net assets $407,839,448
------------
------------
CALCULATION OF REDEMPTION PRICE:
Net asset value and redemption price per share
($407,839,448 3 10,909,056 shares outstanding) $37.39
------
------
The accompanying notes to financial statements are an integral part of this
statement.
BRANDYWINE BLUE FUND, INC.
SCHEDULE OF INVESTMENTS
September 30, 2000
QUOTED
MARKET
SHARES COST VALUE
--------- --------- ---------
COMMON STOCKS - 98.7% (A)<F14>
AEROSPACE - 9.3%
575,000 The Boeing Co. $ 29,812,435 $ 36,225,000
THIS SECTOR IS 21.5% ABOVE YOUR FUND'S COST.
APPAREL & SHOE RETAILERS - 3.4%
600,000 The Limited, Inc. 13,170,042 13,237,500
THIS SECTOR IS 0.5% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT - 7.3%
150,000 Alcatel SA ADR 11,227,514 9,431,250
400,000 Tellabs, Inc.*<F13> 21,863,207 19,100,000
------------ ------------
33,090,721 28,531,250
THIS SECTOR IS 13.8% BELOW YOUR FUND'S COST.
COMPUTER RELATED - 8.7%
144,000 Ceridian Corp.*<F13> 3,814,823 4,041,000
450,000 Compaq Computer Corp. 13,468,065 12,411,000
350,000 Gateway, Inc.*<F13> 19,890,449 16,362,500
40,800 Microchip Technology, Inc.*<F13> 761,523 1,348,950
------------ ------------
37,934,860 34,163,450
THIS SECTOR IS 9.9% BELOW YOUR FUND'S COST.
ELECTRONICS - 5.0%
120,000 Amphenol Corp.*<F13> 6,399,446 6,832,500
73,875 Molex Inc. 2,247,968 3,061,195
140,000 ON Semiconductor Corp.*<F13> 2,553,700 1,522,500
244,000 Thermo Electron Corp.*<F13> 5,705,521 6,344,000
100,000 Viasystems Group, Inc.*<F13> 1,671,356 1,700,000
------------ ------------
18,577,991 19,460,195
THIS SECTOR IS 4.7% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 4.2%
242,500 Lincoln National Corp. 10,235,394 11,670,312
124,200 MBNA Corp. 3,446,560 4,781,700
------------ ------------
13,681,954 16,452,012
THIS SECTOR IS 20.2% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 1.8%
150,000 Darden Restaurants, Inc. 2,790,880 3,121,875
203,500 Wendy's International, Inc. 3,745,672 4,082,719
------------ ------------
6,536,552 7,204,594
THIS SECTOR IS 10.2% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 4.2%
106,900 Marriott International, Inc. 4,180,029 3,895,169
400,000 Starwood Hotels & Resorts
Worldwide, Inc. 12,453,524 12,500,000
------------ ------------
16,633,553 16,395,169
THIS SECTOR IS 1.4% BELOW YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 2.7%
225,000 Dover Corp. 10,677,603 10,560,938
THIS SECTOR IS 1.1% BELOW YOUR FUND'S COST.
MEDICAL RELATED - 7.2%
150,000 Cardinal Health, Inc. 11,407,001 13,228,125
140,000 St. Jude Medical, Inc.*<F13> 5,749,063 7,140,000
77,800 UnitedHealth Group Inc. 5,708,766 7,682,750
------------ ------------
22,864,830 28,050,875
THIS SECTOR IS 22.7% ABOVE YOUR FUND'S COST.
OIL/GAS EXPLORATION & PRODUCTION - 6.1%
112,000 Alberta Energy Company Ltd. 4,157,074 4,662,000
159,250 Anadarko Petroleum Corp. 7,253,035 10,583,755
129,000 Kerr-McGee Corp. 7,678,307 8,546,250
------------ ------------
19,088,416 23,792,005
THIS SECTOR IS 24.6% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 6.8%
165,000 ENSCO International Inc. 5,918,922 6,311,250
290,000 Grant Prideco, Inc.*<F13> 5,809,035 6,361,875
90,100 Rowan Companies, Inc.*<F13> 2,603,833 2,612,900
100,000 Santa Fe International Corp. 3,538,199 4,506,250
160,000 Weatherford International, Inc.*<F13> 6,405,735 6,880,000
------------ ------------
24,275,724 26,672,275
THIS SECTOR IS 9.9% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR RELATED - 5.6%
135,000 Fairchild Semiconductor Corp.*<F13> 4,514,062 3,796,875
450,000 National Semiconductor Corp.*<F13> 17,583,187 18,112,500
------------ ------------
22,097,249 21,909,375
THIS SECTOR IS 0.9% BELOW YOUR FUND'S COST.
SOFTWARE - 7.6%
475,000 Cadence Design Systems, Inc.*<F13> 12,154,685 12,201,562
625,000 PeopleSoft, Inc.*<F13> 13,912,803 17,460,938
------------ ------------
26,067,488 29,662,500
THIS SECTOR IS 13.8% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 12.1%
170,000 BJ's Wholesale Club, Inc.*<F13> 5,156,388 5,801,250
850,000 The Kroger Co.*<F13> 18,402,452 19,178,125
400,000 Safeway Inc.*<F13> 20,779,166 18,675,000
80,000 Tech Data Corp.*<F13> 3,200,205 3,420,000
------------ ------------
47,538,211 47,074,375
THIS SECTOR IS 1.0% BELOW YOUR FUND'S COST.
TRANSPORTATION RELATED - 5.0%
800,000 Southwest Airlines Co. 18,027,100 19,400,000
THIS SECTOR IS 7.6% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 1.7%
160,000 PPL Corp. 5,382,148 6,680,000
------------ ------------
THIS SECTOR IS 24.1% ABOVE YOUR FUND'S COST.
Total common stocks 365,456,877 385,471,513
PRINCIPAL
AMOUNT COST VALUE
--------- --------- ---------
SHORT-TERM INVESTMENTS - 1.3% (A)<F14>
COMMERCIAL PAPER - 1.3%
$5,000,000 FPL Group Capital Inc.,
due 10/03/00, discount of 6.57% 4,998,175 4,998,175
VARIABLE RATE DEMAND NOTE - 0.0%
65,519 Firstar Bank U.S.A., N.A. 65,519 65,519
------------ ------------
Total short-term investments 5,063,694 5,063,694
------------ ------------
Total investments - 100% $370,520,571 $390,535,207
------------ ------------
------------ ------------
*<F13> Non-dividend paying security.
(a)<F14> Percentages for the various classifications relate to total
investments.
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2000
INCOME:
Dividends $ 1,028,858
Interest 1,174,159
------------
Total income 2,203,017
------------
EXPENSES:
Management fees 4,300,678
Administrative services 131,950
Professional fees 44,113
Custodian fees 43,401
Registration fees 36,705
Board of Directors fees 20,254
Transfer agent fees 16,314
Printing and postage expense 12,011
Other expenses 12,202
------------
Total expenses 4,617,628
------------
NET INVESTMENT LOSS (2,414,611)
------------
NET REALIZED GAIN ON INVESTMENTS 162,091,687
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (49,792,564)
------------
NET GAIN ON INVESTMENTS 112,299,123
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $109,884,512
------------
------------
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, 2000 and 1999
<TABLE>
2000 1999
---- ----
<S> <C> <C>
OPERATIONS:
Net investment loss $ (2,414,611) $ (2,243,216)
Net realized gain on investments 162,091,687 50,355,688
Net (decrease) increase in unrealized appreciation on investments (49,792,564) 53,901,197
------------ ------------
Net increase in net assets resulting from operations 109,884,512 102,013,669
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividend from net investment income ($0.204780 per share) -- (3,234,784)
Distributions from net realized gains ($2.178740 and $0.132292 per share, respectively) (23,090,864) (2,089,735)
------------ ------------
Total distributions (23,090,864)*<F15> (5,324,519)
------------ ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (5,442,065 and 3,879,907 shares, respectively) 208,227,765 101,668,079
Net asset value of shares issued in distributions
(665,230 and 226,167 shares, respectively) 21,712,487 4,828,670
Cost of shares redeemed (5,788,300 and 9,983,841 shares, respectively) (220,878,508) (255,552,611)
------------ ------------
Net increase (decrease) in net assets derived from Fund share activities 9,061,744 (149,055,862)
------------ ------------
TOTAL INCREASE (DECREASE) 95,855,392 (52,366,712)
NET ASSETS AT THE BEGINNING OF THE YEAR 311,984,056 364,350,768
------------ ------------
NET ASSETS AT THE END OF THE YEAR $407,839,448 $311,984,056
------------ ------------
------------ ------------
</TABLE>
*<F15> See Note 7.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each year)
<TABLE>
Years Ended September 30,
----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $29.46 $22.13 $35.78 $25.26 $24.37
Income from investment operations:
Net investment (loss) income (0.21)(1)<F16> (0.18)(1)<F16> 0.19 (0.10)(1)<F16> (0.05)(1)<F16>
Net realized and unrealized gains (losses)
on investments 10.32 7.85 (8.75) 10.62 2.05
------ ------ ------ ------ ------
Total from investment operations 10.11 7.67 (8.56) 10.52 2.00
Less distributions:
Dividends from net investment income -- (0.21) -- -- --
Distributions from net realized gains (2.18) (0.13) (5.09) -- (1.11)
------ ------ ------ ------ ------
Total from distributions (2.18) (0.34) (5.09) -- (1.11)
------ ------ ------ ------ ------
Net asset value, end of year $37.39 $29.46 $22.13 $35.78 $25.26
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 35.5% 35.2% (26.5%) 41.6% 8.9%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 407,839 311,984 364,351 617,362 351,459
Ratio of expenses to average net assets 1.07% 1.08% 1.06% 1.08% 1.13%
Ratio of net investment (loss) income
to average net assets (0.6%) (0.7%) 0.6% (0.5%) (0.4%)
Portfolio turnover rate 245.7% 228.4% 299.5% 202.1% 196.9%
</TABLE>
(1)<F16> In 1999, net investment loss per share was calculated using average
shares outstanding. In all other 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, 2000
(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 schedule of
investments, 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 and the Blue
Fund will utilize earnings and profits distributed to shareholders
on redemption of shares as part of the dividends paid deduction,
during the year ended September 30, 2000.
(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 the
respective 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 30, 2000
to shareholders of record of October 26, 2000. Shareholders will be sent
a 2000 Form 1099-DIV in January, 2001 representing their proportionate
share of these distributions. The Form 1099-DIV would consider the impact
of any retroactive tax law changes.
(4) INVESTMENT TRANSACTIONS
For the period ended September 30, 2000, purchases and proceeds of sales
of investment securities (excluding short-term investments) for the
Brandywine Fund were $13,550,301,564 and $13,765,866,256, respectively;
purchases and proceeds of sales of investment securities (excluding
short-term investments) for the Blue Fund were $988,902,656 and
$1,019,910,238, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 2000, liabilities of each Fund included the
following:
Brandywine Blue
Fund Fund
---------- ----------
Payable to brokers for
investments purchased $217,424,647 $15,244,662
Payable to shareholders
for redemptions 22,809,836 17,982
Payable to Adviser for
management fees 5,253,994 381,863
Deferred compensation plan for
Directors 105,826 25,530
Other liabilities 349,112 23,780
(6) SOURCES OF NET ASSETS
As of September 30, 2000, the sources of net assets were as follows:
Fund shares issued
and outstanding $3,522,574,105 $273,034,191
Net unrealized appreciation
on investments 379,471,818 20,014,636
Accumulated net
realized gains 2,081,117,209 114,790,621
-------------- ------------
$5,983,163,132 $407,839,448
-------------- ------------
-------------- ------------
Aggregate net unrealized appreciation as of September 30, 2000 consisted
of the following:
Brandywine Blue
Fund Fund
---------- ----------
Aggregate gross
unrealized appreciation $647,424,429 $36,693,367
Aggregate gross unrealized
depreciation (267,952,611) (16,678,731)
------------ -----------
Net unrealized appreciation $379,471,818 $20,014,636
------------ -----------
------------ -----------
(7) REQUIRED FEDERAL INCOME TAX DISCLOSURES (UNAUDITED)
In early 2000, shareholders received information regarding all
distributions paid to them by the Funds during the fiscal year ended
September 30, 2000. The Funds hereby designate the following amounts as
long-term capital gains distributions.
Capital gains taxed at 20% $349,722,826 $23,090,864
The percentage of ordinary income which is eligible for the corporate
dividend received deduction for the fiscal year ended September 30, 2000
was 1.0% 0%
(PRICEWATERHOUSECOOPERS LOGO)
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
REPORT OF INDEPENDENT ACCOUNTANTS
October 9, 2000
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF BRANDYWINE FUND, INC. AND BRANDYWINE BLUE FUND, INC.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, 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, 2000, 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 accounting principles generally accepted in the United States of
America. 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 auditing standards generally accepted in the United States of
America, 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
KUDOS FOR YOUR FUND . . .
LOUIS RUKEYSER'S MUTUAL FUNDS --". . . Brandywine's performance over the past 12
months has been impressive, with a 54.5% advance that not only beat its average
peer but was more than two-and-a-half times the return of the S&P." January 2000
------------
MUTUAL FUNDS MAGAZINE -- Brandywine receives an overall 5-star rating, the
highest performance accolade for risk-adjusted return. February 2000
-------------
FORBES -- Brandywine listed among a dozen funds as "Outsiders with Winning Ways"
for posting superior results in the 1990s -- 20 percent annualized -- without
mimicking the S&P 500. February 2000
-------------
MONEY -- Brandywine named to the Money 100, "the best mutual funds you can buy,"
for the third consecutive year. June 2000
---------
MORNINGSTAR -- "Friess and D'Alonzo work with one of the deepest management
staffs in the business." July 2000
---------
MUTUAL FUNDS MAGAZINE -- Brandywine awarded the highest 5-star rating.
"Brandywine deserves some new respect. Fund managers Bill D'Alonzo and Foster
Friess rewarded the faithful with a 54% gain in 1999, which whipped the returns
of the average growth fund and the S&P 500." August 2000
-----------
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, 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; Carl Gates, Vice
President; John Ragard, Vice President; and Paul Robinson, Vice President
Report editor: Rebecca Buswell
Report Staff: Chris Aregood, Chris Long, Adam Rieger
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.
