(THE BRANDYWINE FUNDS LOGO)
MANAGED BY FRIESS ASSOCIATES, INC.
QUARTERLY REPORT
DECEMBER 31, 2000
DEAR FELLOW SHAREHOLDERS:
Gains in Brandywine and Brandywine Blue of 7.1 and 6.8 percent last year put you
in an elite group. Most investors lost money. Besides Brandywine, only three
other funds in the Investor's Business Daily Mutual Fund Index increased. The
other 19 lost an average of 18.5 percent, with the worst plummeting 51 percent.
The Nasdaq Composite's 39 percent drop was the worst in any major index since
1931. The S&P 500 had its worst year since 1977. The Dow Jones Industrial
Average fell more than any year since 1981. The Nasdaq Telecom, Philadelphia
Stock Exchange Semiconductor and Nasdaq Computer indexes dropped 62, 57 and 56
percent from their highs.
The comment from the No-Load Fund Analyst that we "are among the most obsessive
growth stock pickers with respect to knowing [our] companies well" and
Morningstar's quote that our approach caters to investors "who want aggressive
growth exposure, just toned down a notch" took on more relevance in the December
quarter when most of the carnage occurred. Brandywine retraced a meager 0.6
percent and Blue actually grew 3.6 percent, putting them in the top 6 and top 1
percent of their Morningstar peers.
DECEMBER QUARTER PERFORMANCE
Brandywine Blue 3.6%
Brandywine Fund (0.6)%
S&P MidCap (4.1)%
Russell 2000 (7.3)%
S&P 500 (7.8)%
NASDAQ Industrials (27.5)%
What explains your success?
Seldom do we make an exception to the criterion that a company possess three
years of EARNINGS HISTORY and at least $3 million in after-tax income before it
comes onto your researchers' radar screens. In your March 1999 report we decried
"bloated Internet valuations" when other investors believed only growth in
revenues and subscribers counted, and earnings were irrelevant.
Your belief in our key tenet that EARNINGS DO MATTER shielded you from the dot-
com debacle. TheStreet.com Internet Index plummeted 74 percent last year. At
least 210 Internet companies closed their doors, taking $1.5 billion in
investment with them. Sixty percent of them occurred in the December quarter.
There will be more "demises."
You also escaped the compression in PE RATIOS among "the favorites of the day."
Highflying multiples of 80 to 90 times earnings, and even higher, dropped closer
to realistic levels. From their former highs, Microsoft, Dell, America Online,
AT&T and Lucent are down 64, 70, 63, 72 and 84 percent, as of year end. Your
companies' price-to-earnings ratios over many years ranged from 14 to 19 times
forward earnings, rarely exceeding 22 times.
BRANDYWINE BRANDYWINE BLUE
CUMULATIVE % CHANGE % CHANGE
---------- -------- --------
Quarter -0.6 3.6
One Year 7.1 6.8
Five Years 128.6 132.1
Ten Years 556.4 N/A
Inception 1133.7*<F1> 533.2**<F2>
ANNUALIZED
----------
Five Years 18.0 18.3
Ten Years 20.7 N/A
Inception 18.2*<F1> 20.3**<F2>
*<F1> 12/30/85
**<F2> 1/10/91
Baseline statistics show your average stock selling at 19 times 2001 estimates,
with forecasted earnings growth of 24 percent. The average S&P 500 component is
expected to grow only 7 percent, yet sells at a higher 21 times expectations.
Being sensitive to how much one pays for any given company's excellence also
matters.
Your commitment to ACTIVE MANAGEMENT versus indexing has been richly rewarded.
Investing in a pre-constructed basket of stocks, including the sick and
outrageously over-valued ones, has never made sense to us. The following chart
shows your results since March 1999 versus indexers, represented by the S&P 500,
and investors in the highflying, mega-PE Wall Street darlings, represented by
the Nasdaq Composite, through 2000.
BRANDYWINE ACTIVE MANAGEMENT CLOBBERED
INDEXERS AND HIGH-PE INVESTORS
Brandywine Fund 60.2%
Brandywine Blue Fund 54.3%
S&P 500 4.8%
NASDAQ Composite 0.4%
Digging deeply into a company's FUNDAMENTAL PROSPECTS, its accounting and its
management caused your research team to reduce technology holdings in the spring
and summer from a high of 67 percent of assets well before most investors
perceived the deterioration in outlooks about to occur. Redeploying into
aerospace, airline and health-care companies, as well as beneficiaries of
natural gas shortages and utility deregulation built your results.
Had Brandywine kept the portfolio with which it started the year, the Fund would
have dropped 17.9 percent. Intense sensitivity to each company's progress
improved Brandywine's year-2000 fate by 25 percentage points -- a difference of
nearly $1 billion!
Your LONG-TERM PERSPECTIVE positioned you to benefit from recent progress. The
Nasdaq Composite's 86 percent surge in 1999 surpassed your results. In the past
year, however, it dropped 39 percent, resulting in 13 percent growth for the
past two years combined. Brandywine grew 64 percent.
The same in-depth fundamental analysis kept us out of many companies in the
March quarter of 1998. Companies such as J.C. Penney, Kmart, Gillette, Goodyear
and Sears rose 18 to 45 percent that quarter.
You underperformed the S&P 500 by 11 percentage points in that period. But your
long-term perspective now gives you 63.3 percent growth versus 41.4 percent for
the S&P 500 over the past three years, including that quarter. The above-
---------
mentioned stocks that climbed in the March quarter fell 36 to 79 percent from
the end of March 1998 through 2000. About half of the stocks in the S&P 500 at
the end of March 1998 declined through 2000.
"What have you done for me lately?" is always a fair question we expect to be
asked. We are keenly aware that it is what we do for you TOMORROW that counts
and believe the strategy you have chosen becomes even more important in the more
challenging environment of the immediate future.
The surprise 0.5 percent reduction in short-term interest rates January 3 will
not immediately halt the economic slide just as near zero interest rates in
Japan do not necessarily guarantee resurgence there. We will need to maintain
vigilance on a company-by-company basis. Many stocks will go up in ANTICIPATION
of the eventual return of growth even though no immediate sign of that growth
appears in current or near-term company statistics.
We appreciate the many notes and Christmas cards carrying congratulations on
year-2000 results. These are welcome offsets to the few shareholders annoyed
with the large distribution this past fiscal year. As Bill D'Alonzo and I both
have essentially all of our own stock market investments in the Funds with you,
we too are bummed about paying taxes. But, as we discuss on page 2 of Looking
Forward, we're fully aware that paying lower taxes means we made less money.
Sir John Templeton, whose John M. Templeton Foundation is one of your largest
fellow shareholders, just edited a book called Worldwide Worship, which includes
songs, prayers and poetry from many of the world's religions. Support a fellow
shareholder and go buy it! Eighty-eight-year-old Sir John is remarkable not only
for his icon status as one of the world's greatest investors, but also for his
transition from "Success to Significance" talked about in the book Half Time by
Bob Buford.
Sir John's foundation now dedicates $30 million a year to increasing man's
understanding of God. It finances, for example, scientific studies at key
universities like Harvard on the impact of forgiveness on the immune system,
general health and even longevity.
Many of you have encouraged spreading the 100 percent ownership Lynn and I have
of the Funds' manager, Friess Associates. We recently enlisted the assistance of
Goldman Sachs. We've stressed to them that Friess Associates is not "for sale,"
but rather in search of a strategic investor who would: 1) allow us to shift a
portion of the firm's equity to teammates; 2) add expertise that would benefit
existing clients and shareholders; and 3) want me to maintain a significant
equity stake and stay involved long into the future.
With three of my aunts reaching age 100 and my mother still playing a mean game
of bingo at 91, I plan to be of help to you for a long time to come, Lord
willing. We'll keep you posted. Thanks for the opportunity to invest the assets
you have entrusted to our stewardship.
God Bless!
/s/Foster Friess
Foster Friess
President
January 4, 2001
BRANDYWINE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. The Boeing Co. +31.7%
2. Tellabs, Inc. +8.4%
3. Tyco International Ltd. +3.2%
4. Southwest Airlines Co. +50.7%
5. Duke Energy Corp. -2.1%
6. The Kroger Co. +24.6%
7. Safeway, Inc. +20.8%
8. Schering-Plough Corp. +0.8%
9. American Home Products Corp. +1.2%
10. Waste Management, Inc. +12.9%
EARNINGS GROWTH
Your Companies 24%
S&P 500 7%
FORECASTED INCREASE IN EARNINGS PER SHARE
2001 VS 2000
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE. DECEMBER 31,
2000.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
56.9%
MID CAP
$2 billion to $9 billion
25.5%
SMALL CAP
below $2 billion
11.4%
CASH
6.2%
TOP TEN INDUSTRY GROUPS
Utilities (10.3%)
Drilling and Oil/Gas Services (9.3%)
Supermarkets (8.0%)
Pharmaceuticals (7.8%)
Oil/Gas Exploration & Production (6.6%)
Medical Related (5.9%)
Communications Equipment (5.7%)
Software (5.7%)
Aerospace (5.2%)
Machinery & Miscellaneous Manufacturing (4.7%)
All Others (24.6%)
Cash (6.2%)
<TABLE>
BRANDYWINE FUND
DECEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
------------------ ------------- ------ ---------------
<S> <C> <C> <C>
Southwest
Airlines Co. $77.0 37.6 As a scrappy low-cost competitor to major airlines, Southwest
benefits from a lower operating cost structure and well executed fuel
hedges. The company grew September-quarter earnings 46 percent,
marking the third straight quarter it topped estimates.
PeopleSoft, Inc. $61.2 41.0 September-quarter earnings quadrupled to $0.08 a share from $0.02 a
year earlier, beating estimates by 14 percent. September-quarter
revenues from software licenses doubled from the same quarter a year
ago as enthusiasm continues for PeopleSoft 8.0, the industry's first
suite of enterprise resource planning software hosted exclusively on
the Internet.
Tellabs, Inc. $60.1 18.6 Strong sales of Tellabs' flagship Titan cross-connect products that
manage broadband traffic fueled 38 percent September-quarter earnings
growth. The company announced a multi-year contract with Sprint for
its new Titan 6500 product in December.
Safeway, Inc. $56.7 33.9 The supermarket chain operator grew September-quarter earnings 20
percent. The company acquired Genuardi's Family Markets, a privately
owned supermarket chain based in Pennsylvania, to solidify its strong
East-Coast foothold.
King
Pharmaceuticals, Inc. $43.0 50.4 The FDA approved the company's Altace ace inhibitor for additional
uses, leading to a deal with American Home Products to co-market the
drug for new applications. The manufacturer of branded and generic
drugs grew September-quarter earnings 30 percent on revenue growth of
55 percent.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------- ------ ----------------
Compaq
Computer Corp. $104.9 -40.4 Slowing demand for personal computers spread to the higher-end
commercial computers and low-end network termination servers Compaq
sells to small businesses. You sold as Compaq pre-announced lower-
than-expected sales for the December quarter.
National
Semiconductor
Corp. $70.8 -38.3 The changing economic environment limited near-term earnings
visibility for the manufacturer of semiconductors used in computers
and communication devices. You sold in October on signs that revenue
and earnings might not meet expectations in upcoming quarters because
of weaker-than-expected mobile-phone sales.
Integrated Device
Technology
$56.0 -41.4 The communications chip maker fell after Cisco Systems, which uses a
version of the company's Internet Protocol processors in its
switches, reported rising inventories. You sold Integrated Device in
October.
ADC
Telecommunications,
Inc. $41.0 -24.5 The maker of equipment that enables communication over broadband
networks came under pressure as sales of high-bandwidth digital
services slowed. October-quarter earnings per share still increased
to $0.18 from $0.12 last year.
Cirrus Logic, Inc. $40.0 -46.9 The company grew October-quarter earnings 87 percent, earning $0.43 a
share versus $0.23 a year ago. Your team sold Cirrus as fears
surfaced that slowing personal computer sales would force the company
to scale back inventory and earnings projections.
</TABLE>
All gains/losses are calculated on an average cost basis
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
December 31, 2000
(Unaudited)
QUOTED
MARKET
SHARES COST VALUE (B)<F4>
------ ---- -------------
COMMON STOCKS - 93.8% (A)<F3>
AEROSPACE - 5.2%
426,600 BE Aerospace, Inc. $ 5,988,162 $ 6,825,600
4,416,000 The Boeing Co. 221,306,101 291,456,000
180,000 Teledyne Technologies Inc. 3,595,800 4,252,500
------------ ------------
230,890,063 302,534,100
THIS SECTOR IS 31.0% ABOVE YOUR FUND'S COST.
APPAREL & SHOE RETAILERS - 4.1%
1,290,000 American Eagle Outfitters, Inc. 41,644,247 54,502,500
120,500 Factory 2-U Stores Inc. 3,695,623 3,991,562
140,000 Gadzooks, Inc. 2,493,162 2,065,000
1,800,000 Jones Apparel Group, Inc. 54,953,170 57,937,500
184,800 Kenneth Cole Productions, Inc. 6,364,286 7,438,200
250,000 The Men's Wearhouse, Inc. 6,435,204 6,812,500
1,435,200 Pacific Sunwear of California, Inc. 25,669,344 36,777,000
400,000 Polo Ralph Lauren Corp. 7,813,718 8,925,000
250,000 Too Inc. 3,780,131 3,125,000
3,615,000 Venator Group, Inc. 56,573,019 56,032,500
------------ ------------
209,421,904 237,606,762
THIS SECTOR IS 13.5% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT - 5.7%
2,828,700 ADC Telecommunications, Inc. 63,237,517 51,270,188
4,893,200 Tellabs, Inc. 255,153,343 276,465,800
------------ ------------
318,390,860 327,735,988
THIS SECTOR IS 2.9% ABOVE YOUR FUND'S COST.
COMPUTER/ELECTRONICS - 2.9%
74,900 Amphenol Corp. 3,454,108 2,935,144
1,400,000 Ceridian Corp. 37,743,133 27,912,500
1,100,000 Electronic Data Systems Corp. 59,496,230 63,525,000
405,800 Quantum Corp.-DLT &
Storage Systems 5,374,423 5,402,213
173,000 Tech Data Corp. 4,541,158 4,679,096
2,085,900 Thermo Electron Corp. 49,126,793 62,055,525
------------ ------------
159,735,845 166,509,478
THIS SECTOR IS 4.2% ABOVE YOUR FUND'S COST.
DRILLING AND OIL/GAS SERVICES - 9.3%
900,000 Baker Hughes Inc. 36,316,725 37,406,250
2,100,000 Dynegy Inc. 99,445,835 117,731,250
2,350,000 ENSCO International Inc. 81,270,709 80,046,875
688,000 Helmerich & Payne, Inc. 23,844,089 30,186,000
1,000,000 Marine Drilling Companies, Inc. 25,622,321 26,750,000
1,154,600 Pride International, Inc. 26,402,849 28,432,025
2,400,000 Rowan Companies, Inc. 56,780,460 64,800,000
271,600 Seitel, Inc. 4,323,302 5,007,625
14,500 TMBR/Sharp Drilling, Inc. 176,181 212,969
50,000 Universal Compression
Holdings, Inc. 1,540,500 1,884,375
750,000 UTI Energy Corp. 16,636,887 24,656,250
400,000 Veritas DGC Inc. 11,395,858 12,920,000
2,300,000 Weatherford International, Inc. 89,316,250 108,675,000
------------ ------------
473,071,966 538,708,619
THIS SECTOR IS 13.9% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 3.6%
100,000 AmeriPath, Inc. 1,735,550 2,500,000
170,500 Career Education Corp. 6,427,434 6,670,812
850,000 Charter One Financial, Inc. 21,925,425 24,543,750
150,000 Copart, Inc. 2,381,625 3,225,000
43,574 Employee Solutions, Inc. 0 131
174,300 Fidelity National Financial, Inc. 4,264,633 6,438,206
725,000 First Health Group Corp. 22,344,607 33,757,812
459,800 Quanta Services, Inc. 16,365,750 14,799,813
50,000 Resources Connection, Inc. 600,000 950,000
816,800 Sabre Holdings Corp. 31,315,527 35,224,500
925,000 True North Communications Inc. 35,973,514 39,312,500
465,000 XL Capital Ltd. 35,026,337 40,629,375
------------ ------------
178,360,402 208,051,899
THIS SECTOR IS 16.6% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 2.0%
160,000 American Italian Pasta Co. 3,700,340 4,290,000
260,000 Applebee's International, Inc. 8,027,092 8,173,750
135,000 Buca, Inc. 1,927,924 1,982,812
400,000 CEC Entertainment Inc. 11,763,075 13,650,000
141,100 Darden Restaurants, Inc. 2,476,891 3,227,663
600,000 Jack in the Box Inc. 16,786,060 17,662,500
89,200 Panera Bread Co. 1,444,356 2,034,875
70,000 Performance Food Group Co. 2,394,625 3,588,592
85,400 RARE Hospitality
International, Inc. 1,537,005 1,905,488
222,900 Ruby Tuesday, Inc. 2,115,375 3,399,225
172,500 Sonic Corp. 3,584,552 4,021,406
1,900,700 Wendy's International, Inc. 34,068,880 49,893,375
------------ ------------
89,826,175 113,829,686
THIS SECTOR IS 26.7% ABOVE YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 4.7%
345,100 Dycom Industries, Inc. 15,007,932 12,402,031
4,700,000 Tyco International Ltd. 252,857,440 260,850,000
------------ ------------
267,865,372 273,252,031
THIS SECTOR IS 2.0% ABOVE YOUR FUND'S COST.
MEDICAL RELATED - 5.9%
280,000 Advance Paradigm, Inc. 9,961,812 12,740,000
350,000 Apria Healthcare Group Inc. 9,488,891 10,412,500
441,400 The Cooper Companies, Inc. 15,543,391 17,600,825
5,360,000 HEALTHSOUTH Corp. 84,107,668 87,435,000
550,000 Lincare Holdings Inc. 27,337,900 31,384,375
1,298,300 Omnicare, Inc. 21,934,678 28,075,737
950,000 Orthodontic Centers
of America, Inc. 24,276,621 29,687,500
600,000 Owens & Minor, Inc. 10,216,969 10,650,000
200,000 Regeneration Technologies, Inc. 2,681,565 2,850,000
50,000 RehabCare Group, Inc. 1,862,385 2,568,750
250,000 Respironics, Inc. 4,745,331 7,125,000
1,500,000 St. Jude Medical, Inc. 64,060,939 92,156,250
242,200 Zoll Medical Corp. 9,981,572 8,492,138
------------ ------------
286,199,722 341,178,075
THIS SECTOR IS 19.2% ABOVE YOUR FUND'S COST.
OIL/GAS EXPLORATION & PRODUCTION - 6.6%
561,100 Alberta Energy Company Ltd. 20,824,642 27,073,075
1,705,000 Anadarko Petroleum Corp. 77,369,754 121,191,400
368,300 Cabot Oil & Gas Corp. 7,912,520 11,486,356
650,000 Canadian Natural Resources Ltd. 21,120,517 17,875,000
1,800,000 Chesapeake Energy Corp. 13,884,510 18,225,000
212,200 Comstock Resources, Inc. 1,631,287 3,129,950
600,000 El Paso Energy Corp. 43,719,500 42,975,000
272,000 Equitable Resources, Inc. 13,743,808 18,156,000
2,000,000 Gulf Canada Resources Ltd. 9,515,895 10,125,000
250,900 Hydril Co. 4,810,171 4,406,432
200,000 Magnum Hunter Resources, Inc. 1,453,603 2,162,500
395,000 Mitchell Energy &
Development Corp. 18,455,647 24,193,750
686,000 Nexen Inc. 17,464,517 16,935,625
384,200 Ocean Energy Inc. 6,368,893 6,675,475
250,000 Spinnaker Exploration Co. 7,353,000 10,625,000
800,000 Talisman Energy Inc. 25,178,506 29,650,000
488,000 Triton Energy Ltd. 14,024,126 14,640,000
150,000 Unit Corp. 2,315,186 2,840,625
------------ ------------
307,146,082 382,366,188
THIS SECTOR IS 24.5% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 7.8%
3,200,000 American Home Products Corp. 200,969,033 203,360,000
566,271 King Pharmaceuticals, Inc. 19,521,262 29,269,132
3,800,000 Schering-Plough Corp. 213,940,637 215,650,000
------------ ------------
434,430,932 448,279,132
THIS SECTOR IS 3.2% ABOVE YOUR FUND'S COST.
POLLUTION CONTROL SERVICES - 3.2%
200,000 Waste Connections, Inc. 4,301,587 6,612,500
6,407,000 Waste Management, Inc. 157,519,472 177,794,250
------------ ------------
161,821,059 184,406,750
THIS SECTOR IS 14.0% ABOVE YOUR FUND'S COST.
RETAILING - 4.2%
1,750,000 BJ's Wholesale Club, Inc. 53,072,125 67,156,250
2,450,000 RadioShack Corp. 117,945,330 104,890,625
39,800 Stein Mart, Inc. 594,484 462,675
2,225,000 Tiffany & Co. 75,432,918 70,365,625
------------ ------------
247,044,857 242,875,175
THIS SECTOR IS 1.7% BELOW YOUR FUND'S COST.
SOFTWARE - 5.7%
460,700 AremisSoft Corp. 15,174,960 19,666,131
600,000 BindView Development Corp. 3,610,700 5,643,720
3,170,000 Cadence Design Systems, Inc. 80,091,435 87,175,000
407,900 FileNet Corp. 8,621,339 11,115,275
1,195,700 Mentor Graphics Corp. 29,014,068 32,807,019
3,828,900 PeopleSoft, Inc. 82,924,056 142,387,219
448,800 Rainbow Technologies, Inc. 8,662,432 7,096,650
445,000 Synopsys, Inc. 15,785,777 21,109,687
------------ ------------
243,884,767 327,000,701
THIS SECTOR IS 34.1% ABOVE YOUR FUND'S COST.
SUPERMARKETS - 8.0%
8,600,000 The Kroger Co. 186,794,089 232,737,500
500,000 Pathmark Stores, Inc. 8,312,190 8,250,000
3,582,700 Safeway Inc. 185,403,154 223,918,750
------------ ------------
380,509,433 464,906,250
THIS SECTOR IS 22.2% ABOVE YOUR FUND'S COST.
TRANSPORTATION RELATED - 4.5%
150,000 Frontier Airlines, Inc. 2,630,133 4,640,625
7,525,000 Southwest Airlines Co. 167,429,163 252,313,250
------------ ------------
170,059,296 256,953,875
THIS SECTOR IS 51.1% ABOVE YOUR FUND'S COST.
UTILITIES - 10.3%
3,196,100 American Electric Power
Company, Inc. 143,626,231 148,618,650
99,600 CONSOL Energy Inc. 2,549,690 2,782,575
2,950,000 Duke Energy Corp. 256,922,645 251,487,500
1,333,600 Exelon Corp. 93,315,505 93,632,056
1,050,000 PPL Corp. 36,210,102 47,446,875
1,850,000 Southern Energy, Inc. 50,412,178 52,378,125
------------ ------------
583,036,351 596,345,781
THIS SECTOR IS 2.3% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 0.1%
50,000 Intrawest Corp. 949,840 996,875
150,000 Trammell Crow Company 2,055,117 2,025,000
------------ ------------
3,004,957 3,021,875
THIS SECTOR IS 0.6% ABOVE YOUR FUND'S COST.
------------- -------------
Total common stocks 4,744,700,043 5,415,562,365
SHORT-TERM INVESTMENTS - 9.4% (A)<F3>
COMMERCIAL PAPER - 9.3%
$70,000,000 American General Finance ECN,
due 01/03/01-01/05/01,
discounts of 6.59% - 6.60% 69,962,460 69,962,460
25,000,000 AT&T Corp.
due 01/12/01, discount of 7.42% 24,943,320 24,943,320
25,000,000 Citicorp,
due 01/02/01, discount of 6.56% 24,995,445 24,995,445
25,000,000 Consolidated Edison Co of NY,
due 01/02/01, discount of 6.55% 24,995,451 24,995,451
25,000,000 Ford Motor Credit Puerto Rico,
due 01/05/01, discount of 6.56% 24,981,778 24,981,778
50,000,000 FPL Group Capital Inc.,
due 01/10/01-01/11/01,
discounts of 6.83% - 6.87% 49,909,632 49,909,632
50,000,000 General Electrict Credit Cap. PR,
due 01/04/01-01/08/01,
discounts of 6.55% - 6.61% 49,954,222 49,954,222
45,000,000 General Motors Acceptance Corp.,
due 01/02/01, discount of 6.56% 44,991,800 44,991,800
50,000,000 Goldman Sachs Group LP,
due 01/10/01-01/11/01,
discounts of 6.55% 49,913,576 49,913,576
25,000,000 Household International,
due 01/09/01, discount of 6.64% 24,963,111 24,963,111
70,000,000 Morgan Stanley Dean Witter
& Co. Inc.,
due 01/03/01-01/11/01,
discounts of 6.60% - 6.70% 69,930,111 69,930,111
55,000,000 Salomon Smith Barney
Holdings Inc.,
due 01/02/01-01/03/01,
discounts of 6.55% - 6.58% 54,985,419 54,985,419
20,000,000 Southern Co.,
due 02/15/01, discount of 6.62% 19,834,500 19,834,500
------------ ------------
Total commercial paper 534,360,825 534,360,825
VARIABLE RATE DEMAND NOTE - 0.1%
7,644,057 Firstar Bank U.S.A., N.A. 7,644,057 7,644,057
------------ ------------
Total short-term investments 542,004,882 542,004,882
-------------- -------------
Total investments $5,286,704,925 5,957,567,247
--------------
--------------
Liabilities, less cash and
receivables (3.2%) (A)<F3> (186,841,679)
--------------
NET ASSETS $5,770,725,568
--------------
--------------
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($5,770,725,568 / 196,387,054
shares outstanding) $29.38
------
------
(a)<F3> Percentages for various classifications relate to net assets.
(b)<F4> Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price.
Securities which are traded over-the-counter are valued at the latest
bid price. Short-term investments are valued at amortized cost which
approximates quoted market value.
BRANDYWINE BLUE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. Safeway, Inc. +20.3%
2. The Kroger Co. +25.0%
3. The Boeing Co. +34.8%
4. Southwest Airlines Co. +52.4%
5. Duke Energy Corp. -2.8%
6. Tyco International Ltd. +3.8%
7. Tellabs, Inc. +10.4%
8. PeopleSoft, Inc. +67.5%
9. Waste Management, Inc. +14.2%
10. Cadence Design Systems, Inc. +8.4%
EARNINGS GROWTH
Your Companies 24%
S&P 500 7%
FORECASTED INCREASE IN EARNINGS PER SHARE
2001 VS 2000
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE. DECEMBER 31,
2000.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
69.8%
MID CAP
$2 billion to $9 billion
26.6%
CASH
3.6%
TOP TEN INDUSTRY GROUPS
Utilities (14.0%)
Supermarkets (12.4%)
Drilling and Oil/Gas Services (8.7%)
Software (7.8%)
Pharmaceuticals (6.6%)
Retailing (6.1%)
Aerospace (5.5%)
Oil/Gas Exploration & Production (5.3%)
Transportation Related (5.2%)
Machinery & Miscellaneous Manufacturing (5.0%)
All Others (19.8%)
Cash (3.6%)
<TABLE>
BRANDYWINE BLUE FUND
DECEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
----------------- ------------- ------ ----------------
<S> <C> <C> <C>
PeopleSoft, Inc. $7.4 42.5 September-quarter earnings rose to $0.08 a share from $0.02 a year earlier,
beating estimates by 14 percent. September-quarter revenues from software
licenses doubled from the same quarter a year ago as enthusiasm continues for
PeopleSoft 8.0, the industry's first suite of enterprise resource planning
software hosted exclusively on the Internet.
Southwest
Airlines Co. $7.1 36.4 As a scrappy low-cost competitor to major airlines, Southwest benefits from a
lower operating cost structure and well executed fuel hedges. The company
grew September-quarter earnings 46 percent, marking the third straight
quarter it topped estimates.
Safeway, Inc. $6.3 33.9 The supermarket chain operator grew September-quarter earnings 20 percent.
The company acquired Genuardi's Family Markets, a privately owned supermarket
chain based in Pennsylvania, to solidify its strong East-Coast foothold.
Tellabs, Inc. $6.2 20.7 Strong sales of Tellabs' flagship Titan cross-connect products that manage
broadband traffic fueled 38 percent September-quarter earnings growth. The
company announced a multi-year contract with Sprint for its new Titan 6500
product in December.
The Kroger Co. $3.8 19.9 Kroger's success integrating its 1999 purchase of Fred Meyer stores continues
to create purchasing power, distribution efficiency and administrative
savings. October-quarter earnings grew to $0.28 per share from $0.24 a year
ago. During the quarter, the retail food and drug store owner introduced 480
private-label products, which have higher margins than brand-name goods.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------- ------ ----------------
Compaq
Computer Corp. $9.2 -40.3 Slowing demand for personal computers spread to the higher-end commercial
computers and low-end network termination servers Compaq sells to small
businesses. You sold as Compaq pre-announced lower-than-expected sales for
the December quarter.
National
Semiconductor
Corp. $6.9 -38.3 The changing economic environment limited near-term earnings visibility for
the manufacturer of semiconductors used in computers and communication
devices. You sold in October on signs that revenue and earnings might not
meet expectations in upcoming quarters because of weaker-than-expected
mobile-phone sales.
ADC
Telecommunications,
Inc. $3.8 -24.7 The maker of equipment that enables communication over broadband networks
came under pressure as sales of high-bandwidth digital services slowed.
October-quarter earnings per share still increased to $0.18 from $0.12 last
year.
SBC
Communications, Inc. $3.3 -19.4 SBC shares slid as consumer demand for digital subscriber lines slowed along
with the economic outlook. The state-by-state approval process the company
needs in order to offer long distance services in new states is taking longer
than expected and delaying digital subscriber line (DSL) roll out. You sold
SBC in December.
Amphenol Corp. $2.7 -39.1 The maker of electronic and fiber-optic connectors expects to beat December-
quarter estimates despite order delays from AT&T's broadband unit. Even with
strong growth prospects, you sold to fund better prospects as the stock
traded down in unison with other technology stocks amid slowing economic
conditions.
</TABLE>
All gains/losses are calculated on an average cost basis
BRANDYWINE BLUE FUND, INC.
STATEMENT OF NET ASSETS
December 31, 2000
(Unaudited)
QUOTED
MARKET
SHARES COST VALUE (B)<F6>
------ ---- -------------
COMMON STOCKS - 96.4% (A)<F5>
AEROSPACE - 5.5%
324,400 The Boeing Co. $ 15,885,354 $ 21,410,400
THIS SECTOR IS 34.8% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT - 4.8%
130,100 ADC Telecommunications, Inc. 2,811,448 2,358,062
285,200 Tellabs, Inc. 14,595,063 16,113,800
------------ ------------
17,406,511 18,471,862
THIS SECTOR IS 6.1% ABOVE YOUR FUND'S COST.
COMPUTER/ELECTRONICS - 4.4%
200,000 Ceridian Corp. 5,379,101 3,987,500
100,000 Electronic Data Systems Corp. 5,405,802 5,775,000
244,000 Thermo Electron Corp. 5,705,521 7,259,000
------------ ------------
16,490,424 17,021,500
THIS SECTOR IS 3.2% ABOVE YOUR FUND'S COST.
DRILLING AND OIL/GAS SERVICES - 8.7%
48,100 Baker Hughes Inc. 1,902,910 1,999,156
200,000 Dynegy Inc. 9,576,224 11,212,500
250,000 ENSCO International Inc. 8,600,553 8,515,625
250,000 Weatherford International, Inc. 9,690,204 11,812,500
------------ ------------
29,769,891 33,539,781
THIS SECTOR IS 12.7% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 2.4%
58,500 Charter One Financial, Inc. 1,505,063 1,689,188
60,000 Sabre Holdings Corp. 2,229,584 2,587,500
55,000 XL Capital Ltd. 4,123,719 4,805,625
------------ ------------
7,858,366 9,082,313
THIS SECTOR IS 15.6% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 1.4%
9,600 Darden Restaurants, Inc. 168,783 219,600
203,500 Wendy's International, Inc. 3,745,672 5,341,875
------------ ------------
3,914,455 5,561,475
THIS SECTOR IS 42.1% ABOVE YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 5.0%
350,000 Tyco International Ltd. 18,705,192 19,425,000
THIS SECTOR IS 3.8% ABOVE YOUR FUND'S COST.
MEDICAL RELATED - 2.7%
228,300 HEALTHSOUTH Corp. 3,487,398 3,724,144
110,000 St. Jude Medical, Inc. 4,746,506 6,758,125
------------ ------------
8,233,904 10,482,269
THIS SECTOR IS 27.3% ABOVE YOUR FUND'S COST.
OIL/GAS EXPLORATION & PRODUCTION - 5.3%
112,000 Alberta Energy Company Ltd. 4,157,074 5,404,000
174,900 Anadarko Petroleum Corp. 8,199,088 12,431,892
40,000 El Paso Energy Corp. 2,906,443 2,865,000
------------ ------------
15,262,605 20,700,892
THIS SECTOR IS 35.6% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 6.6%
180,600 American Home Products Corp. 11,317,234 11,477,130
251,100 Schering-Plough Corp. 14,121,900 14,249,925
------------ ------------
25,439,134 25,727,055
THIS SECTOR IS 1.1% ABOVE YOUR FUND'S COST.
POLLUTION CONTROL SERVICES - 4.1%
575,000 Waste Management, Inc. 13,974,158 15,956,250
THIS SECTOR IS 14.2% ABOVE YOUR FUND'S COST.
RETAILING - 6.1%
170,000 BJ's Wholesale Club, Inc. 5,156,388 6,523,750
300,000 RadioShack Corp. 14,278,780 12,843,750
142,500 Tiffany & Co. 4,875,175 4,506,563
------------ ------------
24,310,343 23,874,063
THIS SECTOR IS 1.8% BELOW YOUR FUND'S COST.
SOFTWARE - 7.8%
525,000 Cadence Design Systems, Inc. 13,315,270 14,437,500
429,100 PeopleSoft, Inc. 9,313,118 15,957,156
------------ ------------
22,628,388 30,394,656
THIS SECTOR IS 34.3% ABOVE YOUR FUND'S COST.
SUPERMARKETS - 12.4%
850,000 The Kroger Co. 18,402,451 23,003,125
400,000 Safeway Inc. 20,779,166 25,000,000
------------ ------------
39,181,617 48,003,125
THIS SECTOR IS 22.5% ABOVE YOUR FUND'S COST.
TRANSPORTATION RELATED - 5.2%
600,600 Southwest Airlines Co. 13,213,569 20,138,118
THIS SECTOR IS 52.4% ABOVE YOUR FUND'S COST.
UTILITIES - 14.0%
275,000 American Electric Power
Company, Inc. 12,339,725 12,787,500
235,000 Duke Energy Corp. 20,615,256 20,033,750
100,000 Exelon Corp. 6,984,395 7,021,000
160,000 PPL Corp. 5,382,148 7,230,000
250,000 Southern Energy, Inc. 6,805,065 7,078,125
------------ ------------
52,126,589 54,150,375
THIS SECTOR IS 3.9% ABOVE YOUR FUND'S COST.
------------ ------------
Total common stocks 324,400,500 373,939,134
SHORT-TERM INVESTMENTS - 5.5% (A)<F5>
COMMERCIAL PAPER - 3.9%
$10,000,000 Morgan Stanley Dean Witter
& Co. Inc., due 01/03/01-01/05/01,
discounts of 6.65%-6.70% 9,994,445 9,994,445
5,000,000 FPL Group Capital Inc.,
due 01/12/01, discount of 6.87% 4,989,504 4,989,504
------------ ------------
Total commercial paper 14,983,949 14,983,949
VARIABLE RATE DEMAND NOTES - 1.6%
2,616,222 American Family Financial Services 2,616,222 2,616,222
3,500,000 Firstar Bank U.S.A., N.A. 3,500,000 3,500,000
------------ ------------
Total variable rate demand notes 6,116,222 6,116,222
------------ ------------
Total short-term investments 21,100,171 21,100,171
------------ ------------
Total investments $345,500,671 395,039,305
------------
------------
Liabilities, less cash and
receivables (1.9%) (A)<F5> (7,238,472)
------------
NET ASSETS $387,800,833
------------
------------
Net Asset Value Per Share
($0.01 par value 100,000,000
shares authorized), offering
and redemption price
($387,800,833 / 14,065,946
shares outstanding) $27.57
------
------
(a)<F5> Percentages for the various classifications relate to net assets.
(b)<F6> Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price.
Securities which are traded over-the-counter are valued at the latest
bid price. Short-term investments are valued at amortized cost which
approximates quoted market value.
BE ON THE LOOKOUT . . .
On January 2 and 3, Firstar mailed your year-end statements, recapping all
account activity for 2000, and your 1099 forms, including information for
October's distribution. You should be receiving them shortly. Please hold on to
them for tax preparation purposes.
KUDOS FOR YOUR FUND . . .
BLOOMBERG - "Brandywine's stock pickers bettered the index crowd during its past
two fiscal years. The fund returned 95 percent during the two years ended
September 30, while the Standard & Poor's 500 Index returned less than 45
percent." October 2000
------------
SUCCESS - "In 2000, with all the major indexes flat or negative, Brandywine was
by late summer posting a gain of more than 5 percent for the year." November
--------
2000
----
MONEY - " . . . it's worth looking at a fund that specializes in buying growth
stocks on the cheap. Brandywine has averaged 21.3 percent over the past decade
without taking the kind of outsize risks that have powered a lot of its rivals."
December 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, Dave Marky, Adam Rieger
This material is appropriate for use by prospective investors only when
accompanied by a current Brandywine Funds prospectus, which contains more
complete information, including fees and expenses. Please read it carefully
before investing. Past performance is no guarantee of future results. The value
--------------------------------------------------
of securities will fluctuate so that when redeemed, shares may be worth more or
less than their original cost.
Morningstar includes Brandywine and Brandywine Blue in its mid-cap growth peer
group, which consists of 326 funds. Funds are ranked by total return percentile
where 1 is the highest and 100 is the lowest. For the three months ended
12/31/00, Brandywine and Brandywine Blue ranked in the 6th and 1st percentiles.
Total returns assume the reinvestment of all dividends and capital gains
distributions. References to specific stocks are not recommendations to buy or
sell any security. Statistical sources utilized include Baseline, Bloomberg,
Investor's Business Daily (IBD) and Morningstar.
