<PAGE> 1
BRANDYWINE BLUE FUND, INC.
Managed by Friess Associates, Inc. Annual Report September 30, 1995
DEAR FELLOW SHAREHOLDERS:
Congratulations on another successful year! Your 42.8 percent surge
for your 12-month fiscal year ended September 30 handily outdistanced all the
major indices.
The S&P 500 rose 29.7 percent; Nasdaq Industrials 26.3 percent; S&P
Midcap 23.4 percent; and the NYSE 22.6 percent. The Russell 2000 was up 21.2
percent, less than half your 42.8 percent gain.
MOST RECENT TWELVE MONTHS
<TABLE>
<CAPTION>
PERCENT
<S> <C>
RUSSELL 2000 21.2
NYSE 22.6
S&P MIDCAP* 23.4
NASDAQ IND. 26.3
S&P 500* 29.7
YOUR FUND* 42.8
</TABLE>
* TOTAL RETURN
These results include a portion of the long-awaited correction in
technology stocks which began in the final weeks of the quarter and spilled
over into October as we write this to you.
The Hambrecht & Quist Technology Index dropped 3.4 percent from
September 11 to quarter end negatively impacting your final September quarter
which, nevertheless, rose 13.4 percent.
Your results of 42.9 percent since December 31, 1994, the last nine
months of Brandywine Blue's fiscal year, garnered strong rankings in Investor's
Business Daily which on October 2 included your Fund among the top ten quality
growth funds in the U.S. for its year to date performance. The S&P 500 rose
29.8 percent and the NYSE 24.8 percent in the same time frame.
We're grateful for the efforts of your 20 researchers and support team
that generate these results as well as the dedicated people at the companies in
which you invest -- those on the assembly lines, shipping docks, and in
secretarial pools and accounting departments. They are the ultimate generator
of all of our successes.
A new feature of your report highlights Larry Hornbeck, the Texas
Instruments engineer who developed the digital mirror, as an example of these
contributors.
Mike Musson and Greg Friess came on board as research consultants in
Palo Alto and Minneapolis.
Mike was investor contact at billion-dollar software giant, Oracle
Systems, and then at Applied Materials, the billion-dollar supplier of
semiconductor equipment. Greg served as energy analyst for Northern States
Power for four years. Both bring you insights into those particular industires.
Kerry Polini, Renae Puckett and Diane McGonagle join the support team
in Delaware and Cammy Cooper adds to your team's resources in Jackson.
The volatility of the tech stocks in which you have a significant
investment has always been and always will be a feature of this fast-moving,
rapidly-changing sector of the U.S. economy.
For your September quarter some of your more dynamic moves include an
amazing 83 percent jump by Cirrus Logic, and gains by Cisco Systems, Dell
Computer, Bay Networks, and Read-Rite, each moving up between 29 and 41
percent.
Stronger gains came in LSI Logic and Diamond Multimedia which rose 48
and 57 percent during the recent three months.
Although there has been much hand-wringing in the financial press
heralding "the end to the upward spiral of technology stocks," our own
detective work, talking not only to the companies' managements but to their
customers and competitors, indicates that the fundamental outlook for sales and
earnings still appears strong for the specific companies you own.
The shift from Intel 486 to Pentium chips, difficulties in adjusting
to the new Windows 95 world, component shortages, weakness in Europe, slippage
of deliveries from the September quarter into the December quarter, and some
technology transitions such as slower than expected CDMA (digital wireless
communication technology) shipments are some key
<PAGE> 2
"potholes in the technology road" we have isolated and attempted to avoid.
Companies plagued with these problems dragged down almost all
technology companies providing significant opportunities for those investors
who can sort out the subtle distinctions. Networking, client-server software,
and database software provide some of the stronger areas.
All technology companies are not influenced by the same issues.
"Never invest in technology, invest in individual technology COMPANIES."
The demand/supply relationships in your key telecommunications,
networking, semiconductor, wireless, and personal computer related holdings
reveal an earnings momentum that the larger investment community does not yet
believe will happen.
Over the last three months, each time your core technology holdings
experienced a downward correction, a seemingly large pool of new investor
interest willingly jumped in and snapped up what were perceived to be solid
bargains. We expect this pattern will continue during the current correction.
Sailing on the economic front seems to be steady as well. August's
recently announced 6.8 percent increase in orders for durable goods
demonstrates the continuing strength in demand for capital goods that has been
one of the shining lights of this long, steady economic recovery.
We see little evidence of either recessionary worry or inflationary
pressure as the economy moves forward and the dollar strengthens, possibly
anticipating some dramatic action regarding the federal budget deficit
reduction.
The dollar's recent increase of 20 percent compared to the yen and 10
percent against the German mark causes us to focus closely on the impact of
currency accounting on your portfolio holdings with significant international
business.
Despite this recent rise in the dollar, however, it is still 60
percent below its peak ten years ago providing excellent opportunities for your
companies that export to foreign markets.
Concerns over a possible unraveling of the Japanese financial
structure adds to market worries. The $1.1 billion trading loss previously
unrevealed at Daiwa Bank shakes confidence in other Japanese banks as well and
unsettles other financial markets. We continue to focus on the earnings
progress of your companies which on balance remain very positive.
We are particularly appreciative of those of you who have stuck with us in all
the good and bad markets we have endured together over the years.
That loyalty and patience on your part has been rewarded with a near
triple (195 percent) increase since inception nearly five years ago, yielding a
25.7 percent average annual return.
The Friess Associates strategy of "never invest in the stock market
but invest in individual companies" has been a key in generating Brandywine
Blue's results.
According to Lipper Analytical, your Fund ranks in the top 2 percent
(or among the top four) for all 323 U.S. growth funds for its three year
performance of 116.6 percent.
MOST RECENT THREE YEARS
<TABLE>
<CAPTION>
PERCENT
<S> <C>
RUSSELL 2000 36.5
NYSE 49.2
S&P MIDCAP* 51.9
NASDAQ IND. 28.1
S&P 500* 60.9
YOUR FUND* 116.6
</TABLE>
* TOTAL RETURN
Many investors joined you in recognizing the efficacy of the Friess
Associates strategy that drives your investment selections as more than $50
million in net purchases came during the quarter. Your Friess team, along with
family and friends, has more than $10 million invested with you. I personally
have no other equity investments outside those I have in Brandywine and
Brandywine Blue Funds.
Thanks for giving us the opportunity to build for you exceptional
results in the months and years ahead.
God Bless!
[PHOTO OF FOSTER FRIESS]
/s/ Foster Friess
- -----------------
Foster Friess
President October 13, 1995
BRANDYWINE BLUE FUND, INC. 2
<PAGE> 3
FUND SHAREHOLDER . . .
"The Bob Hope and Toastmaster General of the Food Industry." That is
quite a mouthful, but that is exactly how Joe Larson is often introduced at his
many speaking engagements around the country.
Joe, who recently retired as Chairman of the Board of the Sparta Brush
Company in Sparta, Wisconsin, is a successful business executive, but he is
also a highly skilled motivational speaker. He has excelled in both careers
for 30 years.
Joe's personal story of recognizing opportunities and then making them
work for you is what gives his speeches credibility. He was a "high school
drop-out" long before that phrase was coined, but he never quit learning.
Starting in sales with Fuller Brush and Jewel Tea, Joe took over the
slumbering Sparta Brush Company in 1949 and built it into a solid enterprise.
Then disaster struck. Fire destroyed his plant and warehouse.
Joe saw that catastrophe as "an opportunity to act," confirming his
conviction that, "It's not important what happens to a fellow -- it's how he
responds that really counts."
Joe and his employees rolled up their sleeves and one week after the
fire they were back in limited production. They went on to rebuild and expand
the business making it a market leader. Today, Sparta brushes are used
internationally in the dairy and food service industries.
Sparta recently merged with Carlisle Companies allowing Joe more time
to play golf with his wife Jan in Scottsdale, Arizona, but his can-do spirit is
still on the job as he helps to build a new church in his desert community.
[PHOTO OF JOE LARSON]
"We started in the clubhouse of a development with only a few members.
Last year we built a beautiful new church and our congregation is over 200 and
growing by leaps and bounds," Joe excitedly explains.
A deeply religious man, Joe shows his love of his fellow man every
day. Joe just smiles and says simply, "I've always been hooked on people."
- Margaret Barton
ALL IS NOT ROSES . . .
Like last quarter, the good news outweighs the bad news in your
portfolio's performance. But, amidst the big winners like Cirrus Logic, Cisco
Systems, and Bay Networks, unfortunately, there were some losers, too.
Your biggest retracement was in EMC Corp., followed by Philips
Electronics, Browning Ferris, Integrated Process and Autodesk, backtracking
more than $200,000 each. All but Philips and Autodesk were sold from your
portfolio and replaced with other better-performing stocks.
The gains from only your top two biggest performers -- Cirrus Logic
and Cisco Systems -- compensated for what the four retreaters lost by more than
$1 million!
Led by Cirrus Logic's $1.7 million increase, 32 other companies gained
more than $200,000 apiece. Cisco gained $1.1 million, Bay Networks $973,000;
Dell Computer $920,000; Gateway 2000, Inc. $669,000; General Nutrition
$612,000; Nokia and U.S. Robotics $595,000 each; and Altera $537,000. These
companies on average grew 34 percent during the quarter.
3 BRANDYWINE BLUE FUND, INC.
<PAGE> 4
HIGHLIGHTS . . .
APPAREL & SHOES
The "swoosh" logo. "Air Jordan." "Just do it." To nearly everyone in the U.S.,
whether they are physically active or not, these phrases mean one thing --
NIKE, INC.
In a generally sluggish retail environment, Nike, the largest athletic footwear
company in the world, makes products that are selling well in all athletic and
outdoor footwear categories.
According to Chief Financial Officer Bob Falcone, the high performance shoes
and apparel in the women's sports and fitness division are gaining market share
with orders increasing 80 percent in the August quarter.
Revenues jumped 38 percent in the August quarter from $1.2 billion last year to
$1.6 billion which catapulted earnings up 58 percent to $2.26 from $1.43. In
the November quarter we expect an earnings increase of 34 percent.
Nike's increased international opportunities in France, Germany, Japan, and
South America propel your company to be a dominant world-wide brand.
Fueling that world-wide recognition is the recent endorsement contract Nike
signed with Hideo Nomo, the "Michael Jordan" of Japan. Hideo recently moved to
the U.S. to play for the Los Angeles Dodgers and quickly has become an All-Star
pitcher.
Selling now at $111, your shares have jumped 18 percent since purchase in
August at $94.
GROWING YOUR FUND . . .
Bright, dedicated employees at the companies in which you invest your
money are really the people who generate your earnings and grow your assets.
For that reason,we want to highlight some of these creative and motivated hard
workers who increase the value of your investment.
With semiconductor stocks rocketing, a natural place to begin is
introducing you to Larry Hornbeck, a Ph.D. physicist who works for Texas
Instruments at their Central Research Laboratories in Dallas, Texas.
[PHOTO OF LARRY HORNBECK]
Larry is the inventor of the Digital Micromirror Device (DMD). You may
never have heard of the digital mirror semiconductor, but it will literally
change the way you look at things.
The DMD is a silicon chip measuring 5/8" across, but unlike the chips
already in your computer or television, the DMD contains more than 442,000
tiny, movable aluminum mirrors.
The digital mirror is currently used in high resolution projection
systems but ultimately it will produce bigger, brighter, film-quality images on
your TV, computer screen, and printed faxes at a lower price and with greater
reliability than older technologies.
This device is the latest in a succession of ingenious ideas Larry has
developed for Texas Instruments. Holder of 24 patents, Larry is a man of
contrasts. At Texas Instruments, he invents new technologies which can
potentially add billions of dollars to the company's bottom line.
Away from the job, he is equally comfortable tinkering with his
50-year-old tractor on his small farm.
While pictured here in a coat and tie, Larry favors cowboy boots and
western attire over business suits at both Texas Instruments and on the farm.
Soon, Larry will travel to Munich to accept the prestigious Rhein
Foundation Award for outstanding achievement in the area of radio, television,
and information technology. We extend our congratulations and appreciation for
the great contributions he and his associates make to Brandywine Blue Fund.
- Margaret Barton
BRANDYWINE BLUE FUND, INC. 4
<PAGE> 5
FUND BROKER . . .
"Kenny Epstein is a hard worker whose keen sense of timing really
helps our research effort," remarks senior researcher David Harrington. "He's
not afraid to put himself on the line and voice his opinion when he thinks we
should be buying or selling a stock."
A broker at Needham & Company for five years, Kenny says, "Our
strength is our focus. We follow only 150 companies in three sectors:
technology, healthcare and retailing, and so I have met the senior management
at almost every company in our research universe."
[PHOTO OF KENNY EPSTEIN]
His personal interaction with the people running a company is exactly
the research style your Fund's team practices.
"The folks at Friess are competitive, intense, and on top of their
investments," reports Kenny. "When I bring them an idea, I know they will
seriously consider it. Intel is a good case in point.
"The work of our semiconductor analyst, Raj Rajaratnam, on Intel
helped Bill D'Alonzo decide to sell the stock in January 1994. Raj believed
that product transitions would depress profits. The stock proceeded to perform
below other semiconductor stocks for nearly 12 months.
"In January 1995, we encouraged David Harrington to consider the
stock. David shared Raj's opinion that the new Pentium chips would propel
earnings, so he bought back Intel. The stock has since doubled."
Other gainers Kenny has suggested to your research team for Brandywine
Blue Fund include Applied Materials, KLA Instruments, Tencor Instruments, and
Altera. Together they contributed more than $2 million to the value of your
Fund.
After receiving an economics degree from Colby and an MBA from
Columbia Business School, Kenny married his college sweetheart Wendy. They have
two kids, Lila 4 and Jacob 1, and, having recently moved from Manhattan to
Westport, Connecticut, they are still adjusting to waking up to birds chirping.
Kenny spends nearly all of his free time with his family but does find
a little time for skiing, golfing, and playing tennis.
- Margaret Barton
HIGHLIGHTS . . . (CONTINUED)
FINANCIAL/BUSINESS SERVICES
In today's real estate market, more than one out of five homes purchased is a
manufactured home. GREEN TREE FINANCIAL CORP. is the largest new and used
manufactured home lender with an estimated 30 percent of total market share.
Ninety percent of manufactured home buyers require a loan, and the majority
obtain one through a manufactured housing dealer. Green Tree services these
dealers while successfully diversifying into other areas, including financing
loans for in-site home improvement, consumer products (motorcycles, boats,
aircraft), and equipment (trucks), thus providing a broad range of financial
services.
According to Green Tree's Chief Financial Officer John Brink, loans to people
purchasing manufactured homes increased 27 percent in the June quarter, but the
newer business your company recently expanded into grew at a higher rate.
Loans for home improvement increased 46 percent, consumer finance leapt 340
percent, and equipment finance tripled from $9 million to $27 million.
In the June quarter, revenues rose 37 percent from $112 million to $153 million
which drove earnings
Continued on Page 6
5 BRANDYWINE BLUE FUND, INC.
<PAGE> 6
HIGHLIGHTS . . . (CONTINUED)
up 38 percent to $.88 from $.64. We anticipate earnings to increase 35 percent
in the September quarter and to finish 1995 at $3.50, up 34 percent from last
year.
Valued now at $61, your shares have soared 72 percent since purchase in
February.
FOOD/RESTAURANTS
Dave Thomas, Senior Chairman of the Board and Founder of WENDY'S INTERNATIONAL,
INC., is a well recognized personality in America. Because of clever
television commercials featuring Dave, most Americans know whatever Wendy's
newest sandwich is, and where Dave may have traveled to get the recipe.
A fast food chain offering more than just a typical hamburger, your company
gives the customer more healthy choices for the person on the go. The Super Bar
has a full salad bar along with various pasta, sauces, and Mexican foods.
This variety stimulates sales, which averaged more than $1 million per
restaurant last year, according to Treasurer John Brownley.
Wendy's will open 1200 new restaurants within the next two years, which will
help your company continue growing earnings at the 20 percent rate they grew in
1994 and 1995.
In addition to this base growth, Wendy's plans to acquire Tim Horton's, a chain
of 1,000 restaurants in Canada specializing in breakfast and coffee-break
foods. If the acquisition is completed by the end of this year, 1996 earnings
should increase by more than 30 percent.
BLAIR . . .
While serving as an equity analyst for Rauscher, Pierce, Refsnes,
Inc., Blair Baker had the opportunity to work with Friess researchers Carl
Gates, Andy Graves, Mark Lapolla and Conrad Doenges. He comments, "Of the many
firms I came in contact with, I noticed that one company in particular always
asked the right questions at the right time: Friess Associates.
"I was impressed with each Friess team member I met while at Rauscher,
and was quite excited about the chance to begin a consulting relationship with
this dedicated group," Blair explains, who began consulting to Friess in
September 1994.
Senior researcher Bill D'Alonzo remarks, "We always valued Blair as an
analyst at Rauscher, but his direct contribution to our clients and
shareholders now is even more valuable. We're fortunate to have his
stock-picking abilities on our team to help grow the assets entrusted to us."
Such winners as CompUSA, Dell Computer, Tellabs, and Nokia Corp., all
recommended by Blair, combined create more than $2 million in profits for your
portfolio.
Before working at Rauscher Pierce, Blair was a product manager at
Convex Computer Corp. for six years. He earned a BS in Computer Science from
the University of Texas at Austin and an MBA from Southern Methodist
University.
After completing his graduate studies, Blair became Adjunct Professor
of Finance for Dallas Baptist University. In 1986, Blair served on the advance
staff of George Bush while he served as Vice President to Ronald Reagan.
[PHOTO OF BLAIR BAKER]
Together with his wife Stephanie, Blair lives in Dallas. He enjoys
playing golf, bicycling, snow skiing, and spending time outdoors with
Stephanie.
- Rebecca Buswell
BRANDYWINE BLUE FUND, INC. 6
<PAGE> 7
FRAN . . .
"Before I can do any research, I need the information Fran Okoniewski
provides to me," comments senior researcher, John Ragard.
"Without Fran's ability to recognize those companies which fit our
investment criteria, I would have brokers and analysts calling me twenty times
or more each day telling me about a stock. Fran screens the information and
passes along only those companies which he knows I want to look at.
"His contribution is vital to our research effort, allowing us to
concentrate on our number one objective -- growing the assets of our
shareholders and clients."
Fran also monitors our many in-house, research-based information
programs. One program in particular, the "Helmsman" report, is run every week.
This ranks all companies in every portfolio according to earnings progression
and helps senior researchers make any necessary adjustments to your current
holdings.
"What inspires me most about working at Friess is the people. I feel
privileged to be part of this smart and talented group who constantly encourage
others to perform to the best of their God-given potential," Fran remarks. "It
is this culture and attitude that makes each day rewarding."
Fran earned a BA in Political Science from Widener University, and
prior to joining Friess in 1992, he worked as a bankruptcy paralegal for a
local law firm.
He and wife Christine have been married for nearly five years, and
away from work, Fran enjoys spending most of his free time with her. He also
relishes being outdoors mountain biking, hiking, and running. Next year he may
be spending more workdays in our Wyoming office as he hopes to tackle the
Tetons!
- Rebecca Buswell
[PHOTO OF FRAN OKONIEWSKI]
HIGHLIGHTS . . . (CONTINUED)
LEISURE & ENTERTAINMENT
Since 1992, HARMAN INTERNATIONAL INDUSTRIES, INC., producer of high fidelity
sound systems, has consolidated 23 different enterprises into three operational
groups -- consumer, professional, and automotive.
As a result of this streamlining and internal sales growth of 94 percent, 1995
fiscal year earnings are $2.70, nearly seven times the $.39 they were three
years ago.
Through its Consumer Group, home sound systems carrying the names JBL, Harman
Kardon, and Infinity enjoy strong sales. A recent acquisition now adds the
legendary Mark Levinson and Proceed brands to the growing list of
U.S.-manufactured electronic products.
The Automotive Group supplies sound systems to auto manufacturers such as
Toyota, Jaguar, Saab, Mercedes Benz, Chrysler, Ford, and BMW.
In a recent conversation with Chief Executive Officer Sidney Harman, we learned
that over the next three to five years, the Automotive Group will expand its
music systems to incorporate navigation, security, communications, and active
cabin quieting.
We estimate fiscal 1996 earnings will be above the analyst consensus of $3.23,
and still Harman sells at a modest price earnings ratio of 15.
Continued on Page 8
7 BRANDYWINE BLUE FUND, INC.
<PAGE> 8
HIGHLIGHTS . . . (CONTINUED)
Purchased in April and June of this year at an average cost of $35, your
shares, now at $49, carry a healthy 41 percent appreciation.
RETAILING
GENERAL NUTRITION, INC. stands apart in the retailing business by franchising
their stores only to owner-operators, not to corporations or "ghost" owners who
don't have hands-on experience in the business.
Your company specializes in the retail sales of vitamins, sports nutrition
formulas, and herbs, and health food products, with many of these products
bearing the General Nutrition brand name. Your company also markets fitness
and other health-related services.
On a recent visit consultant Greg Friess made to a General Nutrition store in
downtown Minneapolis, he learned that the "hot" seller is Melatonin, which aids
sleeping and reputedly slows the aging process.
When the FDA allowed it back on the shelves two months ago, it sold for $7.99.
Now it retails for $9.99, and the product sells out so quickly the company has
trouble keeping the stores in stock.
PAT . . .
Just as a Mom keeps a family in sync and sees that everyone's needs
are met, from the simplest to the most complicated, Friess Associates has
someone who keeps us on track -- Pat Bankert.
Anything that must be done, whether it be organizing a company
luncheon, arranging cellular service, negotiating large purchases, or locating
a hard-to-find item, you can call on Pat.
When Pat launched her business, Go-For Professionals, she had no idea
that her flyer which someone passed along to Foster Friess would lead to a
long-standing business relationship and friendship spanning more than 12 years.
In fact, Friess Associates was one of Pat's first business clients.
Pat explains, "My mission is to take all the hassles out of people's
lives so they can give to their jobs more effectively, efficiently, and, most
importantly, with a smile on their face."
The genuine care and concern Pat feels for all the folks at Friess is
reflected in her willingness to do whatever it takes to help everyone here
focus on our important obligation to our clients and shareholders.
In addition to her serving attitude, Pat is most appreciated for her
innate ability to light up a room with her infectious laugh, joyous spirit, and
terrific sense of humor.
Always caring for others, when she's not catering a luncheon, or
running errands for her clients, Pat voluntarily assists senior citizens with
their weekly grocery shopping.
When Pat does have a free moment, she and her husband of 34 years,
Dick, love to travel and especially enjoy being by the sea. Their five grown
children and five young grandchildren all live in the area so Pat and Dick
often play the roles of Grammy and Pop-Pop -- much to their delight!
Brandywine Fund Secretary, Lynda Campbell, praises, "Pat helps
eliminate the stress that is often found in this business. She seems to sense
what is needed and takes care of it before you even have to ask. She's
invaluable to all of us."
- Rebecca Buswell
[PHOTO OF PAT BANKERT]
BRANDYWINE BLUE FUND, INC. 8
<PAGE> 9
HIGHLIGHTS . . . (CONTINUED)
The quarter ending July saw earnings rise 52 percent to $.35 from $.23 with
estimated earnings next quarter of 38 percent. For the fiscal year, we
anticipate earnings growth of 44 percent.
Up 44 percent from its purchase price of $32, your shares now sell at $46.
SOFTWARE
With the healthcare marketplace in the U.S. evolving towards a managed-care
environment, HBO & COMPANY provides hospitals with the latest software for
management solutions, thus enabling hospitals to function competitively.
Your debt-free company's computer systems maintain patients' records, both on a
financial and clinical outcome basis, through whatever path a treatment,
however complex or simple, may take.
President and Chief Executive Officer Charlie McCall explained how the recent
Pegasus Medical Ltd. acquisition afforded HBO the opportunity to integrate
patient records at the physicians' offices with the information networks at
hospitals, HMOs, and insurance companies.
Revenues for the June quarter rose 31 percent, shooting earnings up 79 percent
to $.34 from $.19. The forecast for the September quarter shows earnings
increasing 57 percent with the year 1995 showing a 59 percent increase over
1994.
YOUR CUSTODIAN AND TRANSFER AGENT . . .
Firstar Bank, is the 45th largest bank in the United States with 210
locations employing 10,000 people, offering a full line of financial services
from mortgage banking, to insurance products, to the mutual fund services it
provides for your Fund.
These mutual fund services are provided by Firstar Trust Company
("Firstar"), one of the thirty subsidiaries of Firstar Corporation.
Firstar was founded in 1894 and is the largest trust organization in
Wisconsin. Firstar provides an array of trust services including personal
trust, stock transfer, bond trustee, employee benefit and of course mutual fund
services.
In addition to Brandywine Blue Fund, Firstar handles more than 200
other mutual funds totalling $37 billion in mutual fund assets.
Firstar services shareholders' accounts and its function is unrelated
to the research, selection, and trading of stocks in the portfolio which is
provided by your team at Friess Associates. We selected their services in
order to concentrate solely on growing your investment in the Fund.
Among the services Firstar provides for you are:
- - Executing all purchases and redemption of Fund shares
- - Providing statements of Fund share holdings and changes
- - Providing the 800-number automatic voice response unit for checking
your account
- - Responding to inquiries about Brandywine Blue Fund
- - Taking requests for all application forms for investment in the Fund
- - Serving as custodian for IRA accounts and for the stocks held by the
Fund
- - Handling direct rollover and transfer funds for IRA accounts
We'd like your insights on how Firstar fulfills its mission to you.
On the enclosed comment sheet, please also feel free to offer any suggestions
and comments on how we can better serve you in any other areas as well.
9 BRANDYWINE BLUE FUND, INC.
<PAGE> 10
TOP TEN . . .
Two new categories joined your Top Ten Industry Groups during the
quarter -- Apparel & Shoes and Leisure & Entertainment.
Apparel & Shoes is an entirely new group at 5.7 percent of your
portfolio with purchases of Nike, Nine West, Liz Claiborne, Warnaco Group,
Tommy Hilfinger Corp., and Fila Holding, which together have already gained
more than $1.2 million since your purchase during the quarter.
The $1.8 million addition of Mattel and Harman International's near
$500,000 gain moved the Leisure & Entertainment category from 1.8 percent to
5.7 percent of your portfolio.
Dropping from the Top Ten, Financial/Business Services went from 8.1
percent to only 4.6 percent of your holdings. Advanta Corp., Bank of New York,
and Solectron Group were all sold, cutting back this group, but realizing net
gains in excess of $300,000.
The Electronics category, making up 7.0 percent of your assets in
June, also fell from the Top Ten during the quarter as Park Electrochemical
Corp., Millipore Corp., Varian Associates, and Amphenol, were eliminated from
your portfolio as more than $700,000 in profits were captured.
TOP TEN INDUSTRY GROUPS
[PIE CHART]
<TABLE>
<S> <C>
Networking (6.5%)
Software (6.3%)
Communications (5.9%)
Leisure & Entertainment (5.7%)
Apparel & Shoes (5.7%)
Computer Systems (5.0%)
Semiconductor/Equipment & Suppliers (4.6%)
Semiconductors & Related (13.1%)
Retailing (8.1%)
Computers & Related (7.9%)
Cash (0.9%)
All Others (30.3%)
</TABLE>
PRICE WATERHOUSE LLP [LOGO]
100 EAST WISCONSIN AVENUE
SUITE 1500
MILWAUKEE, WI 53202
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF BRANDYWINE BLUE FUND, INC.
In our opinion, the accompanying statement of net assets 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
Brandywine Blue Fund, Inc. (the "Fund") at September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the four years in the period then ended and for the period from January 10,
1991 (commencement of operations) to September 30, 1991, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/ PRICE WATERHOUSE LLP
- ------------------------
October 13, 1995
BRANDYWINE BLUE FUND, INC. 10
<PAGE> 11
BRANDYWINE BLUE FUND, INC.
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Quoted
Market
Shares Cost Value
- ---------- ---------- -----------
<S> <C> <C> <C>
Common Stocks - 99.1% (a)
APPAREL & SHOES - 5.7%
20,000 Fila Holding S. p. A. . . . . . . . . . . . . . $ 547,404 $ 707,500
47,200 Liz Claiborne, Inc. . . . . . . . . . . . . . . 1,203,506 1,191,800
29,400 NIKE, Inc. Cl B . . . . . . . . . . . . . . . . 2,739,134 3,267,075
35,000 Nine West Group Inc.* . . . . . . . . . . . . . 1,390,161 1,592,500
39,100 Tommy Hilfiger Corp.* . . . . . . . . . . . . . 1,092,259 1,270,750
56,000 The Warnaco Group, Inc. . . . . . . . . . . . . 1,151,046 1,344,000
----------- -----------
8,123,510 9,373,625
THIS SECTOR IS 15.4% ABOVE YOUR COST.
AUTOMOTIVE & RELATED - 1.6%
50,000 Lear Seating Corp.* . . . . . . . . . . . . . . 1,471,750 1,468,750
27,400 Varity Corp.* . . . . . . . . . . . . . . . . . 1,229,527 1,219,300
----------- -----------
2,701,277 2,688,050
THIS SECTOR IS 0.5% BELOW YOUR COST.
COMMUNICATIONS - 5.9%
40,000 DSC Communications Corp.* . . . . . . . . . . . 2,441,415 2,370,000
50,000 L.M. Ericsson Telephone
Co. ADR . . . . . . . . . . . . . . . . . . . 1,156,875 1,225,000
74,700 Frontier Corp. . . . . . . . . . . . . . . . . . 1,977,587 1,988,887
60,300 Nokia Corp. "A" ADR . . . . . . . . . . . . . . 3,090,374 4,205,925
----------- -----------
8,666,251 9,789,812
THIS SECTOR IS 13.0% ABOVE YOUR COST.
COMPUTERS & RELATED - 7.9%
45,000 Adaptec, Inc.* . . . . . . . . . . . . . . . . . 1,805,512 1,856,250
52,900 Compaq Computer Corp.* . . . . . . . . . . . . . 2,632,861 2,559,037
25,000 Diamond Multimedia
Systems, Inc.* . . . . . . . . . . . . . . . . 506,250 806,250
85,000 Gateway 2000, Inc.* . . . . . . . . . . . . . . 2,039,358 2,603,125
39,600 Read-Rite Corp.* . . . . . . . . . . . . . . . . 661,375 1,445,400
88,900 Seagate Technology, Inc.* . . . . . . . . . . . 3,825,323 3,744,913
----------- -----------
11,470,679 13,014,975
THIS SECTOR IS 13.5% ABOVE YOUR COST.
COMPUTER SYSTEMS - 5.0%
58,900 Dell Computer Corp.* . . . . . . . . . . . . . . 4,018,067 5,006,500
35,200 Hewlett-Packard Co. . . . . . . . . . . . . . . 2,026,736 2,934,800
16,100 Sequent Computer Systems, Inc.* . . . . . . . . 334,656 319,987
----------- -----------
6,379,459 8,261,287
THIS SECTOR IS 29.5% ABOVE YOUR COST.
ELECTRONICS - 4.2%
59,000 AVX Corporation* . . . . . . . . . . . . . . . . 1,788,290 1,976,500
58,800 KEMET Corp.* . . . . . . . . . . . . . . . . . . 1,337,525 2,013,900
45,000 SCI Systems, Inc.* . . . . . . . . . . . . . . . 1,455,750 1,552,500
34,650 Vishay Intertechnology, Inc.* . . . . . . . . . 1,068,151 1,455,300
----------- -----------
5,649,716 6,998,200
THIS SECTOR IS 23.9% ABOVE YOUR COST.
FINANCIAL/BUSINESS SERVICES - 4.6%
48,800 Equifax Inc. . . . . . . . . . . . . . . . . . . 1,786,827 2,043,500
15,700 Green Tree Financial Corp. . . . . . . . . . . . 555,932 957,700
35,500 Household International, Inc. . . . . . . . . . 1,767,613 2,201,000
31,900 MGIC Investment Corp. . . . . . . . . . . . . . 1,459,645 1,826,275
10,000 The PMI Group, Inc. . . . . . . . . . . . . . . 340,000 473,750
----------- -----------
5,910,017 7,502,225
THIS SECTOR IS 26.9% ABOVE YOUR COST.
</TABLE>
<TABLE>
<CAPTION>
Quoted
Market
Shares Cost Value
- ---------- ---------- -----------
<S> <C> <C> <C>
FOOD/RESTAURANTS - 2.1%
55,000 Applebee's International Inc. . . . . . . . . . $ 1,516,432 $ 1,498,750
92,100 Wendy's International, Inc. . . . . . . . . . . 1,727,741 1,945,613
----------- -----------
3,244,173 3,444,363
THIS SECTOR IS 6.2% ABOVE YOUR COST.
HEALTHCARE - 2.5%
59,000 Apria Healthcare Group Inc.* . . . . . . . . . . 1,659,375 1,460,250
25,000 HBO & Co. . . . . . . . . . . . . . . . . . . . 1,583,464 1,562,500
46,100 Surgical Care Affiliates, Inc. . . . . . . . . . 1,069,230 1,071,825
----------- -----------
4,312,069 4,094,575
THIS SECTOR IS 5.0% BELOW YOUR COST.
LEISURE & ENTERTAINMENT - 5.7%
44,100 Harman International Industries . . . . . . . . 1,530,335 2,160,900
60,000 Mattel, Inc. . . . . . . . . . . . . . . . . . . 1,790,620 1,762,500
85,000 Philips Electronics N.V. ADR . . . . . . . . . . 4,430,803 4,143,750
57,700 Toy Biz, Inc.* . . . . . . . . . . . . . . . . . 1,440,279 1,384,800
----------- -----------
9,192,037 9,451,950
THIS SECTOR IS 2.8% ABOVE YOUR COST.
MACHINERY/CONSTRUCTION & MISC. MANUFACTURING - 1.3%
40,000 Albany International Corp. . . . . . . . . . . . 872,856 935,000
20,400 Case Corp. . . . . . . . . . . . . . . . . . . . 460,224 749,700
13,800 Parker-Hannifin Corp. . . . . . . . . . . . . . 370,458 524,400
----------- -----------
1,703,538 2,209,100
THIS SECTOR IS 29.7% ABOVE YOUR COST.
MEDICAL PRODUCTS & SUPPLIES - 2.8%
120,000 Biomet, Inc.* . . . . . . . . . . . . . . . . . 1,768,826 2,070,000
24,100 Nellcor Puritan Bennett Inc.* . . . . . . . . . 966,453 1,198,975
50,000 Sofamor/Danek Group, Inc.* . . . . . . . . . . . 1,288,070 1,387,500
----------- -----------
4,023,349 4,656,475
THIS SECTOR IS 15.7% ABOVE YOUR COST.
NETWORKING - 6.5%
95,000 Bay Networks, Inc.* . . . . . . . . . . . . . . 3,778,977 5,070,625
20,000 Cabletron Systems, Inc.* . . . . . . . . . . . . 1,328,332 1,317,500
63,000 Cisco Systems Inc.* . . . . . . . . . . . . . . 2,413,908 4,347,000
----------- -----------
7,521,217 10,735,125
THIS SECTOR IS 42.7% ABOVE YOUR COST.
OIL/GAS FIELD SERVICES - 4.5%
149,400 Halliburton Co. . . . . . . . . . . . . . . . . 6,098,849 6,237,450
40,000 Tidewater Inc. . . . . . . . . . . . . . . . . . 1,084,308 1,125,000
----------- -----------
7,183,157 7,362,450
THIS SECTOR IS 2.5% ABOVE YOUR COST.
PHARMACEUTICALS - 2.3%
33,300 Genzyme Corp. . . . . . . . . . . . . . . . . . 1,799,776 1,931,400
34,600 Pfizer Inc. . . . . . . . . . . . . . . . . . . 1,711,420 1,846,775
----------- -----------
3,511,196 3,778,175
THIS SECTOR IS 7.6% ABOVE YOUR COST.
</TABLE>
11 BRANDYWINE BLUE FUND, INC.
<PAGE> 12
BRANDYWINE BLUE FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Quoted
Market
Shares Cost Value
- ---------- ---------- -----------
<S> <C> <C> <C>
Common Stocks - 99.1% (a) (continued)
RETAILING - 8.1%
24,700 Circuit City Stores, Inc. . . . . . . . . . . . $ 859,807 $ 781,137
18,000 CompUSA Inc.* . . . . . . . . . . . . . . . . . 738,980 774,000
75,000 Consolidated Stores Corp.* . . . . . . . . . . . 1,440,772 1,734,375
68,100 Dollar General Corp. . . . . . . . . . . . . . . 1,764,594 2,000,438
59,000 General Nutrition Companies* . . . . . . . . . . 1,861,500 2,684,500
58,800 OfficeMax, Inc.* . . . . . . . . . . . . . . . . 960,071 1,425,900
112,400 Price/Costco, Inc.* . . . . . . . . . . . . . . 2,006,649 1,924,850
32,800 Tandy Corp. . . . . . . . . . . . . . . . . . . 1,972,578 1,992,600
----------- -----------
11,604,951 13,317,800
THIS SECTOR IS 14.8% ABOVE YOUR COST.
SEMICONDUCTOR EQUIPMENT & SUPPLIES - 4.6%
15,000 Applied Materials, Inc.* . . . . . . . . . . . . 938,336 1,533,750
35,000 ASM Lithography Holding N.V.* . . . . . . . . . 1,695,551 1,535,625
39,300 Tencor Instruments* . . . . . . . . . . . . . . 1,769,915 1,739,025
77,800 Teradyne, Inc.* . . . . . . . . . . . . . . . . 1,597,863 2,800,800
----------- -----------
6,001,665 7,609,200
THIS SECTOR IS 26.8% ABOVE YOUR COST.
SEMICONDUCTORS & RELATED - 13.1%
44,300 Alliance Semiconductor Corp.* . . . . . . . . . 1,751,418 1,760,925
77,600 Cirrus Logic, Inc.* . . . . . . . . . . . . . . 2,815,691 4,442,600
12,000 Cypress Semiconductor Corp.* . . . . . . . . . . 469,271 463,500
71,000 Integrated Device
Technology, Inc.* . . . . . . . . . . . . . . 1,827,537 1,775,000
22,700 Intel Corp. . . . . . . . . . . . . . . . . . . 1,051,572 1,364,837
25,000 LSI Logic Corp.* . . . . . . . . . . . . . . . . 538,579 1,443,750
5,000 MEMC Electronic Materials, Inc.* . . . . . . . . 120,000 135,625
20,300 Micron Technology, Inc. . . . . . . . . . . . . 1,388,330 1,613,850
61,500 National Semiconductor Corp.* . . . . . . . . . 1,874,288 1,698,938
39,000 SGS-THOMSON
Microelectronics N.V.* . . . . . . . . . . . . 2,023,929 1,896,375
20,000 Texas Instruments Inc. . . . . . . . . . . . . . 938,957 1,597,500
50,700 VLSI Technology, Inc.* . . . . . . . . . . . . . 1,601,692 1,736,475
33,900 Xilinx, Inc.* . . . . . . . . . . . . . . . . . 1,191,161 1,631,438
----------- -----------
17,592,425 21,560,813
THIS SECTOR IS 22.6% ABOVE YOUR COST.
SOFTWARE - 6.3%
36,000 Autodesk, Inc. . . . . . . . . . . . . . . . . . 1,805,349 1,575,000
69,000 BMC Software, Inc.* . . . . . . . . . . . . . . 2,656,736 3,174,000
28,800 Cadence Design Systems, Inc.* . . . . . . . . . 892,256 1,130,400
84,500 Mentor Graphics Corp.* . . . . . . . . . . . . . 1,349,597 1,763,938
38,500 Softkey International Inc.* . . . . . . . . . . 1,726,244 1,703,625
23,700 Sterling Software, Inc.* . . . . . . . . . . . . 1,102,334 1,078,350
----------- -----------
9,532,516 10,425,313
THIS SECTOR IS 9.4% ABOVE YOUR COST.
</TABLE>
<TABLE>
<CAPTION>
Shares or Quoted
Principal Market
Amount Cost Value
- ---------- ---------- -----------
<S> <C> <C>
TRANSPORTATION - 1.7%
96,400 America West Airlines, Inc. Cl B* . . . . . . . $ 1,536,134 $ 1,494,200
50,000 Pittston Services Group . . . . . . . . . . . . 1,330,773 1,356,250
------------ ------------
2,866,907 2,850,450
THIS SECTOR IS 0.6% BELOW YOUR COST.
MISCELLANEOUS - 2.7%
7,700 Alco Standard Corp. . . . . . . . . . . . . . . 467,274 652,575
51,400 Carpenter Technology Corp. . . . . . . . . . . . 1,856,868 2,011,025
20,900 R.R. Donnelley & Sons Co. . . . . . . . . . . . 728,528 815,100
16,400 Harsco Corp. . . . . . . . . . . . . . . . . . . 844,569 912,250
------------ ------------
3,897,239 4,390,950
THIS SECTOR IS 12.7% ABOVE YOUR COST.
RIGHTS - 0.0%
50,000 L.M. Ericsson Telephone
Co. Rights, 10/26/95* . . . . . . . . . . . . 0 5
------------ ------------
Total common stocks . . . . . . . . . . . . . . 141,087,348 163,514,918
SHORT-TERM INVESTMENTS - 1.9% (a)
VARIABLE-RATE DEMAND NOTES
$50,000 General Mills, Inc. . . . . . . . . . . . . . . 50,000 50,000
75,000 Pitney Bowes Credit Corp. . . . . . . . . . . . 75,000 75,000
1,000,000 Sara Lee Corp. . . . . . . . . . . . . . . . . . 1,000,000 1,000,000
1,390,323 Southwestern Bell Telephone Co . . . . . . . . . 1,390,323 1,390,323
600,000 Wisconsin Electric Power Co. . . . . . . . . . . 600,000 600,000
------------ ------------
Total short-term investments . . . . . . . . . . 3,115,323 3,115,323
------------ ------------
Total investments . . . . . . . . . . . . . . . $144,202,671 166,630,241
============
LIABILITIES, LESS CASH AND
RECEIVABLES (1.0%) (a) . . . . . . . . . . . . . (1,687,664)
------------
NET ASSETS . . . . . . . . . . . . . . . . . . $164,942,577
============
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering
and redemption price
($164,942,577 / 6,769,509
shares outstanding) . . . . . . . . . . . . . . $24.37
======
</TABLE>
* Non-income producing security.
(a) Percentages of various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
BRANDYWINE BLUE FUND, INC. 12
<PAGE> 13
BRANDYWINE BLUE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . $ 371,803
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 218,150
-----------
Total income . . . . . . . . . . . . . . . . . . . . . . 589,953
-----------
EXPENSES:
Management fees . . . . . . . . . . . . . . . . . . . . . . 678,052
Registration fees . . . . . . . . . . . . . . . . . . . . . 69,444
Administrative services . . . . . . . . . . . . . . . . . . 46,371
Professional fees . . . . . . . . . . . . . . . . . . . . . 33,787
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 21,918
Printing and postage expense . . . . . . . . . . . . . . . 12,166
Transfer agent fees . . . . . . . . . . . . . . . . . . . . 12,002
Amortization of organizational expenses . . . . . . . . . . 6,200
Other expenses . . . . . . . . . . . . . . . . . . . . . . 5,458
-----------
Total expenses . . . . . . . . . . . . . . . . . . . . . 885,398
-----------
NET INVESTMENT LOSS . . . . . . . . . . . . . . . . . . . . . (295,445)
-----------
NET REALIZED GAIN ON INVESTMENTS . . . . . . . . . . . . . . 8,175,056
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS . . . 20,117,144
-----------
NET GAIN ON INVESTMENTS . . . . . . . . . . . . . . . . . . . 28,292,200
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . $27,996,755
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (295,445) $ (69,105)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,175,056 220,594
Net increase in unrealized appreciation on investments . . . . . . . . . . . . . . . . . . 20,117,144 546,657
------------ -----------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . 27,996,755 698,146
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains ($0.10774 and $2.33300 per share, respectively) . . (180,673) (804,135)*
------------ -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (5,621,838 and 1,372,478 shares, respectively) . . . . . . . . 120,000,924 23,044,593
Net asset value of shares issued in distributions (10,418 and 48,203 shares, respectively) 177,002 786,353
Cost of shares redeemed (555,714 and 61,143 shares, respectively) . . . . . . . . . . . . (12,137,304) (1,011,658)
------------ -----------
Net increase in net assets derived from Fund share activities . . . . . . . . . . . . 108,040,622 22,819,288
------------ -----------
TOTAL INCREASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,856,704 22,713,299
NET ASSETS AT THE BEGINNING OF THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . 29,085,873 6,372,574
------------ -----------
NET ASSETS AT THE END OF THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $164,942,577 $29,085,873
============ ===========
</TABLE>
* The distribution from net realized gains includes $404,325 of ordinary
income, of which 17.8% is eligible for the corporate dividends received
deduction.
The accompanying notes to financial statements are an integral part of these
statements.
13 BRANDYWINE BLUE FUND, INC.
<PAGE> 14
BRANDYWINE BLUE FUND, INC.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
---------Years Ended September 30,---------
1995 1994 1993 1992 1991+
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . . . . . . . . . . . . . . . . $17.18 $19.11 $12.95 $13.09 $10.01
Income from investment operations:
Net investment income (loss) . . . . . . . . . . . . . . . . . . . 0.00 0.04 (0.06) (0.04) 0.03
Net realized and unrealized gains on investments . . . . . . . . . 7.30 0.36 6.22 0.52 3.05
------ ------ ------ ------ ------
Total from investment operations . . . . . . . . . . . . . . . . . . 7.30 0.40 6.16 0.48 3.08
Less distributions:
Dividend from net investment income . . . . . . . . . . . . . . . . -- -- -- (0.03) --
Distributions from net realized gains . . . . . . . . . . . . . . . (0.11) (2.33) -- (0.59) --
------ ------ ------ ------ ------
Total from distributions . . . . . . . . . . . . . . . . . . . . . . (0.11) (2.33) -- (0.62) --
------ ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . $24.37 $17.18 $19.11 $12.95 $13.09
====== ====== ====== ====== ======
Total Investment Return . . . . . . . . . . . . . . . . . . . . . . . 42.8% 2.8% 47.6% 4.0% 45.1%*
Ratios/Supplemental Data:
Net assets, end of period (in 000's $) . . . . . . . . . . . . . . 164,943 29,086 6,373 4,270 3,975
Ratio of expenses (after reimbursement) to average net assets** . . 1.31% 1.80% 2.00% 2.00% 1.97%*
Ratio of net investment (loss) income to average net assets*** . . (0.44%) (0.4%) (0.6%) (0.3%) 0.6%*
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . 174.1% 220.3% 144.3% 191.9% 115.3%*
</TABLE>
+ For the period from January 10, 1991 (commencement of operations) to
September 30, 1991.
* Annualized.
** Computed after giving effect to adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been 2.09%
and 2.44% for the years ended September 30, 1993 and 1992, respectively,
and 3.00%* for the period ended September 30, 1991.
*** The ratio of net investment income (loss) prior to adviser's expense
limitation undertaking to average net assets for the years ended
September 30, 1993 and 1992 and for the period ended September 30, 1991
would have been (0.7%), (0.7%) and (0.5%)*, respectively.
The accompanying notes to financial statements are an integral part of this
statement.
-----------------------------
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of
Brandywine Blue Fund, Inc. (the "Fund"), which is registered under the
Investment Company Act of 1940. The Fund was incorporated under the laws
of Maryland on November 13, 1990.
(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 are valued at amortized cost which approximates quoted
market value. Investment transactions are recorded no later than the
first business day after the trade date. Cost amounts, as reported on
the statement of net assets, are the same for Federal income tax
purposes.
(b) Net realized gains and losses on common stock are com-puted on the
basis of the cost of specific certificates.
(c) Provision has not been made for Federal income taxes since the Fund
has elected to be taxed as a "regulated investment company" and
intends to distribute substantially all income to its shareholders
and otherwise comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(e) The Fund has investments in short-term variable rate demand notes,
which are unsecured instruments. The Fund may be susceptible to
credit risk with respect to these notes to the extent the issuer
defaults on its payment obligation. The Fund's policy is to monitor
the creditworthiness of the issuer and does not anticipate
nonperformance by these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to capital
stock.
BRANDYWINE BLUE FUND, INC. 14
<PAGE> 15
BRANDYWINE BLUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1995
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND
TRANSACTIONS WITH RELATED PARTIES
The Fund has a management agreement with Friess Associates, Inc. (the
"Adviser"), with whom certain officers and directors of the Fund are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreement, the Fund will pay the Adviser a monthly management fee at
the annual rate of one percent (1%) on the daily net assets of the Fund.
Also, the Adviser is reimbursed for administrative services rendered to
the Fund by a consultant paid by the Adviser.
(3) DISTRIBUTION TO SHAREHOLDERS
Net investment income and net realized gains, if any, are distributed to
shareholders. On October 26, 1995, the Fund is expected to distribute
$6,929,543 from ordinary income (approximately $1.01 per share) and
$954,707 from net long-term realized gains (approximately $0.14 per
share). The distributions will be paid on October 27, 1995 to shareholders
of record on October 25, 1995. The percentage of income which is eligible
for the corporate dividend received deduction for this income distribution
is 5%.
(4) DEFERRED EXPENSES
Organizational expenses were deferred and are being amortized on a
straight-line basis over a period of not more than five years beginning
with the date of sales of shares to the public. These expenses were
advanced by the Adviser who will be reimbursed by the Fund over a period
of not more than five years. The proceeds of any redemption of the initial
shares by the original shareholder will be reduced by a pro-rata portion
of any then unamortized deferred expenses in the same proportion as the
number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of such redemption. The unamortized
organizational expenses at September 30, 1995 were $1,550.
(5) INVESTMENT TRANSACTIONS
For the year ended September 30, 1995, purchases and proceeds of sales of
investment securities (excluding short-term investments) were $229,238,466
and $115,679,558, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 1995, liabilities of the Fund included the following:
<TABLE>
<S> <C>
Payable to brokers for
investments purchased . . . . . . . $ 5,371,591
Payable to Adviser for management
fees and deferred expenses . . . . 136,270
Other liabilities . . . . . . . . . . 63,318
</TABLE>
(7) SOURCES OF NET ASSETS
As of September 30, 1995, the sources of net assets were
as follows:
<TABLE>
<S> <C>
Fund shares issued and outstanding . . $134,630,757
Net unrealized appreciation
on investments . . . . . . . . . . 22,427,570
Undistributed net realized gains
and losses . . . . . . . . . . . . 7,884,250
------------
$164,942,577
============
</TABLE>
Aggregate net unrealized appreciation as of September 30, 1995 consisted
of the following:
<TABLE>
<S> <C>
Aggregate gross
unrealized appreciation . . . . . . $ 24,343,456
Aggregate gross unrealized
depreciation . . . . . . . . . . . (1,915,886)
------------
Net unrealized appreciation . . . . . $ 22,427,570
============
</TABLE>
DON'T PANIC. . .
when you see your October 26 Fund quote in the newspapers. That day
you will receive a dividend of APPROXIMATELY $1.15 per share -- $1.01 in
short-term capital gains (treated as ordinary income) and $0.14 in long-term
capital gains -- so your quote will be reduced accordingly.
WHILE INCOME TAX WILL HAVE TO BE PAID FOR THIS YEAR ON THE
DISTRIBUTION, IT WILL NOT HAVE TO BE PAID LATER ON THIS SAME AMOUNT IF AND WHEN
THE SHARES ARE REDEEMED.
Shares purchased on or after October 26, 1995 will not receive the
distribution and will not incur the consequent tax liability. However, any
investor who delays his purchase to avoid the distribution will forego any
appreciation which may occur in the interim.
Consult with your accountant to calculate how much the Fund would have
to gain before offsetting any advantages of deferring purchase. This would
depend on your particular tax situation.
15 BRANDYWINE BLUE FUND, INC.
<PAGE> 16
MARKET CAP . . .
The most notable shift in your market capitalization occurred in the
$1 to $5 billion category. Fueled primarily by new purchases in Halliburton
Company, Frontier Corp., Integrated Device, and Adaptec, and a $2 million
additional purchase in Dell Computer, this group rose from 55.0 percent in June
to 64.3 percent of your total assets this quarter.
Substantial gains in existing holdings in this group also contributed
to this growth. Xilinx, Inc. and Green Tree Financial were each up 37 percent,
and Cirrus Logic jumped 60 percent during the quarter.
Large cap holdings of $5 billion and over dropped slightly from 29.5
percent in June to 25.5 percent. The sale of your $3 million position in IBM
was the main factor causing this change.
Your companies below $1 billion fell from 13.1 percent to 9.3 percent
during the quarter.
YOUR COMPANIES' MARKET CAPITALIZATION
[PIE CHART]
<TABLE>
<S> <C>
$1 TO $5 BILLION 64.3%
BELOW $1 BILLION 9.3%
CASH 0.9%
$5 BILLION AND OVER - 25.5%
</TABLE>
BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
[PHOTO OF JOHN E. BURRIS] [PHOTO OF FOSTER S. FRIESS] [PHOTO OF STIG RAMEL]
John E. Burris Foster S. Friess Stig Ramel
Chairman President Former President
Burris Foods, Inc. Friess Associates, Inc. Nobel Foundation
Milford, Delaware Jackson, Wyoming Stockholm, Sweden
</TABLE>
(800) 656-3017
<TABLE>
<S> <C>
Investment Adviser: FRIESS ASSOCIATES, INC. Independent Accountants: PRICE WATERHOUSE LLP
Custodian, Transfer Agent: FIRSTAR TRUST COMPANY Legal Counsel: FOLEY & LARDNER
</TABLE>
OFFICERS: Foster S. Friess, President and Treasurer; Clarke Adams, Vice
President; William F. D'Alonzo, Vice President; Carl S. Gates, Vice President;
Paul R. Robinson, Vice President; and Lynda J. Campbell, Secretary
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of Brandywine Blue Fund unless accompanied or
preceded by the Fund's current prospectus.
<TABLE>
<S> <C>
Report editor: Lynda J. Campbell, Paul R. Robinson Report Staff: Margaret Barton, Rebecca A. Buswell, Jennifer Fidance
</TABLE>
BRANDYWINE BLUE FUND, INC. 16
