BRANDYWINE BLUE FUND, INC.
MANAGED BY FRIESS ASSOCIATES, INC.
ANNUAL REPORT
SEPTEMBER 30, 1996
DEAR FELLOW SHAREHOLDERS:
Your Fund hit historic new highs the last week of this quarter, a great way to
end your fiscal year!
While we're delighted to provide solid long-term results for you, we also enjoy
having a positive response for the question, "What have you done for me lately?"
Your 5.4 percent growth for the September quarter compared favorably to the 3.1
percent rise in the S&P 500 and the 1.9 percent gain in the Investor's Business
Daily Mutual Fund Index. Lipper's average growth fund grew 3.9 percent.
For the twelve months ended September 30, your Fund is up 8.9 percent which
included the backtracking in last year's December quarter. After absorbing that,
your assets advanced a bold 21 percent as we write today.
BRANDYWINE BLUE FUND
PERFORMANCE 6/30/94 TO 9/30/96
June 30, 1994 100
September 30, 1994 107.8
December 31, 1994 107.7
March 31, 1995 117.1
June 30, 1995 135.7
September 30, 1995 153.9
December 31, 1995 142.5
March 31, 1996 155.6
June 30, 1996 159
September 30, 1996 167.6
In the most recent two years, you've seen a 55 percent jump in your Fund, or
24.7 percent on an average annualized basis.
Those of you with us for the last five years enjoyed a 145 percent increase in
your investment, 19.7 percent annualized, leaving behind the S&P 500 which rose
just 103 percent, the IBD Index's 93 percent gain, and the 72 percent climb in
the NYSE.
According to Lipper Analytical, your Fund is in the top four percent of 247 U.S.
growth funds for the five year period.
MOST RECENT FIVE YEARS
NYSE 72.2%
S&P MIDCAP 84.2%
IBD*<F1> 92.9%
S&P 500*<F1> 102.9%
YOUR FUND*<F1> 145.3%
*<F1>TOTAL RETURN
IBD=Investor's Business Daily Mutual Fund Index
Your first nine months results through September 30 of 17.6 percent nicely
outpaced the major indices. The IBD Index rose 14.3 percent, the S&P 500 climbed
13.5 percent, and the NYSE gained 11.5 percent.
In the last several weeks, mainstream economic thinking widely forecasted
Federal Reserve tightening to slow an overheated economy. The consensus took a
serious body blow in mid-September when indicators flashed that retail sales
were lackluster at the same time inflation indicators posted tepid results.
Those who thought interest rates would rise reversed field.
Two weeks later, declining durable goods orders and rising jobless claims began
painting a picture of economic activity slowing to sustainable levels on its own
accord, without federal interest rate intervention, again showing the wisdom of
Alan Greenspan's patient waiting strategy.
At Friess Associates we continue to focus on investments in companies whose
growth is based on the ability to gain market share with the introduction of
exciting new products. We emphasize companies whose margins are secured by an
ability to price their goods and services in a way that offsets the impact from
inflation.
Companies whose profitability and growth depend solely on the overall direction
of the economy are systematically eliminated as candidates for your Fund.
According to an analysis by O'Neil and Company, the growth of the companies in
your portfolio exceeds that of those making up the S&P 500 yet P/E ratios on
1997 estimates are a modest 17 times.
COMPANY GROWTH
AVERAGE INCREASE LATEST 12 MOS. EARNINGS
Your Companies 53%
S&P 500 14%
AVERAGE INCREASE LATEST QUARTERLY EARNINGS
Your Companies 50%
S&P 500 14%
All S&P figures are unweighted. Analysis by William O'Neil & Co., Inc. September
27, 1996
Your well-balanced research team isolated many individual companies which
performed well for you this quarter. Some of the largest percentage gainers were
Mark Lapolla's SCI Systems, up 39 percent, ADC Telecom, picked by Andy Graves,
rose 46 percent, and A.J. Berk's Precision Castparts rose 20 percent.
Individual stock selection is what led us to participate in many energy-related
stocks as previously mentioned in June. After a correction in July, energy
stocks in your Fund resumed their upward trend. Cooper Cameron Corp. rose 31
percent, Reading & Bates increased 23 percent, and J. Ray McDermott climbed 19
percent.
Worldwide hydrocarbon demand continues to outstrip supply, creating an
environment where oil prices are far more stable than in the past. This allows
more predictable cash flows and the confidence to increase drilling and
development.
Today, new technologies such as 3D and 4D seismic, directional drilling, and
floating production allow highly profitable field development at oil prices of
$17 to $20 and natural gas prices of $1.75 to $2.00. So far, cautious optimism
by the industry has mitigated the over-building of capacity which spoiled the
profitable expansion in the late 1970's.
Concerns that additional oil would come onto the markets with Iraq's agreement
to comply with United Nations' sanctions were alleviated by Saddam Hussein's
recent behavior.
To put that inevitable increase in oil supply in perspective, the expected
700,000 barrels per day from Iraq will represent less than one percent of
worldwide consumption and roughly 35 percent of one year's increase in demand.
With global expansion being accelerated by increasing demand from fast-growing
Asian economies, the big question is where will the additional needs come from,
particularly since many mature fields such as the Alaskan North Slope and the
North Sea are peaking out or already declining in production.
Recent strength in technology stocks was sparked when Intel, Diane Hakala's pick
which rose 31 percent this quarter, pre-released its positive results. Why?
Our field research indicated all year that end demand for computers and related
electronics has been solid, yet many companies' first half earnings didn't truly
reflect this. Inventory corrections masked the real picture. When inventories
came down, fundamentals looked to be improving and lifted the wall of worry
concerning end demand.
Meanwhile, companies such as David Harrington's Dell Computer, up 53 percent
during the quarter, Clarke Adams' Gateway, up 41 percent, Jon Fenn's Adaptec, up
27 percent, and John Ragard's Western Digital, up 54 percent, among others,
benefit from lower component prices for their products. This results in stronger
gross margins and permits lower prices to consumers which in turn creates higher
demand.
Our challenge every day is to focus our intensive, bottom-up research process on
finding out what is really going on and then to compare what we have found to
Wall Street's perceptions, ONE STOCK AT A TIME!
This research strategy is what fuels your growth since inception of 221 percent,
or 22.6 percent annualized, compared to the S&P 500's 156 percent gain, the 113
percent climb in the NYSE, and the IBD Mutual Fund Index's rise of 126 percent.
SINCE INCEPTION
JANUARY 10, 1991
NYSE 113.0%
IBD*<F2> 125.8%
S&P 500*<F2> 156.3%
DJIA*<F2> 176.4%
YOUR FUND*<F2> 221.1%
*<F2>TOTAL RETURN
Your Friess Associates team remains committed to this strategy, with more than
$15 million of their own personal assets invested in your Fund.
During the quarter others saw the value of this strategy and entrusted $20
million in new assets to our stewardship.
As always, we are honored by your confidence and grateful for your long-term
perspective. We continually look forward to putting our strategy to work for
your benefit as we shepherd your precious assets. Have a wonderful autumn!
God Bless!
/s/ Foster Friess
Foster Friess
President
October 9, 1996
HIGHLIGHTS . . .
COMMUNICATIONS
Talking on the telephone, communicating over the Internet, and even watching
television involve data being transmitted over various wires and cables. ADC
TELECOMMUNICATIONS, INC. manufactures products which enhance data transmission.
Ameritech, GTE, and Sprint are some of your company's major customers.
With the passage of the telecommunication reform rules earlier this year, orders
from telephone companies such as AT&T, Worldcom and the "Baby Bells"
accelerated. CEO Bill Cadigan told investors at the Baird Conference recently
that backlog of orders for all of ADC's equipment will likely surpass $1 billion
in the next 12 months, up from $600 million today.
We learned from Aimee Gallogly, Treasurer, that many ADC customers have been
testing your company's Homeworx platform for delivering pay-per-view video,
telephone service, and modem access to their cable subscribers. Analysts believe
these contacts have the potential of several millions of dollars in orders.
Revenues were $217 million for the recent July quarter, increasing 45 percent
from $150 million, fueling earnings growth of 25 percent from $.36 to $.45.
Purchased just in July at $45, your shares have risen 43 percent to $64.
HOME/OFFICE & RELATED . . .
With customers like NationsBank, Fidelity, Motorola, and Hewlett-Packard, HERMAN
MILLER, INC. is the largest office furniture manufacturing company in the
country offering a complete line of chairs, desks, credenzas, and other office
pieces.
Even with consolidation in the industry creating just a 5-7 percent growth rate
for the smaller players, Herman Miller is gaining market share. Your company
benefits from the trend of many Fortune 500 Companies minimizing the number of
vendors they use. In an effort to cut costs, most companies look for more
service from each individual vendor and will select a larger player in the
market, like Herman Miller, that can provide that additional service.
For the last quarter, earnings rose 56 percent from $.37 to $.58 and for the
fiscal year ended May 1996, earnings were $2.25, escalating 72 percent from
$1.31 last year. Revenues climbed 18 percent during the year.
Chief Financial Officer Brian Walker explained to us recently that your company
"put their money where their mouth is," so to speak, and aggressively
repurchased 1.3 million shares of the total shares outstanding, which should add
to share earnings.
Since purchase in July, your shares have increased 21 percent selling now at
$40.
NETWORKING . . .
Best known for its high-end routers which allow computer networks to communicate
over long distances, CISCO SYSTEMS is the world's networking giant with annual
sales expected to exceed $5 billion for the current fiscal year.
Your company's recent acquisition of Stratacom helps position Cisco in the
telecom market as, according to Larry Carter, Chief Financial Officer,
Stratacom's frame relay and ATM switching technologies complement Cisco's
routing and Ethernet switching business.
With networking, the older mainframes are replaced by servers and "smart"
personal computers -- those with the Intel or Apple processors inside to make
them run more quickly and efficiently.
These PC's are tied together into intranets -- within a firm -- and the
Internet, thereby building the Internet's network of PC's, servers, and
workstations.
Revenues exploded 108 percent during the recent July quarter to reach $1.2
billion, up from $621 million last year, fueling earnings growth of 80 percent
from $.25 to $.45.
Original shares purchased in April 1995 at $20 have more than tripled to $62.
Additional shares, purchased following the Stratacom acquisition in July, less
than three months ago, have already increased 18 percent.
SEMICONDUCTORS & RELATED
Just as the commercial claims, if it says "Intel inside," you know the computer
contains a Pentium processor and therefore runs at high speed. Most all PC
manufacturers -- Compaq, IBM, Dell, and Gateway -- are customers of INTEL CORP.
which produces the Pentium.
Intel's CEO Andy Grove told us recently that your company's newly completed
Pentium plant in Chandler, Arizona, is designed not only for this chip, but
also for the next generation of chips. All that will be required is a simple
change in the equipment.
Your company is, by far, the major producer of microprocessors for PC's, its
newest being the Pentium Pro. These chips serve as the primary "brain" for the
PC and are becoming faster and able to handle even greater function than before.
With PC unit growth above expectations, Intel's earnings jumped 18 percent
during the June quarter to $1.17 from $.99 while revenues rose 19 percent to
$4.6 billion from $3.8 billion.
In just a little more than two months, your shares climbed 31 percent, selling
now at $95 up from the purchase price of $72.
FELLOW SHAREHOLDER . . .
In 1971, Dr. Keith Phillips started a Christian Bible school in the Los Angeles
ghetto of Watts. He soon realized that to make a real difference in people's
lives he needed to have a long term relationship with them. Today his idea has
grown into the World Impact organization serving inner-city families in 13 urban
centers across America.
World Impact's center in Chester, Pennsylvania was launched in 1988 and now
includes classes for kids, after-school activities for teens, and programs for
adults.
Five years ago Keith Phillips visited Chester and spoke at some local churches.
Foster and Lynn Friess invited a group of people to meet him. It was there that
the seed of an idea was planted.
Lois Aldrich attended that gathering and heard Dr. Phillips' hopes of someday
offering vocational training that could help people in the inner city find jobs,
get off welfare, and turn their lives around. Lois says, "A light bulb went on
in my head." A nurse with experience in teaching nurse's aid certification, Lois
decided to put together a program.
After trudging through the bureaucracy and paperwork of a state-licensed
program, she obtained approval for her course, resigned from her other job, and
started a pilot program in summer 1993 at World Impact's Frederick Douglass
Christian School in Chester. Starting with two students, Lois is now teaching
her seventh class and counts 32 graduates of her program, including four men.
The students attend class for eight weeks, three days a week. Half their time
is spent in the classroom and half is spent in a nursing home learning how to
care for people who are not able to care for themselves.
But the program's purpose goes beyond job training. Lois spends a lot of
personal time with her students helping them to believe in their own self-worth
and to have confidence that they can make a positive contribution in the
workplace.
Some of the students are young, single mothers on welfare. Some students, in
their thirties with grown children who've given them grandchildren to care for,
are entering the job market for the first time.
Although a few students have gone through the program and not sought employment,
most of her graduates have jobs and feel good about themselves and their
accomplishments.
Lois lives in Kennett Square, Pennsylvania with her husband, an engineer with
the DuPont Company. Her daughter, just graduated from college, is a teacher,
and her son is a junior in college. When she has a little free time for herself
she enjoys working on craft projects, gardening, and camping with her family.
We salute Lois and her commitment to volunteer her time to improve the lives of
her students. World Impact is one of the outstanding organizations we number
among our fellow Brandywine Blue Fund shareholders, and we are honored to
support their good works.
- - Margaret Barton
NEWS FROM YOUR CUSTODIAN . . .
You'll notice a change on your next statement from Firstar Trust. In order to
prevent the POSSIBILITY of fraudulent use of your social security number or tax
identification number, it will no longer be printed on any statement unless your
statement reflects an initial purchase into the Fund. In the box where the
number normally appeared, it will read "on file" if Firstar has your number or
"specify" if they need it from you.
GROWING YOUR FUND . . .
We would not be able to create any gains for you in the Fund were it not for the
many folks at all the companies in your portfolio. The people on the shipping
docks, in secretarial pools, and on the assembly line are those who are really
responsible for your Fund's success. Because of their essential contribution we
want to highlight these individuals.
This quarter we would like to introduce you to Lysa Bryant, one of three
Investor Relations contacts at Compaq Computer, whom your consultant Mike Davis
met when he was researching new developments at the company.
Lysa admits that it took a little while to gain the confidence to speak for
Compaq, because she knows that what she says can have a big impact on the stock
as the Investor Relations group serves as the company's liaison to Wall Street.
When Compaq makes an announcement, or the press catches hold of a rumor about
the company, Lysa's department can be on the phone all day confirming, denying,
or explaining the issues.
As program manager for Investor Relations, Lysa sets up all the meetings with
the institutional investors and the analysts, and she handles all the details
when Compaq participates in a technology conference -- everything from catering
services to developing computerized multi-media presentations.
Lysa started at Compaq as a temporary worker in the software training
department. Two years later, when a permanent position opened up in the Investor
Relations office, she jumped at the chance.
Praising her boss, Alice McGuire, a good friend to Lysa who encourages her to
grow in her job, Lysa remembers, "I had been here two weeks, and Alice came to
my son's second birthday party. How many bosses do you know of who would do
that after just two weeks?"
With their two sons, Hayden and Colby, Lysa and her husband Mike live in
Tomball, Texas, outside of Houston, and are kept busy with soccer, baseball, and
Cub Scouts. When they find a little time to get away, they enjoy scuba diving
and motorcycling.
We applaud Lysa and the more than 17,000 employees at Compaq for adding value to
your investment in Brandywine Blue. Compaq shares purchased during this quarter
have already brought in more than $1.2 million to your portfolio.
- - Margaret Barton
A.J. . . .
Researcher Andre "A.J." Berk, traces his interest in the stock market back to
his high school days, when he began investing in growth stocks. Upon entering
Wayne State University in Detroit, A.J. had already decided to major in Business
and earned a B.S. in Economics and Finance in 1986.
A.J. joined your Phoenix research team in December 1994 after spending seven
years as a financial analyst for a small money management firm located near his
home in the Detroit suburb of West Bloomfield. During his time there, he had
three years of continuous contact with researcher, Diane Hakala.
The two met at an investment conference and A.J. recalls, "I was instantly
impressed by Diane's in-depth knowledge of multiple industries and specific
companies. That research-intensive strategy is instrumental in our fulfilling
our important obligation to those depending on us to grow their assets."
According to senior researcher John Ragard, A.J. quickly and effectively grasped
the Friess strategy. "A.J. is an extraordinarily thorough researcher. As
teammates, we have the opportunity to regularly bounce stock ideas off each
other. In almost every instance when we discuss an issue about a company that
needs to be understood, A.J. has already thought it through and contacted
several industry sources about it."
Reflective of A.J.' s capabilities, Newbridge Networks, Payless Shoe Source,
Precision Castparts, Thrifty PayLess, and Praxair have together gained $5
million for your Fund.
With his interest in playing tennis and hockey and his active involvement in the
Cystic Fibrosis Foundation, A.J. keeps busy during his time away from the
office.
- Rebecca Buswell
CONRAD . . .
After three years as a researcher in both your Wilmington and Jackson offices,
Conrad Doenges went out on his own as a consultant two years ago and moved back
to his native Tulsa, Oklahoma.
While not a hub in the investment world, the location works perfectly for Conrad
as the "virtual office" concept at Friess Associates enables him to be near his
family and communicate with Friess researchers via Lotus Notes and fax just as
though he were visiting any of our three main offices.
"With the computer systems Friess has in place, your research team can more
effectively grow your investments and tap into company contacts in every major
city," Conrad explains.
"For example, in August I met in Tulsa with all the senior management of Apache
Corporation, a stock followed by Wilmington-based senior researcher, John
Ragard. My meeting saved John nearly two full work days as he didn't have to
travel to Tulsa and back."
In 1988, Conrad earned a B.A. in History from Davidson College where he served
as President of the student body his senior year. Upon graduating, he was a
corporate banking officer at NationsBank in both Charlotte and Chicago. There he
received rigorous financial analysis training he now implements in dissecting a
company's financial statement.
Some of those companies Conrad recommended for your Fund include Jones Apparel
and Scott Paper, which together have brought you more than $2 million in gains.
Friess researcher and college buddy Andy Graves applauds Conrad's abilities.
"Conrad and I collaborate often on companies for your Fund, and he has a keen
eye for the finances of a business which can drive its success. His patience and
cool head give him an edge in this fast-paced and often tough business."
Aside from picking stocks, Conrad enjoys keeping fit and works out daily --
lifting weights and running. He is also active in his community, serving on the
boards of The Arts and Humanities Council of Tulsa, and Art After Five at
Philbrook Art Museum.
- - Rebecca Buswell
MIMI . . .
"As assistant to researcher Andy Graves, I understand the value of being a team
player, especially in an industry where timing is of the utmost importance. By
focusing on the variables that can significantly impact a stock's price like a
new product line or new management, and alerting Andy to those issues, I can
effectively empower him in his research efforts on behalf of our clients and
shareholders."
That's how research manager Mimi Wry describes her role at your Jackson Friess
Associates headquarters.
Lettering in four varsity sports all through high school, in Summit, New Jersey,
it's no surprise that Mimi thrives within the Friess team environment. "Everyone
makes a contribution. Everyone shares the same enthusiasm for fulfilling our
mission of growing the assets entrusted to us," Mimi relates.
Graduating from Bucknell University in Lewisburg, Pennsylvania with a degree in
psychology, Mimi went on to graduate studies in the social work program at
Rutgers University. She worked as a youth counselor with troubled teenagers,
first in New Jersey and later in Jackson. Then, for a total change of pace,
Mimi worked in technical support at a software company, testing new products and
helping clients solve technical problems.
Complimenting her organizational skills, Andy says, "Mimi's knack for
coordinating with three consultants located in San Francisco, Tulsa, and
Minneapolis, all from her office in Jackson, is an invaluable contribution to
our investment objective." Mimi's work helped in producing gains of $11 million
for your Fund from Andy's Cisco Systems, Tellabs, Tommy Hilfiger, and Gap
selections.
Mimi loves most outdoor activities, particularly skiing and backpacking, and she
also enjoys playing tennis and ice hockey. Last summer, Mimi climbed the Grand
Teton. Now her teammates are just waiting to see what adventure she will tackle
next!
- - Margaret Barton
MARKET CAP . . .
The biggest shift in your market cap this quarter occurred in your large cap
holdings -- those above $5 billion -- increasing from 31.6 percent in June to
34.2 percent. The new purchase of Intel and its subsequent 31 percent gain, as
well as an increase in the market value of Dell Computer, up 53 percent this
quarter mov-ing it to the large cap category, helped grow this group.
You also bought Compaq Computer and Computer Associates and added to Cisco
Systems and 3Com Corp., increasing this category. Together, these companies
brought in $6.5 million during the quarter.
The sale of Intimate Brands, TWA, and Network General reduced your small cap
group to 9.7 percent from 11.3 percent. Your mid cap holdings decreased
slightly from 55.4 percent to 55.1 percent.
CASH 1.0%
SMALL CAP 9.7%
MID CAP 55.1%
LARGE CAP 34.2%
The investment community is filled with experts who publish information for the
investing public about where to put their money. We at Brandywine Blue Fund
recognize that these folks help grow our Fund since many of our shareholders
decide to pool their assets with ours based in part on the articles and
materials they read. Because we understand how important this influence is to
our business, we are launching this feature to highlight these individuals in
future reports.
FUND EXPERT . . .
With so many mutual funds in the marketplace today, the $320 million asset
management firm, Litman/Gregory & Company, based in San Francisco, uses a
screening system to select which funds to include for their clients.
Co-founder Ken Gregory looks for the following characteristics in a fund's
manager: an experienced track record relative to its appropriate peer group; a
willingness to think independently and act upon that; an intense focus; and,
most importantly, a passion for the business. Ken says he finds all of these in
your Friess Associates research team.
"Friess Associates is one of the very few examples of an investment firm that
has grown rapidly but maintained its ability to manage more money and more
people effectively," Ken states. "Many firms who grow stumble and trip in terms
of delivering the same quality and performance they provided when they were
small. This has not been the case with Friess."
Just after launching Litman/Gregory in 1987, Ken discovered Friess Associates
and your sister fund, Brandywine, and wanted to offer the Fund to their clients.
Their firm is set up to invest only through Charles Schwab, so they could not
initially propose Brandywine as an option to their clients because, at that
time, Brandywine was only available through direct investment.
Ken's enthusiasm about the opportunities Brandywine could create for his clients
finally convinced Foster to form a relationship with Schwab exclusively for
Litman/Gregory. Since 1989, Litman/Gregory clients, primarily individuals whose
average account size is $2 million, have been Brandywine Fund shareholders.
Litman/Gregory's newsletter, The No-Load Fund Analyst is one of the most widely
respected publications in the financial press and, according to Ken, has been
instrumental in fueling the company's growth. "We have never marketed our
services, but, instead, have focused on generating good performance for our
clients -- the best advertising of all."
Before joining up with Craig Litman, Ken worked in the investment industry as
president of an asset management company and as a financial adviser. He earned
his MBA at the University of Michigan and returned to his native San Francisco
where he and his wife of 15 years, Erica, live and raise their three children.
A shareholder himself, Ken understands how your manager's strategy works and
explains, "I'm impressed with Friess' obsessiveness in knowing their companies
well and understanding what's driving revenues and earnings. This business is
filled with bright people, but being bright isn't enough. To really be
successful, you must be obsessed with getting any edge on the competition that
you can. The Brandywine team does just that."
- - Rebecca Buswell
ON THE CUTTING EDGE . . .
CUTTING BOARDS PROTECT AGAINST SALMONELLA AND E. COLI . . . HOSPITAL GOWNS KILL
STAPH GERMS ON CONTACT
By adding bacteria-killing chemicals to plastics and synthetic fibers, Microban
Products Co. in Huntersville, N.C. is making these and other products with
built-in antibacterial protection. The pellet-encased ingredient is colorless,
odorless, and, unlike surface coating, does not wash off. Hasbro is test-
marketing a child's high-chair with the ingredient molded into the food tray.
STOPPING DISABLED PLANES
"Foamcrete," a mixture of cement, water, and foaming agents, manufactured by
Engineered Systems in Aston, Pennsylvania, can stop a runaway Boeing 727
traveling at 60 mph within 400 feet. Disabled planes making an emergency landing
would roll onto a strip of foamcrete laid out at the end of the runway.
Currently, foamcrete is being installed at New York's Kennedy Airport; the
Boston and Seattle airports may soon follow.
"BATTERIES NOT INCLUDED" -- BUT THIS TIME THEY ARE NOT NECESSARY
Trevor Bayless, a British inventor, has created the Bayless Clockwork Radio.
Simply wind it up like an old-time phonograph, and listen to AM, FM, or short
wave for half an hour. A grant from the British government is making the radios
available for $4 a piece for aid agencies to distribute in African villages.
The hope is the radios will be a good source for distance learning and health
information. The "Freeplay" radio makes a logical emergency set here in the U.S.
because it can be stored unwound and wrapped in watertight plastic without
worrying about batteries leaking. The retail price here is about $100.
SOMETIMES LESS IS MORE
Personal digital assistants are those "pocket computers" that are usually too
heavy, slow, and complicated to be useful. Palm Computing's Pilot fits in a
pocket, weighs 5.7 ozs., and has one goal -- to keep you organized. Set the
Pilot into a special cradle attached to your personal computer, press one
button, and the two devices exchange updates of their data -- phone numbers,
addresses, appointments. Since the Pilot was introduced in April, retailers can
barely keep the $299 device in stock. Palm's parent company is U.S. Robotics
Corp.
(PRICE WATERHOUSE LLP LOGO)
3100 MULTIFOODS TOWER
33 SOUTH SIXTH STREET
MINNEAPOLIS, MN 55402
REPORT OF INDEPENDENT ACCOUNTANTS
October 7, 1996
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, 1996, 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 five 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, 1996 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
BRANDYWINE BLUE FUND, INC.
STATEMENT OF NET ASSETS
September 30, 1996
QUOTED
MARKET
SHARES OR PRINCIPAL AMOUNT COST VALUE
- -------------------------- ----- --------
COMMON STOCKS - 99.0% (A)<F4>
APPAREL & SHOES - 8.1%
57,900 Jones Apparel Group, Inc.*<F3> $2,248,901 $3,691,125
172,200 Liz Claiborne, Inc. 5,338,260 6,414,450
47,200 NIKE, Inc. Cl B 2,630,478 5,734,800
112,800 Nine West Group Inc.*<F3> 5,163,911 6,119,400
136,200 The Sports Authority, Inc.*<F3> 3,045,188 3,626,325
9,400 St. John Knits, Inc. 401,539 471,175
41,050 Tommy Hilfiger Corp.*<F3> 1,178,546 2,432,212
----------- -----------
20,006,823 28,489,487
THIS SECTOR IS 42.4% ABOVE YOUR FUND'S COST.
AUTOMOTIVE & RELATED - 0.5%
20,000 Borg-Warner Automotive, Inc. 821,200 710,000
32,400 Lear Corporation*<F3> 938,887 1,069,200
----------- -----------
1,760,087 1,779,200
THIS SECTOR IS 1.1% ABOVE YOUR FUND'S COST.
BUILDING & RELATED - 0.7%
25,700 Champion Enterprises, Inc.*<F3> 631,140 581,462
70,000 U.S. Industries, Inc.*<F3> 1,867,507 1,837,500
------------ -----------
2,498,647 2,418,962
THIS SECTOR IS 3.2% BELOW YOUR FUND'S COST.
COMMUNICATIONS - 6.4%
54,900 ADC Telecommunications, Inc.*<F3> 2,460,978 3,513,600
49,000 Andrew Corp.*<F3> 2,431,373 2,443,875
44,200 Dynatech Corp.*<F3> 1,415,550 2,022,150
80,000 ECI Telecom Ltd. 1,759,184 1,680,000
65,000 Octel Communications Corp.*<F3> 1,717,957 1,885,000
114,300 Tellabs, Inc.*<F3> 4,478,856 8,072,438
46,600 U.S. Robotics Corp.*<F3> 3,309,158 3,011,525
------------ -----------
17,573,056 22,628,588
THIS SECTOR IS 28.8% ABOVE YOUR FUND'S COST.
COMPUTERS & RELATED - 7.8%
55,000 Adaptec, Inc.*<F3> 2,303,754 3,300,000
145,500 Compaq Computer Corp.*<F3> 8,078,026 9,330,187
20,000 Dell Computer Corp.*<F3> 701,799 1,555,000
77,000 Gateway 2000, Inc.*<F3> 3,101,202 3,686,375
70,000 Sun Microsystems, Inc.*<F3> 3,325,607 4,348,750
126,300 Western Digital Corp.*<F3> 3,143,381 5,067,788
------------ -----------
20,653,769 27,288,100
THIS SECTOR IS 32.1% ABOVE YOUR FUND'S COST.
DISTRIBUTION - 0.6%
58,700 U.S. Office Products Co.*<F3> 2,490,141 2,105,863
THIS SECTOR IS 15.4% BELOW YOUR FUND'S COST.
ELECTRICAL EQUIPMENT MANUFACTURERS - 2.4%
55,000 Honeywell Inc. 3,221,218 3,471,875
40,000 Precision Castparts Corp. 1,540,610 1,940,000
75,000 Sundstrand Corp. 2,634,632 2,925,000
------------ -----------
7,396,460 8,336,875
THIS SECTOR IS 12.7% ABOVE YOUR FUND'S COST.
ELECTRONICS - 2.2%
75,000 Computer Products, Inc.*<F3> 1,647,810 1,640,625
80,000 SCI Systems, Inc.*<F3> 2,973,296 4,500,000
50,000 Waters Corp.*<F3> 1,346,595 1,637,500
------------ ------------
5,967,701 7,778,125
THIS SECTOR IS 30.3% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 8.3%
85,000 AccuStaff Inc.*<F3> 2,216,103 2,199,375
183,700 Associates First Capital Corporation 6,437,128 7,531,700
18,000 Beneficial Corp. 914,249 1,035,000
49,000 CMAC Investment Corp. 2,815,543 3,111,500
20,000 Comdisco, Inc. 548,488 577,500
84,000 Conseco, Inc. 3,592,934 4,137,000
15,000 Credit Acceptance Corp.*<F3> 283,125 412,500
63,500 Diebold, Inc. 3,419,606 3,706,812
37,900 MGIC Investment Corp. 2,388,990 2,553,513
37,600 The Money Store, Inc. 661,713 996,400
15,000 The PMI Group, Inc. 735,900 796,875
83,000 The Quick & Reilly Group, Inc. 2,575,249 2,178,750
------------- ------------
26,589,028 29,236,925
THIS SECTOR IS 10.0% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 2.2%
50,000 Dean Foods Co. 1,357,795 1,412,500
70,000 Flowers Industries, Inc. 1,264,444 1,426,250
160,000 Food Lion CL B 1,273,750 1,420,000
80,000 The Kroger Co.*<F3> 3,473,531 3,580,000
------------ -----------
7,369,520 7,838,750
THIS SECTOR IS 6.4% ABOVE YOUR FUND'S COST.
HEALTHCARE - 2.8%
15,000 HealthCare COMPARE Corp.*<F3> 715,312 710,625
5,000 HEALTHSOUTH Corp.*<F3> 175,300 191,875
60,500 MedPartners, Inc.*<F3> 1,316,805 1,376,375
100,000 OrNda HealthCorp*<F3> 2,570,448 2,737,500
35,000 Pacificare Health Systems, Inc.*<F3> 2,886,562 3,027,500
69,600 Quorum Health Group, Inc.*<F3> 1,669,224 1,722,600
----------- ------------
9,333,651 9,766,475
THIS SECTOR IS 4.6% ABOVE YOUR FUND'S COST.
HOME/OFFICE & RELATED - 1.9%
22,500 HON INDUSTRIES Inc. 883,688 894,375
60,000 Lowe's Companies, Inc. 2,342,636 2,452,500
80,000 Herman Miller, Inc. 2,673,738 3,240,000
------------ -----------
5,900,062 6,586,875
THIS SECTOR IS 11.6% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 1.4%
50,000 American Greetings Corp. Cl A 1,382,305 1,431,250
123,000 Interstate Hotels Company*<F3> 2,846,257 3,397,875
------------ -----------
4,228,562 4,829,125
THIS SECTOR IS 14.2% ABOVE YOUR FUND'S COST.
MEDICAL PRODUCTS & SUPPLIES - 1.4%
85,000 AmeriSource Health Corp.*<F3> 2,675,000 3,782,500
36,100 Sybron International Corp.*<F3> 1,015,767 1,046,900
------------ -----------
3,690,767 4,829,400
THIS SECTOR IS 30.9% ABOVE YOUR FUND'S COST.
NETWORKING - 6.8%
167,800 3Com Corp.*<F3> 7,712,393 10,078,571
223,000 Cisco Systems Inc.*<F3> 9,306,538 13,840,049
------------ ------------
17,018,931 23,918,620
THIS SECTOR IS 40.5% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 13.0%
100,000 Apache Corp. 2,960,736 2,975,000
50,000 BJ Services Co.*<F3> 1,572,247 1,812,500
30,000 Camco International Inc. 1,030,905 1,121,250
40,000 Chesapeake Energy Corporation*<F3> 2,022,915 2,505,000
15,900 Cooper Cameron Corp.*<F3> 616,042 912,262
44,000 Diamond Offshore Drilling, Inc.*<F3> 2,266,000 2,420,000
110,000 Global Marine Inc.*<F3> 1,544,697 1,732,500
13,500 J. Ray McDermott, S.A.*<F3> 331,304 393,187
196,700 Noble Drilling Corp.*<F3> 2,902,999 2,975,088
185,000 Oryx Energy Co.*<F3> 3,069,820 3,283,750
64,000 Pennzoil Co. 3,164,652 3,384,000
70,000 Phillips Petroleum Co. 2,949,221 2,992,500
145,000 Reading & Bates Corp.*<F3> 1,785,313 3,933,125
131,500 Rowan Companies, Inc.*<F3> 2,126,249 2,449,188
110,000 Schlumberger Ltd. 9,538,992 9,295,000
98,000 Smith International, Inc.*<F3> 2,913,991 3,442,250
------------ -----------
40,796,083 45,626,600
THIS SECTOR IS 11.8% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 1.6%
65,000 Genzyme Corp.*<F3> 1,896,667 1,657,500
25,000 R.P. Scherer Corp.*<F3> 1,224,998 1,218,750
60,000 Teva Pharmaceutical Industries
Ltd. ADR 2,690,606 2,782,500
------------ -----------
5,812,271 5,658,750
THIS SECTOR IS 2.6% BELOW YOUR FUND'S COST.
RETAILING - 12.0%
110,000 CompUSA Inc.*<F3> 2,419,565 5,940,000
100,000 Consolidated Stores Corp.*<F3> 2,794,150 4,000,000
65,000 Dollar General Corp. 1,561,483 2,023,125
250,000 Gap, Inc. 5,922,207 7,218,750
30,000 Mac Frugal's Bargainso
Close-outs Inc.*<F3> 638,994 708,750
115,000 Melville Corp. 5,032,656 5,074,375
22,000 Neiman-Marcus Group, Inc.*<F3> 772,361 775,500
86,000 Payless ShoeSource, Inc.*<F3> 2,708,462 2,891,750
176,700 Sears, Roebuck and Co. 7,344,951 7,907,325
67,000 Sunglass Hut International, Inc.*<F3> 1,033,100 1,067,846
40,000 Thrifty PayLess Holdings, Inc. Cl B*<F3> 626,308 745,000
110,200 TJX Companies, Inc. 2,611,981 3,953,425
------------- -----------
33,466,218 42,305,846
THIS SECTOR IS 26.4% ABOVE YOUR FUND'S COST.
SEMICONDUCTORS & RELATED - 3.0%
110,000 Intel Corp. 7,965,429 10,498,180
THIS SECTOR IS 31.8% ABOVE YOUR FUND'S COST.
SOFTWARE - 11.2%
130,000 Adobe Systems Inc. 4,619,624 4,842,500
70,400 BMC Software, Inc.*<F3> 2,734,436 5,596,800
20,000 Cadence Design Systems, Inc.*<F3> 272,688 715,000
202,500 Computer Associates
International, Inc. 11,044,115 12,099,375
65,000 Compuware Corp.*<F3> 2,351,877 2,973,750
200,000 Informix Corp.*<F3> 5,078,824 5,575,000
85,000 McAffee Associates, Inc.*<F3> 4,531,252 5,865,000
35,000 Parametric Technology Corp.*<F3> 1,518,930 1,728,125
------------ ------------
32,151,746 39,395,550
THIS SECTOR IS 22.5% ABOVE YOUR FUND'S COST.
TRANSPORTATION - 0.9%
50,000 Comair Holdings, Inc. 1,224,150 1,175,000
125,500 USAir Group, Inc.*<F3> 2,413,013 2,070,750
------------ ------------
3,637,163 3,245,750
THIS SECTOR IS 10.8% BELOW YOUR FUND'S COST.
MISCELLANEOUS - 3.8%
40,000 The B. F. Goodrich Company 1,719,862 1,805,000
25,000 Olin Corp. 2,117,373 2,100,000
68,800 Praxair, Inc. 2,178,628 2,958,400
75,000 UCAR International Inc.*<F3> 3,056,001 3,037,500
100,000 United Waste Systems, Inc.*<F3> 2,209,165 3,475,000
------------ ------------
11,281,029 13,375,900
THIS SECTOR IS 18.6% ABOVE YOUR FUND'S COST.
Total common stocks 287,587,144 347,937,946
SHORT-TERM INVESTMENTS - 2.5% (A)<F4>
COMMERCIAL PAPER - 1.4%
$5,000,000 The CIT Group Holdings, Inc.,
due 10/01/96, discount of 5.66% 5,000,000 5,000,000
VARIABLE RATE DEMAND NOTES - 1.1%
364,311 American Family
Financial Services 364,311 364,311
1,160,000 Johnson Controls, Inc. 1,160,000 1,160,000
2,300,000 Wisconsin Electric Power Co. 2,300,000 2,300,000
------------ -----------
Total variable rate demand notes 3,824,311 3,824,311
------------ -----------
Total short-term investments 8,824,311 8,824,311
------------ -----------
Total investments $296,411,455 356,762,257
-----------
-----------
LIABILITIES, LESS CASH AND
RECEIVABLES (1.5%) (A)<F4> (5,303,201)
------------
NET ASSETS $351,459,056
-----------
-----------
Net Asset Value Per Share
($0.01 par value 100,000,000
shares authorized), offering
and redemption price
($351,459,056 / 13,914,587
shares outstanding) $25.26
-------
-------
* <F3>Non-income producing security.
(a)<F4>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.
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1996
INCOME:
Dividends $1,417,718
Interest 338,823
----------
Total income 1,756,541
----------
EXPENSES:
Management fees 2,563,756
Registration fees 111,702
Administrative services 79,450
Custodian fees 68,144
Professional fees 31,401
Printing and postage expense 17,006
Transfer agent fees 12,038
Amortization of organizational expenses 1,550
Other expenses 16,346
----------
Total expenses 2,901,393
----------
NET INVESTMENT LOSS (1,144,852)
-----------
NET REALIZED LOSS ON INVESTMENTS (7,503,424)
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 37,923,232
-----------
NET GAIN ON INVESTMENTS 30,419,808
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $29,274,956
----------
----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
1996 1995
---- ----
OPERATIONS:
Net investment loss $(1,144,852) $(295,445)
Net realized (loss) gain on investments (7,503,424) 8,175,056
Net increase in unrealized appreciation
on investments 37,923,232 20,117,144
----------- -----------
Net increase in net assets resulting
from operations 29,274,956 27,996,755
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains
($1.10564 and $0.10774 per share, respectively) (7,884,335)*<F5>(180,673)
----------- ---------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (9,072,193 and
5,621,838 shares, respectively) 209,837,352 120,000,924
Net asset value of shares issued in distributions
(344,224 and 10,418 shares, respectively) 7,555,722 177,002
Cost of shares redeemed (2,271,339 and 555,714
shares, respectively) (52,267,216)(12,137,304)
----------- -----------
Net increase in net assets derived from
Fund share activities 165,125,858 108,040,622
----------- -----------
TOTAL INCREASE 186,516,479 135,856,704
NET ASSETS AT THE BEGINNING OF THE YEAR 164,942,577 29,085,873
----------- -----------
NET ASSETS AT THE END OF THE YEAR $351,459,056$164,942,577
----------- -----------
----------- -----------
*<F5>Total distribution includes $6,929,563 of ordinary income, of which 5% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of these
statements.
<TABLE>
BRANDYWINE BLUE FUND, INC.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------------
1996 1995 1994 1993 1992 1991+<F6>
----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $24.37 $17.18 $19.11 $12.95 $13.09 $10.01
Income from investment operations:
Net investment (loss) income (0.05)(1)<F7> 0.00 0.04 (0.06) (0.04) 0.03
Net realized and unrealized gains on investments 2.05 7.30 0.36 6.22 0.52 3.05
------- ------ ------ ------- ------ ------
Total from investment operations 2.00 7.30 0.40 6.16 0.48 3.08
Less distributions:
Dividend from net investment income -- -- -- -- (0.03) --
Distributions from net realized gains (1.11) (0.11) (2.33) -- (0.59) --
------- ------ ------ ------- ------ ------
Total from distributions (1.11) (0.11) (2.33) -- (0.62) --
------- ------ ------ ------- ------ ------
Net asset value, end of period $25.26 $24.37 $17.18 $19.11 $12.95 $13.09
------- ------ ------ ------- ------ ------
------- ------ ------ ------- ------ ------
Total Investment Return 8.9% 42.8% 2.8% 47.6% 4.0% 45.1%*<F8>
Ratios/Supplemental Data:
Net assets, end of period (in 000's $) 351,459 164,943 29,086 6,373 4,270 3,975
Ratio of expenses (after reimbursement) to average
net assets**<F9> 1.13% 1.31% 1.80% 2.00% 2.00% 1.97%*<F8>
Ratio of net investment (loss) income to average
net assets***<F10> (0.4%) (0.4%) (0.4%) (0.6%) (0.3%) 0.6%*<F8>
Portfolio turnover rate 196.9% 174.1% 220.3% 144.3% 191.9% 115.3%*<F8>
Average Commission Per Share****<F11> 0.0599
+<F6>For the period from January 10, 1991 (commencement of operations) to
September 30, 1991.
(1)<F7>Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for permanent book and tax differences.
*<F8>Annualized.
**<F9>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.
***<F10>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.
****<F11>Disclosure required for fiscal years beginning after 9/1/95.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(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. The investment objective of the Fund is to produce long-term capital
appreciation principally through investing in common stocks.
(a) Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the latest bid price. Securities which
are traded over-the-counter are valued at the latest bid price. Securities for
which quotations are not readily available are valued at fair value as
determined by the investment adviser under the supervision of the Board of
Directors. Short-term investments 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. The cost amount of securities
for Federal income tax purposes aggregates $296,703,647. The difference between
cost amounts for book purposes and tax purposes is due to deferred wash losses.
(b) Net realized gains and losses on common stock are computed 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 net investment company taxable income and net
capital gains to its shareholders and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. The Fund
has $2,505,300 of net capital losses which expire September 30, 2004 and
$4,705,965 of post-October losses, both of which may be used to offset capital
gains in future years to the extent provided by tax regulations.
(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.
(g) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT 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.
(4) DEFERRED EXPENSES
Organizational expenses were deferred and were amortized on a straight-line
basis over a period of five years ending December 1995. These expenses were
advanced by the Adviser who was reimbursed by the Fund over the amortization
period.
(5) INVESTMENT TRANSACTIONS
For the year ended September 30, 1996, purchases and proceeds of sales of
investment securities (excluding short-term investments)
were $651,594,125 and $497,589,681, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 1996, liabilities of the Fund included the following:
Payable to brokers for
investments purchased $11,021,982
Payable to Adviser for management fees 274,829
Other liabilities 113,471
(7) SOURCES OF NET ASSETS
As of September 30, 1995, the sources of net assets were
as follows:
Fund shares issued and outstanding $298,611,763
Net unrealized appreciation
on investments 60,350,802
Accumulated net realized losses (7,503,509)
------------
$351,459,056
-----------
-----------
Aggregate net unrealized appreciation as of September 30, 1996 consisted of
the following:
Aggregate gross
unrealized appreciation $62,946,499
Aggregate gross unrealized
depreciation (2,595,697)
-----------
Net unrealized appreciation $60,350,802
-----------
-----------
ALL IS NOT ROSES. . .
The old adage, "You win some, you lose some" applies to nearly everything,
including the activity in your Fund's portfolio. The trick is to win more than
you lose. Fortunately, this was a quarter in which you did just that.
There were eight companies that gave up more than $800,000 each during the
quarter. Glenayre Technology, WorldCom, Heilig-Meyers Co., Qualcomm Inc., and
Trans World Airlines were all sold from your portfolio. You still hold
Healthsouth Corp., Sears Roebuck, and Gap, all solid holdings for you, together
bringing in nearly $1 million since initial purchase.
You saw 16 companies contribute more than $800,000 a piece during the quarter,
13 of which exceeded gains of $1 million each. Your largest gainer was Intel
with $2.5 million.
Other major winners for you were 3Com Corp. bringing in $2.4 million, CompUSA
with $2.2 million, Western Digital at $1.8 million, Cisco Systems contributing
$1.7 million, Dell Computer and SCI Systems gaining $1.6 million a piece, and
BMC Software with $1.4 million.
TOP TEN . . .
There were no new industries appearing in your top ten this quarter, but some
rearrangement did occur.
The greatest change took place in your Software category, which grew from 4.5
percent in June to 11.2 percent this quarter, to assume the number three
position. The addition of Adobe Systems, Computer Associates, Informix, and
McAfee Associates to your portfolio helped grow this group and has already added
more than $3 million to your Fund.
Your number two group in June, Oil/Gas Field Services, now occupies the number
one spot but was pared back from 15.2 percent to 13.0 percent. Ensco
International, Tosco Corp., Weatherford Enterra, and Tidewater were all removed
from your portfolio to reduce this group.
A major portion of your Sears position and your entire Dayton Hudson position
were sold, decreasing your Retailing companies from number one in June at 16.5
percent to number two this quarter at 12.0 percent. You also sold Estee Lauder
and some of your Gap stock, realizing more than $1 million in gains.
TOP TEN INDUSTRY GROUPS
Cash 1.0%
All Others 19.6%
Healthcare 2.8%
Semiconductors & Related 3.0%
Communications 6.4%
Networking 6.8%
Computers & Related 7.8%
Apparel & Shoes 8.1%
Financial/Business Services 8.3%
Software 11.2%
Retailing 12.0%
Oil/Gas Field Services 13.0%
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 Fundation
Stockholm, Sweden
(800) 656-3017
Investment Adviser: FRIESS ASSOCIATES, INC.
Custodian, Transfer Agent: FIRSTAR TRUST COMPANY
Independent Accountants: PRICE WATERHOUSE LLP
Legal Counsel: FOLEY & LARDNER
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.
Report editor: Lynda J. Campbell
Report Staff: Margaret Barton, Rebecca A. Buswell, Paul R. Robinson
