(BRANDYWINE BLUE FUND, INC. LOGO)
MANAGED BY FRIESS ASSOCIATES, INC.
QUARTERLY REPORT
DECEMBER 31, 1996
DEAR FELLOW SHAREHOLDERS:
We're delighted with your Fund's strong finish for '96, jumping nearly 4 percent
in the last two weeks to complete the quarter with a 4.8 percent rise. You
finished the year up 23.2 percent nicely outpacing the 17.5 percent gain posted
by Lipper Analytical's Growth Fund index.
Your results also eked out the 23 percent increase in the S&P 500, the NYSE's
19.1 percent climb and the IBD's Mutual Fund Index growth of 12.9 percent.
This is particularly satisfying in view of the fact that most of the progress in
the market in general this year was in the larger cap stocks. While your fund
does not invest in companies with market caps below $500 million, it also does
not emphasize these gigantic, over-owned, over-researched companies. Your
portfolio holds only about one third of its assets in big cap companies.
If you eliminate the 100 largest over-the-counter Nasdaq companies, those
remaining Nasdaq stocks increased only 5.5 percent!
Your "sister fund," Brandywine, earned some recognition in the January 1 New
York Times for its 1996 return. The ranking showed your Fund as the number one
fund for the year among the 391 largest mid-cap funds they listed and it was
also the best performer out of 292 mid-cap funds for the last three years with
its 19.3 percent annualized increase.
Your five year figure is impressive at 140.1 percent, 19.1 percent annualized,
compared to just a 102.9 percent increase for the S&P 500 and the 71 percent
rise in the NYSE.
MOST RECENT FIVE YEARS
NYSE 71.0%
IBD*<F1> 73.7%
S&P MIDCAP 74.4%
LIPPER GROWTH 84.9%
S&P 500*<F1> 102.9%
YOUR FUND*<F1> 140.1%
*<F1>TOTAL RETURN
IBD = INVESTOR'S BUSINESS DAILY MUTUAL FUND INDEX
Our mantra of "Never Invest in the Stock Market, Invest in Individual Companies"
was supported by the performance on January 3 of Diane Hakala's Intel pick. It
surged 8 points in a single day for a six percent move. Intel, as well as other
technology stocks, had been under pressure as leading computer retailer CompUSA
reported disappointing monthly sales.
This was perceived as a slow-down in the entire PC industry, but your Friess
Associates research team determined that the weakness was primarily on the
consumer end. Buyers were deferring purchases awaiting the introduction in the
weeks ahead of the powerful MMX chip from Intel which will provide a broader
range of multi-video capabilities. Business PC demand remains robust.
Continued strength in the Networking arena benefits companies which show a
consistent ability to deliver new products and services and allows the strong to
get stronger. During the quarter, David Harrington's 3Com Corp. brought in $2.2
million while Andy Graves' Cisco Systems added $600,000.
Some particularly strong gainers for you during the quarter were Jon Fenn's
Adaptec up 23 percent, Carl Gates' Quorum Health which rose 17 percent, Clarke
Adams' TJX Companies which jumped 32 percent, and John Ragard's USAir pick, up
42 percent.
Conditions in the U.S. remain good for sustaining a growing economy and
expanding corporate profits. Commentators continue to speculate about the need
for an increase in the discount rate because of the strengthening economy (or
did they say THIS WEEK we need a decrease because the economy is weakening?).
Most visible measures of inflation remain in check, thanks in large part to the
consistent hand of the Federal Reserve.
The volatility in the bond market resulting from these weekly gyrations in the
economic outlook again underscores the value of the Friess Associates approach
which focuses on the progress of the COMPANY.
An analysis by William O'Neil shows that your companies are experiencing growth
greater than those companies in the S&P 500.
COMPANY GROWTH
AVERAGE INCREASE
LATEST 12 MOS. EARNINGS
YOUR COMPANIES 51%
S&P 500 13%
AVERAGE INCREASE
LATEST QUARTERLY EARNINGS
YOUR COMPANIES 58%
S&P 500 13%
ALL S&P FIGURES ARE UNWEIGHTED. ANALYSIS BY WILLIAM O'NEIL & CO., INC. DECEMBER
27, 1996.
The fourth quarter of 1996 witnessed falling interest rates, reflecting
subsiding fears that inflation will accelerate materially in the near future.
Alan Greenspan's recent suggestion that action may need to be taken if there
were "irrational exuberance" in the stock market purged many weak holders from
the market -- making room for future advances. With the continuous decline in
interest rates during the last nine years, it's easy to forget that the long
term Treasury bond's rate has declined by almost 50 percent in the past decade.
The extended economic expansion we've experienced has created concerns that
labor costs are escalating as the economy reaches full employment. In many
businesses, it remains very difficult to raise prices due to aggressive
competition. This combination can cause profit margins to decline unless
companies increase productivity. Fortunately, many businesses are doing just
that.
Continued expansion of investments in communications and computing technologies
is creating a dramatic increase in labor productivity. The Bank Credit Analyst
states manufacturing unit labor costs have stayed flat for the last five years
due to a dramatic increase in information processing equipment investments --
many created by your companies.
Your research team remains comfortable that near term interest rates will
continue to provide an environment where the stock market will focus on the
dynamic fundamentals your companies are experiencing.
Since your Fund's inception our investment strategy has remain unchanged,
creating a 236 percent increase, 22.5 percent annualized, compared to the S&P
500's climb of 177 percent.
SINCE INCEPTION
JANUARY 10, 1991
IBD*<F2> 123.0%
NYSE 127.5%
S&P 500*<F2> 177.7%
YOUR FUND*<F2> 236.1%
*<F2>TOTAL RETURN
Others continue to discover the value of this strategy as $13 million in new
assets were entrusted to us during the quarter. Your Friess team is equally
committed with more than $15 million invested with you.
We are grateful for the many kind comments hundreds of you sent along with your
Christmas or seasonal greetings. We are encouraged by your thoughtful remarks.
Sharing them with the rest of our team inspires all of us to continue working
hard for you.
We're excited about the new beginning January 1 brings us. Equally exhilarating
was the finale of our year as Lynn and I experienced the joy of seeing
scientific, economic, and literary excellence recognized at the Nobel Award
ceremonies December 10.
We enjoyed dining with the King and Queen of Sweden and 1,750 of their closest
friends in the Stockholm City Hall banquet room afterwards. It is SOME event!
We look forward to a happy and prosperous new year and remain committed to
managing your assets enthusiastically and prudently.
God Bless!
/s/ Foster Friess
Foster Friess
President
January 7, 1997
ALL IS NOT ROSES . . .
Stocks go up and stocks go down. Happily, we can report that the gainers greatly
outnumbered those that went down during this quarter.
You saw seven stocks dropping back more than $800,000 over the last three
months, with Toys R Us, Informix Corp., CompUSA, Regis Corp., and Iomega each
losing more than $1 million. SCI Systems gave up $900,000, while Octel
Communications fell back $870,000. SCI Systems still remains a good gainer for
you overall with nearly $600,000 in gains since purchase. You no longer hold
Iomega, Informix, Octel, and Regis.
Your top four winners for the quarter -- Intel with $3.8 million, 3Com Corp.
with $2.2 million, Western Digital with $2.1 million and Schlumberger Ltd. with
$1.7 million -- together brought in more than $500,000 MORE than the above seven
companies gave up. Other big performers during the quarter were Compaq at $1.4
million, Oryx Energy, Herman Miller and TJX Companies with $1.3 million each,
Conseco gaining $1.2 million, and Smith International bringing in $1 million.
Noble Drilling, EMC Corp, and USAir gained more than $800,000 apiece, giving you
13 companies which exceeded the $800,000 mark this quarter.
HIGHLIGHTS...
APPAREL & SHOES
CEO Paul Charron of LIZ CLAIBORNE simply won't rest on his laurels. Despite a
rising stock price and increasing revenues and margins in the competitive
women's apparel business, he recently told us he must strive for improvement.
"There are always new or existing competitors waiting for us to stumble or those
getting an early jump on a new fashion trend." That attitude has shaped a
resurgence at your company.
Mr. Charron and a new staff of aggressive managers and buyers took the reins
early in 1995, and made a series of dramatic changes at your company.
The number of clothing items offered were pared back, lowering inventory risk to
Liz Claiborne's key department store customers. Fast-growing smaller brands
within the company, such as the Sport and Dana Buchman lines, helped add some
pizzazz to your company's fashions.
Finally, Liz Claiborne cut $65 million in overhead costs since early 1995, with
another $35 million in savings planned for 1997. The last quarter showed a 22
percent increase in earnings from $.64 to $.78.
Jumping 25 percent since purchase, your shares sell today at $39, a modest 15
times expected 1997 earnings.
COMPUTERS & RELATED
What good is a computer if it cannot save the information you've inputted? The
products made by WESTERN DIGITAL enable personal computers to store this
valuable data. Your company is the third largest manufacturer of hard disk
drives with customers like AT&T, Toshiba, and IBM.
With the number of Internet users growing steadily, the demand for more
sophisticated storage capabilities is increasing. During 1995 and 1996, Western
Digital invested heavily in producing new high speed, high reliability products
with higher margins to meet this need. That move is paying off.
The recent September quarter saw earnings per share explode to $.70, more than
four times the $.16 reported last year. Revenues were up 58 percent for the
quarter.
Western Digital's WD Enterprise line of disk drives has capacities up to 4.2
gigabytes and is designed for LAN (local area network) servers and multi-user
systems. We learned recently from VP of Finance Dustin Williams that many
Western Digital products remain on allocation to customers.
Your shares now sell at $57, up 129 percent since their May purchase price of
$25.
SOFTWARE
Prospering from offering its products via the Internet, MCAFEE ASSOCIATES
developed some of the first and best anti-virus software well before the term
anti-virus became a household word.
Unlike its top competitor Symantec, McAfee sells its products primarily
electronically, allowing network administrators and at-home computer whizzes to
download the software via modem, try it out for a month for FREE, and THEN pay
for it. A key advantage to this strategy? More people trying it out than if
users had to buy pre-packaged software at the computer store.
In the most recent quarter ended September 30, McAfee's sales jumped 85 percent
to $47 million pushing earnings up 60 percent to $.24 versus $.15.
A recent conversation with CEO Bill Larson outlined McAfee's strategy of an
Internet "cafeteria line" of software products. "We want our traditional anti-
virus users to try our other products and then convince network administrators,
who buy thousands of copies at once, of our depth of network software
offerings."
Purchased for you in July at $36, your shares increased 24 percent to $44.
FELLOW SHAREHOLDER . . .
"To build a better world, start in your own community." That's the slogan found
on the letterhead of Lehman Communications Corporation, a publishing company
which runs three daily community newspapers in Colorado. Chief Executive Officer
and Publisher Ed Lehman illustrates the slogan in everything he does -- not just
in business, but in his personal life as well.
Ed began his career as a lawyer. He was a trial lawyer for three years in the
Denver District Attorney's office handling his share of difficult cases -- nine
of them murder trials -- and then spent two years as a partner in a law firm.
However, law could not keep him from the career he most enjoyed -- journalism.
While attending Denver University's law school at night, he got his first taste
of the newspaper business working at the Rocky Mountain News and the Denver Post
during the day.
In 1957, he and his wife Ruth, bought a majority share of the Longmont Daily
Times-Call and Ed became Editor and Publisher of the newspaper. Ruth and Ed
then acquired the Loveland Reporter-Herald and the Canon City Daily Record and
the company assumed its current name.
Ed enjoys his work. "Being responsible for the overall operation of the three
papers gives me the opportunity to interact closely with three distinctly
different communities, defining their individual objectives, addressing their
problems and devising solutions," Ed reflects.
"We also focus on development issues including the political perspective and the
various leaders who have an effect on the community." Each paper has been in
circulation for more than a century.
Serving since 1986 as a Trustee of Boettcher Foundation, a Friess Associates
client, Ed was introduced to the Friess strategy. "The Foundation really
appreciates this association," Ed explains. "It's as if we're investment
partners with the firm in addition to being a valued client."
Seeing first-hand that Friess Associates grew Boettcher's assets, Ed and Ruth
decided to invest their personal assets and are shareholders in Brandywine and
Brandywine Blue.
According to Ed, investing is a challenge for most business people because they
find they are too busy with their jobs to devote anything more than a part-time
effort toward the stock market.
"Successful investing really requires a full throttle approach, and Ruth and I
can no more work on just LOCATING the right stock let alone knowing when to buy
or sell it. Brandywine Fund handles those important details for us."
Along with Boettcher, Ed has served with many other groups including being
President of the University of Denver National Alumni Association, the Colorado
State Press Association, and The Inland Press Association. He also served as a
member of the Colorado House of Representatives.
Married for 46 years, Ed and Ruth have two children and two grandchildren, all
of whom live in Colorado, making for frequent family visits.
- -Rebecca Buswell
RUSS . . .
"Every day another situation arises to remind us how fortunate we are to have
Russ Boone on board," explains Doug McMinn. "Russ has been consulting with us
for about four years, and I've never seen a computer problem that he can't
solve."
No one has been more instrumental in the technological growth of Friess
Associates than Russ. When he first came on the scene, the Jackson office had
just recently opened and it housed only two full-time teammates. Now, your
Friess team operates out of four offices each with anywhere from six to 20
people, who can communicate with one another instantaneously via computer. Russ
is largely responsible for designing and maintaining that system.
In April, when the Delaware operations and trading team moved to a new building,
Russ spent the weekend transporting the entire computer system -- which supports
more than 60 computer stations -- to the new location. With the complex set-up
Friess Associates has, it's amazing that the move occurred without a hitch so
that on Monday morning in the new office, everything was in top-notch working
order. That's just the kind of task Russ handles with ease.
Not only is Russ skilled in the hardware end, he can also figure out any glitch
that might arise in a software package. In fact, there are times when a
bottleneck occurs in a newly installed software program that even the support
people can't fix. Russ alleviates the problem and then instructs the company how
it was done.
"As our growth advanced from $5 billion to $6 billion in just three months, and
then to nearly $11 billion in the next 18 months, Russ has made sure that the
infrastructure we have set up grows with us," Doug relates. "We have more than a
dozen software programs and Russ sees that they work together to help us in our
obligations to our clients and shareholders."
Russ enjoys making the virtual office concept a reality. "It is exciting to help
Friess Associates implement the many technological advances that exist to
improve communications between the teammates wherever they are located."
A master in Lotus Notes, Russ creates numerous databases including the Research
Tracking Database which enables your research team to monitor the companies in
your portfolio. Every time a call is placed to one of your holdings, an entry is
made and that entry is immediately accessible to every researcher. Russ also
designed a laptop for every researcher so that while they're traveling visiting
your companies they can easily make updates to the system in one simple step.
Aside from dissecting and fixing computer systems, Russ enjoys outdoor
activities like camping, white-water rafting and canoeing. He also loves to
travel. Two years ago he went to Africa and spent a month in Zimbabwe studying
sustainable wildlife management.
- -Rebecca Buswell
KEEPING IN TOUCH . . .
A big thanks to all of you who continually share your remarks with us. Your
feedback about our management of the Fund is appreciated and helps us find ways
to better serve your investment needs.
Please don't hesitate to email me at [email protected] or at [email protected],
fax me at (302) 656-9015, or write to P.O. Box 4166, Greenville, DE 19807, with
any of your ideas. I'll pass your comments along to the team and get answers for
you.
- -Kelli Fazler
UNCLE SAM'S TIME IS HERE . . .
and Firstar will once again be sending your 1099 form to you in mid-January for
your tax filing purposes. Please remember to consult your tax adviser for any
additional assistance you may need.
DIANE . . .
Gains of $6.4 million from such big names as Compaq, Sun Microsystems, Dell
Computer, and Hewlett-Packard were picked by your Delaware-based researcher,
David Harrington. David could not have made these picks without the daily
assistance provided him by his research manager, Diane McGonagle.
Diane first started at Friess in Fall 1994. Her previous experience at McDonnell
& Company, a Philadelphia brokerage house, prepared Diane well for her
responsibilities to help grow the assets in Brandywine Blue Fund. The quick pace
of getting orders to the trading floor in a timely fashion showed Diane how
hectic the investment business can be.
"Even though my current role isn't in trading, my function here is just as
crucial -- perhaps even more so -- because I contribute to the management of
more than $10 billion that many people and organizations are counting on to
reach their financial goals," Diane explains. "It is my job to see that David
knows what's going on with his companies." Diane sifts through the barrage of
information David receives from Wall Street and forwards to him only what will
be most helpful.
David says Diane is invaluable to him. "She puts me in touch with the key people
at the company." Daily, Diane hunts for any breaking news on the stocks he
follows and as the preliminary filter, she ensures that David's time is spent
most efficiently on making the buy and sell decisions that ultimately create the
gains you experience. David continues, "Most importantly, Diane is always
pleasant and eager to help. A positive attitude is everything in this
business."
Diane and her husband of 29 years, Bob, have three grown children, Denise, Tara
and Keith, who all live in the general vicinity of Diane's hometown,
Philadelphia. The McGonagles also support a young girl from Bolivia whom they
sponsor through the Save the Children Foundation. Communicating through letters
and receiving photos, Diane learns about the girl's struggles and says, "We feel
fortunate that we are able to give this small but much needed help to a child."
Covenant House in New York City is another organization Diane and Bob sponsor.
Many runaway teens who have stayed at the halfway house through the years have
written letters expressing gratitude for the support folks like Diane and Bob
give which helped them in turning their lives around.
Avid about keeping physically fit, Diane walks four miles every day and makes
time three times a week to attend her step aerobics class. She also enjoys
playing tennis and skiing with her family.
This year Diane undertook a new challenge -- coaching a soccer team for girls
under age 8. "I had such a good time with these kids who were so eager to learn
and work together as a team," Diane explains. "We even won our division the
first time around!"
- -Rebecca Buswell
MARKET CAP . . .
Your mid cap companies -- those between $1 billion and $5 billion -- shifted the
most this quarter. Moving up from 55.1 percent of the portfolio in September,
they now comprise 59.1 percent of your holdings. Already adding more than $2.5
million to your portfolio are your new purchases in CVS Corp., National
Semiconductor, Fruit of the Loom, Electronics for Imaging, Tektronix, Quantum
Corp. and Aspect Telecommunications.
Your large cap holdings were pared back from 34.2 percent in September to 32.6
percent. You sold some of your positions in Intel, Cisco, Computer Associates
and Nike while securing more than $5 million in profits.
YOUR COMPANIES' MARKET CAPITALIZATION
CASH 1.5%
SMALL CAP 6.8%
MID CAP 59.1%
LARGE CAP 32.6%
GROWING YOUR FUND . . .
We want to note the contributions of workers at the companies in which we
invest. It is their energy and talents which create profits in their companies
which in turn add value to your investment.
This month we highlight Mark Murray, a Customer Relations Representative at the
Sears Repair Service Unit in Raleigh, North Carolina. Mark fields incoming
calls from customers with problems ranging from service delays to billing mix-
ups. Being such a positive person, Mark enjoys the challenge the diverse calls
create. "Customers are what keep us in business, so we just have to do whatever
it takes to make them happy. If we have broken a promise to them, we have to
make it right."
Mark started at Sears at the Teleservice Center in Greensboro answering the 800
number before he was transferred to a local service unit. Most of the problems
are handled at the teleservice center, so if someone calls the local unit Mark
says, "We are the last stop and we have to take care of the problem."
The new trainees are sometimes surprised to see Mark, the trainer in the unit,
working on his computer with the monitor turned off. Mark forgets to turn it on
because he is totally blind.
Modern technology converts the screen display into a Braille display, a system
Mark learned when he worked for Holiday Inns. With this aid, Mark says,
"Anything you can do with sight, I can do. Sears is great about hiring blind
people and giving us a shot."
At the age of two, Mark developed cancer of the optic nerve and lost his sight.
Crediting his parents for raising him like a normal kid, a great school for the
blind where he lived and studied, and his early training from Goodwill
Industries, Mark leads an independent life with many interests, including
basketball with a beeper on the ball, cooking, and bowling.
"We had a bowling lane at the blind school and we enjoyed it so much we started
a bowling league," Mark remembers. His current bowling league competes with
blind leagues in others cities and the team is going to Pittsburgh for the
Nationals.
"Thanksgiving Day was my second anniversary at Sears. I have found a home here
and really enjoy what I do."
- -Margaret Barton
FUND BROKER . . .
Buying a stock is just one side of the investment equation in your Fund. Bear
Stearns broker Michael Needleman explains that knowing when to sell is key to
your portfolio's success. Michael looks at the valuation of the stock, its
expectations, and other issues to determine if it might be time to sell.
"A telltale sign can be finding a weak link within the industry that will likely
affect most related companies," Michael says. "I also look at whether there are
additional buyers of the stock and if there is much new information out there
about the company. Those two factors can drive the stock price up which often
makes maintaining the position a wise move."
For Michael, finding a company that meets Friess Associates criteria for
Brandywine Blue Fund is based on analysts' comments and feedback as well as
observations from contact with the company management. Additionally, Michael
pinpoints the company's catalyst for growth and scrutinizes the company further,
looking at distribution cycles and marketing patterns.
With a four year football scholarship, Michael attended Northeast Louisiana
University, earning a double BS in Marketing and Management. He and wife, Jill,
reside in Dix Hills on New York's Long Island with their two young sons, Ethan
and Joshua who are four and two.
Michael works closely with research teammates John Ragard and A.J. Berk and your
consultants Hank Bannister and Mike Davis. When he has an idea -- whether it be
a buy or a sell -- he filters his information to your team who makes the final
decision on whether to act. Just as your three research locations in Wilm-
ington, Jackson, and Phoenix are tied together through Lotus Notes, so are all
your preferred brokers connected. Michael sends his ideas through email using a
form which he had a hand in creating.
John Ragard is impressed with Michael's abilities. "Working directly with us for
only a year, Michael has been quick to pick up on what we are looking for in new
stock ideas that fit our approach. He is idea driven and digs deep into issues
that others might miss."
Praxair is one of the companies Michael worked on for your Fund, bringing you
nearly $3 million in gains.
"The dynamics of the Friess Associates organization fit well with my own skills
and work patterns," relates Michael. "The firm's objective is well defined and
their process is no-nonsense, emphasizing how everyone personally contributes to
that mission."
- -Rebecca Buswell
BRANDYWINE BLUE FUND, INC.
STATEMENT OF NET ASSETS
December 31, 1996
(Unaudited)
QUOTED
MARKET
SHARES COST VALUE (B)<F4>
- ------ ---- ---------
COMMON STOCKS - 98.5%(A)<F3>
APPAREL & SHOES - 6.3%
100,000 Fruit of the Loom, Inc. $3,607,826 $3,787,500
60,000 Gucci Group, N.V. 4,503,841 3,832,500
115,800 Jones Apparel Group, Inc. 2,248,901 4,328,025
172,200 Liz Claiborne, Inc. 5,338,260 6,651,225
30,000 NIKE, Inc. Cl B 690,590 1,792,500
50,000 Unifi, Inc. 1,596,750 1,606,250
75,000 The Warnaco Group, Inc. 2,109,235 2,221,875
---------- ----------
20,095,403 24,219,875
THIS SECTOR IS 20.5% ABOVE YOUR FUND'S COST.
BUILDING & RELATED - 0.6%
70,000 U.S. Industries, Inc. 1,867,507 2,406,250
THIS SECTOR IS 28.8% ABOVE YOUR FUND'S COST.
COMMUNICATIONS - 6.9%
60,000 Andrew Corp. 2,980,685 3,183,780
65,600 Aspect Telecommunications Corp. 3,645,181 4,165,600
6,500 MasTec, Inc. 298,187 344,500
189,600 Tellabs, Inc. 3,676,893 7,133,700
161,600 U.S. Robotics Corp. 11,702,753 11,635,200
---------- ----------
22,303,699 26,462,780
THIS SECTOR IS 18.6% ABOVE YOUR FUND'S COST.
COMPUTERS & RELATED - 11.8%
50,000 Adaptec, Inc. 1,003,062 2,000,000
148,000 Compaq Computer Corp. 8,282,761 10,989,000
40,000 Dell Computer Corp. 701,799 2,125,000
300,000 EMC Corp. (Mass.) 9,111,950 9,937,500
77,000 Gateway 2000, Inc. 3,101,202 4,124,351
200,700 Quantum Corp. 5,310,620 5,745,037
84,900 Read-Rite Corp. 2,190,824 2,143,725
27,200 Stratus Computer, Inc. 645,146 741,200
126,300 Western Digital Corp. 3,143,381 7,183,313
---------- ----------
33,490,745 44,989,126
THIS SECTOR IS 34.3% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 3.3%
125,000 Consolidated Stores Corp. 2,794,150 4,031,250
50,000 Family Dollar Stores, Inc. 996,257 1,018,750
164,700 Sears, Roebuck and Co. 6,750,475 7,596,787
---------- ----------
10,540,882 12,646,787
THIS SECTOR IS 20.0% ABOVE YOUR FUND'S COST.
DISTRIBUTION - 0.9%
102,000 U.S. Office Products Co. 3,685,597 3,480,750
THIS SECTOR IS 5.6% BELOW YOUR FUND'S COST.
ELECTRICAL EQUIPMENT MANUFACTURERS - 1.6%
60,000 Precision Castparts Corp. 2,470,610 2,977,500
75,000 Sundstrand Corp. 2,634,633 3,187,500
---------- ----------
5,105,243 6,165,000
THIS SECTOR IS 20.8% ABOVE YOUR FUND'S COST.
ELECTRONICS - 3.1%
65,200 AVX Corp. 1,445,655 1,401,800
75,000 Computer Products, Inc. 1,647,810 1,462,500
75,000 KEMET Corp. 1,692,207 1,743,750
77,000 SCI Systems, Inc. 2,836,812 3,436,125
75,000 Tektronix, Inc. 3,719,530 3,843,750
---------- ----------
11,342,014 11,887,925
THIS SECTOR IS 4.8% ABOVE YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 7.5%
160,000 AccuStaff Inc. 4,163,922 3,380,000
80,000 AMRESCO, Inc. 2,070,000 2,140,000
90,000 CMAC Investment Corp. 2,582,582 3,307,500
26,500 Comdisco, Inc. 758,664 841,375
119,000 Conseco, Inc. 5,838,545 7,586,250
129,000 COREStaff Inc. 2,954,266 3,055,752
15,000 Credit Acceptance Corp. 283,125 352,500
63,500 Diebold, Inc. 3,419,605 3,992,563
37,900 MGIC Investment Corp. 2,388,990 2,880,400
10,000 The Money Store, Inc. 175,988 276,250
15,000 The PMI Group, Inc. 735,900 830,625
---------- ----------
25,371,587 28,643,215
THIS SECTOR IS 12.9% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 2.4%
160,000 Food Lion CL B 1,273,750 1,620,000
159,000 The Kroger Co. 7,059,125 7,393,500
---------- ----------
8,332,875 9,013,500
THIS SECTOR IS 8.2% ABOVE YOUR FUND'S COST.
HEALTHCARE - 1.1%
15,000 HealthCare COMPARE Corp. 715,312 635,625
5,000 HEALTHSOUTH Corp. 175,300 193,125
60,500 MedPartners, Inc. 1,316,805 1,270,500
25,000 OrNda HealthCorp 632,750 731,250
45,800 Quorum Health Group, Inc. 1,098,426 1,362,550
---------- ----------
3,938,593 4,193,050
THIS SECTOR IS 6.5% ABOVE YOUR FUND'S COST.
HOME/OFFICE & RELATED - 1.7%
60,000 Lowe's Companies, Inc. 2,342,636 2,130,000
80,000 Herman Miller, Inc. 2,673,738 4,530,000
---------- ----------
5,016,374 6,660,000
THIS SECTOR IS 32.8% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 0.2%
28,000 Interstate Hotels Company 647,928 791,000
THIS SECTOR IS 22.1% ABOVE YOUR FUND'S COST.
MACHINERY/CONSTRUCTION & MISCELLANEOUS MANUFACTURING - 0.8%
151,300 Coltec Industries Inc. 2,505,318 2,855,788
THIS SECTOR IS 14.0% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SUPPLIES - 2.5%
85,000 AmeriSource Health Corp. 2,675,000 4,101,250
50,000 Ballard Medical Products 969,200 931,250
59,500 Guidant Corp. 3,108,454 3,391,500
36,100 Sybron International Corp. 1,015,768 1,191,300
---------- ----------
7,768,422 9,615,300
THIS SECTOR IS 23.8% ABOVE YOUR FUND'S COST.
NETWORKING - 4.8%
73,800 3Com Corp. 3,298,421 5,415,075
205,000 Cisco Systems Inc. 8,267,789 13,043,125
---------- ----------
11,566,210 18,458,200
THIS SECTOR IS 59.6% ABOVE YOUR FUND'S COST.
OIL/GAS FIELD SERVICES - 12.2%
50,000 BJ Services Co. 1,572,247 2,550,000
89,500 Chesapeake Energy Corporation 4,800,172 4,978,437
40,900 Energy Ventures, Inc. 1,980,991 2,080,787
20,000 Ensco International Inc. 828,092 970,000
90,000 Global Marine Inc. 1,263,843 1,856,250
196,700 Noble Drilling Corp. 2,902,999 3,909,413
25,000 Nuevo Energy Co. 1,246,875 1,300,000
185,000 Oryx Energy Co. 3,069,820 4,578,750
10,000 Phillips Petroleum Co. 415,493 442,500
145,000 Reading & Bates Corp. 1,785,313 3,842,500
140,000 Rowan Companies, Inc. 2,309,076 3,167,500
100,000 Schlumberger Ltd. 8,651,489 9,987,500
98,000 Smith International, Inc. 2,913,991 4,397,750
106,900 USX-Marathon Group 2,620,350 2,552,238
---------- ----------
36,360,751 46,613,625
THIS SECTOR IS 28.2% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 1.7%
82,500 Teva Pharmaceutical Industries
Ltd. ADR 3,694,252 4,145,625
56,000 Watson Pharmaceuticals Inc. 2,327,919 2,516,528
---------- ----------
6,022,171 6,662,153
THIS SECTOR IS 10.6% ABOVE YOUR FUND'S COST.
RETAILING-SPECIALTY - 13.5%
95,000 Borders Group, Inc. 3,414,357 3,408,125
220,000 CompUSA Inc. 2,419,564 4,537,500
115,000 CVS Corporation 4,346,863 4,758,125
50,000 Dollar General Corp. 1,634,335 1,600,000
60,000 Footstar, Inc. 1,258,644 1,492,500
250,000 Gap, Inc. 5,922,207 7,531,250
50,000 General Nutrition Companies, Inc. 949,250 843,750
30,000 Mac Frugal's Bargains o
Close-outs Inc. 638,994 783,750
86,000 Payless ShoeSource, Inc. 2,708,462 3,225,000
78,400 Pier 1 Imports, Inc. 1,339,790 1,381,800
65,000 Ross Stores, Inc. 3,124,536 3,250,000
136,200 The Sports Authority, Inc. 3,045,188 2,962,350
49,300 Tiffany & Co. 1,721,751 1,805,613
110,200 TJX Companies, Inc. 2,611,981 5,220,725
300,000 Toys 'R' Us, Inc. 10,629,928 9,000,000
---------- ----------
45,765,850 51,800,488
THIS SECTOR IS 13.2% ABOVE YOUR FUND'S COST.
SEMICONDUCTORS & RELATED - 4.4%
80,000 Intel Corp. 5,779,860 10,475,040
194,200 National Semiconductor Corp. 4,388,588 4,733,625
61,000 VLSI Technology, Inc. 1,436,395 1,456,375
---------- ----------
11,604,843 16,665,040
THIS SECTOR IS 43.6% ABOVE YOUR FUND'S COST.
SOFTWARE - 7.1%
130,000 Adobe Systems Inc. 4,619,624 4,858,750
40,000 BMC Software, Inc. 628,500 1,655,000
20,000 Cadence Design Systems, Inc. 272,688 795,000
20,000 Computer Associates Int'l, Inc. 1,034,080 995,000
65,000 Compuware Corp. 2,351,877 3,258,125
68,600 Electronics for Imaging, Inc. 5,128,408 5,642,350
127,500 McAffee Associates, Inc. 4,531,252 5,610,000
35,000 Parametric Technology Corp. 1,518,930 1,798,125
84,100 Sterling Software, Inc. 2,605,372 2,659,662
---------- ----------
22,690,731 27,272,012
THIS SECTOR IS 20.2% ABOVE YOUR FUND'S COST.
TRANSPORTATION & RELATED - 0.8%
125,500 USAir Group, Inc. 2,413,013 2,933,562
THIS SECTOR IS 21.6% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 3.3%
130,900 The B.F. Goodrich Company 5,688,470 5,301,450
58,800 Praxair, Inc. 1,861,967 2,712,150
75,000 RPM, INC. 1,268,587 1,275,000
100,000 United Waste Systems, Inc. 2,209,165 3,437,500
---------- ----------
11,028,189 12,726,100
THIS SECTOR IS 15.4% ABOVE YOUR FUND'S COST.
Total common stocks 309,463,945 377,161,526
QUOTED
MARKET
PRINCIPAL AMOUNT COST VALUE (B)<F4>
- --------------- ---- ---------
SHORT-TERM INVESTMENTS - 2.2% (A)<F3>
VARIABLE RATE DEMAND NOTES - 2.2%
$3,985,762 American Family Financial Services $3,985,762 $3,985,762
4,500,000 Johnson Controls, Inc. 4,500,000 4,500,000
35,500 Wisconsin Electric Power Co. 35,500 35,500
---------- ----------
Total variable rate demand notes 8,521,262 8,521,262
---------- ----------
Total investments $317,985,207 385,682,788
===========
Liabilities, less cash and
receivables (0.7%) (A)<F3> (2,656,752)
-----------
NET ASSETS $383,026,036
===========
Net Asset Value Per Share
($0.01 par value 100,000,000
shares authorized), offering
and redemption price
($383,026,036 / 14,469,597
shares outstanding) $26.47
=====
(a)<F3>Percentages for the various classifications relate to net assets.
(b)<F4>Each security, excluding short-term investments, is valued at the last
sales price reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the last bid price. Securities which are
traded over-the-counter are valued at the lastest bid price. Short-term
investments are valued at amortized cost which approximates quoted market value.
ON THE CUTTING EDGE . . .
JUST LIKE BEING AT THE MOVIES -- AT HOME
The Federal Communications Commission has approved a plan to deliver crisp,
movie-quality pictures and CD-quality sound in a format called high definition
television. It could appear as early as 1998. The FCC's action marks a crucial
step in implementing higher-quality digital TV in the U.S. and harkens the
biggest change to television since the advent of color in 1953.
FLUENT SOUNDING SPANISH, FRENCH, GERMAN, ENGLISH -- FROM YOUR PC
A University of Chicago linguist, John Goldsmith, is working with Microsoft to
make computers pronounce text -- any text -- naturally. If a computer sounds
humanlike now, it's because someone recorded the message. This new technology
will be a completely computer-generated, human-sounding voice. Goldsmith's
program has a computer speak in rounded Midwestern tones.
X-RAY VISION ANYWHERE
A Naval Research Lab developed a compact, mobile, battery-operated X-ray unit
weighing just 26 pounds. Combine it with an X-ray detector of the type used for
dental X-rays, control it all with a notebook computer, and you have an
instrument to use in remote or confined spaces for X-ray inspection, security
surveillance, and medical applications. Conventional X-ray generators use rack-
mounted power supplies and can weigh hundreds of pounds. Researchers have
working models and estimate it will take about a year to make a production
model.
TOP TEN . . .
Your Software holdings experienced the biggest top ten shift this quarter,
moving down from the number 3 spot in September to number 6 currently. You sold
all of your Informix and much of your BMC Software and Computer Associates
positions.
To better define your Fund's holdings, we have split Retailing (which was No. 2
in September) into Retailing - Specialty and Retailing - Department Stores.
Retailing - Specialty takes over the number 1 position with 13.5 percent as CVS
Corp., Pier 1 Imports, Ross Stores, Footstar and Tiffany & Co. were all added
during the quarter. Already these companies together have gained nearly $1
million.
Department Stores alone is in the top ten at 3.3 percent of your portfolio, with
the growth you've enjoyed in Sears Roebuck & Co. and Consolidated Stores,
combined bringing in more than $1.5 million.
Coming in at number 3 with 11.8 percent is Computers & Related moving up from
number 6 last quarter at 7.8 percent. EMC Corp, Quantum Corp. and Stratus
Computer are all new to your portfolio this quarter and have already added $1.3
million for you.
TOP TEN INDUSTRY GROUPS
Retailing - Specialty 13.5%
Oil/Gas Field Services 12.2%
Computers & Related 11.8%
Financial/Business Services 7.5%
Software 7.1%
Communications 6.9%
Apparel & Shoes 6.3%
Networking 4.8%
Semiconductors & Related 4.4%
Department Stores 3.3%
Cash 1.5%
All Others 20.7%
BOARD OF DIRECTORS
John E. Burris
Chairman
Burris Foods, Inc.
Milford, Delaware
Foster S. Friess
President
Friess Associates, Inc.
Jackson, Wyoming
Stig Ramel
Former President
Nobel Foundation
Stockholm, Sweden
(800) 656-3017 [email protected]
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. Past performance is not indicative of future
performance. Investment return and principal value of an investment may
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
Report editor: Lynda J. Campbell
Report Staff: Margaret Barton, Rebecca A. Buswell, Paul R. Robinson, Jennifer
Weldon
