013096-1 Registration No. 33-37959
_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
(Check appropriate box or boxes.)
BRANDYWINE BLUE FUND, INC.
(Exact name of Registrant as Specified in Charter)
3908 Kennett Pike
Greenville, Delaware 19807
(Address of Principal Executive Offices) (Zip Code)
(302) 656-3017
(Registrant's Telephone Number, including Area Code)
Copy to:
Foster S. Friess W. David Knox, II
350 Broadway Foley & Lardner
P. O. Box 576 777 East Wisconsin Avenue
Jackson, Wyoming 83001 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
Registrant has registered an indefinite number or amount of shares of its
common stock, $0.01 par value, under the Securities Act of 1933 pursuant
to Rule 24f-2 of the Investment Company Act of 1940, and filed its
required Rule 24f-2 Notice for the Registrant's fiscal year ended
September 30, 1996 on November 22, 1996.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[X] on January 15, 1997 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2), of Rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
__________________________________________________________________________
The Exhibit Index is located at page __ of the sequential numbering
system.
<PAGE>
BRANDYWINE BLUE FUND, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
Part A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights; Performance
Information Information
4. General Description Introduction; Investment Objective
of Registrant and Policies
5. Management of the Management of the Fund; Capital
Fund Structure
5A. Management's Discussion Performance Information; Management's
of Fund Performance Discussion of Fund Performance
6. Capital Stock and Dividends, Distributions and Taxes;
Other Securities Capital Structure; Stockholder
Reports
7. Purchase of Securities Determination of Net Asset Value;
Being Offered Purchase of Shares; Dividend
Reinvestment
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and *
History
13. Investment Objectives Investment Restrictions
and Policies
14. Management of the Directors and Officers of the Fund
Registrant
15. Control Persons and Included in Prospectus under "Capital
Principal Holders Structure"; Principal Stockholders
of Securities
16. Investment Advisory Included in Prospectus under "Management
and Other Services of the Fund"; Investment Adviser; Service
Agreement; Custodian; Independent
Accountants
17. Brokerage Allocation Allocation of Portfolio Brokerage
18. Capital Stock and Included in Prospectus under
Other Securities "Capital Structure"
19. Purchase, Redemption Included in Prospectus under
and Pricing of "Determination of Net Asset Value";
Securities Being "Dividend Reinvestment"; Determination
Offered of Net Asset Value and Performance;
Systematic Withdrawal Plan
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Per- Determination of Net Asset Value and
formance Data Performance
23. Financial Statements Financial Statements
____________________________
*Answer negative or inapplicable
P R O S P E C T U S
(BRANDYWINE BLUE FUND, INC. LOGO)
A NO-LOAD MUTUAL FUND
SEEKING LONG-TERM
CAPITAL APPRECIATION
BOARD OF DIRECTORS
JOHN E. BURRIS
Chairman, Burris Foods, Inc.
Milford, Delaware
FOSTER S. FRIESS
President, Friess Associates, Inc.
Jackson, Wyoming
STIG RAMEL
President, Nobel Foundation
1972 to 1992
Chairman, "Fond '92-'94"
Solna, Sweden
INVESTMENT ADVISER
FRIESS ASSOCIATES, INC.
350 Broadway
P.O. Box 576
Jackson, Wyoming 83001
MANAGED BY
FRIESS ASSOCIATES, INC.
350 Broadway
P.O. Box 576
Jackson, Wyoming 83001
P R O S P E C T U S JANUARY 15, 1997
(BRANDYWINE BLUE FUND, INC. LOGO)
Brandywine Blue Fund, Inc. (the "Fund") is an open-end, diversified management
investment company -- a mutual fund. Its primary investment objective is to
produce long-term capital appreciation principally through investing in common
stocks. Current income is a secondary consideration.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors are advised to
read this Prospectus and retain it for future reference. This Prospectus does
not set forth all of the information included in the Registration Statement and
Exhibits thereto which the Fund has filed with the Securities and Exchange
Commission. A Statement of Additional Information, dated January 15, 1997, which
is a part of such Registration Statement is incorporated by reference in this
Prospectus. Copies of the Statement of Additional Information will be provided
promptly without charge to each person to whom a Prospectus is delivered upon
written or telephone request. Written requests should be made by writing to
Brandywine Blue Fund, Inc., P.O. Box 4166, Greenville, Delaware 19807, Attn:
Corporate Secretary, or Internet: [email protected], and telephone requests
should be made by calling (800) 656-3017.
(BRANDYWINE BLUE FUND, INC. LOGO)
3908 KENNETT PIKE
GREENVILLE, DELAWARE 19807
INTERNET: [email protected]
(800) 656-3017
(BRANDYWINE BLUE FUND, INC. LOGO)
TABLE OF CONTENTS
Page No.
--------
Expense Information................................. 1
Financial Highlights................................ 2
Introduction........................................ 2
Investment Objective and Policies................... 3
Management of the Fund.............................. 4
Determination of Net Asset Value.................... 5
Purchase of Shares.................................. 5
Redemption of Shares................................ 6
Exchange Privilege.................................. 8
Dividend Reinvestment............................... 9
Dividends, Distributions and Taxes.................. 9
Capital Structure................................... 10
Stockholder Reports................................. 10
Performance Information............................. 11
Management's Discussion of Fund Performance......... 12
Share Purchase Application.......................... 13
EXPENSE INFORMATION
STOCKHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases or Reinvested Dividends... None
Deferred Sales Load............................................... None
Redemption Fee.................................................... None*<F1>
Exchange Fee...................................................... None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees................................................... 1.00%
12b-1 Fees........................................................ None
Other Expenses.................................................... 0.13%
------
Total Fund Operating Expenses..................................... 1.13%
======
*<F1>A fee of $10.00 is charged for each wire redemption.
Example: 1 Year 3 Years 5 Years 10 Years
----------------------------------
An investor would pay the following
expenses on a $1,000 investment, assuming
(l) 5% annual return and (2) redemption
at the end of each time period: $12 $36 $62 $137
The purpose of the preceding table is to assist investors in understanding
the various costs that an investor in the Fund will bear, directly or
indirectly. They should not be considered to be a representation of past or
future expenses. Actual expenses may be greater or lesser than those shown. See
"Management of the Fund" for a more complete discussion of applicable management
fees. The Annual Fund Operating Expenses are based on actual expenses incurred
for the year ended September 30, 1996. The example assumes a 5% annual rate of
return pursuant to requirements of the Securities and Exchange Commission. This
hypothetical rate of return is not intended to be representative of past or
future performance of the Fund.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
The Financial Highlights of the Fund should be read in conjunction with the
Fund's financial statements and notes thereto included in the Fund's Annual
Report to Shareholders. Further information about the performance of the Fund is
also contained in the Fund's Annual Report to Shareholders, copies of which may
be obtained without charge upon request.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------
1996 1995 1994 1993 1992 1991+
<F2>
------ ------ ------ ------ ------ ------
<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)<F3> 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%*
Ratios/Supplemental Data: <F4>
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**<F5> 1.13% 1.31% 1.80% 2.00% 2.00% 1.97%*
Ratio of net investment (loss) <F4>
income to average net assets***<F6> (0.4%) (0.4%) (0.4%) (0.6%) (0.3%) 0.6%*
<F4>
Portfolio turnover rate 196.9% 174.1% 220.3% 144.3% 191.9% 115.3%*
<F4>
Average commission rate paid****<F7> $0.0599 -- -- -- -- --
+<F2>For the period from January 10, 1991 (commencement of operations) to
September 30, 1991.
(1)<F3>Net investment loss per share is calculated using ending balances
prior to consideration of adjustments for permanent book and tax differences.
*<F4>Annualized.
**<F5>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.
***<F6>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.
****<F7>Disclosure required for fiscal years beginning after 9/1/95.
INTRODUCTION
The Fund was incorporated under the laws of Maryland on November 13, 1990.
The Fund is an open-end, diversified management investment company registered
under the Investment Company Act of 1940. As an open-end investment company it
obtains its assets by continuously selling shares of its Common Stock, $.01 par
value ("Common Stock"), to the public. Proceeds from such sales are invested by
the Fund in securities of other companies. The resources of many investors are
thus combined and each individual investor has an interest in every one of the
securities owned thereby providing diversification in a variety of industries.
The Fund's investment adviser furnishes experienced management to select and
watch over its investments. As an open-end investment company, the Fund will
redeem any of its outstanding shares on demand of the owner at the next
determined net asset value.
INVESTMENT OBJECTIVE AND POLICIES
The primary objective of the Fund is to produce long-term capital
appreciation principally through investing in common stocks. The Fund is
designed for investors who wish to limit their investment to larger, well-
established but dynamic companies with potential for growth in share value.
Current income is a secondary consideration. In managing the Fund, Friess
Associates, Inc., the Fund's investment adviser (the "Adviser"), will use the
same research process used in purchasing stocks of companies regardless of size
for Brandywine Fund, Inc., another fund managed by the Adviser. However, the
Fund's investments will be limited to larger, well-established companies,
whereas the Brandywine Fund, Inc.' s investments include less familiar medium-
to smaller-sized companies.
Accordingly, the Adviser will purchase common stocks of large, well-
established companies with opportunity for long-term capital growth resulting
from new products, acquisitions, divestitures, changes in management, new
legislation, or other phenomena which the Adviser believes will alter for the
better their investment outlook. Exempt for temporary defensive purposes, the
Fund intends to have at all times at least 70% of its investments in common
stocks of blue chip companies having market capitalization above $500,000,000.
In addition, such blue chip companies may exhibit one or more of the following
characteristics:
o Included in Fortune 500 or Russell 1000 list of America's largest
companies.
o Included in Dow-Jones averages.
o Included in S&P 500 stock index.
o S&P rating B+ or better.
o Projected earnings greater than $20,000,000.
In selecting investments the Fund's Adviser will consider various financial
characteristics of the issuer including historical sales and net income,
debt/equity and price/earnings ratios and book value. The Fund's Adviser may
also review research reports of broker-dealers and trade publications and, in
appropriate situations, may meet with management. Greater weight will be given
to internal factors such as product or service development than to external
factors such as interest rate changes, commodity price fluctuations, general
stock market trends and foreign currency exchange values. Since the Fund's
primary investment objective is to produce long-term capital appreciation and
current income is a secondary consideration in the selection of investments, a
particular issuer's dividend history is not a primary consideration.
Investors should be aware that since the major portion of the Fund's
portfolio will normally be invested in common stocks, the Fund's net asset value
may be subject to greater fluctuation than a portfolio containing a substantial
amount of fixed income securities. There can be no assurance that the primary
objective of the Fund will be realized or that any income will be earned. Nor
can there be any assurance that the Fund's portfolio will not decline in value.
Except for temporary defensive purposes, cash and money market instruments
will be retained by the Fund only in amounts deemed adequate for current needs
and to permit the Fund to take advantage of investment opportunities. The money
market instruments in which the Fund may invest include conservative fixed-
income securities such as United States Treasury Bills, certificates of deposit
of U.S. banks, provided that the bank has capital, surplus and undivided
profits, (as of the date of its most recently published annual financial
statements) with a value in excess of $100,000,000 at the date of investment,
commercial paper rated A-l by Standard & Poor's Corporation, commercial paper
master notes and repurchase agreements. Commercial paper master notes are
unsecured promissory notes issued by corporations to finance short-term credit
needs. They permit a series of short-term borrowings under a single note.
Borrowings under commercial paper master notes are payable in whole or in part
at any time, may be prepaid in whole or in part at any time and bear interest at
rates which are fixed to known lending rates and automatically adjusted when
such known lending rates change. There is no secondary market for commercial
paper master notes. The Fund's Adviser will monitor the creditworthiness of the
issuer of the commercial paper master notes while any borrowings are
outstanding. Repurchase agreements are agreements under which the seller of a
security agrees at the time of sale to repurchase the security at an agreed time
and price. The Fund will not enter into repurchase agreements with entities
other than banks or invest over 5% of its assets in repurchase agreements with
maturities of more than seven days.
The Fund does not intend to place emphasis on short-term trading profits. The
Fund's investment adviser expects that the Fund's annual portfolio turnover rate
generally will not exceed 200%. See "Management's Discussion of Fund
Performance." The annual portfolio turnover rate indicates changes in the Fund's
portfolio and is calculated by dividing the lesser of purchases or sales of
portfolio securities (excluding securities having maturities at acquisition of
one year or less), for the fiscal year, by the monthly average of the value of
the portfolio securities (excluding securities having maturities at acquisition
of one year or less) owned by the Fund during the fiscal year. The annual
portfolio turnover rate may vary widely from year to year depending upon market
conditions and prospects. High turnover in any year will result in the payment
by the Fund from capital of above average amounts of brokerage commissions and
other transaction costs.
The Fund will limit to 15% of its assets investments in securities of foreign
issuers or in American Depository Receipts of such issuers. Such investments may
involve risks which are in addition to the usual risks inherent in domestic
investments. In many countries, there is less publicly available information
about issuers than is available in the reports and ratings published about
companies in the United States. Additionally, foreign companies may not be
subject to uniform accounting, auditing and financial reporting standards.
Dividends and interest on foreign securities may be subject to foreign
withholding taxes, which would reduce the Fund's income without providing a tax
credit for the Fund's stockholders. Although the Fund intends to invest in
securities of foreign issuers domiciled in nations which the Fund's investment
adviser considers as having stable and friendly governments, there is the
possibility of expropriation, confiscatory taxation, currency blockage or
political or social instability which could affect investments in those nations.
Under certain circumstances the Fund may (a) temporarily borrow money from
banks for emergency or extraordinary borrowings, (b) pledge its assets to secure
borrowings, and (c) purchase securities of other investment companies. A more
complete discussion of the circumstances in which the Fund may engage in these
activities is included in the Fund's Statement of Additional Information. Except
for the investment policies listed in this paragraph, the investment objective
and the other policies described under this caption are not fundamental policies
and may be changed by the Board of Directors without stockholder approval. Such
changes may result in the Fund having investment objectives different from the
objectives which the stockholder considered appropriate at the time of
investment in the Fund. Stockholders will receive at least 30 days' prior
written notice of any changes in the policies of the Fund which are not
fundamental.
MANAGEMENT OF THE FUND
As a Maryland corporation, the business and affairs of the Fund are managed
under the direction of its Board of Directors. Under an investment advisory
agreement (the "Agreement") with the Fund, Friess Associates, Inc. (the
"Adviser"), 350 Broadway, P.O. Box 576, Jackson, Wyoming 83001, furnishes
continuous investment advisory services and management to the Fund. In addition
to the Fund, the Adviser is the investment adviser to Brandywine Fund, Inc.,
another mutual fund, and to individual and institutional clients with
substantial investment portfolios. The Adviser was organized in 1974 and is
wholly owned by Foster S. Friess and Lynnette E. Friess, who are directors and
the sole officers of the Adviser.
The Adviser supervises and manages the investment portfolio of the Fund and,
subject to such policies as the Board of Directors of the Fund may determine,
directs the purchase or sale of investment securities in the day to day
management of the Fund. All investment decisions are made by a team of
investment professionals representing the Adviser, any of whom may
make recommendations subject to final approval of Foster S. Friess or another
senior member of the Adviser's management team to whom he may delegate that
authority. Mr. Friess has been President, Treasurer and a director of both
the Fund and Brandywine Fund, Inc. since their inceptions in
1990 and 1985, respectively. He is also President and Chairman of
the Board of the Adviser. Under the Agreement, the Adviser, at its
own expense and without reimbursement from the Fund, will furnish office space,
and all necessary office facilities, equipment, and executive personnel for
making the investment decisions necessary for managing the Fund and maintaining
its organization, and will pay the salaries and fees of all officers and
directors of the Fund (except the fees paid to disinterested directors). For the
foregoing, the Adviser will receive a monthly fee of 1/12 of 1% (1% per annum)
on the daily net assets of the Fund. The rate of the advisory fee is higher than
that paid by most mutual funds. The advisory fees paid in the fiscal year ended
September 30, 1996 were equal to 1.0% of the Fund's average net assets.
The Fund and Fiduciary Management, Inc., Milwaukee, Wisconsin have entered
into a Service Agreement pursuant to which certain accounting and record keeping
services will be performed for the Fund by Fiduciary Management, Inc. These
services include (a) preparing and maintaining financial statements, books of
accounts and related documents, (b) determining the Fund's net asset value, (c)
preparing excise tax returns and (d) preparing reports and filings with the
Securities and Exchange Commission. For such services, the Fund pays Fiduciary
Management, Inc. an annual fee of $85,000.
DETERMINATION OF NET ASSET VALUE
The per share net asset value of the Fund is determined by dividing the total
value of its net assets (meaning its assets less its liabilities excluding
capital and surplus) by the total number of its shares outstanding at that time.
The net asset value is determined as of the close of regular trading (currently
4:00 p.m. Eastern time) on the New York Stock Exchange on each day the New York
Stock Exchange is open for trading. This determination is applicable to all
transactions in shares of the Fund prior to that time and after the previous
time as of which net asset value was determined. Accordingly, purchase orders
accepted or shares tendered for redemption prior to the close of regular trading
on a day the New York Stock Exchange is open for trading will be valued as of
the close of trading, and purchase orders accepted or shares tendered for
redemption after that time will be valued as of the close of the next trading
day.
Securities traded on any national stock exchange or quoted on the Nasdaq
National Market System will be valued on the basis of the last sale price on the
date of valuation or, in the absence of any sale on that date, the most recent
bid price. Other securities will be valued at the most recent bid price, if
market quotations are readily available. Any securities for which there are no
readily available market quotations and other assets will be valued at their
fair value as determined in good faith by the Board of Directors. Odd lot
differentials and brokerage commissions will be excluded in calculating values.
PURCHASE OF SHARES
Shares of Common Stock may be purchased directly from the Fund. A share
purchase application form is included at the back of this Prospectus. The price
per share is the next determined per share net asset value after receipt of an
application by Firstar Trust Company. Additional purchase applications may be
obtained from the Fund. Purchase applications should be mailed directly to:
Brandywine Blue Fund, Inc., c/o Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. The U.S. Postal Service and other independent delivery
services are not agents of the Fund. Therefore, deposit of purchase applications
in the mail or with such services does not constitute receipt by Firstar Trust
Company or the Fund. Please do not mail letters by overnight courier to the Post
Office Box address. To purchase shares by overnight or express mail, please use
the following street address: Brandywine Blue Fund, Inc., c/o Firstar Trust
Company, Mutual Fund Services, Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202. All applications must be accompanied by payment in the form of
a check drawn on a U.S. bank payable to Brandywine Blue Fund, Inc., or by direct
wire transfer. No cash will be accepted. Firstar Trust Company will charge a $20
fee against a stockholder's account for any payment check returned to the
custodian. THE STOCKHOLDER WILL ALSO BE RESPONSIBLE FOR ANY LOSSES SUFFERED BY
THE FUND AS A RESULT.
Funds should be wired to: Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
(WIRED FUNDS MUST BE Milwaukee, Wisconsin 53202
RECEIVED PRIOR TO ABA #075000022
4:00 P.M. EASTERN credit: Firstar Trust Company
TIME TO BE ELIGIBLE Account #112952137
FOR SAME DAY PRICING.) further credit: Brandywine Blue Fund, Inc.
"name of stockholder and account number (if
known)"
The establishment of a new account or any additional purchases for an
existing account by wire transfer should be preceded by a phone call to Firstar
Trust Company, (800) 656-3017 or (414) 765-4124, to provide information for the
account. A properly signed share purchase application marked "Follow up" must be
sent for all new accounts opened by wire transfer. Applications are subject to
acceptance by the Fund, and are not binding until so accepted. The Fund does not
accept telephone orders for purchase of shares and reserves the right to reject
applications in whole or part. You may also invest in the Fund by purchasing
shares through a registered broker-dealer who may charge you a fee either at the
time of purchase or redemption. The fee, if charged, is retained by the broker-
dealer and not remitted to the Fund or Adviser.
THE BOARD OF DIRECTORS OF THE FUND HAS ESTABLISHED $100,000 AS THE MINIMUM
INITIAL PURCHASE AND $1,000 AS THE MINIMUM FOR ANY SUBSEQUENT PURCHASE (except
through dividend reinvestment), which minimum amounts are subject to change at
any time. Stockholders will receive written notification at least 30 days in
advance of any changes in such minimum amounts. Shares of the Fund may be
purchased without regard to the foregoing minimum initial investment by
employees, officers and directors of the Fund or the Adviser or firms providing
contractual services to the Fund, and by members of their "immediate families"
(i.e., spouses, siblings, parents, children, grandchildren and grandparents) and
by retirement plans and trusts for their benefit. The officers of the Fund in
their discretion may waive the minimum initial investment for charitable
organizations, employee benefit plans whose investment in the aggregate exceed
the Fund's minimum initial investment, and others with whom the Fund or Adviser
has an established relationship. Stock certificates for shares purchased are not
issued unless a request is made in writing and directed to Brandywine Blue Fund,
Inc., c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
Employee benefit, profit-sharing, or retirement plans (such as 401(k) plans)
may purchase shares of Common Stock through financial institutions or other
service providers ("Processing Intermediaries"), which may become stockholders
of record of the shares and which may use procedures and impose restrictions in
addition to or different from those applicable to stockholders who invest
directly in the Fund. Processing Intermediaries may charge fees or assess other
charges for the services they provide to their customers. Any such fee or charge
is retained by the Processing Intermediary and is not remitted to the Fund or
its Adviser. Program materials provided by the Processing Intermediary should be
read by the individual in conjunction with this Prospectus before investing in
such plans. Once an account is established, additional shares of Common Stock
may be purchased by the plans through Processing Intermediaries without regard
to the Fund's minimum subsequent purchase amounts.
REDEMPTION OF SHARES
A stockholder may require the Fund to redeem his shares in whole or in part
at any time during normal business hours. Redemption requests must be made in
writing and directed to: Brandywine Blue Fund, Inc., c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service and other
independent delivery services are not agents of the Fund. Therefore, deposit of
redemption requests in the mail or with such services does not constitute
receipt by Firstar Trust Company or the Fund. PLEASE DO NOT mail letters by
overnight courier to the Post Office Box address. Redemption requests sent by
overnight or express mail should be directed to: Brandywine Blue Fund, Inc.,
Firstar Trust Company, Mutual Fund Services, Third Floor, 615 East Michigan
Street, Milwaukee, Wisconsin 53202. A redemption request form is included at
the back of this Prospectus. If a redemption request is inadvertently sent to
the Fund, it will be forwarded to Firstar Trust Company, but the effective
date of redemption will be delayed until the request is received by Firstar
Trust Company. Requests for redemption by telegram and requests which are
subject to any special conditions or which specify an effective date other
than as provided herein cannot be honored.
A request for redemption must be signed by the stockholder or stockholders
exactly as the shares are registered, including the signature of each joint
owner, and must specify either the number of shares or the dollar amount of
shares that are to be redeemed. If the proceeds of redemption are requested to
be sent to an address or a person other than as the shares to be redeemed are
registered, each signature on the redemption request must be guaranteed by a
commercial bank or trust company in the United States, a member firm of the New
York Stock Exchange or other eligible guarantor institution. If certificates
have been issued for any of the shares to be redeemed, the certificates,
properly endorsed or accompanied by a properly executed stock power, must
accompany the request for redemption. Additional documentation may be required
for redemptions by corporations, executors, administrators, trustees, guardians,
or others who hold shares in a fiduciary or representative capacity or who are
not natural persons. In case of any questions concerning the nature of such
documentation, the Fund's transfer agent, Firstar Trust Company, should be
contacted in advance at (800) 656-3017 or (414) 765-4124. Redemptions will not
be effective or complete until all of the foregoing conditions, including
receipt of all required documentation by Firstar Trust Company in its capacity
as transfer agent, have been satisfied.
The redemption price is the net asset value next determined after receipt by
Firstar Trust Company in its capacity as transfer agent of the written request
in proper form with all required documentation. The amount received may be more
or less than the cost of the shares redeemed. A check in payment for shares
redeemed will be mailed to the holder no later than the seventh day after
receipt of the redemption request in proper form with all required documentation
except that when a purchase has been made by check, the Fund can hold payment on
redemption until it is reasonably satisfied the check has cleared. (This may
normally take up to 3 days for local personal or corporate checks and up to 7
days for other personal or corporate checks.) Wire transfers may be arranged on
request. The transfer agent currently charges a $10.00 fee for each payment made
by wire of redemption proceeds, which will be deducted from the stockholder's
account.
If a stockholder instructs Firstar Trust Company in writing, redemption
requests may be made by telephone by CALLING ONLY FIRSTAR TRUST COMPANY, NOT THE
FUND OR ITS ADVISER, at (800) 656-3017 or (414) 765-4124, provided the
redemption proceeds are to be mailed, wired or forwarded via Electronic Funds
Transfer ("EFT") to the stockholder's address or bank of record as shown on the
records of the transfer agent. (Transfers via EFT generally take up to 3
business days to reach the stockholders bank account.) Proceeds redeemed by
telephone will be mailed, wired or forwarded via EFT to an address or account
other than that shown on the records of the transfer agent only if such has been
prearranged by a written request sent via mail or facsimile copy to Firstar
Trust Company. Such a request must be signed by the stockholder with signatures
guaranteed as described above. Additional documentation may be requested from
those who hold shares in a fiduciary or representative capacity or who are not
natural persons. A stockholder may change his address by calling Firstar Trust
Company at (800) 656-3017 or (414) 765-4124. Any written redemption requests
received within 30 days after an address change, whether such address is made in
writing or by telephone, must be accompanied by a signature guarantee. In
addition, no telephone redemptions will be allowed within 30 days of an address
change. The Fund reserves the right to refuse a telephone redemption request if
it is believed advisable to do so. Redemption by telephone is not available for
IRA accounts or if share certificates have been issued for the account.
PROCEDURES FOR TELEPHONE REDEMPTIONS MAY BE MODIFIED OR TERMINATED AT ANY TIME
BY THE FUND OR FIRSTAR TRUST COMPANY. Neither the Fund nor Firstar Trust Company
will be liable for following instructions for telephone redemption transactions
that they reasonably believe to be genuine, provided reasonable procedures are
used to confirm the genuineness of the telephone instructions, but may be liable
for unauthorized transactions if they fail to follow such procedures. These
procedures include requiring some form of personal identification prior to
acting upon the telephone instructions and recording all telephone calls. During
periods of substantial economic or market change, telephone redemptions may be
difficult to implement. In the event a stockholder cannot contact Firstar Trust
Company by telephone, he or she should make a redemption request in writing in
the manner set forth above.
The Fund reserves the right to redeem the shares held in any account if at
the time of any exchange or redemption of shares in the account, the value of
the remaining shares in the account falls below $10,000. The stockholder will be
notified that the value of his account is less than the minimum and allowed at
least 60 days to make an additional investment. The receipt of proceeds of the
redemption of shares held in an IRA will constitute a taxable distribution of
benefits from the IRA unless a qualifying rollover contribution is made.
The right to redeem shares of the Fund will be suspended for any period
during which the New York Stock Exchange is closed because of financial
conditions or any other extraordinary reason and may be suspended for any period
during which (a) trading on the New York Stock Exchange is restricted pursuant
to rules and regulations of the Securities and Exchange Commission, (b) the
Securities and Exchange Commission has by order permitted such suspension, or
(c) an emergency, as defined by rules and regulations of the Securities and
Exchange Commission, exists as a result of which it is not reasonably
practicable for the Fund to dispose of its securities or fairly to determine the
value of its net assets.
To accommodate the current cash needs of investors the Fund offers a
Systematic Withdrawal Plan pursuant to which a stockholder who owns Fund shares
worth at least $100,000 at current net asset value may provide that a fixed sum
will be distributed to him at regular intervals. In electing to participate in
the Systematic Withdrawal Plan investors should realize that within any given
period the appreciation of their investment in the Fund may not be as great as
the amount withdrawn. A stockholder may vary the amount or frequency of
withdrawal payments or temporarily discontinue them by notifying Firstar Trust
Company in writing or by telephone at (800) 656-3017 or (414) 765-4124. A more
complete discussion of the Systematic Withdrawal Plan is included in the Fund's
Statement of Additional Information.
EXCHANGE PRIVILEGE
A request to exchange shares of Common Stock for shares of Brandywine Fund,
another mutual fund managed by the Adviser, may be made by submitting the
request in writing to Brandywine Blue Fund, Inc., c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701, along with a completed share
purchase application for Brandywine Fund. Prior to exercising the Exchange
Privilege, a stockholder should obtain and carefully read the prospectus for
Brandywine Fund. The stockholder must give the account name, account number and
the amount or number of shares of Common Stock to be exchanged. The registration
of the account from which the exchange is being made and the account to which
the exchange is being made must be identical. Signatures required are the same
as explained under "REDEMPTION OF SHARES."
In establishing a new account in Brandywine Fund through this privilege, the
shares exchanged must have a value at least equal to the minimum investment
(currently $25,000) required by that fund.
The exchange privilege is available only in states where the exchange may be
legally made. Exchange requests may be subject to other limitations, including
those relating to frequency, that may be established from time to time to ensure
that the exchanges do not disadvantage the Fund, Brandywine Fund or their
respective stockholders. Stockholders will be notified at least 60 days in
advance of any changes in such limitations and may obtain the terms of any such
limitations by writing to Brandywine Blue Fund, Inc., c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. No exchange fee is currently
imposed by the Fund on exchanges; however, the Fund reserves the right to impose
a service charge in the future.
An exchange involves a redemption of all or a portion of a stockholder's
shares of Common Stock and the investment of the redemption proceeds in shares
of Brandywine Fund and is subject to any applicable adjustments in connection
with such redemption and investment. The redemption will be made at the per
share net asset value of the shares to be redeemed next determined after the
exchange request is received as described above. The shares to be acquired will
be purchased (subject to any applicable adjustment) at the per share net asset
value of those shares next determined coincident with or after the time of
redemption.
For federal income tax purposes, an exchange of shares is a taxable event in
which a capital gain or loss may be realized by an investor. Before making an
exchange request, an investor should consult a tax or other financial adviser to
determine the tax consequences of a particular exchange.
DIVIDEND REINVESTMENT
Stockholders may elect to have all income dividends and capital gains
distributions reinvested or paid in cash, or to have income dividends reinvested
and capital gains distributions paid in cash or capital gains distributions
reinvested and income dividends paid in cash. Stockholders having dividends
and/or capital gains distributions paid in cash may choose to have such amounts
mailed, wired or forwarded via EFT. Transfers via EFT generally take up to 3
business days to reach the stockholder's bank account. See the share purchase
application form included at the back of this Prospectus for further
information. If a stockholder does not specify an election, all income dividends
and capital gains distributions will automatically be reinvested in full and
fractional shares of the Fund calculated to the nearest 1,000th of a share.
Shares are purchased at the net asset value in effect on the business day after
the dividend record date and are credited to the stockholder's account on the
dividend payment date. Cash dividends are mailed, wired or forwarded via EFT to
stockholders within 5 business days of the dividend record date. As in the case
of normal purchases, stock certificates are not issued unless requested.
Stockholders will be advised of the number of shares purchased and the price
following each reinvestment. An election to reinvest or receive dividends and
distributions in cash will apply to all shares of the Fund registered in the
same name, including those previously purchased.
A stockholder may change an election at any time by notifying the Fund in
writing or, subject to certain limited exceptions, by calling Firstar Trust
Company at (800) 656-3017 or (414) 765-4124. If such a notice is received
between a dividend declaration date and payment date, it will become effective
on the day following the payment date. The Fund may modify or terminate its
dividend reinvestment program at any time on thirty days' written notice to
participants.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund will endeavor to qualify annually for and elect tax treatment
applicable to a regulated investment company under Subchapter M of the Internal
Revenue Code (the "Code"). Pursuant to the requirements of the Code, the Fund
intends to distribute annually, to its stockholders, substantially all of its
net investment income and net realized capital gains, if any, less any available
capital loss carry-over, to avoid paying income tax on its net investment income
and net realized capital gains or being subject to a federal excise tax on
undistributed net investment income and net realized capital gains. The primary
distribution will normally be made near the end of October, following the close
of the Fund's fiscal year, with a secondary distribution, if required, at the
end of December. For federal income tax purposes, distributions by the Fund,
whether invested in additional shares of Common Stock or received in cash, will
be taxable to the Fund's stockholders except those stockholders that are not
subject to tax on their income. Stockholders will be notified annually as to the
federal tax status of dividends and distributions. Currently, short-term capital
gains are treated as dividend income for federal income tax purposes and are
generally subject to U.S. withholding for non-resident alien stockholders. They
will be reported as such on the year-end Form 1099. For federal income tax
purposes, a stockholder's original cost for his shares, including shares
purchased pursuant to reinvested dividends, continues as his basis, and on
redemption his gain or loss is the difference between such basis and the
redemption price. Distributions and redemptions may also be taxed under state
and local tax laws which may differ from the Code.
CAPITAL STRUCTURE
The Fund's authorized capital consists of 100,000,000 shares of Common Stock.
Stockholders are entitled: (i) to one vote per full share of Common Stock; (ii)
to such distributions as may be declared by the Fund's Board of Directors out of
funds legally available; and (iii) upon liquidation, to participate ratably in
the assets available for distribution. There are no conversion or sinking fund
provisions applicable to the shares, and the holders have no preemptive rights
and may not cumulate their votes in the election of directors. Consequently the
holders of more than 50% of the shares of Common Stock voting for the election
of directors can elect the entire Board of Directors and in such event the
holders of the remaining shares voting for the election of directors will not be
able to elect any person or persons to the Board of Directors. The Maryland
General Corporation Law permits registered investment companies, such as the
Fund, to operate without an annual meeting of stockholders under specified
circumstances if an annual meeting is not required by the Investment Company Act
of 1940. The Fund has adopted the appropriate provisions in its Bylaws and does
not anticipate holding an annual meeting in any year in which the election of
directors is not required to be acted on by stockholders under the Investment
Company Act of 1940. The Fund also has adopted provisions in its Bylaws for the
removal of directors by the stockholders.
The shares are redeemable and are transferable. All shares issued and sold by
the Fund will be fully paid and nonassessable. Fractional shares of Common Stock
entitle the holder to the same rights as whole shares of Common Stock. Firstar
Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202 acts as the
Fund's transfer agent and dividend disbursing agent.
The Fund will not issue certificates evidencing shares of Common Stock
purchased unless so requested in writing. Where certificates are not issued, the
stockholder's account will be credited with the number of shares purchased,
relieving stockholders of responsibility for safekeeping of certificates and the
need to deliver them upon redemption. Written confirmations are issued for all
purchases of Common Stock. Any stockholder may deliver certificates to Firstar
Trust Company and direct that his account be credited with the shares. A
stockholder may direct Firstar Trust Company at any time to issue a certificate
for his shares of Common Stock without charge.
STOCKHOLDER REPORTS
Stockholders will be provided at least semi-annually with a report showing
the Fund's portfolio and other information and annually after the close of the
Fund's fiscal year, which ends September 30, with an annual report containing
audited financial statements. Stockholders who have questions about the Fund
should write to: Brandywine Blue Fund, Inc., P.O. Box 4166, Greenville, Delaware
19807, Attention: Corporate Secretary, or E-mail [email protected]. Questions
about the Fund or individual accounts may be directed toll free to Firstar Trust
Company at (800) 656-3017 or (414) 765-4124.
PERFORMANCE INFORMATION
The Fund's average annual compounded rate of return is the rate of return
which, if applied to an initial investment in the Fund at the beginning of a
stated period and compounded annually over the period, would result in the
redeemable value of the investment in the Fund at the end of the stated period.
The calculation assumes reinvestment of all dividends and distributions and
reflects the effect of all recurring fees but ignores individual income tax
consequences to stockholders.
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
BRANDYWINE BLUE FUND AND S&P 500 INDEX
date Brandywine Blue Fund S&P 500 Index
1/10/91*<F1> $100,000 $100,000
9/30/91 $130,769 $125,100
9/30/92 $136,018 $138,986
9/30/93 $200,719 $157,054
9/30/94 $206,398 $162,708
9/30/95 $294,736 $211,195
9/30/96 $320,979 $254,279
AVERAGE ANNUAL TOTAL RETURN
1-YEAR +8.9%
5-YEAR +19.7%
Since Inception 1/10/91*<F1> +22.6%
*<F1>inception date
Past performance is not predictive of future performance.
The results below show by calendar year the value of an assumed initial
investment of $100,000 made on January 10, 1991 through December 31, 1996,
assuming reinvestment of all dividends and distributions.
VALUE OF
$100,000 CUMULATIVE
DECEMBER 31 INVESTMENT % CHANGE
----------- ---------- ----------
1991 $140,009 +40.0%
1992 158,390 +58.4
1993 201,473 +101.5
1994 206,135 +106.1
1995 272,775 +172.8
1996 336,144 +236.1
The foregoing performance results are historical and should not be considered
indicative of the future performance of the Fund. An investment in the Fund will
fluctuate in value and at redemption its value may be more or less than the
initial investment. The Fund may compare its performance to other mutual funds
with similar investment objectives and to the industry as a whole, as reported
by Lipper Analytical Services, Inc., Money, Forbes, Business Week and Barron's
magazines and Investor's Business Daily and The Wall Street Journal newspapers.
The Fund may also compare its performance to the Dow Jones Industrial Average,
Nasdaq Industrials Index, Value Line Index, the Standard &Poor's 500 Stock Index
and others. Such comparisons may be made in advertisements, stockholder reports
or other communications to stockholders.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The principal factor affecting the Fund's performance for the fiscal year
ended September 30, 1996 was the selection and purchase by the Adviser of stocks
of companies with earnings growth substantially in excess of the overall market,
in accordance with the investment philosophy described under "Investment
Objective and Policies."
The increase of 8.9% in share value for the year reflected continuing growth
in technology stock holdings, plus gains in retailing and energy-related stocks.
The broader based and larger captialization S&P 500 Index rose 20.3% for
the year, while the more growth-oriented Mutual Fund Index of Investor's
Business Daily increased 17.6% in the period. For the five year period
ended September 30, 1996, the Fund's average annual total return was 19.7%
as compared to 15.2% for the S&P 500 Index and 14.0% for the Mutual Fund
Index. The Mutual Fund Index consists of 20 growth-oriented mutual funds
selected primarily on the basis of their size, reputation and historical
performance.
The Fund focused particularly on companies with new products, services, or
markets, which were growing rapidly in an improving economic environment or
which were taking market share from the competition.
Sales of stocks to provide for replacing existing holdings with better ones
in line with the Adviser's strategy of "forced displacement", resulted in a
continuing high turnover of 197% in the portfolio for the twelve-month period.
(BRANDYWINE BLUE FUND, INC. LOGO)
PURCHASE APPLICATION
--- This is a follow-up application to an investment by wire transfer.
Mail to:
Brandywine Blue Fund, Inc.
c/o Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Express Mail to:
Brandywine Blue Fund, Inc.
c/o Firstar Trust Company
Mutual Fund Services
615 E. Michigan St., 3rd Floor
Milwaukee, WI 53202-5207
Use this form for individual, custodial, trust, profit-sharing or pension plan
accounts. For any additional information please call Brandywine Blue Fund, Inc.
at 1-800-656-3017 or 1-414-765-4124.
- ------------------------------------------------------------------------------
A. INVESTMENT Please indicate the amount you wish to invest $ -----------
($100,000 MINIMUM)
- --- By check enclosed payable to Brandywine Blue Fund, Inc. Amount $ ---------
- --- By wire (call first): 1-800-656-3017 or 1-414-765-4124 to set up account.
Indicate total amount and date of wire $ --------------- Date ---------------
- ------------------------------------------------------------------------------
B. REGISTRATION
- --- Individual
- ---------------- --- ---------------- --------------- ----------------
FIRST NAME M.I. LAST NAME SOCIAL SECURITY # BIRTHDATE
(Mo/Dy/Yr)
- --- Joint Owner*<F9> (cannot be a minor)
- ---------------- --- ---------------- --------------- ----------------
FIRST NAME M.I. LAST NAME SOCIAL SECURITY # BIRTHDATE
(Mo/Dy/Yr)
*<F9>Registration will be Joint Tenancy with Rights of Survivorship (JTWROS)
unless otherwise specified.
- --- Gift to Minors
- ------------------------------------------ ---- --------------------------
CUSTODIAN'S FIRST NAME (ONLY ONE PERMITTED) M.I. LAST NAME
- --------------------------------------- ---- -----------------------------
MINOR'S FIRST NAME (ONLY ONE PERMITTED) M.I. LAST NAME
- -------------------------- ---------------------------- ------------------
MINOR'S SOCIAL SECURITY # MINOR'S BIRTHDATE (Mo/Dy/Yr) STATE OF RESIDENCE
- --- Corporation**<F5> (including Corporate Pension Plans),**<F10> Trust, Estate
or Guardianship
- ------------------------------------------------------------------------------
NAME OF TRUSTEE(S) (IF TO BE INCLUDED IN REGISTRATION)***<F11>
- --- Partnership***<F11>
- ------------------------------------------------------------------------------
NAME OF TRUST/CORPORATION**<F10>/PARTNERSHIP
- --- Other Entity***<F11>
- ---------------------------------------- -----------------------------------
SOCIAL SECURITY #/TAX ID # DATE OF AGREEMENT (Mo/Dy/Yr)
**<F10>Corporate Resolution is required. ***<F11>Additional documentation and
certification may be requested.
- ------------------------------------------------------------------------------
C. MAILING ADDRESS
- -------------------------------------- -------------------------------------
STREET APT/SUITE
- -------------------------------------- ------- ---------------------------
CITY STATE ZIP
- --------------------------------------- ------------------------------------
DAYTIME PHONE # EVENING PHONE #
- --- Duplicate Confirmation to:
- ------------------------------ ---- --------------------------------------
FIRST NAME M.I. LAST NAME
- -------------------------------------- -------------------------------------
STREET APT/SUITE
- -------------------------------------- ------- ---------------------------
CITY STATE ZIP
- ------------------------------------------------------------------------------
D. DISTRIBUTION OPTIONS
Capital gains & dividends will be reinvested if no option is selected.
Capital Gains & Dividends Capital Gains & Dividends
Reinvested --- in Cash ---
Capital Gains in Cash & Capital Gains Reinvested &
Dividends Reinvested --- Dividends in Cash ---
If the distribution is to be paid in cash, specify payment method below:
- --- Send check to mailing address in Section C.
- --- Automatic deposit to my bank account via Electronic Funds Transfer
("EFT"). May take up to 3 business days to reach your bank account (complete
bank information following).
Your signed Application must be received at least 15 business days prior to
initial transaction.
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your Application.
- ------------------------------------------------------------------------------
NAME(S) ON BANK ACCOUNT
- ---------------------------------- -----------------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
To ensure proper crediting of your bank account, please attach a voided check
or a deposit slip.
- ------------------------------------------------------------------------------
E. TELEPHONE REDEMPTION OPTIONS
(800) 656-3017 OR
(414) 765-4124
Your signed Application must be received at least 15 business days prior to
initial transaction.
An unsigned voided check (for checking accounts) or a savings account deposit
slip is required with your Application.
I (we) authorize Brandywine Blue Fund, Inc., to act upon my (our) telephone
instructions to redeem shares from this account. Please check all that may
apply.
- --- The proceeds will be mailed to the address in Section C.
- --- By wire. The proceeds of any redemption may be wired to your bank
(complete bank information below). A wire fee of $10.00 will be charged.
- --- By EFT. Proceeds generally take up to 3 business days to reach your bank
(complete bank information below).
- ------------------------------------------------------------------------------
NAME(S) ON BANK ACCOUNT
- ------------------------------------ ---------------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
To ensure proper crediting of your bank account, please attach a voided check
or a deposit slip.
- ------------------------------------------------------------------------------
F. SYSTEMATIC WITHDRAWALS
I would like to withdraw from Brandywine Blue Fund, Inc. $ -------- (no minimum)
as follows:
- --- I would like to have payments made to me on or about the ----- day of each
month, or
- --- I would like to have payments made to me on or about the ----- day of the
months that I have circled below:
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- --- To have payments automatically deposited to your bank account. Complete
bank account information below. (A check will be mailed to the address in
Section C if this box is not checked.)
- ------------------------------------------------------------------------------
NAME(S) ON BANK ACCOUNT
- --------------------------------------- ------------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------------------------------------------------
BANK ADDRESS
To ensure proper crediting of your bank account, please attach a voided check
or a deposit slip.
- ------------------------------------------------------------------------------
G. SIGNATURE AND CERTIFICATION REQUIRED BY THE INTERNAL REVENUE SERVICE
Neither the Fund nor its transfer agent will be responsible for the
authenticity of transaction instructions received by telephone, provided that
reasonable security procedures have been followed.
By selecting the options in Section (E or F), I hereby authorize the Fund to
initiate credits to my account at the bank indicated and for the bank to credit
the same to such account through the Automated Clearing House ("ACH") system.
UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER OR
TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER AS
A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. THE IRSDOES NOT
REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
- ---------------------------- -----------------------------------------------
DATE (Mo/Dy/Yr) SIGNATURE OF OWNER*<F12>
- ---------------------------- -----------------------------------------------
DATE (Mo/Dy/Yr) SIGNATURE OF CO-OWNER, if any
*<F12>If shares are to be registered in (1) joint names, both persons should
sign, (2) a custodian for a minor, the custodian should sign, (3) a trust, the
trustee(s) should sign, or (4) a corporation or other entity, an officer should
sign and print name and title on space provided below.
- ------------------------------------------------------------------------------
PRINT NAME AND TITLE OF OFFICER SIGNING FOR A CORPORATION OR OTHER ENTITY
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
BRANDYWINE BLUE FUND, INC.
3908 Kennett Pike
Greenville, Delaware 19807
Internet: [email protected]
(800) 656-3017
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION January 15, 1997
BRANDYWINE BLUE FUND, INC.
3908 Kennett Pike
Greenville, Delaware 19807
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Brandywine Blue Fund,
Inc. dated January 15, 1997. Requests for copies of the prospectus should
be made in writing to Brandywine Blue Fund, Inc., P.O. Box 4166,
Greenville, Delaware, 19807, Attention: Corporate Secretary, Internet:
bfunds @ friess.com, or by calling (800) 656-3017.
BRANDYWINE BLUE FUND, INC.
Table of Contents
Page No.
Investment Restrictions ............................. 1
Directors and Officers of the Fund .................. 3
Principal Stockholders .............................. 6
Investment Adviser .................................. 7
Service Agreement ................................... 8
Determination of Net Asset Value and Performance..... 9
Purchase of Shares................................... 10
Systematic Withdrawal Plan .......................... 10
Allocation of Portfolio Brokerage ................... 11
Custodian ........................................... 12
Taxes ............................................... 12
Stockholder Meetings ................................ 13
Independent Accountants ............................. 14
Financial Statements ................................ 15
No person has been authorized to give any information or to make
any representations other than those contained in this Statement of
Additional Information and the Prospectus dated January 15, 1997 and, if
given or made, such information or representations may not be relied upon
as having been authorized by Brandywine Blue Fund, Inc.
This Statement of Additional Information does not constitute an
offer to sell securities.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated January 15, 1997 of
Brandywine Blue Fund, Inc. (the "Fund") under the caption "Investment
Objective and Policies", the primary investment objective of the Fund is
to produce long-term capital appreciation principally through investing in
common stocks. Current income is a secondary consideration. Consistent
with its investment objective, the Fund has adopted the following
investment restrictions which are matters of fundamental policy and cannot
be changed without approval of the holders of the lesser of: (i) 67% of
the Fund's shares present or represented at a stockholder's meeting at
which the holders of more than 50% of such shares are present or
represented; or (ii) more than 50% of the outstanding shares of the Fund.
l. The Fund will not purchase warrants, purchase securities on
margin, participate in a joint-trading account, sell securities short, or
write or invest in put or call options.
2. The Fund will not borrow money or issue senior securities,
except for temporary bank borrowings for emergency or extraordinary
purposes (but not for the purpose of purchase of investments) and then
only in an amount not in excess of 5% of the value of its net assets and
will not pledge any of its assets except to secure borrowings and then
only to an extent not greater than 10% of the value of the Fund's net
assets. The Fund will not purchase securities while it has any
outstanding borrowings.
3. The Fund will not lend money (except by purchasing publicly
distributed debt securities or entering into repurchase agreements
provided that repurchase agreements maturing in more than seven days plus
all other illiquid securities will not exceed 10% of the Fund's total
assets) and will not lend its portfolio securities.
4. The Fund will not purchase securities of other investment
companies except (a) as part of a plan of merger, consolidation or
reorganization approved by the shareholders of the Fund or (b) securities
of registered closed-end investment companies on the open market where no
commission or profit results, other than the usual and customary broker's
commission and where as a result of such purchase the Fund would hold less
than 3% of any class of securities, including voting securities, of any
registered closed-end investment company and less than 5% of the Fund's
assets, taken at current value, would be invested in securities of
registered closed-end investment companies.
5. The Fund will not make investments for the purpose of
exercising control or management of any company.
6. The Fund will limit its purchases of securities of any
issuer (other than the United States or an instrumentality of the United
States) in such a manner that it will satisfy at all times the
requirements of Section 5(b)(1) of the Investment Company Act of 1940
(i.e., that at least 75% of the value of its total assets is represented
by cash and cash items (including receivables), U.S. Government
Securities, securities of other investment companies, and other securities
for the purpose of the foregoing limited in respect of any one issuer to
an amount not greater than 5% of the value of the total assets of the Fund
and to not more than 10% of the outstanding voting securities of such
issuer.)
7. The Fund will not concentrate 25% or more of the value of
its total assets, determined at the time an investment is made, exclusive
of U.S. Government securities, in securities issued by companies engaged
in the same industry.
8. The Fund will not acquire or retain any security issued by
a company, an officer or director of which is an officer or director of
the Fund or an officer, director or other affiliated person of its
investment adviser.
9. The Fund will not acquire or retain any security issued by
a company if any of the directors or officers of the Fund, or directors,
officers or other affiliated persons of its investment adviser
beneficially own more than 1/2% of such company's securities and all of
the above persons owning more than 1/2% own together more than 5% of its
securities.
10. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund and will not purchase any
securities which are restricted from sale to the public without
registration under the Securities Act of 1933, as amended.
11. The Fund will not purchase any interest in any oil, gas or
any other mineral exploration or development program.
12. The Fund will not purchase or sell real estate or real
estate mortgage loans.
13. The Fund will not purchase or sell commodities or
commodities contracts, including futures contracts.
The following investment limitation is not fundamental and may
be changed without stockholder approval.
1. The Fund will not invest in securities of unseasoned
issuers, including their predecessors, which have been in operation for
less than 3 years, and equity securities of issuers which are not readily
marketable, if by reason thereof the value of its aggregate investment in
such securities would exceed 5% of its total assets.
DIRECTORS AND OFFICERS OF THE FUND
The name, address, principal occupations during the past five
years and other information with respect to each of the directors and
officers of the Fund are as follows:
FOSTER S. FRIESS*
350 Broadway
P. O. Box 576
Jackson, Wyoming
(PRESIDENT, TREASURER AND A
DIRECTOR OF THE FUND)
Mr. Friess, age 56, has served as President, Treasurer and a
director of both the Fund and Brandywine Fund, Inc. since their inceptions
in 1990 and 1985, respectively. He is also President and Chairman of the
Board of Friess Associates, Inc., an investment advisory firm which he
co-founded in 1974 with his wife, Lynnette E. Friess. Friess Associates,
Inc. has been the investment adviser of Brandywine Fund, Inc. since its
inception and is the investment adviser of the Fund. Mr. Friess has been
a Chartered Financial Analyst since 1970. He is currently Chairman of the
Life Enrichment Foundation, Wilmington, Delaware. He is also a member of
the Advisory Council of the Royal Swedish Academy of Sciences.
STIG RAMEL
Resedavagen 8
171732 Solna
Sweden
(DIRECTOR)
Mr. Ramel, age 69, served as President of the Nobel Foundation
from 1972 to 1992 and was thereafter appointed by the Swedish Government
as Chairman of Fond 92-94, a nonprofit organization with the
responsibility of financing scientific research institutions. He is a
member of the Royal Academy of Sciences and Director of the Board of
Gustavus Adolphus College in Minnesota. He is Chairman or a board member
of 15 foreign companies and organizations. Mr. Ramel also has served as a
director of Brandywine Fund, Inc. since it was founded in 1985.
JOHN E. BURRIS
5th and McColley Street
Milford, Delaware
(DIRECTOR)
Mr. Burris, age 76, is Chairman of Burris Foods, Inc. He is a
trustee of the University of Delaware and a former member of the Board of
Directors of Wilmington Trust Company. He is a member of the board of
directors of Milford Memorial Hospital and is a member of the Private
Industry Council for the State of Delaware. He also has served as a
director of Brandywine Fund, Inc. since it was founded in 1985.
WILLIAM F. D'ALONZO
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. D'Alonzo, age 42, has been an analyst for Friess Associates,
Inc. since 1981. He also has served as a Vice President of Brandywine
Fund, Inc. since April, 1990.
CLARKE ADAMS, JR.
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. Adams, age 51, has been an analyst for Friess Associates,
Inc. since 1983. He also has served as a Vice President of Brandywine
Fund, Inc. since April, 1990.
CARL S. GATES
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. Gates, age 64, has been employed by Friess Associates, Inc.
in various capacities since 1988. He has served as a Vice President of
both the Fund and Brandywine Fund, Inc. since April, 1994.
PAUL R. ROBINSON
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT AND ASSISTANT SECRETARY)
Mr. Robinson, age 73, has been a consultant for Friess
Associates, Inc. since June, 1985. He also has served as a Vice President
of Brandywine Fund, Inc. since April, 1990 and as Assistant Secretary of
Brandywine Fund, Inc. since April, 1987.
LYNDA J. CAMPBELL
3908 Kennett Pike
Greenville, Delaware
(SECRETARY)
Ms. Campbell, age 51, has served as Secretary of Brandywine
Fund, Inc. since December, 1989. She is also an employee of Friess
Associates, Inc. and has been employed in various capacities with such
firm since December, 1985.
__________________
* Mr. Friess is the only director who is an "interested person" of the
Fund as that term is defined in the Investment Company Act of 1940.
During the fiscal year ended September 30, 1996, the Fund paid
$2,000 in director's fees to the Fund's disinterested directors. The
Fund's standard method of compensating directors is to pay each
disinterested director an annual fee of $1,000. The Fund also may
reimburse its directors for travel expenses incurred in order to attend
meetings of the Board of Directors.
The table below sets forth the compensation paid by the Fund to
each of the directors of the Fund during the fiscal year ended September
30, 1996:
</TABLE>
<TABLE>
COMPENSATION TABLE
<CAPTION>
Pension or
Retirement Total
Aggregate Benefits Accrued Estimated Annual Compensation
Compensation As Part of Fund Benefits Upon from Fund Paid
Name of Person From Fund Expenses Retirement to Directors
<S> <C> <C> <C> <C>
Foster S. Friess $0 $0 $0 $0
Stig Ramel $1,000 $0 $0 $1,000
John E. Burris $1,000 $0 $0 $1,000
</TABLE>
PRINCIPAL STOCKHOLDERS
Set forth below are the names and addresses of all holders of
the Fund's Common Stock who as of December 31, 1996 beneficially owned
more than 5% of the then outstanding shares of the Fund's Common Stock as
well as the number of shares of the Fund's Common Stock beneficially owned
by all officers and directors of the Fund as a group, indicating in each
case whether the person has sole or shared power to vote or dispose of
such shares.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
Sole Power Shared Power Aggregate
Lynnette E. Friess 1,156,928 -0- 1,156,928 8.0%
Revocable Trust
Lynnette E. Friess,
Trustee
P.O. Box 30575
Jackson, WY 83001
Officers and Directors 166,192(1) 1.2%
as a group (8 persons)
____________________________
(1) Includes 12,712 shares held by the Adviser but excludes 1,156,928
shares held by the Lynnette E. Friess Revocable Trust.
At December 31, 1996, Charles Schwab & Co., Inc., 101 Montgomery
Street, San Francisco, California 94104, owned of record 1,040,460 shares
of the Fund's Common Stock, or 7.2% of the then outstanding shares. All
of the shares owned by Charles Schwab & Co., Inc. were owned of record
only.
INVESTMENT ADVISER
As set forth in the Prospectus under the caption "Management of
the Fund" the investment adviser to the Fund is Friess Associates, Inc.
(the "Adviser"). Pursuant to an investment advisory agreement between the
Fund and the Adviser (the "Agreement") the Adviser furnishes continuous
investment advisory services and management to the Fund. During the
fiscal years ended September 30, 1996, September 30, 1995 and September
30, 1994, the Fund paid the Adviser fees of $2,563,756, $678,052 and
$164,255, respectively.
The Fund will pay all of its expenses not assumed by the Adviser
including, but not limited to, the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto, the expense of
registering its shares with the Securities and Exchange Commission and in
the various states, the printing and distribution cost of prospectuses
mailed to existing stockholders, the cost of stock certificates, director
and officer liability insurance, reports to stockholders, reports to
government authorities and proxy statements, interest charges, brokerage
commissions, and expenses incurred in connection with portfolio
transactions. During the fiscal years ended September 30, 1996, September
30, 1995 and September 30, 1994, such expenses included $9,450, $6,125 and
$6,250, respectively, in administrative services performed by the Adviser.
The Fund will also pay the fees of directors who are not interested
persons of the Fund, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, fees and
expenses of any custodian or trustees having custody of Fund assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, and charges and expenses of dividend disbursing agents,
registrars, and stock transfer agents, including the cost of keeping all
necessary stockholder records and accounts and handling any problems
related thereto.
The Adviser has undertaken to reimburse the Fund to the extent
that the aggregate annual operating expenses, including the investment
advisory fee but excluding interest, taxes, brokerage commissions and
extraordinary items, exceed that percentage of the average net assets of
the Fund for such year, as determined by valuations made as of the close
of each business day of the year, which is the most restrictive percentage
provided by the state laws of the various states in which the Common Stock
is qualified for sale. As of the date hereof, no such state law provision
was applicable to the Fund. The Fund monitors its expense ratio at least
on a monthly basis. If the accrued amount of the expenses of the Fund
exceeds the applicable expense limitation, the Fund creates an account
receivable from the Adviser for the amount of such excess. In such a
situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the
balance of the Fund's fiscal year if accrued expenses thereafter fall
below this limit. Notwithstanding the most restrictive applicable expense
limitation of state securities commissions described above, the Adviser
has voluntarily agreed to reimburse the Fund for any such expenses
incurred in excess of 2% of average net assets. No reimbursement was
required during the fiscal years ended September 30, 1996, September 30,
1995 and September 30, 1994.
The Agreement will remain in effect as long as its continuance
is specifically approved at least annually, by (i) the Board of Directors
of the Fund, or by the vote of a majority (as defined in the Investment
Company Act of 1940) of the outstanding shares of the Fund, and (ii) by
the vote of a majority of the directors of the Fund who are not parties to
the Agreement or interested persons of the Adviser, cast in person at a
meeting called for the purpose of voting on such approval. The Agreement
provides that it may be terminated at any time without the payment of any
penalty, by the Board of Directors of the Fund or by vote of a majority of
the Fund's stockholders, on sixty days written notice to the Adviser, and
by the Adviser on the same notice to the Fund and that it shall be
automatically terminated if it is assigned.
The Agreement provides that the Adviser shall not be liable to
the Fund or its stockholders for anything other than willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or
duties. The Agreement also provides that the Adviser and its officers,
directors and employees may engage in other businesses, devote time and
attention to any other business whether of a similar or dissimilar nature,
and render investment advisory services to others.
SERVICE AGREEMENT
As described in the Fund's prospectus under the caption
"Management of the Fund," the Fund and Fiduciary Management, Inc.,
Milwaukee, Wisconsin have entered into a Service Agreement pursuant to
which certain accounting and record keeping services will be performed for
the Fund by Fiduciary Management, Inc. For its services the Fund
currently pays Fiduciary Management, Inc. ("FMI") an annual fee of
$85,000. For the fiscal year ended September 30, 1996, such annual fee
was $70,000. Prior to October 1, 1995, the Fund paid FMI a monthly fee of
1/12 of 0.1% (0.1% per annum) on the first $30,000,000 of the daily net
assets of the Fund and 1/12 of 0.05% (0.05% per annum) on the daily net
assets of the Fund over $30,000,000, with a minimum fee of $15,000. The
total fees paid pursuant to the Service Agreement for the fiscal years
ended September 30, 1996, September 30, 1995 and September 30, 1994 were
$70,000, $40,246 and $22,245, respectively. The Service Agreement may be
terminated at any time by either the Fund or FMI upon 90 days' written
notice. The Service Agreement provides that FMI shall not be liable to
the Fund, the Adviser or any stockholders of the Fund for anything other
than willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties. FMI performs similar services for
other investment companies.
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "Determination
of Net Asset Value" the net asset value of the Fund will be determined as
of the close of trading on each day the New York Stock Exchange is open
for trading. The New York Stock Exchange is open for trading Monday
through Friday except New Year's Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. Additionally, if any of the aforementioned holidays falls on a
Saturday, the New York Stock Exchange will not be open for trading on the
preceding Friday and when any such holiday falls on a Sunday, the New York
Stock Exchange will not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the ending of a monthly
or the yearly accounting period.
Any total rate of return quotation for the Fund will be for a
period of three or more months and will assume the reinvestment of all
dividends and capital gains distributions which were made by the Fund
during that period. Any period total rate of return quotation of the Fund
will be calculated by dividing the net change in value of a hypothetical
shareholder account established by an initial payment of $1,000 at the
beginning of the period by 1,000. The net change in the value of a
shareholder account is determined by subtracting $1,000 from the product
obtained by multiplying the net asset value per share at the end of the
period by the sum obtained by adding (A) the number of shares purchased at
the beginning of the period plus (B) the number of shares purchased during
the period with reinvested dividends and distributions. Any average
annual compounded total rate of return quotation of the Fund will be
calculated by dividing the redeemable value at the end of the period
(i.e., the product referred to in the preceding sentence) by $1,000. A
root equal to the period, measured in years, in question is then
determined and 1 is subtracted from such root to determine the average
annual compounded total rate of return.
The foregoing computation may also be expressed by the following
formula:
n
P(1+T) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the stated periods at the end of
the stated periods.
PURCHASE OF SHARES
The Fund has adopted procedures pursuant to Rule 17a-7 under the
Investment Company Act of 1940 pursuant to which the Fund may effect a
purchase and sale transaction with an affiliated person of the Fund (or an
affiliated person of such an affiliated person) in which the Fund issues
its shares in exchange for securities of a character which is a permitted
investment for the Fund. For purposes of determining the number of shares
of the Fund to be issued, the securities to be exchanged will be valued in
accordance with the requirements of Rule 17a-7. No such transactions will
be made with respect to any person in which an affiliated person of the
Fund has a beneficial interest.
SYSTEMATIC WITHDRAWAL PLAN
A stockholder who owns Fund shares worth at least $100,000 at the
current net asset value may, by completing an application which may be
obtained from Firstar Trust Company, create a Systematic Withdrawal Plan
from which a fixed sum will be paid to the stockholder at regular
intervals. To establish the Systematic Withdrawal Plan, the stockholder
deposits Fund shares with the Fund and appoints it as agent to effect
redemptions of Fund shares held in the account for the purpose of making
withdrawal payments (not more than monthly) of a fixed amount to the
stockholder out of the account. Fund shares deposited by the stockholder
in the account need not be endorsed or accompanied by a stock power if
registered in the same name as the account; otherwise, a properly executed
endorsement or stock power, obtained from any bank, broker-dealer or the
Fund is required. The stockholder's signature should be guaranteed by a
bank, a member firm of a national stock exchange, or other eligible
guarantor institution.
There is no minimum withdrawal payment. These payments will be
made from the proceeds of periodic redemption of shares in the account at
net asset value. Redemptions will be made on or about the day selected by
the stockholder of each month in which a withdrawal payment is to be made.
Establishment of a Systematic Withdrawal Plan constitutes an election by
the stockholder to reinvest in additional Fund shares, at net asset value,
all income dividends and capital gains distributions payable by the Fund
on shares held in such account, and shares so acquired will be added to
such account. The stockholder may deposit additional Fund shares in his
account at any time.
Withdrawal payments cannot be considered as yield or income on the
stockholder's investment, since portions of each payment will normally
consist of a return of capital. Depending on the size or the frequency of
the disbursements requested, and the fluctuation in the value of the
Fund's portfolio, redemptions for the purpose of making such disbursements
may reduce or even exhaust the stockholder's account.
The stockholder may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying Firstar Trust Company in writing. The
stockholder also may vary the amount or frequency of withdrawal payments
or temporarily discontinue them by notifying Firstar Trust Company by
telephone at (800) 656-3017 or (414) 765-4124.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made by the
Adviser subject to review by the Fund's Board of Directors. In placing
purchase and sale orders for portfolio securities for the Fund, it is the
policy of the Adviser to seek the best execution of orders at the most
favorable price in light of the overall quality of brokerage and research
services provided, as described in this and the following paragraph. In
selecting brokers to effect portfolio transactions, the determination of
what is expected to result in best execution at the most favorable price
involves a number of largely judgmental considerations. Among these are
the Adviser's evaluation of the broker's efficiency in executing and
clearing transactions, block trading capability (including the broker's
willingness to position securities) and the broker's financial strength
and stability. The most favorable price to the Fund means the best net
price without regard to the mix between purchase or sale price and
commission, if any. Over-the-counter securities are generally purchased
and sold directly with principal market makers who retain the difference
in their cost in the security and its selling price. In some instances,
the Adviser feels that better prices are available from non-principal
market makers who are paid commissions directly. While some brokers with
whom the Fund effects portfolio transactions may recommend the purchase of
the Fund's shares, the Adviser will not allocate portfolio brokerage on
the basis of recommendations to purchase shares of the Fund.
In allocating brokerage business for the Fund, the Adviser also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the Adviser,
and the Fund may indirectly benefit from services available to the Adviser
as a result of transactions for other clients. The Agreement provides
that the Adviser may cause the Fund to pay a broker which provides
brokerage and research services to the Adviser a commission for effecting
a securities transaction in excess of the amount another broker would have
charged for effecting the transaction, if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing broker
viewed in terms of either the particular transaction or the Adviser's
overall responsibilities with respect to the Fund and the other accounts
as to which he exercises investment discretion. Brokerage commissions
paid by the Fund during the fiscal years ended September 30, 1996,
September 30, 1995 and September 30, 1994 totaled $1,269,308 on total
transactions of $1,149,183,806, $383,604 on total transactions of
$344,918,024 and $74,721 on total transactions of $69,305,441,
respectively. All of the brokers to whom commissions were paid provided
research services to the Adviser.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Fund. As such, Firstar Trust
Company holds all securities and cash of the Fund, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Fund. Firstar Trust Company does not exercise
any supervisory function over the management of the Fund, the purchase and
sale of securities or the payment of distributions to stockholders.
Firstar Trust Company also acts as the Fund's transfer agent and dividend
disbursing agent.
TAXES
As set forth in the Prospectus under the caption "Dividends,
Distributions and Taxes" the Fund will endeavor to qualify annually for
and elect tax treatment applicable to a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended.
Dividends from the Fund's net investment income and distributions
from the Fund's net realized short-term capital gains are taxable to
stockholders as ordinary income, whether received in cash or in additional
shares of Common Stock. The 70% dividends-received deduction for
corporations will apply to such dividends and distributions, subject to
proportionate reductions if the aggregate dividends received by the Fund
from domestic corporations in any year are less than 100% of the Fund's
gross income.
Any dividend or capital gains distribution paid shortly after a
purchase of shares of Common Stock will have the effect of reducing the
per share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, if the net asset value of the shares of Common
Stock immediately after a dividend or distribution is less than the cost
of such shares to the stockholder, the dividend or distribution will be
taxable to the stockholder even though it results in a return of capital
to him.
The Fund may be required to withhold Federal income tax at a rate
of 31% ("backup withholding") from dividend payments and redemption
proceeds if a shareholder fails to furnish the Fund with his social
security or other tax identification number and certify under penalty of
perjury that such number is correct and that he is not subject to backup
withholding due to the underreporting of income. The certification form
is included as part of the share purchase application and should be
completed when the account is opened.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered investment
companies, such as the Fund, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not
required by the Investment Company Act of 1940. The Fund has adopted the
appropriate provisions in its Bylaws and may, at its discretion, not hold
an annual meeting in any year in which the election of directors is not
required to be acted on by stockholders under the Investment Company Act
of 1940.
The Fund's Bylaws also contain procedures for the removal of
directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting, the Secretary of the Fund shall promptly call a special meeting
of stockholders for the purpose of voting upon the question of removal of
any director. Whenever ten or more stockholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the Fund's Secretary in writing, stating
that they wish to communicate with other stockholders with a view to
obtaining signatures to a request for a meeting as described above and
accompanied by a form of communication and request which they wish to
transmit, the Secretary shall within five business days after such
application either: (1) afford to such applicants access to a list of the
names and addresses of all stockholders as recorded on the books of the
Fund; or (2) inform such applicants as to the approximate number of
stockholders of record and the approximate cost of mailing to them the
proposed communication and form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all stockholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may,
and if demanded by the Board of Directors or by such applicants shall,
enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness
after the entry of such order and the renewal of such tender.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 3100 Multifoods Tower, 33 South Sixth Street,
Minneapolis, Minnesota 55402, currently serves as the independent
accountants for the Fund and has so served for all periods since the Fund
commenced operations on January 10, 1991.
FINANCIAL STATEMENTS
The following financial statements are incorporated by reference to
the Annual Report, dated September 30, 1996, of Brandywine Blue Fund, Inc.
(File No. 811-6221), as filed with the Securities and Exchange Commission
on October 22, 1996:
Report of Independent Accountants
Statement of Net Assets as of September 30, 1996
Statement of Operations for the Year Ended
September 30, 1996
Statements of Changes in Net Assets for the Years
Ended September 30, 1996 and 1995
Financial Highlights for the Years Ended September 30,
1996, 1995, 1994, 1993 and 1992 and for the period from
January 10, 1991 (commencement of operations) to
September 30, 1991
Notes to Financial Statements
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Financial Statements (Financial Highlights included in Part
A and all incorporated by reference to the Annual Report,
dated September 30, 1996 (File No. 811-6221), of Brandywine
Blue Fund, Inc. (as filed with the Securities and Exchange
Commission on October 22, 1996))
Brandywine Blue Fund, Inc.
Report of Independent Accountants
Statement of Net Assets as of September 30, 1996
Statement of Operations for the Year Ended
September 30, 1996
Statements of Changes in Net Assets for the
Years Ended September 30, 1996 and 1995
Financial Highlights for the Years Ended
September 30, 1996, 1995, 1994, 1993 and 1992 and for
the period from January 10, 1991 (commencement
of operations) to September 30, 1991
Notes to Financial Statements
(b.) Exhibits
(1) Registrant's Articles of Incorporation as amended
through January 15, 1997
(1.1) Articles Supplementary to Articles of Incorporation dated
March 28, 1996
(2) Registrant's By-Laws as amended through January 15,
1997
(3) None
(4) Specimen Stock Certificate (Exhibit 4 to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement
on Form N-1A is incorporated by reference pursuant to
Rule 411 under the Securities Act of 1933)
(5) Investment Advisory Agreement
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company
(9.1) Service Agreement with Fiduciary Management, Inc.
(9.2) Transfer Agent Agreement with First Wisconsin Trust
Company
(10) Opinion of Foley & Lardner, counsel for Registrant
(Exhibit 10 to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933)
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreement (Exhibit 13 to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on
Form N-1A is incorporated by reference pursuant to Rule
411 under the Securities Act of 1933)
(14) None
(15) None
(16) Schedule for Computation of Performance Quotations
(Exhibit 16 to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933)
(17) Financial Data Schedule
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is not controlled by any person. Registrant neither
controls any person nor is under common control with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of December 31, 1996
Common Stock, $.01 par value 761
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or canceled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the
preparation of and/or presentation of the defense of a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as authorized in
the manner provided in Section 2-418(F) of the Maryland General
Corporation Law upon receipt of: (i) an undertaking by or on behalf of
the corporate representative to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by
the corporation as authorized in this bylaw; and (ii) a written
affirmation by the corporate representative of the corporate
representative's good faith belief that the standard of conduct necessary
for indemnification by the corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 3 through 5 of the Statement
of Additional Information pursuant to Rule 411 under the Securities Act of
1933. Mr. Herman Friess, a director of the Adviser, is a lawyer having
his own practice with offices in Rice Lake, Wisconsin.
Item 29. Principal Underwriters
Registrant has no principal underwriters.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the
physical possession of Fiduciary Management, Inc. and Registrant's
Custodian as follows: the documents required to be maintained by
paragraphs (4), (5), (6), (7), (10) and (11) of Rule 31a-1(b) will be
maintained by Fiduciary Management, Inc. at its offices at 225 East Mason
Street, Milwaukee, Wisconsin 53202, and all other records will be
maintained by the Custodian.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Jackson and
State of Wyoming on the 14th day of January, 1997.
BRANDYWINE BLUE FUND, INC.
(Registrant)
By: /s/ Foster S. Friess
Foster S. Friess, President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
/s/ Foster S. Friess Principal Executive, January 14, 1997
Foster S. Friess Financial and
Accounting Officer
and Director
/s/ Stig Ramel Director January 14, 1997
Stig Ramel
/s/ John E. Burris Director January 14, 1997
John E. Burris
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Articles of
Incorporation
(1.1) Articles Supplementary to Articles of Incorporation
(2) Registrant's Bylaws
(3) None
(4) Specimen Stock Certificate*
(5) Investment Advisory Agreement
(6) None
(7) None
(8) Custodian Agreement with Firstar
Trust Company
(9.1) Service Agreement with Fiduciary
Management, Inc.
(9.2) Transfer Agent Agreement with
First Wisconsin Trust Company
(10) Opinion of Foley & Lardner,
counsel for Registrant*
(11) Consent of Price Waterhouse LLP
(12) None
(13) Subscription Agreement*
(14) None
(15) None
(16) Schedule for Computation of
Performance Quotations*
(17) Financial Data Schedule
(18) None
_________________
* Incorporated by reference.
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
BRANDYWINE BLUE FUND, INC.*
The undersigned sole incorporator, being at least eighteen years
of age, hereby adopts the following Articles of Incorporation for the
purpose of forming a Maryland corporation under the general laws of the
State of Maryland:
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
BRANDYWINE BLUE FUND, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is formed are to engage
in any lawful business for which corporations may be organized under the
Maryland General Corporation Law.
ARTICLE IV
A. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is One Hundred
Million (100,000,000) shares, all with a par value of One Cent ($0.01) per
share, to be known and designated as "Common Stock." The aggregate par
value of the authorized shares of the Corporation is One Million
Dollars ($1,000,000). The Board of Directors of the Corporation may
increase or decrease the aggregate number of authorized shares of Common
Stock pursuant to Section 2-105 of the Maryland General Corporation Law or
any successor provision thereto. The Board of Directors of the
Corporation may classify or reclassify any unissued shares of Common Stock
and may designate or redesignate the name of any class of outstanding
Common Stock. The Board of Directors may fix the number of shares of
Common Stock in any such class and, except as specifically set forth in
these Articles of Incorporation, may set or change the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions or redemption of any
class of unissued shares of Common Stock.
B. Notwithstanding the authority granted to the Board of
Directors of the Corporation with respect to the designation,
classification and reclassification of the unissued shares of Common Stock
of the Corporation, each class of Common Stock shall have the following
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption:
1. Each holder of shares of Common Stock of the
Corporation, irrespective of the class, shall be entitled to one
(1) vote for each full share (and a fractional vote for each
fractional share) then standing in his or her name on the books
of the Corporation; provided, however, that shares of any class
of Common Stock owned, other than in a fiduciary capacity, by
the Corporation or by another corporation in which the
Corporation owns shares entitled to cast a majority of all the
votes entitled to be cast by all shares outstanding and entitled
to vote of such corporation, shall not be voted at any meeting
of stockholders. On any matter submitted to a vote of
stockholders all shares of the Corporation's Common Stock then
issued and outstanding and entitled to vote, irrespective of the
class, shall be voted in the aggregate and not by class, except
that: (a) when otherwise expressly provided by the Maryland
General Corporation Law, the Investment Company Act of 1940 and
the regulations thereunder, or other applicable law, shares
shall be voted by individual class; and (b) when the matter to
be acted upon does not affect any interest of a particular class
of the Corporation's Common Stock, then only shares of the
affected class shall be entitled to vote thereon. At all
elections of directors of the Corporation, each stockholder
shall be entitled to vote the shares owned of record by him for
as many persons as there are directors to be elected, but shall
not be entitled to exercise any right of cumulative voting.
2. All consideration received by the Corporation for the
issue or sale of shares of any class of the Corporation's Common
Stock, together with all assets in which such consideration is
invested and reinvested, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any such funds or payments derived
from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to the class of the
Corporation's Common Stock with respect to which such assets,
payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein
referred to as "assets belonging to" such class. Any assets,
income, earnings, profits and proceeds thereof, funds or
payments which are not readily attributable to any particular
class of the Corporation's Common Stock shall be allocable among
any one or more of the classes of the Corporation's Common Stock
in such manner and on such basis as the Board of Directors, in
its sole discretion, shall deem fair and equitable. The power
to make such allocations may be delegated by the Board of
Directors from time to time to one or more of the officers of
the Corporation.
3. The assets belonging to any class of the Corporation's
Common Stock shall be charged with the liabilities in respect of
such class of the Corporation's Common Stock, and shall also be
charged with the share of the general liabilities of the
Corporation allocated to such class determined as hereinafter
provided. The determination of the Board of Directors shall be
conclusive as to: (a) the amount of such liabilities, including
the amount of accrued expenses and reserves; (b) any allocation
of the same to a given class; and (c) whether the same are
allocable to one or more classes. The liabilities so allocated
to a class are herein referred to as "liabilities belonging to"
such class. Any liabilities which are not readily attributable
to any particular class of the Corporation's Common Stock shall
be allocable among any one or more of the classes of the
Corporation's Common Stock in such manner and on such basis as
the Board of Directors, in its sole discretion, shall deem fair
and equitable. The power to make such allocations may be
delegated by the Board of Directors from time to time to one or
more of the officers of the Corporation.
4. Shares of a class of the Corporation's Common Stock
shall be entitled to such dividends and distributions, in stock
or in cash or both, as may be declared from time to time by the
Board of Directors, acting in its sole discretion, with respect
to such class; provided, however, that dividends and
distributions on shares of a class of the Corporation's Common
Stock shall be paid only out of the lawfully available "assets
belonging to" such class as such phrase is defined in this
Article IV.
5. In the event of the liquidation or dissolution of the
Corporation, stockholders of a class of the Corporation's Common
Stock shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to
stockholders, but other than general assets not belonging to any
particular class, the assets belonging to such class, and the
assets so distributable to the holders of any class of the
Corporation's Common Stock shall be distributed among such
holders in proportion to the number of shares of such class of
the Corporation's Common Stock held by them and recorded on the
books of the Corporation. In the event that there are any
general assets not belonging to any particular class of the
Corporation's Common Stock and available for distribution, such
distribution shall be made to the holders of all classes of the
Corporation's Common Stock in proportion to the net asset value
of the respective class of the Corporation's Common Stock
determined as set forth in the Bylaws of the Corporation.
6. Each share of each class of Common Stock of the
Corporation now or hereafter issued shall be subject to
redemption by the stockholders of the Corporation and, subject
to the suspension of such right of redemption as provided in the
Bylaws, each holder of shares of any class of Common Stock of
the Corporation, upon request to the Corporation accompanied by
surrender of the appropriate stock certificate or certificates,
if any, in proper form for transfer and after complying with any
other redemption procedures established by the Board of
Directors, shall be entitled to require the Corporation to
redeem all or any part of the shares of such class of Common
Stock standing in the name of such holder on the books of the
Corporation at the net asset value of such shares. In the event
that no certificates have been issued to the holder, the Board
of Directors may require the submission of a stock power with an
appropriate signature guarantee. All shares of any class of its
Common Stock redeemed by the Corporation shall be deemed to be
canceled and restored to the status of authorized but unissued
shares. The method of computing the net asset value of shares
of each class of Common Stock of the Corporation for purposes of
the issuance and sale, or redemption, thereof, as well as the
time as of which such net asset value shall be computed, shall
be as set forth in the Bylaws. Payment of the net asset value
of each share of each class of Common Stock of the Corporation
surrendered to it for redemption shall be made by the
Corporation within seven (7) days after surrender of such stock
to the Corporation for such purpose, or within such other
reasonable period as may be determined from time to time by the
Board of Directors.
7. Each holder of shares of the Corporation's Common
stock, irrespective of the class, may, upon request to the
Corporation accompanied by surrender of the appropriate stock
certificate or certificates, if any, in proper form for transfer
and after complying with any other conversion procedures
established by the Board of Directors, convert such shares into
shares of any other class of the Corporation's Common Stock on
the basis of their relative net asset values (determined in
accordance with the Bylaws or the Corporation) less a conversion
charge or discount determined by the Board of Directors. Any
fee so imposed shall be uniform as to all stockholders.
8. No holder of shares of any class of Common Stock of
the Corporation shall, as such holder, have any right to
purchase or subscribe for any shares of any class of the Common
Stock of the Corporation which it may issue or sell (whether out
of the number of shares authorized by these Articles of
Incorporation, or out of any shares of any class of Common Stock
of the Corporation acquired by it after the issue thereof, or
otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
ARTICLE V
The number of directors constituting the Board of Directors
shall initially be three (3), and the names of the initial directors are
John E. Burris, Foster S. Friess and Stig Ramel. Thereafter, the number
of directors shall be such number as is fixed from time to time by the
Bylaws.
ARTICLE VI
The Corporation reserves the right to enter into, from time to
time, investment advisory agreements providing for the management and
supervision of the investments of the Corporation, the furnishing of
advice to the Corporation with respect to the desirability of investing
in, purchasing or selling securities or other property and the furnishing
of clerical and administrative services to the Corporation. Such
agreement shall contain such other terms, provisions and conditions as the
Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate custodians, transfer agents,
registrars and/or disbursing agents for the stock and assets of the
Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such custodian, transfer agent,
registrar and/or disbursing agent.
ARTICLE VII
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the stockholders:
A. The Corporation may issue and sell shares of any class
of is own Common Stock in such amounts and on such terms and
conditions, for such purposes and for such amount or kind of
consideration now or hereafter permitted by the laws of the
State of Maryland, the Bylaws and these Articles of
Incorporation, as its Board of Directors may determine;
provided, however, that the consideration per share of any class
of its Common Stock shall not be less than the net asset value
per share of such class of Common Stock outstanding at the time
as of which the computation of said net asset value shall be
made.
B. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders for the purchase
of shares of any class of Common Stock and may, in addition,
require such orders to be in such minimum amounts as it shall
determine.
C. The holders of any fractional shares of any class
Common Stock shall be entitled to the payment of dividends on
such fractional shares, to receive the net asset value thereof
upon redemption, to share in the assets of the Corporation upon
liquidation and to exercise voting rights with respect thereto.
D. The Board of Directors shall have full power in
accordance with good accounting practice: (a) to determine what
receipts of the Corporation shall constitute income available
for payment of dividends and what receipts shall constitute
principal and to make such allocation of any particular receipt
between principal and income as it may deem proper; and (b) from
time to time, in its discretion (i) to determine whether any and
all expenses and other outlays paid or incurred (including any
and all taxes, assessments or governmental charges which the
Corporation may be required to pay or hold under any present or
future law of the United States of America or of any other
taxing authority therein) shall be charged to or paid from
principal or income or both, and (ii) to apportion any and all
of said expenses and outlays, including taxes, between principal
and income.
E. The Board of Directors shall have the power to
determine from time to time whether and to what extent and at
what time and places and under what conditions and regulations
the books, accounts and documents of the Corporation or any of
them, shall be open to the inspection of stockholders, except as
otherwise provided by applicable law; and except as so provided,
no stockholder shall have any right to inspect any book, account
or document of the Corporation unless authorized to do so by
resolution of the Board of Directors.
ARTICLE VIII
The address of the principal office of the Corporation is 3908
Kennett Pike, Greenville, Delaware 19807.
ARTICLE IX
The address of the initial registered office is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202.
ARTICLE X
The name of the initial registered agent at such address is The
Corporation Trust, Incorporated, a Maryland corporation.
ARTICLE XI
The name and address of the sole incorporator is:
Name Address
Todd B. Pfister c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
IN WITNESS WHEREOF, the undersigned incorporator who executed
the foregoing Articles of Incorporation hereby acknowledges the same to be
his act and further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material respects
under the penalties of perjury.
Dated this 12th day of November, 1990.
_______________________________________
Todd B. Pfister
Sole Incorporator
_______________
* Restated in electronic format to include all supplements and
amendments through January 15, 1997.
EXHIBIT 1.1
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
BRANDYWINE BLUE FUND, INC.
Pursuant to Section 2-208.1 of the Maryland General Corporation
Law (the "MGCL"), Brandywine Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Company"), does hereby
certify to the State Department of Assessments and Taxation of Maryland
(The "Department") that:
FIRST: The Company is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: Pursuant to Section 2-105(c) of the MGCL, the Board of
Directors of the Company duly adopted on March 28, 1996 resolutions: (a)
increasing the total number of share of capital stock that the Company has
authority to issue pursuant to Article IV of the Company's Articles of
Incorporation from twenty million (20,000,000) shares to one hundred
million (100,000,000) shares; and (b) authorizing and directing the filing
of these Articles Supplementary for record with the Department.
THIRD: (a) The total number of shares of stock which the
Company was heretofore authorized to issue was twenty million (20,000,000)
shares, consisting of one class only, designated as "Common Stock," of the
par value of $.01 per share and of the aggregate par value of two million
dollars ($200,000).
(b) The total number of share of stock which the Company shall
be authorized to issue upon the filing of these Articles Supplementary for
record with the Department is one hundred million (100,000,000) shares,
consisting of one class only, designated as "Common Stock," of the par
value of $.01 per share and of the aggregate par value of one million
dollars ($1,000,000).
FOURTH: These Articles Supplementary shall become effective as
of the time they are accepted by the Department for record.
IN WITNESS WHEREOF, the Company has caused these presents to be
signed in its name and on its behalf by its President and attested by its
Secretary as of this 28th day of March, 1996.
BRANDYWINE BLUE FUND, INC.
(the "Company")
Attest: ________________________ By: _________________________________
Lynda J. Campbell, Foster S. Friess,
Secretary President
<PAGE>
EXHIBIT 2
BYLAWS
OF
BRANDYWINE BLUE FUND, INC.*
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of stockholders shall be
held at such location as the Board of Directors shall direct.
Section 2. Annual Meeting.
(a) The annual meeting of stockholders for the election of
directors and the transaction of such other business as may Properly come
before it, if the annual meeting shall be held, shall be held during the
month of May of each year (or during such other month as the Board of
Directors shall determine), commencing in 1991, at such date and time as
shall be fixed by the Board of Directors and stated in the notice of such
meeting, but in no event more than one hundred twenty (120) days after the
occurrence of the event requiring the meeting to elect directors. Any
business of the corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business
as is specifically required by statute to be stated in the notice.
(b) The corporation shall not be required to hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Investment Company Act of 1940.
Section 3. Special Meeting. Special meetings of the stockholders may
be called by the board of directors, the president, vice president, or the
secretary, and shall be called by the secretary upon the written request
of the holders of shares entitled to not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting; provided that
such holders prepay the costs to the corporation of preparing and mailing
the notice of the meeting. The business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10) days nor more
than ninety (90) days before the date of every stockholders' meeting, the
secretary shall give to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of such meeting under
applicable law, written or printed notice stating the time and place of
the meeting, and in the case of a special meeting (or where required by
applicable law) the purpose or purposes for which the meeting is called,
either by mail, by presenting it to him personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to
the stockholder at his post office address as it appears on the records of
the corporation, with postage thereon prepaid.
Section 5. Quorum. At any meeting of stockholders the presence in
person or by proxy of stockholders entitled to cast a majority of the
votes thereat shall constitute a quorum; but this section shall not affect
any requirement under statute or under the charter for the vote necessary
for the adoption of any measure. If at any meeting a quorum is not
present or represented, the chairman of the meeting or the holders of a
majority of the stock present or represented may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
Section 6. Stock Entitled to Vote. Each issued share of each class of
stock shall be entitled to vote at any meeting of stockholders except
shares owned, other than in a fiduciary capacity, by the corporation or by
another corporation in which the corporation owns shares entitled to cast
a majority of all the votes entitled to be cast by all shares outstanding
and entitled to vote of such corporation.
Section 7. Voting. Each outstanding share of each class of stock
entitled to vote at a meeting of stockholders shall be entitled to one
vote on each matter submitted to a vote. In all elections for directors
every stockholder shall have the right to vote the shares of each class
owned of record by him for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of cumulative
voting. A stockholder may vote the shares owned of record by him either
in person or by proxy executed in writing by the stockholder or by his
authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from its date unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize any action which may properly come before
the meeting, unless a greater number is required by statute or by the
charter.
Section 8. Informal Action. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and such
consent is filed with the records of stockholders meetings.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the corporation shall
be three (3). By vote of a majority of the entire board of directors, the
number of directors fixed by the charter or by these bylaws may be
increased or decreased from time to time to not more than fifteen nor less
than three, but the tenure of office of a director shall not be affected
by any decrease in the number of directors so made by the board.
Section 2. Election and Qualification. Until the first annual meeting
of stockholders and until successors are duly elected and qualify, the
board of directors shall consist of the persons named as such in the
charter. At the first annual meeting of stockholders, the stockholders
shall elect directors to hold office until their successors are elected
and qualify. A director need not be a stockholder of the corporation, but
must be eligible to serve as a director of a registered investment company
under the Investment Company Act of 1940. All but one (1) of the
directors may be interested persons of the investment adviser of the
corporation, as defined in the Investment Company Act of 1940, or officers
or employees of the corporation.
Section 3. Vacancies. Any vacancy on the board of directors occurring
between stockholders' meetings called for the purpose of electing
directors may be filled, if immediately after filling any such vacancy at
least two-thirds of the directors then holding office shall have been
elected to such office at an annual or special meeting of stockholders, in
the following manner: (i) for a vacancy occurring other than by reason of
an increase in directors, by a majority of the remaining members of the
board, although such majority is less than a quorum; and (ii) for a
vacancy occurring by reason of an increase in the number of directors, by
action of a majority of the entire board. A director elected by the board
to fill a vacancy shall be elected to hold office until the next annual
meeting of stockholders or until his successor is elected and qualifies.
If by reason of the death, disqualification or bona fide resignation of
any director or directors, there is no member of the board of directors
who is not an interested person of the investment adviser of the
corporation, as defined in the Investment Company Act of 1940, such
vacancy shall be filled within thirty (30) days if it may be filled by the
board, or within sixty (60) days if a vote of stockholders is required to
fill such vacancy; provided that such vacancy may be filled within such
longer period as the Securities and Exchange Commission may prescribe by
rules and regulations, upon its own motion or by order upon application.
In the event that at any time less than a majority of the directors were
elected by the stockholders, the board or proper officer shall forthwith
cause to be held as promptly as possible, and in any event within sixty
(60) days, a meeting of the stockholders for the purpose of electing
directors to fill any existing vacancies in the board, unless the
Securities and Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the corporation shall
be managed under the direction of the board of directors, which may
exercise all of the powers of the corporation, except such as are by law
or by the charter or by these bylaws conferred upon or reserved to the
stockholders.
Section 5. Removal.
A. At any meeting of stockholders, duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors
to fill any resulting vacancies for the unexpired terms of removed
directors.
B. Notwithstanding any other provisions of these Bylaws, the
secretary of the corporation shall promptly call a special meeting of
stockholders for the purpose of voting upon the question of removal of any
director upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting.
C. Whenever ten or more stockholders of record who have been such
for at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least $25,000
or at least one percent (1%) of the total outstanding shares, whichever is
less, shall apply to the corporation's secretary in writing, stating that
they wish to communicate with other stockholders with a view to obtaining
signatures to a request for a meeting pursuant to subsection (b) above and
accompanied by a form of communication and request which they wish to
transmit, the secretary shall within five business days after such
application either: (1) afford to such applicants access to a list of the
names and addresses of all stockholders as recorded on the books of the
corporation; or (2) inform such applicants as to the approximate number of
stockholders of record and the approximate cost of mailing to them the
proposed communication and form of request.
D. If the secretary elects to follow the course specified in
clause (2) of subsection (c) above, the secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after
such tender the secretary shall mail to such applicants and file with the
Securities and Exchange Commission, together with a copy of the material
to be mailed, a written statement signed by at least a majority of the
board of directors to effect that in their opinion either such material
contains untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be in
violation of applicable law, and specifying the basis of such opinion.
E. After opportunity for hearing upon the objections specified in
the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the board of directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
Section 6. Place of Meetings. Meetings of the board of directors,
regular or special, may be held at any place in or out of the State of
Maryland as the board may from time to time determine or as may be
specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The first meeting of
each newly elected board of directors shall be held without notice
immediately after and at the same general place as the annual meeting of
the stockholders, for the purpose of organizing the board, electing
officers and transacting any other business that may properly come before
the meeting.
Section 8. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and place as shall from
time to time be determined by the board.
Section 9. Special Meetings. Special meetings of the board of
directors may be called at any time either by the board, the president, a
vice president or a majority of the directors in writing with or without a
meeting. Notice of special meetings shall either be mailed by the
secretary to each director at least three (3) days before the meeting or
shall be given personally or telegraphed to each director at least one (1)
day before the meeting. Such notice shall set forth the time and place of
such meeting but need not, unless otherwise required by law, state the
purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At all meetings of
the board of directors a majority of the entire board shall constitute a
quorum for the transaction of business, and the action of a majority of
the directors present at any meetings at which a quorum is present shall
be the action of the board of directors unless the concurrence of a
greater proportion is required for such action by statute, the articles of
incorporation or these bylaws. If at any meeting a quorum is not present,
a majority of the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a
quorum is present. Members of the board of directors or a committee of
the board may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time; provided, however, that a
director may not participate in a meeting by means of a conference
telephone or similar communications equipment if the purpose of the
meeting is to approve the corporation's investment advisory agreement
and/or to approve the selection of the corporation's auditors, or if
participation in such a manner would otherwise violate the Investment
Company Act of 1940 or other applicable laws. Except as set forth in the
preceding sentence, participation in a meeting by these means constitutes
presence in person at the meeting.
Section 11. Executive and Other Committees. The board of directors may
appoint from among its members an executive and other committees composed
of two (2) or more directors. The board may delegate to such committees in
the intervals between meetings of the board any of the powers of the board
to manage the business and affairs of the corporation, except the power
to: (i) declare dividends or distributions upon the stock of the
corporation; (ii) issue stock of the corporation; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend
the bylaws; (v) approve any merger or share exchange which does not
require stockholder approval; or (vi) take any action required by the
Investment Company Act of 1940 to be taken by the independent directors of
the corporation or by the full board of directors.
Section 12. Informal Action. Except as set forth in the following
sentence, any action required or permitted to be taken at any meeting of
the board of directors or of a committee of the board may be taken without
a meeting, if a written consent to such action is signed by all members of
the board or the committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the board or committee.
Notwithstanding the preceding sentence, no action may be taken by the
board of directors pursuant to a written consent with respect to the
approval of the corporation's investment advisory agreement, the approval
of the selection of the corporation's auditors, or any action required by
the Investment Company Act of 1940 or other applicable law to be taken at
a meeting of the board of directors to be held in person.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first meeting of each
newly elected board of directors there shall be elected a president, one
or more vice presidents, a secretary and a treasurer. The board may also
elect one or more assistant secretaries and assistant treasurers. No
officer need be a director. Any two or more offices, except the offices
of president and vice president, may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law, charter or these
bylaws to be executed, acknowledged or verified by two or more officers.
Each officer must be eligible to serve as an officer of a registered
investment company under the Investment Company Act of 1940. Nothing
herein shall preclude the employment of other employees or agents by the
corporation from time to time without action by the board.
Section 2. Term, Removal and Vacancies. The officers shall be elected
to serve until the next first meeting of a newly elected board of
directors and until their successors are elected and qualify. Any officer
may be removed by the board, with or without cause, whenever in its
judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any,
of the person so removed. A vacancy in any office shall be filled by the
board for the unexpired term.
Section 3. Bonding. Each officer and employee of the corporation who
singly or jointly with others has access to securities or funds of the
corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities shall be bonded
against larceny and embezzlement by a reputable fidelity insurance company
authorized to do business in Delaware and Wisconsin. Each such bond,
which may be in the form of an individual bond, a schedule or blanket bond
covering the corporation's officers and employees and the officers and
employees of the investment adviser to the corporation and other
corporations to which said investment adviser also acts as investment
adviser, shall be in such form and for such amount (determined at least
annually) as the board of directors shall determine in compliance with the
requirements of Section 17(g) of the Investment Company Act of 1940, as
amended from time to time, and the rules, regulations or orders of the
Securities and Exchange Commission thereunder.
Section 4. President. The president shall be the principal executive
officer of the corporation. He shall preside at all meetings of the
stockholders and directors, have general and active management of the
business of the corporation, see that all orders and resolutions of the
board of directors are carried into effect, and execute in the name of the
corporation all authorized instruments of the corporation, except where
the signing shall be expressly delegated by the board to some other
officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if there be more
than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall have such
other duties and powers as the board may from time to time prescribe or
the president delegate.
Section 6. Secretary and Assistant Secretaries. The secretary shall
give notice of, attend and record the minutes of meetings of stockholders
and directors, keep the corporate seal and, when authorized by the board,
affix the same to any instrument requiring it, attesting to the same by
his signature, and shall have such further duties and powers as are
incident to his office or as the board may from time to time prescribe.
The assistant secretary, if any, or, if there be more than one, the
assistant secretaries in the order determined by the board, shall in the
absence or disability of the secretary, perform the duties and exercise
the powers of the secretary, and shall have such other duties and powers
as the board may from time to time prescribe or the secretary delegate.
Section 7. Treasurer and Assistant Treasurers. The treasurer shall be
the principal financial and accounting officer of the corporation. He
shall be responsible for the custody and supervision of the corporation's
books of account and subsidiary accounting records, and shall have such
further duties and powers as are incident to his office or as the board of
directors may from time to time prescribe. The assistant treasurer, if
any, or, if there be more than one, the assistant treasurers in the order
determined by the board, shall in the absence or disability of the
treasurer, perform all duties and exercise the powers of the treasurer,
and shall have such other duties and powers as the board may from time to
time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION
TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and executive officers as
such shall not receive any salary for their services or reimbursement for
expenses from the corporation; provided that the corporation may pay fees
in such amounts and at such times as the board of directors shall
determine to directors who are not interested persons of the corporation
for attendance at meetings of the board of directors. Clerical employees
shall receive compensation for their services from the corporation in such
amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and Sales. No
affiliated person of the corporation, as defined in the Investment Company
Act of 1940, or affiliated person of such person, shall, except as
permitted by Section 17(e) of the Act, or the rules, regulations or orders
of the Securities and Exchange Commission thereunder, (i) acting as agent,
accept from any source any compensation for the purchase or sale of any
property or securities to or for the corporation or any controlled company
of the corporation, as defined in such Act, or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction. The
investment adviser to the corporation shall not profit directly or
indirectly from sales of securities to or from the corporation.
Section 3. Transactions with Affiliated Person. No affiliated person
of the corporation, as defined in the Investment Company Act of 1940, or
affiliated person of such person shall knowingly (i) sell any security or
other property to the corporation or to any company controlled by the
corporation, as defined in the Act, except shares of stock of the
corporation or securities of which such person is the issuer and which are
part of a general offering to the holders of a class of its securities,
(ii) purchase from the corporation or any such controlled company any
security or property except shares of stock of the corporation or
securities of which such person is the issuer, (iii) borrow money or other
property from the corporation or any such controlled company, or (iv)
acting as a principal effect any transaction in which the corporation or
controlled company is a joint or joint and several participant with such
person; provided, however, that this section shall not apply to any
transaction permitted by Sections 17(a), (b), (c), (d) or 21(b) of the
Investment Company Act of 1940 or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, and shall not prohibit the
joint participation by the corporation and an affiliate in a fidelity bond
arrangement.
Section 4. Investment Adviser. The corporation shall employ only one
investment adviser, the employment of which shall be pursuant to one or
more written agreements in accordance with Section 15 of the Investment
Company Act of 1940, as amended from time to time.
ARTICLE V
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Certificates. Each holder of shares of any class of stock
of the corporation shall be entitled to a certificate or certificates, in
such form as the board of directors shall from time to time approve,
representing and certifying the number of shares of such class of stock
owned by him in the corporation. Each certificate shall be signed,
manually or by facsimile signature, by the president or a vice president,
countersigned, manually or by facsimile signature, by the secretary, an
assistant secretary, the treasurer or an assistant treasurer and sealed
with the corporate seal or facsimile thereof. In case any officer who has
signed any certificate, or whose facsimile signature appears thereon,
ceases to be an officer of the corporation before the certificate is
issued, the certificate may nevertheless be issued with the same effect as
if the officer had not ceased to be such officer as of the date of its
issue. Each certificate shall contain on its face or back a full
statement or summary of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms of each class of stock of the
corporation or shall state that the corporation will furnish such
information to the stockholder on request and without charge. Any
certificate representing stock which is restricted or limited as to
transferability also shall have a full statement of such restriction or
limitation plainly stated thereon or shall state that the corporation will
furnish such information to the stockholder on request and without charge.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been
lost, stolen, destroyed or mutilated (or may delegate such authority to
one or more officers of the corporation) upon the making of an affidavit
of that fact by the person claiming the certificate to be lost, stolen,
destroyed or mutilated. The board or such officer may, in its or his
discretion, require the owner of such certificate or his legal
representative to give bond with sufficient surety to the corporation to
indemnify it against any loss or claim which may arise or expense which
may be incurred by reason of the issuance of a new certificate.
Section 3. Stock Ledger. The corporation shall maintain at its office
in Greenville, Delaware, or at the office of its principal transfer agent,
if any, an original or duplicate stock ledger containing the names and
addresses of all stockholders and the number of shares of each class of
stock held by each stockholder.
Section 4. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as
such, as the owner of shares for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as other provided by the laws of Maryland.
Section 5. Transfer Agent and Registrar. The corporation may maintain
one or more transfer offices or agencies, each in charge of a transfer
agent designated by the board of directors, where the shares of each class
of stock of the corporation shall be transferable. The corporation may
also maintain one or more registry offices, each in charge of a registrar
designated by the board, where the shares of such classes of stock shall
be registered.
Section 6. Transfers of Stock. Upon surrender to the corporation or a
transfer agent of a certificate for shares of any class duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 7. Fixing of Record Dates and Closing of Transfer Books. The
board of directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment
of any dividend or the allotment of any rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in
any case, shall be not more than ninety (90) days, and in case of a
meeting of stockholders not less than ten (10) days, prior to the date on
which the particular action requiring such determination of stockholders
is to be taken. In lieu of fixing a record date, the board may provide
that the stock transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the stock transfer books are
closed or a record date is fixed for the purpose of determining
stockholders entitled to vote at a meeting of stockholders, such books
shall be closed for at least ten (10) days immediately preceding such
action.
ARTICLE VI
ACCOUNTS, REPORTS, CUSTODIAN AND INVESTMENT ADVISER
Section 1. Inspection of Books. The board of directors shall
determine from time to time whether, and, if allowed, when and under what
conditions and regulations the accounts and books of the corporation
(except such as may by statute be specifically open to inspection) or any
of them, shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be limited accordingly.
Section 2. Reliance on Records. Each director and officer shall, in
the performance of his duties, be fully protected in relying in good faith
on the books of account or reports made to the corporation by any of its
officials or by an independent public accountant.
Section 3. Preparation and Maintenance of Accounts, Records and
Statements. The president, a vice president or the treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the stockholders and filed within twenty (20) days thereafter at the
principal office of the corporation in the State of Delaware. If the
corporation is not required to hold an annual meeting of stockholders, the
statement of affairs shall be placed on file at the corporation's
principal office within one hundred twenty (120) days after the end of the
fiscal year. The proper officers of the corporation shall also prepare,
maintain and preserve or cause to be prepared, maintained and preserved
the accounts, books and other documents required by Section 2-111 of the
Maryland General Corporation Law and Section 31 of the Investment Company
Act of 1940 and shall prepare and file or cause to be prepared and filed
the reports required by Section 30 of such Act. No financial statement
shall be filed with the Securities and Exchange Commission unless the
officers or employees who prepared or participated in the preparation of
such financial statement have been specifically designated for such
purpose by the board of directors.
Section 4. Auditors. No independent public accountant shall be
retained or employed by the corporation to examine, certify or report on
its financial statements for any fiscal year unless such selection: (i)
shall have been approved by a majority of the entire board of directors
within thirty (30) days before or after the beginning of such fiscal year
or before the annual ratification by the stockholders; (ii) shall have
been ratified by the stockholders, provided that any vacancy occurring
between such annual ratification due to the death or resignation of such
accountant may be filled by the board of directors; and (iii) shall
otherwise meet the requirements of Section 32 of the Investment Company
Act of 1940.
Section 5. Custodianship. All securities owned by the corporation and
all cash, including, without limiting the generality of the foregoing, the
proceeds from sales of securities owned by the corporation and from the
issuance of shares of the capital stock of the corporation, payments of
principal upon securities owned by the corporation, and distributions in
respect of securities owned by the corporation which at the time of
payment are represented by the distributing corporation to be capital
distributions, shall be held by a custodian or custodians which shall be a
bank, as that term is defined in the Investment Company Act of 1940,
having capital, surplus and undivided profits aggregating not less than
$2,000,000. Unless otherwise authorized by the board of directors, the
terms of custody of such securities and cash shall include provisions to
the effect that the custodian shall deliver securities owned by the
corporation only (a) upon sales of such securities for the account of the
corporation and receipt by the custodian of payment therefor, (b) when
such securities are called, redeemed or retired or otherwise become
payable, (c) for examination by any broker selling any such securities in
accordance with "street delivery" custom, (d) in exchange for or upon
conversion into other securities alone or other securities and cash
whether pursuant to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise, (e) upon conversion of
such securities pursuant to their terms into other securities, (f) upon
exercise of subscription, purchase or other similar rights represented by
such securities, (g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities, (h) for the purpose of
redeeming in kind shares of the capital stock of the corporation, or (i)
for other proper corporate purposes. Unless otherwise authorized by the
board of directors, such terms of custody shall also include provisions to
the effect that the custodian shall hold the securities and funds of the
corporation in a separate account or accounts and shall have sole power to
release and deliver any such securities and draw upon any such account,
any of the securities or funds of the corporation only on receipt by such
custodian of written instruction from one or more persons authorized by
the board of directors to give such instructions on behalf of the
corporation (or pursuant to other instructions authorized by the board of
directors), and that the custodian shall deliver cash of the corporation
required by this Section 5 to be deposited with the custodian only upon
the purchase of securities for the portfolio of the corporation and the
delivery of such securities to the custodian, for the purchase or
redemption of shares of the capital stock of the corporation, for the
payment of interest, dividends, taxes, management or supervisory fees or
operating expenses, for payments in connection with the conversion,
exchange or surrender of securities owned by the corporation, or for other
proper corporate purposes. Upon the resignation or inability to serve of
any such custodian the corporation shall (a) use its best efforts to
obtain a successor custodian, (b) require the cash and securities of the
corporation held by the custodian to be delivered directly to the
successor custodian, and (c) in the event that no successor custodian can
be found, submit to the stockholders of the corporation, before permitting
delivery of such cash and securities to anyone other than a successor
custodian, the question whether the corporation shall be dissolved or
shall function without a custodian; provided, however, that nothing herein
contained shall prevent the termination of any agreement between the
corporation and any such custodian by the affirmative vote of the holders
of a majority of all the shares of the capital stock of the corporation at
the time outstanding and entitled to vote. Upon its resignation or
inability to serve, the custodian may deliver any assets of the
corporation held by it to a qualified bank or trust company selected by
it, such assets to be held subject to the terms of custody which governed
such retiring custodian, pending action by the corporation as set forth in
this Section 5.
Section 6. Termination of Custodian Agreement. Any employment
agreement with a custodian shall be terminable on not more than sixty (60)
days' notice in writing by the board of directors or the custodian and
upon any such termination the custodian shall turn over only to the
succeeding custodian designated by the board of directors all funds,
securities and property and documents of the corporation in its
possession.
Section 7. Checks and Requisitions. Except as otherwise authorized by
the board of directors, all checks and drafts for the payment of money
shall be signed in the name of the corporation by a custodian, and all
requisitions or orders for the payment of money by a custodian or for the
issue of checks and drafts therefore, all promissory notes, all
assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board
of directors) at least one of which shall be an officer. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to
the order of a custodian or its nominee by the treasurer or president or
by such other person or persons as shall be thereto authorized by the
board of directors.
Section 8. Investment Advisory Contract. Any investment advisory
contract in effect after the first annual meeting of stockholders of the
corporation, to which the corporation is or shall become a party, whereby,
subject to the control of the board of directors of the corporation, the
investment portfolio with respect to any class of Common Stock of the
corporation shall be managed or supervised by the other party to such
contract, shall be effective and binding only upon the affirmative vote of
a majority of the outstanding voting securities of such class of Common
Stock of the corporation (as defined in the Investment Company Act of
1940), and the investment advisory contract currently in effect with
respect to any class of Common Stock shall be submitted to the holders of
shares of such class of Common Stock for ratification by the affirmative
vote of such majority. Any investment advisory contract to which the
corporation shall be a party whereby, subject to the control of the board
of directors of the corporation, the investment portfolio with respect to
any class of Common Stock of the corporation shall be managed or
supervised by the other party to such contract, shall provide, among other
things, that such contract cannot be assigned. Such investment advisory
contract shall prohibit the other party thereto from making short sales of
shares of capital stock of the corporation; and such investment advisory
contract shall prohibit such other party from purchasing shares otherwise
than for investment, and shall require such other party to advise the
corporation of any sales of shares of the capital stock of the corporation
made by such person or organization less than two months after the date
of any purchase by him or it of shares of the capital stock of the
corporation. Unless any such contract shall expressly otherwise provide,
any provisions therein for the termination thereof by action of the board
of directors of the corporation shall be construed to require that such
termination can be accomplished only upon the vote of a majority of the
entire board.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The registered office of the corporation in the
State of Maryland shall be in the City of Baltimore. The corporation
shall also have an office in Greenville, Delaware. The corporation may
also have offices at such other places within and without the State of
Maryland as the board of directors may from time to time determine.
Except as otherwise required by statute, the books and records of the
corporation may be kept outside the State of Maryland.
Section 2. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, and the words "Corporate Seal" and "Maryland".
The seal may be used by causing it or a facsimile thereof to be impressed,
affixed, reproduced or otherwise.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any notice of the
time, place or purpose of any meeting of stockholders or directors is
required to be given under the statute, the charter or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to
such notice and filed with the records of the meeting, either before or
after the holding thereof, or actual attendance at the meeting of
stockholders in person or by proxy or at the meeting of directors in
person, shall be deemed equivalent to the giving of such notice to such
person. No notice need be given to any person with whom communication is
made unlawful by any law of the United States or any rule, regulation,
proclamation or executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered by the board of
directors, the president shall have full power and authority, in the name
and on behalf of the corporation, (i) to attend, act and vote at any
meeting of stockholders of any company in which the corporation may own
shares of stock of record, beneficially (as the proxy or attorney-in-fact
of the record holder) or of record and beneficially, and (ii) to give
voting directions to the record stockholder of any such stock beneficially
owned. At any such meeting, he shall possess and may exercise any and all
rights and powers incident to the ownership of such shares which, as the
holder or beneficial owner and proxy of the holder thereof, the
corporation might possess and exercise if personally present, and may
delegate such power and authority to any officer, agent or employee of the
corporation.
Section 6. Dividends. Dividends upon any class of stock of the
corporation, subject to the provisions of the charter, if any, may be
declared by the board of directors in any lawful manner. The source of
each dividend payment shall be disclosed to the stockholders receiving
such dividend, to the extent required by the laws of the State of Maryland
and by Section 19 of the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Section 8. Amendments.
A. These bylaws may be altered, amended or repealed and new bylaws
may be adopted by the stockholders by affirmative vote of not less than a
majority of the shares of all classes of stock present or represented at
any annual or special meeting of the stockholders at which a quorum is in
attendance.
B. These bylaws may also be altered, amended or repealed and new
bylaws may be adopted by the Board of Directors by affirmative vote of a
majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the stockholders shall be
amended or repealed by the Board of Directors if the bylaws so adopted so
provides.
C. Any action taken or authorized by the stockholders or by the
Board of Directors, which would be inconsistent with the bylaws then in
effect but is taken or authorized by affirmative vote of not less than the
number of shares or the number of directors required to amend the bylaws
so that the bylaws would be consistent with such action, shall be given
the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as was necessary to permit the specific
action so taken or authorized.
Section 9. Reports to Stockholders. The books of account of the
corporation shall be examined by an independent firm of public accountants
at the close of each annual fiscal period of the corporation and at such
other times, if any, as may be directed by the Board of Directors of the
corporation. A report to the stockholders based upon each such
examination shall be mailed to each stockholder of the corporation of
record on such date with respect to each report as may be determined by
the Board of Directors at his address as the same appears on the books of
the corporation. Each such report shall include the financial information
required to be transmitted to stockholders by rules or regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940 and shall be in such form as the Board of Directors shall determine
pursuant to rules and regulations of the Securities and Exchange
Commission.
Section 10. Information to Accompany Dividends. At the time of the
payment by the corporation of any dividend to the holders of any class of
stock of the corporation, each stockholder to whom such dividend is paid
shall be notified of the account or accounts from which it is paid and the
amount thereof paid from each such account.
ARTICLE VIII
SALES, REDEMPTION AND
NET ASSET VALUE OF SHARES
Section 1. Sale of Shares. Shares of any class of Common Stock of the
corporation shall be sold by it for the net asset value per share of such
class of Common Stock outstanding at the time as of which the computation
of said net asset value shall be made as hereinafter provided in these
bylaws.
Section 2. Periodic Investment and Dividend Reinvestment Plans. The
corporation acting by and through the Board of Directors shall have the
right to adopt and to offer to the holders of each class of stock and to
the public a periodic investment plan and an automatic reinvestment of
dividend plan subject to the limitations and restrictions imposed thereon
and as set forth in the Investment Company Act of 1940 and any rule or
regulation adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of shares of any
class of stock of the corporation issued in whole or in part in exchange
for securities, there may, at the discretion of the board of directors of
the corporation, be included in the value of said securities, for the
purpose of determining the number of shares of such class of stock of the
corporation issuable in exchange therefor, the amount, if any, of
brokerage commissions (not exceeding an amount equal to the rates payable
in connection with the purchase of comparable securities on the New York
Stock Exchange) or other similar costs of acquisition of such securities
paid by the holder of said securities in acquiring the same.
Section 4. Redemption of Shares. Each share of each class of Common
Stock of the corporation now or hereafter issued shall be subject to
redemption, as provided in the Articles of Incorporation of the
corporation.
Section 5. Suspension of Right of Redemption. The Board of Directors
of the corporation may suspend the right of the holders of any class of
Common Stock of the corporation to require the corporation to redeem
shares of such class:
(1) for any period (a) during which the New York Stock Exchange
is closed other than customary weekend and holiday closings, or (b)
during which trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency, as defined by
rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (a) disposal by the corporation
of securities owned by it is not reasonably practicable, or (b) it is
not reasonably practicable for the corporation fairly to determine
the value of its net assets; or
(3) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the corporation.
Section 6. Computation of Net Asset Value. For purposes of these
bylaws, the following rules shall apply:
A. The net asset value of each share of each class of Common
Stock of the corporation shall be determined at such time or times as
may be disclosed in the then currently effective Prospectus relating
to such class of Common Stock of this corporation. The Board of
Directors may also, from time to time by resolution, designate a time
or times intermediate of the opening and closing of trading on the
New York Stock Exchange on each day that said Exchange is open for
trading as of which the net asset value of each share of each class
of Common Stock of the corporation shall be determined or estimated.
Any determination or estimation of net asset value as provided
in this Subparagraph A shall be effective at the time as of which
such determination or estimation is made.
The net asset value of each share of each class of Common Stock
of the corporation for purposes of the issue of such class of Common
Stock shall be the net asset value which becomes effective as
provided in Subparagraph A above, next succeeding receipt of the
subscription to such share of such class of Common Stock. The net
asset value of each share of each class of Common Stock of the
corporation tendered for redemption shall be the net asset value
which becomes effective as provided in Subparagraph A above, next
succeeding the tender of such share of such class of Common Stock for
redemption.
B. The net asset value of each share of each class of Common
Stock of the corporation, as of the close of business on any day,
shall be the quotient obtained by dividing the value at such close of
the net assets belonging to such class (meaning the assets belonging
to such class and any other assets allocated to such class less the
liabilities belonging to such class and any other liabilities
allocated to such class excluding capital and surplus) of the
corporation by the total number of shares of such class outstanding
at such close.
(i) The assets belonging to any class of Common Stock
shall be that portion of the total assets of the corporation as
determined in accordance with the provisions of Article IV of
the Articles of Incorporation of the corporation. The assets of
the corporation shall be deemed to include (a) all cash on hand,
on deposit, or on call, (b) all bills and notes and accounts
receivable, (c) all shares of stock and subscription rights and
other securities owned or contracted for by the corporation,
other than its own common stock, (d) all stock and cash
dividends and cash distributions, to be received by the
corporation, and not yet received by it but declared to
stockholders of record on a date on or before the date as of
which the net asset value is being determined, (e) all interest
accrued on any interest-bearing securities owned by the
corporation, and (f) all other property of every kind and nature
including prepaid expenses; the value of such assets to be
determined as follows: In determining the value of any assets of
the corporation for the purpose of obtaining the net asset value
of each share of a particular class of Common Stock, each
security listed on an exchange shall be valued on the basis of
the last sale price thereof on that exchange on the business day
as of which such value is being determined. If there is no sale
on such day, then the security shall be valued on the basis of
the most recent bid price. All other securities for which over-
the-counter market quotations are readily available shall be
valued on the basis of the most recent bid price. When market
quotations are not readily available, or when restricted
securities are being valued, such securities are valued at fair
value as determined in good faith by the Board of Directors.
All other assets of the corporation shall be valued at fair
value as determined in good faith by the Board of Directors,
except that debt securities having maturities of less than 60
days may be valued by the amortized cost method.
(ii) The liabilities belonging to any class of Common Stock
shall be that portion of the total liabilities of the
corporation as determined in accordance with the provisions of
Article IV of the Articles of Incorporation of the corporation.
The liabilities of the corporation shall be deemed to include
(a) all bills and notes and accounts payable, (b) all
administration expenses payable and/or accrued (including
investment advisory fees), (c) all contractual obligations for
the payment of money or property including the amount of any
unpaid dividend declared upon the corporation's stock and
payable to stockholders of record on or before the day as of
which the value of the corporation's stock is being determined,
(d) all reserves, if any, authorized or approved by the Board of
Directors for taxes, including reserves for taxes at current
rates based on any unrealized appreciation in the value of the
assets of the corporation, and (e) all other liabilities of the
corporation of whatever kind and nature except liabilities
represented by outstanding capital stock and surplus of the
corporation.
(iii) For the purposes hereof: (a) shares of each class of
Common Stock subscribed for shall be deemed to be outstanding as
of the time of acceptance of any subscription and the entry
thereof on the books of the corporation and the net price
thereof shall be deemed to be an asset belonging to such class;
and (b) shares of each class of Common Stock surrendered for
redemption by the corporation shall be deemed to be outstanding
until the time as of which the net asset value for purposes of
such redemption is determined or estimated.
C. The net asset value of each share of each class of Common
Stock of the corporation, as of any time other than the close of
business on any day, may be determined by applying to the net asset
value as of the close of business on the preceding business day,
computed as provided in Paragraph C of this Section of these bylaws,
such adjustments as are authorized by or pursuant to the direction of
the Board of Directors and designed reasonably to reflect any
material changes in the market value of securities and other assets
held and any other material changes in the assets or liabilities of
the corporation and in the number of its outstanding shares which
shall have taken place since the close of business on such preceding
business day.
D. In addition to the foregoing, the Board of Directors is
empowered, in its absolute discretion, to establish other bases or
times, or both, for determining the net asset value of each share of
each class of the Common Stock of the corporation.
_______________
* Restated in electronic format to include all amendments through
January 15, 1997.
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
Agreement made this _____ day of _______________ 1990, between
Brandywine Blue Fund, Inc., a Maryland corporation (the "Fund"), and
Friess Associates, Inc., a Delaware corporation (the "Adviser").
W I T N E S S E T H :
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as as open-end management investment
company under the Investment Company Act of 1940 (the "Act");
WHEREAS, upon so registering with the Securities and Exchange
Commission, the Fund will be a registered investment company satisfying
the conditions of Section 10(d) of the Act; and
WHEREAS, the Fund desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940
and which is engaged principally in the business of rendering investment
supervisory services within the meaning of Section 202(a)(13) of the
Investment Advisers Act of 1940, as its investment adviser.
NOW, THEREFORE, the Fund and the Adviser do mutually promise and
agree as follows:
1. Employment. The Fund hereby employs the Adviser to manage
the investment and reinvestment of the assets of the Fund for the period
and on the terms set forth in this Agreement. The Adviser hereby accepts
such employment for the compensation herein provided and agrees during
such period to render the services and to assume the obligations herein
set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the board of directors of the Fund may determine, direct the purchase
and sale of investment securities in the day to day management of the
Fund. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund. However, one or more
stockholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Fund, but without compensation or
reimbursement of expenses for such services from the Fund. Nothing herein
contained shall be deemed to require the Fund to take any action contrary
to its Articles of Incorporation or any applicable statute or regulation,
or to relieve or deprive the board of directors of the Fund of its
responsibility for, and control of, the affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund. The Adviser shall pay the salaries and fees of
all officers and directors of the Fund (except the fees paid to those
directors who are not interested persons of the Adviser, as defined in the
Act, and who are not officers or employees of the Fund). The Adviser
shall also bear all sales and promotional expenses of the Fund, except for
expenses incurred in complying with laws regulating the issue or sale of
securities. Fees paid for attendance at meetings of the Fund's board of
directors to directors of the Fund who are not interested persons of the
Adviser, as defined in the Act, as amended, shall be borne by the Fund.
The Fund shall bear all other expenses initially incurred by it, provided
that the total expenses borne by the Fund, including the Adviser's fee but
excluding all federal, state and local taxes, interest, brokerage
commissions and extraordinary items, shall not in any year exceed that
percentage of the average net asset value of the Fund for such year, as
determined by valuations made as of the close of each business day, which
is the most restrictive percentage provided by the state laws of the
various states in which the Fund's common stock is qualified for sale.
The expenses of the Fund's operations borne by the Fund include by way of
illustration and not limitation, the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Act (and amendments thereto), the expense of registering its shares with
the Securities and Exchange Commission and in the various states, the
printing and distribution cost of prospectuses mailed to existing
stockholders, the cost of stock certificates, director and officer
liability insurance, reports to stockholders, reports to government
authorities and proxy statements, interest charges, taxes, legal expenses,
salaries of administrative and clerical personnel, association membership
dues, auditing and accounting services, insurance premiums, brokerage and
other expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, charges and expenses of dividend disbursing agents, registrars and
stock transfer agents and the cost of keeping all necessary stockholder
records and accounts.
The Fund shall monitor its expense ratio on a monthly basis. If
the accrued amount of the expenses of the Fund exceeds the expense
limitation established herein, the Fund shall create an account receivable
from the Adviser for the amount of such excess. In such a situation the
monthly payment of the Adviser's fee will be reduced by the amount of such
excess, subject to adjustment month by month during the balance of the
Fund's fiscal year if accrued expenses thereafter fall below the expense
limitation.
4. Compensation of the Adviser. For the services and
facilities to be rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Fund shall pay to the Adviser an advisory fee,
paid monthly, based on the average net asset value of the Fund, as
determined by valuations made as of the close of each business day of the
month. The advisory fee shall be 1/12 of 1% of such net asset value. For
any month in which this Agreement is not in effect for the entire month,
such fee shall be reduced proportionately on the basis of the number of
calendar days during which it is in effect and the fee computed upon the
average net asset value of the business days during which it is so in
effect.
5. Ownership of Shares of the Fund. Except in connection with
the initial capitalization of the Fund, the Adviser shall not take, and
shall not permit any of its stockholders, officers, directors or employees
to take a long or short position in the shares of the Fund, except for the
purchase of shares of the Fund for investment purposes at the same price
as that available to the public at the time of purchase.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has permitted and is
permitting the Fund to use the name "Brandywine," it is understood and
agreed that the Adviser reserves the right to use and to permit other
persons, firms or corporations, including investment companies, to use
such name, and that the Fund will not use such name if the Adviser ceases
to be the Fund's sole investment adviser. During the period that this
Agreement is in effect, the Adviser shall be the Fund's sole investment
adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any stockholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser may cause the Fund to
pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing broker-
dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act).
9. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Fund in the
manner required by the Act, and by the vote of the majority of the
outstanding voting securities of the Fund, as defined in the Act.
10. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the Fund
or by a vote of the majority of the outstanding voting securities of the
Fund, as defined in the Act, upon giving sixty (60) days' written notice
to the Adviser. This Agreement may be terminated by the Adviser at any
time upon the giving of sixty (60) days' written notice to the Fund. This
Agreement shall terminate automatically in the event of its assignment (as
defined in Section 2(a)(4) of the Act). Subject to prior termination as
hereinbefore provided, this Agreement shall continue in effect for two (2)
years from the date hereof and indefinitely thereafter, but only so long
as the continuance after such two (2) year period is specifically approved
annually by (i) the board of directors of the Fund or by the vote of the
majority of the outstanding voting securities of the Fund, as defined in
the Act, and (ii) the board of directors of the Fund in the manner
required by the Act, provided that any such approval may be made effective
not more than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FRIESS ASSOCIATES, INC.
By: ___________________________ By: _________________________________
Secretary President
BRANDYWINE BLUE FUND, INC.
By: ___________________________ By: _________________________________
Secretary President
EXHIBIT 8
CUSTODIAN AGREEMENT
THIS AGREEMENT made on _____________________________, 1990,
between Brandywine Blue Fund, Inc., a Maryland Corporation (hereinafter
called the "Fund"), and FIRST WISCONSIN TRUST COMPANY, a corporation
organized under the laws of the State of Wisconsin (hereinafter called
"Custodian"),
W I T N E S S E T H :
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of Brandywine
Blue Fund, Inc.
2. Names, Titles and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of
the Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of Custodian
referred to in Section 7 or in proper form for transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon proper
instructions from the Brandywine Blue Fund, Inc.;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing and
custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the
Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c)
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made, provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the
Fund upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether pursuant to any
plan of merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
<PAGE>
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g) or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in
writing, such compensation shall be as set forth in Exhibit A attached
hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct. Custodian is authorized
to charge any account of the Fund for such items. In the event of any
advance of cash for any purpose made by Custodian resulting from orders or
instructions of the Fund, or in the event that Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be security
therefore.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at 3908 Kennett Pke, Greenville, Delaware 19807, as the case may be. Upon
any termination of this Agreement, pending appointment of a successor to
Custodian or a vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund
to the Fund, but may deliver them to a bank or trust company of its own
selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report of not less than Two Million Dollars
($2,000,000) as a Custodian for the Fund to be held under terms similar to
those of this Agreement, provided, however, that Custodian shall not be
required to make any such delivery or payment until full payment shall
have been made by the Fund of all liabilities constituting a charge on or
against the properties then held by Custodian or on or against Custodian,
and until full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository, provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above-written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRST WISCONSIN TRUST COMPANY
________________________________ By _________________________________
ASSISTANT SECRETARY VICE PRESIDENT
Attest: BRANDYWINE BLUE FUND, INC.
________________________________ By _________________________________
EXHIBIT 9.1
SERVICE AGREEMENT
Agreement made this _____ day of _______________ 1990, between
Brandywine Blue Fund, Inc., a Maryland corporation (the "Fund"), and
Fiduciary Management, Inc., a Wisconsin corporation ("Fiduciary").
W I T N E S S E T H :
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"); and
WHEREAS, the Fund desires to retain Fiduciary to provide certain
management-related services as further provided herein and Fiduciary
desires to perform such services for the Fund.
NOW, THEREFORE, the Fund and Fiduciary do mutually promise and
agree as follows:
1. Employment. The Fund hereby employs Fiduciary to perform
the management-related services set forth in Section 2 hereof for the
period and on the terms set forth in this Agreement. Fiduciary hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Management-Related Services. Fiduciary shall perform the
following management-related services for the Fund:
(a) Prepare and maintain the books, accounts and
other documents specified in Rules 31a-1(b)(1), 31a-1(b)(2) (i)-
(iii), 31a-1(b)(3) and 31a-1(b)(8) under the Act in accordance
with the requirements of Rule 31a-1 and Rule 31a-2 under the
Act;
(b) Determine the Fund's net asset value in
accordance with the provisions of the Fund's Articles of
Incorporation and its Registration Statement;
(c) Respond to stockholder inquiries forwarded to it
by the Fund;
(d) Prepare the financial statements contained in
reports to stockholders of the Fund;
(e) Prepare tax returns;
(f) Prepare reports to and filings with the
Securities and Exchange Commission (other than the Fund's
Registration Statement on Form N-1A);
(g) Prepare reports to and filings with state Blue
Sky authorities; and
(h) Perform such other services as may be agreed to
by Fiduciary and the Fund.
Fiduciary shall not act, and shall not be required to act, as an
investment adviser to the Fund or have any authority to supervise the
investment or reinvestment of the cash, securities or other property
comprising the Fund's assets or to determine what securities or other
property may be purchased or sold by the Fund. Fiduciary shall for all
purposes herein be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed to be an
agent of the Fund. Fiduciary agrees that all books, accounts and other
documents prepared and maintained by it pursuant to this Section 2 are the
property of the Fund and will be surrendered to the Fund promptly on
request.
3. Expenses. Fiduciary shall, at its own expense and without
reimbursement from the Fund, furnish all office space, office facilities,
equipment and personnel necessary to perform the services required to be
performed by it under this Agreement. The Fund shall pay the fees of
counsel or independent public accountants reviewing or assisting in the
preparation of the reports and financial statements referred to in Section
2 hereof.
4. Compensation of Fiduciary. For the services to be rendered
by Fiduciary hereunder, the Fund shall pay to Fiduciary a fee, paid
monthly, based on the average net asset value of the Fund, as determined
by valuations made as of the close of each business day of the month. The
fee shall be 1/12 of 0.1% (0.1% per annum) on the first Thirty Million
Dollars ($30,000,000) of the Fund's average net assets, 1/12 of 0.05%
(0.05% per annum) on the next Thirty Million Dollars ($30,000,000) of its
average net assets, and 1/12 of 0.01% (0.01% per annum) on its average net
assets over Sixty Million Dollars ($60,000,000).
5. Exclusivity. The services of Fiduciary to the Fund
hereunder are not to be deemed exclusive and Fiduciary shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby.
6. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Fiduciary, Fiduciary shall not be subject to
liability to the Fund, the Fund's investment adviser or to any stockholder
of the Fund for any act or omission in the course of, or connected with,
rendering services hereunder.
7. Amendments and Termination. This Agreement may be amended
by the mutual consent of the parties. This Agreement may be terminated at
any time, without the payment of any penalty, by the board of directors of
the Fund or by Fiduciary, upon the giving of ninety (90) days' written
notice. Upon any such termination Fiduciary shall deliver to the Fund all
books, accounts and other documents then maintained by it pursuant to
Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
FIDUCIARY MANAGEMENT, INC.
By: ____________________________ By: _________________________________
Secretary President
BRANDYWINE BLUE FUND, INC.
By: ___________________________ By: _________________________________
Secretary President
EXHIBIT 9.2
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this ______ day of
___________________ 1990, by and between Brandywine Blue Fund, Inc.
(hereinafter referred to as the "Fund") and First Wisconsin Trust Company,
a corporation organized under the laws of the state of Wisconsin
(hereinafter referred to as the "Agent").
W I T N E S S E T H :
WHEREAS, the Fund is an open-ended management investment company
which is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in
the business of administering transfer and dividend disbursing agent
functions for the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree
as follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection
with accumulation, open account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program),
including but not limited to:
A. Receive orders for the purchase of shares, with prompt delivery,
where appropriate, of payment and supporting documentation to
the Fund's custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Fund's
custodian;
D. Pay monies (upon receipt from the Fund's custodian, where
relevant) in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Fund;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant
to Section Rule 17ad-10(e), a record of the total number of
shares of the Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable
transactions as agreed upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor
the total number of shares sold in each state. In addition, the
Fund shall identify to the Agent in writing those transactions
and assets to be treated as exempt from the Blue Sky reporting
to the Fund for each state. The responsibility of the Agent for
the Fund's Blue Sky state registration status is solely limited
to the initial compliance by the Fund and the reporting of such
transactions to the Fund.
2. Compensation
The Fund agrees to pay the Agent for performance of the duties listed
in this Agreement; the fees and out-of-pocket expenses include, but are
not limited to the following: printing, postage, forms, stationery, record
retention, mailing, insertion, programming, labels, shareholder lists and
proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
3. Representations of Agent
Agent represents and warrants to the Fund that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is duly qualified to carry on its business in the state of
Wisconsin;
C. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement; and
E. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
4. Representations of the Fund
The Fund represents and warrants to the Agent that:
A. The Fund is an open-ended diversified investment company under
the Investment Company Act of 1940;
B. The Fund is a corporation or business trust organized, existing,
and in good standing under the laws of Maryland;
C. The Fund is empowered under applicable laws and by its Corporate
Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter have
been taken to authorize it to enter into and perform this
Agreement;
E. The Fund will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules
and regulations of governmental authorities having jurisdiction;
and
F. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to
be made, with respect to all shares of the Fund being offered
for sale.
5. Covenants of Fund and Agent
The Fund shall furnish the Agent a certified copy of the resolution
of the Board of Directors of the Fund authorizing the appointment of the
Agent and the execution of this Agreement.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules thereunder, the Agent agrees that all such records prepared
or maintained by the Agent relating to the services to be performed by the
Agent hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such section and rules
and will be surrendered to the Fund on and in accordance with its request.
6. Indemnification; Remedies Upon Breach
The Agent agrees to use reasonable care and act in good faith in
performing its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or
responsible for delays or errors occurring by reason of circumstances
beyond its control, including acts of civil or military authority,
national or state emergencies, fire, mechanical or equipment failure,
flood or catastrophe, acts of God, insurrection or war. In the event of a
mechanical breakdown beyond its control, the Agent shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond the Agent's control. The Agent will
make every reasonable effort to restore any lost or damaged data, and the
correcting of any errors resulting from such a breakdown will be at the
Agent's expense. The Agent agrees that it shall, at all times, have
reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of Brandywine
Blue Fund, Inc. shall be entitled to inspect the Agent's premises and
operating capabilities at any time during regular business hours of the
Agent, upon reasonable notice to the Agent.
The Fund will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or
suit not resulting from the Agent's bad faith or negligence, and arising
out of or in connection with the Agent's duties on behalf of the Fund
hereunder.
Further, the Fund will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand,
action or suit as a result of the negligence of the Fund or the principal
underwriter (unless contributed to by the Agent's own negligence or bad
faith); or as a result of the Agent acting upon telephone instructions
relating to the exchange or redemption of shares received by the Agent and
reasonably believed by the Agent to have originated from the record owner
of the subject shares; or as a result of the Agent acting upon any
instructions executed or orally communicated by a duly authorized officer
or employee of the Fund, according to such lists of authorized officers
and employees furnished to the Agent and as amended from time to time in
writing by a resolution of the Board of Directors of the Fund; or as a
result of acting in reliance upon any genuine instrument or stock
certificate signed, countersigned or executed by any person or persons
authorized to sign, countersign or execute the same.
In order for this section to apply, it is understood that if in any
case the Fund may be asked to indemnify or hold harmless the Agent, the
Fund shall be advised of all pertinent facts concerning the situation in
question, and it is further understood that the Agent will use reasonable
care to notify the Fund promptly concerning any situation which presents
or appears likely to present a claim for indemnification against the Fund.
The Fund shall have the option to defend the Agent against any claim which
may be the subject of this indemnification and, in the event that the Fund
so elects, the Agent will so notify the Fund, and thereupon the Fund shall
take over complete defense of the claim and the Agent shall sustain no
further legal or other expenses in such situation for which the Agent
shall seek indemnification under this section. The Agent will in no case
confess any claim or make any compromise in any case in which the Fund
will be asked to indemnify the Agent, except with the Fund's prior written
consent.
In the event that it is determined that the Agent has breached its
responsibilities under this contract, the Fund's sole and exclusive
remedies shall be:
A. Termination of the Agreement;
B. To collect damages directly and actually incurred in a sum up to
but not in excess of fifty percent (50%) of any fees received by
the Agent during the period of twelve (12) months immediately
proceeding the Agent's performance or failure to perform which
constituted a material breach of this Agreement;
C. To submit a claim for damages directly incurred by the Fund as a
consequence of the Agent's failure to perform which constituted
a material breach of this Agreement, and which act, nonact or
event was covered under the Agent's blanket bond policy or
policies, in which event the Agent agrees to indemnify and hold
the Fund harmless solely to the extent of the Agent's best
efforts to include the Fund's claim as a loss payee under the
filing of a proof of loss under such policy; and
D. To reprocess and correct administrative errors at the Agent's
own expense.
Regardless of the foregoing, the Agent shall not be liable to
the Fund or to any third party for any indirect or consequential damages.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and
its shareholders and shall not be disclosed to any other party, except
after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where
the Agent may be exposed to civil or criminal contempt proceedings for
failure to comply after being requested to divulge such information by
duly constituted authorities.
8. Wisconsin Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of
Wisconsin.
9. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent of
the parties.
B. After the first full year, this Agreement may be terminated upon
ninety (90) day's written notice given by one party to the
other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of
the other party.
D. Any notice required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed
and delivered, or mailed to the principal place of business of
the other party.
E. In the event that the Fund gives to the Agent its written
intention to terminate and appoint a successor transfer agent,
the Agent agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all
relevant books, records and other data established or maintained
by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and
material will be paid by the Fund.
BRANDYWINE BLUE FUND, INC. FIRST WISCONSIN TRUST COMPANY
By: __________________________ By: _________________________________
Attest: ________________________ Attest: ___________________________
Assistant Secretary
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 7 to the
registration statement on Form N-1A (the "Registration Statement") of our
report dated October 7, 1996, relating to the financial statements and
financial highlights of Brandywine Blue Fund, Inc., which appears in such
Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us under the
heading "Independent Accountants" in such Statement of Additional
Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
January 14, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 296,411
<INVESTMENTS-AT-VALUE> 356,762
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</TABLE>
