Registration No. 33-37959
Investment Company Act Registration No. 811-06221
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. 9 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 10 |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.
It is proposed that this filing become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
|X| on November 30, 1998 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.
<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
Item No. on Form N-1A Prospectus or Statement of
Additional Information
Part A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expenses and Fees
3. Condensed Financial Information Financial Highlights;
Performance Information
4. General Description of Registrant Financial Highlights;
Investment Objectives and
Policies
5. Management of the Management of the Fund
5A. Management's Discussion of Fund Performance Information;
Performance Management's Discussion of
Fund Performance
6. Capital Stock and Other Securities Financial Highlights;
Dividends, Distributions and
Taxes; Shareholder
Statements and Reports
7. Purchase of Securities Being Offered Determining Net Asset Value;
About Our Minimum Requirement
For Initial Investment;
Investing with Brandywine Blue
Fund; Account Services and
Policies
8. Redemption or Repurchase Investing with Brandywine Blue
Fund; Account Services and
Policies
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
- -----------------------------
* Answer negative or inapplicable.
<PAGE>
11. Table of Contents Table of Contents
12. General Information and History *
13. Investment Objectives and Policies Investment Restrictions
14. Management of the Registrant Directors and Officers of the
Fund
15. Control Persons and Principal Holders Principal Stockholders
of Securities
16. Investment Advisory and Other Services Included in Prospectus under
"Management of the Fund";
Investment Adviser; Service
Agreement; Custodian;
Independent Accountants
17. Brokerage Allocation Allocation of Portfolio
Brokerage
18. Capital Stock and
Other Securities Included in Prospectus under
"Financial Highlights"
19. Purchase, Redemption and Pricing of Included in Prospectus under
Securities Being Offered "Determining Net Asset Value";
"About Our Minimum Requirement
for Initial Investment";
"Investing with Brandywine
Blue Fund"; "Account Services
and Policies"; Determination
of Net Asset Value and
Performance; Purchase of
Shares; Systematic Withdrawal
Plan
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Data Determination of Net Asset
Value and Performance
23. Financial Statements Financial Statements
- -----------------------
* Answer negative or inapplicable
<PAGE>
(Brandywind Blue Fund, Inc. Logo)
(Brandywine Fund Logo)
Brandywine Blue Fund, Inc.
3908 Kennett Pike
Greenville, Delaware 19807
Email: [email protected]
Website: www.brandywinefunds.com
1-800-656-3017 or 1-414-765-4124
PROSPECTUS NOVEMBER 30, 1998
(Brandywind Blue Fund, Inc. Logo)
(Brandywine Fund Logo)
Brandywine Blue Fund, Inc.
3908 Kennett Pike
Greenville, Delaware 19807
Email: [email protected]
Website: www.brandywinefunds.com
1-800-656-3017 or 1-414-765-4124
TABLE OF CONTENTS
EXPENSES AND FEES 2
FINANCIAL HIGHLIGHTS 3
INVESTMENT OBJECTIVES AND POLICIES 4
MANAGEMENT OF THE FUND 8
DETERMINING NET ASSET VALUE 9
ABOUT OUR MINIMUM REQUIREMENT FOR INITIAL INVESTMENT 9
INVESTING WITH BRANDYWINE BLUE FUND 10
How to Open Your Brandywine Blue Fund Account 10
How to Buy Additional Shares in Brandywine Blue Fund 11
How to Sell Shares in Brandywine Blue Fund 12
Payment of Redemption Proceeds 13
How to Exchange Shares 14
Dividend and Distribution Options 14
DIVIDENDS, DISTRIBUTIONS, AND TAXES 15
STOCKHOLDER STATEMENTS AND REPORTS 15
PERFORMANCE INFORMATION 16
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE 16
ACCOUNT SERVICES AND POLICIES 19
PURCHASE APPLICATION 21
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
Stockholm, Sweden
INVESTMENT ADVISER
Friess Associates, Inc.
115 East Snow King Avenue
P.O. Box 576
Jackson, Wyoming 83001
FUND ADMINISTRATOR
Fiduciary Management, Inc.
225 East Mason Street
Milwaukee, Wisconsin 53202
LIKE ALL MUTUAL FUND SHARES, 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.
Thank you for your interest in Brandywine Blue Fund. The Friess Associates
teammates who invest and manage the Fund have tried to make this prospectus easy
to understand. We hope you will take the time to read it carefully before you
invest and keep it on hand for future reference.
Brandywine Blue Fund, Inc. (the "Fund") is open to new investors, charges no
sales or marketing fees, and invests in a wide range of industries and
companies. The terms often used to describe it are "open-end," "no-load," and
"diversified." It is also known as a management investment company. Its primary
investment objective is to produce long-term capital appreciation mainly through
investing in common stocks. Current income is a secondary consideration.
If you are investing for retirement or another longer term goal, you may want
to invest in Brandywine Blue Fund. If you may need to redeem your shares in a
hurry, or if you are uncomfortable with an investment that will go up and down
in value, the Fund probably is not the right choice for you.
Read on. We hope you will find that this prospectus answers all of your
questions and it may even be enjoyable reading.
/S/ Foster Friess
Foster Friess
President
The Fund has filed a Statement of Additional Information, dated November 30,
1998, with the Securities and Exchange Commission. The contents of the
Statement of Additional Information are considered to be part of the prospectus
(i.e., incorporated by reference). To obtain a copy, call 1-800-656-3017 or 1-
414-765-4124.
You should be aware that the Securities and Exchange Commission maintains a
website (http://www.sec.gov) that contains the Statement of Additional
Information, material we have incorporated by reference into the prospectus, and
other information about the Fund and other registrants that file electronically
with the Commission.
EXPENSES AND FEES
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 0.06%
-----
Total Fund Operating Expenses 1.06%
-----
-----
*<F1> A fee of $12.00 is charged for each wire redemption.
Example:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
An investor would pay the
following expenses on
a $10,000 investment, assuming
(1) 5% annual return and
(2) redemption at the end
of each time period: $108 $337 $585 $1,294
THESE EXAMPLES ARE FOR COMPARISON PURPOSES ONLY AND ARE NOT MEANT TO
REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR EXPENSES, WHICH MAY VARY.
The "Other Expenses" referred to above are primarily the servicing of
stockholder accounts, such as providing statements and reports, disbursing
dividends, and providing custodial services, together with necessary
registration, accounting, and legal costs.
For more details on Fund expenses, please see the section titled, "Management
of the Fund" on page 8.
FINANCIAL HIGHLIGHTS
(Selected data for each share of the Fund outstanding throughout each
period.)
The Financial Highlights of the Fund, which have been audited, should be read
along with the Fund's audited financial statements and notes, included in the
Fund's Annual Report to Stockholders which contains the auditor's report as to
the Financial Highlights. The Fund's audited financial statements, notes and
auditor's report contained in the Fund's Annual Report to Stockholders are
incorporated by reference into the Statement of Additional Information. Further
information about the performance of the Fund is also contained in the Fund's
Annual Report to Stockholders, copies of which may be obtained, without charge,
upon request. To obtain a copy, call 1-800-656-3017 or 1-414-765-4124.
<TABLE> YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991+<F2>
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $35.78 $25.26 $24.37 $17.18 $19.11 $12.95 $13.09 $10.01
Income from investment operations:
Net investment income (loss) 0.19 (0.10)(1)<F3>(0.05)(1)<F3> 0.00 0.04 (0.06) (0.04) 0.03
Net realized and unrealized (loss) gains
on investments (8.75) 10.62 2.05 7.30 0.36 6.22 0.52 3.05
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations (8.56) 10.52 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 (5.09) -- (1.11) (0.11) (2.33) -- (0.59) --
------ ------ ------ ------ ------ ------ ------ ------
Total from distributions (5.09) -- (1.11) (0.11) (2.33) -- (0.62) --
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $22.13 $35.78 $25.26 $24.37 $17.18 $19.11 $12.95 $13.09
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Total Investment Return (26.5%) 41.6% 8.9% 42.8% .8% 47.6% 4.0% 45.1%*<F4>
Ratios/Supplemental Data:
Net assets, end of period (in 000's $) 364,351 617,362 351,459 164,943 29,086 6,373 4,270 3,975
Ratio of expenses (after reimbursement)
to average net assets**<F5> 1.06% 1.08% 1.13% 1.31% 1.80% 2.00% 2.00% 1.97%*<F4>
Ratio of net investment income (loss)
to average net assets***<F6> 0.6% (0.5%) (0.4%) (0.4%) (0.4%) (0.6%) (0.3%) 0.6%*<F4>
Portfolio turnover rate 299.5% 202.1% 196.9% 174.1% 220.3% 144.3% 191.9% 115.3%*<F4>
</TABLE>
+<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%*<F4> 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%)*<F4>, respectively.
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE
Brandywine Blue Fund began fiscal 1998 with its net asset value (price) at
$35.78 per share. During the fiscal year ending September 30, 1998, the Fund
gained $0.19 per share from investment operations because our investment income
(interest and dividends) was more than our expenses and lost $8.75 per share
from investments that had depreciated in value, whether or not they had been
sold. This resulted in net loss of $8.56 per share. $5.09 per share was
returned to stockholders in distributions. The combined decrease in net asset
value ($13.65 per share) resulted in a share price of $22.13 at the fiscal year
end September 30, 1998. Total return from the Fund was a negative 26.5% for the
fiscal year ending September 30, 1998.
For the year ending September 30, 1998, Brandywine Blue Fund had an expense
ratio of 1.06% ($10.60 per $1,000 of average net assets). Net investment income
was .6% of its average net assets. The Fund had a portfolio turnover rate of
299.5% of its average net assets (see page 6 for definition of turnover rate).
At September 30, 1998, Brandywine Blue Fund had $364 million in net assets.
BUSINESS STRUCTURE
Brandywine Blue Fund, Inc. was incorporated under the laws of Maryland on
November 13, 1990. The Fund is an open-end, diversified management investment
company. As such, it pools money from numerous investors and invests the money
to achieve its investment objectives. 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.
The Fund is supervised by a board of directors that has ultimate
responsibility for the Fund's activities. The Fund does not hold annual
stockholder meetings but may hold special meetings for purposes such as electing
or removing board members, changing fundamental policies, or for any other
purposes requiring a stockholder vote under the Investment Company Act of 1940.
Each share outstanding is entitled to one vote.
The Fund's authorized capital consists of 100,000,000 shares of Common Stock.
This number may be increased when necessary, as has been done in the past. The
Fund has no present plans to limit its size.
A WORD ABOUT RISK
Look for this "warning flag" symbol throughout the prospectus. (FLAG) It is
used to mark detailed information about each type of risk that you, as a
stockholder, will confront.
INVESTMENT OBJECTIVES AND POLICIES
THE FUND'S PRIMARY INVESTMENT OBJECTIVE
The primary investment objective of the Fund is to produce long-term
appreciation of capital principally through investing in common stocks. Current
income is less important. The Fund is designed for investors who wish to limit
their investments to larger, well-established but dynamic companies with
potential for growth in share value.
Friess Associates, Inc. (the "Adviser"), anticipates that most of the time at
least 70% of the Fund's portfolio will be invested in common stocks of blue chip
companies having market capitalizations above $500,000,000 and offering
potential for growth through new products, acquisitions, divestitures, changes
in management, new legislation, or other similar phenomena. These companies may
be included in the Fortune 500 or Russell 1000 lists of America's largest
companies or the Dow-Jones or S&P 500 stock indexes, but they will probably not
be the largest, most researched companies in their industries.
Not more than 5% of the Fund's net assets may be invested in securities of
unseasoned companies, defined as companies having a record of less than three
years of continuous operation, including any business already in existence
before it was added to a company through a merger, consolidation,
reorganization, or purchase.(FLAG) The investment risks associated with these
securities may be considerably greater than those associated with common stocks
of more established companies.
HOW THE ADVISER SELECTS STOCKS
In selecting investments the Adviser will consider various financial
characteristics of the issuer of the shares of common stock, including
historical sales and net income, and debt/equity and price/earnings ratios. The
Adviser may also review research reports of broker-dealers and trade
publications and may meet with management. The Adviser will give greater weight
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.
(FLAG) 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. The Fund can provide no assurance that its
primary objective will be realized or that any income will be earned. Nor can
the Fund assure investors that the Fund's portfolio will not decline in value.
INVESTMENTS OTHER THAN COMMON STOCKS
Except for temporary defensive purposes, the Fund intends to have at all
times at least 70% of its investments in securities which the Fund's investment
adviser believes offer opportunity for growth of capital. No minimum or maximum
percentage of the Fund's assets is required to be invested in common stocks or
any other type of security. When the Adviser believes that securities other
than common stocks offer opportunity for long-term capital appreciation, the
Fund may invest in publicly distributed debt securities, preferred stocks,
particularly those which are convertible into or carry rights to acquire common
stocks, and warrants, which are long-term rights to acquire common stocks.
Investments in publicly distributed debt securities and nonconvertible preferred
stocks offer an opportunity for growth of capital during periods of declining
interest rates, when the market value of such securities in general increases.
CASH INSTRUMENTS
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. While
maintaining a temporary defensive position, the Fund may invest up to 100% of
its assets in cash and money market instruments. 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 in excess of $100,000,000 in value at the date of
investment), and commercial paper, commercial paper master notes, and repurchase
agreements.
Commercial paper is short-term debt issued by well-established corporations.
Since this debt is unsecured, the Fund will buy commercial paper only of
companies that are very strong financially. The Adviser measures a company's
strength by tracking the rating it has received from Standard & Poor's
Corporation or Moody's Investors Service, Inc., rating agencies which analyze
and grade companies on their ability to pay their debts. All commercial paper
bought by the Fund must be rated A-1 by Standard & Poor's or P1 by Moody's.
Commercial paper master notes differ from commercial paper in that they 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 variable rates of interest. The Adviser will
also 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.
FOREIGN SECURITIES
The Fund may invest in foreign securities. It will limit to 15% of its
assets investments in securities of foreign issuers traded on U.S. securities
markets or in American Depository Receipts of foreign issuers. Such investments
increase a portfolio's diversification and may enhance return.(FLAG) Such
investments also involve risks which are in addition to the usual risks inherent
in U.S. investments.
In many foreign countries, there is less publicly available information about
issuers than is available in the reports and ratings published about companies
in the United States. Also, 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 issuers
residing in nations with 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.
TURNOVER RATE AND SELL DISCIPLINE
The Fund does not intend to place emphasis on short-term trading profits,
but, when circumstances warrant, securities will be purchased and sold without
regard to the length of time held. The Adviser expects that the Fund's annual
portfolio turnover rate will normally approximate 200%. A turnover rate of 200%
would occur, for example, if the Fund replaced securities valued at 100% of its
average total net assets twice within a one-year period. Turnover rate may vary
considerably from year to year. (FLAG) Higher than normal turnover rate will
increase transaction costs and may increase short-term capital gains,
distributions of which will be considered ordinary income for federal income tax
purposes.
The Adviser may decide to sell a particular stock in the Fund portfolio for a
variety of reasons:
o Deteriorating fundamentals
o Unrealistic expectations
o Forced displacement
The policy of forced displacement is central to the sell discipline of the
Adviser and is most indicative of the Adviser's stock selection process. When
the Adviser discovers a company with great potential for growth, the Adviser
sells a company in the Fund's portfolio with lesser appreciation potential and
replaces it with the new company with greater potential.
INVESTMENT POLICIES
Under certain circumstances the Fund may (a) invest in warrants (long-term
rights to acquire stock), (b) temporarily borrow money from banks for emergency
or extraordinary purposes, (c) pledge its assets to secure borrowings, and (d)
purchase securities of other investment companies. All of the circumstances in
which the Fund may engage in these activities are included in the Fund's
Statement of Additional Information (to obtain a copy, call 1-800-656-3017 or 1-
414-765-4124).
The Board of Directors may not change the fundamental policies of the Fund
without stockholder approval, but may change the Fund's investment objectives
and other non-fundamental policies. The investment policies listed in the
preceding paragraph are the only fundamental policies described in this
prospectus. (FLAG) If there is a change in investment objective, you should
consider whether the Fund remains an appropriate investment in light of your
then current financial position and needs.
MANAGEMENT OF THE FUND
ABOUT THE ADVISER
The Board of Directors sets policies and oversees the management for the
Fund. Under an investment advisory agreement (the "Agreement"), Friess
Associates, Inc. (the "Adviser"), 115 East Snow King Avenue, P.O. Box 576,
Jackson, Wyoming 83001, furnishes continuous investment advisory services and
management to the Fund. In addition to the Fund, Friess Associates is the
investment adviser to Brandywine Fund, Inc., another mutual Fund, and to
individual and institutional clients with substantial investment portfolios.
Friess Associates was established in 1974 and was incorporated in 1980; it is
wholly owned by Foster S. Friess and Lynnette E. Friess, who are the sole
directors and the sole officers of Friess Associates, Inc.
INVESTMENT DECISIONS
The Adviser, supervises the investment portfolio of the Fund, directing the
purchase and 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 Friess Associates, Inc.
EXPENSES
The Adviser furnishes continuous investment supervision and management to the
Fund and also furnishes office space, equipment, and management personnel. The
Adviser pays the salaries and fees of all officers and directors of the Fund
(except the fees paid to directors not employed by the Adviser). For its
services the Adviser is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of 1% of the net assets of the Fund.
FUND ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
Under a service agreement with the Fund, Fiduciary Management, Inc.,
Milwaukee, Wisconsin serves as the Fund's administrator and in this capacity is
responsible for (a) calculating daily the Fund's net asset value, (b)
recordkeeping and preparing financial statements, tax returns, and (c) reports
required by the Securities and Exchange Commission. For these services, the
Fund currently pays Fiduciary Management, Inc. an annual fee of $102,000.
Firstar Mutual Fund Services, LLC of Milwaukee, Wisconsin serves as the Fund's
transfer agent and is responsible for stockholder accounting and distributing
dividends. Firstar Bank Milwaukee of Milwaukee, Wisconsin serves as the Fund's
custodian and is responsible for holding the Fund's assets and settling all
portfolio trades.
(FLAG) YEAR 2000
The Fund is aware of the "Year 2000" issue. The "Year 2000" issue stems from
the use of a two-digit format to define the year in certain date-sensitive
computer application systems rather than the use of a four-digit format. As a
result, date-sensitive software programs could recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in major systems or
process failures or the generation of erroneous data, which would lead to
disruptions in the Fund's business operations.
The Fund has no application systems of its own and is entirely dependent on
its service providers' systems and software. The Fund is working with its
service providers (including its investment adviser, administrator, transfer
agent and custodian) to identify and remedy any Year 2000 issues. However, the
Fund cannot guarantee that all Year 2000 issues will be identified and remedied,
and the failure to successfully identify and remedy all Year 2000 issues could
result in an adverse impact on the Fund.
DETERMINING NET ASSET VALUE
Since the Fund is a pure no-load fund, the share price for purchase or sale
is equal to its net asset value or "NAV," calculated as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m., Eastern Time) each
day the New York Stock Exchange is open for business. To calculate the NAV, (a)
the Fund's assets are valued and totaled; (b) liabilities, or debts, are
subtracted; and (c) the balance, called net assets, is divided by the number of
shares outstanding, that is, the number of shares currently owned by the
stockholders.
NET ASSET VALUE = TOTAL ASSETS - LIABILITIES
-----------------------------
NUMBER OF SHARES OUTSTANDING
If the transfer agent, Firstar Mutual Fund Services, LLC, receives your
request to buy or to sell shares by the close of regular trading on the New York
Stock Exchange, your transaction will be priced at that day's NAV. If the
transfer agent receives your request after that time, it will be priced at the
next business day's NAV.
The daily net asset value, or NAV, multiplied by the number of Fund shares
you own, gives you the dollar amount you would have received that day had you
sold your shares back to the Fund.
The Fund's share price can be found daily in the mutual fund listings of most
major newspapers under the heading "BrndywBlue" or "BrndywBl." The NASDAQ symbol
is "BLUEX."
ABOUT OUR MINIMUM REQUIREMENT FOR INITIAL INVESTMENT
The Board of Directors has established $100,000 as the minimum initial
investment, which is high compared to other mutual funds. The Fund is intended
for investors with long term investment goals. It is not an appropriate
investment vehicle for market timers who wish to jump in and out of the market.
When the market goes through periods of rapid decline, these market timers will
"head for the hills" and the Fund may need to liquidate assets to redeem their
shares. This could be detrimental to the welfare of other stockholders. A high
minimum investment relies on the commitment of long term investors while
discouraging short term investors. The Fund reserves the right to accept or
refuse any application.
Employees, officers, and directors of the Fund or the Adviser or firms
providing contractual services to the Fund, members of their immediate families
(spouses, siblings, parents, children, and grandchildren), and retirement plans
and trusts for their benefit may purchase shares without regard to the minimum.
The officers of the Fund may, but are not required to, waive or lower the
requirement for charitable organizations and employee benefit plans whose
aggregate investment exceeds the Fund's minimum initial investment. The
officers may also, but are not required to, waive or lower the requirement for
spouses, parents, children, and grandchildren of stockholders under special
circumstances, considering the additional shares to be an extension of the
investment of the first stockholder.
INVESTING WITH BRANDYWINE BLUE FUND
Our goal is to make it easy and pleasant for you to do business with us.
This section will help you become familiar with the many different services we
offer to you as a stockholder.
HOW TO OPEN YOUR BRANDYWINE BLUE FUND ACCOUNT
1. Read this prospectus carefully.
2. Determine how much you want to invest.
MINIMUM INVESTMENTS ARE AS FOLLOWS:
TO OPEN A NEW ACCOUNT $100,000
TO ADD TO AN EXISTING ACCOUNT $1,000
3. Complete the appropriate parts of the purchase application at the back of
this prospectus, carefully following the instructions. (Additional purchase
applications may be obtained from the Fund.)
Please be sure to provide your Social Security or taxpayer identification number
on the application. If you have questions, please contact our Investor Service
Representatives at 1-800-656-3017 or 1-414-765-4124.
4. Complete the appropriate parts of the account privileges section of the
application. By applying for privileges, such as telephone redemption,
electronic transfer, and wire transfer now, you can avoid the delay and
inconvenience later of having to file an additional request to add these
privileges which would require a signature guarantee.
5. Make your check payable to Brandywine Blue Fund, Inc.
All checks must be drawn on U.S. banks. Brandywine Blue Fund will not accept
checks made payable to third parties.
No cash will be accepted.
(FLAG) FIRSTAR MUTUAL FUND SERVICES, LLC WILL CHARGE A $25 FEE AGAINST A
STOCKHOLDER'S ACCOUNT FOR ANY PAYMENT CHECK RETURNED FOR INSUFFICIENT FUNDS.
THE STOCKHOLDER WILL ALSO BE RESPONSIBLE FOR ANY LOSSES SUFFERED BY THE FUND AS
A RESULT.
6. Send application and check to:
BY MAIL
FOR U.S. POSTAL SERVICE:
Brandywine Blue Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P. O. Box 701
Milwaukee, WI 53201-0701
FOR OVERNIGHT CARRIER:
Brandywine Blue Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
615 E. Michigan St., 3rd Floor
Milwaukee, WI 53202-5207
PLEASE DO NOT MAIL LETTERS BY OVERNIGHT CARRIER TO THE POST OFFICE BOX
ADDRESS.
The price per share will be the next determined per share net asset value
after receipt of your application by Firstar Mutual Fund Services, LLC.
BY WIRE
If you wish to open an account by wire, please call 1-800-656-3017 or 1-414-
765-4124 prior to sending the wire in order to obtain a confirmation number and
to ensure prompt and accurate handling of funds. Wired funds must be received
prior to 4:00 p.m. Eastern time to be eligible for same day pricing. Send a
properly signed share purchase application marked "FOLLOW UP."
THE FUND AND ITS TRANSFER AGENT ARE NOT RESPONSIBLE FOR THE CONSEQUENCES OF
DELAYS RESULTING FROM THE BANKING OR FEDERAL RESERVE WIRE SYSTEM, OR FROM
INCOMPLETE WIRING INSTRUCTIONS. APPLICATIONS ARE SUBJECT TO ACCEPTANCE BY THE
FUND AND ARE NOT BINDING UNTIL SO ACCEPTED.
WIRE TO:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA 075000022
CREDIT:
Firstar Mutual Fund Services, LLC
Account 112-952-137
FURTHER CREDIT:
Brandywine Blue Fund, Inc.
(stockholder account number)
(stockholder registration)
OTHER
Shares of the Fund may also be purchased through a registered broker-dealer
who may charge the investor 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.
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 which apply 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.
SHARE CERTIFICATES
Shares are credited to your account and certificates are not issued unless
you request them by writing to:
Brandywine Blue Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P. O. Box 701
Milwaukee, WI 53201-0701
HOW TO GET IN TOUCH WITH BRANDYWINE BLUE FUND
If you have any questions, please call one of our Investor Service
Representatives at:
1-800-656-3017 or
1-414-765-4124
Monday - Friday 8:00 a.m. - 7:00 p.m. CST
HOW TO BUY ADDITIONAL SHARES IN BRANDYWINE BLUE FUND
You may purchase additional shares (in amounts over $1,000) by mailing your
check with an Invest-By-Mail form detached from your confirmation statement to
the address listed on the form or by following the wiring instructions above.
The Fund does not accept telephone orders for purchase of shares.
Make your check payable to:
Brandywine Blue Fund, Inc.
All checks must be drawn on U.S. banks. Brandywine Blue Fund will not accept
checks made payable to third parties.
No cash will be accepted.
NOTE:
If you buy or sell Fund shares through a registered broker-dealer, the
broker-dealer may charge you a service fee, no part of which is returned to the
Fund. The stockholder will receive the net asset value next calculated after
the broker-dealer receives the purchase or redemption order.
In the case of an account established through a plan with a Processing
Intermediary, additional shares of Common Stock may be purchased by the plan
through the Processing Intermediary without regard to the Fund's minimum
subsequent purchase amounts.
HOW TO SELL SHARES IN BRANDYWINE BLUE FUND
IMPORTANT TAX NOTE:
ANY SALE OR EXCHANGE OF SHARES IN A NON-RETIREMENT ACCOUNT COULD RESULT IN A
TAXABLE GAIN OR LOSS. 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.
You may sell (redeem) some or all of your shares at any time during normal
business hours. IF YOU HOLD THE CERTIFICATES FOR YOUR SHARES, YOU MUST RETURN
THE CERTIFICATES, PROPERLY ENDORSED, WITH OR BEFORE YOUR REDEMPTION REQUEST.
YOU WILL NEED TO ASSEMBLE THE FOLLOWING INFORMATION:
o the account number(s)
o the amount of money or number of shares being redeemed
o the names on the account
o your daytime phone number
o the signature(s) of all registered account owners, if you plan to request
a redemption in writing
o a signature guarantee is also required under special circumstances,
including...
1. If you wish the check to be sent to an address or person other than as
registered with the Fund.
2. You would like the check mailed to an address which has been changed
within 30 days of the redemption request.
o additional documentation may be required for redemptions by corporations,
executors, administrators, trustees, guardians, or others who hold shares
in a fiduciary or representative capacity. Contact the Fund's transfer
agent, Firstar Mutual Fund Services, LLC, in advance at 1-800-656-3017 or
1-414-765-4124.
TO OBTAIN A SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. It protects
stockholders from unauthorized account transfers. The following financial
institutions may guarantee signatures: banks, trust companies, a member firm of
the New York Stock Exchange or other national securities exchange. A NOTARIZED
SIGNATURE IS NOT ACCEPTABLE.
SEND A LETTER OF INSTRUCTION
Include with your letter the necessary information you have already
assembled.
THE PRICE YOU WILL RECEIVE FOR YOUR SHARES
The redemption price per share is the next determined net asset value after
Firstar Mutual Fund Services, LLC, the Fund's transfer agent, receives your
written request in proper form with all the required information.
BY MAIL
FIRST-CLASS MAIL TO:
Brandywine Blue Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
OVERNIGHT OR REGISTERED MAIL TO:
Brandywine Blue Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
615 E. Michigan St., 3rd Floor
Milwaukee, WI 53202-5207
PLEASE DO NOT MAIL LETTERS BY OVERNIGHT CARRIER TO THE POST OFFICE BOX
ADDRESS.
BY TELEPHONE
You must instruct Firstar Mutual Fund Services, LLC, in writing, that you
wish to be able to make telephone redemptions, before you can redeem by
telephone.
With this option, you just...
Call Firstar Mutual Fund Services, LLC at 1-800-656-3017 or
1-414-765-4124.
PLEASE DO NOT CALL THE FUND'S ADVISER.
REDEMPTION BY TELEPHONE IS NOT AVAILABLE FOR IRA ACCOUNTS OR WHEN SHARE
CERTIFICATES HAVE BEEN ISSUED FOR AN ACCOUNT. FOR MORE INFORMATION ON TELEPHONE
REDEMPTIONS, PLEASE USE THE SECTION ENTITLED "ACCOUNT SERVICES AND POLICIES" ON
PAGE 19.
THROUGH PROCESSING INTERMEDIARIES
If your shares are held by a Processing Intermediary, you must redeem your
shares through the Processing Intermediary. Contact the Processing
Intermediaries for instructions on how to do so.
AUTOMATICALLY
The Systematic Withdrawal Plan option may be activated if you have a minimum
of $100,000 in your Fund account. This option allows you to redeem a specific
dollar amount from your account on a regular basis. You may vary the amount or
frequency of withdrawal payments or temporarily discontinue them. For more
information or to request the appropriate form, please call Firstar Mutual Fund
Services, LLC at 1-800-656-3017 or 1-414-765-4124.
PAYMENT OF REDEMPTION PROCEEDS
A CHECK WILL BE MAILED TO YOU
A check in payment for your redeemed shares will be mailed to you at your
address of record no later than the seventh day after Firstar Mutual Fund
Services, LLC receives your valid request.
Exception: If the shares being redeemed were purchased by check, the Fund
may delay the payment of your redemption proceeds until it is reasonably
satisfied the check has cleared. This normally may take up to 3 days for local
personal or corporate checks and up to 7 days for other personal or corporate
checks.
If you redeem by telephone, Firstar Mutual Fund Services, LLC normally will
transfer the redemption proceeds to your designated bank account if you have
elected to receive redemption proceeds by either electronic funds transfer or
wire. If you redeem shares through Processing Intermediaries, you will receive
your redemption proceeds in accordance with the procedures established by the
Processing Intermediary.
ELECTRONIC TRANSFERS
If you have established this option, your redemption proceeds can be
electronically transferred to your designated bank account. An Electronic Funds
Transfer ("EFT") generally takes up to 3 business days to reach the
stockholder's bank account. There is no fee for this option.
BY WIRE
If you have established this option, your redemption proceeds can be wired
directly into your designated bank account. The transfer agent, Firstar Mutual
Fund Services, LLC, currently charges a $12 fee for each wire, which is deducted
from the stockholder's account.
HOW TO EXCHANGE SHARES
You may exchange shares in Brandywine Blue Fund for shares in Brandywine
Fund, another mutual fund managed by the Adviser, providing the shares exchanged
have a value of at least $25,000, the minimum required by that Fund. Before
exchanging your shares, you should first obtain and carefully read the
prospectus for Brandywine Fund and you should consider the tax consequences if
yours is a taxable account.
IMPORTANT TAX NOTE:
WHEN YOU EXCHANGE SHARES OF BRANDYWINE BLUE FUND FOR SHARES OF BRANDYWINE
FUND, YOU ARE SELLING YOUR SHARES OF BRANDYWINE BLUE FUND AND BUYING SHARES OF
BRANDYWINE FUND. FOR FEDERAL INCOME TAX PURPOSES, SUCH AN EXCHANGE IS A TAXABLE
EVENT IN WHICH YOU MAY REALIZE A CAPITAL GAIN OR LOSS. BEFORE MAKING AN
EXCHANGE REQUEST, YOU SHOULD CONSULT A TAX OR OTHER FINANCIAL ADVISER TO
DETERMINE THE TAX CONSEQUENCES. (This concern does not apply to IRA or other tax
exempt accounts.)
To exchange shares, send your written request along with a completed share
purchase application for Brandywine Fund (found at the back of its prospectus)
to:
Brandywine Blue Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
YOU MUST INCLUDE:
Account name
Account number
Amount or number of shares of Brandywine Blue Fund to be exchanged
The registration (both name and address) of the account from which the
exchange is being made and the account to which the exchange is being made must
be identical. The signatures of all registered account owners are required.
At the present time there are no limitations on the number of exchanges a
stockholder can make, and no exchange fee is currently imposed by the Fund on
exchanges. THE FUND DOES NOT PERMIT TELEPHONE EXCHANGES.
DIVIDEND AND DISTRIBUTION OPTIONS
The Fund distributes annually all of its net earnings in the form of
dividends and capital gains as distributions. Most investors have their
dividends and capital gains distributions reinvested in additional shares of the
Fund. When you open an account, you must specify on your application how you
want to receive your distributions. YOU MAY CHANGE YOUR DISTRIBUTION OPTION
ANYTIME BY WRITING OR CALLING THE FUND AT 1-800-656-3017 OR 1-414-765-4124.
You can receive distributions of dividends and capital gains in two ways:
1. REINVESTMENT
Dividends and capital gains are automatically reinvested in additional shares
of the Fund, unless you request them to be paid in cash. You will be advised
of the number of shares purchased and the price following each reinvestment.
The value of shares reinvested is added to the basis of your total investment
for tax purposes.
2. DIVIDENDS AND CAPITAL GAINS IN CASH
Both dividends and capital gains are paid in cash. You may choose to have
such amounts mailed to you, or forwarded by EFT (Electronic Funds Transfer) to
your account.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
As long as the Fund meets the requirements for being a regulated investment
company, which is its intent, it pays no federal income tax on the earnings it
distributes to the stockholders. However, distributions stockholders receive
from the Fund, whether reinvested in additional shares of the Fund or taken as
cash, are taxable in all accounts except tax-exempt accounts.
Income dividends paid to stockholders come from the dividends that the Fund
earns from its holdings as well as interest it receives from its cash
investments, less expenses, and are taxed at ordinary income rates. Capital
gains are realized whenever the Fund sells securities for higher prices than it
paid for them. These capital gains are either short term or long term depending
on how long the Fund held the securities. Distributions to stockholders of
short term capital gains are taxed at ordinary income rates and distributions of
long term capital gains are taxed as long term 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 SECOND DISTRIBUTION, IF
REQUIRED, AT THE END OF DECEMBER.
In January, the Fund will mail you a Form 1099-DIV detailing your income
dividends and capital gains distributions and their federal tax status,
although you should verify your tax liability with your tax adviser.
(FLAG)Even if you buy shares shortly before or on the "record date," the date
that establishes you as the person to receive the upcoming distribution, you
will receive the full taxable distribution, which for a taxable investor may
seem an unfair burden on money just invested since it did not participate in the
generation of this distribution. However, offsetting this burden, your future
tax liability will be reduced by this same amount. In any case, you may wish to
consider the Fund's record date before investing.
STOCKHOLDER STATEMENTS AND REPORTS
To help you keep accurate records, we will send you a confirmation
immediately following each transaction you make.
In January, we will send you a clear, concise statement detailing all your
transactions during the year. For taxable accounts, this year-end statement also
includes the 1099-DIV information indicating the tax status of any dividends and
capital gains distributions made to you. Information on the status of your
account is always available by telephone.
Four times a year, the Adviser will send you a report of the Fund's
operations. These comprehensive reports include an assessment of the Fund's
performance, various comparisons to benchmarks, an overview of the markets, a
report from the Adviser, listings of the Fund's holdings, and other items of
interest. The Adviser will also provide interim letters to update stockholders
about important matters.
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 transaction costs and recurring fees such as
management fees and operating expenses, but it ignores individual income tax
consequences to stockholders. The performance of the S&P 500 Index does not take
into consideration any transaction costs, expenses or taxes. The following
chart shows growth of the Fund since its inception, adjusted to December year
ends, through the fiscal year ending September 30, 1998.
YEARLY PERFORMANCE
FOR THE PERIOD 1-10-91 THROUGH 9-30-98
NASDAQ IND. RUSSELL 2000 S&P 500 YOUR FUND
1991 69.9 48.9 36.9 40.1
1992 8.4 16.4 7.6 13.1
1993 11.2 17 10.1 27.2
1994 -6.5 -3.2 1.3 2.3
1995 28 26.2 37.5 32.4
1996 15.0 14.8 23 23.2
1997 10 20.5 33.3 19.3
1998 -15.5 -16.8 6.0 -16.7
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
1997 400,854 + 300.9
The table on the left shows by CALENDAR YEAR the value of an assumed initial
investment of $100,000 made on January 10, 1991 through December 31, 1997,
assuming reinvestment of all dividends and distributions.
These 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.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A financial crisis in Asia that had a widespread effect on economies around
the world impacted the Fund's performance for the fiscal year ending
September 30, 1998.
The Adviser purchased stocks in accordance with the investment philosophy
described under "Investment Objectives and Policies" by buying rapidly growing
companies that should exceed general earnings expectations at modest price-to-
earnings ratios. In December, however, the Adviser recognized that the earnings
of many companies held in the Fund, particularly those in the semiconductor and
oil-service industries, would be adversely affected by the situation developing
in Asia. These issues were sold to avoid declines in value.
In the months that followed, approximately 80 percent of the stocks sold
declined, about half of them by 40 to 90 percent. The Fund decreased 11.8
percent in the December quarter, following a 19.9 percent gain in the September
quarter of 1997, the prior fiscal year's closing quarter.
Replacement holdings that met the criteria of the Adviser's investment
strategy were initially difficult to isolate. They were either below the
Adviser's growth criteria, selling at price-to-earings ratios deemed too high or
about to experience earnings disappointments. Wall Street analysts' expectations
in January that the average S&P 500 company's earnings would grow 10, 13 and 15
percent in the first three quarters of 1998 subsequently fell to near zero.
Although the Adviser was correct in assessing deteriorating earnings, the
market was generally strong in the March quarter, as other investments did not
perceive these earnings shortfalls until after the quarter's end. The U.S.
Treasury later reported an unprecedented $129 billion flow of foreign capital
into U.S. equity markets in this single quarter, exceeding annual totals for
1994, 1995 and 1996 combined.
These large foreign capital inflows helped push well-known big-cap stocks to
new highs, which coupled with significant moves by "conceptual" stocks with
little or no earnings, such as internet companies, propelled the market indices
higher. This unusual environment disadvantaged the Fund, as both these
categories are well outside the Adviser's strict discipline.
The Fund's cash level, reaching as high as 78 percent during the transition,
prevented the Fund from participating in much of the March quarter. It grew 3.5
percent, as the average Morningstar mid-cap fund grew 12.9 percent and the S&P
soared 13.5 percent.
The Adviser sought companies that would either benefit from, or at least not
be negatively affected by, Asia's troubles. The Fund added consumer-oriented
stocks such as retail-apparel, financial-services and transportation companies
because of the benefits U.S. consumers would enjoy from lower oil prices and
interest rates.
In the March quarter, the Fund bought $265 million in stocks and continued
buying after quarter end, reducing the cash position to approximately 7 percent
by the end of April. As a result, the Fund performed more in line with indices
that are often used as benchmarks for the Fund in the June and September
quarters.
From March 31 to September 30, the Fund retraced 19.5 percent; the average
Morningstar mid-cap fund fell 16.9 percent; and the Russell 2000 and Nasdaq
Industrials dropped 24.4 and 24.3 percent, respectively. The S&P 500 and Nasdaq
Composite, which are impacted by significantly larger companies, both fell more
than 7 percent.
The more "narrow" market during the year was another influence on the Fund's
performance. Investors generally sought larger, more well-known companies, which
are not typically held in the Fund because of their slower growth and higher
price-to-earnings ratios.
The most exaggerated example of this trend was the eight months ended August
31, during which the top 20 companies in the Nasdaq Composite grew 26 percent
compared to the other 5,000 plus companies in the Nasdaq Composite, which
declined 19 percent. This phenomenon, which can be attributed to concerns
triggered by Asia, also negatively impacted the Fund.
The unwinding of Long Term Capital, a hedge fund that borrowed an estimated
$50 for each $1 of its $3 billion in invested capital, created selling pressure
in stocks in the September quarter. That fund and others like it sold stocks
irrespective of individual-company fundamentals. They did so to raise capital to
cover losses from derivatives and other financial instruments after a shift in
the value of the U.S. dollar versus the Russian ruble and Japanese yen, among
other factors, pushed many hedge funds to the brink of collapse.
Fiscal 1998 represents the first time in the Fund's history that it has
significantly trailed the S&P 500 index, which gained 9 percent in the 12 months
ended September 30. The Russell 2000 declined 19 percent and the Nasdaq
Industrials fell 25 percent. The Fund backtracked 26.5 percent. Although a large
percentage of the Fund's assets are not represented by the Nasdaq Industrials,
the index does provide a proxy for what smaller companies experienced.
The Fund is also a component of the Investor's Business Daily Mutual Fund
Index, which declined 12.6 percent in the 12 months ended September 30. Despite
the 9 percent gain in the S&P 500, 17 of these 23 funds declined.
As the September fiscal year came to a close, more observers adjusted to the
realities of slower growth and recognized that the disparity between smaller-cap
stocks and larger-cap stocks could finally be coming to a conclusion. The
dramatic outperformance for the S&P 500 relative to the Russell 2000 that began
in the middle of 1996 could be showing signs of reversal in the final weeks of
the September quarter.
A significant factor contributing to the Fund's lag relative to the S&P 500
Index is a performance divergence of historic proportion between smaller
companies, measured by the Russell 2000, and larger companies, measured by the
S&P 500. From July 15, 1996, through September 30, 1998, there has emerged an
almost 50 percentage point under performance by smaller companies, which history
strongly suggests will be reversed.
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
BRANDYWINE BLUE FUND, S&P 500 INDEX(1)<F9>, NASDAQ INDUSTRIALS INDEX(2)<F10>
AND RUSSEL 2000 INDEX(3)<F11>
AVERAGE ANNUAL TOTAL RETURN
1-YEAR -26.5%
5-YEAR +10.7%
SINCE INCEPTION 1/10/91*<F8> +16.9%
*<F8> INCEPTION DATE
BRANDYWINE S&P 500 NASDAQ RUSSELL
DATE BLUE FUND INDEX INDUSTRIALS INDEX 2000 INDEX
1/10/91 $100,000 $100,000 $100,000 $100,000
9/30/91 $130,800 $125,100 $149,900 $143,900
9/30/92 $136,032 $138,986 $157,695 $156,851
9/30/93 $200,783 $157,054 $198,222 $208,769
9/30/94 $206,405 $162,708 $197,628 $211,900
9/30/95 $294,747 $211,195 $249,604 $261,485
9/30/96 $320,979 $254,279 $281,553 $295,739
9/30/97 $454,506 $357,771 $349,689 $393,925
9/30/98 $333,880 $390,507 $262,267 $319,000
(1)<F9> The Standard & Poor's 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The
Standard & Poor's Ratings Group designates the stocks to be included
in the Index on a statistical basis. A particular stock's weighting
in the Index is based on its relative total market value (i.e., its
market price per share times the number of shares outstanding).
Stocks may be added or deleted from the Index from time to time. The
Standard & Poor's 500 Index assumes reinvestment of dividends.
(2)<F10> The NASDAQ Industrial Index is a capitalization-weighted index
designed to measure the performance of all NASDAQ stocks in the
industrial sector. The index was developed with a base value of 100
as of February 5, 1971 and does not include income.
(3)<F11> The Russell 2000 Index is an index comprised of 2,000 publicly
traded small capitalization common stocks that are ranked in terms
of capitalization sectors of the United States equity market. The
Russell 2000 Index is a trademark/service mark of the Frank Russell
Company and assumes reinvestment of income.
ACCOUNT SERVICES AND POLICIES
IMMEDIATE BALANCE INFORMATION
We offer a 24-hour a day stockholders service. Just call 1-800-656-3017 or
1-414-765-4124 for an update on your account balance or latest share prices.
The Voice Response Unit (VRU) will guide you to your desired information.
Remember to have your account number handy.
WEB SITE
Visit Brandywine Blue Fund's site on the World Wide Web at
www.brandywinefunds.com.
ACCOUNT MINIMUMS
The Fund reserves the right to redeem the shares held in any account, other
than an IRA, 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 $5,000.
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.
TELEPHONE TRANSACTIONS
It may be difficult to reach the Fund by telephone during periods of unusual
market activity. If you are unable to reach a representative by telephone, you
may have to send written instructions.
Neither the Fund nor Firstar Mutual Fund Services, LLC 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.
Procedures for telephone redemptions may be modified or terminated at any
time by the Fund or its transfer agent, Firstar Mutual Fund Services, LLC.
The Fund reserves the right to refuse a telephone redemption request if it is
believed advisable to do so.
ADDRESS CHANGES
To change the address on your account, call Firstar Mutual Fund Services, LLC
at 1-800-656-3017 or 1-414-765-4124. Any written redemption requests received
within 30 days after an address change, whether such address change is made in
writing or by telephone, must be accompanied by a signature guarantee. NO
TELEPHONE REDEMPTIONS WILL BE ALLOWED WITHIN 30 DAYS OF AN ADDRESS CHANGE.
TEMPORARY SUSPENSION OF SERVICES
The Fund can stop selling shares or postpone payment at times when the New
York Stock Exchange is closed or under any emergency circumstances as determined
by the United States Securities and Exchange Commission.
(BRANDYWINE BLUE FUND, INC.)
PURCHASE APPLICATION
--- This is a follow-up application to an investment by wire transfer.
Mail to:
Brandywine Blue Fund, Inc.
c/o Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Express Mail to:
Brandywine Blue Fund, Inc.
c/o Firstar Mutual Fund Services, LLC
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
- ---------------------- ----------------- Citizen of --- U.S. --- Other
NAME SOCIAL SECURITY #
- -------------------
BIRTHDATE
(Mo/Dy/Yr)
- --- Joint Owner*<F12> (cannot be a minor)
- ---------------------- ----------------- Citizen of --- U.S. --- Other
NAME SOCIAL SECURITY #
- -------------------
BIRTHDATE
(Mo/Dy/Yr)
*<F12>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**<F13> (including Corporate Pension Plans),**<F13> Trust,
Estate or Guardianship ***<F14>
- ------------------------------------------------------------------------------
NAME OF TRUSTEE(S) (IF TO BE INCLUDED IN REGISTRATION)***<F14>
- --- Partnership***<F14>
- ------------------------------------------------------------------------------
NAME OF TRUST/CORPORATION**<F13>/PARTNERSHIP
- --- Other Entity***<F14>
- ---------------------------------------- -----------------------------------
SOCIAL SECURITY #/TAX ID # DATE OF AGREEMENT (Mo/Dy/Yr)
**<F13>Corporate Resolution is required. ***<F14>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 Reinvested
--- Capital Gains & 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 $12.00 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 ABA NUMBER 0R ROUNTING NUMBER
- ------------------------------------ ---------------------------------------
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 IRS DOES 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*<F15>
- ---------------------------- -----------------------------------------------
DATE (Mo/Dy/Yr) SIGNATURE OF CO-OWNER, if any
*<F15>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
TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
CUSTODIAN
Firstar Bank Milwaukee
615 East Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
STATEMENT OF ADDITIONAL INFORMATION November 30, 1998
- -----------------------------------
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 November 30, 1998. 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, Email: [email protected] or Website:
www.brandywinefunds.com, or by calling (800) 656-3017.
<PAGE>
BRANDYWINE BLUE FUND, INC.
Table of Contents
Page No.
INVESTMENT RESTRICTIONS ................................................... 1
DIRECTORS AND OFFICERS OF THE FUND ........................................ 3
PRINCIPAL STOCKHOLDERS .................................................... 7
INVESTMENT ADVISER ........................................................ 7
SERVICE AGREEMENT ......................................................... 9
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 November 30, 1998 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.
-i-
<PAGE>
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated November 30, 1998 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 objectives,
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.
1. 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
<PAGE>
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.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from changes in value of the
Fund's assets will not constitute a violation of that restriction.
-2-
<PAGE>
Portfolio Turnover
The Fund's portfolio turnover rate for fiscal 1998 increased over the
1997 rate because the Fund took a temporary defensive position in fiscal 1998
and liquidated a substantial portion of its portfolio.
-3-
<PAGE>
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*
115 East Snow King Avenue
P. O. Box 576
Jackson, Wyoming
(PRESIDENT, TREASURER AND A
DIRECTOR OF THE FUND)
Mr. Friess, age 58, 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 and sits on the Board of Advisers for the John Templeton
Foundation.
STIG RAMEL
Resedavagen 8
171732 Solna
Sweden
(DIRECTOR)
Mr. Ramel, age 71, who is now retired, 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 Swedish Academy of Sciences. Mr. Ramel also has served as a director
of Brandywine Fund, Inc. since it was founded in 1985.
-4-
<PAGE>
JOHN E. BURRIS
5th and McColley Street
Milford, Delaware
(DIRECTOR)
Mr. Burris, age 78, 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 43, 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.
JOHN D. FRASER
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. Fraser, age 39, has been an analyst for Friess Associates, Inc.
since 1996. From 1985 to 1996, he also served as a Vice President of Credit
Suisse First Boston. Since May, 1998, he has served as a Vice President of the
Fund and as a Vice President of Brandywine Fund.
CARL S. GATES
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. Gates, age 66, has been an analyst for Friess Associates, Inc.
since 1988. He has served as a Vice President of both the Fund and Brandywine
Fund, Inc. since April, 1994.
-5-
<PAGE>
ANDREW T. GRAVES
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. Graves, age 33, has been an analyst for Friess Associates, Inc.
since 1991. Since May, 1998, he has served as a Vice President of the Fund and
as a Vice President of Brandywine Fund.
DAVID T. HARRINGTON
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. Harrington, age 36, has been an analyst for Friess Associates,
Inc. since 1991. Since May, 1998, he has served as a Vice President of the Fund
and as a Vice President of Brandywine Fund.
JOHN P. RAGARD
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT)
Mr. Ragard, age 44, has been an analyst for Friess Associates, Inc.
since 1993. Since May, 1998, he has served as a Vice President of the Fund and
as a Vice President of Brandywine Fund.
PAUL R. ROBINSON
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT AND ASSISTANT SECRETARY)
Mr. Robinson, age 75, 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.
-6-
<PAGE>
LYNDA J. CAMPBELL
3908 Kennett Pike
Greenville, Delaware
(VICE PRESIDENT AND SECRETARY)
Ms. Campbell, age 53, has served as Vice President of the Fund since
May, 1998 and as Secretary since the Fund's inception in 1989. Ms. Campbell has
served as Vice President of Brandywine Fund since May, 1998 and 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, 1998, 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.
-7-
<PAGE>
The table below sets forth the compensation paid by the Fund and
Brandywine Fund to each of the directors of the Fund during the fiscal year
ended September 30, 1998:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from Fund and
Compensation As Part of Fund Benefits Upon Fund Complex
Name of Person From Fund Expenses Retirement Paid to Directors
-------------- --------- -------- ---------- -----------------
<S> <C> <C> <C> <C>
Foster S. Friess $0 $0 $0 $0
Stig Ramel $1,000 $0 $0 $11,000*
John E. Burris $1,000 $0 $0 $11,000*
- ---------------
* Includes compensation paid for services as a director of Brandywine Fund.
</TABLE>
PRINCIPAL STOCKHOLDERS
At October 31, 1998, all officers and directors of the Fund as a group
(11 persons) beneficially owned 1,137,238 shares of Common Stock, or 7.24% of
the then outstanding shares. At such date, Charles Schwab & Co., Inc., 101
Montgomery Street, San Francisco, California 94111, owned of record 1,543,887
shares of the Fund's Common Stock, or 9.83% of the then outstanding shares;
National Financial Services Corp., Church Street Station, P.O. Box 3908, New
York, New York 10068, owned of record 1,264,298 shares of the Fund's Common
Stock, or 8.05% of the then outstanding shares, and Foster S. Friess, P.O. Box
4166, Greenville, Delaware 19807, owned 1,059,622 shares of the Fund's Common
Stock, or 6.74% of the then outstanding shares, of which 1,044,622 shares are
held as trustee. All of the shares owned by Charles Schwab & Co., Inc. and
National Financial Services Corp. 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, 1998, 1997 and 1996, the Fund paid the Adviser fees of $5,424,730,
$4,414,637 and $2,563,756 , 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
-8-
<PAGE>
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, 1998, 1997
and 1996, such expenses included $2,620, $1,775 and $9,450 , 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, 1998, 1997 and 1996.
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.
-9-
<PAGE>
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 $102,000 and varying fees for blue sky filing services. For the
fiscal years ended September 30, 1998, 1997 and 1996, the annual fees were
$102,000, $85,000 and $70,000, respectively. The total fees (i.e., annual and
blue sky fees) paid pursuant to the Service Agreement for the fiscal years ended
September 30, 1998, 1997 and 1996 were $108,800, $91,800 and $70,000,
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, Dr. Martin Luther King, Jr. Day, President's Day, 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. The New
York Stock Exchange also may be closed on national days of mourning.
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.
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 stockholder 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 stockholder 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
-10-
<PAGE>
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 Mutual Fund Services, LLC, 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.
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<PAGE>
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 Mutual Fund Services, LLC in writing. The
stockholder also may vary the amount or frequency of withdrawal payments or
temporarily discontinue them by notifying Firstar Mutual Fund Services, LLC 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
-12-
<PAGE>
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, 1998, 1997 and 1996 totaled $2,949,957 on total
transactions of $1,922,497,872, $1,907,197 on total transactions of
$1,180,501,076 and $1,269,308 on total transactions of $744,605,383,
respectively. All of the brokers to whom commissions were paid provided research
services to the Adviser.
CUSTODIAN
Firstar Bank Milwaukee, 615 East Michigan Street, Milwaukee, Wisconsin
53202, acts as custodian for the Fund. As such, Firstar Bank Milwaukee 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 Bank Milwaukee 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 Mutual Fund Services, LLC, an affiliate
of Firstar Bank Milwaukee, acts as the Fund's transfer agent and dividend
disbursing agent.
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 (the "Code").
The Fund intends to distribute substantially all of its net investment
income and net capital gains each fiscal year. Dividends from the Fund's net
investment income, including short-term capital gains, are taxable to
stockholders as ordinary income, while distributions from the Fund's net
realized capital gains are taxable as long-term capital gains regardless of the
stockholder's holding period for the shares. Distributions from the Fund are
taxable to stockholders, whether received in cash or in additional Fund shares .
A portion of the income distributions of the Fund may be eligible for the 70%
dividends-received deduction for domestic corporate stockholders.
Any dividend or capital gains distribution paid shortly after a
purchase of Fund shares will have the effect of reducing the per share net asset
value of such shares by the
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<PAGE>
amount of the dividend or distribution. Furthermore, if the net asset value of
the Fund shares 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.
Redemptions of shares will generally result in a capital gain or loss
for income tax purposes. Such capital gain or loss will be long term or short
term, depending upon the holding period. However, if a loss is realized on
shares held for six months or less, and the stockholder received a capital gain
distribution during that period, then such loss is treated as a long-term
capital loss to the extent of the capital gain distribution received.
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
stockholder 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.
This section is not intended to be a full discussion of present or
proposed federal income tax laws and the effects of such laws on an investor.
Investors are urged to consult their own tax advisers for a complete review of
the tax ramifications of an investment in the Fund.
STOCKHOLDER MEETINGS
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 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
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<PAGE>
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
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Suite 1500,
Milwaukee, Wisconsin 53202, 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.
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<PAGE>
FINANCIAL STATEMENTS
The following financial statements are incorporated by reference to
the Annual Report, dated September 30, 1998, of Brandywine Blue Fund, Inc. (File
No. 811-6221), as filed with the Securities and Exchange Commission on October
29, 1998:
Report of Independent Accountants
Statement of Net Assets as of September 30, 1998
Statement of Operations for the Year Ended
September 30, 1998
Statements of Changes in Net Assets for the Years
Ended September 30, 1998 and 1997
Financial Highlights for the Years Ended September 30, 1998,
1997, 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
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<PAGE>
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, 1998 (File No. 811-6221), of Brandywine
Blue Fund, Inc. (as filed with the Securities and Exchange
Commission on October 29, 1998))
Brandywine Blue Fund, Inc.
Report of Independent Accountants
Statement of Net Assets as of September 30, 1998
Statement of Operations for the Year Ended
September 30, 1998
Statements of Changes in Net Assets for the
Years Ended September 30, 1998 and 1997
Financial Highlights for the Years Ended
September 30, 1998, 1997, 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(2)
(1.1) Articles Supplementary to Articles of Incorporation
dated March 28, 1996(2)
(2) Registrant's By-Laws as amended through January 15,
1997(2)
(3) None
(4) None
(5) Investment Advisory Agreement(2)
(6) None
(7) None
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<PAGE>
(8) Custodian Agreement with Firstar Trust Company
(predecessor to Firstar Bank Milwaukee, N.A.)(2)
(9.1) Service Agreement with Fiduciary Management, Inc.
(9.2) Transfer Agent Agreement with First Wisconsin Trust
Company (predecessor to Firstar
Bank Milwaukee, N.A.)(2)
(10) Opinion of Foley & Lardner, counsel for Registrant.
(11) Consent of PricewaterhouseCoopers LLP
(12) None
(13) Subscription Agreement(3)
(14) None
(15) None
(16) Schedule for Computation of Performance Quotations(1)
(17) Financial Data Schedule
(18) None
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(1) Previously filed as an exhibit to the Registration Statement and
incorporated by reference thereto. The Registration Statement was filed on
January 31, 1996 and its accession number is 0000897069-96-000015.
(2) Previously filed as an exhibit to the Registration Statement and
incorporated by reference thereto. The Registration Statement was filed on
January 15, 1997 and its accession number is 0000897069-97-000011.
(3) Previously filed as an exhibit to the Registration Statement and
incorporated by reference thereto. The Registration Statement was filed on
January 30, 1998 and its accession number is 0000897069-98-000026.
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 October 31, 1998
-------------- ------------------------
Common Stock, $.01 par value 886
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
h. 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.
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<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 Scottsdale and State of
Arizona on the 23rd day of November, 1998
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, November 23, 1998
- ----------------------
Foster S. Friess Financial and
Accounting Officer
and Director
/s/ Stig Ramel Director November 20 1998
- ----------------------
Stig Ramel
/s/ John E. Burris Director November 19, 1998
- ----------------------
John E. Burris
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<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) None
(5) Investment Advisory Agreement*
(6) None
(7) None
(8) Custodian Agreement with Firstar
Trust Company (predecessor to Firstar Bank
Milwaukee, N.A.)*
(9.1) Service Agreement with Fiduciary
Management, Inc.
(9.2) Transfer Agent Agreement with
First Wisconsin Trust Company (predecessor
to Firstar Bank Milwaukee, N.A.)*
(10) Opinion of Foley & Lardner,
counsel for Registrant
(11) Consent of PricewaterhouseCoopers LLP
(12) None
- -----------------
* Incorporated by Reference
<PAGE>
(13) Subscription Agreement*
(14) None
(15) None
(16) Schedule for Computation of
Performance Quotations*
(17) Financial Data Schedule
(18) None
- -------------------------
Incorporated by Reference
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.
<PAGE>
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
<PAGE>
AMENDMENT TO SERVICE AGREEMENT
AMENDMENT TO SERVICE AGREEMENT made as of this 1st day of
October, 1997, 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 parties hereto did, on the 31st day of December,
1990, enter into a Service Agreement (hereinafter referred to as the
"Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as
permitted by Section 7 thereof.
NOW, THEREFORE, the Fund and Fiduciary hereby agree as follows:
1. Section 4 of the Agreement is hereby amended to read as
follows:
4. Compensation of Fiduciary. For the services rendered by
Fiduciary the Fund shall pay to Fiduciary an annual service fee of
$102,000, beginning October 1, 1997, payable in equal monthly
installments. 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 calendar days during which it is in effect.
2. Except to the extent changed and modified herein, all of
the terms and conditions of the Agreement shall remain unchanged and in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to Service Agreement to be executed on the day first above
written.
FIDUCIARY MANAGEMENT, INC. BRANDYWINE BLUE FUND, INC.
By: ____________________________ By: _________________________________
Ted D. Kellner, Chairman Foster S. Friess, President
and CEO
By: ___________________________ By: _________________________________
Donald S. Wilson, President Lynda J. Campbell, Secretary
CHICAGO FIRSTAR CENTER SACRAMENTO
DENVER 777 EAST WISCONSIN AVENUE SAN DIEGO
JACKSONVILLE MILWAUKEE, WISCONSIN 53202-5367 SAN FRANCISCO
LOS ANGELES TELEPHONE (414) 271-2400 TALLAHASSEE
MADISON FACSIMILE (414) 297-4900 TAMPA
MILWAUKEE WASHINGTON, D.C.
ORLANDO WEST PALM BEACH
November 25, 1998
Brandywine Blue Fund, Inc.
3908 Kennett Pike
Greenville, DE 19807
Ladies & Gentlemen:
We have acted as counsel for you in connection with the preparation of
an Amended Registration Statement on Form N-1A relating to the sale by you of an
indefinite amount of Brandywine Blue Fund, Inc. Common Stock (such Common Stock
being hereinafter referred to as the "Stock") in the manner set forth in the
Amended Registration Statement to which reference is made. In this connection we
have examined: (a) the Amended Registration Statement on Form N-1A; (b) your
Articles of Incorporation and Bylaws, as amended to date; (c) corporate
proceedings relative to the authorization for issuance of the Stock; and (d)
such other proceedings, documents and records as we have deemed necessary to
enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares of
Stock when sold as contemplated in the Amended Registration Statement will be
legally issued, fully paid and nonassessable
We hereby consent to the use of this opinion as an exhibit to the
Amended Registration Statement on Form N-1A. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons whose consent is required
by Section 7 of said Act.
Very truly yours,
/S/Foley & Lardner
Foley & Lardner
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