UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number
811-04447
Brandywine Fund, Inc.
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(Exact name of registrant as specified in charter)
3711 Kennett Pike
Greenville, DE 19807
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(Address of principal executive offices) (Zip code)
Foster S. Friess
Friess Associates, LLC
115 East Snow King Avenue,
P. O. Box 576
Jackson, Wyoming 83001
----------------------
(Name and address of agent for service)
(302) 656-3017
--------------
Registrant's telephone number, including area code:
Date of fiscal year end: 09/30/2003
Date of reporting period: 09/30/2003
ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------
THE BRANDYWINE FUNDS
Managed by Friess Associates, LLC Annual Report September 30, 2003
DEAR FELLOW SHAREHOLDERS:
Brandywine and Brandywine Blue grew 2.1 and 1.9 percent in the September-
quarter, bringing their year-to-date gains to 16.5 and 16.2 percent. We're
encouraged that this solid performance occurred despite an environment dominated
by excessively risky stocks and confident that our focus on companies with
strong fundamentals will increasingly benefit the Brandywine Funds as the market
digests what's transpired so far this year.
Makers of durable consumer goods were a notable positive force in the
September quarter. Portfolio holdings handily outperformed the sector as a whole
thanks to company-specific factors that drew attention to Nissan Motors (in both
funds) and audio-equipment maker Harman International (Brandywine). Harman, for
example, built on its lengthy string of positive earnings surprises with 45
percent June-quarter earnings growth.
Retail and technology holdings helped Brandywine Blue maintain its year-to-
date lead on large-cap indexes such as the S&P 500 and Russell 1000, which are
up 14.7 and 15.7 percent so far this year. While holdings from those sectors
also contributed to Brandywine's performance, they didn't bolster relative
performance versus mid-cap indexes by quite as much.
For more information on the specific holdings that influenced September-
quarter results the most, please see "Roses & Thorns" on pages 4 and 6.
BRANDYWINE BRANDYWINE BLUE
CUMULATIVE % CHANGE % CHANGE
---------- ---------- ---------------
QUARTER 2.11 1.90
ONE YEAR 11.64 16.94
FIVE YEARS 40.69 47.27
TEN YEARS 123.57 144.87
INCEPTION 794.10*<F1> 391.50**<F2>
ANNUALIZED
----------
FIVE YEARS 7.07 8.05
TEN YEARS 8.38 9.37
INCEPTION 13.14*<F1> 13.33**<F2>
*<F1> 12/30/85 **<F2> 1/10/91
Past performance is no guarantee of future results. The principal value and
investment return of an investment will fluctuate so that when redeemed an
investor's shares may be worth more or less than their original cost.
One of Wall Street's better-known axioms is that smaller companies lead the
market in the early stage of an economic recovery, and investors have used this
to justify speculative bets on small and midsize companies with lackluster
fundamentals, high valuations or both.
For example, a key reason Brandywine didn't capture the full rise in tech
stocks in the quarter was that we harvested gains in many tech stocks when their
price-to-earnings ratios hit 25 or 30, only to watch them run up to frothy
levels of 40, 50 or higher. Another reason was that weak stocks fueled much of
tech's rise.
According to Morningstar, the type of stocks that outperformed by a wide
margin in the September quarter and in the six months through September fell
into the firm's "distressed" category. Meanwhile, we can cite numerous examples
of companies firing on all cylinders whose results went unnoticed or actually
led to declines during this time. Aetna, a big year-to-date contributor, was a
drag on September-quarter results. Shares began falling soon after Aetna topped
estimates by 25 percent with 300 percent June-quarter earnings growth and raised
guidance for future earnings growth.
Aetna's decline offset a sizable rise in Brandywine holding Pharmaceutical
Resources. Other health-care holdings generally lagged the overall market
because of the focus on tech and other areas that top-down market strategists
deem more appealing in economic recoveries. As a result, health care as a group
was a performance detractor.
It's an odd position to be in when a double-digit gain through the first
nine months of the year begs explanation. But, like you, we're acutely aware of
relative performance. While Brandywine outpaces major indexes such as the S&P
500 this year, we recognize that's not the case versus some other commonly
touted benchmarks. A closer look at indexes that currently lead Brandywine
portfolio in the short, year-to-date timeframe sheds some light on relative
results.
The Russell Midcap, for example, grew 6.4 percent in the September quarter
and is up 22.9 percent so far this year. A study by Prudential shows that
companies with no earnings were the largest performance contributors in both
-----------
periods! Companies in the index's top 20 percent in terms of price-to-earnings
ratios, a quintile with a median P/E of 40, represented the second greatest
positive performance influence.
The same reckless trend was evident in the Russell Midcap Growth. With a 116
percent year-to-date gain, Yahoo, a company with a 2003 P/E of 101, was the
index's top contributor. The top 15 contributors to the index this year have an
average P/E of 52.
We're growth investors that expect the stocks we identify to experience P/E-
multiple expansion as the broader investment community becomes aware of the
catalysts that drive earnings growth among the companies we hold. But we don't
throw caution to the wind.
We're also valuation-sensitive because the more a stock's price gets ahead
of underlying fundamentals the more likely it is to fall, and no one can predict
what will trigger the decline or when. Said simply, we don't bet your assets in
a game of chicken against the market's mood no matter how rosy things seem at a
given point in time.
A rally led by low-quality and overpriced stocks is unsustainable. A
stronger connection between stock prices and fundamentals will need to arise if
the market's progress is to continue, and we're already seeing evidence of such
a development as we approach earnings reporting season for the first three
months of the highly anticipated second half of the year.
Investors have pinned their hopes on a late-year economic recovery, and we
expect weak companies with results that belie this overarching thesis to be
punished while companies that provide positive confirmation on the grassroots
level invite rewards.
The average Brandywine Funds holding sells at just 16 times 2004 estimates
and is expected to grow earnings 29 percent next year, versus a P/E of over 17
and an earnings growth rate of only 10 percent for the average S&P 500 company.
We sense investors will find the strong earnings trends and reasonable
valuations among your companies increasingly appealing in the months ahead.
Thanks for your long-term focus and continued confidence. We're working hard
to build on the growth your portfolio achieved this year through September. Your
entire Friess team joins me in sending best wishes.
Sincerely,
/s/ Bill D'Alonzo
Bill D'Alonzo
Chief Executive Officer October 10, 2003
LATE TRADING, MARKET TIMING AND THE BRANDYWINE FUNDS
By now you're probably aware of investigations involving mutual fund firms
that allegedly allowed "late trading," the placing of orders after the market's
close at a mutual fund's net asset value for that day. Late trading is illegal
under the Investment Company Act of 1940 and other federal securities laws. The
Brandywine Funds have never permitted late trading and would not even if there
was no law against it, as it is an obvious violation of the trust shareholders
place in mutual fund managers.
As distinguished from late trading, the market timing of mutual funds is an
investment strategy that certain investors pursue, and one that is not on its
face illegal. Nonetheless, to the best of our knowledge, the Brandywine Funds
are not used for market timing arbitrage activities. Additionally, we do not
have any special arrangements in place with intermediaries or other third
parties to permit or facilitate such arbitrage activities.
Like all mutual fund industry participants, at SEC Chairman William
Donaldson's request we are pro-actively examining our policies and procedures in
areas touched by the recent investigation to see whether they could be further
improved upon.
We take our obligations to you, our fellow shareholders, seriously. Thank
you for your continued confidence in the Brandywine Funds.
INVESTMENT MINIMUM LOWERED . . .
Over the years, many folks asked that we reduce the $25,000 minimum
investment for Brandywine and Brandywine Blue. Well, we listened. The Funds'
board voted to allow investments into the Brandywine Funds at $10,000, effective
November 1, 2003. If you know of friends or family who passed on the Brandywine
Funds because the $25,000 minimum was too high, please let them know.
BRANDYWINE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. UnitedHealth Group, Inc. -6.7%
2. State Street Corp. +3.7%
3. Autozone, Inc. +0.7%
4. Nextel Communications, Inc. +32.4%
5. Williams-Sonoma, Inc. -10.3%
6. Oracle Corp. -11.7%
7. Fox Entertainment Group, Inc. -6.8%
8. Boston Scientific Corp. -4.1%
9. Express Scripts, Inc. -0.9%
10. BJ Services Co. -6.1%
EARNINGS GROWTH
YOUR COMPANIES 27%
S&P 500 10%
FORECASTED INCREASE IN EARNINGS PER SHARE
2004 VS 2003
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE.
SEPTEMBER 30, 2003.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
28.8%
MID CAP
$2 billion to $9 billion
52.4%
SMALL CAP
below $2 billion
16.4%
CASH
2.4%
TOP TEN INDUSTRY GROUPS
Financial/Business Services (10.4%)
Specialty Retailing (8.2%)
Computer/Electronics (7.8%)
Medical/Dental Products & Services (7.6%)
Automotive Related (7.4%)
Software (7.1%)
Semiconductor Related (6.0%)
Medical/Managed Care (5.8%)
Communications Equipment/Services (5.5%)
Health Care Related (5.3%)
All Others (26.5%)
Cash (2.4%)
BRANDYWINE FUND
SEPTEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
----------------- ------------- ------ ---------------
Nissan Motor Co. $19.7 17.6 Nissan continued to gain U.S. market share through sales of new models such as its
Quest minivan. The popularity of its new line of offerings allowed Japan's third-
largest automaker to sell 700,215 vehicles representing $13.7 billion in revenue
in the three months through June without the costly incentives that are common
among its competitors.
Best Buy Co. $18.4 18.1 Strong back-to-school computer sales helped the electronics retailer boost August-
quarter same-store sales 7.5 percent from year-ago levels. Earnings jumped to
$0.42 per share from $0.24 a year ago on demand for high-margin digital products,
such as televisions, phones and cameras. Your team sold Best Buy when it reached
its target price.
Pharmaceutical
Resources $15.7 40.2 The manufacturer and distributor of generic drugs grew June-quarter earnings 19
percent, beating Wall Street expectations. The company announced it will sell a
generic version of GlaxoSmithKline's antidepressant drug Paxil, which had 2002
sales of $2 billion. Pharmaceutical Resources raised revenue guidance for
calendar-year 2003 on September 30.
Cytyc Corp. $9.8 43.0 The developer of diagnostic tests for women turned in record June-quarter results,
driven by 10 percent quarterly sequential volume growth of its ThinPrep Pap Test
for cervical cancer. The company also received FDA approval for an imaging system
that reads ThinPrep slides.
Nextel
Communications $9.0 9.1 June-quarter earnings per share quadrupled to $0.28, beating estimates by 13
percent. The wireless carrier's nationwide rollout of "direct connect" continues
to drive subscriber growth and increase revenue generated per user. The company
lowered its interest expense during the quarter by refinancing debt and improved
its debt-to-capital ratio.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------- ------ ---------------
Oracle Corp. $12.1 11.7 The enterprise software developer matched August-quarter earnings growth forecasts
of 14 percent, but lost ground because of weaker-than-expected license revenues.
August is typically a weak quarter for the company and overall improving trends in
technology spending coincide with the start of an upgrade cycle in database
products, which account for 80 percent of Oracle's license revenues.
Aetna Inc. $10.9 9.8 June-quarter earnings grew to $1.28 per share from $0.32 a year ago, beating
estimates by 25 percent. However, shares fell on membership and revenue declines,
which should have been expected as the health insurer aggressively cut
unprofitable members in a bid to improve its profitability earlier this year.
Additionally, an analyst's report raised concerns that health insurers may not be
able to increase prices or add members if the job market doesn't turn around. Your
team sold Aetna and locked in a substantial profit.
Williams-Sonoma, Inc. $10.6 10.3 The owner of Pottery Barn and Williams-Sonoma specialty stores grew June-quarter
earnings 25 percent. Fears that a fragile economic recovery would falter were
exacerbated by an analyst inferring that a change in the company's hiring plans
was driven by declining sales trends. Williams-Sonoma raised its earnings guidance
for the October quarter.
Cardinal Health $9.4 10.0 June-quarter earnings grew 20 percent, but the pharmaceutical wholesaler lowered
its long-term growth expectations. A lack of new drugs hitting the market and
longer regulatory reviews for those in the pipeline has tightened the inventory
channel and made products less profitable. Your team sold Cardinal Health to fund
an idea with better near-term prospects.
UnitedHealth Group $9.2 6.7 Despite 41 percent June-quarter earnings growth that exceeded estimates, shares
declined as investors migrated into speculative names and away from solid,
predictable growth companies in the "conservative" health-care sector. The
provider of health-care coverage has a long history of surpassing Wall Street's
earnings expectations, which currently predict calendar-year 2003 earnings growth
of 35 percent.
All gains/losses are calculated on an average cost basis
BRANDYWINE BLUE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. Nextel Communications, Inc. +34.5%
2. UnitedHealth Group Inc. -5.7%
3. Autozone, Inc. +0.0%
4. State Street Corp. +4.3%
5. Texas Instruments Inc. -1.3%
6. Fox Entertainment Group, Inc. -7.2%
7. America Movil +10.9%
8. Hewlett-Packard Co. -4.9%
9. Oracle Corp. -11.4%
10. Baxter International Inc. -3.2%
EARNINGS GROWTH
YOUR COMPANIES 32%
S&P 500 10%
FORECASTED INCREASE IN EARNINGS PER SHARE
2004 VS 2003
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE.
SEPTEMBER 30, 2003.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
57.2%
MID CAP
$2 billion to $9 billion
34.7%
CASH
8.1%
TOP TEN INDUSTRY GROUPS
Financial/Business Services (10.2%)
Specialty Retailing (9.9%)
Semiconductor Related (9.5%)
Communications Equipment/Services (8.9%)
Medical/Dental Products & Services (7.4%)
Software (7.0%)
Automotive Related (6.9%)
Computer/Electronics (6.3%)
Oil/Gas Services (5.4%)
Medical/Managed Care (4.8%)
All Others (15.6%)
Cash (8.1%)
BRANDYWINE BLUE FUND
SEPTEMBER QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
----------------- ------------- ------ ---------------
Best Buy Co. $2.5 17.5 Strong back-to-school computer sales helped the electronics retailer boost August-
quarter same-store sales 7.5 percent from year-ago levels. Earnings jumped to
$0.42 per share from $0.24 a year ago on demand for high-margin digital products,
such as televisions, phones and cameras. Your team sold Best Buy when it reached
its target price.
Nissan Motor Co. $2.3 17.6 Nissan continued to gain U.S. market share through sales of new models such as its
Quest minivan. The popularity of its new line of offerings allowed Japan's third-
largest automaker to sell 700,215 vehicles representing $13.7 billion in revenue
in the three months through June without the costly incentives that are common
among its competitors.
Staples, Inc. $1.5 17.0 July-quarter earnings jumped 38 percent, beating estimates by 13 percent, as the
operator of office-supply superstores attracted more business customers and
enjoyed record operating profit margins. Sales in the three months ended August
surged 18 percent to nearly $2.9 billion.
Intel Corp. $1.4 18.1 June-quarter earnings grew 56 percent, topping consensus estimates. The
manufacturer of microprocessors for computers raised guidance by 21 percent in
September. Personal computer sales rose and the mix shifted to higher-margin
notebook computers utilizing Intel's recently introduced Centrino chip, which
enables wireless Internet access. Your team sold Intel when it reached its target
price.
Nextel
Communications $1.3 9.1 June-quarter earnings per share quadrupled to $0.28, beating estimates by 13
percent. The wireless carrier's nationwide rollout of "direct connect" continues
to drive subscriber growth and increase revenue generated per user. The company
lowered its interest expense during the quarter by refinancing debt and improved
its debt-to-capital ratio.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------- ------ ---------------
Oracle Corp. $1.5 11.4 The enterprise software developer matched August-quarter earnings growth forecasts
of 14 percent, but lost ground because of weaker-than-expected license revenues.
August is typically a weak quarter for the company and overall improving trends in
technology spending coincide with the start of an upgrade cycle in database
products, which account for 80 percent of Oracle's license revenues.
Aetna Inc. $1.1 9.9 June-quarter earnings grew to $1.28 from $0.32 a year ago, beating estimates by 25
percent. However, shares fell on membership and revenue declines, which should
have been expected as the health insurer aggressively cut unprofitable members in
a bid to improve its profitability. Additionally, an analyst's report raised
concerns that health insurers may not be able to increase prices or add members if
the job market doesn't turn around. Your team sold Aetna and locked in a
substantial profit.
XL Capital CL A $1.1 7.0 June-quarter earnings per share grew to $1.94 from $0.18 a year ago. The provider
of insurance and reinsurance coverage sold off as hurricane Isabel moved toward
the East Coast. Your team sold XL Capital to fund an idea with greater near-term
earnings visibility.
Cardinal Health $0.9 9.7 June-quarter earnings grew 20 percent, but the pharmaceutical wholesaler lowered
its long-term growth expectations. A lack of new drugs hitting the market and
longer regulatory reviews for those in the pipeline has tightened the inventory
channel and made products less profitable. Your team sold Cardinal Health to fund
an idea with better near-term prospects.
Fox Entertainment
Group $0.9 7.3 Shares fell when a competitor reduced its full-year revenue forecast, saying that
advertising sales in local markets were falling short of expectations. June-
quarter earnings per share grew to $0.29 from $0.08 a year ago, topping estimates
by 21 percent. Fox has experienced an increase in upfront advertising spending due
to hit shows like "American Idol."
All gains/losses are calculated on an average cost basis
MANAGEMENT'S DISCUSSION OF RESULTS, BRANDYWINE FUND
Brandywine is a growth fund, one that values companies based on their
ability to grow earnings. Earnings did not drive stock prices for most of the 12
months through September, and companies with poor fundamentals prospered.
Advanced Micro Devices, a company expected to lose money in 2003 and 2004,
typified this dominant market trend. Analysts now believe the company's losses
will be 91 and 200 percent worse in those years than they predicted just six
months ago. Despite the company's deteriorating outlook, Advanced Micro soared
108 percent in the year ended September 30.
The trend toward low-quality stocks was especially pronounced in the
December quarter of 2002, when investors made sector bets on semiconductors and
other broad groups based on general optimism about the economy rather than the
actual earnings prospects of the specific companies in the sectors. For example,
the Philadelphia Stock Exchange Semiconductor Index grew 21 percent in the
quarter at the same time 2003 earnings estimates for the companies in the index
fell 25 percent.
Brandywine did not hold the kind of earnings-challenged technology-related
stocks that performed best in the December quarter, so it trailed most major
indexes during the period. In the March quarter of 2003, however, Brandywine
fared better than most indexes as the prelude to the Iraq war prompted investors
to rethink the highly risky bets they placed in the months before.
Aggressive investing with little regard to individual-company fundamentals
resumed with the commencement and rapid progress of military operations in Iraq.
While the continuation of the speculative mentality of the December quarter was
the guiding trend, the elimination of pre-war uncertainty also fueled a positive
environment for companies with solid fundamentals.
Brandywine's results improved markedly in the first three quarters of 2003,
though it did trail some indexes such as the Russell Midcap Growth as companies
we wouldn't own contributed to its rise. For instance, Yahoo, which sports a
2003 price-to-earnings ratio of 101, contributed most to the index's year-to-
date performance through September with its 116 percent gain. Meanwhile,
Brandywine kept pace with "the market" as measured by the Russell 3000 while
outperforming the S&P 500 in this nine-month stretch.
Comparison of Change in Value of $10,000 Investment in Brandywine Fund,
S&P 500 INDEX(1)<F3>, NASDAQ Industrials Index(2)<F4> and Russell 3000
Index(3)<F5>
BRANDYWINE FUND S&P 500 NASDAQ INDUSTRIALS RUSSELL 3000
--------------- ------- ------------------ ------------
1993 10000 10000 10000 10000
1994 9860 10360 9970 9997
1995 14346 13447 12592 12599
1996 15781 16191 14204 14968
1997 21983 22780 17641 20720
1998 15894 24853 13231 21634
1999 21742 31762 20640 27328
2000 31050 35980 27652 32299
2001 24076 26397 14733 23284
2002 20033 20991 12640 18902
2003 22364 26111 18930 23801
AVERAGE ANNUAL TOTAL RETURN
Since Inception
1-Year 5-Year 10-Year 12/30/85
------ ------ ------- ---------------
11.64% 7.07% 8.38% 13.14%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE GRAPH AND THE
TABLE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
(1)<F3> The S&P 500 Index consists of 500 stocks, mostly on the New York Stock
Exchange, selected by the Standard & Poor's Ratings Group. Each
stock's weighting is based on its relative total market value. Stocks
may be added or deleted from the Index which assumes reinvestment of
dividends.
(2)<F4> The NASDAQ Industrials is capitalization-weighted to measure the
performance of all NASDAQ stocks in the industrial sector and does not
include income.
(3)<F5> The Russell 3000, a trademark of the Frank Russell Company, is 3,000
of the largest publicly traded companies in the United States equity
market and includes income.
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
September 30, 2003
SHARES OR
PRINCIPAL
AMOUNT COST VALUE
- --------- ---- -----
COMMON STOCKS - 97.6% (A)<F7>
AEROSPACE/DEFENSE - 1.6%
100,000 DRS Technologies, Inc.*<F6> $ 2,492,062 $ 2,413,000
1,200,000 L-3 Communications
Holdings, Inc.*<F6> 49,069,369 51,900,000
-------------- --------------
51,561,431 54,313,000
THIS SECTOR IS 5.3% ABOVE YOUR FUND'S COST.
APPAREL & SHOE RETAILERS - 1.7%
850,000 Aeropostale, Inc.*<F6> 23,037,061 22,992,500
83,000 Kellwood Co. 2,774,714 2,776,350
380,000 The Men's Wearhouse, Inc.*<F6> 10,244,402 9,747,000
600,000 Talbots, Inc. 21,528,140 20,910,000
-------------- --------------
57,584,317 56,425,850
THIS SECTOR IS 2.0% BELOW YOUR FUND'S COST.
AUTOMOTIVE RELATED - 7.4%
750,000 Advance Auto Parts, Inc.*<F6> 37,581,903 53,175,000
1,310,200 AutoZone, Inc.*<F6> 116,480,166 117,302,206
644,700 Cooper Tire & Rubber Co. 11,228,624 10,231,389
650,800 Goodyear Tire & Rubber Co. 5,042,661 4,275,756
300,000 Harman International
Industries, Inc. 14,713,877 29,505,000
1,700,000 Nissan Motor Co., Ltd. SP-ADR 24,550,184 36,941,000
-------------- --------------
209,597,415 251,430,351
THIS SECTOR IS 20.0% ABOVE YOUR FUND'S COST.
BUILDING RELATED - 3.3%
56,000 Chicago Bridge & Iron Co.
N.V. - NYS 1,218,000 1,520,960
500,000 Pulte Homes, Inc. 32,910,789 34,005,000
686,800 Ryland Group, Inc. 46,941,274 50,211,948
660,000 Standard Pacific Corp. 22,538,703 25,014,000
-------------- --------------
103,608,766 110,751,908
THIS SECTOR IS 6.9% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT/SERVICES - 5.5%
2,550,000 America Movil S.A. de C.V.
ADR Series L 53,413,202 58,930,500
800,000 Andrew Corp.*<F6> 10,742,708 9,664,000
5,511,900 Nextel Communications, Inc.*<F6> 82,055,530 108,639,549
150,000 NII Holdings Inc. Cl B*<F6> 8,955,045 8,902,500
250,000 Westell Technologies, Inc.*<F6> 2,591,700 1,872,500
-------------- --------------
157,758,185 188,009,049
THIS SECTOR IS 19.2% ABOVE YOUR FUND'S COST.
COMPUTER/ELECTRONICS - 7.8%
500,000 Arrow Electronics, Inc.*<F6> 9,464,270 9,195,000
125,000 AVX Corp. 1,729,388 1,711,250
800,000 Computer Sciences Corp.*<F6> 31,998,278 30,056,000
450,000 Cray, Inc.*<F6> 4,616,307 4,927,500
100,000 Dot Hill Systems Corp.*<F6> 1,550,000 1,377,000
465,000 Enterasys Networks, Inc.*<F6> 1,847,468 1,860,000
3,695,200 Hewlett-Packard Co. 75,317,730 71,539,072
1,279,600 Maxtor Corp.*<F6> 14,038,754 15,572,732
1,043,600 PerkinElmer, Inc. 14,731,476 15,977,516
300,000 Tektronix, Inc. 7,573,671 7,425,000
3,400,000 Teradyne, Inc.*<F6> 69,643,322 63,240,000
1,295,000 Vishay Intertechnology, Inc.*<F6> 21,980,124 22,688,400
1,350,000 Western Digital Corp.*<F6> 17,890,725 17,401,500
-------------- --------------
272,381,513 262,970,970
THIS SECTOR IS 3.5% BELOW YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 10.4%
875,000 Bank of New York Company, Inc. 27,033,829 25,471,250
305,000 CACI International Inc.*<F6> 9,853,202 13,069,250
200,000 Corrections Corporation
of America*<F6> 5,273,451 4,934,000
1,050,000 Diebold, Inc. 43,910,034 53,182,500
7,300,000 E*TRADE Group, Inc.*<F6> 64,181,834 67,598,000
461,000 Fiserv, Inc.*<F6> 14,162,640 16,729,690
26,500 Gartner, Inc.*<F6> 257,278 292,030
400,000 ITT Educational Services, Inc.*<F6> 12,341,178 19,168,000
447,300 Northern Trust Corp. 19,251,262 18,943,155
2,750,000 State Street Corp. 119,332,491 123,750,000
69,300 Sylvan Learning Systems, Inc.*<F6> 1,925,889 1,899,513
250,000 Total System Services, Inc. 6,543,598 6,587,500
-------------- --------------
324,066,686 351,624,888
THIS SECTOR IS 8.5% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 4.0%
1,400,000 Brinker International, Inc.*<F6> 41,718,205 46,704,000
425,000 CBRL Group, Inc. 16,504,924 15,113,000
1,570,200 McDonald's Corp. 27,785,784 36,962,508
1,500,000 SUPERVALU INC. 33,989,934 35,790,000
-------------- --------------
119,998,847 134,569,508
THIS SECTOR IS 12.1% ABOVE YOUR FUND'S COST.
HEALTH CARE RELATED - 5.3%
1,400,000 Express Scripts, Inc.*<F6> 86,355,316 85,554,000
1,250,000 Fisher Scientific
International Inc.*<F6> 49,034,019 49,612,500
1,325,000 McKesson Corp. 44,334,498 44,109,250
-------------- --------------
179,723,833 179,275,750
THIS SECTOR IS 0.2% BELOW YOUR FUND'S COST.
HOME/OFFICE RELATED - 0.7%
87,200 HON INDUSTRIES Inc. 2,882,329 3,222,912
900,000 Leggett & Platt, Inc. 19,722,706 19,467,000
85,500 Herman Miller, Inc. 1,783,767 1,946,835
-------------- --------------
24,388,802 24,636,747
THIS SECTOR IS 1.0% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 2.3%
1,150,000 Marvel Enterprises, Inc.*<F6> 22,852,221 25,587,500
1,805,200 Royal Caribbean Cruises Ltd. 52,004,864 50,744,172
-------------- --------------
74,857,085 76,331,672
THIS SECTOR IS 2.0% ABOVE YOUR FUND'S COST.
MEDIA GROUP - 3.8%
850,000 Entercom Communications
Corp.*<F6> 41,687,128 38,097,000
3,200,000 Fox Entertainment Group, Inc.*<F6> 96,083,685 89,568,000
-------------- --------------
137,770,813 127,665,000
THIS SECTOR IS 7.3% BELOW YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SERVICES - 7.6%
2,250,000 Baxter International Inc. 67,666,723 65,385,000
1,350,000 Boston Scientific Corp.*<F6> 89,779,080 86,130,000
1,600,000 Cytyc Corp.*<F6> 19,412,031 24,016,000
625,000 Henry Schein, Inc.*<F6> 29,661,403 35,443,750
50,000 Omnicare, Inc. 1,799,365 1,803,000
600,000 QLT Inc.*<F6> 10,357,478 9,594,000
140,000 Respironics, Inc.*<F6> 5,142,871 5,856,200
50,000 Sybron Dental Specialties, Inc.*<F6> 1,143,315 1,253,500
3,100,000 WebMD Corp.*<F6> 35,146,598 27,745,000
-------------- --------------
260,108,864 257,226,450
THIS SECTOR IS 1.1% BELOW YOUR FUND'S COST.
MEDICAL/MANAGED CARE - 5.8%
225,000 American Medical Security
Group, Inc.*<F6> 3,192,969 4,569,750
300,000 AMERIGROUP Corp.*<F6> 8,766,268 13,389,000
975,000 Coventry Health Care, Inc.*<F6> 50,342,692 51,421,500
2,550,000 UnitedHealth Group Inc. 137,549,898 128,316,000
-------------- --------------
199,851,827 197,696,250
THIS SECTOR IS 1.1% BELOW YOUR FUND'S COST.
OIL/GAS EXPLORATION & PRODUCTION - 1.2%
1,550,000 Pioneer Natural Resources Co.*<F6> 36,064,476 39,463,000
THIS SECTOR IS 9.4% ABOVE YOUR FUND'S COST.
OIL/GAS SERVICES - 4.3%
2,100,000 BJ Services Co.*<F6> 76,438,142 71,757,000
100,000 Core Laboratories N.V.*<F6> 984,952 1,405,000
1,250,000 Nabors Industries, Ltd.*<F6> 47,764,719 46,575,000
1,000,000 Rowan Companies, Inc.*<F6> 24,551,134 24,580,000
160,000 Unit Corp.*<F6> 3,147,297 3,014,400
-------------- --------------
152,886,244 147,331,400
THIS SECTOR IS 3.6% BELOW YOUR FUND'S COST.
PHARMACEUTICALS - 2.4%
525,000 Biovail Corp.*<F6> 19,968,384 19,503,750
315,000 K-V Pharmaceutical Co.*<F6> 4,551,836 7,087,500
800,000 Pharmaceutical Resources, Inc.*<F6> 37,724,860 54,576,000
125,000 QIAGEN N.V.*<F6> 1,218,000 1,326,250
-------------- --------------
63,463,080 82,493,500
THIS SECTOR IS 30.0% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR RELATED - 6.0%
6,450,000 Agere Systems Inc.*<F6> 17,823,542 19,801,500
1,800,000 Fairchild Semiconductor
International, Inc.*<F6> 30,108,449 29,844,000
4,350,000 Flextronics International Ltd.*<F6> 57,795,979 61,857,000
135,000 Lexar Media, Inc.*<F6> 954,477 2,303,100
2,700,000 Micron Technology, Inc.*<F6> 38,956,794 36,234,000
200,000 Semtech Corp.*<F6> 3,812,910 3,702,000
2,200,000 Texas Instruments Inc. 50,021,892 50,160,000
-------------- --------------
199,474,043 203,901,600
THIS SECTOR IS 2.2% ABOVE YOUR FUND'S COST.
SOFTWARE - 7.1%
300,000 Autodesk, Inc. 5,220,093 5,106,000
1,350,000 DST Systems, Inc.*<F6> 51,612,435 50,760,000
8,065,000 Oracle Corp.*<F6> 102,795,819 90,731,250
1,900,000 PeopleSoft, Inc.*<F6> 34,022,906 34,713,000
647,300 Reynolds & Reynolds Co. 16,277,258 17,833,115
185,000 SERENA Software, Inc.*<F6> 3,576,273 3,413,250
1,400,000 SunGard Data Systems Inc.*<F6> 36,545,188 36,834,000
-------------- --------------
250,049,972 239,390,615
THIS SECTOR IS 4.3% BELOW YOUR FUND'S COST.
SPECIALTY RETAILING - 8.2%
715,000 Barnes & Noble, Inc.*<F6> 16,226,697 18,168,150
150,000 Bombay Company, Inc.*<F6> 1,458,726 1,477,500
1,200,000 Borders Group, Inc.*<F6> 21,817,092 22,704,000
900,000 Hollywood Entertainment Corp.*<F6> 14,211,364 15,300,000
1,650,000 Home Depot, Inc. 47,048,940 52,552,500
450,000 Michaels Stores, Inc. 20,318,978 18,342,000
436,300 Regis Corp. 12,448,256 14,005,230
1,588,400 Staples, Inc.*<F6> 32,527,921 37,867,456
3,441,600 Williams-Sonoma, Inc.*<F6> 103,461,179 92,854,368
200,000 Yankee Candle Company, Inc.*<F6> 4,036,120 5,096,000
-------------- --------------
273,555,273 278,367,204
THIS SECTOR IS 1.8% ABOVE YOUR FUND'S COST.
TRANSPORTATION RELATED - 0.5%
125,000 ExpressJet Holdings, Inc.*<F6> 1,762,178 1,725,000
225,000 Frontier Airlines, Inc.*<F6> 3,815,645 3,699,000
457,100 Werner Enterprises, Inc. 10,084,671 10,495,016
-------------- --------------
15,662,494 15,919,016
THIS SECTOR IS 1.6% ABOVE YOUR FUND'S COST.
MISCELLANEOUS - 0.7%
100,000 GrafTech International Ltd.*<F6> 762,495 800,000
190,000 Peabody Energy Corp. 6,029,537 5,960,300
175,000 StanCorp Financial Group, Inc. 9,489,242 10,053,750
970,000 Tesoro Petroleum Corp.*<F6> 7,360,565 8,206,200
-------------- --------------
23,641,839 25,020,250
THIS SECTOR IS 5.8% ABOVE YOUR FUND'S COST.
-------------- --------------
Total common stocks 3,188,055,805 3,304,813,978
SHORT-TERM INVESTMENTS - 2.7% (A)<F7>
COMMERCIAL PAPER - 2.6%
$27,000,000 Alcoa Inc.,
due 10/01/03, discount of 1.13% 27,000,000 27,000,000
63,000,000 Mortgage Interest Networking Trust,
due 10/01/03 -- 10/02/03,
discounts of 1.10% 62,999,083 62,999,083
-------------- --------------
Total commercial paper 89,999,083 89,999,083
VARIABLE RATE DEMAND NOTE - 0.1%
2,741,458 U.S. Bank, N.A. 2,741,458 2,741,458
-------------- --------------
Total short-term investments 92,740,541 92,740,541
-------------- --------------
Total investments $3,280,796,346 3,397,554,519
--------------
--------------
Liabilities, less cash and
receivables (0.3%) (A)<F7> (11,964,969)
--------------
NET ASSETS $3,385,589,550
--------------
--------------
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($3,385,589,550 / 158,968,441
shares outstanding) $21.30
------
------
*<F6> Non-dividend paying security.
(a)<F7> Percentages for the various classifications relate to net assets.
NYS - NY Registered Shares
ADR -- American Depository Receipts
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2003
INCOME:
Dividends $ 15,527,322
Interest 1,859,013
------------
Total income 17,386,335
EXPENSES:
Management fees 31,476,934
Transfer agent fees 1,190,983
Administrative services 547,585
Printing and postage expense 357,437
Custodian fees 308,022
Board of Directors fees 114,039
Registration fees 47,403
Professional fees 44,583
Other expenses 50,924
------------
Total expenses 34,137,910
------------
NET INVESTMENT LOSS (16,751,575)
------------
NET REALIZED GAIN ON INVESTMENTS 204,896,466
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 156,935,580
------------
NET GAIN ON INVESTMENTS 361,832,046
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $345,080,471
------------
------------
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 2003 and 2002
2003 2002
---- ----
OPERATIONS:
Net investment loss $ (16,751,575) $ (20,527,578)
Net realized gain (loss) on investments 204,896,466 (403,830,527)
Net increase (decrease) in unrealized appreciation on investments 156,935,580 (234,611,174)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 345,080,471 (658,969,279)
-------------- --------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (21,107,528 and 21,852,014 shares, respectively) 410,081,518 479,222,817
Cost of shares redeemed (29,685,813 and 41,977,386 shares, respectively) (566,431,690) (926,380,230)
-------------- --------------
Net decrease in net assets derived from Fund share activities (156,350,172) (447,157,413)
-------------- --------------
TOTAL INCREASE (DECREASE) 188,730,299 (1,106,126,692)
NET ASSETS AT THE BEGINNING OF THE YEAR 3,196,859,251 4,302,985,943
-------------- --------------
NET ASSETS AT THE END OF THE YEAR $3,385,589,550 $3,196,859,251
-------------- --------------
-------------- --------------
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each year)
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $19.08 $22.93 $46.23 $35.09 $25.99
Income from investment operations:
Net investment loss(1)<F8> (0.10) (0.12) (0.09) (0.25) (0.20)
Net realized and unrealized gains (losses)
on investments 2.32 (3.73) (7.10) 14.51 9.64
------ ------ ------ ------ ------
Total from investment operations 2.22 (3.85) (7.19) 14.26 9.44
------ ------ ------ ------ ------
Less distributions:
Dividend from net investment income -- -- -- -- (0.27)
Distributions from net realized gains -- -- (16.11) (3.12) (0.07)
------ ------ ------ ------ ------
Total from distributions -- -- (16.11) (3.12) (0.34)
------ ------ ------ ------ ------
Net asset value, end of year $21.30 $19.08 $22.93 $46.23 $35.09
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 11.64% (16.79%) (22.46%) 42.81% 36.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 3,385,590 3,196,859 4,302,986 5,983,163 4,194,917
Ratio of expenses to average net assets 1.09% 1.08% 1.06% 1.04% 1.05%
Ratio of net investment loss
to average net assets (0.53%) (0.52%) (0.32%) (0.61%) (0.66%)
Portfolio turnover rate 279.3% 272.9% 284.3% 244.0% 208.7%
(1)<F8> In 2003, 2002, 2001 and 1999, net investment loss per share was
calculated using average shares outstanding. In 2000, net investment
loss per share was calculated using ending balances prior to
consideration of adjustments for book and tax differences.
The accompanying notes to financial statements are an integral part of these
statements.
MANAGEMENT'S DISCUSSION OF RESULTS
BRANDYWINE BLUE FUND
Brandywine Blue follows an investment strategy based on the earnings
prospects of individual companies. While earnings did not drive stock prices
among larger-cap stocks in the first three months of the year ended September
30, 2003, Brandywine Blue's consistent focus on individual-company fundamentals
enabled the Fund to outpace large-cap indexes over the final nine months of the
period.
The prospect of war and economic uncertainty contributed to an ugly start to
the 12 months through September, with major indexes hitting multiyear lows on
October 9, 2002. Mild signs of life on the economic front, however, quickly
changed the market's mood, sparking a rally from depressed levels.
Speculation marked the December quarter of 2002, as investors made sector
bets on semiconductors and other broad groups based on general optimism about
the economy rather than the actual earnings prospects of the companies in the
sectors. For example, the Philadelphia Stock Exchange Semiconductor Index grew
21 percent in the quarter even as 2003 earnings estimates for the companies in
the index fell 25 percent.
Brandywine Blue's avoidance of companies with weak fundamentals kept it from
the stocks that fared best in this climate and, as a result, the Fund didn't
keep pace with large-cap indexes in this three-month period. Soon after, the
prelude to war in Iraq prompted investors to rethink the highly risky bets they
placed in the months before, fueling a cautious March-quarter environment in
which Brandywine Blue outperformed the S&P 500 and Russell 1000.
The environment grew increasingly positive with the commencement of the Iraq
war and the ensuing military progress. The improved geopolitical backdrop
allowed investors to shift their focus to the strong earnings trends and
reasonable prices among Brandywine Blue's holdings, fueling double-digit June-
quarter results. Following the significant gains of the June quarter, Brandywine
Blue and large-cap indexes posted more modest gains in the September quarter.
The same strategy that prevented Brandywine Blue from fully participating in
the speculative rally of the December quarter positioned the Fund to outperform
in the first nine months of 2003. Brandywine Blue grew 16.2 percent in the nine
months through September versus gains in the S&P 500 and Russell 1000 of 14.7
and 15.7 percent.
Comparison of Change in Value of $10,000 Investment in Brandywine Blue Fund,
S&P 500 INDEX(1)<F9>, NASDAQ Industrials Index(2)<F10> and Russell 1000
Index(3)<F11>
BRANDYWINE BLUE FUND S&P 500 NASDAQ INDUSTRIALS RUSSELL 3000
-------------------- ------- ------------------ ------------
1993 10000 10000 10000 10000
1994 10280 10360 9970 9981
1995 14680 13447 12592 12634
1996 15986 16191 14204 15091
1997 22637 22780 17641 20932
1998 16638 24853 13231 22416
1999 22495 31762 20640 28461
2000 30463 35980 27652 33530
2001 24395 26397 14733 24001
2002 20949 20991 12640 19318
2003 24498 26111 18930 24175
AVERAGE ANNUAL TOTAL RETURN
Since Inception
1-Year 5-Year 10-Year 01/10/91
------ ------ ------- ---------------
16.94% 8.05% 9.37% 13.33%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE GRAPH AND THE
TABLE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
(1)<F9> The S&P 500 Index consists of 500 stocks, mostly on the New York
Stock Exchange, selected by the Standard & Poor's Ratings Group.
Each stock's weighting is based on its relative total market value.
Stocks may be added or deleted from the Index which assumes
reinvestment of dividends.
(2)<F10> The NASDAQ Industrials is capitalization-weighted to measure the
performance of all NASDAQ stocks in the industrial sector and does
not include income.
(3)<F11> The Russell 1000, a trademark of the Frank Russell Company, is the
largest 1,000 companies of the 3,000 largest publicly traded
companies in the United States equity market and includes income.
BRANDYWINE BLUE FUND
STATEMENT OF NET ASSETS
September 30, 2003
SHARES OR
PRINCIPAL
AMOUNT COST VALUE
--------- ---- -----
COMMON STOCKS - 91.9% (A)<F13>
AUTOMOTIVE RELATED - 6.9%
160,000 AutoZone, Inc.*<F12> $ 14,322,843 $ 14,324,800
329,100 Nissan Motor Co., Ltd. SP-ADR 4,746,955 7,151,343
------------ ------------
19,069,798 21,476,143
THIS SECTOR IS 12.6% ABOVE YOUR FUND'S COST.
BUILDING RELATED - 2.9%
373,000 Masco Corp. 9,194,995 9,131,040
THIS SECTOR IS 0.7% BELOW YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT/SERVICES - 8.9%
519,900 America Movil S.A. de C.V.
ADR Series L 10,832,811 12,014,889
799,400 Nextel Communications, Inc.*<F12> 11,713,852 15,756,174
------------ ------------
22,546,663 27,771,063
THIS SECTOR IS 23.2% ABOVE YOUR FUND'S COST.
COMPUTER/ELECTRONICS - 6.3%
203,600 Computer Sciences Corp.*<F12> 8,190,806 7,649,252
615,000 Hewlett-Packard Co. 12,517,848 11,906,400
------------ ------------
20,708,654 19,555,652
THIS SECTOR IS 5.6% BELOW YOUR FUND'S COST.
FINANCIAL/BUSINESS SERVICES - 10.2%
250,000 Bank of New York Company, Inc. 7,732,542 7,277,500
146,800 Fiserv, Inc.*<F12> 4,520,631 5,327,372
100,000 Northern Trust Corp. 4,316,618 4,235,000
300,000 State Street Corp. 12,940,181 13,500,000
61,200 Total System Services, Inc. 1,617,768 1,612,620
------------ ------------
31,127,740 31,952,492
THIS SECTOR IS 2.6% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 2.7%
358,400 McDonald's Corp. 6,334,301 8,436,736
THIS SECTOR IS 33.2% ABOVE YOUR FUND'S COST.
HEALTH CARE RELATED - 2.2%
205,500 McKesson Corp. 6,707,004 6,841,095
THIS SECTOR IS 2.0% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 2.9%
320,000 Royal Caribbean Cruises Ltd. 9,158,294 8,995,200
THIS SECTOR IS 1.8% BELOW YOUR FUND'S COST.
MEDIA GROUP - 3.9%
440,000 Fox Entertainment Group, Inc.*<F12> 13,277,792 12,315,600
THIS SECTOR IS 7.2% BELOW YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SERVICES - 7.4%
400,000 Baxter International Inc. 12,008,407 11,624,000
180,000 Boston Scientific Corp.*<F12> 11,988,135 11,484,000
------------ ------------
23,996,542 23,108,000
THIS SECTOR IS 3.7% BELOW YOUR FUND'S COST.
MEDICAL/MANAGED CARE - 4.8%
300,000 UnitedHealth Group Inc. 16,004,571 15,096,000
THIS SECTOR IS 5.7% BELOW YOUR FUND'S COST.
OIL/GAS SERVICES - 5.4%
300,000 BJ Services Co.*<F12> 10,835,949 10,251,000
180,000 Nabors Industries, Ltd.*<F12> 6,787,732 6,706,800
------------ ------------
17,623,681 16,957,800
THIS SECTOR IS 3.8% BELOW YOUR FUND'S COST.
PHARMACEUTICALS - 1.0%
84,900 Biovail Corp.*<F12> 3,229,312 3,154,035
THIS SECTOR IS 2.3% BELOW YOUR FUND'S COST.
SEMICONDUCTOR RELATED - 9.5%
598,200 Flextronics International Ltd.*<F12> 7,945,583 8,506,404
653,000 Micron Technology, Inc.*<F12> 9,366,822 8,763,260
546,500 Texas Instruments Inc. 12,621,691 12,460,200
------------ ------------
29,934,096 29,729,864
THIS SECTOR IS 0.7% BELOW YOUR FUND'S COST.
SOFTWARE - 7.0%
1,050,000 Oracle Corp.*<F12> 13,333,159 11,812,500
279,000 PeopleSoft, Inc.*<F12> 4,960,775 5,097,330
185,600 SunGard Data Systems Inc.*<F12> 4,877,385 4,883,136
------------ ------------
23,171,319 21,792,966
THIS SECTOR IS 5.9% BELOW YOUR FUND'S COST.
SPECIALTY RETAILING - 9.9%
305,000 Costco Wholesale Corp.*<F12> 9,177,968 9,500,750
350,000 Home Depot, Inc. 9,308,122 11,147,500
435,000 Staples, Inc.*<F12> 8,863,549 10,370,400
------------ ------------
27,349,639 31,018,650
THIS SECTOR IS 13.4% ABOVE YOUR FUND'S COST.
------------ ------------
Total common stocks 279,434,401 287,332,336
SHORT-TERM INVESTMENTS - 5.8% (A)<F13>
COMMERCIAL PAPER - 4.8%
$ 4,000,000 Alcoa Inc.,
due 10/01/03, discount of 1.13% 4,000,000 4,000,000
11,000,000 Mortgage Interest Networking Trust,
due 10/01/03 -- 10/02/03,
discounts of 1.10% 10,999,847 10,999,847
------------ ------------
Total commercial paper 14,999,847 14,999,847
VARIABLE RATE DEMAND NOTE - 1.0%
3,308,047 U.S. Bank, N.A. 3,308,047 3,308,047
------------ ------------
Total short-term investments 18,307,894 18,307,894
------------ ------------
Total investments $297,742,295 305,640,230
------------
------------
Cash and receivables, less
liabilities 2.3% (A)<F13> 7,085,430
------------
NET ASSETS $312,725,660
------------
------------
Net Asset Value Per Share
($0.01 par value 100,000,000
shares authorized), offering
and redemption price
($312,725,660 / 14,614,577
shares outstanding) $21.40
------
------
*<F12> Non-dividend paying security.
(a)<F13> Percentages for the various classifications relate to net assets.
ADR -- American Depository Receipts
Statement of Operations
For the Year Ended September 30, 2003
INCOME:
Dividends $ 1,658,649
Interest 250,751
-----------
Total income 1,909,400
-----------
EXPENSES:
Management fees 2,618,506
Administrative services 139,140
Transfer agent fees 53,484
Professional fees 46,629
Registration fees 41,278
Board of Directors fees 33,570
Custodian fees 21,217
Printing and postage expense 11,416
Other expenses 12,716
-----------
Total expenses 2,977,956
-----------
NET INVESTMENT LOSS (1,068,556)
-----------
NET REALIZED GAIN ON INVESTMENTS 32,634,458
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 8,824,716
-----------
NET GAIN ON INVESTMENTS 41,459,174
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $40,390,618
-----------
-----------
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE BLUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 2003 and 2002
2003 2002
---- ----
OPERATIONS:
Net investment loss $ (1,068,556) $ (645,110)
Net realized gain (loss) on investments 32,634,458 (24,371,957)
Net increase (decrease) in unrealized appreciation on investments 8,824,716 (10,561,189)
------------ ------------
Net increase (decrease) in net assets resulting from operations 40,390,618 (35,578,256)
------------ ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (4,710,513 and 2,442,936 shares, respectively) 93,274,187 49,601,985
Cost of shares redeemed (1,993,790 and 3,303,815 shares, respectively) (38,676,807) (68,233,500)
------------ ------------
Net increase (decrease) in net assets derived from Fund share activities 54,597,380 (18,631,515)
------------ ------------
TOTAL INCREASE (DECREASE) 94,987,998 (54,209,771)
NET ASSETS AT THE BEGINNING OF THE YEAR 217,737,662 271,947,433
------------ ------------
NET ASSETS AT THE END OF THE YEAR $312,725,660 $217,737,662
------------ ------------
------------ ------------
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each year)
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $18.30 $21.31 $37.39 $29.46 $22.13
Income from investment operations:
Net investment loss(1)<F14> (0.08) (0.05) (0.05) (0.21) (0.18)
Net realized and unrealized gains (losses)
on investments 3.18 (2.96) (5.32) 10.32 7.85
------ ------ ------ ------ ------
Total from investment operations 3.10 (3.01) (5.37) 10.11 7.67
Less distributions:
Dividend from net investment income -- -- -- -- (0.21)
Distributions from net realized gains -- -- (10.71) (2.18) (0.13)
------ ------ ------ ------ ------
Total from distributions -- -- (10.71) (2.18) (0.34)
------ ------ ------ ------ ------
Net asset value, end of year $21.40 $18.30 $21.31 $37.39 $29.46
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 16.94% (14.12%) (19.92%) 35.53% 35.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 312,726 217,738 271,947 407,839 311,984
Ratio of expenses to average net assets 1.14% 1.13% 1.09% 1.07% 1.08%
Ratio of net investment loss
to average net assets (0.41%) (0.26%) (0.18%) (0.56%) (0.67%)
Portfolio turnover rate 300.0% 310.7% 274.5% 245.7% 228.4%
(1)<F14> In 2003, 2002, 2001 and 1999, net investment loss per share was
calculated using average shares outstanding. In 2000, net investment
loss per share was calculated using ending balances prior to
consideration of adjustments for book and tax differences.
The accompanying notes to financial statements are an integral part of these
statements.
The Brandywine Funds
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of Brandywine
Fund, Inc. (the "Brandywine Fund") and Brandywine Blue Fund (the "Blue
Fund," one of two Funds in a series of the Brandywine Blue Fund, Inc.)
(collectively the "Funds"). Each Fund is registered as a diversified open-
end management company under the Investment Company Act of 1940, as
amended. The assets and liabilities of each Fund are segregated and a
shareholder's interest is limited to the Fund in which the shareholder owns
shares. The Brandywine Fund was incorporated under the laws of Maryland on
October 9, 1985. The Blue Fund was incorporated under the laws of Maryland
on November 13, 1990. The investment objective of each Fund is to produce
long-term capital appreciation principally through investing in common
stocks.
(a) Each security, excluding short-term investments, is valued at the last
sale price reported by the principal security exchange on which the
issue is traded, or if no sale is reported, the latest bid price.
Securities which are traded over-the-counter are valued at the latest
bid price. Securities for which quotations are not readily available
are valued at fair value as determined by the investment adviser under
the supervision of the Board of Directors. Short-term investments with
maturities of 60 days or less are valued at amortized cost which
approximates market value. For financial reporting purposes,
investment transactions are recorded on the trade date.
(b) Net realized gains and losses on sales of securities are computed on
the identified cost basis.
(c) Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis.
(d) The Funds have investments in short-term variable rate demand notes,
which are unsecured instruments. The Funds may be susceptible to
credit risk with respect to these notes to the extent the issuer
defaults on its payment obligation. The Funds' policy is to monitor
the creditworthiness of the issuer and nonperformance by these
counterparties is not anticipated.
(e) Accounting principles generally accepted in the United States of
America ("GAAP") require that permanent differences between income for
financial reporting and tax purposes be reclassified in the capital
accounts.
(f) The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
(g) No provision has been made for Federal income taxes since the Funds
have elected to be taxed as "regulated investment companies" and
intend to distribute substantially all net investment company taxable
income and net capital gains to shareholders and otherwise comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENTS AND TRANSACTIONS WITH RELATED
PARTIES
Each Fund has a management agreement with Friess Associates, LLC (the
"Adviser"), with whom certain officers and directors of the Funds are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreements, each Fund will pay the Adviser a monthly management fee at
the annual rate of one percent (1%) on the daily net assets of such Fund.
Also, the Adviser is reimbursed for administrative services rendered to
each Fund by a consultant paid by the Adviser.
The Adviser entered into sub-advisory agreements with its affiliate, Friess
Associates of Delaware, LLC (the "Sub-Adviser"), to assist it in the day-
to-day management of each of the Funds. The Adviser and, if so delegated,
the Sub-Adviser supervise the investment portfolios of the Funds, directing
the purchase and sale of investment securities in the day-to-day management
of the Funds. The Adviser pays the Sub-Adviser a fee equal to 110% of the
monthly expenses the Sub-Adviser incurs in performing its services as Sub-
Adviser.
Each Director who is not affiliated with the Funds receives an annual fee
for service as a Director and is eligible to participate in a deferred
compensation plan with respect to these fees. Participants in the plan may
designate their deferred Director's fees as if invested in the respective
Funds. The value of each Director's deferred compensation account will
increase or decrease as if it were invested in shares of the selected Fund.
The Funds maintain their proportionate share of the Fund's liability for
deferred fees.
(3) DISTRIBUTION TO SHAREHOLDERS
Net investment income and net realized gains, if any, are distributed to
shareholders at least annually.
(4) INVESTMENT TRANSACTIONS
For the year ended September 30, 2003, purchases and proceeds of sales of
investment securities (excluding short-term investments) for the Brandywine
Fund were $8,461,733,330 and $8,583,599,828, respectively; purchases and
proceeds of sales of investment securities (excluding short-term
investments) for the Blue Fund were $764,939,209 and $730,764,052,
respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 2003, liabilities of each Fund included the following:
Brandywine Blue
Fund Fund
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Payable to brokers for investments purchased $51,122,399 $2,693,737
Payable to Adviser for management fees 2,867,397 262,824
Deferred compensation plan for Directors 260,856 67,841
Payable to shareholders for redemptions 125,740 --
Other liabilities 421,660 46,345
(6) SOURCES OF NET ASSETS
As of September 30, 2003, the sources of net assets were as follows:
Brandywine Blue
Fund Fund
---------- ----
Fund shares issued and outstanding $4,555,672,318 $358,817,519
Net unrealized appreciation on investments 116,758,173 7,897,935
Accumulated net realized losses (1,286,840,941) (53,989,794)
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$3,385,589,550 $312,725,660
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(7) INCOME TAX INFORMATION
The following information for the Funds is presented on an income tax basis
as of September 30, 2003:
GROSS GROSS NET UNREALIZED DISTRIBUTABLE DISTRIBUTABLE
COST OF UNREALIZED UNREALIZED APPRECIATION ORDINARY LONG-TERM
INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS INCOME CAPITAL GAINS
----------- ------------ ------------ -------------- ------------- -------------
Brandywine Fund $3,284,478,885 $213,553,259 $100,477,625 $113,075,634 $ 0 $ 0
Brandywine Blue Fund $ 297,742,295 $ 16,034,753 $ 8,136,818 $ 7,897,935 $ 0 $ 0
The difference, if any, between the cost amounts for financial statement
and federal income tax purposes is due primarily to timing differences in
recognizing certain gains and losses in security transactions.
The tax components of dividends paid during the years ended September 30,
2003 and 2002, capital loss carryovers (expiring in varying amounts through
2011), as of September 30, 2003, and tax basis post-October losses as of
September 30, 2003, which are not recognized for tax purposes until the
first day of the following fiscal year are:
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
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ORDINARY LONG-TERM NET CAPITAL ORDINARY LONG-TERM
INCOME CAPITAL GAINS LOSS POST-OCTOBER INCOME CAPITAL GAINS
DISTRIBUTIONS DISTRIBUTIONS CARRYOVERS LOSSES DISTRIBUTIONS DISTRIBUTIONS
------------- ------------- ---------- ------------ ------------- -------------
Brandywine Fund $ 0 $ 0 $1,288,142,310 $ 0 $ 0 $ 0
Brandywine Blue Fund $ 0 $ 0 $ 53,348,440 $ 0 $ 0 $ 0
The Brandywine Fund and Blue Fund have utilized $370,353,672 and $23,883,957,
respectively, of their post-October losses from the prior year to increase
current year net capital losses or reduce any net capital gains.
Since there were no ordinary distributions paid for either Fund for the year
ended September 30, 2003, there were no distributions designated as
qualifying for the dividends received deduction for corporate shareholders.
(PRICEWATERHOUSECOOPERS LOGO)
100 EAST WISCONSIN AVENUE
SUITE 1500
MILWAUKEE, WI 53202
(414) 212-1600
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF BRANDYWINE FUND, INC. AND BRANDYWINE BLUE FUND
In our opinion, the accompanying statements of net assets of Brandywine Fund,
Inc. and Brandywine Blue Fund (a series of the Brandywine Blue Fund, Inc.) (the
"Funds") and the related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material respects, the
financial position of each of the Funds at September 30, 2003, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended and their
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/PricewaterhouseCoopers LLP
October 10, 2003
BRANDYWINE FUND AND BRANDYWINE BLUE FUND DIRECTORS AND OFFICERS
"Disinterested Persons" of the Funds
Term of Office and Length of
Time Served and Number of
Name, Age, Address Portfolios in Fund Complex Principal Occupation Other Directorships Held
and Position Overseen by Director or Officer During Past Five Years by Director or Officer
- ------------------ ------------------------------- ---------------------- ------------------------
Robert F. Birch, 67 Indefinite Term Mr. Birch has been Chairman and Hyperion Funds
8 Knollwood Drive since October, 2001 President of the New America High (4 portfolios), New
Dover, MA 02030 3 Portfolios Income Fund since 1992, a high- America High Income Fund
Director yield bond fund traded on the New
York Stock Exchange.
C. Quentin S. Jackson, 59 Indefinite Term Mr. Jackson is President and Chief None
c/o Nuclear Electric since October, 2001 Executive Officer of Nuclear Electric
Insurance Ltd. 3 Portfolios Insurance Ltd., a multibillion-dollar
1201 Market Street company mutually owned by energy
Suite 1200 companies. He has been with Nuclear
Wilmington, DE 19801 Electric since 1980.
Director
Stuart A. McFarland, 56 Indefinite Term Mr. McFarland is a Managing Partner Basic 100 Inc., NCRIC
c/o Federal City since October, 2001 at Federal City Capital Advisors. group, Inc. and Newcastle
Capital Advisors 3 Portfolios From 1999 until 2002, he served as Investment Corporation
3000 K Street NW, Suite 125 President and Chief Executive of
Washington, DC 20007 Pedestal Inc. Mr. McFarland also
Director served as Chief Financial Officer
of Fannie Mae, and an officer of
G.E. Capital.
W. Richard Scarlett III, 64 Indefinite Term Mr. Scarlett is Chairman, President United Bancorporation
c/o United Bancorporation since October, 2001 and Chief Executive Officer of United of Wyoming, Inc.
of Wyoming, Inc. 3 Portfolios Bancorporation of Wyoming, Inc.,
112 Center Street having been with the Bank since 1981.
Jackson, WY 83001
Director
Marvin N. Schoenhals, 56 Indefinite Term Mr. Schoenhals is Chairman and WSFS Financial Corp.
c/o WSFS Corporation since October, 1998 President of WSFS Financial Corporation,
838 Market Street 3 Portfolios a bank holding company. Mr. Schoenhals
Wilmington, DE 19801 first began serving as a Brandywine
Director Funds director in 1998.
James W. Zug, 63 Indefinite Term Mr. Zug is a retired Partner of Episcopal Academy, Kimmel
5 Radnor Corporate Center, since October, 2001 PricewaterhouseCoopers LLP. He was Center for the Performing
Suite 520 3 Portfolios employed with PricewaterhouseCoopers Arts, Philadelphia
100 Matsonford Road and its predecessors from 1964 until Orchestra, Merion Golf
Radnor, PA 19087 2000. Club, SPS Technologies,
Director Stackpole, Ltd., and Amkor
Technologies.
"Interested Persons" of the Funds*<F15>
William F. D'Alonzo, 48 Indefinite Term since Mr. D'Alonzo joined Friess Associates Delaware Community
c/o Friess Associates October, 2001 in 1981 as part of the research team, Foundation, Delaware Wild
3711 Kennett Pike Vice President since became Chief Investment Officer in Lands, United Way of
Greenville, DE 19807 1990 1997 and Chief Executive Officer in Delaware's Alexis de
Director and Vice President 3 Portfolios 2002. Tocqueville Society,
Delaware Safety Council,
and Ducks Unlimited.
Foster S. Friess, 63 Indefinite Term since Mr. Friess founded Friess The Advisory Council of the
c/o Friess Associates October, 1985 Associates in 1974 with his wife, Royal Swedish Academy of
115 East Snow King Avenue President and Lynnette E. Friess. Serving as Science of Stockholm, The
Jackson, WY 83001 Treasurer since 1985 Chairman of the Board since Council for National
Director, President and 3 Portfolios Brandywine's inception in 1985, Policy, and the John M.
Treasurer he also serves as Chairman of Templeton Foundation.
Friess Associates, LLC, the Funds'
advisor.
Lynda J. Campbell, 57 Vice President Ms. Campbell joined Friess Associates Mom's House of
c/o Friess Associates since 1998 in 1985, the year of Brandywine Fund's Wilmington Inc.
3711 Kennett Pike Secretary since 1990 inception. Ms. Campbell is currently
Greenville, DE 19807 3 Portfolios Chief Administrative Officer of Friess
Vice President and Secretary Associates of Delaware, LLC.
Carl S. Gates, 71 Vice President Mr. Gates joined Friess Associates in None
c/o Friess Associates since 1994 1988, following 34 years at the DuPont
3711 Kennett Pike 3 Portfolios Co., where he ran the half-a-billion-
Greenville, DE 19807 dollar-a-year Riston Division.
Vice President
Christopher G. Long, 37 Vice President Mr. Long joined Friess Associates in Marion T. Academy, Young de
c/o Friess Associates since 2002 1996, and became Chief Operating Tocqueville Society of the
3711 Kennett Pike 3 Portfolios Officer of Friess Associates of United Way of Delaware,
Greenville, DE 19807 Delaware, LLC in 2001. member of The Council for
Vice President National Policy.
David D. Marky, 38 Vice President Mr. Marky joined Friess Associates None
c/o Friess Associates since 2002 in 2000, following 13 years with
3711 Kennett Pike 3 Portfolios PFPC, Inc., where he served as a
Greenville, DE 19807 Director of Fund Accounting and
Vice President Administration. He currently serves
as Compliance Officer for Friess
Associates.
Paul R. Robinson, 80 Vice President Mr. Robinson has been a consultant None
c/o Friess Associates since 1990 to Friess Associates since June 1985,
3711 Kennett Pike 3 Portfolios just six months before Brandywine
Greenville, DE 19807 Fund's launch. Prior to Friess
Vice President Associates, Mr. Robinson spent 40
years at the DuPont Co.
For additional information about the Directors and Officers, please call (800)
656-3017 and request a Statement of Additional Information. One will be mailed
to you free of charge.
*<F15> Messrs. D'Alonzo, Friess, Gates, Long, Marky and Robinson and Ms.
Campbell are "interested persons" of the Funds as that term is defined
in the Investment Company Act of 1940 by reason of their being officers
of the Funds and employees of Friess Associates, LLC.
CAPITAL GAINS UPDATE . . .
Both Brandywine and Brandywine Blue realized net capital gains during the
fiscal year ended September 2003, but those gains were less than the capital
loss carry-forward from prior years. As a result, there will be no October
capital gains distribution, and it is unlikely there will be a year-end
distribution. Brandywine and Brandywine Blue finished September with net
realized loss positions of approximately $8.10 and $3.70 per share, meaning the
Funds can realize gains equal to those amounts before triggering a taxable
capital gains distribution. These numbers will change, so please look to future
quarterly reports for updated estimates.
THE BRANDYWINE FUNDS HIGHLIGHTED IN THE LIST OF "Who Runs the Best Funds
-- 10 Families That Still Do It Right."
Kiplinger's, August 2003
BRANDYWINE FUND HIGHLIGHTED AMONG "OUR FAVORITE MID-CAP GROWTH FUNDS" by
Morningstar Analysts. "This is an aggressive fund with a sensitive side
. . . it has been one of the least volatile funds in the category
because it sets high standards for the companies it owns."
Morningstar.com, October 6, 2003
P.O. Box 4166, Greenville, DE 19807
(800) 656-3017 www.brandywinefunds.com bfunds@friess.com
Investment Adviser: FRIESS ASSOCIATES, LLC
Investment Sub-Adviser: FRIESS ASSOCIATES OF DELAWARE, LLC
Custodian: U.S. BANK, N.A.
Transfer Agent: U.S. BANCORP FUND SERVICES, LLC
Independent Auditors: PRICEWATERHOUSECOOPERS LLP
Legal Counsel: FOLEY & LARDNER
OFFICERS: Foster S. Friess, President and Treasurer; Lynda Campbell, Vice
President and Secretary; William D'Alonzo, Vice President; Carl Gates, Vice
President; Christopher Long, Vice President; David Marky, Vice President; and
Paul Robinson, Vice President
Report Editor: Chris Aregood
Report Staff: Dave Marky, Adam Rieger, Rebecca Schuster
This material is appropriate for use by prospective investors only when
preceded or accompanied by a current Brandywine Funds' prospectus. Past
----
performance does not guarantee future results. The principal value and
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investment return of an investment will fluctuate so that when redeemed, an
investor's shares may be worth more or less than their original cost. Fund
holdings and sector weightings are subject to change at any time and are not
recommendations to buy or sell any securities. Securities discussed were not
held by the Funds as of 9/30/03, unless listed in the accompanying financial
statements.
The Russell Midcap Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represent approximately 26 percent of
the total market capitalization of the Russell 1000 Index. The Russell Midcap
Growth Index measures the performance of those Russell Midcap companies with
higher price-to-book ratios and higher forecasted growth values. The stocks are
also members of the Russell 1000 Growth Index. The Philadelphia Stock Exchange
Semiconductor Index is a price-weighted index composed of 18 companies primarily
involved in the design, distribution, manufacture and sale of semiconductors.
As of September 30, 2003, the Russell 1000 Index's average annual total
returns for 1, 5 and 10 years were 25.14, 1.52 and 9.91 percent; the Russell
3000 Index's were 25.92, 1.93 and 9.68; the Russell Midcap Index's were 32.63,
8.06 and 10.86; the Russell Midcap Growth Index's were 38.89, 4.49 and 8.50; and
the S&P 500 Index's were 24.40, 1.00 and 10.05 percent. Baseline Financial
Services, Inc. (Baseline) provides analytical information and services to the
investment community.
ITEM 2. CODE OF ETHICS.
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Registrant has adopted a code of ethics. See attached Exhibit 10 (a).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
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Registrant's Board of Directors has determined that 3 members of its audit
committee, Mr. Stuart A. McFarland, Mr. Marvin N. Schoenhals and Mr. James W.
Zug, are audit committee financial experts. Messrs. McFarland, Schoenhals and
Zug are "independent" as such term is defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
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Not required for annual reports filed for periods ending before December 15,
2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
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Not applicable.
ITEM 6. [RESERVED]
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ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
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MANAGEMENT INVESTMENT COMPANIES
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Not applicable.
ITEM 8. [RESERVED]
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ITEM 9. CONTROLS AND PROCEDURES.
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(a) The disclosure controls and procedures of the Brandywine Fund, Inc. are
periodically evaluated. As of October 22, 2003, the date of the last
evaluation, we concluded that our disclosure controls and procedures are
adequate.
(b) The internal controls of the Brandywine Fund, Inc. are periodically
evaluated. Since, October 22, 2003, the date of the last evaluation, there
have been no significant changes in the Brandywine Fund's internal controls
or in other factors that could have had a significant effect on such
controls. There have also been no significant deficiencies or material
weaknesses identified since the last evaluation that required any
corrective action.
ITEM 10. EXHIBITS.
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(a) Any code of ethics or amendment thereto. Filed herewith.
(b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Brandywine Fund, Inc.
---------------------
Registrant
By /s/ William F. D'Alonzo
-----------------------------------------------
William F. D'Alonzo Principal Executive Officer
Date 10/22/03
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Brandywine Fund, Inc.
---------------------
Registrant
By /s/ William F. D'Alonzo
------------------------------------------------
William F. D'Alonzo, Principal Financial Officer
Date 10/22/03
----------------------------------