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.
---------------------
(Exact name of registrant as specified in charter)
3711 Kennett Pike
Greenville, DE 19807
--------------------
(Address of principal executive offices) (Zip code)
William F. D'Alonzo
Friess Associates, LLC
3711 Kennett Pike
Greenville, Delaware 19807
--------------------------
(Name and address of agent for service)
(302) 656-3017
--------------
Registrant's telephone number, including area code:
Date of fiscal year end: September 30
Date of reporting period: 03/31/2004
ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------
THE BRANDYWINE FUNDS
MANAGED BY FRIESS ASSOCIATES, LLC SEMI-ANNUAL REPORT MARCH 31, 2004
DEAR FELLOW SHAREHOLDERS:
The Brandywine Funds generated their fourth consecutive quarter of gains in
the first three months of 2004, bringing growth in Brandywine Fund and
Brandywine Blue Fund to 39.31 and 40.31 percent over the past year.
Brandywine grew 4.41 percent in the March quarter, outpacing gains in the
S&P 500 and Russell 3000 Indexes of 1.69 and 2.23 percent. Brandywine Blue grew
6.97 percent, which in addition to topping the S&P 500 also surpassed the
Russell 1000 Index's 1.90 percent gain.
MARCH QUARTER PERFORMANCE
Percent Return
--------------
BRANDYWINE BLUE FUND 6.97%
BRANDYWINE FUND 4.41%
RUSSELL 3000 INDEX 2.23%
RUSSELL 1000 INDEX 1.90%
S&P 500 INDEX 1.69%
Total returns for the quarter ended March 31, 2004.
March-quarter results for Brandywine and Brandywine Blue, respectively,
landed among the top 11 and top 3 percent of the 2,257 growth funds tracked by
Lipper Inc. Performance through March also put Brandywine Blue in the top 1
percent of Morningstar's large-cap growth category over the past five years.
Despite large-cap companies in general not faring as well as smaller and
midsize companies, stock picking shined as Brandywine and Brandywine Blue shared
top, large-cap contributors -- America Movil, Pulte Homes and Boston Scientific.
That's notable because it demonstrates how our individual-company focus can
help the Brandywine Funds buck prevailing trends by consistently stressing what
ultimately matters most: earnings strength. For example, the homebuilders that
Brandywine held doubled the performance of homebuilders in the Russell 3000.
Brandywine Blue's health-care holdings gained 15 percent on average while health
care as a group within the S&P 500 fell slightly.
It also highlights the flexibility the Funds enjoy in their pursuit of
companies with the most attractive earnings prospects. While the bulk of
Brandywine's assets tend to be dedicated to companies in the mid-cap category,
the Fund is not restricted from capitalizing on promising opportunities such as
America Movil and Boston Scientific, which are well into large-cap territory
with market caps of $25 billion and $35 billion, respectively. Likewise,
Brandywine Blue concentrates on large caps while being free to selectively own
larger mid caps such as Pulte Homes at $7 billion.
Boston Scientific helped make the health-care sector a significant positive
force in the quarter. We added Boston Scientific in September, when Wall Street
predicted the company would earn $1.60 a share in 2004. Although analysts have
revised estimates higher to $1.71 a share since then, based on our research the
investment community continues to underestimate the potential market-share reach
of its recently approved drug-eluting coronary stent, which transmits a drug to
prevent re-hardening of the repaired artery.
Express Scripts in Brandywine and Aetna in Brandywine Blue were also strong
contributors from the health-care sector.
Homebuilders continue to be standout performers in the portfolios. We bought
Pulte Homes for Brandywine in August and, following share-price appreciation
that raised its market value into the upper reaches of the mid-cap range, added
it to Brandywine Blue in February. Standard Pacific, up 24 percent, added extra
upside to Brandywine's homebuilder fortunes, while Brandywine Blue's purchase of
D.R. Horton in mid-January quickly generated a 25 percent gain.
Nearly all financial-services holdings gained ground during the quarter.
While the particular markets they focus on vary, these companies share a proven
ability to positively surprise investors. Every financial services holding in
Brandywine and Brandywine Blue, from insurer Allstate to community banker
Wintrust Financial, exceeded earnings estimates in its most recently reported
quarter.
Technology holdings represented the greatest percentage of assets in both
Funds, giving the tech sector the most sway on March-quarter results. Adobe
Systems, Andrew Corp. (held by Brandywine only), Ericsson and Flextronics helped
make tech a positive force in the portfolios even as the sector in major indexes
lost ground. Tech holdings continue to comprise the largest percentage of assets
in Brandywine and Brandywine Blue. On average, the tech companies in the
portfolios are expected to grow earnings 35 percent this year (excluding
holdings rebounding from 2003 losses).
For more information on the holdings that influenced March-quarter
performance the most, please see "Roses & Thorns" on page 5 for Brandywine and
page 7 for Brandywine Blue.
BRANDYWINE BRANDYWINE BLUE
CUMULATIVE TOTAL RETURN % CHANGE % CHANGE
- ----------------------- ---------- ---------------
QUARTER 4.41 6.97
ONE YEAR 39.31 40.31
FIVE YEARS 36.78 42.65
TEN YEARS 165.24 191.68
INCEPTION 953.19*<F1> 485.20**<F2>
ANNUALIZED TOTAL RETURN
- -----------------------
FIVE YEARS 6.46 7.36
TEN YEARS 10.25 11.30
INCEPTION 13.77*<F1> 14.30**<F2>
*<F1>12/30/85 **<F2>1/10/91
Performance data quoted represents past performance; past performance does
--------------------------------------------------------------------------
not guarantee future results. The investment return and principal value of an
-----------------------------
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Current performance of the fund
may be lower or higher than the performance quoted. Performance data current
to the most recent month end may be obtained by visiting
www.brandywinefunds.com.
There will be occasional hand wringing about the economy, the election and
other matters for investors to consider as they navigate 2004. Nevertheless, it
is increasingly apparent that individual- company earnings will demand attention
from the investment community as the year marches on. Current forecasts put U.S.
economic expansion on its fastest pace in 20 years and, given the measures
companies took to rein in costs during the leaner times that preceded current
conditions, corporations are in a position to make the most of the favorable
environment.
". . . WE'VE UNCOVERED COMPANIES THAT ON AVERAGE SELL IN THE SAME PRICE-TO-
EARNINGS RATIO RANGE AS THE TYPICAL S&P 500 STOCK WHILE ENJOYING EARNINGS GROWTH
ABOUT THREE TIMES GREATER THAN THE INDEX'S AVERAGE COMPANY."
Analyst estimates compiled by Bloomberg predict the companies in the S&P 500
will post their biggest profit gain for the first six months of a year since the
recession first took hold, with particular strength in technology and financial
services. Corporate spending is showing signs of life and consumers continue to
do their part, with personal spending rising each month since October. There's
no arguing that earnings from companies in a range of industries are on the
rise.
At a time when the companies in the S&P 500 position themselves for better
earnings results than they've experienced in years, your team has greater
prospects to pursue the companies with the best earnings outlooks from the S&P
500 and elsewhere. As a result, we've uncovered companies that on average sell
in the same price-to-earnings ratio range as the typical S&P 500 stock while
enjoying earnings growth about three times greater than the index's average
company.
As we head into the June quarter, the companies in the Brandywine and
Brandywine Blue portfolios show the right combination of strong fundamentals and
reasonable prices to build on recent gains. Thanks for your continued confidence
in us to isolate the companies to help you reach your long-term financial goals.
Best wishes from your entire Friess team!
/s/Bill D'Alonzo
Bill D'Alonzo
Chief Executive Officer April 8, 2004
PUTTING COSTS INTO CONTEXT
A few weeks ago the Securities and Exchange Commission adopted a new rule
requiring annual and semiannual fund reports released after July 9 this year to
outline the actual expenses a shareholder pays in dollars based on a $1,000
investment. We see no reason to wait, so we'd like to be among the first to
disclose this information to our fellow shareholders.
We support any enhanced disclosure that benefits investors. And, given all
the recent attention on fund expenses and related issues in the news, we think
sooner is better. Sharing this information now also affords us the opportunity
to provide detail and background that can assist you in making informed
investment decisions.
Mutual fund shareholders incur two types of costs: 1) transaction costs,
including sales charges (loads) on purchases, reinvested dividends or other
distributions; redemption fees; and exchange fees; and 2) ongoing costs,
including management fees; distribution and/or service fees (12b-1); and other
fund expenses.
Brandywine and Brandywine Blue shareholders incur ongoing costs in the form
of a management fee (the fee Friess Associates receives to invest your assets)
and other fund expenses. The Funds do not have distribution fees associated with
a 12b-1 plan. Other fund expenses primarily include: accounting, custody, board
of directors, regulatory filing, insurance, legal, printing, postage and
transfer agent fees. These fees allow your Fund to settle its securities
transactions, calculate its net asset value, process your orders, send you
shareholder reports, and file documents with the SEC and other regulatory
authorities.
EXPENSE RATIOS VS. PEER AVERAGES
Percent of Net Assets
---------------------
BRANDYWINE FUND 1.09%
AVERAGE MID-CAP GROWTH FUND 1.68%
BRANDYWINE BLUE FUND 1.13%
AVERAGE LARGE-CAP GROWTH FUND 1.59%
Source: Morningstar; March 31, 2004.
The only Fund transaction costs you might currently incur would be wire
fees, if you choose to have proceeds from a redemption wired to your bank
account instead of receiving a check. Additionally, U. S. Bank charges an annual
processing fee if you maintain an IRA account with the Funds. The Funds
currently do not assess sales charges, reinvestment, redemption or exchange
fees.
For the six months ended March 31, 2004, Brandywine Fund's expense ratio
represented an annual rate of 1.09 percent of average net assets and Brandywine
Blue's was 1.13 percent. As the bar chart shows, Brandywine's and Brandywine
Blue's expense ratios are less than two-thirds and three-quarters of their
respective Morningstar peer group averages.
The table below shows a beginning and ending value for a $1,000 investment
over the six months through March 2004 and expenses paid during the period. In
accordance with the new rule, it also includes the same information assuming a
hypothetical 5 percent annual return, which is intended to provide a consistent
example for shareholders to use when comparing the impact of expenses on
different funds. Per SEC guidelines, all figures are rounded to the nearest
dollar.
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*<F3>
9/30/03 3/31/04 9/30/03-3/31/04
--------- ------- ------------------
BRANDYWINE ACTUAL $1,000 $1,178 $6
HYPOTHETICAL 5% RETURN $1,000 $1,019 $6
BRANDYWINE BLUE ACTUAL $1,000 $1,191 $6
HYPOTHETICAL 5% RETURN $1,000 $1,019 $6
*<F3> Expenses are equal to the Funds' annualized expense ratios of 1.09% and
1.13%, multiplied by the average account value over the period,
multiplied by 183/366 (to reflect the one-half year period between
September 30, 2003 and March 31, 2004).
Some useful detail can be lost in the rounding. Down to the penny, $1,000
investments in Brandywine and Brandywine Blue would generate costs of $5.52 and
$5.72 over six months assuming a 5 percent annual return. That compares to $8.51
for Brandywine's average peer and $8.05 for Brandywine Blue's.
All reported fund returns always reflect the impact of all fund expenses.
While we're pleased that Brandywine and Brandywine Blue stack up well against
their peers on the expense-ratio front, we focus our efforts on maximizing
performance so that the Funds can excel at what matters most: generating more
money for you in the end.
BRANDYWINE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. Boston Scientific Corp. +28.6%
2. MBNA Corp. -1.2%
3. Goldman Sachs Group, Inc. -2.6%
4. Pulte Homes, Inc. +41.2%
5. Nike, Inc. +16.7%
6. Allstate Corp. +14.4%
7. Adobe Systems Inc. +5.7%
8. America Movil S.A. +84.7%
9. Ameritrade Holding Corp. +17.3%
10. Capital One Financial Corp. +11.4%
EARNINGS GROWTH
YOUR COMPANIES 41%
S&P 500 11%
FORECASTED INCREASE IN EARNINGS PER SHARE
2004 VS 2003
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE. MARCH 31,
2004.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
35.8%
MID CAP
$2 billion to $9 billion
44.2%
SMALL CAP
below $2 billion
16.8%
CASH
3.2%
TOP TEN INDUSTRY GROUPS
Financial (14.1%)
Communications Equipment/Services (9.1%)
Apparel & Shoe Retailers (7.9%)
Computer/Electronics (7.7%)
Semiconductor Related (6.8%)
Automotive Related (5.9%)
Building Related (5.7%)
Software (5.0%)
Specialty Retailing (4.9%)
Medical/Dental Products & Services (4.8%)
All Others (24.9%)
Cash (3.2%)
BRANDYWINE FUND
MARCH QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
----------------- ------------- ------ ---------------
America Movil S.A. $28.6 14.4 December-quarter earnings more than doubled to $0.79 per share, beating
estimates by 72 percent. Mexico's largest cellular telephone service provider
benefits from strong demand for its prepaid mobile phone cards as it continues
to expand in Latin America and the U.S.
Pulte Homes, Inc. $23.9 19.0 Pulte Homes beat estimates with 40 percent December-quarter earnings growth.
Revenues increased 23 percent to $3.1 billion. Record backlog, accelerating
order rates and improving margins all contributed to higher earnings guidance
for 2004. The builder of active-adult home communities outlined a three-year
strategic plan targeting annual growth at 20 percent or more.
Boston Scientific
Corp. $19.7 15.3 The recent U.S. launch of Boston Scientific's Taxus drug-coated stent, which
helps prevent repaired arteries from re-clogging, has the potential to
dramatically increase revenues and capture a majority market share in this
segment. Free cash flow largely driven by Taxus is expected to allow the
company to invest as much as $3 billion in new technologies.
Fisher Scientific
International, Inc. $17.1 33.0 The supplier of laboratory equipment raised earnings guidance for the next two
years and made two acquisitions that expand its line of self-manufactured,
high-margin products used by pharmaceutical and biotechnology companies to make
medicines based on human proteins. December-quarter earnings jumped 31 percent,
beating consensus estimates.
Nike, Inc. $15.5 13.8 The world's largest athletic shoe maker more than doubled earnings in its
February quarter, earning $0.74 per share and beating consensus estimates.
Revenues grew 21 percent to $2.9 billion, aided by strong demand for higher-
priced basketball, soccer and running shoes in the U.S., Europe and Asia. The
company shipped more shoes to Footlocker, its largest customer, after the
companies ended a two-year dispute.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------- ------ ---------------
QLogic Corp. $24.7 26.8 The maker of equipment that connects computers to storage devices grew
December-quarter earnings 30 percent, beating consensus estimates. Late in
March, QLogic pre-announced a revenue shortfall due to lower-than-expected
sales of host bus adapters (HBAs) to two large customers undergoing inventory
corrections.
Williams-Sonoma, Inc. $9.6 8.0 January-quarter earnings grew 27 percent to $0.85 per share. While the
company's Williams-Sonoma, Pottery Barn and Pottery Barn Kids brands showed
strength, inclement weather increased the costs associated with getting
products to customers at the same time the company was investing in new
concepts. Your team sold Williams-Sonoma to fund an idea with greater near-term
earnings potential.
SanDisk Corp. $9.1 18.5 Your team sold SanDisk as negative perceptions overshadowed impressive top- and
bottom-line growth. December-quarter earnings more than tripled, but shares
fell on concerns of increased competition and the potential for an oversupply
of flash memory used in digital cameras and other devices. Our research
indicated that supply-and-demand balance for flash would remain tight, due to
the significant resources needed to enter the market.
Gap, Inc. $8.9 20.5 January-quarter earnings grew 37 percent, but lower-than-anticipated same-store
sales during the month of December sent shares lower. Marketing efforts fell
short at the company's Gap and Old Navy stores, and a late surge of shopping
just prior to Christmas didn't make up the shortfall. Your team sold Gap to
fund an idea with greater near-term earnings potential.
Ryanair Holdings $8.2 31.0 December-quarter earnings grew 18 percent and beat consensus expectations.
Management of Europe's largest low-cost airline announced a plan to slash fares
and reduced its revenue forecasts in an aggressive and unexpected move to
capture additional market share from already struggling competitors. Your team
sold shares to fund an idea with better near-term earnings visibility.
All gains/losses are calculated on an average cost basis
BRANDYWINE BLUE FUND
PERCENT CHANGE IN TOP TEN HOLDINGS FROM BOOK COST
1. Adobe Systems Inc. +7.3%
2. MBNA Corp. -0.9%
3. Goldman Sachs Group, Inc. -2.6%
4. Aetna Inc. +20.2%
5. Boston Scientific Corp. +26.9%
6. Lowe's Companies, Inc. +4.3%
7. Deere & Co. +8.3%
8. Capital One Financial Corp. +14.2%
9. Staples, Inc. +12.7%
10. Nike, Inc. +16.8%
EARNINGS GROWTH
YOUR COMPANIES 31%
S&P 500 11%
FORECASTED INCREASE IN EARNINGS PER SHARE
2004 VS 2003
ALL FIGURES ARE DOLLAR WEIGHTED AND BASED ON DATA FROM BASELINE. MARCH 31,
2004.
YOUR COMPANIES' MARKET CAPITALIZATION
LARGE CAP
$9 billion and over
64.8%
MID CAP
$2 billion to $9 billion
31.1%
CASH
4.1%
TOP TEN INDUSTRY GROUPS
Financial (19.7%)
Specialty Retailing (11.3%)
Communications Equipment/Services (8.8%)
Building Related (8.4%)
Computer/Electronics (6.0%)
Department Stores (5.6%)
Business/Communication Services (5.3%)
Semiconductor Related (4.9%)
Software (4.8%)
Medical/Managed Care (4.5%)
All Others (16.6%)
Cash (4.1%)
BRANDYWINE BLUE FUND
MARCH QUARTER "ROSES AND THORNS"
$ GAIN
BIGGEST $ WINNERS (IN MILLIONS) % GAIN REASON FOR MOVE
----------------- ------------ ------ ---------------
America Movil S.A. $4.8 41.4 December-quarter earnings more than doubled to $0.79 per share, beating
estimates by 72 percent. Mexico's largest cellular telephone service provider
benefits from strong demand for its prepaid mobile phone cards as it continues
to expand in Latin America and the U.S.
Pulte Homes, Inc. $4.2 20.2 Pulte Homes beat estimates with 40 percent December-quarter earnings growth.
Revenues increased 23 percent to $3.1 billion. Record backlog, accelerating
order rates and improving margins all contributed to higher earnings guidance
for 2004. The builder of active-adult home communities outlined a three-year
strategic plan targeting annual growth at 20 percent or more.
Aetna Inc. $3.6 20.3 December-quarter earnings jumped 71 percent, beating estimates by 12 percent.
The third largest health insurer in the U.S. boosted its profit forecast for the
first quarter and all of 2004 as it added new subscribers and controlled costs.
New product launches, such as consumer-directed plans known as Health Savings
Accounts, are expected to continue to boost enrollment growth.
D.R. Horton, Inc. $2.9 24.7 December-quarter earnings beat estimates by 26 percent, growing 56 percent as
revenues jumped 24 percent to $2.2 billion. D.R. Horton builds homes in 20
states and 47 markets. Its size, while allowing it to leverage costs and take
significant market share from smaller competitors, is controlled by a
decentralized management structure that gives regional offices operational
autonomy.
Boston Scientific
Corp. $2.8 15.3 The recent U.S. launch of Boston Scientific's Taxus drug-coated stent, which
helps prevent repaired arteries from re-clogging, has the potential to
dramatically increase revenues and capture a majority market share in this
segment. Free cash flow largely driven by Taxus is expected to allow the company
to invest as much as $3 billion in new technologies.
$ LOSS
BIGGEST $ LOSERS (IN MILLIONS) % LOSS REASON FOR MOVE
---------------- ------------ ------ ---------------
Ryanair Holdings $3.6 30.6 December-quarter earnings grew 18 percent and beat consensus expectations.
Management of Europe's largest low-cost airline announced a plan to slash fares
and reduced its revenue forecasts in an aggressive and unexpected move to
capture additional market share from already struggling competitors. Your team
sold shares to fund an idea with better near-term earnings visibility.
Gap, Inc. $2.3 20.5 January-quarter earnings grew 37 percent, but lower-than-anticipated same-store
sales during the month of December sent shares lower. Marketing efforts fell
short at the company's Gap and Old Navy stores, and a late surge of shopping
just prior to Christmas didn't make up the shortfall. Your team sold Gap to fund
an idea with greater near-term earnings potential.
SanDisk Corp. $1.5 6.8 Your team sold SanDisk as negative perceptions overshadowed impressive top- and
bottom-line growth. December-quarter earnings more than tripled, but shares fell
on concerns of increased competition and the potential for an oversupply of
flash memory used in digital cameras and other devices. Our research indicated
that supply-and-demand balance for flash would remain tight, due to the
significant resources needed to enter the market.
Best Buy Co. $1.5 6.8 February-quarter earnings grew 22 percent, beating estimates. Shares of the
electronics retailer came under pressure as investors worried that costs
associated with the company's "Customer Centricity" initiative, such as store
remodeling and sales associate training, would hurt margins. Your team sold Best
Buy shares to fund an idea with greater near-term upside.
Staples, Inc. $1.1 5.6 January-quarter earnings per share jumped 20 percent to $0.42 on revenue growth
of 10 percent. Despite strong operating results, improving trends and
promotional activity from large competitor Office Depot, which recently
purchased 124 former Kids R Us stores, created concerns that Staples' ability to
take market share could be hampered.
All gains/losses are calculated on an average cost basis
BRANDYWINE FUND, INC.
STATEMENT OF NET ASSETS
March 31, 2004
(Unaudited)
SHARES COST VALUE
------ ---- -----
COMMON STOCKS - 96.8% (A)<F5>
AEROSPACE/DEFENSE - 0.7%
918,600 Rockwell Collins, Inc. $ 28,392,895 $ 29,036,946
THIS SECTOR IS 2.3% ABOVE YOUR FUND'S COST.
APPAREL & SHOE RETAILERS - 7.9%
1,800,000 American Eagle
Outfitters, Inc.*<F4> 45,653,999 48,528,000
1,100,000 AnnTaylor Stores Corp.*<F4> 47,551,610 47,080,000
150,000 Charming Shoppes, Inc.*<F4> 1,039,215 1,168,500
50,000 Children's Place
Retail Stores, Inc.*<F4> 1,452,800 1,548,500
250,000 The Finish Line, Inc.*<F4> 8,376,915 9,245,000
325,000 The Men's Wearhouse, Inc.*<F4> 8,480,152 8,635,250
1,650,000 NIKE, Inc. Cl B 110,120,380 128,485,500
750,000 Polo Ralph Lauren Corp. 23,011,449 25,710,000
500,000 Timberland Co.*<F4> 30,550,000 29,725,000
200,000 Wolverine World Wide, Inc. 4,750,333 4,826,000
-------------- --------------
280,986,853 304,951,750
THIS SECTOR IS 8.5% ABOVE YOUR FUND'S COST.
AUTOMOTIVE RELATED - 5.9%
2,007,800 Advance Auto Parts, Inc.*<F4> 57,297,128 81,657,226
792,700 Cummins Inc. 41,471,361 46,333,315
600,000 Harman International
Industries, Inc. 14,713,877 47,760,000
1,150,000 Navistar International Corp.*<F4> 53,372,709 52,727,500
-------------- --------------
166,855,075 228,478,041
THIS SECTOR IS 36.9% ABOVE YOUR FUND'S COST.
BUSINESS/COMMUNICATION SERVICES - 3.7%
2,450,000 Accenture Ltd.*<F4> 59,484,561 60,760,000
425,000 Affiliated Computer
Services, Inc.*<F4> 21,343,425 22,057,500
1,310,000 ChoicePoint Inc.*<F4> 46,583,235 49,819,300
525,000 Navigant Consulting, Inc.*<F4> 10,257,388 10,620,750
-------------- --------------
137,668,609 143,257,550
THIS SECTOR IS 4.1% ABOVE YOUR FUND'S COST.
BUILDING RELATED - 5.7%
530,000 Centex Corp. 28,783,699 28,651,800
250,000 Dycom Industries, Inc.*<F4> 6,461,290 6,630,000
110,000 Meritage Corp.*<F4> 7,800,002 8,167,500
2,485,400 Pulte Homes, Inc. 97,836,824 138,188,240
680,000 Standard Pacific Corp. 24,304,308 40,800,000
-------------- --------------
165,186,123 222,437,540
THIS SECTOR IS 34.7% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT/SERVICES - 9.1%
2,524,800 America Movil S.A. de C.V.
ADR Series L 52,844,569 97,583,520
2,325,000 Andrew Corp.*<F4> 29,886,854 40,687,500
2,625,000 Cisco Systems Inc.*<F4> 63,257,705 61,740,000
2,537,800 Comverse Technology, Inc.*<F4> 44,704,042 46,035,692
1,100,000 L.M. Ericsson
Telephone Co. ADR*<F4> 24,656,930 30,525,000
475,000 NII Holdings Inc. Cl B*<F4> 16,218,052 16,639,250
150,000 Polycom, Inc.*<F4> 3,116,430 3,184,500
1,675,000 Scientific-Atlanta, Inc. 55,686,103 54,169,500
100,000 Tekelec*<F4> 1,804,360 1,659,000
-------------- --------------
292,175,045 352,223,962
THIS SECTOR IS 20.6% ABOVE YOUR FUND'S COST.
COMPUTER/ELECTRONICS - 7.7%
2,800,000 Celestica Inc.*<F4> 48,526,366 45,920,000
2,600,000 Flextronics International Ltd.*<F4> 34,938,510 44,772,000
715,900 KEMET Corp.*<F4> 9,583,876 10,266,006
315,000 Manhattan Associates, Inc.*<F4> 9,208,890 8,757,000
145,700 PerkinElmer, Inc. 2,640,920 3,014,533
1,691,500 QLogic Corp.*<F4> 75,742,190 55,836,415
525,000 Rockwell Automation Inc. 16,763,661 18,201,750
3,327,400 Teradyne, Inc.*<F4> 67,857,728 79,291,942
1,432,900 Vishay Intertechnology, Inc.*<F4> 24,503,529 30,578,086
-------------- --------------
289,765,670 296,637,732
THIS SECTOR IS 2.4% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 1.0%
475,000 Federated Department Stores, Inc. 25,538,643 25,673,750
432,400 J.C. Penney Company, Inc.
(Holding Co.) 12,823,946 15,038,872
-------------- --------------
38,362,589 40,712,622
THIS SECTOR IS 6.1% ABOVE YOUR FUND'S COST.
ENERGY - 0.3%
500,000 CONSOL Energy Inc. 13,370,400 13,400,000
THIS SECTOR IS 0.2% ABOVE YOUR FUND'S COST.
FINANCIAL - 14.1%
744,800 American Express Co. 33,056,242 38,617,880
6,020,000 Ameritrade Holding Corp.*<F4> 79,044,419 92,708,000
1,100,000 Capital One Financial Corp. 74,511,811 82,973,000
1,372,300 Goldman Sachs Group, Inc. 147,022,911 143,199,505
5,350,000 MBNA Corp. 149,649,822 147,820,500
447,200 SEI Investments Co. 12,863,488 14,757,600
650,000 Silicon Valley Bancshares*<F4> 21,978,444 21,086,000
100,000 Wintrust Financial Corp. 4,485,596 4,863,000
-------------- --------------
522,612,733 546,025,485
THIS SECTOR IS 4.5% ABOVE YOUR FUND'S COST.
FOOD/RESTAURANTS - 0.4%
407,500 Panera Bread Co.*<F4> 15,429,043 15,859,900
THIS SECTOR IS 2.8% ABOVE YOUR FUND'S COST.
HEALTH CARE RELATED - 2.6%
426,900 Express Scripts, Inc.*<F4> 25,433,797 31,842,471
1,250,000 Fisher Scientific
International Inc.*<F4> 49,034,019 68,800,000
-------------- --------------
74,467,816 100,642,471
THIS SECTOR IS 35.1% ABOVE YOUR FUND'S COST.
INSURANCE - 2.9%
2,461,600 Allstate Corp. 97,812,284 111,904,336
THIS SECTOR IS 14.4% ABOVE YOUR FUND'S COST.
LEISURE & ENTERTAINMENT - 1.5%
1,375,000 Brunswick Corp. 55,445,899 56,141,250
100,000 Orbitz, Inc.*<F4> 2,416,530 2,381,000
-------------- --------------
57,862,429 58,522,250
THIS SECTOR IS 1.1% ABOVE YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 2.9%
103,400 Carlisle Companies Inc. 5,907,958 5,857,610
1,150,000 Deere & Co. 74,805,793 79,706,500
450,000 Maverick Tube Corp.*<F4> 10,164,648 10,597,500
294,700 Terex Corp.*<F4> 10,435,930 10,895,059
300,500 Timken Co. 5,886,213 6,980,615
-------------- --------------
107,200,542 114,037,284
THIS SECTOR IS 6.4% ABOVE YOUR FUND'S COST.
MEDIA GROUP - 1.1%
975,000 Clear Channel Communications, Inc. 40,309,957 41,291,250
THIS SECTOR IS 2.4% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SERVICES - 4.8%
360,000 Accredo Health, Inc.*<F4> 11,736,825 13,716,000
3,500,000 Boston Scientific Corp.*<F4> 115,322,680 148,330,000
950,000 Select Medical Corp. 15,685,755 15,865,000
325,000 Serologicals Corp.*<F4> 6,608,889 6,630,000
-------------- --------------
149,354,149 184,541,000
THIS SECTOR IS 23.6% ABOVE YOUR FUND'S COST.
MEDICAL/MANAGED CARE - 2.1%
850,000 Aetna Inc. 74,832,411 76,262,000
225,000 American Medical Security
Group, Inc.*<F4> 3,192,969 6,009,750
-------------- --------------
78,025,380 82,271,750
THIS SECTOR IS 5.4% ABOVE YOUR FUND'S COST.
OIL/GAS - 1.9%
3,175,000 Chesapeake Energy Corp. 40,088,360 42,545,000
710,000 FMC Technologies, Inc.*<F4> 18,993,834 19,191,300
450,000 Southwestern Energy Co.*<F4> 8,894,935 10,854,000
-------------- --------------
67,977,129 72,590,300
THIS SECTOR IS 6.8% ABOVE YOUR FUND'S COST.
PHARMACEUTICALS - 1.9%
600,000 Angiotech
Pharmaceuticals, Inc.*<F4> 15,354,422 14,646,000
300,000 K-V Pharmaceutical Co.*<F4> 4,316,836 7,368,000
930,000 Pharmaceutical Resources, Inc.*<F4> 55,902,137 52,879,800
-------------- --------------
75,573,395 74,893,800
THIS SECTOR IS 0.9% BELOW YOUR FUND'S COST.
SEMICONDUCTOR RELATED - 6.8%
140,000 ASM International N.V.*<F4> 3,311,883 3,094,000
1,262,400 Broadcom Corp.*<F4> 49,349,407 49,448,208
2,200,000 Conexant Systems, Inc.*<F4> 14,838,255 13,552,000
400,000 Cymer, Inc.*<F4> 17,284,793 15,444,000
225,000 Entegris Inc.*<F4> 2,659,108 2,848,500
100,000 Exar Corp.*<F4> 1,974,044 1,850,000
1,270,000 Fairchild Semiconductor
International, Inc.*<F4> 20,605,580 30,518,100
609,800 Integrated Circuit
Systems, Inc.*<F4> 16,272,312 15,263,294
1,925,000 Intersil Corp. 51,118,135 42,908,250
300,000 LTX Corp.*<F4> 4,976,955 4,530,000
425,000 M-Systems Flash
Disk Pioneers Ltd.*<F4> 7,918,035 8,661,500
1,750,000 MEMC Electronic
Materials, Inc.*<F4> 16,975,000 16,012,500
150,000 MKS Instruments, Inc.*<F4> 3,637,088 3,601,500
1,475,000 ON Semiconductor Corp.*<F4> 10,042,950 11,121,500
150,000 Sigmatel Inc.*<F4> 3,771,045 3,367,500
3,850,000 Taiwan Semiconductor Manufacturing
Co., Ltd. SP- ADR*<F4> 42,171,923 40,194,000
-------------- --------------
266,906,513 262,414,852
THIS SECTOR IS 1.7% BELOW YOUR FUND'S COST.
SOFTWARE - 5.0%
2,619,500 Adobe Systems Inc. 97,739,654 103,286,885
56,200 Check Point Software
Technologies Ltd.*<F4> 1,218,894 1,279,674
3,400,000 Compuware Corp.*<F4> 25,882,494 25,330,000
70,000 Dendrite International, Inc.*<F4> 1,126,795 1,120,000
325,000 Digital Insight Corp.*<F4> 6,937,200 6,734,000
300,000 Informatica Corp.*<F4> 3,351,290 2,577,000
650,000 Internet Security
Systems, Inc.*<F4> 11,402,526 11,466,000
850,000 Macromedia, Inc.*<F4> 17,148,919 17,059,500
175,000 SERENA Software, Inc.*<F4> 3,351,494 3,561,250
300,000 Sybase, Inc.*<F4> 6,010,388 6,297,000
1,950,000 TIBCO Software Inc.*<F4> 13,445,262 15,931,500
-------------- --------------
187,614,916 194,642,809
THIS SECTOR IS 3.7% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 4.9%
350,000 Fastenal Co. 16,928,910 18,791,500
1,100,000 Home Depot, Inc. 39,942,624 41,096,000
731,000 Linens On Things, Inc.*<F4> 25,570,361 25,884,710
939,900 Lowe's Companies, Inc. 50,473,239 52,756,587
150,000 MSC Industrial Direct Co., Inc. 4,247,700 4,492,500
400,000 Regis Corp. 11,680,694 17,776,000
225,000 Select Comfort Corp.*<F4> 5,625,296 6,207,750
506,000 Staples, Inc. 9,714,646 12,847,340
236,000 Tempur-Pedic
International Inc.*<F4> 3,304,000 3,691,040
150,000 Tuesday Morning Corp.*<F4> 4,759,933 5,169,000
-------------- --------------
172,247,403 188,712,427
THIS SECTOR IS 9.6% ABOVE YOUR FUND'S COST.
TRANSPORTATION RELATED - 1.9%
650,000 Hunt (J.B.) Transport
Services, Inc.*<F4> 17,750,803 18,310,500
1,075,000 Laidlaw International Inc.*<F4> 14,248,664 15,641,250
975,000 Ryder System, Inc. 34,043,459 37,761,750
100,000 Werner Enterprises, Inc. 1,863,425 1,895,000
-------------- --------------
67,906,351 73,608,500
THIS SECTOR IS 8.4% ABOVE YOUR FUND'S COST.
-------------- --------------
Total common stocks 3,394,063,299 3,753,094,557
PRINCIPAL
AMOUNT
---------
SHORT-TERM INVESTMENTS - 2.7% (A)<F5>
COMMERCIAL PAPER - 2.6%
$50,000,000 UBS Americas, Inc.,
due 04/01/04, discount of 1.06% 50,000,000 50,000,000
50,000,000 Citigroup, due 04/02/04,
discount of 1.03% 49,998,570 49,998,570
-------------- --------------
Total commercial paper 99,998,570 99,998,570
VARIABLE RATE DEMAND NOTE - 0.1%
$2,841,045 U.S. Bank, N.A. 2,841,045 2,841,045
-------------- --------------
Total short-term investments 102,839,615 102,839,615
-------------- --------------
Total investments $3,496,902,914 3,855,934,172
--------------
--------------
Cash and receivables, less
liabilities 0.5% (A)<F5> 21,059,346
--------------
NET ASSETS $3,876,993,518
--------------
--------------
Net Asset Value Per Share
($0.01 par value 500,000,000
shares authorized), offering
and redemption price
($3,876,993,518 / 154,523,811
shares outstanding) $25.09
------
------
*<F4> Non-dividend paying security.
(a)<F5> Percentages for the various classifications relate to net assets.
ADR - American Depository Receipt
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 2004
(Unaudited)
INCOME:
Dividends $ 7,843,538
Interest 675,443
------------
Total income 8,518,981
------------
EXPENSES:
Management fees 18,973,460
Transfer agent fees 748,935
Administrative services 271,780
Printing and postage expense 238,107
Custodian fees 171,345
Board of Directors fees 110,489
Insurance expense 53,656
Professional fees 43,235
Registration fees 35,057
Other expenses 15,396
------------
Total expenses 20,661,460
------------
NET INVESTMENT LOSS (12,142,479)
------------
NET REALIZED GAIN ON INVESTMENTS 369,113,647
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 242,273,085
------------
NET GAIN ON INVESTMENTS 611,386,732
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $599,244,253
------------
------------
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 2004 (Unaudited)
and For the Year Ended September 30, 2003
2004 2003
---- ----
OPERATIONS:
Net investment loss $ (12,142,479) $ (16,751,575)
Net realized gain on investments 369,113,647 204,896,466
Net increase in unrealized appreciation on investments 242,273,085 156,935,580
-------------- --------------
Net increase in net assets resulting from operations 599,244,253 345,080,471
-------------- --------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (10,051,049 and 21,107,528 shares, respectively) 241,388,792 410,081,518
Cost of shares redeemed (14,495,679 and 29,685,813 shares, respectively) (349,229,077) (566,431,690)
-------------- --------------
Net decrease in net assets derived from Fund share activities (107,840,285) (156,350,172)
-------------- --------------
TOTAL INCREASE 491,403,968 188,730,299
NET ASSETS AT THE BEGINNING OF THE PERIOD 3,385,589,550 3,196,859,251
-------------- --------------
NET ASSETS AT THE END OF THE PERIOD $3,876,993,518 $3,385,589,550
-------------- --------------
-------------- --------------
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
For the Six Months Years Ended September 30,
ended March 31, 2004 ----------------------------------------------------------------
(Unaudited) 2003 2002 2001 2000 1999
-------------------- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $21.30 $19.08 $22.93 $46.23 $35.09 $25.99
Income from investment operations:
Net investment loss(1)<F8> (0.08) (0.10) (0.12) (0.09) (0.25) (0.20)
Net realized and unrealized
gains (losses) on investments 3.87 2.32 (3.73) (7.10) 14.51 9.64
------ ------ ------ ------ ------ ------
Total from investment operations 3.79 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 period $25.09 $21.30 $19.08 $22.93 $46.23 $35.09
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 17.79%(a)<F6> 11.64% (16.79%) (22.46%) 42.81% 36.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's $) 3,876,994 3,385,590 3,196,859 4,302,986 5,983,163 4,194,917
Ratio of expenses
to average net assets 1.09%(b)<F7> 1.09% 1.08% 1.06% 1.04% 1.05%
Ratio of net investment loss
to average net assets (0.64%)(b)<F7> (0.53%) (0.52%) (0.32%) (0.61%) (0.66%)
Portfolio turnover rate 139.6% 279.3% 272.9% 284.3% 244.0% 208.7%
(a)<F6> Not Annualized.
(b)<F7> Annualized.
(1)<F8> In 2004, 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.
BRANDYWINE BLUE FUND
STATEMENT OF NET ASSETS
March 31, 2004
(Unaudited)
SHARES COST VALUE
------ ---- -----
COMMON STOCKS - 95.9% (A)<F10>
APPAREL & SHOE RETAILERS - 3.7%
224,000 NIKE, Inc. Cl B $ 14,932,091 $ 17,442,880
THIS SECTOR IS 16.8% ABOVE YOUR FUND'S COST.
BUSINESS/COMMUNICATION SERVICES - 5.3%
633,600 Accenture Ltd.*<F9> 15,406,895 15,713,280
178,900 Affiliated Computer
Services, Inc.*<F9> 8,968,649 9,284,910
------------ ------------
24,375,544 24,998,190
THIS SECTOR IS 2.6% ABOVE YOUR FUND'S COST.
BUILDING RELATED - 8.4%
153,600 Centex Corp. 8,363,389 8,303,616
407,000 D.R. Horton, Inc. 11,568,367 14,420,010
305,500 Pulte Homes, Inc. 13,890,773 16,985,800
------------ ------------
33,822,529 39,709,426
THIS SECTOR IS 17.4% ABOVE YOUR FUND'S COST.
COMMUNICATIONS EQUIPMENT/SERVICES - 8.8%
428,100 America Movil S.A. de C.V.
ADR Series L 8,833,325 16,546,065
650,000 Cisco Systems Inc.*<F9> 15,741,440 15,288,000
359,700 L.M. Ericsson Telephone Co. ADR*<F9> 7,959,561 9,981,675
------------ ------------
32,534,326 41,815,740
THIS SECTOR IS 28.5% ABOVE YOUR FUND'S COST.
COMPUTER/ELECTRONICS - 6.0%
90,900 Danaher Corp. 8,252,761 8,487,333
720,900 Flextronics International Ltd.*<F9> 10,484,328 12,413,898
220,700 Rockwell Automation Inc. 6,890,567 7,651,669
------------ ------------
25,627,656 28,552,900
THIS SECTOR IS 11.4% ABOVE YOUR FUND'S COST.
DEPARTMENT STORES - 5.6%
285,800 Federated Department Stores, Inc. 14,931,535 15,447,490
325,000 J.C. Penney Company, Inc.
(Holding Co.) 9,638,720 11,303,500
------------ ------------
24,570,255 26,750,990
THIS SECTOR IS 8.9% ABOVE YOUR FUND'S COST.
FINANCIAL - 19.7%
316,400 American Express Co. 14,313,730 16,405,340
974,100 Ameritrade Holding Corp.*<F9> 14,789,461 15,001,140
243,000 Capital One Financial Corp. 16,044,498 18,329,490
204,000 Goldman Sachs Group, Inc. 21,857,936 21,287,400
813,000 MBNA Corp. 22,669,580 22,463,190
------------ ------------
89,675,205 93,486,560
THIS SECTOR IS 4.3% ABOVE YOUR FUND'S COST.
INSURANCE - 2.8%
294,800 Allstate Corp. 11,483,310 13,401,608
THIS SECTOR IS 16.7% ABOVE YOUR FUND'S COST.
MACHINERY & MISCELLANEOUS MANUFACTURING - 4.0%
275,000 Deere & Co. 17,597,949 19,060,250
THIS SECTOR IS 8.3% ABOVE YOUR FUND'S COST.
MEDIA GROUP - 1.7%
188,600 Clear Channel
Communications, Inc. 7,746,862 7,987,210
THIS SECTOR IS 3.1% ABOVE YOUR FUND'S COST.
MEDICAL/DENTAL PRODUCTS & SERVICES - 4.4%
489,700 Boston Scientific Corp.*<F9> 16,359,712 20,753,486
THIS SECTOR IS 26.9% ABOVE YOUR FUND'S COST.
MEDICAL/MANAGED CARE - 4.5%
236,000 Aetna Inc. 17,608,260 21,173,920
THIS SECTOR IS 20.2% ABOVE YOUR FUND'S COST.
SEMICONDUCTOR RELATED - 4.9%
367,400 Broadcom Corp.*<F9> 14,435,980 14,391,058
854,300 Taiwan Semiconductor Manufacturing
Co., Ltd. SP-ADR*<F9> 9,339,323 8,918,892
------------ ------------
23,775,303 23,309,950
THIS SECTOR IS 2.0% BELOW YOUR FUND'S COST.
SOFTWARE - 4.8%
575,000 Adobe Systems Inc. 21,129,475 22,672,250
THIS SECTOR IS 7.3% ABOVE YOUR FUND'S COST.
SPECIALTY RETAILING - 11.3%
450,000 Home Depot, Inc. 16,295,444 16,812,000
340,000 Lowe's Companies, Inc. 18,297,920 19,084,200
700,000 Staples, Inc. 15,763,356 17,773,000
------------ ------------
50,356,720 53,669,200
THIS SECTOR IS 6.6% ABOVE YOUR FUND'S COST.
------------ ------------
Total common stocks 411,595,197 454,784,560
PRINCIPAL
AMOUNT
---------
SHORT-TERM INVESTMENTS - 4.3% (A)<F10>
COMMERCIAL PAPER - 3.8%
$9,000,000 New Center Asset Trust,
due 04/01/04, discount of 1.06% 9,000,000 9,000,000
9,000,000 Citigroup, due 04/02/04,
discount of 1.03% 8,999,743 8,999,743
------------ ------------
Total commercial paper 17,999,743 17,999,743
VARIABLE RATE DEMAND NOTE - 0.5%
2,197,131 U.S. Bank, N.A. 2,197,131 2,197,131
------------ ------------
Total short-term investments 20,196,874 20,196,874
------------ ------------
Total investments $431,792,071 474,981,434
------------
------------
Liabilities, less cash and
receivables (0.2%) (A)<F10> (948,471)
------------
NET ASSETS $474,032,963
------------
------------
Net Asset Value Per Share
($0.01 par value 100,000,000
shares authorized), offering
and redemption price
($474,032,963 / 18,602,860
shares outstanding) $25.48
------
------
*<F9> Non-dividend paying security.
(a)<F10> Percentages for the various classifications relate to net assets.
ADR - American Depository Receipts
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS
STATEMENT.
BRANDYWINE BLUE FUND
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 2004
(Unaudited)
INCOME:
Dividends $ 1,204,705
Interest 130,023
-----------
Total income 1,334,728
-----------
EXPENSES:
Management fees 1,942,639
Administrative services 68,215
Professional fees 42,015
Transfer agent fees 36,119
Registration fees 34,755
Board of Directors fees 23,951
Custodian fees 15,632
Printing and postage expense 12,571
Insurance expense 11,296
Other expenses 4,521
-----------
Total expenses 2,191,714
-----------
NET INVESTMENT LOSS (856,986)
-----------
NET REALIZED GAIN ON INVESTMENTS 30,314,427
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 35,291,428
-----------
NET GAIN ON INVESTMENTS 65,605,855
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $64,748,869
-----------
-----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months ended March 31, 2004 (Unaudited)
and for the Year Ended September 30, 2003
2003 2004
---- ----
OPERATIONS:
Net investment loss $ (856,986) $ (1,068,556)
Net realized gain on investments 30,314,427 32,634,458
Net increase in unrealized appreciation on investments 35,291,428 8,824,716
------------ ------------
Net increase in net assets resulting from operations 64,748,869 40,390,618
------------ ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (4,907,823 and 4,710,513 shares, respectively) 118,683,127 93,274,187
Cost of shares redeemed (919,540 and 1,993,790 shares, respectively) (22,124,693) (38,676,807)
------------ ------------
Net increase in net assets derived from Fund share activities 96,558,434 54,597,380
------------ ------------
TOTAL INCREASE 161,307,303 94,987,998
NET ASSETS AT THE BEGINNING OF THE PERIOD 312,725,660 217,737,662
------------ ------------
NET ASSETS AT THE END OF THE PERIOD $474,032,963 $312,725,660
------------ ------------
------------ ------------
The accompanying notes to financial statements are an integral part of these
statements.
BRANDYWINE BLUE FUND
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
For the Six Months Years Ended September 30,
ended March 31, 2004 ----------------------------------------------------------------
(Unaudited) 2003 2002 2001 2000 1999
-------------------- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $21.40 $18.30 $21.31 $37.39 $29.46 $22.13
Income from investment operations:
Net investment loss(1)<F13> (0.05) (0.08) (0.05) (0.05) (0.21) (0.18)
Net realized and unrealized
gains (losses) on investments 4.13 3.18 (2.96) (5.32) 10.32 7.85
------ ------ ------ ------ ------ ------
Total from investment operations 4.08 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 period $25.48 $21.40 $18.30 $21.31 $37.39 $29.46
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 19.07%(a)<F11> 16.94% (14.12%) (19.92%) 35.53% 35.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's $) 474,033 312,726 217,738 271,947 407,839 311,984
Ratio of expenses
to average net assets 1.13%(b)<F12> 1.14% 1.13% 1.09% 1.07% 1.08%
Ratio of net investment loss
to average net assets (0.44%)(b)<F12> (0.41%) (0.26%) (0.18%) (0.56%) (0.67%)
Portfolio turnover rate 143.5% 300.0% 310.7% 274.5% 245.7% 228.4%
(a)<F11> Not Annualized.
(b)<F12> Annualized.
(1)<F13> In 2004, 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 this
statement.
THE BRANDYWINE FUNDS
NOTES TO FINANCIAL STATEMENTS
March 31, 2004 (Unaudited)
(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. Securities that are traded on the Nasdaq National
Market or the Nasdaq Smallcap Market are valued at the Nasdaq Official
Closing Price, 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 period ended March 31, 2004, purchases and proceeds of sales of
investment securities (excluding short-term investments) for the Brandywine
Fund were $5,104,349,113 and $5,267,270,034, respectively; purchases and
proceeds of sales of investment securities (excluding short-term
investments) for the Blue Fund were $627,930,783 and $526,064,460,
respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of March 31, 2004, liabilities of each Fund included the following:
Brandywine Blue
Fund Fund
---------- ----
Payable to brokers for investments purchased $ 155,731,599 $ 1,906,103
Payable to Adviser for management fees 3,287,101 389,834
Deferred compensation plan for Directors 359,783 91,792
Payable to shareholders for redemptions 91,421 5
Other liabilities 590,479 53,997
(6) SOURCES OF NET ASSETS
As of March 31, 2004, the sources of net assets were as follows:
Fund shares issued and outstanding 4,435,689,554 454,518,967
Net unrealized appreciation on investments 359,031,258 43,189,363
Accumulated net realized losses (917,727,294) (23,675,367)
-------------- ------------
$3,876,993,518 $474,032,963
-------------- ------------
-------------- ------------
(7) INCOME TAX INFORMATION
The following information for the Funds is presented on an income tax basis
as of March 31, 2004:
GROSS GROSS NET UNREALIZED
COST OF UNREALIZED UNREALIZED APPRECIATION
INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS
----------- ------------ ------------ --------------
Brandywine Fund $3,498,843,952 $420,488,950 $63,398,730 $357,090,220
Brandywine Blue Fund $ 431,792,071 $ 45,656,424 $ 2,467,061 $ 43,189,363
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
---------------------------------------------- ------------------------------------------------
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.
CAPITAL GAINS UPDATE . . .
Realized gains in the March quarter were not large enough to eliminate net
loss carry-forwards from prior periods. Brandywine and Brandywine Blue can
realize gains of $5.94 and $1.27 per share before triggering taxable capital
gains distributions. These estimates will change, so please look to future
quarterly reports for updates.
BOARD OF DIRECTORS
Robert F. Birch
Chairman and President
New America High Income Fund
Dover, Massachusetts
William F. D'Alonzo
CEO and CIO
Friess Associates of Delaware, LLC
Greenville, Delaware
Foster S. Friess
Chairman
Friess Associates, LLC
Jackson, Wyoming
Quentin Jackson
President and CEO
Nuclear Electric Insurance Limited
Wilmington, Delaware
Stuart A. McFarland
Managing Partner
Federal City Capital Advisors, LLC
Washington, DC
W. Richard Scarlett, III
Chairman and CEO
United Bancorporation of Wyoming, Inc.
Jackson, Wyoming
Marvin N. Schoenhals
Chairman and President
WSFS Financial Corp.
Wilmington, Delaware
James W. Zug
Former Senior Partner
PricewaterhouseCoopers LLP
Radnor, Pennsylvania
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, Chairman; William D'Alonzo, President; Lynda
Campbell, Vice President and Secretary; Carl Gates, Vice President; Christopher
Long, Vice President and Treasurer; David Marky, Vice President and Assistant
Secretary; and Paul Robinson, Vice President
Report Editor: Chris Aregood
Report Staff: Dave Marky, Adam Rieger, Rebecca Schuster
Must be preceded or accompanied by prospectus. Please refer to the prospectus
for important information about the investment companies including investment
objectives, risks, charges and expenses.
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 3/31/04, unless listed in the accompanying financial
statements. References to the earnings growth rates of the Funds refer solely to
the estimated earnings growth rates of the average investment holding of the
Funds based on consensus estimates from Baseline and not to the actual
performance of the Funds themselves. The Russell 1000, Russell 3000 and S&P 500
Indices are unmanaged indices commonly used to measure the performance of U.S.
stocks. You cannot invest directly in an index. As of March 31, 2004 the Russell
1000 Index's average annual total returns for 1, 5 and 10 years were 36.37, -
0.56 and 11.66 percent; the Russell 3000 Index's were 38.19, 0.14 and 11.45
percent; and the S&P 500 Index's were 35.12, -1.20 and 11.68 percent.
Morningstar's "percent rank in category" is a fund's trailing total return
percentile rank relative to all funds that have the same Morningstar category.
The highest, or best, percentile rank is 1 and the lowest is 100. Brandywine
Blue Fund was ranked in the 13, 1 and 13 percentile out of the 1,255, 633 and
225 funds in Morningstar's large-cap growth category for the 1-, 5- and 10-year
periods, respectively as of 03/31/04. Baseline Financial Services, Inc.
(Baseline) and Bloomberg Financial Markets, L.P. provide analytical information
and services to the investment community.
ITEM 2. CODE OF ETHICS.
- -----------------------
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ----------------------------------------
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
- -------------------------------
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- -------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES
- -------------------------------
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
- --------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASERS
- ---------------------------------
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None.
ITEM 10. CONTROLS AND PROCEDURES.
- ---------------------------------
(a) The disclosure controls and procedures of the Brandywine Fund, Inc. are
periodically evaluated. As of April 12, 2004, 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, April 12, 2004, 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 11. EXHIBITS.
- -----------------
(a) Any code of ethics or amendment thereto. Not applicable.
(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 4-22-04
----------------------------------
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/ Christopher G. Long
------------------------------------
Christopher G. Long, Principal Financial Officer
Date 4-22-04
----------------------------------