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BERKELEY MONEY MARKET FUND
ANNUAL REPORT
October 31, 1998
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Dear Shareholder:
We welcome the opportunity to provide you with a summary of developments
affecting the performance of the Berkeley Money Market Fund (the "Fund") and our
investment strategy.
Since the Fund's last report, the crisis in international markets, particularly
debt defaults by the Russian government and the subsequent widening of credit
spreads, led the Federal Reserve to lower short term interest rates by an
aggregate of 75 basis points. This action caused the yield curve to steepen,
with money market instruments yields falling more than yields on longer term
bonds.
The domestic economy also is showing signs of slowing. Third quarter Gross
Domestic Product (GDP) was fairly strong at 3.9%, but much of this growth was
due to a build-up in inventories that should negatively impact the fourth
quarter. Also contributing to the slowdown is the widening trade deficit and the
weakening job creation rate.
In this environment, we believe, along with most observers, that the Federal
Reserve will continue to lower interest rates in an attempt to steer the economy
towards a "soft landing". We are not forecasting a recession in 1999, and
anticipate that an improvement in Asian economies could lead to stronger growth
in the year 2000.
As of October 31, 1998, the 7-day yield was 4.73% and the 7-day effective yield
was 4.84%.
Thank you for your investment in Berkeley Money Market Fund.
Sincerely,
/s/ William F. Cox
William F. Cox
Portfolio Manager
November 19, 1998
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BERKELEY MONEY MARKET FUND
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Schedule of Investments
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
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<S> <C> <C>
COMMERCIAL PAPER - 80.6%
ASSET BACKED SECURITIES - 8.8%
Barton Capital Corp., 5.26%, 11/20/98 $4,300,000 $4,288,063
Cooperative Association Tractor Dealers, 5.22%, 12/8/98 1,000,000 994,635
Cooperative Association Tractor Dealers, 5.25%, 11/13/98 1,185,000 1,182,926
Cooperative Association Tractor Dealers, 5.37%, 11/2/98 1,220,000 1,219,818
Dakota Trust Certificates, 5.27%, 11/9/98 4,000,000 3,995,316
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11,680,758
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AUTOMOTIVE - 12.4%
Ford Motor Credit Co., 5.26%, 11/6/98 6,000,000 5,995,617
General Motors Acceptance Corp., 5.22%, 11/13/98 5,000,000 4,991,300
Hertz Corp., 5.11%, 11/16/98 5,500,000 5,488,290
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16,475,207
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BANKING - 0.7%
Bankers Trust Corp., 5.50%, 1/14/99 1,000,000 988,695
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BROKERAGE FIRM - 8.2%
Goldman Sachs Group, L.P., 5.27%, 11/3/98 6,000,000 5,998,243
Merrill Lynch & Co. Inc., 5.07%, 11/25/98 5,000,000 4,983,100
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10,981,343
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CONSUMER PRODUCTS - 2.5%
Allergan Inc., 5.27%, 11/17/98 2,000,000 1,995,316
Allergan Inc., 5.30%, 11/03/98 1,362,000 1,361,599
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3,356,915
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ENERGY - 4.5%
Shell Deer Park Cogen Trust, 5.27%, 11/3/98 6,000,000 5,998,243
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FINANCIAL SERVICES - 7.5%
Countrywide Home Loans, 5.20%, 1/4/99 4,000,000 3,963,022
General Electric Capital Corp., 5.25%, 11/4/98 6,000,000 5,997,375
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9,960,397
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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2
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BERKELEY MONEY MARKET FUND
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SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
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<S> <C> <C>
INDUSTRIAL - 11.1%
Albertson's Inc., 5.12%, 11/9/98 $6,000,000 $5,993,173
Dupont EI de Nemours Co., 5.08%, 11/24/98 3,000,000 2,990,263
Harley Davidson Funding Corp., 5.22%, 11/2/98 800,000 799,884
Knight-Ridder Inc., 5.27%, 11/5/98 2,500,000 2,498,536
Motorola Inc., 5.14%, 12/1/98 2,550,000 2,539,078
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14,820,934
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INSURANCE - 11.2%
Aetna Services Inc., 5.26%, 11/9/98 4,000,000 3,995,325
Aetna Services Inc., 5.27%, 11/12/98 2,000,000 1,996,779
CIGNA Corporation, 5.12%, 11/6/98 6,000,000 5,995,733
USAA Capital Corp., 5.19%, 11/9/98 3,000,000 2,996,540
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14,984,377
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TECHNOLOGY - 4.5%
Lucent Technologies, 5.10%, 11/10/98 2,000,000 1,997,450
Lucent Technologies, 5.25%, 11/12/98 4,000,000 3,993,583
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5,991,033
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UTILITY - 9.2%
GTE Corporation, 5.28%, 11/9/98 3,000,000 2,996,480
GTE Corporation, 5.32%, 11/6/98 3,000,000 2,997,783
PG&E Corporation, 5.14%, 11/2/98 6,300,000 6,299,100
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12,293,363
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TOTAL COMMERCIAL PAPER 107,531,265
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CORPORATE NOTES/BONDS - 14.5%
ASSET BACKED SECURITIES - 2.2%
Arcadia Automobile Receivables Trust, 5.63%, 7/15/99 1,016,431 1,016,431
WFS Financial Owner Trust, 5.66%, 7/20/99 2,006,095 2,006,095
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3,022,526
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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3
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BERKELEY MONEY MARKET FUND
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SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
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<S> <C> <C>
BANKING - 5.3%
First Union National Bank, 5.83%, 4/29/99 $4,000,000 $4,000,000
KeyCorp, 8.40%, 4/1/99 3,000,000 3,029,231
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7,029,231
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CONSUMER PRODUCTS - 5.5%
Anheuser Busch, 5.48%, 12/16/98 4,000,000 3,998,761
JC Penny Co. Inc., 5.38%, 11/15/98 3,310,000 3,309,379
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7,308,140
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FINANCIAL SERVICES - 1.5%
Household Finance Corp., 5.19%, 3/30/99 2,000,000 1,999,488
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TOTAL CORPORATE NOTES/BONDS 19,359,385
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U.S. GOVERNMENT AGENCY - 0.3%
U.S. Treasury Bill, 3.38%, 11/12/98 360,000 359,628
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TOTAL GOVERNMENT AGENCY 359,628
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<CAPTION>
NUMBER OF AMORTIZED
SHARES COST
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<S> <C> <C>
INVESTMENT COMPANIES - 4.9%
Fidelity Colchester Domestic Fund, Class I 6,512,708 6,512,708
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TOTAL INVESTMENT COMPANIES 6,512,708
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TOTAL INVESTMENTS - 100.3% 133,762,986
LIABILITIES LESS OTHER ASSETS - (0.3)% (335,026)
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NET ASSETS - 100.0% $133,427,960
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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4
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BERKELEY MONEY MARKET FUND
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Statement of Assets and Liabilities
October 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at value based on amortized cost $133,762,986
Interest receivable 303,659
Organization expenses, net 103,962
Prepaid assets 14,099
Cash 937
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TOTAL ASSETS 134,185,643
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LIABILITIES
Dividends payable 566,265
Payable to Investment Manager 85,796
Accrued expenses and other liabilities 105,622
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TOTAL LIABILITIES 757,683
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NET ASSETS $133,427,960
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CAPITAL STOCK
$0.01 par value; unlimited number shares authorized
Shares issued and outstanding 133,427,960
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $1.00
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</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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5
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BERKELEY MONEY MARKET FUND
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Statement of Operations
For the Period Beginning March 23, 1998(1) through October 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $4,338,090
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EXPENSES:
Investment management fees 192,672
Shareholder servicing fees 192,672
Fund administration fees 49,079
Fund accounting fees 28,703
Transfer agent fees 11,819
Custodian fees 12,349
Professional fees 27,454
Registration and filing fees 45,001
Amortization of organization costs 14,473
Trustees' fees and expenses 5,632
Other 17,491
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TOTAL EXPENSES BEFORE REDUCTION 597,345
Less fee reduction and reimbursable expenses by Manager (111,811)
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NET EXPENSES 485,534
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NET INVESTMENT INCOME $3,852,556
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</TABLE>
(1) COMMENCEMENT OF OPERATIONS
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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BERKELEY MONEY MARKET FUND
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Statement of Changes in Net Assets
For the Period Beginning March 23, 1998(1) through October 31, 1998
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $ 3,852,556
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Net increase in net assets resulting from operations 3,852,556
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DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (3,852,626)
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FUND SHARE TRANSACTIONS:
Proceeds from shares sold 222,429,042
Reinvestment of dividends 141,573
Cost of shares redeemed (89,242,585)
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Increase in net assets resulting from fund share transactions 133,328,030
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TOTAL INCREASE IN NET ASSETS 133,327,960
NET ASSETS:
Beginning of period 100,000
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End of period $133,427,960
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</TABLE>
(1) COMMENCEMENT OF OPERATIONS
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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7
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BERKELEY MONEY MARKET FUND
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Financial Highlights for a Share Outstanding Throughout Each Period
For the Period Beginning March 23, 1998(1) through October 31, 1998
<TABLE>
<S> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $1.00
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INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03
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Total from investment operations 0.03
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LESS DISTRIBUTION TO SHAREHOLDERS:
Dividends from net investment income ($0.03)
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Total distributions ($0.03)
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NET ASSET VALUE AT END OF PERIOD $1.00
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TOTAL RETURN (NOT ANNUALIZED) 3.11%
SUPPLEMENTAL DATA AND RATIOS:
Net assets at end of period $133,427,960
Ratio of net expenses to average net assets(2) 0.63%
Ratio of net investment income to average net assets(2) 4.99%
</TABLE>
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED. NET OF FEES WAIVED AMOUNTING TO 0.15% OF AVERAGE NET ASSETS.
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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8
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BERKELEY FUNDS
BERKELEY MONEY MARKET FUND
Notes to the Financial Statements
October 31, 1998
1. ORGANIZATION
Berkeley Money Market Fund (the "Fund"), formerly named Berkeley Capital
Management Money Market Fund, is a diversified investment portfolio of
Berkeley Funds (the "Trust"), an open-end, management investment company.
The Trust, formerly named Berkeley Capital Management Funds, is a business
trust organized under the laws of Delaware on October 28, 1996 and is
registered under the Investment Company Act of 1940, as amended. Berkeley
Money Market Fund commenced operations on March 23, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements, and
such policies are in conformity with generally accepted accounting
principles ("GAAP") for investment companies. 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,
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 those estimates.
VALUATION OF SECURITIES
Securities are stated at amortized cost, which approximates market value.
Under this method, all investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period to maturity.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
The Fund recognizes interest income on an accrual basis. Discounts and
premiums are amortized over the life of the respective securities.
Investment and shareholder transactions are recorded on trade date. Realized
gains and losses from investment transactions are reported on an identified
cost basis. Permanent book and tax basis differences relating to shareholder
distributions will be reclassified to capital stock.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly.
Distributions of net realized capital gains, if any, will be declared at
least annually.
FEDERAL INCOME TAXES
The Fund intends to comply with the requirements necessary to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended, and to make the requisite distributions of income and
realized net capital gains, if any, to shareholders sufficient to
9
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BERKELEY FUNDS
BERKELEY MONEY MARKET FUND
Notes to the Financial Statements (Continued)
October 31, 1998
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
relieve it from all or substantially all federal income taxes. Accordingly,
no federal income tax provision is required.
ORGANIZATION COSTS
Costs incurred by the Fund in connection with the organization, registration
and the initial public offering of shares, are being deferred and amortized
on a straight line basis over the period of benefit, but not to exceed 60
months from the Fund's commencement of operations. These costs were advanced
by Berkeley Capital Management (the "Manager") and are to be reimbursed by
the Fund. In the event that any of the initial shares purchased by Berkeley
International Securities Corporation, an affiliate of the Manager, are
redeemed during the amortization period, the Fund will be reimbursed for any
remaining unamortized costs in the same proportion as the number of initial
shares redeemed bears to the total number of initial shares outstanding at
the time of such redemption.
3. INVESTMENT MANAGEMENT AND SHAREHOLDER SERVICE AGREEMENTS
The Trust has an agreement with the Manager, with whom certain officers and
trustees of Berkeley Funds are affiliated, to furnish investment management
services to the Fund. Under the terms of this agreement, the Manager will
receive an annual fee of 0.25% of the Fund's average daily net assets. The
investment management agreement (the "Agreement") allows the Manager to
voluntarily reduce any portion of its management fee under the Agreement and
to reimburse all or a portion of the Fund's expenses. The Agreement permits
the Manager to seek reimbursement of any reductions made to its management
fee and payments made to limit expenses which are the responsibility of the
Fund within the three-year period following such reduction, subject to the
Fund's ability to effect such reimbursement and remain in compliance with
applicable expense limitations. At such time as it appears probable that the
Manager will seek such reimbursement, the amount of reimbursement that the
Fund is able to effect will be accrued as an expense of the Fund for that
current period. On October 31, 1998, the amount of expense reductions
eligible for reimbursement was $111,811.
Pursuant to a shareholder services agreement, the Manager will provide, or
arrange for others to provide, certain specified shareholder services to
shareholders of the Fund. As compensation for the provision of shareholder
services, the Fund will pay the Manager up to 0.25% of the Fund's average
daily net assets on an annual basis, payable monthly.
4. FEES REDUCTION AND REIMBURSABLE EXPENSES
For the period beginning March 23, 1998 through October 31, 1998, the
Manager voluntarily reduced its management fee by $111,811.
10
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BERKELEY MONEY MARKET FUND
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Report of Independent Accountants
To the Shareholders and Board of Trustees of Berkeley Money Market Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, 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 Berkeley Money Market Fund
(constituting Berkeley Funds, hereafter referred to as the "Fund") at October
31, 1998, the results of its operations, the changes in its net assets and the
financial highlights for the period indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards 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
audit, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 11, 1998
11
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BERKELEY MONEY MARKET FUND
This report and the financial statements
contained herein are provided for the
general information of the shareholders of
the Berkeley Funds. This report is not
authorized for distribution to prospective
investors in the Berkeley Funds unless
preceded or accompanied by an effective
prospectus.
Please remember that money market yields
fluctuate and past performance is no
guarantee of future results. The Fund
seeks to maintain a stable $1.00 share
price to protect your principal; as with
all money funds, there can be no assurance
that the Fund will be able to maintain a
$1.00 net asset value per share. It is
also important to understand that your
investment in the Fund is not insured or
guaranteed by the U.S. Government.
For more information on Berkeley Funds,
including charges and expenses, please
call 888-889-0799 for a free prospectus.
Read it carefully before you invest or
send money.
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Berkeley Funds
650 California Street, Suite 2800
San Francisco, CA 94108
