BERKSHIRE CAPITAL INVESTMENT TRUST
Berkshire Capital Growth & Value Fund
1998
Semi-Annual Report
<PAGE>
TABLE OF CONTENTS
Page
----
Letter to Shareholders ........................................ 1
Performance Graph ............................................. 4
Portfolio Snapshot ............................................ 4
Schedule of Investments ....................................... 5
Statement of Assets & Liabilities ............................. 6
Statement of Operations ....................................... 7
Statement of Changes in Net Assets ............................ 8
Financial Highlights, Related Ratios and Supplemental Data .... 9
Notes to Financial Statements ................................. 10
<PAGE>
PERFORMANCE SUMMARY
(returns as of 6/30/98)
==================================================
Q1 Q2 YTD 1-YEAR
==================================================
BCGVF 16.44% 13.42% 32.06% 15.10%
DJIA 11.75% 2.15% 14.14% 18.71%
S&P 500 13.95% 3.30% 17.71% 30.15%
NASDAQ 17.02% 3.32% 20.91% 31.94%
==================================================
Past performance does not guarantee future results.
All returns reflect reinvested dividends.
August 27, 1998
Dear Shareholder:
We are pleased to report that 1998 has been an exceptional year for your
Fund. We met our goal of delivering superior returns to our shareholders by
significantly outperforming all of our benchmarks. The performance of your
Fund did not go unrecognized as the Associated Press and Lipper Analytical
Services ranked your Fund as the #1 performing Growth & Income fund for the
first-half of 1998 with a return of 32.06%. Your Fund was also ranked #1 in
its category for its performance in the second quarter with a return of
13.42%. Overall, your Fund was ranked 16th out of all U.S. equity funds for
1998. As we move forward into the second-half of the year our goal will be to
work even harder to find investments that will further increase your
share-owner value.
1998
Q1
As you can see in the Performance Summary Chart at the top of the page,
we outperformed both the Dow Jones Industrial Average (DJIA) and the S&P 500
Index (S&P 500) in the first quarter. The noted exception was our near-par
return when compared to the NASDAQ Composite Index (NASDAQ). We also
outperformed the average total return of 11.91% for all U.S. equity funds
during the period according to data from Lipper Analytical Services. Further
confirming our relative outperformance for the period was the Wall Street
Journal's report that 78.5% of all U.S. equity funds failed to even match the
returns of the S&P 500 for the first quarter.
The Fund's heavy weighting in technology stocks contributed substantially
to its performance during the period. We have always maintained a bias towards
investing in the technology sector because we believe that technology is now
the key driver of the U.S. economy. Moreover, your Fund's principal office is
located in the heart of Silicon Valley, giving us a tremendous advantage in
utilizing our connections within the industry. From our Silicon Valley
location we can also witness the direction of technology firsthand, allowing
us to make informed investment decisions on behalf of the Fund. It is no
coincidence then, that the Fund's largest investment is in Cisco Systems whose
corporate campus is located within walking distance from our office.
Semi-Annual Report to Shareholders | 1
<PAGE>
Among the Fund's best performing investments for the first quarter were
Dell Computer Corp. and Berkshire Hathaway which gained 61% and 46%
respectively. We believe that Dell is one of the best managed companies in the
world. Dell employs an intensely focused business model based on the direct
delivery of high-end PCs to its customers. The company will build a computer
only after it has been ordered eliminating the need to maintain inventories.
Additionally, Dell is actually one of the few companies in the world
positioned to benefit from the recent Asian-Pacific crisis. This is because
most of the company's computer components originate from that region. As the
region weakens, component prices become cheaper. This allows Dell to pass on
lower prices to its customers while at the same time further expanding profit
margins. We expect Dell to remain a core holding of our Fund for quite some
time.
Another core holding of the Fund which performed exceptionally well was
our investment in Berkshire Hathaway. At the helm of this company is legendary
investor Warren Buffett. Mr. Buffett is largely known for his outstanding
ability to manage Berkshire Hathaway's investment portfolios. As of late the
company's diverse operating businesses, rather than its investment portfolios,
have contributed most to increases in shareholder value. Continued strong
growth in Berkshire Hathaway's GEICO auto insurance unit best represents the
positive contributions made to shareholder value from the operating
businesses. GEICO's success is the result of the employment of the same
direct-to-the-customer business model as Dell, thereby making it the lowest
cost auto insurer in the business. Mr. Buffett's investment decisions also had
a hand in contributing to shareholder value. The most notable was his timely
decision to purchase $4.6 billion in long-term zero-coupon U.S. Treasury bonds
and 112.2 million ounces of the world's supply of silver. Looking ahead, we
see the recent $22 billion acquisition of General Re Corporation as
positioning the company to enjoy solid growth for quite some time.
[GRAPHIC OMITTED]
Q1 Best Performing Investments
(returns thru 3/31/98)
DELL 61.31%
BRK/B 45.87%
MSFT 38.49%
PSFT 35.10%
CSCO 22.65%
Rounding out the Fund's best performing investments for the quarter were our
holdings in Microsoft, PeopleSoft, and Cisco Systems each appreciating 38%,
35%, and 23% respectively. The graph to the right shows the relative
performance of each of these investments during the period. At the end of the
quarter, the best performing stocks shown in the graph represented a total of
42% of the Fund's assets.
1998
Q2
Our performance for the second quarter of 1998 was extraordinary. The
Fund posted a return of 13.42% for the period while the average U.S. equity
fund lost 0.29% according to data from Lipper Analytical Services. As you can
see from the Performance Summary Chart on the previous page, our returns were
more than four times those of the DJIA, S&P 500 and the NASDAQ. Moreover, the
returns of your Fund for the period were greater than the total combined
returns of these indices added together. While we are enthusiastic about
outperforming all of our benchmarks by such a wide margin, it is important to
remind our shareholders that we are certain such remarkable returns are
unsustainable over the long-term.
Semi-Annual Report to Shareholders | 2
<PAGE>
In the second quarter, the Fund's heavy weighting in technology stocks
again contributed substantially to its performance. During the period we
established new positions in the Internet sector with purchases of shares of
America Online and Yahoo!. America Online's 13 million subscribers makes the
company the world's leading provider of Internet access and content. The
company has successfully leveraged its brand name into multiple sources of
revenue streams including membership fees, advertising and electronic
commerce. Going forward, we expect subscriber growth to remain strong allowing
America Online to further build on its dominant franchise. We feel very
comfortable dedicating a significant portion of our Fund to the leader of one
of the fastest growing sectors of our economy. At the end of the quarter
America Online grew to our second largest investment behind Cisco Systems,
representing 11% of the Fund's total assets.
Our investment in Yahoo! has also proven to be very profitable for the
Fund. The company's shares have appreciated over 45% since our initial
purchase quickly making it one of the best performing stocks in our portfolio.
Yahoo! is an Internet media company widely known for its popular search engine
used to navigate the Web. The company has the most heavily trafficked web-site
on the Internet and derives the majority of its revenues from advertisements
on its web pages. The company has built a strong brand-name and is one of the
few businesses in the sector to have ever made a profit. We continue to be
impressed by Yahoo!'s quality management team and the company's ability to
consistently beat revenues and earnings projections. At the end of the quarter
our Yahoo! investment had appreciated to 6% of the Fund's total assets.
[GRAPHIC OMITTED]
Q2 Best Performing Stocks
(returns from 12/31/97 to 6/30/98*)
DELL 120.98%
BRK/B 69.79%
MSFT 67.70%
CSCO 65.13%
YHOO 45.50%
* Yahoo! returns from date of purchase in second quarter.
To the right is a graph showing the year-to-date returns of the Fund's best
performing investments. As you can see, Dell clearly outpaced all other
investments by appreciating a remarkable 121%. Meanwhile, Berkshire Hathaway,
Microsoft and Cisco Systems all performed exceptionally well with gains in
excess of 65%. Yahoo! shares also fared well by gaining over 45%. The stocks
in the graph represented 53% of the Fund's total assets at the end of the
second quarter.
Looking ahead, we are very enthusiastic about the potential of our Fund's
current holdings. We will continue to focus our investments in only those
companies which have dominant franchises and strong growth prospects. You can
be assured that we will be working hard to continue the trend that we began in
the first half of 1998. Thank you for your confidence in our abilities and for
your investment in the Berkshire Capital Growth & Value Fund.
Sincerely,
/s/ Malcolm R. Fobes III
Chairman
Semi-Annual Report to Shareholders | 3
<PAGE>
PERFORMANCE OVERVIEW
Hypothetical $10,000 Investment At Inception*
[GRAPH DEPICTED HERE]
S&P 500 BERKSHIRE CAPITAL
INDEX GROWTH & VALUE FUND
MONTH $ AMOUNT $ AMOUNT
------ --------- -------------
JUL-97 $10,000 $ 10,000
AUG-97 10,795 10,000
SEP-97 10,191 9,950
OCT-97 10,749 10,050
NOV-97 10,390 9,500
DEC-97 10,871 9,510
JAN-98 11,057 8,740
FEB-98 11,180 9,701
MAR-98 11,986 10,176
APR-98 12,599 10,176
MAY-98 12,725 10,348
JUN-98 12,507 10,045
JUL-98 13,015 11,542
* The inception date of the Fund was July 1, 1997. Past performance does not
guarantee future results. Investment return and principal value will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. All returns reflect reinvested dividends. The Standard & Poor's 500
Index (the "Index") represents an unmanaged, broad-basket of stocks. The Index
is typically used as a proxy for overall market performance. The Fund's
portfolio may differ significantly from the securities in the Index. The Index
does not reflect the cost of portfolio management or trading.
Berkshire Capital Growth & Value Fund
Portfolio as of June 30, 1998
============================================================================
Security Percent Shares Price Market Value
============================================================================
3Com 2.35% 120 30 11/16 $ 3,682
3Dfx Interactive 2.08% 190 17 1/8 3,254
Ascend Communications 1.74% 55 49 9/16 2,726
America Online 11.06% 165 105 1/8 17,346
Berkshire Hathaway 5.00% 3 2,613 7,839
Cisco Systems 25.95% 442 92 1/16 40,692
Coca-Cola 4.36% 80 85 1/2 6,840
Dell Computer 4.74% 80 92 13/16 7,425
E*Trade 1.90% 130 22 15/16 2,982
Gillette 3.63% 100 56 7/8 5,688
i2 Technologies 1.79% 80 35 1/8 2,810
Innovex 1.25% 150 13 1/16 1,959
Intel 4.73% 100 74 1/8 7,412
Microsoft 4.84% 70 108 3/8 7,586
PeopleSoft 9.29% 310 47 14,570
Texas Instruments 1.49% 40 58 5/16 2,333
Yahoo! 6.03% 60 157 1/2 9,450
---------------------------------------------------------------------------
Cash/Equivalents 7.77% 12,188
---------------------------------------------------------------------------
Total 100.00% $ 156,782
===========================================================================
Semi-Annual Report to Shareholders | 4
<PAGE>
Berkshire Capital Investment Trust
Schedule of Investments
June 30, 1998
(unaudited)
Number of
Shares Value
------ -----
COMMON STOCKS - 92.23%
Beverages - 4.36%
80 (The) Coca-Cola Company $ 6,840
Computer - 4.74%
80 Dell Computer Corporation* 7,425
Computer Components - 1.25%
150 Innovex, Inc. 1,959
Conglomerate - 5.00%
3 Berkshire Hathaway (Class B)* 7,839
Financial Services - 1.90%
130 E*Trade Group, Inc.* 2,982
Internet - 17.09%
165 America Online, Inc.* 17,346
60 Yahoo!, Inc.* 9,450
Networking - 30.04%
55 Ascend Communications, Inc.* 2,726
120 3Com Corporation* 3,682
442 Cisco Systems, Inc.* 40,692
Personal Care - 3.63%
100 (The) Gillette Company 5,688
Semiconductor - 8.30%
190 3Dfx Interactive, Inc.* 3,254
100 Intel Corporation 7,412
40 Texas Instruments 2,333
Software - 15.92%
80 i2 Technologies, Inc.* 2,810
70 Microsoft Corporation* 7,586
310 PeopleSoft, Inc.* 14,570
TOTAL COMMON STOCKS
(cost - $113,863) 144,594
-------
OTHER ASSETS
LESS LIABILITIES - 7.77% 12,188
------
NET ASSETS - 100%
Equivalent to $11.41 per share $ 156,782
=======
*Non-income producing
(See Accompanying Notes to Financial Statements)
Semi-Annual Report to Shareholders | 5
<PAGE>
Berkshire Capital Investment Trust
Statement of Assets and Liabilities
June 30, 1998
(unaudited)
ASSETS - Note(1):
Investment in securities, at value
(identified cost - $113,863) ........................... $ 144,594
Cash in bank ........................................... 683
Security sales receivable .............................. 11,493
Dividends receivable ................................... 12
-------
Total Assets ........................................... 156,782
-------
LIABILITIES:
Total Liabilities ...................................... 0
-------
NET ASSETS ................................................ $ 156,782
=======
NET ASSETS COMPRISED OF:
Capital paid-in on shares of beneficial interest ...... $ 134,638
Undistributed net investment income ................... 224
Accumulated net realized losses on investments ........ (8,811)
Net unrealized appreciation on investments ............ 30,731
------
NET ASSETS ................................................ $ 156,782
=======
Net asset value per share based on
13,746.607 shares outstanding ............................. $ 11.41
=====
(See Accompanying Notes to Financial Statements)
Semi-Annual Report to Shareholders | 6
<PAGE>
Berkshire Capital Investment Trust
Statement of Operations
For the Six Month Period Ended June 30, 1998
(unaudited)
INVESTMENT INCOME:
Dividends ............................................. $ 83
Interest .............................................. 141
---
Total Investment Income ................................... 224
---
EXPENSES:
Investment advisory fees .............................. 970
Administration fees ................................... 323
---
Total expenses before fee waiver .......................... 1,293
Investment advisory and administration
fees waived - Note (6) .............................. (1,293)
------
Total Expenses ............................................ 0
------
NET INVESTMENT INCOME ..................................... 224
---
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments ............... (6,198)
Net change in unrealized appreciation on investments .. 43,344
------
Net Gain on Investments ................................... 37,146
------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................. $ 37,370
======
(See Accompanying Notes to Financial Statements)
Semi-Annual Report to Shareholders | 7
<PAGE>
Berkshire Capital Investment Trust
Statement of Changes in Net Assets
Six Months Period From(a)
Ended 07/01/97
06/30/98 to
(unaudited) 12/31/97
----------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ....................... $ 224 $ 1,138
Net realized gain (loss) on investments ..... (6,198) (2,613)
Net change in unrealized appreciation
on investments ............................ 43,344 (12,613)
------ --------
Net increase (decrease) in net assets
from operations ............................... 37,370 (14,088)
------ --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................... 0 (1,138)
Net realized gain on investments ............ 0 0
------ -------
Total distributions to shareholders ............. 0 (1,138)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
(2,008 and 11,607 shares, respectively) ... 18,000 115,500
Increase from shares issued in
reinvested distributions .................. 0 1,138
Shares redeemed ............................. 0 0
------ -------
Net increase in net assets from
capital share transactions ...................... 18,000 116,638
TOTAL INCREASE IN NET ASSETS .................... 55,370 101,412
NET ASSETS:
Beginning of period
(including undistributed net investment
income of $0) .............................. 101,412 0
------- -------
End of period
(including undistributed net investment
income of $224 and $0 respectively) ........ $ 156,782 101,412
======= =======
(a) Date of effectiveness.
(See Accompanying Notes to Financial Statements)
Semi-Annual Report to Shareholders | 8
<PAGE>
Berkshire Capital Investment Trust
Financial Highlights
Six Months Period From(a)
Ended 07/01/97
06/30/98 to
(unaudited) 12/31/97
----------- --------
Per Share Data for a Share Outstanding
Throughout Each Period
NET ASSET VALUE, BEGINNING OF PERIOD: $ 8.64 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................... .01 .10
Net realized and unrealized
gains (losses) on investments .......... 2.76 (1.36)
---- -----
Total from investment operations ............. 11.41 8.74
DISTRIBUTIONS:
Dividends (from net investment income) ... 0 (.10)
Distributions (from capital gains) ....... 0 0
----- -----
Total distributions .......................... 0 (.10)
----- -----
NET ASSET VALUE, END OF PERIOD: $ 11.41 $ 8.64
===== ====
TOTAL RETURN - Note (6) ...................... 32.06%(b) (12.60%)(b)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period .................... $ 156,782 $ 101,412
Ratio of expenses to
average net assets(b)(c) ............... 0.95% 1.00%
Ratio of expenses to
average net assets(d) .................. 0% 0%
Ratio of net investment income to
average net assets(b)(c) ............... (0.79%) 0.12%
Ratio of net investment income to
average net assets(d) .................. 0.16% 1.12%
Portfolio turnover rate(b) ............... 38% 13%
(a) Date of effectiveness.
(b) Not annualized for periods less than one full year.
(c) Before fee waiver.
(d) After fee waiver.
(See Accompanying Notes to Financial Statements)
Semi-Annual Report to Shareholders | 9
<PAGE>
Berkshire Capital Investment Trust
Notes to Financial Statements
June 30, 1998
(unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
The Berkshire Capital Investment Trust (the "Trust") was organized as a
business trust under the state of Delaware on November 25, 1996. The Trust is
authorized to issue an indefinite number of shares of beneficial interest, par
value $1.00 per share. Shares have non-cumulative voting rights, do not have
preemptive subscription rights and are freely transferable. The Berkshire
Capital Growth & Value Fund (the "Fund") is an open-end non-diversified
portfolio of the Trust. The Fund's investment objective is to seek long-term
capital appreciation through investments in equity securities.
(a) Security Valuation
------------------
The market value of securities listed on a national exchange is determined to
be the last recent sales price on such exchange. Listed securities that have
not recently traded and over-the-counter securities are valued at the last bid
price in such market. Other assets are valued at fair market value as
determined in good faith by the Board of Trustees.
(b) Federal Income Taxes
--------------------
The Trust's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
all its taxable income to its shareholders. Therefore, no federal income tax
provision is required.
(c) Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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 those estimates.
(d) Distributions to Shareholders
-----------------------------
Dividends to shareholders are recorded on the ex-dividend date.
(e) Security Transactions and Related Income
---------------------------------------
The Trust follows the industry practice and records security transactions on
the trade date. The specific identification method is used for determining
gains and losses for financial statement and income tax purposes. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
an accrual basis.
Semi-Annual Report to Shareholders | 10
<PAGE>
Berkshire Capital Investment Trust
Notes to Financial Statements
June 30, 1998
(unaudited)
(2) CAPITAL SHARE TRANSACTIONS:
The Trust is authorized to issue an unlimited number of shares of $1.00 par
capital stock. As of June 30, 1998 there was $134,638 of total paid-in
capital.
Shares Amount
------ ------
December 31, 1997 ....... 11,738 $ 116,638
Subscriptions sold ....... 2,008 18,000
----- ------
June 30, 1998 ............ 13,746 $ 134,638
====== =======
(3) ORGANIZATIONAL COSTS:
All organizational costs were borne by the Fund's Investment Advisor.
(4) REGISTRATION FEES:
All registration fees were borne by the Fund's Investment Advisor.
(5) INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities, other than U.S. Government
obligations and short-term investments, were $52,967 and $46,609 respectively
for common stocks. Net gain on investments for the period ended June 30, 1998
were $37,146. That amount represents the net increase in value of investments
held during the period.
For federal income tax purposes, the cost of investments owned at June 30,
1998 was the same as identified cost. At June 30, 1998 the composition of
unrealized appreciation (the excess of value over tax cost) and depreciation
(the excess of tax cost over value) was as follows:
Appreciation ........ $ 38,768
Depreciation ........ (8,037)
-------
Net appreciation..... $ 30,731
======
As of December 31, 1997, the Trust had available for federal income tax
purposes an unused capital loss carryover of $2,613 which will expire in 2005.
Semi-Annual Report to Shareholders | 11
<PAGE>
Berkshire Capital Investment Trust
Notes to Financial Statements
June 30, 1998
(unaudited)
(6) RELATED PARTY TRANSACTIONS/
INVESTMENT ADVISORY AND ADMINISTRATION FEES:
Certain officers and directors of the Trust are also officers and directors of
Berkshire Capital Holdings, Inc. The Trust has an Investment Advisory
Agreement and a separate Administration Agreement with Berkshire Capital
Holdings, Inc. Under the terms of the Investment Advisory Agreement, Berkshire
Capital Holdings, Inc. will receive a fee accrued each calendar day (including
weekends and holidays) at a rate of 1.5% per annum of the daily net assets of
the Fund. Under the Administration Agreement, Berkshire Capital Holdings, Inc.
receives a fee as compensation for services rendered, facilities furnished and
expenses assumed. Such fee is computed as a percentage of the Fund's daily net
assets and are accrued each calendar day (including weekends and holidays).
The administration fee is based on the following schedule:
Percentage Daily Net Asset Range
---------- ---------------------
.50% $0 to $50 million
.45% 50 to $200 million
.40% $200 to $500 million
.35% $500 to $1 billion
.30% excess of $1 billion
Berkshire Capital Holdings, Inc. may at its discretion, forego fees normally
paid to it by the Trust for services rendered. For the period ending June 30,
1998 Berkshire Capital Holdings, Inc. reserves the right to irrevocably waive
any and all investment advisory and administration fees. The foregoing of such
fees for 1998 had a material effect on the Fund's expense ratio and yield to
the shareholders. Such material effect was the subsequent lowering of the
Fund's expense ratio resulting in the increase of the yield to the
shareholders.
Semi-Annual Report to Shareholders | 12
<PAGE>
Important Legal Disclosures
This report is submitted for the general information of the shareholders of
the Berkshire Capital Growth & Value Fund. It is not authorized for
distribution to prospective investors in the Fund unless accompanied or
preceded by an effective Prospectus which includes details regarding the
Fund's objectives, policies, expenses and other information. Please read the
prospectus carefully.
Past performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
The Dow Jones Industrial Average, the Standard & Poor's 500 index and the
NASDAQ Composite index all represent an unmanaged, broad-basket of stocks.
They are typically used as a proxy for overall market performance.
Investing in technology stocks entails certain risks, including increased
volatility of share value. Investors are encouraged to read the Fund's
Prospectus carefully. Copies of the most recent Prospectus may be obtained by
calling the Fund directly at (408) 526-0707.
Semi-Annual Report to Shareholders | 13
<PAGE>
Berkshire Capital Investment Trust
Berkshire Capital Growth & Value Fund
-------------------------------------
475 Milan Drive
Suite #103
San Jose, CA 95134
(408) 526-0707
Board of Trustees
-----------------
Malcolm R. Fobes III
Ronald G. Seger
Leland F. Smith
Andrew W. Broer
Investment Adviser/Administrator
--------------------------------
Berkshire Capital Holdings, Inc.
475 Milan Drive
Suite #103
San Jose, CA 95134
Independent Auditor
-------------------
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, OH 44145
Transfer Agent
--------------
Mutual Shareholder Services
1301 East Ninth Street
Suite #3600
Cleveland, OH 44114
Custodian
---------
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, OH 45263
Legal Counsel
-------------
Hall & Evans, L.L.C.
1200 Seventeenth Street
Suite 1700
Denver, CO 80202
Semi-Annual Report to Shareholders | 14
