<PAGE>
BERKSHIRE FOCUS FUND
1999
Semi-Annual Report to Shareholders
<PAGE>
[Graphic Omitted]
<PAGE>
FROM OUR PERSPECTIVE
WE SEE A WORLD OF UNLIMITED
INVESTMENT OPPORTUNITIES.
Right now, at this very moment, the companies we have invested in are working
hard on your behalf to create shareholder value. How do we find such dedicated
companies? You can start with our strategic location in Silicon Valley. You
see, from our vantage point we have a front row seat to the greatest
technological revolution mankind has ever seen. So if there is a company
positioned to benefit from the revolution, you can bet there's a good chance
we already know about them. Finding the best investment opportunities for your
money has always been the key to our success.
<PAGE>
PERFORMANCE SUMMARY
Average annual total return for periods ended 6/30/99
Since (a)
Year-to-date 1-Year Inception
---------------------------------------------------------------------
Berkshire Focus Fund 29.26% 99.63% 51.89%
Dow Jones Industrial Average 20.45% 24.70% 21.67%
S&P 500 Index 12.38% 22.76% 26.40%
NASDAQ Composite Index 22.70% 42.28% 37.01%
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(a) The inception date of the Fund was July 1, 1997.
(b) Returns are not annualized.
RELATIVE PERFORMANCE
Growth of a Hypothetical $10,000 Investment
[GRAPH DEPICTED HERE]
S&P 500 BERKSHIRE FOCUS
INDEX FUND
MONTH $ AMOUNT $ AMOUNT
------ --------- -------------
JUN-97 $10,000 $ 10,000
JUL-97 10,795 10,000
AUG-97 10,191 9,950
SEP-97 10,748 10,050
OCT-97 10,390 9,500
NOV-97 10,870 9,510
DEC-98 11,057 8,738
JAN-98 11,179 9,699
FEB-98 11,985 10,174
MAR-98 12,598 10,174
APR-98 12,725 10,346
MAY-98 12,506 10,043
JUN-98 13,014 11,539
JUL-98 12,876 11,560
AUG-98 11,017 9,314
SEP-98 11,722 11,287
OCT-98 12,675 11,620
NOV-98 13,443 14,078
DEC-98 14,217 17,822
JAN-99 14,811 20,835
FEB-99 14,351 19,177
MAR-99 14,925 22,776
APR-99 15,503 23,740
MAY-99 15,138 20,976
JUN-99 15,977 23,036
The Berkshire Focus Fund is subject to greater risk than more diversified
funds because of its concentration of investments in fewer companies and
certain segments of a single industry. Specific risks associated with
investments in the technology industry (as described in the Prospectus) could
cause the Fund's share price to fluctuate dramatically. Please read the
Prospectus carefully before investing.
The Fund's performance information assumes reinvestment of all dividends and
includes all fund expenses. Performance data quoted represents past
performance, which is not a guarantee of future results. Both return from and
the principal value of an investment in the Fund will fluctuate so that any
investor's shares, when redeemed, may be worth more or less than their
original cost.
The Dow Jones Industrial Average (DJIA), the Standard & Poor's 500 Index (S&P
500), and the NASDAQ Composite (NASDAQ) each represent an unmanaged,
broad-based basket of stocks. They are typically used as a proxy for overall
market performance.
Berkshire Funds
<PAGE>
Dear Shareholder:
We are pleased to report the Berkshire Focus Fund enjoyed another period of
exceptional performance. We met our goal of delivering superior returns to our
shareholders by posting a gain of 29.26% for the six-months ended June 30,
1999. In comparison our primary benchmark, the S&P 500 Index, returned 12.38%
for the period. These strong results helped make the Fund the 22nd
best-performing equity fund in the U.S. for the 12-months ended June 30, 1999
according to Lipper, Inc., a leading mutual fund rating company.
Our heavy weighting in technology stocks were a significant contributor to the
Fund's solid results. We remain focused on investing in only the top-tier
technology companies with great business models, dominant franchises and
strong growth prospects. Cisco Systems, the Fund's largest holding, recorded a
gain of 39% for the period as it continued to benefit from the explosive
growth of the Internet. Cisco is the world's leading supplier of
high-performance networking equipment used in building out the Internet's
infrastructure. Also contributing to the Fund's performance was our sizable
position in Microsoft which appreciated by 30%. The company's dominance in the
PC market remained unchallenged and the proliferation of the sub-$1,000 PC
helped further fuel unit growth for its operating systems and software
packages. Another significant holding of the Fund was EMC which recorded a
gain of more than 29% for the first six-months. The company is the premier
franchise for supplying data storage systems used by mainframes and network
file servers. As we look ahead, we believe the business fundamentals for these
technology leaders will remain strong.
An important theme of the Fund for 1999 has been to invest in companies
supplying infrastructure to the Internet. A company that we have been
particularly excited about is our investment in Exodus Communications. A top
holding of the Fund since the first quarter, the company's share price has
appreciated over 143% since our initial purchase. Exodus builds and maintains
Internet Data Centers that secure companies mission-critical Internet
operations. Similarly, we have also established new positions in companies
that supply infrastructure components for the Internet. A leader in this area
is Broadcom which designs and makes semiconductor chips that go into broadband
products like cable modems and set-top boxes. Since our initial purchase,
Broadcom's shares have gained more than 47%.
Going forward, we anticipate the economy will continue to grow at a steady
rate with relatively low inflation, an environment which is favorable for
financial assets. Our focus, as always, will be to identify those companies
that are poised to benefit from the powerful trends emerging in the
marketplace. As a result, you can be confident our in-depth research
combined with our strategic location in Silicon Valley will enable us to
continue to find the best investment opportunities for your money.
We appreciate your confidence in our abilities and thank you for your
investment in the Berkshire Focus Fund.
/s/ Malcolm R. Fobes III
- ------------------------
Malcolm R. Fobes III
Portfolio Manager
Berkshire Focus Fund
1999 Semi-Annual Report | 3
<PAGE>
[Graphic Omitted]
<PAGE>
FINANCIAL STATEMENTS
(as of 6/30/99)
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
1999 Semi-Annual Report | 5
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1999 (unaudited)
Shares Value
- ------ -----
COMPUTERS - 4.7% $ 411,378
-------------------------------------------------------
5,720 Dell Computer Corp.* 211,640
2,900 Sun Microsystems, Inc.* 199,738
ELECTRONIC COMMERCE - 5.6% 496,181
-------------------------------------------------------
1,570 Amazon.com, Inc.* 196,446
1,985 eBay, Inc.* 299,735
FINANCE - 7.7%% 676,643
-------------------------------------------------------
3,670 Charles Schwab Corp. 402,553
2,710 E*Trade Group, Inc.* 108,231
2,750 Knight/Trimark Group, Inc.* 165,859
INTERNET SERVICES - 21.7% 1,914,581
-------------------------------------------------------
6,425 America Online, Inc.* 708,356
2,600 CNET, Inc.* 149,825
2,730 Excite@Home Corp.* 147,249
1,475 Inktomi Corp.* 192,580
1,350 Lycos, Inc.* 124,031
3,440 Yahoo!, Inc.* 592,540
NETWORKING - 17.8% 1,566,127
-------------------------------------------------------
17,810 Cisco Systems, Inc.* 1,148,745
3,480 Exodus Communications, Inc.* 417,382
SEMICONDUCTORS - 5.9% 516,516
-------------------------------------------------------
2,260 Broadcom Corp., (Class A)* 326,711
3,190 Intel Corp. 189,805
STORAGE DEVICES - 8.2% 722,689
-------------------------------------------------------
13,110 EMC Corp. - Mass* 722,689
SOFTWARE - 13.1% 1,155,853
-------------------------------------------------------
11,395 Microsoft Corp.* 1,027,687
1,350 Veritas Software Corp.* 128,166
TELECOMMUNICATIONS EQUIPMENT - 8.9% 789,382
-------------------------------------------------------
2,880 Lucent Technologies, Inc. 194,220
1,600 Qualcomm, Inc.* 229,600
3,310 Tellabs, Inc.* 223,632
855 Uniphase Corp.* 141,930
TELEPHONE - 2.3% 201,825
-------------------------------------------------------
2,340 MCI Worldcom, Inc.* 201,825
TOTAL COMMON STOCKS - 95.9%
(Cost $7,886,342) 8,451,175
-------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 4.1% 366,038
-------------------------------------------------------
NET ASSETS - 100%
Equivalent to $21.25 per share $ 8,817,213
=======================================================
*Non-income producing
(see accompanying notes to financial statements)
Berkshire Funds
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (unaudited)
ASSETS
Investment securities:
At acquisition cost $ 7,886,342
====================================================================
At market value (Note 1) $ 8,451,175
Cash in bank 57,110
Interest receivable 4
Receivable for securities sold 322,204
- --------------------------------------------------------------------
TOTAL ASSETS 8,830,493
- --------------------------------------------------------------------
LIABILITIES
Accrued expenses 13,280
- --------------------------------------------------------------------
TOTAL LIABILITIES 13,280
- --------------------------------------------------------------------
NET ASSETS $ 8,817,213
====================================================================
Net assets consist of:
Paid-in-capital $ 8,329,720
Accumulated net investment loss (34,261)
Accumulated net realized gains (losses)
from security transactions (43,079)
Net unrealized appreciation on investments 564,833
- --------------------------------------------------------------------
Net assets $ 8,817,213
====================================================================
Shares of beneficial interest outstanding (indefinite
number of shares authorized, par value $1.00) 414,951
====================================================================
Net assets value, offering price and redemption
price per share (Note 1) $ 21.25
====================================================================
(see accompanying notes to financial statements)
1999 Semi-Annual Report | 7
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 (unaudited)
INVESTMENT INCOME
Interest $ 352
Dividends 6,168
- --------------------------------------------------------------------
TOTAL INVESTMENT INCOME 6,520
- --------------------------------------------------------------------
EXPENSES
Investment advisory fees (Note 3) 30,587
Administrative fees (Note 3) 10,214
- --------------------------------------------------------------------
TOTAL EXPENSES 40,801
- --------------------------------------------------------------------
NET INVESTMENT INCOME (34,281)
- --------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions (43,079)
Net change in unrealized appreciation on investments 460,273
- --------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS 417,194
- --------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 382,913
====================================================================
(see accompanying notes to financial statements)
Berkshire Funds
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Periods Ended June 30, 1999 (unaudited) and December 31, 1998
<TABLE>
<S> <C> <C>
Six-Months Year
Ended Ended
6/30/99 12/31/98
-------- --------
FROM OPERATIONS:
Net investment income $ (34,281) $ 440
Net realized gains (losses) from security transactions (43,079) 24,183
Net change in unrealized appreciation on investments 460,273 117,173
- ------------------------------------------------------------------------------------------
Net increase in net assets from operations 382,913 141,796
==========================================================================================
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income 0 (420)
From net realized gain on investments 0 (21,571)
- ------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders 0 (21,991)
==========================================================================================
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 9,501,145 109,780
Net asset value of shares issued in reinvestment
of distributions to shareholders 0 21,991
Payments for shares redeemed (1,419,833) 0
- ------------------------------------------------------------------------------------------
Net increase in net assets from capital share transactions 8,081,312 131,771
==========================================================================================
TOTAL INCREASE IN NET ASSETS 8,464,225 251,576
NET ASSETS:
Beginning of period 352,988 101,412
- ------------------------------------------------------------------------------------------
End of period $ 8,817,213 $ 352,988
==========================================================================================
CAPITAL SHARE ACTIVITY:
Shares sold 466,860 8,415
Shares issued on reinvestment of dividends 0 1,321
Shares redeemed (73,383) 0
- ------------------------------------------------------------------------------------------
Net increase in shares outstanding 393,477 9,736
Shares outstanding, beginning of period 21,474 11,738
Shares outstanding, end of period 414,951 21,474
==========================================================================================
(see accompanying notes to financial statements)
</TABLE>
1999 Semi-Annual Report | 9
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding
Throughout Each Period
<TABLE>
<S> <C> <C> <C>
Six Months Year Period (a)
Ended Ended Ended
6/30/99 12/31/98 12/31/97
(Unaudited)
----------- --------- ---------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.44 $ 8.64 $ 10.00
- -----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (0.43) 0.03 0.10
Net realized and unrealized
gains (losses) on investments 5.24 8.97 (1.36)
- -----------------------------------------------------------------------------------------
Total from investment operations 4.81 9.00 (1.26)
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net realized gains 0.00 (1.18) 0.00
Distributions from net investment income 0.00 (0.02) (0.10)
- -----------------------------------------------------------------------------------------
Total distributions 0.00 (1.20) (.10)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE AT END OF PERIOD $ 21.25 $ 16.44 $ 8.64
=========================================================================================
TOTAL RETURN (Note 3) 29.26%(b) 104.17% (12.60%)(b)
SUPPLEMENTAL DATA AND RATIOS:
Net assets at end of period (thousands) $ 8,817 $ 353 $ 101
Ratio of expenses to average net assets(c) 1.93% 1.93% 1.00%(b)
Ratio of expenses to average net assets(d) 1.93% 0.00% 0.00%
Ratio of net investment income to
average net assets(c) 0.31% (1.66%) 0.12%
Ratio of net investment income to
average net assets(d) 0.31% 0.26% 1.12%(b)
Portfolio turnover rate 34.7%(b) 136.0% 13.0%(b)
</TABLE>
(a) Represents the period from the commencement of operations
(July, 1 1997) to December 31, 1997.
(b) Not annualized.
(c) Before fee waiver.
(d) After fee waiver.
(See accompanying notes to financial statements)
Berkshire Funds
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (unaudited)
1. Significant Accounting Policies
The Berkshire Funds (formerly Berkshire Capital Investment Trust) (the
"Trust") is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Trust was
organized as a business trust under the state of Delaware on November 25, 1996
and 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 Focus Fund (formerly Berkshire Capital Growth & Value Fund) (the
"Fund") is a non-diversified series of the Trust. The Fund's investment
objective is to seek long-term capital appreciation through investments in
equity securities.
The following is a summary of the Fund's significant accounting policies:
Securities valuation - The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange,
normally 4:00 p.m., Eastern time. Securities which are traded on stock
exchanges or are quoted by NASDAQ are valued at the last reported sale price
as of the close of the regular session of trading on the New York Stock
Exchange, or, if not traded, at the most recent bid price. Securities which
are traded in the over-the-counter market, and which are not quoted by NASDAQ,
are valued at the most recent bid price, as obtained from one or more of the
major market makers for such securities. Securities for which market
quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
Repurchase agreements - Repurchase agreements, which are collateralized by
U.S. Government obligations, are valued at cost which, together with accrued
interest, approximates market. At the time the Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying securities,
including accrued interest, will at all times be equal to or exceed the face
amount of the repurchase agreement.
Share valuation - The net asset value per share of the Fund is calculated
daily by dividing the total value of the Fund's assets, less liabilities, by
the number of shares outstanding, rounded to the nearest cent. The offering
and redemption price per share of the Fund is equal to the net asset value per
share.
Investment income - Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders - Distributions to shareholders arising from net
investment income and net realized capital gains, if any, are distributed at
least once each year. Dividends from net investment income and capital gain
distributions are determined in accordance with income tax regulations.
Security transactions - Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
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 at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
1999 Semi-Annual Report | 11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (unaudited)
Federal income tax - It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the
Fund so qualifies and distributes at least 90% of its taxable net income, the
Fund (but not the shareholders) will be relieved of federal income tax on the
income distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years.
2. Investment Transactions
Purchases and sales of investment securities, other than U.S. Government
obligations and short-term investments, were $9,216,263 and $1,415,876
respectively. Net gain on investments for the period ended June 30, 1999 were
$417,194. 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,
1999 was the same as identified cost. At June 30, 1999 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 $ 988,051
Depreciation (423,218)
---------
Net Appreciation $ 564,833
=========
3. Related Party Transactions/ Investment Advisory and Administrative Fees
Certain officers and directors of the Trust are also officers and directors of
Berkshire Capital Holdings, Inc. ("Berkshire Capital"). The Trust has an
Investment Advisory Agreement and a separate Administration Agreement with
Berkshire Capital. Under the terms of the Investment Advisory Agreement,
Berkshire Capital 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 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 Funds
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (unaudited)
Berkshire Capital may at its discretion, forego fees normally paid to it by
the Trust for services rendered. For the period ending December 31, 1998
Berkshire Capital has waived 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.
This report is provided for the general information of the shareholders of The
Berkshire Funds. This report is not intended for distribution to prospective
investors in the Berkshire Focus Fund, unless preceded or accompanied by an
effective prospectus. For more information regarding the Berkshire Focus Fund,
including charges and expenses, visit our webiste at www.berkshirefunds.com
or call toll-free 1-877-526-0707 for a free prospectus. Please read it
carefully before you invest or send money.
1999 Semi-Annual Report | 13
<PAGE>
[LOGO]
THE BERKSHIRE FUNDS
475 Milan Drive
Suite #103
San Jose, CA 95134
(Toll-Free) 1-877-526-0707
BOARD OF TRUSTEES
Malcolm R. Fobes III
Ronald G. Seger
Leland F. Smith
Andrew W. Broer
INVESTMENT ADVISER
Berkshire Capital Holdings, Inc.
475 Milan Drive
Suite #103
San Jose, CA 95134
COUNSEL
Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower
441 Vine Street
Cincinnati, Ohio 45202
TRANSFER AGENT
Mutual Shareholder Services
1301 East Ninth Street
Suite #1005
Cleveland, OH 44114
CUSTODIAN
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, OH 45263
