<PAGE>
BERKSHIRE FOCUS FUND
1999
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 12/31/99
Since (a)
Year-to-date 1-Year Inception
---------------------------------------------------------------------
Berkshire Focus Fund 142.90% 142.90% 79.64%
Dow Jones Industrial Average 27.20% 27.20% 19.53%
S&P 500 Index 21.04% 21.04% 24.21%
NASDAQ Composite Index 86.13% 86.13% 51.87%
---------------------------------------------------------------------
(a) The inception date of the Fund was July 1, 1997.
Returns assume reinvestment of dividends and distributions. Past performance
is not a guarantee of future results. Investment returns will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
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.
The Dow Jones Industrial Average (DJIA), the Standard & Poor's 500 Index (S&P
500), and the NASDAQ Composite (NASDAQ) each represents an unmanaged,
broad-based basket of stocks. They are typically used as a proxy for overall
market performance.
Please read the Prospectus carefully before investing.
Berkshire Funds
<PAGE>
PERFORMANCE AND PORTFOLIO DISCUSSION
Dear Shareholder:
We are pleased to report the Berkshire Focus Fund enjoyed another year of
exceptional performance. We met our goal of delivering superior returns to our
shareholders by posting a gain of 142.90% for the twelve-months ended December
31, 1999. In comparison, we substantially outperformed our primary benchmark,
the S&P 500 Index, which returned 21.04% for the period. These strong results
helped make the Fund the top-performing (#1 out of 364) U.S. Large-Cap Growth
Fund for 1999 according to Lipper, Inc., a leading mutual fund rating company.
While 1999 was our best year ever, it also marked the second consecutive year
the Fund returned more than 100% to its shareholders. This was a remarkable
achievement considering very few mutual funds have ever crossed the 100%
return threshold in a single calendar year prior to 1999. Naturally, we are
enthusiastic about our recent performance. We feel it is important, however,
to remind our shareholders that we are certain such extraordinary returns are
unsustainable over the long-term. Nevertheless, 1999 was certainly a year that
we will never forget, and we hope that you enjoyed being part of our success.
RELATIVE PERFORMANCE:
FOCUS FUND vs. THE S&P 500 INDEX
Growth of a Hypothetical $10,000 Investment
[GRAPHIC OMITTED]
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
JUL-99 15,479 21,735
AUG-99 15,402 24,001
SEP-99 14,980 24,749
OCT-99 15,928 26,884
NOV-99 16,252 31,405
DEC-99 17,208 43,289
1999 Annual Report | 3
<PAGE>
The Fund posted strong results for the period despite a volatile market
environment. The combination of tight labor markets and a robust U.S. economy
created anxiety about the potential for an acceleration in the rate of
inflation. The Federal Reserve responded by raising interest rates three times
in a series of preemptive moves aimed at slowing the rapid growth of the
economy. While the Fed's actions added volatility to the markets, we remained
focused on our goal of finding investments in companies that can deliver
shareholder value in any economic environment.
The accompanying pie chart shows the Focus Fund's sector holdings as of
December 31. Once again, our heavy weighting in technology stocks was a
significant contributor to the Fund's solid results. Semiconductors were the
Fund's most heavily-weighted sector at the end of the period, representing
23.88% of net assets. We began to establish our large position in
semiconductor stocks during mid-summer after our research revealed the
potential for explosive growth in the networking and wireless communications
markets. Among our largest holdings were companies that supply
FOCUS FUND'S HOLDINGS BY SECTOR
[Graphic Omitted]
Semiconductor 23.88%
Internet Services 19.39%
Telecomm Equipment 16.62%
Software 13.68%
Storage Devices 10.74%
Networking 8.05%
Computer 4.81%
Cash 2.10%
e-Commerce 0.04%
Based on percentage of net assets as of December 31, 1999.
Cash number net of payables and receivables.
Berkshire Funds
<PAGE>
high-performance chipsets to the networking sector, including PMC-Sierra
(PMCS), Applied Micro Circuits (AMCC), and Broadcom (BRCM). Also reflecting
our optimism for the sector were our investments in companies supplying
chipsets to the wireless communications markets, including TriQuint (TQNT),
Conexant (CNXT), and RF Micro Devices (RFMD).
We believe there are few other areas that possess the strong growth potential
and profitability of the semiconductor segment. Demand for chips, especially
those used for Internet infrastructure and wireless communications are in the
beginning stages of a three-year industry up-cycle. We anticipate that the
semiconductor industry's growth rate will accelerate to 25% this year and as
high as 40% by the year 2001. As a result of such strong underlying
fundamentals, we expect the semiconductor sector to remain as one of the
Fund's largest weightings for the foreseeable future.
Another important theme of the Fund for 1999 was our investment in companies
that enable the tremendous growth of the Internet. These "enabling" companies
are the software, hardware and service businesses working behind-the-scenes to
make the exponential growth of the Internet possible. Examples of such
companies can be found in the Internet Services segment.
At 19.39%, the Internet Services segment was the Fund's second-largest
sector weighting. Within this segment, we were especially excited about our
investment in Exodus Communications (EXDS). Already the most dominant
franchise in its space, Exodus is the world's leading provider of premium
web-hosting services for businesses with mission-critical Internet operations.
Since our initial purchase in the first quarter, the company's share price
appreciated a remarkable 625%.
Also within the Internet Services segment were our continuing investments in
America Online (AOL) and Yahoo! (YHOO). AOL's shares grew over 95% during the
period, reflecting strong growth in its subscriber base. Meanwhile Yahoo!,
still the most heavily-trafficked website on the Internet, turned in another
superb performance with a gain of over 265%.
1999 Annual Report | 5
<PAGE>
The Telecommunications Equipment sector was the Fund's third-largest weighting
at 16.62%. This sector was led by our wireless communications holdings.
Worldwide subscriber growth for cellular phones is currently growing in excess
of 50% per year and is expected to accelerate further. Adding to this rapid
growth will be demand for wireless data, which will allow cellular phones to
access the Internet from anywhere.
To take advantage of this phenomenon, we established positions in Nokia (NOK)
and Qualcomm (QCOM). Nokia is the largest manufacturer of cellular phones
world-wide and is the undisputed leader in the fast-growing market for digital
cellular phones. We see future growth being driven by the company's recent
offering of handsets with Internet access using wireless application protocol
(WAP) technology. Since our purchase, Nokia gained 92%.
For 1999, the single stock that clearly outpaced all other investments for the
Fund was Qualcomm. The company blew away all revenue and earnings estimates,
due to extremely strong demand for its proprietary Code Division Multiple
Access (CDMA) technology, the emerging standard for the next-generation of
digital wireless systems. From our initial purchase in the second quarter,
Qualcomm's shares appreciated a phenomenal 793%.
Another stellar performer for the Fund in the Telecomm sector was JDS Uniphase
(JDSU). Formed by the recent merger of JDS Fitel and Uniphase, this Internet
enabling company is the leading manufacturer of active and passive optical
components used to increase the carrying capacity of fiber-optic networks.
With the explosion of Internet data traffic and the subsequent need to expand
the capacity of existing fiber-optic lines, we saw our investment in JDS
Uniphase increase by 400% in 1999.
At 13.68% of net assets, the Software sector was the Fund's fourth-largest
weighting. We maintained our sizable position in Microsoft (MSFT), as the
company continued to generate solid returns. During the period we established
a new position in Veritas Software (VRTS), an Internet enabling company whose
software manages data storage and guards networks against
Berkshire Funds
<PAGE>
data loss. We also added positions in companies benefiting from the rapid
growth of B2B e-commerce, including Vignette (VIGN), BroadVision (BVSN) and
Ariba (ARBA).
The Storage Device sector represented 10.74% of the Fund's net assets at the
end of the period. Leading the way was our substantial investment in storage
king, EMC Corp. (EMC). A beneficiary of the rapid growth of the Internet, EMC
is the premier franchise for supplying data storage systems used by mainframes
and network file servers. The company recorded a gain of 157% for 1999. In the
fourth quarter we also established a new position in Network Appliance (NTAP).
The company is an Internet enabler that makes servers used to store and
deliver files over high-traffic data-intensive networks. During the short
period of time we have owned the stock, it has appreciated over 40%.
Rounding out the Fund's portfolio were the Networking and Computer sectors at
8.05% and 4.81%, respectively. In the Networking sector Cisco Systems (CSCO),
the Fund's largest holding, recorded a gain of 131% as it continued to benefit
from the explosive growth of the Internet. Representing the Computer sector
was Sun Microsystems (SUNW) whose workstations and servers power a majority
of all corporate networks and Web sites. The company's shares returned 155%
for the Fund in 1999.
The Fund ended the year with a net cash position of 2.10%.
Going forward, we anticipate the economy will continue to grow at a robust
rate with relatively low inflation. Our focus, as always, will be to identify
those companies that are poised to benefit from the powerful trends emerging
in the marketplace. 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 Annual Report | 7
<PAGE>
[Graphic Omitted]
Berkshire Funds
<PAGE>
AUDITED FINANCIAL STATEMENTS
(as of 12/31/99)
Report of Independent
Certified Public Accountants
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
1999 Annual Report | 9
<PAGE>
[Graphic Omitted]
Berkshire Funds
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Berkshire Focus Fund
San Jose, California
We have audited the accompanying statement of assets and liabilities of the
Berkshire Focus Fund, including the schedule of portfolio investments, as of
December 31, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for the two years then ended and
financial highlights for the two years then ended and the period from July 1,
1997 (commencement of operations) to December 31, 1997 in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
and cash held by the custodian as of December 31, 1999 by correspondence with
the custodian and broker. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Berkshire Focus Fund as of December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for the two years then
ended and the financial highlights for the two years then ended and for the
period from July 1, 1997 (commencement of operations) to December 31, 1997 in
the period then ended, in conformity with generally accepted accounting
principles.
MCCURDY & ASSOCIATES CPA'S, INC.
Westlake, Ohio 44145
January 8, 2000
1999 Annual Report | 11
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1999
Shares Value
------ -----
COMPUTER - 4.81% $ 1,617,639
-------------------------------------------------------
1,700 Dell Computer Corp.* 86,700
19,770 Sun Microsystems, Inc.* 1,530,939
ELECTRONIC COMMERCE - 0.04% 12,519
-------------------------------------------------------
100 eBay, Inc.* 12,519
INTERNET SERVICES - 19.39% 6,519,203
-------------------------------------------------------
31,400 America Online, Inc.* 2,368,737
23,640 Exodus Communications, Inc.* 2,099,527
4,740 Yahoo!, Inc.* 2,050,939
NETWORKING - 8.05% 2,705,442
-------------------------------------------------------
25,255 Cisco Systems, Inc.* 2,705,442
SEMICONDUCTORS - 23.88% 8,024,410
-------------------------------------------------------
10,990 Applied Micro Circuits Corp.* 1,398,477
4,665 Broadcom Corp., (Class A)* 1,270,629
14,030 Conexant Systems, Inc.* 931,241
1,090 Intel Corp. 89,721
14,270 PMC-Sierra, Inc.* 2,287,659
13,195 RF Micro Devices, Inc.* 903,033
10,280 TriQuint Semiconductor, Inc.* 1,143,650
SOFTWARE - 13.68% 4,596,002
-------------------------------------------------------
1,500 Ariba, Inc.* 266,063
4,265 BroadVision, Inc.* 725,317
13,100 Microsoft Corp.* 1,529,425
9,175 Veritas Software Corp.* 1,313,172
4,675 Vignette Corp.* 762,025
STORAGE DEVICES - 10.74% 3,610,320
-------------------------------------------------------
22,790 EMC Corp. - Mass* 2,489,807
13,490 Network Appliance Corp.* 1,120,513
TELECOMMUNICATIONS EQUIPMENT - 16.62% 5,585,314
-------------------------------------------------------
2,500 Interdigital Communications Corp.* 187,500
14,130 JDS Uniphase Corp.* 2,279,346
8,200 Nokia Oyj ADR 1,558,000
8,860 Qualcomm, Inc.* 1,560,468
TOTAL COMMON STOCKS - 97.21%
(Cost $20,579,632) 32,670,849
=======================================================
*non-income producing
(see accompanying notes to financial statements)
Berkshire Funds
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1999
Shares Value
------ -----
CASH EQUIVALENTS - 3.90% 1,310,431
-------------------------------------------------------
1,310,431 Firstar Financial Reserve Fund 1,310,431
TOTAL INVESTMENT SECURITIES - 101.11% 33,981,280
=======================================================
OTHER ASSETS LESS LIABILITIES - (1.11%) (380,988)
-------------------------------------------------------
NET ASSETS - 100%
Equivalent to $39.84 per share $ 33,600,292
=======================================================
(see accompanying notes to financial statements)
1999 Annual Report | 13
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
ASSETS
Investment securities:
At acquisition cost $ 20,579,632
====================================================================
At market value (Note 1) $ 33,981,280
Cash in bank 1,671,212
Interest receivable 3,935
Receivable for capital shares sold 223,895
- --------------------------------------------------------------------
TOTAL ASSETS 35,880,322
- --------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 2,235,303
Accrued expenses 44,727
- --------------------------------------------------------------------
TOTAL LIABILITIES 2,280,030
- --------------------------------------------------------------------
NET ASSETS $ 33,600,292
====================================================================
Net assets consist of:
Paid-in-capital $ 20,479,944
Accumulated net realized gains (losses)
from security transactions (281,300)
Net unrealized appreciation on investments 13,401,648
- --------------------------------------------------------------------
Net assets $ 33,600,292
====================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, par value $1.00) 843,323
====================================================================
Net assets value, offering price and redemption
price per share (Note 1) $ 39.84
====================================================================
(see accompanying notes to financial statements)
Berkshire Funds
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
INVESTMENT INCOME
Interest $ 18,101
Dividends 531
- -----------------------------------------------------------------------
TOTAL INVESTMENT INCOME 18,632
- -----------------------------------------------------------------------
EXPENSES
Investment advisory fees (Note 3) 144,283
Administrative fees (Note 3) 48,087
- -----------------------------------------------------------------------
TOTAL EXPENSES 192,370
- -----------------------------------------------------------------------
NET INVESTMENT INCOME (173,738)
- -----------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions (135,467)
Net change in unrealized appreciation on investments 13,297,088
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS 13,161,621
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 12,987,883
=======================================================================
(see accompanying notes to financial statements)
1999 Annual Report | 15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Periods Ended December 31, 1999 and 1998
<TABLE>
<S> <C> <C>
Year Year
Ended Ended
12/31/99 12/31/98
-------- --------
FROM OPERATIONS:
Net investment income (loss) $ (173,738) $ 440
Net realized gains (losses) from security transactions (135,467) 24,183
Net change in unrealized appreciation on investments 13,297,088 117,173
- ------------------------------------------------------------------------------------------
Net increase in net assets from operations 12,987,883 141,796
==========================================================================================
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income 0 (420)
From net realized gain on investments (73,435) (21,571)
- ------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (73,435) (21,991)
==========================================================================================
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 25,616,280 109,780
Net asset value of shares issued in reinvestment
of distributions to shareholders 64,311 21,991
Payments for shares redeemed (5,347,735) 0
- ------------------------------------------------------------------------------------------
Net increase in net assets from capital share transactions 20,332,856 131,771
- ------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 33,247,304 251,576
NET ASSETS:
Beginning of period 352,988 101,412
- ------------------------------------------------------------------------------------------
End of period $ 33,600,292 $ 352,988
- ------------------------------------------------------------------------------------------
CAPITAL SHARE ACTIVITY:
Shares sold 1,051,819 8,415
Shares issued on reinvestment of dividends 1,644 1,321
Shares redeemed (231,614) 0
- ------------------------------------------------------------------------------------------
Net increase in shares outstanding 821,849 9,736
Shares outstanding, beginning of period 21,474 11,738
- ------------------------------------------------------------------------------------------
Shares outstanding, end of period 843,323 21,474
==========================================================================================
(see accompanying notes to financial statements)
</TABLE>
Berkshire Funds
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
==========================================================================================
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Period
<S> <C> <C> <C>
Year Year Period (a)(b)
Ended Ended Ended
12/31/99 12/31/98 12/31/97
-------- -------- --------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.44 $ 8.64 $ 10.00
- -----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (0.31) 0.03 0.10
Net realized and unrealized
gains (losses) on investments 23.80 8.97 (1.36)
- -----------------------------------------------------------------------------------------
Total from investment operations 23.49 9.00 (1.26)
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net realized gains (0.09) (1.18) 0.00
Distributions from net investment income 0.00 (0.02) (0.10)
- -----------------------------------------------------------------------------------------
Total distributions (0.09) (1.20) (.10)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE AT END OF PERIOD $ 39.84 $ 16.44 $ 8.64
=========================================================================================
TOTAL RETURN 142.90% 104.17% (12.60%)
=========================================================================================
SUPPLEMENTAL DATA AND RATIOS:
Net assets at end of period (thousands) $ 33,600 $ 353 $ 101
=========================================================================================
Ratio of expenses to average net assets(c) 1.89% 1.93% 1.00%
Ratio of expenses to average net assets(d) 1.89% 0.00% 0.00%
Ratio of net investment income to
average net assets(c) (1.71%) (1.66%) 0.12%
Ratio of net investment income to
average net assets(d) (1.71%) 0.26% 1.12%
Portfolio turnover rate 155.5% 136.0% 13.0%
</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)
1999 Annual Report | 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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.
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.
Berkshire Funds
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 and 98% of its
net realized capital gains 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 $34,461,941 and $15,286,306
respectively.
For federal income tax purposes, the cost of investments owned at December 31,
1999 was the same as identified cost. At December 31, 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 $ 13,434,723
Depreciation (33,075)
------------
Net Appreciation $ 13,401,648
============
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 at the annual rate of 0.50% of the Fund's average daily net
assets up to $50 million, 0.45% of such assets from $50 million to $200
million, 0.40% of such assets from $200 million to $500 million, 0.35% of such
assets from $500 million to $1 billion, and 0.30% of such assets in excess of
$1 billion. Such fee is computed as a percentage of the Fund's daily net
assets and are accrued each calendar day (including weekends and holidays).
During 1999, Berkshire Capital was paid an investment advisory fee of $144,283
and an administration fee of $48,087.
1999 Annual Report | 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
4. Reclassification of Capital Accounts
The Fund has adopted Statement of Position 93-2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies. As a result of this statement, the Fund
changed the classification of distributions to shareholders to better disclose
the difference between financial statement amounts and distributions to
shareholders determined in accordance with income tax regulations.
Accordingly, paid in capital, undistributed net investment loss and
accumulated realized capital loss have been adjusted as of December 31, 1999
in the following amounts. These restatements did not affect net investment
income, net realized loss or net assets for the year ended December 31, 1999.
Paid In Capital
---------------
(101,320)
Undistributed Net Investment Loss
---------------------------------
$ 173,718
Accumulated Realized Capital Loss
---------------------------------
$ (72,398)
Berkshire Funds
<PAGE>
THE BERKSHIRE FUNDS
This report is provided for the general information of the shareholders of the
Berkshire Focus Fund. This report is not intended for distribution to
prospective investors in the Fund, unless preceded or accompanied by an
effective prospectus. For more information regarding the Fund, including
charges and expenses, visit our website at www.berkshirefunds.com or call
toll-free 1-877-526-0707 for a free prospectus.
Please read the prospectus carefully before you invest or send money.
1999 Annual Report | 21
<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, OH 45202
TRANSFER AGENT
Mutual Shareholder Services
1301 East Ninth Street
Suite #1005
Cleveland, OH 44114
CUSTODIAN
Firstar Bank, N.A
425 Walnut Street
Cincinnati, OH 45202
