As filed with the Securities and Exchange Commission on May 1, 2000
Securities Act Registration No. 333-21089
Investment Company Act Registration No. 811-08043
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 6 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7
(Check appropriate box or boxes)
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THE BERKSHIRE FUNDS
(Formerly Berkshire Capital Investment Trust)
(Exact Name of Registrant as Specified in Charter)
475 Milan Drive, Suite #103
San Jose, CA 95134-2453
(Address of Principal Executive Offices)
1-877-526-0707
(Registrant's Telephone Number)
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AGENT FOR SERVICE:
MALCOLM R. FOBES III
The Berkshire Funds
475 Milan Drive, Suite #103
San Jose, CA 95134-2453
(Name and Address of Agent for Service)
COPIES TO:
DONALD S. MENDELSOHN, ESQ.
Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower
441 Vine Street
Cincinnati, Ohio 45202
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It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485.
[ ] on ______________ pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] on ______________ pursuant to paragraph (a)(1) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[ ] on ______________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
PART A
THE BERKSHIRE FUNDS
Berkshire Focus Fund
Berkshire Technology Fund
Prospectus
[Outside front cover]
P R O S P E C T U S
May 1, 2000
BERKSHIRE FOCUS FUND
For Investors Seeking Long-Term Capital Appreciation
BERKSHIRE TECHNOLOGY FUND
For Investors Seeking Long-Term Capital Appreciation
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved of these securities, nor has the Commission determined
that this Prospectus is complete or accurate. Any representation to the
contrary is a criminal offense.
[LOGO]
THE BERKSHIRE FUNDS
475 Milan Drive, Suite #103
San Jose, California 95134-2453
<PAGE>
TABLE OF CONTENTS
The Funds 4
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The Objective of the Funds...................................... 4
The Principal Investment Strategies and Policies of the Funds... 4
The Principal Risks of Investing in the Funds................... 7
Who Should Invest............................................... 8
Performance History............................................. 9
Costs of Investing in the Funds................................. 10
Expense Example................................................. 11
Additional Investment Strategies and Risk Considerations........ 11
Who Manages the Funds 14
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The Investment Adviser.......................................... 14
The Portfolio Manager........................................... 14
How to Buy and Sell Shares 15
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Pricing of Fund Shares.......................................... 15
Investing in the Funds.......................................... 16
Minimum Investments For Each Fund............................... 16
Types of Account Ownership...................................... 17
Instructions For Opening and Adding to an Account............... 18
Telephone and Wire Transactions................................. 19
Tax-Deferred Plans.............................................. 20
Types of Tax-Deferred Accounts.................................. 21
Automatic Investment Plans...................................... 22
Instructions For Selling Fund Shares............................ 22
Additional Redemption Information............................... 24
How to Exchange Shares.......................................... 26
Shareholder Communications...................................... 26
Dividends and Distributions..................................... 26
Taxes........................................................... 27
Financial Highlights 28
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Prospectus 2
<PAGE>
YOUR GUIDE
TO THE PROSPECTUS
This Prospectus is designed to help you make an informed decision about
whether investing in the Berkshire Focus Fund ("Focus Fund") or the Berkshire
Technology Fund ("Technology Fund") is appropriate for you. Please read it
carefully before investing and keep it on file for future reference. When we
are discussing the Focus Fund and the Technology Fund together, we will refer
to them as the "Funds." The investment adviser for both Funds is Berkshire
Capital Holdings, Inc. (the "Adviser").
To make this Prospectus easy for you to read and understand, we have divided
it into four sections. Each section is organized to help you quickly identify
the information that you are looking for.
The first section, The Funds, contains a discussion of the objective,
investment strategies and policies, risks, performance history and costs of
investing in each Fund. In particular, this section tells you four important
things about each Fund that you should know before you invest:
* Each Fund's investment objective - what the Fund is trying to achieve.
* The principal investment strategies of each Fund - how the Fund tries to
meet its investment objective.
* The investment selection process used by each Fund - how the Fund chooses
its primary investments.
* Risks you should be aware of - the principal risks of investing in each Fund.
The other three sections of the Prospectus - Who Manages the Funds, How to Buy
and Sell Shares, and Financial Highlights - provide you with detailed
information about how the Funds are managed, the services and privileges that
are available to you, how shares are priced, how to buy and sell shares, and
financial information about each Fund.
Prospectus 3
<PAGE>
THE FUNDS
THE OBJECTIVE OF THE FUNDS
* Each Fund's investment objective is long-term capital appreciation.
Any income received is incidental to this objective.
THE PRINCIPAL INVESTMENT STRATEGIES
AND POLICIES OF THE FUNDS
* The Focus Fund invests primarily in the common stocks of large companies,
normally a core position of 20-30 common stocks selected for their long-term
growth potential.
* The Technology Fund, under normal market conditions, invests at least 65%
of its assets in the securities of companies engaged in the development,
production, or distribution of technology-related products or services. These
types of products and services currently include office and business
equipment; computer hardware and software; peripherals; mass storage devices;
semiconductors; data networking and telecommunications equipment; and
Internet-related products and services. The Fund may invest in both small and
large companies, without regard to their size.
[Side panel: Each Fund's objective may be changed by the Board of Trustees
without shareholder approval. You will receive advance written notice of any
material changes to your Fund's objective. If there is a material change, you
should consider whether the Fund remains an appropriate investment for you.]
[Side panel: Large vs. Small companies: Both Funds invest in the equity
securities of large companies. Large companies are often referred to as "large
capitalization" companies because they typically have a market capitalization
of $5 billion or more. The Technology Fund also invests in the equity
securities of small and mid-sized companies. These "small and mid-
capitalization" companies typically have a market capitalization of less
than $5 billion. Market capitalization is calculated by multiplying the number
of shares outstanding by the stock price of the company.]
Prospectus 4
<PAGE>
* Each Fund concentrates its investments in the technology industry, which
means at least 25%, and as much as 100%, of the Fund's total assets can be
invested in that particular industry.
* Each Fund invests primarily in growth companies whose revenues and earnings
are likely to grow faster than the economy as a whole, offering above-average
prospects for capital appreciation and little or no emphasis on dividend
income.
* Each Fund is a "non-diversified" portfolio, which means that it can invest
in fewer securities at any one time than diversified portfolios.
* Under adverse market conditions, when investment opportunities are limited,
or in the event of exceptional redemption requests, each Fund may hold cash or
cash-equivalents and invest without limit in obligations of the U.S.
Government and its agencies and in money market securities, including
high-grade commercial paper, certificates of deposit, repurchase agreements
and short-term debt securities. Under these circumstances, the Funds may not
participate in stock market advances or declines to the same extent that they
would if they remained more fully invested in common stocks. As a result, each
Fund may not achieve its investment objective.
The Investment Selection Process
Used by the Funds
In selecting investments for the Funds, the Adviser focuses on industry
leaders with dominant franchises and strong growth prospects. The Adviser also
uses an approach that combines "top down" economic analysis with an emphasis
on "bottom up" stock selection.
* The "top down" approach considers such macro-economic factors as interest
rates, inflation, gross domestic product, unemployment, inventories, tax
rates, and the regulatory environment, as well as global trends, the overall
competitive
[Side panel: Mutual funds generally emphasize either "growth" or "value"
styles of investing. Growth funds invest in companies that exhibit
faster-than-average growth in revenues and earnings, appealing to investors
who are willing to accept more volatility in hopes of a greater increase in
share price. Value funds in-vest in companies that appear underpriced
according to certain financial measurements of their intrinsic worth or
business prospects. Value funds appeal to investors who want some dividend
income and the potential for capital gains, but are less tolerant of
share-price fluctuations. Both Funds invest primarily in growth companies.]
[Side panel: All mutual funds must elect to be "diversified" or
"non-diversified." As a non-diversified portfolio, each Fund may invest half
of its total assets in two or more securities, while the other half is spread
out among investments not exceeding 5% of the Fund's total assets at the time
of purchase. As a result, each Fund has the ability to take larger positions
in a smaller number of securities than diversified portfolios. These
limitations do not apply to U.S. Government securities.]
Prospectus 5
<PAGE>
landscape, industry consolidation and the sustainability of the economic
trends to predict the direction of the economy. As a result, the Adviser
attempts to identify sectors, industries, and companies which should benefit
from the overall trends.
* Upon completion of its "top down" analysis, the Adviser then takes a
"bottom up" approach to selecting individual companies that are most likely
to benefit from the observed trends. In other words, the Adviser seeks to
identify individual companies with earnings growth potential that may not be
recognized by the market at large.
* In determining whether to invest in a particular company, the Adviser
focuses on a number of different attributes, including the company's specific
market expertise or dominance, its franchise durability, sustainable revenue
and earnings growth, pricing power, strong balance sheet, improving return on
equity, the ability to generate free cash flow, and experienced, motivated,
and creative management.
* The Adviser may also implement fundamental security analysis of individual
companies which have been identified through the "bottom up" approach. As part
of its fundamental research, the Adviser may rely upon specific sources of
information including general economic and industry data as provided by the
U.S. Government, various trade associations and other sources, brokerage
research reports, and published corporate financial data such as annual
reports, 10-Ks, and quarterly statements, as well as direct interviews with
company management. The Adviser also reviews traditional financial data such
as price-sales and earnings ratios, return on assets and equity, gross and net
margins, inventory turns, book value, and debt-equity ratios. The Adviser may,
from time-to-time, employ dividend and cash flow discounting models to
determine the company's intrinsic value which it then compares to the
company's current share price.
[Side panel: Fundamental vs. Technical Analysis: There are two major schools
of stock market analysis used in determining whether a particular stock or
group of stocks are undervalued or overvalued relative to their current market
price. The first major school is "fundamental analysis" which relies on an
analysis of the balance sheet and income statements of companies in order to
forecast their future stock price movements. The other major school is
"technical analysis" which is not concerned with the financial position of a
company, but instead relies on price and volume movements through the use of
charts and computer programs to identify and project trends in a market or
security. The Adviser relies on fundamental analysis in selecting portfolio
securities for the Funds.]
Prospectus 6
<PAGE>
THE PRINCIPAL RISKS OF
INVESTING IN THE FUNDS
Risks in General
Domestic and foreign economic growth and market conditions, interest rate
levels, and political events are among the factors affecting the securities
markets of the Funds' investments. There is the risk the Adviser will not
accurately predict the direction of these and other factors and, as a result,
the Adviser's investment decisions may not accomplish what they were intended
to achieve. You could lose money investing in the Funds. You should consider
your own investment goals, time horizon, and risk tolerance before investing
in either Fund. An investment a Fund may not be appropriate for all investors
and is not intended to be a complete investment program.
Risks of Investing in Common Stocks (Both Funds)
Both Funds invest primarily in common stocks, which subjects the Funds and
their shareholders to the risks associated with common stock investing. These
risks include the financial risk of selecting individual companies that do not
perform as anticipated, the risk that the stock markets in which the Funds
invest may experience periods of turbulence and instability, and the general
risk that domestic and global economies may go through periods of decline and
cyclical change.
Many factors affect an individual company's performance, such as the strength
of its management or the demand for its product or services. You should be
aware that the value of a company's share price may decline as a result of
poor decisions made by management or lower demand for the company's products
or services. In addition, a company's share price may also decline if its
earnings or revenues fall short of expectations.
There are overall stock market risks that may also affect the value of each
Fund. Over time, the stock markets tend to move in cycles, with periods when
stock prices rise generally and periods when stock prices decline generally.
The value of each Fund's investments may increase or decrease more than the
stock markets in general.
Risk of Non-Diversification (Both Funds)
As previously mentioned, each Fund is a non-diversified portfolio, which means
that it has the ability to take larger positions in a smaller number of
securities than a portfolio that is "diversified." Non-diversification
increases the risk that the value of the Fund could go down because of the
poor performance of a single investment.
Prospectus 7
<PAGE>
Industry Risk (Both Funds)
Industry risk is the possibility that stocks within the same industry will
decline in price due to industry-specific market or economic developments. To
the extent that each Fund concentrates its investments in the technology
industry, the Funds are subject to the risk that companies in that industry
are likely to react similarly to legislative or regulatory changes, adverse
market conditions and/or increased competition affecting that market segment.
Because of the rapid pace of technological development, there is the risk that
the products and services developed by these companies may become rapidly
obsolete or have relatively short product cycles. There is also the risk that
the products or services offered by these companies will not meet expectations
or even reach the marketplace. Although the Adviser currently believes that
investments by the Funds in the technology industry will offer greater
opportunity for growth of capital than investments in other industries, such
investments can fluctuate dramatically in value and will expose you to greater
than average risk.
Small Company Risk (Technology Fund)
The Technology Fund may invest a substantial portion of its assets in small
and mid-capitalization companies. While smaller companies generally have the
potential for rapid growth, they often involve higher risks because they lack
the management experience, financial resources, product diversification and
competitive strengths of larger corporations. In addition, in many instances
the securities of smaller companies are traded only over-the-counter or on a
regional securities exchange, and the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the
securities of smaller companies may be subject to wider price fluctuations.
When making large sales, the Fund may have to sell portfolio holdings at
discounts from quoted prices or may have to make a series of small sales over
an extended period of time. Investments in smaller companies tend to be more
volatile and somewhat more speculative.
WHO SHOULD INVEST
The Funds may be suitable for you if:
* You are seeking growth of capital over the long-term - at least five years.
* You can tolerate greater risks associated with common stock investments.
* You are not looking for current income.
* You characterize your investment temperament as "aggressive."
* You are seeking funds that emphasize investments in technology-related
companies.
* You are willing to accept significant fluctuations in share price.
* You are not pursuing a short-term goal or investing emergency reserves.
Prospectus 8
<PAGE>
Performance History
The bar chart and table below show the variability of the Focus Fund's
returns, which is one indicator of the risks of investing in the Fund. The bar
chart shows the Fund's performance for 1998 and 1999 together with the best
and worst quarters for those years. The table compares the Fund's average
annual returns for the periods indicated to those of broad-based securities
market indices. The Technology Fund commenced operations on December 29, 1999.
Performance results have not been provided because the Technology Fund has not
yet been in existence for a full calendar year. As with all mutual funds, past
results are not an indication of future performance.
BERKSHIRE FOCUS FUND
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(Annual returns for periods ended December 31)
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[HORIZONTAL BAR CHART]
1998 Return
|=======================================| 104.17%
1999 Return
|==============================================================| 142.90%
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Best Quarter (12-31-99) +74.92% Worst Quarter (9-30-98) -2.19%
==========================================================================
Average annual total return for periods ended 12/31/99
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Since Inception
1 year (7/1/97)
Berkshire Focus Fund 142.90% 79.64%
Dow Jones Industrial Average(1) 27.20% 19.53%
S&P 500 Index(2) 21.04% 24.21%
NASDAQ Composite Index(3) 86.13% 51.87%
------------------------------------
(1) The Dow Jones Industrial Average is a measurement of general market price
movement for 30 widely-held stocks listed primarily on the New York Stock
Exchange.
(2) The S&P 500 is the Standard & Poor's composite index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices.
(3) The NASDAQ Composite Index is an unmanaged index which averages the
trading prices of almost 5,000 domestic companies.
Prospectus 9
<PAGE>
COSTS OF INVESTING IN THE FUNDS
The following table describes the expenses and fees that you may pay if you
buy and hold shares of each Fund. Annual fund operating expenses are paid out
of the assets of a Fund, so their effect is already included in the Fund's
daily share price.
Shareholder Fees
(fees paid directly from your investment)
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Focus Fund Technology Fund
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Sales Charge (Load) Imposed on Purchases None None
Deferred Sales Charge (Load) None None
Sales Charge (Load) Imposed on Reinvested Dividends None None
Redemption Fee None None
Exchange Fee $5.00 $5.00
Annual Fund Operating Expenses(a)
(expenses that are deducted from Fund assets)
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Focus Fund Technology Fund
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Management Fees 1.42% 1.50%
12b-1 Distribution Fees None None
Other Expenses(b) 0.47% 0.50%
Total Annual Fund Operating Expenses 1.89% 2.00%
(a) The expense information for the Focus Fund has been restated to reflect
fees in effect for 1999.
(b) Fees payable under the Administration Agreement between each Fund and the
Adviser are fixed at 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.
[Side panel: The Funds are no-load investments, which means you do not pay any
fees when you buy or sell shares of either Fund. As a result, all of your
investment goes to work for you.]
Prospectus 10
<PAGE>
EXPENSE EXAMPLE
The following example is intended to help you compare the cost of investing in
each Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in a Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% annual return each year and that the
Fund's operating expenses remain the same each year. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Shareholder Transaction Expenses
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One Year Three Years Five Years Ten Years
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Focus Fund $192 $594 $1,021 $2,212
Technology Fund $203 $627
ADDITIONAL INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS
General
Both Funds invest primarily in common stocks and similar securities, including
preferred stocks, warrants, securities convertible into common stock and
securities purchased on a when-issued basis.
Special Situations (Both Funds)
Each Fund may invest in special situations. A special situation arises when
the Adviser believes that the securities of an issuer will be recognized and
appreciate in value due to a specific development with respect to that issuer.
Developments creating a special situation might include significant changes in
a company's allocation of its existing capital, a restructuring of assets, a
redirection of free cash flows, a new product or process, a technological
breakthrough, a management change or other extraordinary corporate event or a
difference in market supply and demand for the security. The Fund's
performance could suffer if the anticipated development in a "special
situation" investment does not occur or does not attract the expected
attention.
[Side panel: Understanding expenses: Operating a mutual fund involves a
variety of expenses including those for portfolio management, shareholder
statements, tax reporting and other services. These expenses are paid from the
Fund's assets in the form of a management fee and administrative fee. Their
effect is already factored into the Fund's daily share price and returns.]
Prospectus 11
<PAGE>
Portfolio Turnover (Both Funds)
Both Funds generally purchase securities for long-term investment although, to
a limited extent, each Fund may purchase securities in anticipation of
relatively short-term price gains. Short-term transactions may also result
from liquidity needs, securities having reached a price or yield objective,
changes in interest rates, or by reason of economic or other developments not
foreseen at the time of the investment decision. Both Funds may also sell one
security and simultaneously purchase the same or comparable security to take
advantage of short-term differentials in securities prices. Changes are made
in each Fund's portfolio whenever the Adviser believes such changes are
desirable. Portfolio turnover rates are generally not a factor in making buy
and sell decisions. Increased portfolio turnover may cause a Fund to incur
higher brokerage costs, which may adversely affect the Fund's performance, and
may produce increased taxable distributions.
Options and Other Derivatives (Both Funds)
Both Funds may use options on securities, securities indices and other types
of derivatives primarily for hedging purposes. Each Fund may also invest, to a
lesser degree, in these types of securities for non-hedging purposes, such as
seeking to enhance returns.
Derivatives are financial instruments whose value depends upon, or is derived
from, the value of the underlying investment, pool of investments, or index. A
Fund's return on a derivative typically depends on the change in the value of
the investment, pool of investments, or index specified in the derivative
instrument. Derivatives involve special risks and may result in losses. Both
Funds will be dependent on the Adviser's ability to analyze and manage these
sophisticated instruments. The prices of derivatives may move in unexpected
ways, especially in abnormal market conditions. A Fund's use of derivatives
may also increase the amount of taxes payable by shareholders.
Foreign Securities (Both Funds)
Each Fund may invest up to 25% of its net assets in foreign securities. These
investments may be publicly traded in the United States or on a foreign
exchange and may be bought and sold in a foreign currency. The Adviser
generally selects foreign securities on a stock-by-stock basis based on growth
potential. Foreign investments are subject to risks not usually associated
with owning securities of U.S. issuers. These risks can include fluctuations
in foreign currencies, foreign currency exchange controls, political and
economic instability, differences in financial reporting, differences in
securities regulation and trading, and foreign taxation issues.
Prospectus 12
<PAGE>
Fixed Income Securities (Both Funds)
Under normal market conditions, each Fund may invest up to 15% of its total
assets in all types of fixed income securities, including U.S. government
obligations, and up to 10% of its total assets in high-yield bonds. Each Fund
may also purchase fixed income securities on a when-issued, delayed delivery,
or forward commitment basis.
Fixed income securities are subject to credit risk and interest rate risk.
Credit risk is the risk that a Fund could lose money if an issuer of a fixed
income security cannot meet its financial obligations or goes bankrupt.
Interest rate risk is the risk that a Fund's investments in fixed income
securities may fall when interest rates rise.
Investments in high-yield bonds are considered to be more speculative than
higher quality fixed income securities. They are more susceptible to credit
risk than investment-grade securities, especially during periods of economic
uncertainty or economic downturns. The value of lower quality securities are
subject to greater volatility and are generally more dependent on the ability
of the issuer to meet interest and principal payments than higher quality
securities. Issuers of high-yield securities may not be as strong financially
as those issuing bonds with higher credit ratings.
Short Sales (Technology Fund)
The Technology Fund may enter into short sales. If this practice is used by
the Fund, the intent would be to primarily hedge the Fund's portfolio by
shorting against existing portfolio holdings or securities whose values are
linked to various indices such as, Standard & Poor's Depository Receipts,
Diamonds Trust, NASDAQ 100 Trust, and Merrill Lynch HOLDRs Trust. Investing
for hedging purposes may result in certain transaction costs which may reduce
the Fund's performance. In addition, there is no assurance that a short
position will achieve a perfect correlation with the security that is being
hedged against.
Year 2000 Issue (Both Funds)
Each Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. Like other mutual funds, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Adviser or the Funds' various
service providers do not properly process and calculate date-related
information and data on and after January 1, 2000. This possibility is
commonly known as the "Year 2000 Issue." The Adviser has taken steps that it
believes are reasonably designed to address the Year 2000 Issue with respect
to computer systems that are used and to obtain reasonable assurances that
comparable steps are being taken by the Funds' major service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Funds. In addition, the Adviser
cannot make any assurances that the Year 2000 Issue will not affect the
companies in which each Fund invests or worldwide markets and economies.
Prospectus 13
<PAGE>
WHO MANAGES THE FUNDS
THE INVESTMENT ADVISER
Berkshire Capital Holdings, Inc. (the "Adviser" or "Berkshire Capital"),
located at 475 Milan Drive, Suite #103, San Jose, California 95134, serves as
the investment adviser to each Fund under an Investment Advisory Agreement
with The Berkshire Funds (the "Trust"). Each Agreement provides that the
Adviser will furnish continuous investment advisory and management services to
the Fund. Berkshire Capital was organized in February 1993 and began serving
as investment adviser to the Focus Fund in July 1997. Malcolm R. Fobes III is
the controlling shareholder, Chairman and Chief Executive Officer of the
Adviser.
The Adviser manages the investment portfolio of each Fund, subject to policies
adopted by the Trust's Board of Trustees. Under the Investment Advisory
Agreements, the Adviser, at its own expense and without reimbursement from the
Trust, furnishes office space and all necessary office facilities, equipment
and executive personnel necessary for managing the Funds. Berkshire Capital
also pays the salaries and fees of all officers and trustees of the Trust who
are also officers, directors, or employees of Berkshire Capital. For its
services, the Adviser receives a fee of 1.50% per year of the average daily
net assets of each Fund.
THE PORTFOLIO MANAGER
Mr. Fobes manages the investment program of the Funds and is primarily
responsible for the day-to-day management of each Fund's portfolio. He has
been the portfolio manager of the Focus Fund since its inception in 1997 and
the Technology Fund since its inception in 1999. Mr. Fobes founded Berkshire
Capital in 1993 where he has been responsible for directing the company's
investment programs in both public and private companies located in Silicon
Valley. Prior to forming Berkshire Capital, Mr. Fobes was employed by Adobe
Systems, Inc., a leading provider of digital publishing and imaging software
technologies. Mr. Fobes holds a Bachelor of Science degree in Finance and
Economics from San Jose State University in California.
Prospectus 14
<PAGE>
HOW TO BUY AND SELL SHARES
PRICING OF FUND SHARES
The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV"). The NAV is calculated by taking the total value of the Fund's assets,
subtracting its liabilities, and then dividing by the total number of shares
outstanding, rounded to the nearest cent:
Total Net Assets - Liabilities
Net Asset Value = ------------------------------
Number of Shares Outstanding
The NAV is generally calculated as of the close of trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern time) every day the Exchange is
open. All purchases, redemptions or reinvestments of Fund shares will be
priced at the next NAV calculated after your order is received in proper form
by the Fund's transfer agent, Firstar Mutual Fund Services, LLC (the "Transfer
Agent"). Your order must be placed with the Transfer Agent prior to the close
of the trading of the New York Stock Exchange in order to be confirmed for
that day's NAV. The Funds' investments are valued at market value or, if a
market quotation is not readily available, at the fair value determined in
good faith by the Adviser, subject to the review and oversight of the Funds'
Board of Trustees. The Funds may use pricing services to determine market
value.
Prospectus 15
<PAGE>
INVESTING IN THE FUNDS
You may purchase shares of either Fund directly through the Fund's Transfer
Agent or through a brokerage firm or other financial institution that has
agreed to sell the Fund's shares. If you are investing directly in a Fund for
the first time, you will need to establish an account by completing a
Berkshire Funds Account Application. (To establish an IRA, complete an IRA
Application.) To request an application, call toll-free 1-877-526-0707 or
visit our website at www.berkshirefunds.com to download an application. Your
initial investment minimum can be found in the table below. The Funds reserve
the right to change the amount of these minimums from time to time or to waive
them in whole or in part for certain accounts. Lower investment minimums are
available to investors purchasing shares through a brokerage firm or other
financial institution.
MINIMUM INVESTMENTS FOR EACH FUND
=======================================================
Initial Additional
=======================================================
Regular account $5,000 $500
Automatic Investment Plan $2,500 $100*
IRA account $2,000 $200
Education IRA $500 $100
- -------------------------------------------------------
* An Automatic Investment Plan requires a $100 minimum
automatic monthly or quarterly investment.
All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash, credit cards or third party checks will be accepted. A $25 fee
will be charged against your account for any payment check returned to the
Transfer Agent or for any incomplete electronic funds transfer, or for
insufficient funds, stop payment, closed account or other reasons. If a check
does not clear your bank or the Fund is unable to debit your predesignated
bank account on the day of purchase, the Fund reserves the right to cancel the
purchase. If your purchase is canceled, you will be responsible for any losses
or fees imposed by your bank and losses that may be incurred as a result of a
decline in the value of the canceled purchase. The Fund (or its agent) has the
authority to redeem shares in your account(s) from either Fund to cover any
losses due to fluctuations in share price. Any profit on such cancellation
will accrue to the Fund.
[Side panel: Investments made through brokerage firms or other financial
institutions: If you invest through a brokerage firm or other financial
institution, the policies and fees may be different than those described here.
Financial advisers, financial supermarkets, brokerage firms, and other
financial institutions may charge transaction and other fees and may set
different minimum investments or limitations on buying or selling shares.
Consult a representative of your financial institution if you have any
questions. Your financial institution is responsible for transmitting your
order in a timely manner.]
Prospectus 16
<PAGE>
Your investment in each Fund should be intended to serve as a long-term
investment vehicle. The Funds are not designed to provide you with a means of
speculating on the short-term fluctuations in the stock market. Each Fund
reserves the right to reject any purchase request that it regards as
disruptive to the efficient management of the Fund, which includes investors
with a history of excessive trading. Each Fund also reserves the right to stop
offering shares at any time.
TYPES OF ACCOUNT OWNERSHIP
You can establish the following types of accounts by completing a Shareholder
Account Application:
* Individual or Joint Ownership
Individual accounts are owned by one person. Joint accounts have two or more
owners.
* A Gift or Transfer to Minor (UGMA or UTMA)
An UGMA/UTMA account is a custodial account managed for the benefit of a
minor. To open an UGMA or UTMA account, you must include the minor's social
security number on the application.
* Trust
An established trust can open an account. The names of each trustee, the name
of the trust and the date of the trust agreement must be included on the
application.
* Business Accounts
Corporation and partnerships may also open an account. The application must be
signed by an authorized officer of the corporation or a general partner of a
partnership.
[Side panel: Costs and market timing: Some investors try to profit from
"market-timing" - switching money into investments when they expect the market
to rise, and taking money out when they expect the market to fall. As money is
shifted in and out by market timers, the Fund incurs expenses for buying and
selling securities. These costs are borne by all Fund shareholders, including
the long-term investors who do not generate the costs. Therefore, each Fund
discourages short-term trading by, among other things, closely monitoring
excessive transactions.]
Prospectus 17
<PAGE>
INSTRUCTIONS FOR OPENING AND ADDING TO AN ACCOUNT
.........................................................................
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
- --------------------------------------------------------------------------
BY MAIL BY MAIL
.........................................................................
Complete and sign the Account Complete the investment slip
Application or an IRA Application. that is included with your account
statement, and write your account
Make your check payable to either number on your check. If you no
the Berkshire Focus Fund or the longer have your investment slip,
Berkshire Technology Fund. please reference your name, address,
* For IRA accounts, please account number, and the Fund name
specify the year for which on your check.
the contribution is to be made.
MAIL YOUR APPLICATION AND CHECK TO: MAIL THE SLIP AND THE CHECK TO:
.........................................................................
The Berkshire Funds The Berkshire Funds
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 P.O. Box 701
Milwaukee, WI 53201-0701 Milwaukee, WI 53201-0701
BY OVERNIGHT COURIER, SEND TO:
.........................................................................
The Berkshire Funds
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
BY TELEPHONE BY TELEPHONE
.........................................................................
Telephone transactions may not be You must select this service on
used for initial purchases. your account application before
making your first telephone trans-
action. Thereafter, you may call
1-877-526-0707 to purchase shares
in an existing account. Your pur-
chase will be effective at the NAV
next computed after your instruc-
tion is received in proper form by
the Transfer Agent.
Prospectus 18
<PAGE>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
- --------------------------------------------------------------------------
BY WIRE BY WIRE
..............................................................................
Call 1-877-526-0707 for instruc- Send your investment to Firstar Bank,
tions and to obtain an investor N.A. by following the instructions
account number or an IRA account listed in the column to the left.
number prior to wiring the funds.
Send your investment to Firstar Bank
N.A. with these instructions:
* Firstar Bank, N.A.
Milwaukee, WI
* ABA#: 0750-0002-2
* For Credit to The Berkshire Funds
* Firstar Trust MFS A/C 112-952-137
* For further credit to:
Name of fund to be purchased
Your shareholder account number
Your shareholder account name
TELEPHONE AND WIRE TRANSACTIONS
Only bank accounts held at domestic financial institutions that are Automated
Clearing House (ACH) members can be used for telephone purchase transactions.
With respect to all transactions made by telephone, the Funds and their
Transfer Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
telephone instructions, providing written confirmation of all such
transactions, and/or tape recording all telephone instructions. If reasonable
procedures are followed, then neither the Funds nor the Transfer Agent will be
liable for any loss, cost, or expense for acting upon an investor's telephone
instructions or for any unauthorized telephone redemption. In any instance
where the Funds' Transfer Agent is not reasonably satisfied that instructions
received by telephone are genuine, neither the Funds nor the Transfer Agent
shall be liable for any losses which may occur because of delay in
implementing a transaction.
Prospectus 19
<PAGE>
If you purchase your initial shares by wire, the Transfer Agent first must
have received a completed account application and issued an account number to
you. The account number and Fund name must be included in the wiring
instructions as set forth on the previous page. The Transfer Agent must
receive your account application to establish shareholder privileges and to
verify your account information. Payment of redemption proceeds may be delayed
and taxes may be withheld unless the Funds receive a properly completed and
executed account application.
Shares purchased by wire will be purchased at the NAV next determined after
the Transfer Agent receives your wired funds and all required information is
provided in the wire instructions. If the Transfer Agent is notified no later
than 3:00 p.m. Eastern time of the wire instructions, and the wired funds are
received by the Transfer Agent no later than 4:00 p.m. Eastern time, then the
shares purchased will be priced at the NAV determined on that business day. If
the wire is not received by 4:00 p.m. Eastern time, the purchase will be
effective at the NAV next calculated after receipt of the wire.
TAX-DEFERRED PLANS
If you are eligible, you may set up one or more tax-deferred accounts. A
tax-deferred account allows you to shelter your investment income and capital
gains from current income taxes. A contribution to certain of these plans may
also be tax deductible. Tax-deferred accounts include retirement plans
described on the following page and the Education IRA. Distributions from
these plans are generally subject to an additional tax if withdrawn prior to
age 59 1/2 or used for a nonqualifying purpose. Investors should consult their
tax adviser or legal counsel before selecting a tax-deferred account. Complete
instructions about how to establish and maintain your tax-deferred retirement
plan will be included in the retirement plan kit you receive in the mail.
Firstar Bank, N.A., serves as the custodian for the tax-deferred accounts
offered by the Funds. You will be charged an annual account maintenance fee of
$12.50 for each tax-deferred account you have with either Fund. You may pay
the fee by check or have it automatically deducted from your account (usually
in December). The custodian reserves the right to change the amount of the fee
or to waive it in whole or part for certain types of accounts.
Prospectus 20
<PAGE>
TYPES OF TAX-DEFERRED ACCOUNTS
* Traditional IRA
An individual retirement account. Your contribution may or may not be
deductible depending on your circumstances. Assets can grow tax-free and
distributions are taxable as income.
* Roth IRA
An IRA with non-deductible contributions, tax-free growth of assets, and
tax-free distributions for qualified distributions.
* Spousal IRA
An IRA funded by a working spouse in the name of a non-earning spouse.
* Education IRA
This plan allows individuals, subject to certain income limitations, to
contribute up to $500 annually on behalf of any child under the age of
eighteen.
* SEP-IRA
An individual retirement account funded by employer contributions. Your assets
grow tax-free and distributions are taxable as income.
* Keogh or Profit Sharing Plans
These plans allow corporations, partnerships and individuals who are
self-employed to make tax-deductible contributions of up to $30,000 for each
person covered by the plans.
* 403(b) Plans
An arrangement that allows employers of charitable or educational
organizations to make voluntary salary reduction contributions to a tax-
deferred account.
* 401(k) Plans
Allows employees of corporations of all sizes to contribute a percentage of
their wages on a tax-deferred basis. These accounts need to be established by
the trustee of the plan.
Prospectus 21
<PAGE>
AUTOMATIC INVESTMENT PLANS
By completing the Automatic Investment Plan section of the account
application, you may make automatic monthly or quarterly investments ($100
minimum per purchase) in either Fund from your bank or savings account. Your
initial investment minimum is $2,500 if you select this option. Shares of
either Fund may also be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable shareholders to
have all or a portion of their payroll or Social Security checks transferred
automatically to purchase Fund shares.
FOR INVESTING
- ---------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN PAYROLL DIRECT DEPOSIT PLAN
...........................................................................
For making automatic investments For making automatic investments from
from a designated bank account. your payroll check.
DIVIDEND REINVESTMENT:
...........................................................................
All income dividends and capital gains dis-
tributions will be automatically reinvested
in shares of the Funds unless you indicate
otherwise on the account application or in
writing.
INSTRUCTIONS FOR SELLING FUND SHARES
You may sell all or part of your shares on any day that the New York Stock
Exchange is open for trading. Your shares will be sold at the next NAV per
share calculated after your order is received in proper form by the Transfer
Agent. The proceeds of your sale may be more or less than the purchase price
of your shares, depending on the market value of the Fund's securities at the
time of your sale. Your order will be processed promptly and you will
generally receive the proceeds within seven days after receiving your properly
completed request. The Funds will not mail any proceeds unless your investment
check has cleared the bank, which may take up to fifteen calendar days. This
procedure is intended to protect each Fund and its shareholders from loss. If
the dollar or share amount requested is greater than the current value of your
account, your entire account balance will be redeemed. If you choose to redeem
your account in full, any automatic services currently in effect for the
account will be terminated unless you indicate otherwise in writing.
Prospectus 22
<PAGE>
TO SELL SHARES
- --------------------------------------------------------------------------
By Mail
..........................................................................
Write a letter of instruction that includes:
* The names(s) and signature(s) of all account owners.
* Your account number.
* The name of the Fund.
* The dollar or share amount you want to sell.
* Where to send the proceeds.
* If redeeming from your IRA, please note applicable withholding requirements.
* Obtain a signature guarantee or other documentation, if required.
MAIL YOUR REQUEST TO: BY OVERNIGHT COURIER, SEND TO:
.........................................................................
The Berkshire Funds The Berkshire Funds
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
BY TELEPHONE
.........................................................................
* You will automatically be granted * You will not be able to redeem by
telephone redemption privileges telephone and have a check sent to
unless you decline them in writing your address of record for a period
or indicate on the appropriate sec- of 15 days following an address
tion of the account application that change.
you decline this option. Otherwise,
you may redeem Fund shares by * Unless you decline telephone
calling 1-877-526-0707. Redemption privileges in writing or on your
proceeds will only be mailed to your account application, as long as the
address of record. Funds take reasonable measures to
verify the order, you may be
* You may redeem a maximum of responsible for any fraudulent
$50,000 per day by telephone. telephone order.
For specific information on how to redeem your account, and to determine if a
signature guarantee or other documentation is required, please call toll-free
in the U.S. 1-877-526-0707.
Prospectus 23
<PAGE>
ADDITIONAL REDEMPTION INFORMATION
SIGNATURE GUARANTEES
Signature guarantees are designed to protect both you and the Funds from
fraud. A signature guarantee of each owner is required to redeem shares
in the following situations:
* If you change ownership on your account.
* If you request the redemption proceeds to be sent to a different address
than that registered on the account.
* If the proceeds are to be made payable to someone other than the account's
owner(s).
* If a change of address request has been received by the Transfer Agent
within the last 15 days.
* If you wish to redeem $50,000 or more from any shareholder account.
Signature guarantees can be obtained from most banks, savings and loan
associations, trust companies, credit unions, broker/dealers, and member firms
of a national securities exchange. Call your financial institution to see if
they have the ability to guarantee a signature. A notary public cannot provide
signature guarantees.
The Funds reserve the right to require a signature guarantee under other
circumstances or to delay a redemption when permitted by Federal Law. For more
information pertaining to signature guarantees, please call 1-877-526-0707.
CORPORATE, TRUST AND OTHER ACCOUNTS
Redemption requests from corporate, trust, and other accounts may require
documents in addition to those described above, evidencing the authority of
the officers, trustees or others. In order to avoid delays in processing
redemption requests for these accounts, you should call the Transfer Agent at
1-877-526-0707 to determine what additional documents are required.
[Side panel: What is a redemption? A redemption is a sale by you to the Fund
of some or all of your shares. The price per share you receive when you redeem
Fund shares may be more or less than the price at which you purchased those
shares. When you redeem your shares, you will generally have a gain or loss,
depending upon whether the amount you receive for your shares is more or less
than your cost or other basis in the shares.]
[Side panel: Redemption in kind: The Funds intend to make payments for all
redemptions in cash. However, if a Fund believes that conditions exist which
make cash payments detrimental to the best interests of the Fund, payment for
shares redeemed may be made in whole or in part through a distribution of
portfolio securities chosen by the Adviser (under the supervision of the Board
of Trustees). If payment is made in securities, shareholders may incur
transaction costs in converting these securities into cash after they have
redeemed their shares.]
Prospectus 24
<PAGE>
ADDRESS CHANGES
To change the address on your account, call the Transfer Agent at
1-877-526-0707 and send a written request signed by all account owners.
Include the name of the Fund(s), account number(s), name(s) on the account and
both the old and new addresses. Certain options may be suspended for a period
of 15 days following an address change.
TRANSFER OF OWNERSHIP
In order to change the account registration or transfer ownership of an
account, additional documents will be required. In order to avoid delays in
processing these requests, you should call the Transfer Agent at
1-877-526-0707 to determine what additional documents are required.
REDEMPTION INITIATED BY THE FUNDS
Because there are certain fixed costs involved with maintaining your account,
a Fund may require you to redeem all of your shares if your account balance
falls below $2,500. After your account balance falls below the minimum
balance, you will receive a notification from the Fund indicating its intent
to close your account along with instructions on how to increase the value of
your account to the minimum amount within 60 days. If your account balance is
still below $2,500 after 60 days, the Fund may close your account and send you
the proceeds. This minimum balance requirement does not apply to IRAs and
other tax-sheltered investment accounts. The right of redemption by a Fund
will not apply if the value of your account balance falls below $2,500 because
of market performance. Each Fund reserves the right to close an account if the
shareholder is deemed to engage in activities which are illegal or otherwise
believed to be detrimental to the Fund.
Prospectus 25
<PAGE>
HOW TO EXCHANGE SHARES
You may exchange all or a portion of your investment from one Berkshire Fund
to another. Any new account established through an exchange will have the same
privileges as your original account and will also be subject to the minimum
investment requirements described on Page 16 of this Prospectus. Aside from
this requirement, there is a $500 minimum for exchanging shares under the
program. There is also a $5 fee for each exchange. Exchanges will be executed
on the basis of the relative NAV of the shares exchanged. An exchange is
considered to be a sale of shares for federal income tax purposes on which you
may realize a taxable gain or loss.
SHAREHOLDER COMMUNICATIONS
ACCOUNT STATEMENTS. Every quarter, shareholders of each Fund will
automatically receive regular account statements. You will also be sent a
yearly statement detailing the tax characteristics of any dividends and
distributions you have received.
CONFIRMATIONS. Confirmation statements will be sent after each transaction
that affects your account balance or account registration.
REGULATORY MAILINGS. Financial reports will be sent at least semiannually.
Annual reports will include audited financial statements. To reduce expenses,
one copy of each report will be mailed to each taxpayer identification number
even though the investor may have more than one account in the Funds.
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to pay distributions on an annual basis and expects that
distributions will consist primarily of capital gains. You may elect to
reinvest income dividends and capital gain distributions in the form of
additional shares of the Fund or receive
[Side panel: What is a distribution? As a shareholder, you are entitled to
your share of the Fund's income from interest and dividends, and gains from
the sale of investments. You receive such earnings as either an income
dividend or a capital gains distribution. Income dividends come from both the
dividends that the Fund earns from its holdings and interest it receives from
its money market and bond investments. Capital gains are realized when the
Fund sells securities for higher prices than it paid for them. The capital
gains are either short-term or long-term depending on whether the Fund held
the securities for less than or more than one year.]
[Side panel: When a fund makes a distribution to its shareholders, the share
price of the Fund drops by the amount of the distribution, net of any market
fluctuations.]
Prospectus 26
<PAGE>
these distributions in cash. Dividends and distributions from each Fund are
automatically reinvested in the Fund, unless you elect to have dividends paid
in cash. Reinvested dividends and distributions receive the same tax treatment
as those paid in cash. If you are interested in changing your election, you
may send written notification to the Transfer Agent or call 1-877-526-0707.
TAXES
Fund dividends and distributions are taxable to most investors (unless your
investment is in an IRA or other tax-advantaged account). Dividends paid by a
Fund out of net ordinary income and distributions of net short-term capital
gains are generally taxable to the shareholders as ordinary income.
Distributions by a Fund of net long-term capital gains to shareholders are
generally taxable to the shareholders at the applicable long-term capital
gains rate, regardless of how long the shareholder has held shares of the
Fund.
Shareholders that sell, exchange or redeem shares generally will have a
capital gain or loss from the sale, redemption or exchange. The amount of the
gain or loss and the rate of tax will depend mainly upon the amount paid for
the shares, the amount received from the sale, exchange, or redemption, and
how long the shares were held.
The Funds' distributions may be subject to federal income tax whether received
in cash or reinvested in additional shares. In addition to federal taxes, you
may be subject to state and local taxes on distributions.
Additional tax information may be found in the Statement of Additional
Information ("SAI"). Because everyone's tax situation is unique, always
consult your tax professional about federal, state, and local tax consequences
of an investment in either Fund.
[Side panel: "Buying a Dividend" If you purchase shares of a Fund just
before it makes a distribution, you will pay the full price for the shares and
then receive a portion back in the form of a taxable distribution. This is
referred to as "buying a dividend." In order to avoid paying unnecessary taxes
as a result of a distribution, check the Fund's distribution schedule before
you invest.]
Prospectus 27
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Focus
Fund's financial performance since inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate you would have earned (or lost) on an investment in the
Focus Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McCurdy & Associates CPA's, Inc., the Trust's
independent accountants, whose report, along with the Fund's financial
statements, are included in the SAI, which is available upon request.
Financial highlights for the Technology Fund are not presented because the
Fund did not commence operations until December 29, 1999.
Berkshire Focus Fund (for the period ended December 31, 1999)
<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) (0.10)
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 155.50% 136.00% 13.00%
</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.
Prospectus 28
<PAGE>
THE BERKSHIRE FUNDS
BERKSHIRE FOCUS FUND
BERKSHIRE TECHNOLOGY FUND
- -----------------------------
BOARD OF TRUSTEES
Malcolm R. Fobes III, Chairman
Ronald G. Seger
Leland F. Smith
Andrew W. Broer
INVESTMENT ADVISER AND ADMINISTRATOR
Berkshire Capital Holdings, Inc.
LEGAL COUNSEL
Brown, Cummins & Brown Co., L.P.A.
INDEPENDENT AUDITOR
McCurdy & Associates CPA's Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
CUSTODIAN
Firstar Bank, N.A.
Prospectus 29
<PAGE>
[Back cover page]
BERKSHIRE FOCUS FUND
BERKSHIRE TECHNOLOGY FUND
- -----------------------------
WHERE TO GO FOR INFORMATION
- ---------------------------
For shareholder inquiries, please call toll-free in the U.S. at
1-877-526-0707. You will find more information about the Berkshire Focus Fund
and the Berkshire Technology Fund in the following documents:
ANNUAL AND SEMIANNUAL REPORTS
- -----------------------------
Our annual and semiannual reports list the holdings of each Fund, describe
Fund performance, include financial statements for the Fund, and discuss the
market conditions and strategies that significantly affected the Fund's
performance
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------
The Statement of Additional Information contains additional and more detailed
information about each Fund, and is considered to be a part of this
Prospectus.
THERE ARE THREE WAYS TO GET A COPY OF THESE DOCUMENTS
- -----------------------------------------------------
1. Call or write for one, and a copy will be sent without charge.
The Berkshire Funds
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
1-877-526-0707
www.berkshirefunds.com
2. Call or write the Public Reference Section of the Securities and Exchange
Commission ("SEC") and ask them to mail you a copy. The SEC charges a fee
for this service. You can also review and copy information about the Funds
in person at the SEC Public Reference Room in Washington D.C.
Public Reference Section of the SEC
Washington D.C. 20549-0102
1-202-942-8090
Copies of these documents may also be obtained, after paying a
duplication fee, by electronic request at the following e-mail address:
[email protected]
3. Go to the SEC's website (www.sec.gov) and download a text-only version.
THE BERKSHIRE FUNDS SEC file number 811-08043
- --------------------------------------------------
Prospectus 30
<PAGE>
PART B
THE BERKSHIRE FUNDS
Berkshire Focus Fund
Berkshire Technology Fund
475 Milan Drive, Suite #103
San Jose, California 95134-2453
(877) 526-0707
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
This Statement of Additional Information ("SAI") is not a Prospectus. It
should be read in conjunction with the Prospectus for the Berkshire Focus Fund
and the Berkshire Technology Fund dated May 1, 2000 (the "Prospectus"). A copy
of the Prospectus can be obtained by writing to the Berkshire Funds at
P.O. Box 701, Milwaukee, WI 53201-0701, or by calling the Berkshire Funds
toll-free at 1-877-526-0707.
The Funds' Annual Report to Shareholders, as filed with the Securities and
Exchange Commission on March 14, 2000, has been incorporated by reference into
this SAI. The annual report is available, without charge and upon request
by writing or calling the Funds at the address or phone number referenced
above.
TABLE OF CONTENTS
THE FUNDS....................................................................1
CAPITAL STRUCTURE............................................................1
CONCENTRATION AND NON-DIVERSIFICATION POLICY.................................1
TAX STATUS...................................................................2
INVESTMENT RESTRICTIONS......................................................2
OTHER INVESTMENTS............................................................5
INVESTMENT ADVISER...........................................................9
ADVISORY AND ADMINISTRATION AGREEMENTS.......................................9
MANAGEMENT OF THE FUNDS.....................................................10
REMUNERATION OF OFFICERS AND TRUSTEES.......................................11
PRINCIPAL SECURITY HOLDERS..................................................11
REDEMPTION OF SHARES........................................................12
PURCHASES AND SALES THROUGH BROKER DEALERS..................................12
PERFORMANCE INFORMATION.....................................................12
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................14
CUSTODIAN...................................................................15
TRANSFER AGENT AND MANAGEMENT-RELATED SERVICES..............................15
DISTRIBUTOR.................................................................16
AUDITORS....................................................................16
FINANCIAL STATEMENTS........................................................16
- i -
<PAGE>
THE FUNDS
The Berkshire Focus Fund (until February 9, 1999, known as Berkshire Capital
Growth & Value Fund) and the Berkshire Technology Fund (the "Funds"), are
open-end, non-diversified series of The Berkshire Funds (until February 9,
1999, known as the Berkshire Capital Investment Trust) (the "Trust"). The
Trust was organized on November 25, 1996 as a Delaware business trust and is
authorized to issue an indefinite number of shares of beneficial interest. The
Berkshire Focus Fund was organized on November 25, 1996 and the Berkshire
Technology Fund was organized on November 5, 1999. The Board of Trustees of
the Trust is responsible for managing the business affairs of the Funds.
CAPITAL STRUCTURE
At present the Funds are the only series authorized by the Trust. The Board of
Trustees may authorize the creation of additional series without shareholder
approval.
All shares, when issued, will be fully paid and non-assessable and will be
redeemable and freely transferable. All shares have equal voting rights and
can be issued as full or fractional shares. A fractional share has pro rata
the same kind of rights and privileges as a full share. The shares possess no
preemptive or conversion rights.
Each shareholder has one vote for each share held irrespective of the relative
net asset value of the shares. Each share has equal dividend, distribution and
liquidation rights. The voting rights of the shareholders are non-cumulative,
so that holders of more than 50% of the shares can elect all trustees being
elected. On some issues, such as election of trustees, all shares of the Funds
vote together as one series. On issues affecting only a particular Fund, the
shares of the affected Fund will vote as a separate series. An example of such
an issue would be a fundamental investment restriction pertaining to only one
Fund.
CONCENTRATION AND NON-DIVERSIFICATION POLICY
CONCENTRATION: Each Fund will concentrate its investments in the equity
securities of companies in the technology industry. Concentration requires a
Fund to invest 25% or more of the value of its total assets in securities of
issuers in a particular industry. Companies in the technology industry shall
include businesses which are principally engaged in the development,
production, or distribution of products or services related to the following
business segments: office and business equipment; computer hardware and
software; peripherals; mass storage devices; semiconductors; data networking
and telecommunications equipment; and Internet-related products and services.
In some future period or periods, due to adverse economic conditions in the
technology industry, a Fund may temporarily have less than 25% of the value of
its assets invested in that industry. At such times the Adviser may adopt a
temporary defensive posture and recommend a Fund invest in money market
instruments or U.S. Government obligations. As a result of such concentration
in the technology industry, each Fund's shares may fluctuate more widely than
the value of shares of a portfolio which invests in a broader range of
industries.
NON-DIVERSIFICATION: Each Fund is classified as being non-diversified which
means that it has the ability to take larger positions in a smaller number of
securities than a diversified fund. Each Fund, therefore, may be more
susceptible to risk of loss than a more widely diversified fund as a result of
a single economic, political, or regulatory occurrence. The policy of each
Fund is one of selective investments rather than broad diversification. Each
Fund seeks only enough diversification for adequate representation among what
it considers to be the best performing securities and to maintain its federal
non-taxable status under Subchapter M of the Internal Revenue Code.
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TAX STATUS
Under the provisions of Subchapter M of the Internal Revenue Code of 1986 as
amended, each Fund intends to pay out substantially all of its investment
income and realized capital gains. As a result, the Funds intend to be
relieved of federal income tax on the amounts distributed to shareholders.
Distributions of any net long-term capital gains realized by each Fund will be
taxable to the shareholder as long-term capital gains regardless of the length
of time Fund shares have been held by the investor. All income realized by
each Fund, including short-term capital gains, will be taxable to the
shareholder as ordinary income. Dividends from net income of a Fund will be
made annually or more frequently at the discretion of the Board of Trustees
and will automatically be reinvested in additional Fund shares at net asset
value, unless the shareholder has elected to receive payment in the form of
cash. Dividends received shortly after purchase of shares by an investor will
have the effect of reducing the per share net asset value of the shares by the
amount of such dividends or distributions and, although in effect a return of
capital, are subject to federal income taxes.
Each Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains, distributions and redemptions)
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement you must certify on the Account
Applications supplied by the Fund, that your Social Security or Taxpayer
Identification Number is correct and that you are not currently subject to
back-up withholding or otherwise certify that you are exempt from back-up
withholding.
INVESTMENT RESTRICTIONS
Berkshire Focus Fund
The Berkshire Focus Fund has adopted the following fundamental investment
restrictions. These restrictions cannot be changed without approval by the
holders of a majority of the outstanding voting securities of the Fund. As
defined in the Investment Company Act of 1940 (the "Act"), the "vote of a
majority of the outstanding voting securities" means the lesser of the vote of
(i) 67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy or (ii) more than 50% of
the outstanding shares of the Fund.
The Fund may not:
(a) Act as underwriter for securities of other issuers except insofar as the
Fund may be deemed an underwriter in selling its own portfolio securities.
(b) Borrow money or purchase securities on margin except for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests that might otherwise require the untimely disposition of securities,
in an aggregate amount not exceeding 25% of the value of the Fund's total
assets at the time any borrowing is made. While the Fund's borrowings are in
excess of 5% of its total assets, the Fund will not purchase any additional
portfolio securities.
(c) Sell securities short.
(d) Invest in securities of other investment companies except as part of a
merger, consolidation, or purchase of assets approved by the Fund's
shareholders or by purchases with no more than 10% of the Fund's assets in the
open market involving only customary broker's commissions.
(e) Make investments in commodities, commodity contracts or real estate
although the Fund may purchase and sell securities of companies which deal in
real estate or interests therein.
(f) Make loans. The purchase of a portion of a readily marketable issue of
publicly distributed bonds, debentures or other debt securities will not be
considered the making of a loan.
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(g) Acquire more than 10% of the securities of any class of another issuer,
treating all preferred securities of an issuer as a single class and all debt
securities as a single class, or acquire more than 10% of the voting
securities of another issuer.
(h) Invest in companies for the purpose of acquiring control.
(i) Purchase or retain securities of any issuer if those officers, directors
or trustees of the Fund or its Investment Adviser individually owns more than
1/2 of 1% of any class of security or collectively own more than 5% of such
class of securities of such issuer.
(j) Pledge, mortgage or hypothecate any of its assets.
(k) Invest in securities which may be subject to registration under the
Securities Act of 1933 prior to sale to the public or which are not at the
time of purchase readily saleable.
(l) Invest more than 10% of the total Fund assets, taken at market value at
the time of purchase, in securities of companies with less than three years'
continuous operation, including the operations of any predecessor.
(m) Issue senior securities.
(n) Acquire any securities of companies within one industry if, as a result of
such acquisition, more than 25% of the value of the Fund's total assets would
be invested in securities of companies within such industry; provided,
however, that there shall be no limitation on the purchase of securities of
companies in the electronic technology industry.
With respect to fundamental restriction (n) above, companies in the electronic
technology industry shall be defined as businesses which are principally
engaged in the development, production, or distribution of products or
services related to the following business segments: Computers, Computer
Peripherals, Semiconductors, Software, Telecommunications and Mass Storage
Devices.
Berkshire Technology Fund
The Berkshire Technology Fund has adopted the following fundamental investment
restrictions. These restrictions cannot be changed without approval by the
holders of a majority of the outstanding voting securities of the Fund. As
defined in the Investment Company Act of 1940 (the "Act"), the "vote of a
majority of the outstanding voting securities" means the lesser of the vote of
(i) 67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy or (ii) more than 50% of
the outstanding shares of the Fund.
Other investment practices which may be changed by the Board of Trustees
without the approval of shareholders to the extent permitted by applicable
law, regulation or regulatory policy are considered non-fundamental
("Non-Fundamental").
1. Borrowing Money. The Fund will not borrow money, except (a) from a bank,
provided that immediately after such borrowing there is an asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering
into reverse repurchase transactions, provided that the Fund has an asset
coverage of 300% for all borrowings and repurchase commitments of the Fund
pursuant to reverse repurchase transactions.
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2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder or interpretations of the Securities and Exchange
Commission or its staff.
3. Underwriting. The Fund will not act as underwriter of securities issued by
other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing
in companies engaged in the real estate business or that have a significant
portion of their assets in real estate (including real estate investment
trusts).
5. Commodities. The Fund will not purchase or sell commodities unless acquired
as a result of ownership of securities or other investments. This limitation
does not preclude the Fund from purchasing or selling options or futures
contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by loaning
portfolio securities, (b) by engaging in repurchase agreements, or (c) by
purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total assets in
a particular industry other than the technology industry. This limitation is
not applicable to investments in obligations issued or guaranteed by the U.S.
government, its agencies and instrumentalities or repurchase agreements with
respect thereto.
With respect to the percentages adopted by the Trust as maximum limitations on
the Berkshire Technology Fund's investment policies and limitations, an excess
above the fixed percentage will not be a violation of the policy or limitation
unless the excess results immediately and directly from the acquisition of any
security or the action taken. This paragraph does not apply to the borrowing
policy set forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment company,
whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the
Berkshire Technology Fund, provided that if such merger, consolidation or
acquisition results in an investment in the securities of any issuer
prohibited by said paragraphs, the Fund shall, within ninety days after the
consummation of such merger, consolidation or acquisition, dispose of all of
the securities of such issuer so acquired or such portion thereof as shall
bring the total investment therein within the limitations imposed by said
paragraphs above as of the date of consummation.
Non-Fundamental. The following limitations have been adopted by the Trust with
respect to the Berkshire Technology Fund and are Non-Fundamental (see
"Fundamental" above).
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a. Pledging. The Fund will not mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any assets of the Fund except as may
be necessary in connection with borrowings described above. Margin deposits,
security interests, liens and collateral arrangements with respect to
transactions involving options, futures contracts, short sales and other
permitted investments and techniques are not deemed to be a mortgage, pledge
or hypothecation of assets for purposes of this limitation.
b. Borrowing. The Fund will generally borrow only for liquidity purposes. The
Fund will not purchase any security while borrowings (including reverse
repurchase agreements) representing more than 5% of its total assets are
outstanding. The Fund will not invest more then 5% of its net assets in
reverse repurchase agreements.
c. Margin Purchases. The Fund will not purchase securities or evidences of
interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
d. Illiquid Investments. The Fund may invest up to 15% of its net assets in
securities for which there are legal or contractual restrictions on resale and
other illiquid securities.
OTHER INVESTMENTS:
In connection with its investment objective and policies each Fund (except
as otherwise indicated) may invest in the following types of securities which
can involve certain risks:
U.S. GOVERNMENT OBLIGATIONS: Each Fund may purchase obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. Such
securities will typically include, without limitation, U.S. Treasury
securities such as Treasury Bills, Treasury Notes or Treasury Bonds that
differ in their interest rates, maturities and times of issuance. U.S.
government obligations may be backed by the credit of the government as a
whole or only by the issuing agency. U.S. Treasury bonds, notes, and bills and
some agency securities, such as those issued by the Federal Housing
Administration and the Government National Mortgage Association (GNMA), are
backed by the full faith and credit of the U.S. government as to payment of
principal and interest and are the highest quality government securities.
Other securities issued by U.S. government agencies or instrumentalities, such
as securities issued by the Federal Home Loan Banks and the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the agency that
issued them, and not by the U.S. government. Securities issued by the Federal
Farm Credit System, the Federal Land Banks, and the Federal National Mortgage
Association (FNMA) are supported by the agency's right to borrow money from
the U.S. Treasury under certain circumstances, but are not backed by the full
faith and credit of the U.S. government.
WARRANTS: Each Fund may purchase warrants, valued at the lower of cost or
market, but only to the extent that such purchase does not exceed 5% of the
Fund's net assets at the time of purchase. Included within that amount, but
not to exceed 2% of the Fund's net assets, may be warrants which are not
listed on the New York or American Stock Exchanges.
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FOREIGN INVESTMENTS. Subject to the limitations described in the prospectus,
each Fund may invest in foreign securities. Foreign investments can involve
significant risks in addition to the risks inherent in U.S. investments. The
value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable
to those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, generally are higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may invoke increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It also may be difficult to enforce legal
rights in foreign countries.
Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into
U.S. dollars, or other government intervention. There may be a greater
possibility of default by foreign governments or foreign government-sponsored
enterprises. Investments in foreign countries also involve a risk of local
political, economic or social instability, military action or unrest, or
adverse diplomatic developments. There is no assurance that the Adviser will
be able to anticipate or counter these potential events and their impacts on
a Fund's share price.
American Depository Receipts and European Depository Receipts ("ADRs" and
"EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
market and currencies.
OPTION TRANSACTIONS. Each Fund may engage in option transactions involving
individual securities and market indexes. An option involves either (a) the
right or the obligation to buy or sell a specific instrument at a specific
price until the expiration date of the option, or (b) the right to receive
payments or the obligation to make payments representing the difference
between the closing price of a market index and the exercise price of the
option expressed in dollars times a specified multiple until the expiration
date of the option. Options are sold (written) on securities and market
indexes. The purchaser of an option on a security pays the seller (the writer)
a premium for the right granted but is not obligated to buy or sell the
underlying security. The purchaser of an option on a market index pays the
seller a premium for the right granted, and in return the seller of such an
option is obligated to make the payment. A writer of an option may terminate
the obligation prior to expiration of the option by making an offsetting
purchase of an identical option. Options are traded on organized exchanges and
in the over-the-counter market. Call options on securities which a Fund
sells (writes) will be covered or secured, which means that it will own the
underlying security in the case of a call option; will segregate with the
Custodian high quality liquid debt obligations equal to the option exercise
price in the case of a put option; or for an option on a stock index, will
hold a portfolio of securities substantially replicating the movement of the
index (or, to the extent it does not hold such a portfolio, will maintain a
segregated account with the Custodian of high quality liquid debt obligations
equal to the market value of the option, marked to market daily). When a
Fund writes options, it may be required to maintain a margin account, to
pledge the underlying securities or U.S. government obligations or to deposit
assets in escrow with the Custodian.
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The purchase and writing of options involves certain risks. The purchase of
options limits a Fund's potential loss to the amount of the premium paid and
can afford the Fund the opportunity to profit from favorable movements in the
price of an underlying security to a greater extent than if transactions were
effected in the security directly. However, the purchase of an option could
result in the Fund losing a greater percentage of its investment than if the
transaction were effected directly. When a Fund writes a covered call
option, it will receive a premium, but it will give up the opportunity to
profit from a price increase in the underlying security above the exercise
price as long as its obligation as a writer continues, and it will retain the
risk of loss should the price of the security decline.
When a Fund writes a put option, it will assume the risk that the price of
the underlying security or instrument will fall below the exercise price, in
which case the Fund may be required to purchase the security or instrument at
a higher price than the market price of the security or instrument. In
addition, there can be no assurance that a Fund can effect a closing
transaction on a particular option it has written. Further, the total premium
paid for any option may be lost if the Fund does not exercise the option or,
in the case of over-the-counter options, the writer does not perform its
obligations.
FIXED INCOME SECURITIES: Fixed income securities include corporate debt
securities, U.S. government securities, mortgage-backed securities, zero
coupon bonds, asset-backed and receivable-backed securities and participation
interests in such securities. Preferred stock and certain common stock
equivalents may also be considered to be fixed income securities. Fixed income
securities are generally considered to be interest rate sensitive, which means
that their value will generally decrease when interest rates rise and increase
when interest rates fall. Securities with shorter maturities, while offering
lower yields, generally provide greater price stability than longer term
securities and are less affected by changes in interest rates.
REPURCHASE AGREEMENTS: A repurchase agreement is a short term investment in
which the purchaser acquires ownership of a U.S. Government security (which
may be of any maturity) and the seller agrees to repurchase the obligation at
a future time at a set price, thereby determining the yield during the
purchaser's holding period (usually not more than seven days from the date of
purchase). Any repurchase transaction in which a Fund engages will require
full collateralization of the seller's obligation during the entire term of
the repurchase agreement. In the event of a bankruptcy or other default of the
seller, a Fund could experience both delays in liquidating the underlying
security and losses in value. However, the Funds intend to enter into
repurchase agreements only with the Trust's custodian, other banks with assets
of $1 billion or more and registered securities dealers determined by the
Adviser to be creditworthy. The Adviser monitors the creditworthiness of the
banks and securities dealers with which a Fund engages in repurchase
transactions, and a Fund will not invest more than 15% of its net assets in
illiquid securities, including repurchase agreements maturing in more than
seven days.
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WHEN ISSUED SECURITIES AND FORWARD COMMITMENTS: Each Fund may buy and sell
securities on a when-issued or delayed delivery basis, with payment and
delivery taking place at a future date. The price and interest rate that will
be received on the securities are each fixed at the time the buyer enters into
the commitment. Each Fund may enter into such forward commitments if it holds,
and maintains until the settlement date in a separate account at the Fund's
Custodian, cash or U.S. government securities in an amount sufficient to meet
the purchase price. Each Fund will not invest more than 25% of its total
assets in forward commitments. Forward commitments involve a risk of loss if
the value of the security to be purchased declines prior to the settlement
date. Any change in value could increase fluctuations in the Fund's share
price and yield. Although each Fund will generally enter into forward
commitments with the intention of acquiring securities for its portfolio, a
Fund may dispose of a commitment prior to the settlement if the Adviser deems
it appropriate to do so.
SHORT SALES (Berkshire Technology Fund only) The Berkshire Technology Fund may
seek to hedge investments through short sales. The Fund may make short sales,
which are transactions in which the Fund sells a security it does not own, in
anticipation of a decline in the market value of that security. Securities
which the Fund may sell short would be those whose values are linked to
various indexes. Examples of these linked securities are Standard & Poor's
Depository Receipts, Diamonds Trust, NASDAQ 100 Trust and Merrill Lynch HOLDRs
Trust. To complete a short sale, the Fund must borrow the security to make
delivery to the buyer. The Fund then is obligated to replace the security
borrowed by purchasing it at the market price at or prior to the time of
replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund. Until the security is replaced, the
Fund is required to repay the lender any dividends or interest that accrue
during the period of the loan. To borrow the security, the Fund also may be
required to pay a premium, which would increase the cost of the security sold.
The net proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is
closed out. The Fund also will incur transaction costs in effecting short
sales.
The Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which
the Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased, and the amount of any loss increased by the amount of the premium,
dividends, interest, or expenses the Fund may be required to pay in connection
with a short sale.
In connection with its short sales, the Fund will be required to maintain a
segregated account with its Custodian of cash or liquid assets equal to the
market value of the securities sold less any collateral deposited with its
broker (not including the proceeds from the short sale). The Fund will limit
its short sales so that no more than 10% of its net assets (less all its
liabilities other than obligations under the short sales) will be deposited as
collateral and allocated to the segregated account. However, the segregated
account and deposits will not necessarily limit the Fund's potential loss on a
short sale, which is unlimited.
In addition, the Fund may make short sales "against the box," i.e., when a
security identical to one owned by the Fund is borrowed and sold short. The
Fund may make a short sale when the Fund's investment adviser believes the
price of the stock may decline and, for tax or other reasons, the Fund's
investment adviser does not want to sell the stock currently. If the Fund
enters into a short sale against the box, it is required to segregate
securities equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and is required
to hold such securities while the short sale is outstanding. The Fund will
incur transaction costs in connection with opening, maintaining and closing
short sales against the box.
The Fund's policy with respect to short sales is non-fundamental, and may be
changed by the Board of Trustees without the vote of the Fund's shareholders.
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INVESTMENT ADVISER
The Funds retain Berkshire Capital Holdings, Inc., 475 Milan Drive, Suite
#103, San Jose, California 95134-2453, as their investment adviser (the
"Adviser"). The Adviser is a California corporation founded in February 1993.
The company is registered as an investment adviser with the Securities and
Exchange Commission under the Investment Advisers Act of 1940. The corporation
is controlled and wholly-owned by Malcolm R. Fobes III and Ronald G. Seger.
Malcolm R. Fobes III has had the direct responsibility for the overall
strategic management of each Fund's portfolio and its administration since
each Fund's inception. Mr. Fobes founded Berkshire Capital Holdings, Inc. in
1993, has served as Chairman of the Board and Chief Executive Officer since
the company's inception, and has been responsible for the direction of the
company's investments in both private and publicly-held concerns. Mr. Fobes
has a B.S. degree in Finance and a minor in Economics from San Jose State
University in California. In addition to founding the company in 1993, Mr.
Fobes was also simultaneously retained by Adobe Systems, Inc., a
high-technology software development firm, as a technical support engineer
from May 1991 to November 1994. Mr. Fobes has served exclusively in the
capacity of Chairman and Chief Executive Officer of the Adviser from November
1994 to present. Ronald G. Seger has served as Secretary and member of the
Board of Directors of the Adviser since September 1996. Both Mr. Fobes and Mr.
Seger also serve as Trustees of the Funds.
The Trust and the Adviser have each adopted a Code of Ethics under Rule 17j-1
of the Investment Company Act of 1940. The Codes restrict the personal
investing activities of all employees of the Adviser. The Code requires that
prior to making any purchases or sale of securities the employees of the
Adviser shall verify that there are no outstanding orders for the relevant
security, verify that no client has transacted in the relevant security within
at least seven (7) calendar days and verify with the portfolio manager of the
Adviser that the relevant security is not under consideration as a purchase or
sale candidate. In addition, investment personnel shall not purchase new
issues of equity securities until at least five (5) business days after the
initial public offering at the then prevailing market price. The restrictions
and prohibitions apply to most securities transactions by employees of the
Adviser, with limited exceptions for some securities (such as U.S. Government
securities and mutual funds).
ADVISORY AND ADMINISTRATION AGREEMENTS
The Trust has a separate, but substantially identical, investment advisory
contract (each of which is referred to as an "Advisory Agreement") and a
separate, but substantially identical, administration contract (each of which
is referred to as an "Administration Agreement") with Berkshire Capital
Holdings, Inc. for each Fund.
Under each Advisory Agreement, Berkshire Capital Holdings, Inc. will determine
what securities will be purchased, retained or sold by the applicable Fund on
the basis of a continuous review of its portfolio. Mr. Fobes, will have the
direct responsibility of managing the composition of the Fund's portfolio in
accordance with the Fund's investment objective. Pursuant to its contract with
the Fund, the Adviser must, among other requirements, (i) render research,
statistical and advisory services to the Fund, (ii) make specific
recommendations based on the Fund's investment requirements, and (iii) pay
salaries of the Fund's employees who may be officers, directors or employees
of the Adviser. The Adviser has paid the initial organizational costs of each
Fund.
The Adviser is paid a fee of 1.5% per year on the net assets of each Fund. All
fees are computed on the average daily closing net asset value of the Fund and
are payable monthly. The Adviser may at its discretion, forego sufficient fees
which would have the effect of lowering each Fund's expense ratio and
increasing the yield to shareholders. For the period July 1, 1997
(commencement of operations) to December 31, 1997, and the fiscal year ended
December 31, 1998, the Adviser voluntarily waived all of its fees for the
Berkshire Focus Fund. For the fiscal year ended December 31, 1999 the Adviser
received $144,283 from the Fund for investment advisory fees. The Adviser does
not intend to waive its fees in 2000. Each Advisory Contract is terminable on
60 days' written notice, without penalty, by a vote of a majority of
applicable Fund's outstanding shares or by vote of a majority of the Board of
Trustees, or by the Adviser on 60 days' written notice, and automatically
terminates in the event of its assignment.
Under each Administration Agreement, Berkshire Capital Holdings, Inc.
("Berkshire Capital") renders all administrative and supervisory services to
the applicable Fund. Berkshire Capital oversees the maintenance of all books
and records with respect to the Fund's securities transactions and the Fund's
book of accounts in accordance with all applicable federal and state laws and
regulations. Berkshire Capital also arranges for the preservation of journals,
ledgers, corporate documents, brokerage account records and other records
which are required pursuant to Rule 31a-1 promulgated under the 1940 Act.
Berkshire Capital is also responsible for the equipment, staff, office space
and facilities necessary to perform its obligations. Berkshire Capital has
delegated some of its administrative and other responsibilities to Firstar
Mutual Fund Services, LLC ("FMFS") and is responsible for paying all fees and
expenses of FMFS.
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Under each Administration Agreement, Berkshire Capital assumes and pays all
ordinary expenses of the applicable Fund not assumed by the Fund. The Fund
pays all brokerage fees and commissions, taxes, borrowing costs (such as (a)
interest and (b) dividend expenses on securities sold short) and extraordinary
or non-recurring expenses. Each Fund may also pay expenses which it is
authorized to pay pursuant to Rule 12b-1 under the Act (none are authorized
at present).
Pursuant to each Administration Agreement, Berkshire Capital receives a fee
which is paid monthly at an annual rate of 0.50% of the applicable 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. For the period July 1, 1997 (commencement
of operations) to December 31, 1997 and for the fiscal year ended December 31,
1998, Berkshire Capital voluntarily waived all fees due for its services as
Administrator to the Berkshire Focus Fund. For the fiscal year ended December
31, 1999 the Adviser received $48,087 from the Fund for administrative fees.
The Adviser may act as an investment adviser and administrator to other
persons, firms, or corporations (including investment companies), and may have
numerous advisory clients besides the Funds.
MANAGEMENT OF THE FUNDS
The business of each Fund is managed under the direction of its Board of
Trustees in accordance with Section 3.2 of the Declaration of Trust of The
Berkshire Funds, which Declaration of Trust has been filed with the Securities
and Exchange Commission and is available upon request. Pursuant to Section 2.6
of the Declaration of Trust, the trustees shall elect officers including a
president, secretary and treasurer. The Board of Trustees retains the power to
conduct, operate and carry on the business of each Fund and has the power to
incur and pay any expenses which, in the opinion of the Board of Trustees, are
necessary or incidental to carry out any of the Funds' purposes. The trustees,
officers, employees and agents of the Trust, when acting in such capacities,
shall not be subject to any personal liability except for his or her own bad
faith, willful misfeasance, gross negligence or reckless disregard of his or
her duties. The trustees and officers, together with their addresses, age,
principal occupations during the past five years are as follows:
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<PAGE>
Principal Occupation
Name and Address Position Past 5 Years
===================== ========= =================================
*Malcolm R. Fobes III Trustee and Berkshire Capital Holdings, Inc.;
475 Milan Drive President, Chairman & CEO
Suite #103 Treasurer and
San Jose, CA 95134 Chief Financial
Year of Birth: 1964 Officer
*Ronald G. Seger Trustee and Ronald G. Seger, O.D.;
1150 W. El Camino Real Secretary Optometrist
Mountain View, CA 94040
Year of Birth: 1950
Leland F. Smith Trustee **Corporate Asset Strategies, Inc.;
P.O. Box 3539 Chairman & CEO
Sunriver, OR 97707 Elesco, Ltd.;
Year of Birth: 1939 Chairman & CEO
Andrew W. Broer Trustee Cisco Systems, Inc.;
325 East Tasman Drive Data Center Manager
San Jose, CA 95134 Taligent, Inc.;
Year of Birth: 1965 Software Integration Engineer
*Trustees who are considered "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of 1940 by virtue of their
affiliation with the Investment Adviser.
**Corporate Asset Strategies, Inc. provides consulting services in the field
of corporate real estate management.
REMUNERATION OF OFFICERS AND TRUSTEES
Trustee fees are paid by Berkshire Capital Holdings, Inc. pursuant to its
Administration Agreement with the Trust. Fees may be paid to the Trustees
in the future. The compensation paid to the Trustees for the year ended
December 31, 1999 is set forth in the following table:
===============================================
Total Compensation from
Trust (the Trust is not
Name in a Fund Complex)
===============================================
Malcolm R. Fobes III 0
Ronald G. Seger 0
Leland F. Smith 0
Andrew W. Broer 0
PRINCIPAL SECURITY HOLDERS
As of April 12, 2000 the following persons owned of record 5% or more of
the shares of the Funds:
BERKSHIRE FOCUS FUND:
NAME % OWNERSHIP
National Financial Services Corp. 26.27%
For Benefit of Customers ("FBOC")
One World Financial Center
200 Liberty Street, 5th Floor
New York, New York 10281-1003
Charles Schwab & Co., Inc. 25.92%
FBOC
101 Montgomery Street
San Francisco, California 94104-4122
National Investors Services Corp. 13.19%
FBOC
55 Water Street, 32nd Floor
New York, New York 10041-3299
Donaldson, Lufkin & Jenrette Securities 5.28%
FBOC
P.O. Box 2052
Attn: 14th Floor
Jersey City, New Jersey 07303-2052
BERKSHIRE TECHNOLOGY FUND:
NAME % OWNERSHIP
National Financial Services Corp. 16.23%
FBOC
One World Financial Center
200 Liberty Street, 5th Floor
New York, New York 10281-1003
Charles Schwab & Co., Inc. 15.75%
FBOC
101 Montgomery Street
San Francisco, California 94104-4122
National Investors Services Corp. 13.62%
FBOC
55 Water Street, 32nd Floor
New York, New York 10041-3299
Donaldson, Lufkin & Jenrette Securities 9.91%
FBOC
P.O. Box 2052
Attn: 14th Floor
Jersey City, New Jersey 07303-2052
As of April 12, 2000, the Trustees and officers of the Trust owned of
record or beneficially less than 1% of each Fund's outstanding shares.
- 11 -
<PAGE>
REDEMPTION OF SHARES
Each Fund has made an election under Rule 18f-1 whereby the Fund may pay for
shares redeemed in part through a distribution of portfolio securities.
Pursuant to Rule 18f-1, the Fund must pay in cash all requests for redemption
by any shareholder of record, limited in amount with respect to each
shareholder during any ninety-day period to the lesser of $250,000 or 1% of
the net value of the Fund at the beginning of such period. Any such
distributions will be taxable to the shareholder.
Each Fund may redeem its shares if the Board of Trustees determines that
failure to do so may have materially adverse consequences to fund
shareholders, such as in a situation where fund expenses on a per share basis
are deemed to be excessive.
PURCHASES AND SALES THROUGH BROKER DEALERS
The Funds may be purchased through broker dealers and other intermediaries.
Each Fund has authorized one or more brokers to receive on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to receive purchase and redemption orders on each Fund's
behalf. The Fund will be deemed to have received a purchase or redemption
order when an authorized broker or, if applicable, a broker's authorized
designee, received the order. Customer orders will be priced at the Fund's net
asset value next computed after they are received by an authorized broker or
the broker's authorized designee.
PERFORMANCE INFORMATION
Each Fund's total returns are based on the overall dollar or percentage change
in value of a hypothetical investment in the Fund, assuming all dividends and
distributions are reinvested. Average annual total return reflects the
hypothetical annually compounded return that would have produced the same
cumulative total return if the Fund's performance had been constant over the
entire period presented. Because average annual total returns tend to smooth
out variations in a Fund's returns, investors should recognize that they are
not the same as actual year-by-year returns. Average annual return is based on
historical earnings and is not intended to indicate future performance.
For the purposes of quoting and comparing the performance of a Fund to that
of other mutual funds and to other relevant market indices in advertisements,
performance will be stated in terms of average annual total return. Under
regulations adopted by the Securities and Exchange Commission, funds that
intend to advertise performance must include average annual total return
quotations calculated according to the following formula:
n
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5, or 10)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-, 5-, or 10-
year period, at the end of such period (or
fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
1, 5, and 10 year periods of the applicable Fund's existence or shorter
periods dating from the commencement of the Fund's registration. In
calculating the ending redeemable value, all dividends and distributions by
the Fund are assumed to have been reinvested at net asset value as described
in the Prospectus on the reinvestment dates during the period. Additionally,
redemption of shares is assumed to occur at the end of each applicable time
period.
- 12 -
<PAGE>
The foregoing information should be considered in light of a Fund's
investment objectives and policies, as well as the risks incurred in the
Fund's investment practices. Each Fund's investment performance will vary
depending upon market conditions, the composition of the Fund's portfolio and
operating expenses of the Fund. These factors and possible differences in the
methods and time periods used in calculating non-standardized investment
performance should be considered when comparing a Fund's performance to
those of other investment companies or investment vehicles. Future results
will be affected by the future composition of the Fund's portfolio, as well as
by changes in the general level of interest rates, and general economic and
other market conditions.
The average annual total return of the Berkshire Focus Fund for the period
July 1, 1997 (commencement of operations) to December 31, 1999 was 79.64% and
for the fiscal year ended December 31, 1999 was 142.90%.
Each Fund may also advertise total return which is calculated differently from
average annual total return. Total return performance for a specific period
(year to date, calendar quarter, fiscal year or portion thereof) is calculated
by taking the initial investment in the Fund's shares on the first day of the
period and the redeemable value of that investment at the end of the period.
The total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains dividends by the Fund have been reinvested
at net asset value on the reinvestment dates during the period. Total return
may also be shown as the increased dollar value of the hypothetical investment
over the period. A quotation of a Fund's total return will always be
accompanied by the Fund's average annual total return.
The total return of the Berkshire Focus Fund for the period July 1, 1997
(commencement of operations) to December 31, 1999 was 332.89% and for the
fiscal year ended December 31, 1999 was 142.90%.
Each Fund may also advertise performance information (a "non-standardized
quotation") which is calculated differently from "average annual total
return." A non-standardized quotation of total return may be a cumulative
return which measures the percentage change in the value of an account between
the beginning and end of a period, assuming no activity in the account other
than reinvestment of dividends and capital gains distributions. A
non-standardized quotation may also be an average annual compounded rate of
return over a specified period, which may be a period different from those
specified for "average annual total return." In addition, a non-standardized
quotation may be an indication of the value of a $10,000 investment (made on
the date of the initial public offering of the Fund's shares) as of the end of
a specified period. A non-standardized quotation will always be accompanied by
the Fund's "average annual total return" as described above.
Performance information for a Fund may be compared, in reports and
promotional literature, to the performance of unmanaged indices which may
assume reinvestment of dividends or interest but generally do not reflect
deductions for administrative and management costs. Examples include, but are
not limited to the Dow Jones Industrial Average (DJIA), Standard & Poor's 500
Composite Stock Price Index (S&P 500), the NASDAQ Composite Index (NASDAQ
Composite) and the Russell 2000 Index. The Dow Jones Industrial Average is a
measurement of general market price movement for 30 widely held stocks listed
on the New York Stock Exchange. The S&P 500 Index is an unmanaged index of 500
stocks, the purpose of which is to portray the pattern of common stock price
movement. The NASDAQ Composite Index is an unmanaged index which averages the
trading prices of more than 3,000 domestic over-the-counter companies. The
Russell 2000 Index, representing approximately 11% of the U.S. equity market,
is an unmanaged index comprised of the 2,000 smallest U.S. domiciled
publicly-traded common stocks in the Russell 3000 Index (an unmanaged index of
the 3,000 largest U.S. domiciled publicly-traded common stocks by market
capitalization representing approximately 98% of the U.S. publicly-traded
equity market).
- 13 -
<PAGE>
In assessing such comparisons of performance an investor should keep in mind
that the composition of the investments in the reported indices and averages
is not identical to either Fund's portfolio, that the averages are generally
unmanaged and that the items included in the calculations of such averages may
not be identical to the formula used by the Fund to calculate its performance.
In addition, there can be no assurance that the Fund will continue this
performance as compared to such other averages.
From time to time, in marketing and other fund literature, each Fund's
performance may be compared to the performance of other mutual funds in
general or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, may be cited. Lipper performance figures
are based on changes in net asset value, with all income and capital gain
dividends reinvested. Such calculations do not include the effect of any sales
charges imposed by other funds. Each Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and portfolio holdings.
Each Fund's performance may also be compared to the average performance of its
Lipper category.
Each Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. which ranks funds on the basis of historical
risk and total return. Morningstar's rankings range from five stars (highest)
to one star (lowest) and represent Morningstar's assessment of the historical
risk level and total return of a fund as a weighted average for three, five
and ten year periods. Ranks are not absolute or necessarily predictive of
future performance. Performance rankings and ratings reported periodically in
national financial publications such as Barron's and Fortune also may be used.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the
Investment Adviser is responsible for each Fund's portfolio decisions and the
placing of each Fund's portfolio transactions. In placing portfolio
transactions, the Investment Adviser seeks the best qualitative execution for
the Funds, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), the execution capability, financial
responsibility and responsiveness of the broker or dealer and the brokerage
and research services provided by the broker or dealer. The Investment Adviser
generally seeks favorable prices and commission rates that are reasonable in
relation to the benefits received.
The Investment Adviser is specifically authorized to select brokers or dealers
who also provide brokerage and research services to the Funds and/or the other
accounts over which the Investment Adviser exercises investment discretion and
to pay such brokers or dealers a commission in excess of the commission
another broker or dealer would charge if the Investment Adviser determines in
good faith that the commission is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of a particular transaction or the Investment Adviser's overall
responsibilities with respect to the Trust and to other accounts over which it
exercises investment discretion.
- 14 -
<PAGE>
Research services include supplemental research, securities and economic
analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Funds effect securities
transactions may also be used by the Investment Adviser in servicing all of
its accounts. Similarly, research and information provided by brokers or
dealers serving other clients may be useful to the Investment Adviser in
connection with its services to the Funds. Although research services and
other information are useful to the Funds and the Investment Adviser, it is
not possible to place a dollar value on the research and other information
received. It is the opinion of the Board of Trustees and the Investment
Adviser that the review and study of the research and other information will
not reduce the overall cost to the Investment Adviser of performing its duties
to the Funds under the Advisory Agreements.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers, if the same or a better price, including
commissions and executions, is available. Fixed income securities are normally
purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid
and asked prices.
For the period July 1, 1997 (commencement of operations) to December 31, 1997
and for the fiscal years ended December 31, 1998 and 1999, the Berkshire Focus
Fund paid brokerage commissions of $1,941, $2,651 and $49,462, respectively.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, M.L. 6118, Cincinnati, Ohio 45202, has
been retained to act as Custodian of each Fund's investments. The custodian
acts as each Fund's depository, safekeeps its portfolio securities and
investments, collects all income and other payments with respect thereto,
disburses funds as instructed and maintains records in connection with its
duties.
TRANSFER AGENT AND MANAGEMENT-RELATED SERVICES
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Milwaukee,
Wisconsin 53202 ("FMFS"), is retained by Berkshire Capital to act as the
Funds' transfer agent. FMFS will maintain the records of each shareholder's
account, process purchases and redemptions of the Funds' shares and act as
dividend and distribution disbursing agent. FMFS also provides
sub-administrative services to each Fund, calculates daily net asset value per
share and maintains such books and records as are necessary to enable FMFS to
perform its duties. For the performance of these services, Berkshire Capital
(not the applicable Fund) pays FMFS (1) a fee for sub-administrative services
at the annual rate of 0.07% of the first $200 million of the Fund's average
daily net assets, 0.05% of the next $500 million of the Fund's average daily
net assets, and 0.03% of the average daily net assets of the Fund thereafter
(subject to a minimum annual fee of $40,000 for the first Fund and $30,000 for
the second Fund); (2) a fee for transfer agency and shareholder services at
the minimum annual rate of $24,000 for the first Fund and $15,000 for the
second Fund; and (3) a fee for accounting and pricing services at the minimum
annual rate of $30,000 for the first $100 million of the Fund's average daily
net assets, 0.01% of the next $200 million of the Fund's average daily net
assets, and 0.005% of the average daily net assets of the Fund thereafter.
Prior to May 1, 2000, Mutual Shareholder Services, LLC acted as the Funds'
transfer agent and dividend paying agent and performed certain management-
related services.
- 15 -
<PAGE>
DISTRIBUTOR
Rafferty Capital Markets, Inc., 1311 Mamaroneck Avenue, White Plains, New York
10609, is the exclusive agent for distribution of shares of the Funds. The
Distributor is obligated to sell the shares of the Funds on a best efforts
basis only against purchase orders for the shares. Shares of the Funds are
offered to the public on a continuous basis.
AUDITORS
The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake,
Ohio 44145, has been selected as independent auditors for the Trust for the
year ending December 31, 2000. McCurdy & Associates CPA's, Inc. performs an
annual audit of each Fund's financial statements and provides financial, tax
and accounting consulting services as requested.
FINANCIAL STATEMENTS
The financial statements and independent auditors report required to be
included in the Statement of Additional Information are incorporated herein by
reference to the Trust's Annual Report to Shareholders for the fiscal year
ended December 31, 1999. The Trust will provide the Annual Report without
charge at written or telephone request.
- 16 -
<PAGE>
PART C
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
(a) Articles of Incorporation.
(i) Copy of Registrant's Declaration of Trust, which was filed as
an Exhibit to Registrant's Pre-Effective Amendment No. 1, is
hereby incorporated by reference.
(ii) Copy of August 8, 1998 Addendum to Registrant's Declaration
of Trust, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 2, is hereby incorporated by
reference.
(iii) Copy of August 8, 1998 Certificate of Amendment to Registrant's
Declaration of Trust, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2, is hereby
incorporated by reference.
(iv) Copy of December 19, 1999 Certificate of Amendment of
Certificate of Trust, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 5, is hereby
incorporated by reference .
(b) By-Laws - Not Applicable.
(c) Instruments Defining Rights of Security Holder. None (other than in the
Declaration of Trust, as amended.)
(d) Investment Advisory Contracts.
(i) Copy of Registrant's Amended and Restated Investment Advisory
Agreement with Berkshire Capital Holdings, Inc., which was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 5, is
hereby incorporated by reference.
(ii) Copy of Registrant's Investment Advisory Agreement with Berkshire
Capital Holdings, Inc. for the Berkshire Technology Fund, which
was filed as an Exhibit to Registrant's Post-Effective Amendment
No. 5, is hereby incorporated by reference.
(e) Underwriting Contracts. Copy of Registrant's Distribution Agreement is to
be supplied.
(f) Bonus or Profit Sharing Contracts - Not Applicable.
(g) Custodial Agreements. Copy of Registrant's agreement with the Custodian,
Firstar Bank, N.A., which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 5, is hereby incorporated by reference.
(h) Other Material Contracts.
(i) Copy of Registrant's Administration Agreement with Berkshire
Capital Holdings, Inc. for the Berkshire Focus Fund, which
was filed as an Exhibit to Registrant's Post-Effective Amendment
No. 5, is hereby incorporated by reference.
(ii) Copy of Registrant's Administration Agreement with Berkshire
Capital Holdings, Inc. for the Berkshire Technology Fund, which
was filed as an Exhibit to Registrant's Post-Effective Amendment
No. 5, is hereby incorporated by reference.
(i) Legal Opinions. Legal Opinion of John F. Splain, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 5, is hereby
incorporated by reference.
(j) Other Opinions. Consent of McCurdy & Associates CPA's, Inc. is filed
herewith.
(k) Omitted Financial Statements - Not Applicable.
(l) Initial Capital Agreements. Subscription Agreements of the Berkshire
Capital Growth & Value Fund, which were filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, are hereby incorporated
by reference.
(m) Rule 12b-1 Plan - Not Applicable.
(n) Rule 18f-3 Plan - Not Applicable.
(o) Reserved.
(p) Code of Ethics.
(i) Registrant's Code of Ethics is filed herewith.
(ii) Berkshire Capital Holdings, Inc.'s Code of Ethics is filed
herewith.
(q) Power of Attorney. Powers of Attorney for the Trustees of the Trust,
which were filed as part of Registrant's Post-Effective Amendment
Nos. 1 and 2, are hereby incorporated by reference.
Item 24. Control Persons.
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. Indemnification
Under section 3817(a) of the Delaware Business Trust Act, a Delaware
business trust has the power to indemnify and hold harmless any
trustee, beneficial owner or other person from and against any and
all claims and demands whatsoever. Reference is made to sections 5.1
and 5.2 of the Declaration of Trust of The Berkshire Funds (the
"Trust") (which was filed as an exhibit to the Trust's Pre-Effective
Amendment No. 1) pursuant to which no trustee, officer, employee or
agent of the Trust shall be subject to any personal liability, when
acting in his or her individual capacity, except for his own bad
faith, willful misfeasance, gross negligence or reckless disregard of
his or her duties. The Trust shall indemnify each of its trustees,
officers, employees and agents against all liabilities and expenses
reasonably incurred by him or her in connection with the defense or
disposition of any actions, suits or other proceedings by reason of
his or her being or having been a trustee, officer, employee or
agent, except with respect to any matter as to which he or she shall
have been adjudicated to have acted in or with bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her
duties.
The Registrant may maintain a standard mutual fund and investment
advisory professional and directors and officers liability policy.
The policy, if maintained, would provide coverage to the Registrant,
its Trustees and officers, and could cover its Advisers, among
others. Coverage under the policy would include losses by reason of
any act, error, omission, misstatement, misleading statement, neglect
or breach of duty.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Trust pursuant to the foregoing, the Trust
has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and
therefore may be unenforceable. In the event that a claim for
indemnification (except insofar as it provides for the payment by
the Trust of expenses incurred or paid by a trustee, officer or
controlling person in the successful defense of any action, suit or
proceeding) is asserted against the Trust by such trustee, officer or
controlling person and the Securities and Exchange Commission is
still in the same opinion, the Trust will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue. Indemnification provisions exist in the
Investment Advisory and Administration Agreement under the headings
"Limitation of Liability" which are identical to those in the
Declaration of Trust noted above.
Item 26. Business and Other Connections of the Investment Adviser.
Not Applicable.
Item 27. Principal Underwriter
Rafferty Capital Markets, Inc.
Item 28. Location of Accounts and Records
Accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the Rules promulgated thereunder,
will be maintained as follows:
For the Investment Adviser - Berkshire Capital Holdings, Inc.
475 Milan Drive, Suite 103, San Jose, CA 95134.
For Administration - Firstar Mutual Fund Services, LLC
615 East Michigan Street, Milwaukee, WI 53202.
For Accounting and Transfer Agency - Firstar Mutual Fund Services, LLC
615 East Michigan Street, Milwaukee, WI 53202.
For Custody - Firstar Bank, N.A.
425 Walnut Street, M.L. 6118, Cincinnati, OH 45202.
For Distribution - Rafferty Capital Markets, Inc.
1311 Mamaroneck Avenue, Suite 140, White Plains, NY 10605.
Item 29. Management Services. Not Discussed in Parts A or B.
Not Applicable.
Item 30. Undertakings
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all requirements
for effectiveness of the Registration Statement under Rule 485(b) under the
Securities Act and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
San Jose, State of California on the 1st day of May, 2000.
THE BERKSHIRE FUNDS
By: /s/ MALCOLM R. FOBES
------------------------------
MALCOLM R. FOBES III, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
/s/ MALCOLM R. FOBES
------------------------------------
MALCOLM R. FOBES, III
President, Treasurer, Chief Financial
Officer & Trustee
May 1, 2000
RONALD G. SEGER* *By: /s/ Malcolm R. Fobes III
Trustee ------------------------------------
Attorney In Fact
LELAND F. SMITH*
Trustee May 1, 2000
ANDREW W. BROER*
Trustee
<PAGE>
THE BERKSHIRE FUNDS
PART C - EXHIBIT INDEX FOR POST-EFFECTIVE AMENDMENT NO. 6
AS FILED ON MAY 1, 2000
<PAGE>
EXHIBIT INDEX
1. Consent of Independent Public Accountants........................EX-99.23.j
2. Registrant's Code of Ethics....................................EX-99.23.p.1
3. Adviser's Code of Ethics.......................................EX-99.23.p.2
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated January 8, 2000 and to all references to our firm included in or made a
part of this Post-Effective Amendment No. 6 to Berkshire Funds' Registration
Statement on Form N-1A (file nos. 333-21089 and 811-08043), including the
references to our firm under the heading "Financial Highlights" in the
Prospectus and heading "Accountants" in the Statement of Additional
Information.
/s/ McCurdy & Associates
- ------------------------
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
April 25, 2000
<PAGE>
CODE OF ETHICS
THE BERKSHIRE FUNDS
Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act")
addresses conflicts of interest that arise from personal trading activities of
investment company personnel. In particular, Rule 17j-1 prohibits fraudulent,
deceptive or manipulative acts by such personnel in connection with their
personal transactions in securities held or to be acquired by the investment
company. The Rule also requires an investment company to adopt a code of
ethics containing provisions reasonably necessary to prevent fraudulent,
deceptive or manipulative acts and requires certain persons to report their
personal securities transactions to the investment company.
This Code of Ethics has been adopted by the Board of Trustees of The
Berkshire Funds (the "Company"). It is based on the principle that the
trustees and officers of the Company owe a fiduciary duty to the Company's
shareholders to conduct their affairs, including their personal securities
transactions, in such a manner as to avoid (1) serving their own personal
interests ahead of the shareholders, (2) taking advantage of their position,
and (3) any actual or potential conflicts of interest.
I. Definitions. As used in this Code of Ethics, the following terms
shall have the following meanings:
(a) "Adviser" shall mean Berkshire Capital Holdings, Inc.
(b) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that the determination of direct or indirect
beneficial ownership shall apply to all securities which a person has or
acquires. It includes ownership by a member of a person's immediate family
(such as a spouse, minor children and adults living in such person's home) and
trusts of which such person or an immediate family member of such person is a
trustee or in which any such person has a beneficial interest.
(c) "Disinterested trustee" shall mean a trustee of the Company who is not
an "interested person" of the Company within the meaning of Section 2(a)(19)
of the 1940 Act.
(d) "Funds" shall mean the Berkshire Focus Fund and the Berkshire Technology
Fund.
(e) "Security" shall have the same meaning set forth in Section 2(a)(36) of
the 1940 Act, except that it shall not include shares of registered open-end
investment companies, direct obligations of the U.S. Government, banker's
acceptances, bank certificates of deposit, commercial paper and high-quality
short-term debt instruments, including repurchase agreements.
(f) A "security held or to be acquired by the Funds" shall mean (1) any
security which, within the most recent fifteen (15) days, is or has been held
by the Funds or is being or has been considered by the Funds or the Adviser
for purchase by the Funds, or (2) any option to purchase or sell, and any
security convertible into or exchangeable for, any such security.
<PAGE>
(g) "Transaction" shall mean any purchase, sale or any type of acquisition or
disposition of securities, including the writing of an option to purchase or
sell securities.
II. Prohibition on Certain Actions. Officers and trustees of the Company
shall not, in connection with the purchase or sale, directly or indirectly, by
such person of a security held or to be acquired by the Funds:
1. To employ any device, scheme or artifice to defraud the Funds;
2. To make any untrue statement of a material fact to the Company or to omit
to state a material fact necessary in order to make the statements made to the
Company, in light of the circumstances under which they are made, not
misleading;
3. To engage in any act, practice or course of business that operates or would
operate as a fraud or deceit on the Funds; or
4. To engage in any manipulative practice with respect to the Funds.
III. Code of Ethics of Adviser. All trustees and officers of the Company
who are also directors, officers or employees of the Adviser are subject to
the Code of Ethics of the Adviser, which is incorporated by reference herein.
IV. Quarterly Reporting of Securities Transactions. Each trustee and
officer, other than a disinterested trustee, shall file with the Chairman of
the Company no later than ten (10) days after the end of each calendar
quarter, all personal security transactions for that quarter. The form
attached as "Exhibit A," Personal Securities Transaction Record, shall be used
for this purpose. All such reports will be reviewed by the Chairman. A
disinterested trustee shall be required to file such reports only with respect
to transactions where such trustee knows, or in the course of fulfilling his
or her duties should have known, that during the 15-day period immediately
preceding or following the date of a transaction in a security by the trustee
such security was purchased or sold by the Funds or the purchase or sale by
the Funds is or was considered by the Funds or the Adviser.
V. Initial and Annual Reporting of Holdings. Each trustee and officer,
other than a disinterested trustee, shall file with the Chairman of the
Company, no later than ten (10) days after he or she becomes a trustee or
officer, an initial holdings report listing all securities beneficially owned
by such person as of the date he or she became a trustee or officer. On an
annual basis, each trustee and officer, other than a disinterested trustee,
shall file with the Chairman a holdings report listing all securities
beneficially owned by such person; such report must be current as of a date no
more than thirty (30) days before the report is submitted. Any such initial or
annual report shall set forth the following information: (1) the title, number
of shares and principal amount of each security in which the trustee or
officer had any direct or indirect beneficial ownership; (2) the name of any
broker, dealer or bank with whom the trustee of officer maintained an account
in which any securities were held for the direct or indirect benefit of such
trustee or officer; and (3) the date that the report is submitted.
<PAGE>
VI. Disclaimer of Beneficial Ownership. A trustee or officer may include
in any report required under Sections IV or V, a disclaimer as to the
beneficial ownership in any securities covered by the report.
VII. Sanctions. If any trustee or officer violates any provisions set
forth in this Code of Ethics, the Chairman of the Company shall impose such
sanctions as he deems appropriate including, but not limited to, a letter of
censure or termination of employment, censure, fines, freezing of one's
personal account or securities in that account for a specified time frame.
VIII. Reporting to Board of Trustees. At least once each year, the Chairman
of the Company shall provide the Board of Trustees with a written report that
(1) describes issues that arose during the previous year under this Code of
Ethics including, but not limited to, information about material violations
and sanctions imposed in response to those material violations, and (2)
certifies to the Board of Trustees that the Company has adopted procedures
reasonably necessary to prevent its access persons from violating this Code of
Ethics.
IX. Notification of Reporting Obligation. The Chairman of the Company
shall identify all persons who are required to make the reports required under
Sections IV and V and shall inform those persons of their reporting
obligation.
X. Retention of Records. The Company shall maintain the following
records, for the time periods and in the manner set forth below, at its
principal place of business:
1. A copy of this Code of Ethics, and each code of ethics previously in
effect for the Company at any time within the past five years, must be
maintained in an easily accessible place.
2. A record of any violation of the Company's code of ethics, and any action
taken as a result of the violation, must be maintained in an easily accessible
place for at least five years after the end of the fiscal year in which the
violation occurs.
3. A copy of each report required to be made by an officer or trustee
pursuant to this Code of Ethics must be maintained for at least five years
after the end of the fiscal year in which the report is made, the first two
years in an easily accessible place.
4. A record of all persons, currently or within the past five years, who are
or were required to make reports under Sections IV and V, or who are or were
responsible for reviewing these reports, must be maintained in an easily
accessible place.
5. A copy of each report required to be made by the Chairman of the Company
to the Board of Trustees pursuant to Section VIII must be maintained for at
least five years after the end of the fiscal year in which the report is
made, the first two years in an easily accessible place.
<PAGE>
EXHIBIT A
Personal Securities Transaction Report
- --------------------------- ---------------------------
Name (please print) Quarter Ending
INSTRUCTIONS: Record all applicable security transactions which are not
specifically excepted by the Code of Ethics. To indicate no transactions, the
word "NONE" must appear. This form must be returned within 10 calendar days
after the close of each quarter.
==============================================================================
| Purchase/Sale | Number of Shares | | | Broker
Date | Other | Principal Amount | Title of Security | Price | Dealer
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
==============================================================================
Please disclose below any securities account over which you have a beneficial
interest and which was established during the quarter covered by this report.
==============================================================================
Account Registration | Broker/Dealer/Bank | Account No. | Date Established
- ------------------------------------------------------------------------------
| | |
- ------------------------------------------------------------------------------
| | |
- ------------------------------------------------------------------------------
| | |
- ------------------------------------------------------------------------------
| | |
==============================================================================
I acknowledge that the transactions listed above comprise all transactions
executed in accounts in which I have a beneficial interest.
- --------------------------- ---------------------------
Signature of Access Person Approved
- --------------------------- ---------------------------
Date of Filing Date Approved
<PAGE>
CODE OF ETHICS
BERKSHIRE CAPITAL HOLDINGS, INC.
The nature of our business places all directors, officers, and employees
(collectively called "employees") of Berkshire Capital Holdings, Inc. (the
"Adviser") in a fiduciary position. We must accept certain limitations as to
our freedom of action with regard to personal financial matters. Our financial
interest must at all times be subordinated to those of the Adviser's clients.
It is impossible to anticipate every circumstance which could, in fact or
in theory, cause a conflict of interest between employees of the Adviser and
the clients of the Adviser (including, but not limited to, The Berkshire
Funds). Many of these are covered in this Code of Ethics. If there is any
doubt in an employee's mind as to whether or not a possible conflict of
interest is involved, he or she should consult Malcolm R. Fobes III (otherwise
known as the "Portfolio Manager" or "Chief Executive Officer").
In addition, the use of inside information to trade in securities or to
benefit in any way is strictly forbidden. Section X highlights our policy on
insider trading and the procedures in place to prevent it.
Employees are reminded that compliance with the letter and intent of this
Code of Ethics is essential to their employment by the Adviser.
I. Definitions. As used in this Code of Ethics, the following terms
shall have the following meanings:
(a) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether an employee is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that the determination of direct or indirect
beneficial ownership shall apply to all securities which an employee has or
acquires. It includes ownership by a member of an employee's immediate family
(such as a spouse, minor children and adults living in such employee's home)
and trusts of which such employee or an immediate family member of such
employee is a trustee or in which any such employee has a beneficial interest.
(b) "Investment personnel" shall mean (i) any employee of the Adviser
who, in connection with his or her regular functions or duties, makes or
participates in making recommendations regarding the purchase or sale of
securities by clients of the Adviser, and (ii) any natural person who controls
the Adviser and who obtains information concerning recommendations made to
clients of the Adviser regarding the purchase or sale of securities by such
clients.
(c) "Personal account" shall mean any securities account or portfolio in
which an employee has any beneficial ownership.
(d) "Security" shall have the same meaning set forth in Section 2(a)(36)
of the Investment Company Act of 1940, except that it shall not include shares
of registered open-end investment companies, direct obligations of the United
States Government, banker's acceptances, bank certificates of deposit,
commercial paper and high-quality short-term debt instruments, including
repurchase agreements.
<PAGE>
(e) A "security held or to be acquired" by a client shall mean (1) any
security which, within the most recent fifteen (15) days, is or has been held
by a client or is being or has been considered by a client or the Adviser for
purchase by a client, or (2) any option to purchase or sell, and any security
convertible into or exchangeable for, any such security.
(f) "Transaction" shall be any purchase, sale or any type of acquisition
or disposition of securities, including the writing of an option to purchase
or sell securities.
II. Restrictions on Trading. Employees are encouraged to choose
investments in keeping with a long-term investment horizon in their personal
accounts. The Adviser does not wish to have employees distracted by trading
activities and believes that such activities invariably would detract from an
employee's value to the Adviser and its clients.
Similarly, employees are encouraged to manage their personal accounts in
such a manner that the performance of one particular investment does not
distract the employee from his or her work.
(a) Prior to making any purchase or sale of securities in personal
accounts, the employees of the Adviser shall (i) verify that there are no
outstanding orders for the relevant security and have the Portfolio Manager of
the Adviser initial a designated form; (ii) verify that no client has
transacted in the relevant security within at least seven (7) calendar days
and have the Portfolio Manager of the Adviser initial the form; and (iii)
verify with the Portfolio Manager of the Adviser that the relevant security is
not under consideration as a purchase or a sale candidate and have the
Portfolio Manager of the Adviser initial the form. Notification of approval or
denial to trade may be given verbally; however, it must be confirmed in
writing within 24 hours of the verbal notification. The form attached as
"Exhibit B", Securities Transaction Approval Form, is to be filed with the
Portfolio Manager of the Adviser. All orders should be placed as day or market
orders. If the order is not completed in a day, the above procedure must be
repeated before the order can be reentered. These restrictions will help
insure that (i) our clients have first access to our investment ideas, (ii)
the security in question is not under active consideration, and (iii) a buy or
sell program is not underway.
(b) In the event the Portfolio Manager himself engages in a transaction
in securities in his personal account, approval of such transaction will be
given by the Treasurer of the Adviser.
(c) Investment personnel shall not purchase new issues of equity
securities until at least five (5) business days after the initial public
offering at the then prevailing market price. Investment personnel shall not
purchase limited offerings or "private placements".
(d) Employees shall immediately report to the Portfolio Manager of the
Adviser (i) any existing financial interest in any brokerage firm or related
organization, and (ii) any employment or family members by any brokerage firm
or related persons.
(e) If an employee recommends that the firm purchase a security of the
same class held by a personal account, the employee must disclose at the time
of the initial recommendation that the personal account owns such security.
(f) No orders of any kind may be placed using the Adviser's trading
facilities other than for client accounts.
III. Restriction on Acceptance of Gifts, Etc. No employee shall accept any
gift of material value, or any entertainment exceeding what is customary, from
any client of the Adviser or from the client's estate or any broker/dealer,
<PAGE>
bank, corporation, or supplier of goods or services to the Adviser or its
clients. Any employee who receives an offer of either a gift or bequest of
material value from any of the foregoing sources shall promptly report it to
the Chief Executive Officer of the Adviser.
IV. Restrictions on Serving as Fiduciary. Employees shall not accept
appointments as trustee, executor, administrator, guardian, conservator,
adviser, partner, director, or other fiduciary without prior approval of the
Chief Executive Officer of the Adviser. Appointment as a fiduciary for a
relative is exempt from this requirement, although such appointment should be
promptly reported.
V. Prohibition on Other Conflicts of Interest. Employees shall not, in
connection with the purchase or sale, directly or indirectly, by such person
of a security held or to be acquired by a client:
1. Employ any device, scheme or artifice to defraud the client;
2. Make any untrue statement of a material fact to the client or to omit
to state a material fact necessary in order to make the statements made to the
client, in light of the circumstances under which they are made, not
misleading;
3. Engage in any act, practice or course of business that operates or
would operate as a fraud or deceit on the client; or
4. Engage in any manipulative practice with respect to the client.
VI. Quarterly Reporting of Securities Transactions. Each employee shall
file with the Portfolio Manager, no later than ten (10) days after the end of
each calendar quarter, all personal security transactions for that quarter.
The form attached as "Exhibit A", Personal Securities Transaction Record,
shall be used for this purpose. All such reports will be reviewed by the
Portfolio Manager, except that reports submitted by the Portfolio Manager
himself will be reviewed by the Treasurer of the Adviser. A gift of a security
to a charitable organization or to an individual is considered a sale and
should be reported. Accounts managed by the Adviser are exempt from this
requirement.
VII. Initial and Annual Reporting of Holdings. Each employee shall file
with the Portfolio Manager, no later than ten (10) days after he or she
becomes an employee, an initial holdings report listing all securities
beneficially owned by such employee as of the date he or she became an
employee. On an annual basis, each employee shall file with the Portfolio
Manager a holdings report listing all securities beneficially owned by such
employee; such report must be current as of a date no more than thirty (30)
days before the report is submitted. Any such initial or annual report shall
set forth the following information: (1) the title, number of shares and
principal amount of each security in which the employee had any direct or
indirect beneficial ownership; (2) the name of any broker, dealer or bank with
whom the employee maintained an account in which any securities were held for
the direct or indirect benefit of such employee; and (3) the date that the
report is submitted.
VIII. Disclaimer of Beneficial Ownership. An employee may include in any
report required under Sections VI or VII, a disclaimer as to beneficial
ownership in any securities covered by the report.
<PAGE>
IX. Exceptions from Reporting Requirements. An employee need not file
reports under Sections VI or VII with respect to transactions effected for,
and securities held in, any account over which the person has no direct or
indirect influence or control. An employee need not make a quarterly report
under Section VI if the report would duplicate information contained in broker
trade confirmations or account statements received by the Portfolio Manager in
the time period required by Section VI, if all of the information required by
such Section is contained in the broker trade confirmations or account
statements, or in the records of the Adviser.
X. Restriction on Use of Inside Information. The Adviser strictly forbids
any of its employees from trading on or relaying inside information for
personal benefit or on behalf of others. This policy applies to every employee
and applies to activities engaged in by the employee both within and outside
of the realm of his or her employment.
Insider trading is a breach of Federal Securities law and is subject to
both civil and criminal penalties. In addition, the Insider Trading and
Securities Fraud Enforcement Act of 1988 (ITSFEA), subsequently increases the
civil and criminal penalties for trading on material, non-public information
and broadens the scope of responsibility for preventing insider trading. The
ITSFEA requires the Adviser to establish and enforce a written policy on
insider trading. The law also creates the concept of a "controlling person"
which means that unless the Adviser establishes and enforces a policy to
prohibit insider trading, the Adviser and its controlling persons may be held
responsible and liable for any insider trading violations of its employees.
(a) Insider Trading. Federal Securities laws do not define the concept of
an insider or insider trading; the burden of proof is upon the individual and
the firm to show that it did not break Federal Securities laws. Any dispute
will be judged in court looking back with perfect hindsight. Insider trading
is generally defined as the use of inside information to trade in securities
or the communication of this information to others. The law prohibits:
(i) Any trading by an insider in possession of material, non-public
information;
(ii) Any trading by a non-insider having inside information either
disclosed by an insider in violation of his or her fiduciary duty to keep it
confidential or misappropriated; and
(iii) The communicating of material, non-public information to others, also
known as "tipping".
(b) The Concept of the Insider. The concept of the insider is very broad.
An insider includes employees, officers and directors of a company. Also
included are persons associated with the company through a special,
confidential relationship in the conducting of the company's affairs and who
receive information solely for the company's purposes. These "insiders" can
include but are not limited to, attorneys, consultants, accountants and
financial printers.
(c) What is Inside Information? Inside information is broadly defined to
include two concepts: materiality and non-public. Material information is
information which a reasonable investor would consider important in making an
investment decision or is reasonably certain to have a substantial impact on
<PAGE>
the price of a company's securities. Such information is considered to be
non-public until it has been disseminated to investors generally. The stock
exchanges require that companies disclose information to the national news and
business newswire services (i.e., Dow Jones News Service and Reuters), the
national services (i.e., Associated Press), and the The New York Times and The
Wall Street Journal. In addition, information appearing in local newspapers,
brokerage reports, and SEC documents are generally considered to be public.
(d) Procedure Upon Receipt of Inside Information. The Adviser requires
employees to report any information which he or she believes to be insider
information to the Chief Executive Officer of the Adviser. The information
should be reported even if the employee is unsure as to whether or not it
represents inside information.
Whenever an employee receives material, non-public information, he or she
shall not:
(i) Trade in the securities to which the information relates;
(ii) Tip the information to others;
(iii) Recommend purchases or sales on the basis of that information; or
(iv) Disclose the information to anyone other than the Adviser's Chief
Executive Officer.
The decision for the appropriate course of action will be made by the
Chief Executive Officer of the Adviser.
XI. Sanctions. If any employee violates any provisions set forth in this
Code of Ethics, the Chief Executive Officer of the Adviser shall impose such
sanctions as he deems appropriate including, but not limited to, a letter of
censure or termination of employment, censure fines, freezing of one's
personal account or securities in that account for a specified time frame.
XII. Reporting to Board of Directors. At least once each year, the Chief
Executive Officer of the Adviser shall provide the Board of Directors of the
Adviser and the Board of Trustees of The Berkshire Funds with a written report
that (1) describes issues that arose during the previous year under this Code
of Ethics including, but not limited to, information about material violations
and sanctions imposed in response to those material violations, and (2)
certifies to the Board of Directors of the Adviser and the Board of Trustees
of The Berkshire Funds that the Adviser has adopted procedures reasonably
necessary to prevent its employees from violating this Code of Ethics.
XIII. Compliance Education Program. The Chief Executive Officer of the
Adviser shall identify all employees who are required to make the reports
required under Sections VI and VII and shall inform those employees of their
reporting obligations. As part of the Adviser's ongoing compliance education
program, it has implemented the following procedures:
(i) Review for New Employees. New employees will be given a copy of the
Code of Ethics and will be required to read and sign it. The Chief Executive
<PAGE>
Officer of the Adviser will be available to review the statement with the
employee.
(ii) Revisions. Any revisions of this statement will be distributed to all
employees.
(iii) Annual Review. Once each year, the Chief Executive Officer of the
Adviser will review this policy statement with all employees.
XIV. Retention of Records. The Adviser shall maintain the following
records, for the time periods and in the manner set forth below, at its
principal place of business:
1. A copy of this Code of Ethics, and each code of ethics previously in
effect for the Adviser at any time within the past five years, must be
maintained in an easily accessible place.
2. A record of any violation of the Adviser's code of ethics, and any action
taken as a result of the violation, must be maintained in an easily accessible
place for at least five years after the end of the fiscal year in which the
violation occurs.
3. A copy of each report required to be made by an employee pursuant to the
Adviser's code of ethics must be maintained for at least five years after the
end of the fiscal year in which the report is made, the first two years in an
easily accessible place.
4. A record of all employees, currently or within the past five years, who
are or were required to make reports under Sections VI and VII, or who are or
were responsible for reviewing these reports, must be maintained in an easily
accessible place.
5. A copy of each report required to be made by the Chief Executive Officer
of the Adviser to the Board of Directors of the Adviser or the Board of
Trustees of The Berkshire Funds pursuant to Section XII must be maintained for
at least five years after the end of the fiscal year in which the report is
made, the first two years in an easily accessible place.
<PAGE>
I acknowledge that I have read, and fully understand the Code of Ethics of
Berkshire Capital Holdings, Inc.
Date:
-------------------------------
Signature:
-------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT A
Personal Securities Transaction Report
- --------------------------- ---------------------------
Name (please print) Quarter Ending
INSTRUCTIONS: Record all applicable security transactions which are not
specifically excepted by the Code of Ethics. To indicate no transactions, the
word "NONE" must appear. This form must be returned within 10 calendar days
after the close of each quarter.
==============================================================================
| Purchase/Sale | Number of Shares | | | Broker
Date | Other | Principal Amount | Title of Security | Price | Dealer
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
- ------------------------------------------------------------------------------
| | | | |
==============================================================================
Please disclose below any securities account over which you have a beneficial
interest and which was established during the quarter covered by this report.
==============================================================================
Account Registration | Broker/Dealer/Bank | Account No. | Date Established
- ------------------------------------------------------------------------------
| | |
- ------------------------------------------------------------------------------
| | |
- ------------------------------------------------------------------------------
| | |
- ------------------------------------------------------------------------------
| | |
==============================================================================
I acknowledge that the transactions listed above comprise all transactions
executed in accounts in which I have a beneficial interest.
- --------------------------- ---------------------------
Signature of Access Person Approved
- --------------------------- ---------------------------
Date of Filing Date Approved
<PAGE>
EXHIBIT B
Securities Transaction Approval Form
(Valid only for the day submitted)
Employee Name (Please Print):
-----------------------------------
Name of Security:
------------------------------------
Proposed transaction (Circle One):
Buy Sell Short Sale Other (Describe)
Does the Adviser have current orders for clients?
(Circle One):
Yes No
Has a client transacted in the security within (7) days?
(Circle One):
Yes No
Any action currently contemplated by the Adviser on behalf of clients?
(Circle One):
Yes No
- --------------------------- ---------------------------
Date Submitted Approved
---------------------------
Date Approved
Comments:
<PAGE>
