As filed with the Securities and Exchange Commission on November 30, 1999
Registration No. 33-48013
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 9 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [X]
(Check appropriate box or boxes)
BHIRUD FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Bhirud Associates, Inc.
1266 E. Main Street, Stamford, Connecticut 06902
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, including Area Code: (203) 977 - 1521
SURESH BHIRUD
Bhirud Associates, Inc.
1266 E. Main Street, Stamford, Connecticut 06902
(Name and Address of Agent for Service)
Copy to: MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
It is proposed that this filing will become effective: (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X ] on December 15, 1999 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) (1)
[ ] on (Date) pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on (Date) pursuant to paragraph (a) (2)
If appropriate, check the following box:
[X] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940, as amended, and Rule 24f-2 thereunder, and the Registrant filed a
Rule 24f-2 Notice for its fiscal year ended July 31, 1999 on September 20,
1999.
PEA9.P 1
BHIRUD FUNDS INC.
Registration Statement on Form N -1A
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CROSS REFERENCE SHEET -
Pursuant to Rule 404 (c)
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Part A
Item No. Prospectus Heading
1. Cover Page Cover Page
2. Synopsis Risk/ Return Summary; Fees and Expenses
3. Condensed Financial Information Investments, Risk and Performance
4. General Description of
Registrant Investment Objectives, Principal
Investment Strategies and Related
Risks; Investment Restrictions.
5. Management of the Fund Management, Organization and Capital
Structure; Shareholder Information
Distribution and Arrangements.
5a.Management's Discussion of
Fund Performance Not Applicable.
6.Capital Stock and Other
Securities Purchase of Shares; Redemption of
Shares;
Dividends, and Distributions;
Tax Consequences.
7.Purchase of Securities Being
Offered Purchase of Shares;
Distribution Arrangements.
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings Not Applicable
PEA9.P 2
- i -
Part B Caption in Statement of Additional
Item No. Information
10.Cover Page Cover Page
11.Table of Contents Table of Contents
12.General Information and
History Fund History
13.Investment Objectives and
Policies Description of the
Fund and its Investments and
Risks
14.Management of the Fund Management of the Fund
15.Control Persons and Principal
Holders of
Securities Control Person and Principal
Holders of Securities
16.Investment Advisory and Other
Services Investment Advisory and Other Services
17. Brokerage Allocation
Brokerage Allocation and Other Practices
18. Capital Stock and other
Securities Capital Stock and Other Securities
19. Purchase, Redemption and
Pricing of Securities Being
Offered Purchase, Redemption and Pricing of
Shares
20. Tax Status Taxation of the Fund
21. Underwriters Distribution and Service Plan
22. Calculation and Performance
Data Calculation of Performance Data
23. Financial Statements Independent Auditors' Report; Financial
Statements
PEA9.P 3
Apex Mid Cap Growth Fund
c/o Bhirud Funds Inc.
1266 EAST MAIN STREET
STAMFORD, CONNECTICUT 06902
TELEPHONE: (877) 593-8637
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PROSPECTUS
NOVEMBER 30,1999
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A mutual fund whose investment objective is to seek growth of capital.
Investments will be made based upon their potential for capital appreciation.
Current income is a secondary objective.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
Page Page
5 Risk/Return Summary: 11 Distribution Arrangements
Investments, Risks and
Performance
8 Investment Objectives, 12 Shareholder Information
Principal Investment
Strategies and Related Risks
10 Management Organization and
Capital Structure
PEA9.P 4
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
Investment Objectives
The Fund seeks growth of capital. Investments will be made based upon
their potential for capital appreciation. Current income is a
secondary objective. There is no assurance that the Fund will achieve
its investment objectives.
Principal Investment Strategies
The Fund's investment philosophy is to invest at least 65% of its
assets, in the equity securities of companies which management
believes, based on fundamental research, have growth potential for
revenues and earnings as well as multiple expansion. Our fundamental
research includes analysis of recent earnings reports along with
various news releases by the company.
The Fund intends to achieve its investment objectives by investing
primarily in a diversified portfolio of domestic common stock.
Under normal circumstances, the fund will invest at least 65% of
total assets in common stocks of companies with medium market
capitalizations (companies with market capitalization ranging from
$150 million to $50 billion and those with market capitalizations
similar to companies in the S&P MidCap 400).
Principal Risks
As with all equity investments, it is possible to lose money by
investing in the Fund.
Since the Fund primarily contains common stocks of domestic issuers,
an investment in the Fund should be made with an understanding of the
risks inherent in an investment in common stocks, including a
susceptibility to general stock market movements and volatile changes
in value.
Investing in medium capitalization stocks may involve greater risk
than investing in large capitalization stocks, because they can be
subject to more abrupt or erratic movements.
The value of the Fund's shares and the securities held by the Fund
can each decline in value.
This Fund is intended for investors who seek long-term capital growth
and are willing to tolerate short-term fluctuations in price in order
to achieve this objective.
PEA9.P 5
Risk / Return Bar Chart
The following bar chart and table may assist you in your decision to
invest in the Fund. The bar chart shows the change in the average
annual returns of the Fund over the last six calendar years. The
table shows how the average annual returns for the last one and five
years and since inception compare with that of the S&P 500 Index and
S&P MidCap 400 Index. While analyzing this information, please note
that the Fund's past performance is not an indicator of how the Fund
will perform in the future.
[GRAPH]
(1) As of September 30,1999, the Fund had a year to date return of
26.89%
(2) The Fund's highest quarterly return was 26.07 for the quarter
ended March 31,1999; the lowest quarterly return was -14.63% for the
quarter ended December 31,1996.
(3) Participating Organizations may charge a fee to investors for
purchasing and redeeming shares. Therefore, the net return to such
investors may be less than if they had invested in the Fund directly.
Sales loads are not reflected in the above chart. If sales loads were
reflected, the fund's returns would be less then those shown.
Average Annual Total Returns - For the periods ended July 31,1999
Apex Mid Cap S&P 500 S&P MidCap 400
Growth Fund Index
Index
One Year 31.36% 18.56% 17.84%
Five Years 2.11% 23.73% 19.12%
Average Annual Total Returns
since Inception
(December 23, 1992) 1.56% 18.25% 15.55%
PEA9.P 6
FEES AND EXPENSES
Shareholder Fees (Fees paid directly your investment)
Maximum Sales Charge (Load) imposed
on purchases (as percentage of offering price) 5.75%*
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets)
Management Fees 1.00% **
Distribution and Service (12b-1) Fees 0.24%
Other Expenses 2.02%
Administration Fees 0.00%
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Total Annual Fund Operating Expenses 3.26%
Fee Table
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other equity funds.
Assume that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those
periods. Also assume that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your
costs would be:
1 year 3 years 5 years 10 years
$380 $1,074 $1,840 $4,115
______________________
* The sales load is one-time charge paid at the time of purchase of
shares, and is varies depending on the amount you invest at a time.
For detail refer sales load table shown under section Purchase of
Shares.
** The advisor has voluntarily waived the management fee for the most
recent fiscal year.
PEA9.P 7
II INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
RELATED RISKS
Investment Objectives
The Fund is a diversified management investment company whose
investment objective is to seek growth of capital. Investments will
be made based upon their potential for capital appreciation. Current
income is a secondary objective.
The Fund's investment objective of growth of capital is fundamental
and may only be changed upon the approval of those holders with a
majority of the outstanding shares of the Fund that would be affected
by such a change.
Principal Investment Strategies
The Fund seeks long-term growth of capital by investing primarily in
common stocks of companies with medium market capitalizations. The
fund normally invests at least 65% of the fund's total assets in
these securities.
Medium market capitalization companies are those whose market
capitalization is similar to the market capitalization of companies
in the S&P MidCap 400 at the time of the fund's investment. The Fund
also uses a broader definition of medium-capitalization companies,
which includes companies with market capitalization ranging from $150
million to $50 billion. However, under normal circumstances the Fund
does not invest in companies with capitalization of $10 billion or
more. Companies whose capitalization no longer meets this definition
after purchase continue to be considered medium-capitalized for pur
poses of the 65% policy. As of July 30, 1999, the S&P MidCap 400
included companies with capitalizations between $272 million and
$10.3 billion. The size of the companies in the S&P MidCap 400
changes with market conditions and the composition of the index.
Defensive Position
The Fund may temporarily take a defensive position and invest in
securities that are inconsistent with its principal investment
strategies when the Manager determines that adverse market, economic,
political, or various other conditions warrant such a position.
Pursuant to this policy, the Fund may invest temporarily without
limit in investment grade debt securities, preferred stocks or money
market instruments. As a result of taking such a temporary defensive
position, the Fund may not achieve its investment objectives.
The Fund will not necessarily dispose of a security that falls below
investment grade unless the Manager determines that the security is
inconsistent with the Fund's investment objectives.
Money market instruments purchased for this purpose include U.S.
Government obligations, high quality commercial paper and
certificates of deposit and bankers' acceptances issued by domestic
banks having more than $1 billion in total assets.
Buy/Sell Decisions
Critical factors which will be considered in the selection of
securities include (i) the potential for future growth in revenues
and earnings as well as the values of individual securities relative
to the other investment alternatives, (ii) the potential of new
product, as well as, the potential for the company to be taken over,
and management capability and practices, and (iii) the economic and
political outlook.
PEA9.P 8
Disposal of a security will be based upon many factors, they include
(i) increases in the price level of the security or of securities
which the Fund believes reflect earnings growth too far in advance,
(ii) changes in the relative opportunities offered by various
securities and (iii) actual or potential deterioration of the
issuer's earning power which the Fund believes may adversely affect
the price of its securities. The Advisor will also rely upon computer
models developed by himself for stock selection.
Portfolio Turnover
Purchases and sales are made for the Portfolio whenever necessary, in
the Advisor's opinion, to meet the Portfolio's objectives. Portfolio
turnover may involve the payment by the Portfolio of dealer spreads
or underwriting commissions, and other transaction costs, on the sale
of securities, as well as on the reinvestment of the proceeds in
other securities. The greater the portfolio turnover the greater the
transaction costs to the Portfolio, which will increase the
Portfolio's total operating expenses. Also, a higher turnover rate
may be more likely to generate capital gains that must be distributed
to shareholders as income subjected to taxes. The Portfolio turnover
rate for the fiscal year ended July 31, 1999 was 405%.
Risks
Equity Risk: Risks inherent in an investment in common stocks include
those associated with the right to receive payments from the issuer
of the common stock. Holders of common stocks have a right to receive
dividends only when declared by the issuer's board of directors.
Moreover, common stocks do not represent an obligation of the issuer.
Therefore, common stocks do not offer any assurance of income or
provide the degree of protection of debt securities. The issuance of
debt securities or even preferred stock by an issuer will create
prior claims for payment of principal, interest and dividends which
can adversely affect the ability of the issuer to pay dividends on
its common stock or the economic interest of holders of common stock
with respect to assets of the issuer upon liquidation or bankruptcy.
Common stocks are also especially susceptible to general stock market
movements and to volatile changes in value as market confidence, and
perceptions of the issuers change. These perceptions are based on
unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates,
economic expansion or contraction, and global or regional political,
economic or banking crises. The value of the Fund's shares and the
securities held by the Fund can each decline in value and the loss of
money is a risk of investing in the Fund.
Additional Investment Strategies and Risks
Futures and Options Risk: The Funds may invest a percentage of their
assets in futures and options contracts. The Funds may use futures
contracts and related options for bona fide hedging purposes to
offset changes in the value of securities held or expected to be
acquired. The Funds will only enter into futures contracts traded on
a national futures exchange or board of trade. Futures and options
contracts are described in more detail below.
Futures Contracts: Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another
party of a specified amount of a specific security at a specified
future time and at a specified price. An option on a futures contract
gives the purchaser the right, in exchange for a premium, to assume a
position in a futures contract at a specified exercise price during
the term of the option. Index futures are futures contracts for
various indices that are traded on registered securities exchanges.
Options: The buyer of an option acquires the right to buy (a call
option) or sell (a put option) a certain quantity of a security (the
underlying security), or instrument, at a certain price up to a
specified point in time. The seller or writer of an option is
obligated to sell (a call option) or buy (a put option) the
underlying security. When writing (selling) call options on
securities, a Fund may cover its position by owning the underlying
security on which the option is written or by owning a call option on
the underlying security. Alternatively, the Fund may cover its
position by maintaining in a segregated account cash or liquid
securities equal in value to the exercise price of the call option
written by the Fund.
PEA9.P 9
The risks associated with the Funds' use of futures and options
contracts include:
The Fund experiencing losses over certain ranges in the market
that exceed losses experienced by a Fund that does not use futures
and options contracts.
There may be an imperfect correlation between the changes in
market value of the securities held by a Fund and the prices of
futures and options on futures.
Although the Fund will only purchase exchange-traded futures and
options, due to market conditions there may not be a liquid secondary
market for a futures contract or option. As a result, the Fund may be
unable to close out their futures or options contracts at a time
which is advantageous.
Trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in futures
contracts and options.
Because option premiums paid or received by the Fund are small
in relation to the market value of the investments underlying the
options, buying and selling put and call options can be more
speculative than investing directly in securities.
Year 2000 Risk: As the Year 2000 approaches, an issue has emerged
regarding how existing application software programs and operating
systems can accommodate this date value. Failure to adequately
address this issue could have potentially serious repercussions. The
Manager is in the process of working with the Fund's service
providers to prepare for the Year 2000. Based on information
currently available, the Manager does not expect that the Fund will
incur material costs to be Year 2000 compliant. Although the Manager
does not anticipate that the Year 2000 issue will have a material
impact on the Fund's ability to provide service at current levels,
there can be no assurance that steps taken in preparation for the
Year 2000 will be sufficient to avoid an adverse impact on the Fund.
The Year 2000 problem may also adversely affect issuers of the
securities contained in the Fund, to varying degrees based upon
various factors, and thus may have a corresponding adverse effect on
the Fund's performance. The Manager is unable to predict what effect,
if any, the Year 2000 problem will have on such issuers.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
The Fund's investment advisor is Bhirud Associates, Inc. (the
"Manager"). The Manager's principal business office is located at
1266 E. Main Street, Stamford, CT 06902. As of July 31,1999, the
Manager was the investment manager, advisor or supervisor with
respect to assets aggregating in excess of $19 Million. The Manager
has been an investment adviser since 1991.
Suresh L. Bhirud is responsible for the day-to-day investment
management of the Fund.
Mr. Bhirud has been President of the Advisor since 1991. He was
Senior Vice President, Chief Investment Strategist and Chairman of
the Investment Policy Committee of Dean Witter Reynolds, Inc., from
1990 to 1991. Mr. Bhirud was the Managing Director, Chief Investment
Strategist and Chairman of the Investment Policy Committee of
Oppenheimer & Co. from 1987 to 1990. Mr. Bhirud was also the Chief
Investment Strategist (1982 to 1987), and held other various
positions involving quantitative market analysis (1972 to 1981), for
The First Boston Corporation. The Fund's Annual Report contains
additional information regarding the Portfolio's performance and will
be provided without charge, upon request.
PEA9.P 10
Investors are advised that the Fund was organized in 1992 and is the
first and only mutual fund managed by the Advisor. In addition, the
Advisor's computer models, used in connection with the management of
the Fund's portfolio, were developed in 1991 and are, therefore,
unseasoned. Furthermore, the S&P MidCap 400 Index, which was
introduced by Standard & Poor's in 1991, is also relatively new.
The Advisor, a New York Corporation, was formed on June 20, 1991.
The Advisor is a registered investment advisor under the Investment
Advisers Act of 1940. In addition to serving the Portfolio, as of
July 31, 1999, the Advisor serves as an advisor to high net worth
individuals with total assets aggregating approximately $19.0 million
under management as of July 31, 1999. The Portfolio is the only
investment company advisory client of the Advisor. Mr. Bhirud may be
deemed a "controlling person" of the Advisor on the basis of his
ownership of stock of the Advisor. The Advisor relies to a
considerable extent on the expertise of Mr. Bhirud who may be
difficult to replace in the event of his death, disability or
resignation. The Advisor's address is the same as the Fund as shown
on the cover of this Prospectus.
Pursuant to the Investment Management Contract, the Manager manages
the Fund's portfolio of securities and makes decisions with respect
to the purchase and sale of investments, subject to the general
control of the Board of Directors of the Fund. Pursuant to the
Investment management Contract, the Fund pays the manager a fee equal
to 1.0% per annum of the Portfolio's average net assets up to $250
million; .75% of the average net assets between $250 million and $500
million; and .65% of the average net assets over $500 million for
managing the Fund's investment portfolio and performing related
services. For the fiscal year ended July 31, 1999 the Manager has
waived the management fee.
Pursuant to the Administrative Services Contract, the Manager
performs clerical, accounting supervision and office service
functions for the Fund. The Manager provides the Fund with the
personnel to perform all other clerical and accounting type functions
not performed by the manager. For its services under the
Administrative Services Contract, the Fund pays the Manager a fee
equal to .20% per annum of the Fund's average daily net assets. For
the fiscal year ended July 31, 1999 the Manager has waived
Administrative Service fee.
The Manager, at its discretion, may voluntarily waive any or all of
the Investment Management Fee and the Administrative Services Fee.
Any portion of the total fees received by the Manager may be used to
provide shareholder services and for distribution of Fund shares.
IV. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
The Fund pays fees in connection with the distribution of shares and
for services provided to its shareholders. The Fund pays these fees
from its assets on an ongoing basis and therefore, over time, the
payment of these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
Pursuant to Rule 12b-1 under the 1940 Act, the SEC requires that an
investment company which bears any direct or indirect expense of
distributing its shares must do so only in accordance with a plan
permitted by Rule 12b-1. The Fund's Board of Directors has adopted a
distribution and service plan (the "Plan") and, pursuant to the Plan,
the Fund and Bhirud Associates, Inc. (the "Distributor") have entered
into a Distribution Agreement and the Fund and the Distributor have
entered into the Shareholder Servicing Agreement. For its services
under the Shareholder Servicing Agreement, the Distributor receives
from the Portfolio a fee equal to .25% per annum of the Portfolio's
average daily net assets (the "Shareholder Servicing Fee").
PEA9.P 11
The Investment Management Contract includes provisions allowing the
Manager to defray the cost of, or compensate other persons, including
banks, broker-dealers and other organizations whose customers or
clients are Fund stockholders ("Intermediaries"), for performing
stockholder, administrative and accounting services to the Fund.
Under the Investment Management Contract, the Manager may also
compensate the foregoing persons and organizations for providing
assistance in distributing the Fund's shares. The Manager is not
subject to any percentage limitation with respect to the amounts it
may expend for the activities described in this paragraph.
Under the Plan, the Fund may pay the costs of printing and
distributing the Fund's prospectus to prospective investors and to
defray the cost of the preparation and printing of brochures and
other promotional materials, mailings to prospective stockholders,
advertising, and other promotional activities, including the salaries
and/or commissions of sales personnel in connection with the
distribution of the Fund's shares. The payments made by the Fund for
the expenses referred to in this paragraph will not exceed in any
year .05% of the Fund's average daily net assets for the year.
V. SHAREHOLDER INFORMATION
On a continuing basis the Fund sells shares at net asset value plus a
sales load, and redeems its shares at their net asset value. All
transactions in Fund shares are effected through the Fund's transfer
agent who accepts orders for purchases and redemption's from
Participating Organizations and from investors directly.
Pricing of Shares
The Fund determines the net asset value of the shares as of 4:00
p.m., New York City time, on each Fund Business Day. Fund Business
Day means weekdays (Monday through Friday) except days on which the
New York Stock Exchange is closed for trading (e.g. national
holidays). The net asset value is computed by dividing the value of
the Fund's net assets (i.e., the value of its securities and other
assets less its liabilities, including expenses payable or accrued,
but excluding capital stock and surplus) by the total number of
shares outstanding.
Portfolio securities for which market quotations are readily
available are valued at market value. U.S. Government obligations and
other debt instruments having sixty days or less remaining until
maturity are stated at amortized cost. All other investment assets of
the Fund are valued in such a manner as the Board of Directors of the
Fund in good faith deems appropriate to reflect their fair value.
Shares are issued as of the first determination of the Fund's net
asset value per share made after receipt of the investor's purchase
order. In order to maximize earnings on its portfolio, the Fund
normally has its assets as fully invested as is practicable. Many
securities in which the Fund invests require the immediate settlement
in funds of Federal Reserve member banks on deposit at a Federal
Reserve Bank (commonly known as "Federal Funds"). The Fund reserves
the right to reject any purchase order for its shares. Certificates
for Fund shares will not be issued to an investor.
Shares are issued as of 4:00 p.m., New York City time, on any Fund
Business Day on which an order for the shares and accompanying
Federal Funds are received by the Fund's transfer agent before 4:00
p.m., New York City time. Fund shares begin accruing income on the
day after the shares are issued to an investor.
PEA9.P 12
Purchase of Shares
Investors who have accounts with Participating Organizations may
invest in the Fund through their Participating Organizations in
accordance with the procedures established by the Participating
Organization. "Participating Organizations" are securities brokers,
banks and financial institutions or other industry professionals or
organizations which have entered into shareholder servicing
agreements with the Distributor with respect to investment of their
customer accounts in the Fund. All other investors, and investors who
have accounts with Participating Organizations but do not wish to
invest in the Fund through them, may invest in the Fund directly.
The minimum initial investment in the Fund is (i) $1,000 for
purchases through Participating Organizations - this may be satisfied
by initial investments aggregating $1,000 by a Participating
Organization on behalf of their customers whose initial investments
are less than $1,000; (ii) $1,000 for securities brokers, financial
institutions and other industry professionals that are not
Participating Organizations and (iii) $1,000 for all other investors.
Initial investments may be made in any amount in excess of the
applicable minimums. The minimum amount for subsequent investments is
$100 unless the investor is a client of a Participating Organization
whose clients have made aggregate subsequent investments of $100;
except that the minimum initial investment for an Individual
Retirement Account is $250.
Each shareholder, except certain shareholders who invest through
accounts at Participating Organizations ("Participant Investors"),
will receive from the Fund a personalized quarterly statement listing
(i) the total number of Fund shares owned as of the statement closing
date, (ii) purchases and redemptions of Fund shares and (iii) the
dividends paid on Fund shares (including dividends paid in cash or
reinvested in additional Fund shares).
The price paid for shares of the Portfolio is the public offering
price, that is, the next determined net asset value of the shares
plus a sales load. The sales load is a one-time charge paid at the
time of purchase of shares, most of which ordinarily goes to the
investor's broker-dealer to compensate him for the services provided
the investor.
Sales loads are determined in accordance with the following sales
load schedule:
DEALER SALES CHARGE DISCOUNT
AMOUNT OF SALES AS % OF NET AS % OF
PURCHASE LOAD AMOUNT INVESTED OFFERING PRICE
Less than $50,000 5.75% 6.10% 5.25%
$50,000 up to $99,999 5.25% 5.54% 4.75%
$100,000 up to $249,999 4.50% 4.71% 4.00%
$250,000 up to $499,999 3.00% 3.09% 2.50%
$500,000 up to $999,999 2.00% 2.04% 1.50%
$1,000,000 or more 0.00% 0.00% 0.00%
The Distributor reserves the right to change the dealer's concession
from time to time.
Investments Through Participating Organizations
Participant Investors may, if they wish, invest in the Fund through
the Participating Organizations with which they have accounts. When
instructed by its customer to purchase or redeem Fund shares, the
Participating Organization, on behalf of the customer, transmits to
the Fund's transfer agent a purchase or redemption order, and in the
case of a purchase order, payment for the shares being purchased.
PEA9.P 13
Participating Organizations may confirm to their customers who are
shareholders in the Fund each purchase and redemption of Fund shares
for the customers' accounts. Also, Participating Organizations may
send their customers periodic account statements showing the total
number of Fund shares owned by each customer as of the statement
closing date, purchases and redemptions of Fund shares by each
customer during the period covered by the statement and the income
earned by Fund shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Fund
shares). Participant Investors whose Participating Organizations have
not undertaken to provide such statements will receive them directly
from the Fund.
Participating Organizations may charge Participant Investors a fee in
connection with their use of specialized purchase and redemption
procedures. In addition, Participating Organizations offering
purchase and redemption procedures similar to those offered to
shareholders who invest in the Fund directly, may impose charges,
limitations, minimums and restrictions in addition to or different
from those applicable to shareholders who invest in the Fund
directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than by investing in the Fund
directly. A Participant Investor should read this Prospectus in
conjunction with the materials provided by the Participating
Organization describing the procedures under which Fund shares may be
purchased and redeemed through the Participating Organization.
In the case of qualified Participating Organizations, orders received
by the Fund's transfer agent before 4:00 p.m., New York City time, on
a Fund Business Day, without accompanying Federal Funds will result
in the issuance of shares on that day only if the Federal Funds
required in connection with the orders are received by the Fund's
transfer agent before 4:00 p.m., New York City time, on that day.
Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance the following Fund Business
Day. Participating Organizations are responsible for instituting
procedures to insure that purchase orders by their respective clients
are processed expeditiously.
Initial Direct Purchases of Shares
Investors who wish to invest in the Fund directly may obtain a
current prospectus and the subscription order form necessary to open
an account by telephoning the Fund at (877) 593-8637
Mail
Investors may send a check made payable to "Apex Mid Cap Growth Fund"
along with a completed subscription order form to:
"The Apex Mid Cap Growth Fund",
c/o Mutual Shareholders Services Inc.
1301 E. 9th Street, Suite 1005
Cleveland, OH 44114-1800
Checks are accepted subject to collection at full value in United
States currency.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal
of money among banks, investors should first obtain a new account
number by telephoning the Fund at (877) 593-8637 and then instruct a
member commercial bank to wire money immediately to:
FIRSTAR BANK, N.A. Cinti/Trust
ABA: 0420-0001-3
Attn: The Apex Mid Cap Growth Fund
DDA # 485812697
Share Holder Account Number: ___________________
Share Holder Account Name: ___________________
SS# / Tax ID#: _________________
PEA9.P 14
The investor should then promptly complete and mail the subscription
order form.
Investors planning to wire funds should instruct their bank early in
the day so the wire transfer can be accomplished the same day. There
may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for use of Federal Funds.
The Fund does charge investors in the Fund for its receipt of wire
transfers. Payment in the form of a "bank wire" received prior to
4:00 p.m., New York City time, on a Fund Business Day, will be
treated as a Federal Funds payment received on that day.
Personal Delivery
Deliver a check made payable to "Apex Mid Cap Growth Fund" along with
a completed subscription order form to:
"The Apex Mid Cap Growth Fund",
c/o Mutual Shareholders Services Inc.
1301 E. 9th Street, Suite 1005
Cleveland, OH 44114-1800
Electronic Funds Transfers (EFI), Preauthorized Credit and Direct
Deposit Privilege
You may purchase shares of the Fund (minimum of $100) by having
salary, dividend payments, interest payments or any other payments
designated by you, Federal salary, social security, or certain
veteran's, military or other payments from the Federal government,
automatically deposited into your Fund account. You can also have
money debited from your checking account. To enroll in any one of
these programs, you must file with the Fund a completed EFT
Application, Pre-authorized Credit Application, or a Direct Deposit
Sign-Up Form for each type of payment that you desire to include in
the Privilege. The appropriate form may be obtained from your broker
or the Fund. You may elect at any time to terminate your
participation by notifying in writing the appropriate depositing
entity and/or Federal agency. Death or legal incapacity will
automatically terminate your participation in the Privilege. Further,
the Fund may terminate your participation upon 30 days' notice to
you.
Subsequent Purchases of Shares
Subsequent purchases can be made by personal delivery or by bank
wire, as indicated above, or by mailing a check to:
"The Apex Mid Cap Growth Fund",
c/o Mutual Shareholders Services Inc.
1301 E. 9th Street, Suite 1005
Cleveland, OH 44114-1800
All payments should clearly indicate the shareholder's account
number.
Provided that the information on the subscription form on file with
the Fund is still applicable, a shareholder may reopen an account
without filing a new subscription order form at any time during the
year the shareholder's account is closed or during the following
calendar year.
PEA9.P 15
Reduction or Elimination of Sales Load
Volume Discounts. Volume discounts are provided if the total amount
being invested in shares of the Portfolio reaches the levels
indicated in the sales load schedule set forth under "Purchase of
Shares" herein. Volume discounts are also available to investors
making sufficient additional purchases of Portfolio shares. The
applicable sales charge may be determined by adding to the total
current value of shares already owned in the Portfolio the value of
new purchases computed at the offering price on the day the
additional purchase is made. For example, if an investor previously
purchased, and still holds, shares of the Portfolio worth $95,000 at
the current net asset value and purchases an additional $5,000 worth
of shares of the Portfolio, the sales charge applicable to the new
purchase would be that applicable to the $100,000 to $249,999 bracket
in the sales load schedule set forth under "Purchase of Shares"
herein.
Reinvestment of Dividends and Distributions. There is no sales load
on purchases of Portfolio shares made by reinvestment of dividends
and distributions paid by the Portfolio. Reinvestment will be made
at net asset value (i.e., without the imposition of a sales load) on
the day on which the dividend or distribution is payable.
Letter of Intent. Any investor may sign a Letter of Intent,
available from the Distributor, stating an intention to make
purchases of shares totaling a specified amount within a period of
thirteen months. Purchases within the thirteen-month period can be
made at the reduced sales load applicable to the total amount of the
intended purchase noted in the Letter of Intent. If a larger
purchase is actually made during the period, then a downward
adjustment will be made to the sales charge based on the actual
purchase size. Any shares purchased within 90 days preceding the
actual signing of the Letter of Intent are eligible for the reduced
sales charge and the appropriate price adjustment will be made on
those share purchases. A number of shares equal to 5.75% of the
dollar amount of intended purchases specified in the Letter of Intent
is held in escrow by the Distributor until the purchases are
completed. Dividends and distributions on the escrowed shares are
paid to the investor. If the intended purchases are not completed
during the Letter of Intent period, the investor is required to pay
the Distributor an amount equal to the difference between the regular
sales load applicable to a single purchase of the number of shares
actually purchased and the sales load actually paid. If such payment
is not made within 20 days after written request by the Distributor,
then the Distributor has the right to redeem a sufficient number of
escrowed shares to effect payment of the amount due. Any remaining
escrowed shares are released to the investor's account. Agreeing to
a Letter of Intent does not obligate you to buy, or the Portfolio to
sell, the indicated amount of shares. You should read the Letter of
Intent carefully before signing.
Open-End Management Investment Company Shareholders. Shareholders of
any open-end management investment company may utilize the net
redemption or sales proceeds from the redemption or sale of such
shares to purchase shares of the Portfolio at no sales load.
Investment of the net redemption or sales proceeds into shares of the
Portfolio must occur within 60 calendar days from the settlement date
of such redemption or sale and must be supported by the documentation
requested by the Distributor to provide evidence of said sale or
redemption.
Employees of the Advisor and Distributor. Employees (and their
immediate families) of Bhirud Associates, Inc. may purchase shares of
the Portfolio at no sales load. The absence of a sales load reflects
the reduced sales effort required to sell shares to this group of
investors.
Purchases may be made at net asset value (without the imposition of a
sales load) provided that such purchases are placed through a broker
that maintains an account with the Fund and such purchases are made
by the following:
PEA9.P 16
Investment advisors or financial planners who place trades for their
own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services, and clients
of such investments advisors or financial planners who place trades
for their own accounts if the accounts are linked to the master
accounts of such investment advisor or financial planner on the books
and records of the broker or agent;
Retirement and deferred compensation plans, as well as trusts used to
fund those plans, including, but not limited to, those defined in
section 401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi
trusts".
Investors may be charged a fee by their advisor or financial planner
if they effect transaction in Fund shares through a broker or agent.
In addition to the above, a registered investment advisor may also
purchase shares at net asset value directly from the Fund, provided
they have on file with Bhirud Associates Inc., their SEC registration
number and part II of their ADV form.
Redemption of Shares
A redemption is effected immediately following, and at a price
determined in accordance with, the next determination of net asset
value per share upon receipt by the Fund's transfer agent of the
redemption order (and any supporting documentation which it may
require). Normally, payment for redeemed shares is made on the same
Fund Business Day the redemption is effected, provided the redemption
request is received prior to 4:00 p.m., New York City time. However,
redemption payments will not be effected unless the check (including
a certified or cashier's check) used for investment has been cleared
for payment by the investor's bank, which could take up to 15 days
after investment.
A shareholder's original subscription order form permits the
shareholder to redeem by written request and to elect one or more of
the additional redemption procedures described below. A shareholder
may only change the instructions indicated on his original
subscription order form by transmitting a written direction to the
Fund's transfer agent. Requests to institute or change any of the
additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature. It should be
signed and guaranteed by an eligible guarantor institution which
includes a domestic bank, a domestic savings and loan institution, a
domestic credit union, a member bank of the Federal Reserve system or
a member firm of a national securities exchange, pursuant to the
Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written
request to the Fund addressed to:
"The Apex Mid Cap Growth Fund",
c/o Mutual Shareholders Services Inc.
1301 E. 9th Street, Suite 1005
Cleveland, OH 44114-1800
All previously issued certificates submitted for redemption must be
endorsed by the shareholder and all written requests for redemption
must be signed by the shareholder, in each case with signature
guaranteed. Normally the redemption proceeds are paid by check and
mailed to the shareholder of record.
PEA9.P 17
Telephone
The Fund accepts telephone requests for redemption from shareholders
who elect this option on their subscription order form. Telephone
requests for redemptions may not exceed $25,000 per request per day.
The proceeds of a telephone redemption may be sent to the
shareholders at their addresses or to their bank accounts, both as
set forth in the subscription order form or in a subsequent written
authorization. The Fund may accept telephone redemption instructions
from any person with respect to accounts of shareholders who elect
this service and thus such shareholders risk possible loss of
principal and interest in the event of a telephone redemption not
authorized by them. The Fund will employ reasonable procedures to
confirm that telephone redemption instructions are genuine, and will
require that shareholders electing such option provide a form of
personal identification. Failure by the Fund to employ such
reasonable procedures may cause the Fund to be liable for the losses
incurred by investors due to unauthorized or fraudulent telephone
redemptions.
A shareholder making a telephone withdrawal should call the Fund at
(877) 593-8637, and state: (i) the name of the shareholder appearing
on the Fund's records; (ii) the shareholder's account number with the
Fund; (iii) the amount to be withdrawn; (iv) whether such amount is
to be forwarded to the shareholder's designated bank account or
address; and (v) the name of the person requesting the redemption.
Usually the proceeds are sent to the designated bank account or
address on the same Fund Business Day the redemption is effected,
provided the redemption request is received before 4:00 p.m., New
York City time. If the redemption request is received after such
time, proceeds are sent the next Fund Business Day. The Fund reserves
the right to terminate or modify the telephone redemption service in
whole or in part at any time and will notify shareholders
accordingly.
There is no redemption charge, no minimum period of investment, no
minimum amount for a redemption, and no restriction on frequency of
withdrawals. Proceeds of redemptions are paid by check. Unless other
instructions are given in proper form to the Fund's transfer agent, a
check for the proceeds of a redemption will be sent to the
shareholders' address of record. If a shareholder elects to redeem
all the shares of the Fund he owns, all dividends accrued to the date
of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after the shares
are tendered for redemption, except for any period during which the
New York Stock Exchange, Inc. is closed (other than customary weekend
and holiday closings) or during which the SEC determines that trading
thereon is restricted. Additional exceptions include any period
during which an emergency (as determined by the SEC) exists as a
result of which disposal by the Fund of its portfolio securities is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value of
its net assets, or for such other period as the SEC may by order
permit for the protection of the shareholders of the Fund.
The Fund has reserved the right to redeem the shares of any
shareholder (other than those in an IRA) if the net asset value of
all the remaining shares in the shareholder's or his Participating
Organization's account after a withdrawal is less than $500. Written
notice of a proposed mandatory redemption will be given at least 30
days in advance to any shareholder whose account is to be redeemed or
the Fund may impose a monthly service charge of $10 on such accounts.
For Participant Investor accounts, notice of a proposed mandatory
redemption will be given only to the appropriate Participating
Organization. The Participating Organization will be responsible for
notifying the Participant Investor of the proposed mandatory
redemption. During the notice period, a shareholder or Participating
Organization who receives such a notice may avoid mandatory
redemption by purchasing sufficient additional shares to increase his
total net asset value to the minimum amount.
PEA9.P 18
Dividends and Distributions
Each dividend and capital gains distribution, if any, declared by the
Fund on its outstanding shares will, at the election of each
stockholder, be paid in cash or in additional shares of common stock
of the Fund having an aggregate net asset value as of the payment
date of such dividend or distribution equal to the cash amount of
such dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are
subscribed for and may be changed by notifying the Fund in writing at
any time prior to the record date for a particular dividend or
distribution. If the stockholder makes no election the Fund will make
the distribution in shares. There is no sales or other charge in
connection with the reinvestment of dividends and capital gains
distributions.
While it is the intention of the Fund to distribute to its
stockholders substantially all of each fiscal year's net income and
net realized capital gains, if any, the amount and time of any such
dividend or distribution must necessarily depend upon the realization
by the Fund of income and capital gains from investments. Dividends
will normally be paid annually. Capital gains distributions, if any,
will be made at least annually and usually at the end of the Fund's
fiscal year. There is no fixed dividend rate, and there can be no
assurance that the Fund will pay any dividends or realize any capital
gains.
Retirement Plans
The Fund has available a form of individual retirement account
("IRA") for investment in the Fund's shares. In general, an
individual can make an annual contribution to an IRA in an amount
equal to the lesser of $2000 or 100% of the individual's earned
income. In addition, in the case of a married couple filing a joint
return, annual IRA contributions of up to $2000 can generally be made
for each spouse, as long as the combined compensation of both spouses
is at least equal to the contributed amounts. IRA contributions can,
in general, be made to either traditional deductible IRAs,
traditional non-deductible IRAs or nondeductible Roth IRAs, a new
type of IRA established by the Taxpayer Relief Act of 1997.
Contributions to a Roth IRA are not deductible, but qualified
distributions from a Roth IRA are not includable in income or subject
to the additional ten-percent tax on early withdrawals, if deemed a
qualified distribution. A "qualified distribution" is a distribution
that is made after the end of the five taxable year period beginning
with the first day of the individual's taxable year in which the
individual made a contribution to a Roth IRA, and which is made on or
after the date in which the individual attains an age of 59 1/2, on
or after the death of the individual or is attributable to the
disability of the individual, or is a distribution for specified
first-time home buyer expenses or certain education expenses.
Contributions to traditional deductible IRAs and Roth IRAs may be
limited based on adjusted gross income levels. The ability of a
person who is an active participant in an employer sponsored
retirement plan to make deductible contributions to a regular IRA is
phased out based on the individual's adjusted gross incomes. For
1999, the phase out occurs over a range of adjusted gross incomes
from $51,000 to $61,000 on a joint return and $31,000 to $41,000 on a
single return. The phase out range for a married individual who is
not an active participant but whose spouse is an active participant
is between $150,000 and $160,000.
The maximum annual contribution that can be made to a Roth IRA is
also subject to phase out rules that apply to married individuals
filing joint returns when adjusted gross income is between $150,000
and $160,000 and to single individuals when adjusted gross income is
between $95,000 and $110,000.
For both traditional deductible IRAs and Roth IRAs, the phase out
range for married individuals filing separate returns is from $0 to
$10,000. Generally, there are penalties for premature distributions
from an IRA before the attainment of age 59 1/2, except in the case
of the participant's death or disability and certain other
circumstances including first-time home buyer expenses and certain
education expenses.
PEA9.P 19
Fund shares may also be a suitable investment for assets of other
types of qualified pension or profit-sharing plans, including cash or
deferred or salary reduction "Section 401(k) plans" which give
participants the right to defer portions of their compensation for
investment on a tax-deferred basis until distributions are made from
the plans.
Persons desiring information concerning investments by IRAs and other
retirement plans should write or telephone the Fund. The minimum
investment required to open an IRA is $250.
Tax Consequences
The Fund qualified for the fiscal year ended July 31,1999 and intends
for each year thereafter to qualify for tax treatment as a "regulated
investment company" under the Internal Revenue Code of 1986, as
amended. Qualification as a regulated investment company relieves the
Fund of Federal income tax on investment company taxable income and
net capital gains paid out to its stockholders. Distributions of
investment company taxable income and net short-term capital gains
are taxable to stockholders as ordinary income. Some corporate
stockholders will be entitled to the dividends-received deduction to
the extent that the Fund's income is derived from qualifying
dividends from domestic corporations. A corporation's dividends-
received deduction will be disallowed unless the corporation holds
shares in the Fund at least 46 days. Furthermore, a corporation's
dividends-received deduction will be disallowed to the extent a
corporation's investment in shares of the Fund is financed with
indebtedness.
The excess of net long-term capital gains over net short-term capital
losses realized and distributed by the Fund as capital gains
distributions is taxable to stockholders as long-term capital gains,
irrespective of the length of time a stockholder may have held its
stock. Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above. If a stockholder that
sells shares held for six months or less received a distribution
taxable as long-term capital gain, any loss realized on the sale of
the shares would be a long-term capital loss to the extent of the
distribution.
Any dividend or distribution received by a stockholder shortly after
the purchase of shares of the Fund will reduce the net asset value of
the shares by the amount of the dividend or distribution.
Furthermore, the dividend or distribution is subject to tax even
though they are, in effect, a return of capital.
The Fund is required by Federal law to withhold 31% of distributions
and the proceeds of redemptions payable to stockholders who have
failed to furnish the Fund with and certify the shareholder's correct
social security or tax identification number and that the stockholder
is not subject to 31% backup withholding for previous underreporting
to the IRS.
The redemption of shares may result in the investor's receipt of more
or less than the investor paid for its shares and, thus, in a taxable
gain or loss to the investor.
An exchange pursuant to the exchange privilege is treated for Federal
income tax purposes as a sale on which a shareholder may realize a
taxable gain or loss.
PEA9.P 20
The Apex Mid Cap Growth Fund
PROSPECTUS
For More Information:
For more information about the Fund, the following documents are
available free upon request:
Annual/Semiannual Reports:
The Fund's semi-annual and audited annual reports to shareholders
contain detailed information on the
Fund's investments. In the annual report, you will find a discussion
of the market conditions and
investment strategies that significantly affected the Fund's
performance during its last fiscal year.
Statement of Additional Information (SAI):
The SAI provides more detailed information about the Fund, including
their operations and investment policies. It is incorporated by
reference, and is legally considered a part of this prospectus.
You can get free copies of Reports and SAI, prospectuses of Apex Mid
cap Growth Fund, or
request other information and discuss your questions about the Fund
by contacting:
Bhirud Associates, Inc.
Soundview Plaza
1266 East Main Street
Stamford, CT 06902
Telephone: 203 977 1521
Fax: 203 977 1525
You can review and obtain the Fund's reports and SAI at the Public
Reference Room of the Securities and Exchange Commission. You may
call 1-800-SEC-0330 for information on the operation of the Public
Reference Room. You can get text-only copies:
For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act file no. 811-6680)
PEA9.P 21
Apex Mid Cap Growth Fund
Bhirud Funds Inc., 1266 E. Main Street
Stamford, CT 06902
STATEMENT OF ADDITIONAL INFORMATION
November 30, 1999
RELATING TO THE APEX MID CAP GROWTH FUND
PROSPECTUS DATED November 30, 1999
This Statement of Additional Information (SAI) is not a Prospectus.
The SAI expands upon and supplements the information contained in the
current Prospectus of Apex Mid Cap Growth Fund. (the "Fund"), dated
September 30,1999 and should be read in conjunction with the Fund's
Prospectus.
A Prospectus may be obtained from Bhirud Funds Inc. or by writing or
calling the Fund toll-free at (877) 593-8637. The Financial
Statements of the Fund have been incorporated by reference to the
Fund's Annual Report. The Annual Report is available, without charge,
upon request by calling the toll-free number provided above.
This Statement of Additional Information is incorporated by reference
into the Fund's Prospectus in its entirety.
Table Of Contents
Fund History 23 Brokerage Allocation and 37
Other Practices
Description of the Fund and 23 Capital Stock and Other 38
its Investments and Risks Securities
Management of the Fund 30 Purchase, Redemption and 38
Pricing Shares
Control Persons and 32 Taxation of the Fund 40
Principal Holders of
Securities
Investment Advisory and 32 Underwriters 42
Other Services
Distribution and Service 34 Calculation of Performance 42
Plan Data
Expense Limitation 35 Financial Statements 42
Custodian and Transfer Agent 36
Counsel and Auditors 36
PEA9.P 22
I. FUND HISTORY
The Fund was incorporated on May 27, 1992 in the state of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, diversified management investment company.
The fund's investment objective is to seek long- term growth of
capital. Current income is a secondary objective. No assurance can be
given that these objectives will be achieved. Although not principal
strategies, the manager may enter into the following types of
transactions or invest in the following types of instruments as part
of its investment strategies.
Warrants and Rights
The Portfolio may invest in warrants or rights of securities of mid-
sized companies (other than those acquired in units or attached to
other securities) which entitle the holder to buy equity securities
at a specific price for a specific period of time but will do so only
if such equity securities are deemed appropriate by the Advisor for
inclusion in the Portfolio. In the event the underlying security
does not sufficiently increase in value during the period when the
warrant may be exercised so as to provide an attractive investment
for the Portfolio, the warrant will expire and the Portfolio will
suffer a loss on the price it paid for the warrant. The Portfolio
will not purchase warrants if, as a result of such purchase, more
than 5% of the Portfolio's total assets are invested in warrants and
the Portfolio will not invest more than 2% of its total assets in
warrants or rights which are not listed on the New York or American
Stock Exchanges.
Convertible Securities
Convertible Securities are bonds, debentures, notes, preferred stocks
or other securities that may be converted or exchanged (by the holder
or by the issuer) into shares of the underlying common stock (or cash
or securities of equivalent value) at a stated exchange ratio. A
convertible security may also be called for redemption or conversion
by the issuer after a particular date and under certain circumstances
(including a specified price) established upon issue. If a
convertible security held by a fund is called for redemption or
conversion, the fund could be required to tender it for redemption,
convert it into the underlying common stock, or sell it to a third
party.
Convertible securities generally have less potential for gain or loss
than common stocks. Convertible securities generally provide yields
higher than the underlying common stocks, but generally lower than
comparable non-convertible securities. Because of this higher yield,
convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to
be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time
depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value,
convertible Securities will tend not to decline to the same extent
because of the interest or dividend payments and the repayment of
principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When
the underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time,
however, the difference between the market value of convertible
securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to
the same extent as the value of the underlying common stocks. Because
convertible securities may also be interest-rate sensitive, their
value may increase as interest rates fall and decrease as interest
rates rise. Convertible securities are also subject to credit risk,
and are often lower-quality securities.
PEA9.P 23
Corporate Reorganizations
Subject to the Portfolio's policy of investing at least 65% of its
total assets in Common Stocks, the Portfolio may invest without limit
in securities listed on the S&P MidCap Index for which a tender or
exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or similar
reorganization proposal has been announced if, in the judgment of the
Advisor, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses
inherent in the short term nature of such transactions. The
principal risk is that such offers or proposals may not be
consummated within the time and under the terms contemplated at the
time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals
which are consummated, the Portfolio may sustain a loss.
Investments in Small, Unseasoned Companies
The Portfolio may invest up to 5% of its total assets in small, less
recognized companies which (including predecessors) have operated
less than three years. The securities of such companies may have
limited liquidity.
When Issued, Delayed Delivery Securities and Forward Commitments
The Portfolio from time to time, in the ordinary course of business,
may purchase securities on a when-issued or delayed-delivery basis
(i.e., delivery and payment can take place between a month and 120
days after the date of the transaction). These securities are subject
to market fluctuation and no interest accrues to the purchaser during
this period. At the time a Portfolio makes the commitment to purchase
securities on a when issued or delayed-delivery basis, the Portfolio
will record the transaction and thereafter reflect the value of the
securities, each day, in determining the Portfolio's net asset value.
The Portfolio will not purchase securities on a when-issued or
delayed delivery basis, if as a result, more than 15% of the
Portfolio's net assets would be so invested. At the time of delivery
of the securities, the value of the securities may be more or less
than the purchase price.
The Portfolio will enter into when-issued or delayed-delivery
transactions for the purpose of acquiring securities and not for the
purpose of leverage. When issued securities purchased by the
Portfolio may include securities purchased on a "when, as and if
issued" basis under which the issuance of the securities depends on
the occurrence of a subsequent event. Upon purchasing a security on a
when-issued or delayed-delivery basis, the Portfolio will identify,
as part of a segregated account, cash or liquid securities in an
amount at least equal to the when-issued or delayed-delivery
commitment.
The Portfolio will also establish a segregated account with the
Trust's custodian bank in which the Portfolio will maintain liquid
instruments equal to or greater in value than the Portfolio's
purchase commitments for such when-issued or delayed-delivery
securities, or the Portfolio does not believe that a Portfolio's net
asset value or income will be adversely affected by the Portfolio's
purchase of securities on a when issued or delayed delivery basis.
Short Sales
The Portfolio may engage in short sales transactions under which the
Portfolio sells a security it does not own. To complete such a
transaction, the Portfolio must borrow the security to make delivery
to the buyer. The Portfolio then is obligated to replace the security
borrowed by purchasing the security at the market price at 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 Portfolio. Until the
security is replaced, the Portfolio is required to pay to the lender
amounts equal to any dividends or interest which accrue during the
period of the loan. To borrow the security, the Portfolio also may be
required to pay a premium, which would increase the cost of the
security sold. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet the margin requirements,
until the short position is closed out.
PEA9.P 24
Until the Portfolio closes its short position or replaces the
borrowed security, the Portfolio will cover its position with an
offsetting position or maintain a segregated account containing cash
or liquid instruments at such a level that the amount deposited in
the account plus the amount deposited with the broker as collateral
will equal the current value of the security sold short.
The market value of the securities sold short of any one issuer will
not exceed either 2% of the Portfolio's total assets or 2% of such
issuer's voting securities. The Portfolio will not make a short
sale, if, after giving effect to such sale, the market value of all
securities sold short exceeds 30% of the value of its assets or the
Portfolio's aggregate short sales of a particular class of securities
exceeds 30% of the outstanding securities of that class. The
Portfolio may also make short sales "against the box" without respect
to such limitations. In this type of short sale, at the time of the
sale, the Portfolio owns or has the immediate and unconditional right
to acquire, at no additional cost, the identical security.
Repurchase Agreements
The Portfolio may enter into repurchase agreements with financial
institutions. Under a repurchase agreement, a Portfolio purchases a
debt security and simultaneously agrees to sell the security back to
the seller at a mutually agreed-upon future price and date, normally
within a few days. The resale price is greater than the purchase
price, reflecting an agreed-upon market interest rate during the
purchaser's holding period. While the maturities of the underlying
securities in repurchase transactions may be more than one year, the
term of each repurchase agreement will always be less than one year.
The Portfolio follows certain procedures designed to minimize the
risks inherent in such agreements. These procedures include effecting
repurchase transactions only with large, well-capitalized and well
established financial institutions whose condition will be
continually monitored by the Advisor. In addition, the value of the
collateral underlying the repurchase agreement will always be at
least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, a Portfolio will seek
to liquidate such collateral which could involve certain costs or
delays and, to the extent that proceeds from any sale upon a default
of the obligation to repurchase were less than the repurchase price,
the Portfolio could suffer a loss. A Portfolio also may experience
difficulties and incur certain costs in exercising its rights to the
collateral and may lose the interest the Portfolio expected to
receive under the repurchase agreement. Repurchase agreements usually
are for short periods, such as one week or less, but may be longer.
It is the current policy of the Portfolio not to invest in repurchase
agreements that do not mature within seven days if any such
investment, together with any other liquid assets held by the
Portfolio, amounts to more than 15% of the Portfolio's total net
assets. The investments of the Portfolio in repurchase agreements at
times may be substantial when, in the view of the Advisor, liquidity,
investment, regulatory, or other considerations so warrant.
Securities Lending
A fund may lend securities to brokers, dealer, and financial
institutions. Securities lending allows a fund to retain ownership of
the securities loaned and, at the same time, to earn additional
income. Since there may be delays in the recovery of loaned
securities, or even a loss of rights in collateral supplied should
the borrower fail financially, loans will be made only to parties
deemed by the fund to be of good standing. Furthermore, they will
only be made if, in the advisor's judgment, the consideration to be
earned from such loans would justify the risk.
The fund understands that it is the current view of the SEC Staff
that a fund may engage in loan transactions only under the following
conditions: (i) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from
the borrower; (ii) the borrower must increase the collateral whenever
the market value of the securities loaned (determined on a daily
basis) rises above the value of the collateral; (iii) after giving
notice, the fund must be able to terminate the loan at any time; (iv)
the fund must receive reasonable interest on the loan or a flat fee
from the borrower, as well as amounts equivalent to any dividends,
interest, or other distributions on the securities loaned and to any
increase in market value; (v) the fund may pay only reasonable
custodian fees in connection with the loan; and (vi) the Board of
Trustees must be able to vote proxies on the securities loaned,
either by terminating the loan or by entering into an alternative
arrangement with the borrower.
PEA9.P 25
Cash received through loan transactions may be invested in other
eligible securities. Investing this cash subjects that investment, as
well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
Futures and Options
The following paragraphs pertain to futures and options: Asset
Coverage for Futures and Options Positions, Combined Positions,
Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity
of Options and Futures Contracts, Options and Futures Relating to
Foreign Currencies, OTC Options, Purchasing Put and Call Options, and
Writing Put and Call Options.
Asset Coverage for Futures and Options Positions
The fund will comply with guidelines established by the SEC with
respect to coverage of options and futures strategies by mutual funds
and, if the guidelines so require, we will set aside appropriate
liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold
while the futures or options strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of the fund's
assets could impede portfolio management or the fund's ability to
meet redemption requests or other current obligations.
Combined Positions
Combined Positions involve purchasing and writing options in
combination with each other, or in combination with futures or
forward contracts, to adjust the risk and return characteristics of
the overall position. For example, purchasing a put option and
writing a call option on the same underlying instrument would
construct a combined position whose risk and return characteristics
are similar to selling a futures contract. Another possible combined
position would involve writing a call option at one strike price and
buying a call option at a lower price, to reduce the risk of the
written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open
and close out.
Correlation of Price Changes
Because there are a limited number of types of exchange-traded
options and futures contracts, it is likely that the standardized
contracts available will not match a fund's current or anticipated
investments exactly. A fund may invest in options and futures
contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which the fund typically
invests, which involves a risk that the options or futures position
will not track the performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase
or sell options and futures contracts with a greater or lesser value
than the securities it wishes to hedge or intends to purchase in
order to attempt to compensate for differences in volatility between
the contracts and the securities, although this may not be successful
in all cases. If price changes in a fund's options or futures
positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses
that are not offset by gains in other investments.
PEA9.P 26
Futures Contracts
In purchasing a futures contract, the buyer agrees to purchase a
specified underlying instrument at a specified future date. In
selling a futures contract, the seller agrees to sell a specified
underlying instrument at a specified future date. The price at which
the purchase and sale will take place is fixed when the buyer and
seller enter into the contract. Some currently available futures
contracts are based on specific securities, such as U.S. Treasury
bonds or notes, and some are based on indices of securities prices,
such as the Standard & Poor's 500 Index (S&P 500). Futures can be
held until their delivery dates, or can be closed out before then if
a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the
value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much
as if the underlying instrument had been sold.
Futures Margin Payments
The purchaser or seller of a futures contract is not required to
deliver or pay for the underlying instrument unless the contract is
held until the delivery date. However, both the purchaser and seller
are required to deposit "initial margin" with a futures broker, known
as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of
the contract's value. If the value of either party's position
declines, that party will be required to make additional "variation
margin" payments to settle the change in value on a daily basis. The
party that has a gain may be entitled to receive all or a portion of
this amount. Initial and variation margin payments do not constitute
purchasing securities on margin for purposes of a fund's investment
limitations. In the event of the bankruptcy of an FCM that holds
margin on behalf of a fund, the fund may be entitled to return of
margin owed to it only in proportion to the amount received by the
FCM's other customers, potentially resulting in losses to the fund.
Limitations on Futures and Options Transactions: In addition, the
fund will not: (i) sell futures contracts, purchase put options, or
write call options if, as a result, more than 10% of the fund's total
assets would be hedged with futures and options under normal
conditions; (ii)) purchase futures contracts or write put options if,
as a result, the fund's total obligations upon settlement or exercise
of purchased futures contracts and written put options would exceed
10% of its total assets; or (iii) purchase call options if, as a
result, the current value of option premiums for call options
purchased by the fund would exceed 5% of the fund's total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The above limitations on the fund's investments in futures contracts
and options, and the fund's policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
PEA9.P 27
Liquidity of Options and Futures Contracts
There is no assurance a liquid secondary market will exist for any
particular options or futures contract at any particular time.
Options may have relatively low trading volume and liquidity if their
strike prices are not close to the underlying instrument's current
price. In addition, exchanges may establish daily price fluctuation
limits for options and futures contracts, and may halt trading if a
contract's price moves upward or downward more than the limit in a
given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible to
enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation
of unfavorable positions, and potentially could require a fund to
continue to hold a position until delivery or expiration regardless
of changes in its value. As a result, a fund's access to other assets
held to cover its options or futures positions could also be
impaired.
Options and Futures Relating to Foreign Currencies
Currency futures contracts are similar to forward currency exchange
contracts, except that they are traded on exchanges (and have margin
requirements) and are standardized as to contract size and delivery
date. Most currency futures contracts call for payment or delivery in
U.S. dollars. The underlying instrument of a currency option may be a
foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, or may be a futures contract. The
purchaser of a currency call obtains the right to purchase the
underlying currency, and the purchaser of a currency obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. A fund may purchase and sell currency futures and may purchase
and write currency options to increase or decrease its exposure to
different foreign currencies. Currency options may also be purchased
or written in conjunction with each other or with currency futures or
forward contracts. Currency futures and options values can be
expected to correlate with exchange rates, but may not reflect other
factors that affect the value of a fund's investments. A currency
hedge, for example, should protect a Yen-denominated security from a
decline in the Yen, but will not protect a fund against a price
decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange
rates, it may not be possible to match the amount of currency options
and futures to the value of the fund's investments exactly over time.
Purchasing Put and Call Options
By purchasing a put option, the purchaser obtains the right (but not
the obligation) to sell the option's underlying instrument at a fixed
strike price. In return for this right, the purchaser pays the
current market price for the option (known as the option premium).
Options have various types of underlying instruments, including
specific securities, indices of securities prices, and futures
contracts. The purchaser may terminate its position in a put option
by allowing it to expire or by exercising the option. If the option
is allowed to expire, the purchaser will lose the entire premium. If
the option is exercised, the purchaser completes the sale of the
underlying instrument at the strike price. A purchaser may also
terminate a put option position by closing it out in the secondary
market at its current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium, plus related transaction
costs).
PEA9.P 28
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the
same time, the buyer can expect to suffer a loss if security prices
do not rise sufficiently to offset the cost of the option.
Writing Put and Call Options
The writer of a put or call option takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the
premium, the writer assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the
option chooses to exercise it. The writer may seek to terminate a
position in a put option before exercise by closing out the option in
the secondary market at its current price. If the secondary market is
not liquid for a put option, however, the writer must continue to be
prepared to pay the strike price while the option is outstanding,
regardless of price changes, and must continue to set aside assets to
cover its position. When writing an option on a futures contract, a
fund will be required to make margin payments to an FCM as described
above for futures contracts.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall,
the put writer would expect to suffer a loss. This loss should be
less than the loss from purchasing the underlying instrument
directly, however, because the premium received for writing the
option should mitigate the effects of the decline.
Writing a call option obligates the writer to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options
are similar to those of writing put options, except that writing
calls generally is a profitable strategy if prices remain the same or
fall. Through receipt of the option premium, a call writer mitigates
the effects of a price decline. At the same time, because a call
writer must be prepared to deliver the underlying instrument in
return for the strike price, even if its current value is greater, a
call writer gives up some ability to participate in security price
increases.
Investment Restrictions
The Fund has adopted the following fundamental investment
restrictions. They may not be changed unless approved by a majority
of the outstanding shares "of each series of the Fund's shares that
would be affected by such a change." The term "majority of the
outstanding shares" of the Fund means the vote of the lesser of (i)
67% or more of the shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. The following are the fund's
fundamental investment limitations set forth in their entirety. The
fund may not:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities,
or securities of other investment companies) if, as a result, more
than 5% of the fund's total assets would be invested in the
securities of that issuer, or the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in
an amount not exceeding 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within
three days (not including Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
PEA9.P 29
(4) underwrite securities issued by others, except to the extent
that the fund may be considered an underwriter in regard to the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this
shall not prevent the fund from purchasing or selling options and
futures contracts or from investing in securities or other
instruments backed by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
If a percentage restriction is adhered to at the time an investment
is made, a later change in percentage resulting from changes in the
value of the Portfolio's investment securities will not be considered
a violation of the Portfolio's restrictions.
The following investment limitations are not fundamental and may be
changed without shareholder approval.
(1) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as
are necessary for the clearance of transactions, and provided that
margin payments in connection with futures contracts and options on
futures contracts shall not constitute purchasing securities on
margin.
(2) The fund may borrow money only (i) from a bank or (ii) by
engaging in reverse repurchase agreements with any party (reverse
repurchase agreements are treated as borrowings for purposes of
fundamental investment limitation (3)). The fund will not borrow if
total outstanding borrowings immediately after such borrowing would
exceed 15% of the fund's total assets.
(3) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at the prices
at which they are valued.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall
management and supervision of the Fund, has employed the Manager to
serve as investment manager of the Fund. The Manager provides persons
satisfactory to the Fund's Board of Directors to serve as officers of
the Fund. Such officers, as well as certain other employees and
directors of the Fund, may be directors or officers of Bhirud
Associates, Inc., the sole general partner of the Manager or
employees of the Manager or its affiliates. Due to the services
performed by the Manager, the Fund currently has no employees and its
officers are not required to devote their full-time to the affairs of
the Fund.
PEA9.P 30
The Directors and Executive Officers of the Fund, and their principal
occupations during the past five years, are set forth below. Unless
otherwise specified, the address of each of the following persons is
Bhirud Funds Inc., 1266 E. Main Street, Stamford, CT 06902. Directors
deemed to be "interested persons" of the Fund for the purposes of the
Investment Company Act of 1940 (the "1940 Act"), as amended are
indicated by an asterisk.
Suresh L. Bhirud* (51) Director, Chairman of the Board and Treasurer
President of Bhirud Associates, Inc., from 1991 to date; Senior Vice
President, Chief Investment Strategist, Chairman of the Investment
Policy Committee of Dean Witter Reynolds, Inc., New York, NY from
1990-91; Managing Director, Chief Investment Strategist, Chairman of
the Investment Policy Committee of Oppenheimer & Co., New York, NY,
from 1987-90; Chief Investment Strategist (1982-87) and various
positions involving quantitative market analysis (1972-81) at The
First Boston Corporation, New York, NY, from 1972-87.
Harish L. Bhirud* (46) Director and Vice-President Bhirud Funds Inc.,
from 1993 to date; Project Manager at M/s Mehtalia and Associates,
Bombay, India, from 1990-1993.
Alexander Norman Crowder, III (64) Director; 159 E. Ave., Old Forge
Green, New Canaan, CT 06840. Management Consultant, from 1991 to
date; Chairman and Chief Executive Officer of Alexander & Alexander
Consulting Group (1991); Managing Principal and Director of
Tillinghast (Towers Perrin) from 1986-91.
Timothy M. Fenton (56) Director; 46 Norton Avenue Darien, CT 06820.
Chairman of Fenton & Zalenetz Inc., a direct marketing consulting
firm, from 1990 to date; President of Bozell Direct Response, a
division of Bozell Worldwide, Inc. from 1987-90. Executive vice-
president of McCaffrey and McCall Advertising 1980-87.
M. John Sterba, Jr., (56) Director; Investment Management Advisors,
Inc. 156 Fifth Avenue, New York, NY 10010; Chairman of Investment
Management Advisors, Inc. from 1991 to date; of Counsel to Taub &
Fasciana, P.C. from 1984 to 1994; Principal of Venture Capital
Associates from 1988 to date.
The Fund paid an aggregate remuneration of $12,000 to its Directors
with respect to the period ended July 31, 1999, all of which
consisted of aggregate director's fees paid to the three
disinterested directors, pursuant to the terms of the Investment
Management Contract. See Compensation Table below.
Compensation Table
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
from Benefits Benefits from Fund
Registrant Accrued as upon and Fund
for Fiscal Part of Fund Retirement Complex Paid
Year Expenses to
Directors*
Alexander $4,000 0 0 $4,000
Norman Crowder,
III
Director
Timothy M. $4,000 0 0 $4,000
Fenton
Director
M. John Sterba, $4,000 0 0 $4,000
Jr.
Director
* The total compensation paid to such persons by the Fund for the
fiscal year ending July 31, 1999.
PEA9.P 31
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On July 31, 1999 there were 271,621 shares of the Fund's common stock
outstanding. As of July 31,1999, the amount of shares owned by all
officers and directors of the Fund, as a group, was more than 2% of
the outstanding shares of the Fund. Set forth below is certain
information as to persons who owned 5% or more of the Fund's
outstanding common stock as of July 31,1999:
Name & Address % of Nature of
Shares Ownership
Suresh L. Bhirud 26.3% Record &
27 Winding LN., Darien, CT 06820 Beneficial
Sunil M. Deshmukh 19.9% Record
1300 Rockrimmon Rd., Stamford, CT 06903
BA Trust & Co. 8.9% Record
C/o Bankers Trust Co.
PO Box 9005, Church Street Station
New York, NY 1008
Dennis Shaughnessy & Rita Holmes 5.7% Record
Shaughnessy
103 Old King Highway South, Darien, CT
06820
V. INVESTMENT ADVISORY AND OTHER SERVICES
The Advisor to the Portfolio is Bhirud Associates, Inc., a New York
corporation with principal offices located at Soundview Plaza, 1266
E. Main Street, Stamford, Connecticut 06902. In addition to serving
the Portfolio as Advisor, as of July 30, 1999, the Advisor served as
an investment advisor to individual accounts having a total value of
approximately $19.0 million. The Fund is the only investment company
advisory client of the Advisor.
Suresh L. Bhirud, an officer, director and sole shareholder of the
Advisor is deemed to be a "controlling person" of the Advisor.
Consequently, Mr. Bhirud, as an officer and director of the Fund, is
an affiliated person of both the Advisor and the Fund.
Pursuant to the Advisory Contract for the Portfolio, the Advisor
manages the portfolio of securities and makes decisions with respect
to the purchase and sale of investments, subject to the general
control of the Board of Directors of the Fund. In addition, the
Advisor provides persons satisfactory to the Board of Directors of
the Fund to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors,
officers or employees of the Advisor or its affiliates.
The Advisor also provides the Fund with supervisory personnel who are
responsible for supervising the performance of the Portfolio's
administrator. The administrator will provide personnel who will be
responsible for performing the operational components of such
supervisory services and who may be employees of the Advisor, of its
affiliates or of other organizations.
PEA9.P 32
The continuance of the Advisory Contract was approved by vote of a
majority of directors, including a majority of directors who are not
interested persons (as defined in the Act) of the Fund or Advisor, at
the Board of Directors meeting held July 14, 1999. The Advisory
Contract has a term which extends to July 31, 2000, and may be
continued in force thereafter for successive twelve-month periods
beginning each August 1st, provided that such continuance is
specifically approved annually by majority vote of the Portfolio's
outstanding voting securities or by the Fund's Board of Directors,
and in either case by a majority of the directors who are not parties
to the Advisory Contract or interested persons of any such party, by
votes cast in person at a meeting called for the purpose of voting on
such matter.
The Advisory Contract is terminable without penalty by the Portfolio
on sixty days' written notice when authorized either by majority vote
of the outstanding voting shares of the Portfolio or by a vote of a
majority of the Fund's Board of Directors, or by the Advisor on sixty
days' written notice, and will automatically terminate in the event
of an assignment. The Advisory Contract provides that in the absence
of willful misfeasance, bad faith or gross negligence on the part of
the Advisor, or of reckless disregard of its obligations thereunder,
the Advisor shall not be liable for any action or failure to act in
accordance with its duties thereunder.
For its services under the Advisory Contract, the Advisor receives
from the Fund an advisory fee, computed daily and payable monthly, in
accordance with the following schedule: (i) 1.0% of the first $250
million of the average net assets of the Portfolio; (ii) .75% of the
average net assets of the Portfolio between $250 million and $500
million; and (iii) .65% of the average net assets of the Portfolio
over $500 million.
For its services under the Advisory Contract, the Advisor receives
from the Fund a fee, payable monthly, at the annual rate of 1.00% of
the Fund's average daily net assets. In addition to management
services with respect to the purchase and sale of securities, the fee
includes compensation for overall management of the Fund and for
distributing the Fund's shares. For the Fund's fiscal years ended
July 31,1999, 1998 and 1997, the Advisor voluntarily, permanently and
irrevocably waived all advisory fees and, therefore, it did not
receive any advisory fees for the year ended July 31, 1999, 1998 and
1997. There can be no assurance that such fees will be waived in the
future.
Effective November 1, 1994, pursuant to an administrative services
agreement (the "Administrative Services Agreement") with the
Portfolio, the Advisor provides all management and administrative
services reasonably necessary for the Portfolio, other than those
provided by the Advisor under the Advisory Contract, subject to the
supervision of the Fund's Board of Directors. Because of the
services rendered the Portfolio by the Advisor, the Fund itself may
not require any employees other than its officers, none of whom
receive compensation from the Fund.
Under the Administrative Services Agreement with the Portfolio, the
Advisor provides all administrative services including, without
limitation: (i) provides services of persons competent to perform
such administrative and clerical functions as are necessary to
provide effective administration of the Fund, including maintaining
certain books and records described in Rule 31a-1 under the 1940 Act,
and reconciling account information and balances among the
Portfolio's Custodian and Advisor; (ii) oversees the performance of
administrative and professional services to the Portfolio by others,
including the Portfolio's Custodian; (iii) prepares, but does not pay
for, the periodic updating of the Fund's Registration Statement,
Prospectus and Statement of Additional Information in conjunction
with Fund counsel, including the printing of such documents for the
purpose of filings with the Securities and Exchange Commission and
state securities administrators, prepares the Fund's tax returns, and
prepares reports to the Portfolio's shareholders and the Securities
and Exchange Commission; (iv) prepares in conjunction with Fund
counsel, but does not pay for, all filings under the securities or
"Blue Sky" laws of such states or countries as are designated by the
Distributor, which may be required to register or qualify, or
continue the registration or qualification, of the Fund and/or the
Portfolio's shares under such laws; (v) prepares notices and agendas
for meetings of the Fund's Board of Directors and minutes of such
meetings in all matters required by the 1940 Act to be acted upon by
the Board; (vi) monitors daily and periodic compliance with respect
to all requirements and restrictions of the Investment Company Act,
the Internal Revenue Code and the Prospectus; and (vii) monitors and
evaluates daily income and expense accruals, and sales and
redemptions of shares of the Portfolios.
PEA9.P 33
For the services rendered to the Portfolio by the Advisor under the
Administrative Services Agreement, the Portfolio pays the Advisor an
administrative fee (the "Administration Fee"), computed daily and
payable monthly, equal, on an annual basis, to .20% of the
Portfolio's average daily net assets. For the Fund's fiscal years
ended July 31, 1999, 1998 and 1997, the Administrator voluntarily,
permanently and irrevocably waived all administrative fees and,
therefore, it did not receive any administrative fees for the years
ended July 31, 1999, 1998 and 1997. There can be no assurance that
such fees will be waived in the future.
VI. DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a Distribution and Service Plan (the "Plan"),
pursuant to Rule 12b-1 under the Act (the "Rule") for the Portfolio.
The Rule provides that an investment company which bears any direct
or indirect expense of distributing its shares must do so only in
accordance with a plan permitted by the Rule. The Plan provides that
the Portfolio may bear certain expenses and costs which in the
aggregate are subject to a maximum of .30% per annum of the
Portfolio's average daily net assets. Pursuant to the Plan, the Fund
and Bhirud Associates, Inc. (the "Distributor") have entered into a
Shareholder Servicing Agreement under which the Portfolio will pay
the Distributor a Shareholder Servicing Fee at the annual rate of
.25% of the average daily net assets of the Portfolio. The fee is
accrued daily and paid monthly and any portion of the fee may be
deemed to be used by the Distributor for purposes of (i) providing
personal shareholder servicing and for maintenance of shareholder
accounts and (ii) for payments to participating organizations, with
which it has written agreements, with respect to servicing their
clients or customers who are shareholders of the Portfolio (each a
"Participating Organization").
The Plan and the Shareholder Servicing Agreement provide that, the
Fund will reimburse the distributor a maximum of 0.05% per annum of
the portfolio's average daily net assets for such expenses as
delivering prospectus. No expenses have been reimbursed by the Fund
for the most recent fiscal year ended July 31, 1999 under the Plan.
The Plan and the Advisory Contract provide that the Advisor may make
payments from time to time from the advisory fee and past profits for
the following purposes: to pay promotional and administrative
expenses in connection with the offer and sale of the shares of the
Portfolio, including payments to Participating Organizations for
performing shareholder servicing and related administrative functions
and for providing assistance in distributing the Portfolio's shares.
The Distributor, in its sole discretion, will determine the amount of
such payments made pursuant to the Plan, provided that such payments
will not increase the amount which the Fund is required to pay to the
Advisor or Distributor for any fiscal year under the Advisory
Contract or the Shareholder Servicing Agreement in effect for that
year. The Portfolio incurred and paid fees and expenses totaling
$4,805, $21,517, $19,773, $9,276, $4,040, $4,256 and $4,739 for the
fiscal years ended July 31, 1993, 1994, 1995, 1996, 1997, 1998 and
1999 respectively, pursuant to the Plan.
PEA9.P 34
The Glass-Steagall Act limits the ability of a depository institution
to become an underwriter or distributor of securities. However, it
is the Fund management's position that banks are not prohibited from
acting in other capacities for investment companies, such as
providing administrative and shareholder account maintenance services
and receiving compensation from the Distributor for providing such
services. However, this is an unsettled area of the law and if a
determination contrary to the Fund management's position is made by a
bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Distributor, any such
payments will be terminated and any shares registered in the banks'
names, for their underlying customers, will be reregistered in the
name of the customers at no cost to the Portfolio or its
shareholders. In addition, state securities laws on this issue may
differ from the interpretation of Federal law expressed herein and
banks and financial institutions may be required to register as
dealers pursuant to state law.
In accordance with the Rule, the Plan provides that all written
agreements relating to the Plan entered into between either the Fund
or the Distributor and Participating Organizations or other
organizations must be in a form satisfactory to the Fund's Board of
Directors. In addition, the Plan requires the Fund and the
Distributor to prepare, at least quarterly, written reports setting
forth all amounts expended for distribution purposes by the Fund and
the Distributor pursuant to the Plan and identifying the distribution
activities for which those expenditures were made.
Under the Plan, the Manager may make payments in connection with the
distribution of the Fund's shares from the Management Fee received
from the Fund, from the Manager's revenues (which may include
management or advisory fees received from other investment companies)
and past profits. The Manager, in its sole discretion, will determine
the amount of its payments made pursuant to the Plan, but no such
payment will increase the amount which the Fund is required to pay to
the Manager for any fiscal year under the Investment Management
Contract.
The Plan provides that it may continue in effect for successive
annual periods provided it is approved by the shareholders or by the
Board of Directors, including a majority of directors who are not
interested persons of the Fund and who have no direct or indirect
interest in the operation of the Plan or in the agreements related to
the Plan. The continuance of the Plan until July 31, 2000 was
approved by a majority of the directors at a Board of Directors
meeting held July 14, 1999. The Plan further provides that it may not
be amended to increase materially the costs which may be spent by the
Fund for distribution pursuant to the Plan without shareholder
approval, and that all material amendments must be approved by a
majority of the Board of Directors, including those who are not
"interested persons" of the Fund and who have no direct or indirect
financial interest in the Plan. The Plan may be terminated at any
time by a vote of a majority of the disinterested directors of the
Portfolio or the shareholders.
The Advisor has agreed to reimburse the Portfolio for its expenses
(exclusive of interest, taxes, brokerage, and extraordinary expenses)
which in any year exceed the limits on investment company expenses
prescribed by any state in which the Portfolio's shares are qualified
for sale. For the purpose of this obligation to reimburse expenses,
the Portfolio's annual expenses are estimated and accrued daily, and
any appropriate estimated payments are made on a monthly basis. From
time to time, the Advisor and the Distributor may voluntarily assume
certain expenses of the Portfolio. This would have the effect of
lowering the overall expense ratio of that Portfolio and of
increasing yield to investors in that Portfolio.
VII. EXPENSE LIMITATION
The Advisor has agreed to reimburse the Fund for its expenses
(exclusive of interest, taxes, brokerage and extraordinary expenses)
PEA9.P 35
which in any year exceed the limits prescribed by any state in which
the Fund's shares are qualified for sale. The Fund's expenses for
distribution purposes pursuant to the Plan described above, are
included within such expenses only to the extent required by the
state with the most restrictive expense limitation in which the
Fund's shares are qualified for sale. The Fund may elect not to
qualify its shares for sale in every state. For the purpose of this
limitation, expenses shall include the fee payable to the Manager and
the amortization of organization expenses. For the purpose of this
obligation to reimburse expenses, the Fund's annual expenses are
estimated and accrued daily, and any appropriate estimated payments
are made to it on a monthly basis. No such reimbursement was required
for the year ended July 31,1999. As a result of the passage of the
National Securities Markets Improvement Act of 1996, all state
expense limitations have been eliminated at this time.
Subject to the Advisor's obligations to pay for services performed by
officers of the Advisor or its affiliates and for investment
management services and certain distribution and promotional expenses
and to reimburse the Fund for its excess expenses as described above,
under the Investment Management Contract the Fund has assumed
responsibility for payment of all of its other expenses, including
(i) brokerage and commission expenses, (ii) Federal, state and local
taxes, including issue and transfer taxes incurred by or levied on
the Fund, (iii) commitment fees and certain insurance premiums, (iv)
interest charges on borrowings, (v) charges and expenses of the
Fund's custodian, (vi) charges and expenses of persons performing
issuance, redemption, transfer and dividend disbursing functions for
the Fund, (vii) recurring and nonrecurring legal and accounting
expenses, including the Fund's cost of the bookkeeping agent for the
determination of net asset value per share and the maintenance of
portfolio and general accounting records, (viii) telecommunication
expenses, (ix) costs of organizing and maintaining the Fund's
existence as a corporation, (x) compensation, including directors'
fees, of any of the Fund's directors, officers or employees who are
not officers of Bhirud Associates, Inc., and costs of other personnel
providing services to the Fund, (xi) costs of stockholders' services
including charges and expenses of persons providing confirmations of
transactions in Fund shares, periodic statements to stockholders, and
recordkeeping and stockholder services, (xii) costs of stockholders'
reports, proxy solicitations, and corporate meetings, (xiii) fees and
expenses of registering the Fund's shares under the appropriate
Federal securities laws and of qualifying those shares under
applicable state securities laws, including expenses attendant upon
the initial registration and qualifications of the Fund's shares and
attendant upon renewals of, or amendments to, those registrations and
qualifications, (xiv) expenses of preparing and printing the Fund's
prospectuses and statements of additional information and of
delivering them to stockholders of the Fund, (xv) payment of fees and
expenses provided for in the Investment Management Contract,
Administrative Services Agreement and Distribution Agreement and
(xvi) any other distribution or promotional expenses pursuant to a
distribution and service plan.
VIII. CUSTODIAN AND TRANSFER AGENT
The Firstar Bank, N.A., Mutual Fund Custody Department, 425 Walnut
Street, M.L. 6118, Cincinnati, Ohio 45202, is custodian for the
Portfolio's cash and securities. Mutual Shareholders Services Inc.,
1301 E. 9th Street, Suite 1005, Cleveland, OH 44114-1800 is transfer
agent for the Portfolio's shares. Pursuant to a custody agreement
with the Portfolio, The Star Bank, N.A. is responsible for
safekeeping the Portfolio's securities and cash and maintaining the
books and records related to such duties. Subject to the supervision
of the Advisor, Star Bank, N.A. also maintains the portfolio
transaction records and Mutual Shareholders Services Inc., maintains
Portfolio's accounting records. The custodian and transfer agents do
not assist in, and are not responsible for, investment decisions
involving assets of the Fund.
IX. COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of stock of
the Fund are passed upon by Battle Fowler LLP, 75 East 55th Street,
New York, New York 10022.
PEA9.P 36
Van Buren & Hauke, LLC , 63 Wall Street, Suite 2501, New York, NY
10005, independent certified public accountants, have been selected
as auditors for the Fund.
X. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Advisor makes the Fund's portfolio investment decisions and
determines the broker to be used in each specific transaction with
the objective of negotiating a combination of the most favorable
commission and the best price obtainable on each transaction
(generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed to
persons or firms supplying investment information to the Advisor or
portfolio transactions may be effected by the Advisor. Neither the
Fund nor the Advisor has entered into agreements or understandings
with any brokers regarding the placement of securities transactions
because of research services they provide. To the extent that such
persons or firms supply investment information to the Advisor for use
in rendering investment advice to the Fund, such information may be
supplied at no cost to the Advisor and, therefore, may have the
effect of reducing the expenses of the Advisor in rendering advice to
the Fund. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Advisor probably does
not reduce the overall expenses of the Advisor to any material
extent. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best
execution, the Advisor may consider sales of shares of the Fund as a
factor in the selection of brokers to execute portfolio transactions
for the Fund.
The investment information provided to the Advisor is of the type
described in Section 28(e) of the Securities Exchange Act of 1934 and
is designed to augment the Advisor's own internal research and
investment strategy capabilities. Research services furnished by
brokers through which the Fund effects securities transactions are
used by the Advisor in carrying out its investment management
responsibilities with respect to all its clients' accounts. There
may be occasions where the transaction cost charged by a broker may
be greater than that which another broker may charge if the Advisor
determines in good faith that the amount of such transaction cost is
reasonable in relation to the value of brokerage and research
services provided by the executing broker. The Advisor may consider
the sale of shares of the Portfolio by brokers including the
Distributor as a factor in its selection of brokers of Portfolio
transactions.
The Fund may deal in some instances in securities which are not
listed on a national securities exchange but are traded in the over-
the-counter market. It may also purchase listed securities through
the third market. Where transactions are executed in the over-the-
counter market or third market, the Fund will seek to deal with the
primary market makers; but when necessary in order to obtain best
execution, it will utilize the services of others. In all cases the
Fund will attempt to negotiate the best execution.
The Distributor may from time to time effect transactions in the
Fund's portfolio securities. In such instances, the placement of
orders with the Distributor would be consistent with the Fund's
objective of obtaining the best execution. With respect to orders
placed with the Distributor for execution on a national securities
exchange, commissions received must conform to Section 17(e)(2)(A) of
the Investment Company Act of 1940 and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company (such
as the Fund) to receive brokerage commissions from such registered
investment company provided that such commissions are reasonable and
fair compared to commissions received by other brokers in connection
with comparable transactions involving similar securities during a
comparable period of time. In addition, pursuant to Section 11(a) of
the Securities Exchange Act of 1934, the Distributor is restricted as
to the nature and extent of the brokerage services it may perform for
the Fund. The Securities and Exchange Commission has adopted rules
PEA9.P 37
under Section 11(a) which permit a distributor to a registered
investment company to receive compensation for effecting, on a
national securities exchange, transactions in portfolio securities of
such investment company, including causing such transactions to be
transmitted, executed, cleared and settled and arranging for
unaffiliated brokers to execute such transactions. To the extent
permitted by such rules, the Distributor may receive compensation
relating to transactions in portfolio securities of the Fund provided
that the Fund enters into a written agreement, as required by such
rules, with the Distributor authorizing it to retain compensation for
such services. Transactions in portfolio securities placed with the
Distributor which are executed on a national securities exchange must
be effected in accordance with procedures adopted by the Board of
Directors of the Fund pursuant to Rule 17e-1.
Bhirud Associates, Inc. is affiliated persons of the Fund, and was
paid by the Portfolio $24,380, in brokerage commissions for the
fiscal year ended July 31, 1999 in conformity with Section
17(e)(2)(A) of the Investment Company Act and Rule 17e-1 thereunder.
The percentage of the Portfolio's aggregate brokerage commissions
paid to Bhirud Associates, Inc. for the fiscal year ended July 31,
1999 was 66.85%. The percentage of the Portfolio's aggregate dollar
amount of transactions involving the payment of commissions effected
through Bhirud Associates, Inc. for the fiscal year ended July 31,
1999 was 69.71%.
XI. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of twenty billion
shares of common stock having a par value of one-tenth of one cent
($.001) per share. Each share has equal dividend, distribution,
liquidation and voting rights. There are no conversion or preemptive
rights in connection with any shares of the Fund. All shares when
issued in accordance with the terms of the offering will be fully
paid and non-assessable.
As a general matter, the Fund will not hold annual or other meetings
of the Fund's stockholders. This is because the Bylaws of the Fund
provide for annual meetings only (i) for the election of directors,
(ii) for approval of revised investment advisory contracts with
respect to a particular class or series of stock, (iii) for approval
of revisions to the Fund's distribution agreement with respect to a
particular class or series of stock, and (iv) upon the written
request of shareholders entitled to cast not less than 25% of all the
votes entitled to be cast at such meeting. Annual and other meetings
may be required with respect to such additional matters relating to
the Fund as may be required by the 1940 Act including the removal of
Fund director(s) and communication among stockholders, any
registration of the Fund with the SEC or any state, or as the
Directors may consider necessary or desirable. Each Director serves
until the next meeting of the stockholders called for the purpose of
considering the election or reelection of such Director or of a
successor to such Director, and until the election and qualification
of his or her successor, elected at such a meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of
the stockholders.
XII. PURCHASE, REDEMPTION AND PRICING SHARES
Pricing of Fund Shares
The Fund determines the net asset value of the shares as of 4:00
p.m., New York City time, on each Fund Business Day. Fund Business
Day is a weekday (Monday through Friday) except days on which the New
York Stock Exchange is closed for trading (e.g. national holidays).
The net asset value is computed by dividing the value of the Fund's
net assets (i.e., the value of its securities and other assets less
its liabilities, including expenses payable or accrued, but excluding
capital stock and surplus) by the total number of shares outstanding.
PEA9.P 38
Portfolio securities for which market quotations are readily
available are valued at market value. U.S. Government obligations and
other debt instruments having sixty days or less remaining until
maturity are stated at amortized cost. All other investment assets of
the Fund are valued in such manner as the Board of Directors of the
Fund in good faith deems appropriate to reflect their fair value.
Shares are issued as of the first determination of the Fund's net
asset value per share made after acceptance of the investor's
purchase order. In order to maximize earnings on its portfolio, the
Fund normally has its assets as fully invested as is practicable.
Many securities in which the Fund invests require the immediate
settlement in funds of Federal Reserve member banks on deposit at a
Federal Reserve Bank (commonly known as "Federal Funds"). The Fund
reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.
Shares are issued as of 4:00 p.m., New York City time, on any Fund
Business Day on which an order for the shares and accompanying
Federal Funds are received by the Fund's transfer agent before 4:00
p.m., New York City time. Fund shares begin accruing income on the
day after the shares are issued to an investor.
Purchase and Redemption of Fund Shares
The material relating to the purchase and redemption of shares in the
Prospectus is herein incorporated by reference.
Net Asset Value
The Fund does not determine its net asset value per share on the
following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
For purposes of determining the Fund's net asset value per share,
readily marketable portfolio securities listed on the New York Stock
Exchange are valued, except as indicated below, at the last sale
price reflected on the consolidated tape at the close of the New York
Stock Exchange on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are
valued at the mean of the closing bid and asked prices on such day.
If no bid or asked prices are quoted on such day, then the security
is valued by such method as the Board of Directors shall determine in
good faith to reflect its fair market value. Readily marketable
securities not listed on the New York Stock Exchange but listed on
other national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automated Quotations, Inc.
("NASDAQ") National List are valued in like manner. Portfolio
securities traded on more than one national securities exchange are
valued at the last sale price on the business day as of which such
value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the
Manager to be over-the-counter but excluding securities admitted to
trading on the NASDAQ National List, are valued at the mean of the
current bid and asked prices as reported by NASDAQ or, in the case of
securities not quoted by NASDAQ, the National Quotation Bureau or
such other comparable sources as the Board of Directors deems
appropriate to reflect their fair market value.
U.S. Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost.
All other investment assets, including restricted and not readily
marketable securities, are valued in such manner as the Board of
Directors in good faith deems appropriate to reflect their fair
market value.
PEA9.P 39
XIII. TAXATION OF THE FUND
The Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company,
the Fund must distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items,
dividends, taxable interest and the excess of net short-term capital
gains over net long-term capital losses), and meet certain
diversification of assets, source of income, and other requirements.
By meeting these requirements, the Fund generally will not be subject
to Federal income tax on investment company taxable income and net
capital gains (the excess of net long-term capital gains over net
short-term capital losses) designated by the Fund as capital gain
dividends and distributed to shareholders. In determining the amount
of net capital gains to be distributed, any capital loss carryover
from prior years will be applied against capital gains to reduce the
amount of distributions paid. If the Fund does not meet all of these
requirements, it will be taxed as an ordinary corporation and
distributions will generally be taxed to shareholders as ordinary
income.
Amounts, other than tax-exempt interest, not distributed on a timely
basis in accordance with a calendar year distribution requirement may
be subject to a nondeductible 4% of excise tax. To prevent imposition
of the excise tax, the Fund must distribute for the calendar year an
amount equal to the sum of (i) at least 98% of its ordinary income
(excluding any capital gains or losses) for the calendar year, (ii)
at least 98% of the excess of its capital gains over capital losses
(adjusted for certain losses) for the one-year period ending October
31 of such year, and (iii) all ordinary income and capital gain net
income (adjusted for certain ordinary losses) for previous years that
were not distributed during such years.
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions from the
Fund may be eligible for the dividends-received deduction available
to corporations. However, any dividends received by the Fund that are
attributable to foreign corporations will not be eligible for the
dividends-received deduction, since that deduction is generally
available only with respect to dividends paid by domestic
corporations. In addition, the dividends-received deduction will be
disallowed for shareholders who do not hold their shares in the Fund
for at least 45 days during the 90 day period beginning 45 days
before a share in the Fund becomes ex dividend with respect to such
dividend and will be disallowed with respect to an investment in the
Fund that is debt financed.
Distributions of net capital gains, if any, designated by the Fund as
capital gain dividends are taxable to shareholders as long-term
capital gains, regardless of the length of time the Fund's shares
have been held by the shareholder. All distributions are taxable to
the shareholder whether reinvested in additional shares or received
in cash. Shareholders will be notified annually as to the Federal tax
status of distributions.
Investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Fund. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Distributions by the Fund reduce the net asset value of
the Fund's shares, and if a distribution reduces the net asset value
below a stockholder's cost basis, such distribution, nevertheless,
would be taxable to the shareholder as ordinary income or capital
gain as described above, even though, from an investment standpoint,
it may constitute a partial return of capital.
Upon the taxable disposition (including a sale or redemption) of
shares of the Fund, a shareholder may realize a gain or loss
depending upon its basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets in
PEA9.P 40
the shareholder's hands. Such gain or loss will be long-term or short-
term, generally depending upon the shareholder's holding period for
the shares. Non-corporate shareholders are subject to tax at a
maximum rate of 20% on capital gains resulting from the disposition
of shares held for more than 12 months. However, a loss realized by a
shareholder on the disposition of Fund shares with respect to which
capital gains dividends have been paid will, to the extent of such
capital gain dividends, also be treated as long-term capital loss if
such shares have been held by the shareholder for six months or less.
Furthermore, a loss realized on a disposition will be disallowed to
the extent the shares disposed of are replaced (whether by
reinvestment of distributions or otherwise) within a period of 61
days beginning 30 days before and ending 30 days after the shares are
disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Shareholders receiving
distributions in the form of additional shares will have a cost basis
for Federal income tax purposes in each share received equal to the
net asset value of a share of the Fund on the reinvestment date.
Under certain circumstances, the sales charge incurred in acquiring
shares of the Fund may not be taken into account in determining the
gain or loss on the disposition of those shares. This rule applies
where shares of the Fund are exchanged within 90 days after the date
they were purchased and new shares of the Fund are acquired without
sales charge or at a reduced sales charge. In that case, the gain or
loss recognized on the exchange will be determined by excluding from
the tax basis of the shares exchanged all or a portion of the sales
charge incurred in acquiring those shares. This exclusion. applies to
the extent that the otherwise applicable sales charge with respect to
the newly acquired shares is reduced as a result of having incurred
the sales charge initially. Instead, the portion of the sales charge
affected by this rule will be treated as a sales charge paid for the
new shares.
Gains or losses attributable to fluctuations in exchange rates
resulting from transactions in a foreign currency generally are
treated as ordinary income or ordinary loss. These gains or losses
may increase, decrease, or eliminate the amount of the Fund's
investment company taxable income to be distributed to its
shareholders as ordinary income.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other similar income taxes imposed by
the foreign country. The Fund does not expect to be eligible to elect
to allow shareholders to claim such foreign taxes or a credit against
their U.S. tax liability.
The Fund is required to report to the IRS all distributions to
shareholders except in the case of certain exempt shareholders.
Distributions by the Fund (other than distributions to exempt
shareholders) are generally subject to backup withholding of Federal
income tax at a rate of 31% if (i) the shareholder fails to furnish
the Funds with and to certify the shareholder's correct taxpayer
identification number or social security number, (ii) the IRS
notifies the Fund or a shareholder that the shareholder has failed to
report properly certain interest and dividend income to the IRS and
to respond to notices to that effect, or (iii) when required to do
so, the shareholder fails to certify that he or she is not subject to
backup withholding. If the withholding provisions are applicable, any
such distributions (whether reinvested in additional shares or taken
in cash) will be reduced by the amounts required to be withheld.
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and
U.S. domestic corporations, partnerships, trusts and estates).
Distributions by the Fund also may be subject to state and local
taxes, and the treatment of distributions under state and local
income tax laws may differ from the Federal income tax treatment.
Shareholders should consult their tax advisors with respect to
particular questions of Federal, state and local taxation.
Shareholders who are not U.S. persons should consult their tax
advisors regarding U.S. foreign tax consequences of ownership of
shares of the Fund, including the likelihood that distributions to
them would be subject to withholding of U.S. tax at a rate of 30% (or
at a lower rate under a tax treaty).
PEA9.P 41
XIV. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their
net asset value and imposes a sales charge for sells. The Distributor
receives an underwriting commission. In effecting sales of Fund
shares under the Distribution Agreement, the Distributor, for nominal
consideration (i.e., $1.00) and as agent for the Fund, will solicit
orders for the purchase of the Fund's shares, provided that any
subscriptions and orders will not be binding on the Fund until
accepted by the Fund as principal.
The Glass-Steagall Act and other applicable laws and regulations
prohibit banks and other depository institutions from engaging in the
business of underwriting, selling or distributing most types of
securities. In the opinion of the Manager, however, based on the
advice of counsel, these laws and regulations do not prohibit such
depository institutions from providing other services for investment
companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of
Directors will consider appropriate modifications to the Fund's
operations, including discontinuation of any payments being made
under the Plan to banks and other depository institutions, in the
event of any future change in such laws or regulations which may
affect the ability of such institutions to provide the above-
mentioned services. It is not anticipated that the discontinuation of
payments to such an institution would result in loss to shareholders
or change in the Fund's net asset value. In addition, state
securities laws on this issue may differ from the interpretations of
Federal law expressed herein and banks and financial institutions may
be required to register ad dealers pursuant to state law.
XV. CALCULATION OF PERFORMANCE DATA
From time to time the Fund may distribute sales literature or publish
advertisements containing "total return" quotations for the Fund.
Such sales literature or advertisements will disclose the Fund's
average annual compounded total return for the Fund's last one year
period, five year period and the period since the Fund's inception,
and may include total return information for other periods. The
Fund's total return for each period is computed by finding, through
the use of a formula prescribed by the Securities and Exchange
Commission, the average annual compounded rates of return over the
period that would equate an assumed initial amount invested to the
value of such investment at the end of the period. For purposes of
computing total return, income dividends and capital gains
distributions paid on shares of the Fund are assumed to have been
reinvested when received.
The Fund's total return for the twelve months ended July 31,1999 was
23.81%. The Fund's average annual compounded total return for the
five year period ended July 31, 1999 was 0.91%. The Fund's average
annual compounded total return from December 23, 1992 (inception) to
July 31, 1999 was 1.56%.
The Fund's total return is not fixed and will fluctuate in response
to prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the Fund's
performance but such information may not provide a basis for
comparison with bank deposits or other investments which pay a fixed
return for a stated period of time. An investor's principal invested
in the Fund is not fixed and will fluctuate in response to prevailing
market conditions.
XVI. FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year
ended July 31, 1999 and the report thereon of Van Buren & Hauke, LLC,
63 Wall Street, Suite 2501, New York, NY 10005 are herein
incorporated by reference to the Fund's Annual Report. The Annual
Report is available upon request and without charge.
PEA9.P 42
BHIRUD FUNDS, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(A) Financial Statements (filed with the annual report and
incorporated herein by reference).
(B) Exhibits.
*(1) Amended Articles of Incorporation of the
Registrant.
**(2) By-laws of the Registrant.
(3) Not applicable.
*(4) Form of certificate for shares of
Common Stock, par value $0.001 per share, of the
Registrant.
**(5) Form of Advisory Contract between the
Registrant and Bhirud Associates, Inc.
(6) See Distribution Agreement filed as Exhibit
15.2 hereto.
(7) Not applicable.
***(8) Form of Custody Agreement between
the Registrant and The Star Bank, N. A., 425
Walnut Street, Cincinnati, OH 45202.
***(9.1) Form of Administrative Services
Agreement between the Registrant and Bhirud
Associates, Inc. for the Portfolio of the
Registrant.
***(9.2) Form of Transfer Agent Agreement
between the Registrant and Mutual Shareholders
Services Inc.
**(10) Opinion of Messrs. Battle Fowler LLP,
as to the legality of the securities being
registered, including their consent to the
filing thereof and to the use of their name
under the heading "Dividends, Distributions and
Taxes" in the Prospectus.
****(11) Consent of Van Buren & Hauke, LLC,
Independent Auditors.
(12) Not applicable.
*(13) Written assurance of Thomas James
MidCap Partners, that its purchase of shares of
the Registrant was for investment purposes
without any present intention of redeeming or
reselling.
(14) Not applicable.
***(15.1) Form of Distribution and Service
Plan Pursuant to Rule 12b-1 under the Investment
Company Act of 1940.
*(15.2) Form of Distribution Agreement between
the Registrant and Bhirud Associates, Inc.
***(15.3) Form of Shareholder Servicing
Agreement between the Registrant and Bhirud
Associates, Inc.
(16.0) Not applicable.
------------------------------------------------------------
* Filed with Registration Statement on Form N-1A
Registration No. 33 - 48013, filed May 27, 1992, and
incorporated by reference herein.
** Filed with Pre-Effective Amendment No. 1 to said
Registration Statement on August 11, 1992, and incorporated
herein by reference.
*** Filed with Post-Effective Amendment No. 7 to said
Registration Statement on November 23, 1998, and
incorporated herein by reference.
**** Filed with Post-Effective Amendment No. 8 to said
Registration Statement on October 1, 1999, and incorporated
herein by reference.
PEA9.P 43
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of July 31, 1999
Common Stock (par value $.001) 222
The Apex MidCap Growth Fund
Item 27. Indemnification.
Filed as Item 27 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N -1A (Registration No.
33-48013) on August 11, 1992, and is incorporated herein
by reference.
Item 28. Business and other Connections of Investment Adviser.
The description of Bhirud Associates, Inc. under the
caption "Management of the Fund" in the Prospectus and
in the Statement of Additional Information constituting
parts A and B, respectively, of the Registration
Statement are incorporated herein by reference.
Registrant's investment adviser, Bhirud Associates,
Inc., is a registered investment adviser. Bhirud
Associates, Inc. serves as an advisor to individual
accounts having a total value of about $19.0 million.
The advisor does not serve as investment advisor to any
other investment companies.
Item 29. Principal Underwriters.
(a) Bhirud Associates, Inc. is the Registrant's
distributor.
(b) The following are the directors and officers of
Bhirud Associates, Inc. The principal business
address of each of these persons is 1266 E. Main
Street, Stamford, Connecticut 06902.
Positions & offices Positions & offices
Name with Distributor With Registrant
Suresh Bhirud President, Treasurer Director, Chairman
and Director of the Board, Treasurer
Susan Bhirud Secretary None
Harish Bhirud Assistant Secretary Director and
Vice-president
PEA9.P 44
Item 30. Location of Accounts and Records.
Accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and the rules promulgated thereunder are
maintained in the physical possession of the Registrant,
at Bhirud Associates, Inc., 1266 E. Main Street,
Stamford, Connecticut 06902, the Registrant's advisor
and administrator, and Mutual Shareholder Services Inc.,
1301 E. 9th Street, Suite 1005, Cleveland, OH 44114, the
Registrant's transfer agent and fund accountant.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's annual report upon request, without
charge.
(d) The Fund shall, if requested by the holders of at
least 10% of the Portfolios outstanding shares, call
a meeting of the stockholders for purposes of voting
upon the question of removal of a director or
directors and the Fund shall assist in
communications with other stockholders.
PEA9.P 45
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 of the requirements for
effectiveness of this amendment to this Registration Statement
pursuant to Rule 485 (b) under the Securities Act of 1933 and
has duly caused this Amendment to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Stamford, and State of Connecticut,
on the 30th day of November, 1999.
BHIRUD FUNDS INC.
By: /s/ Suresh Bhirud
Suresh Bhirud,
Chairman of the Board
Pursuant to the requirements of the Securities Act of
1933, this Amendment to its Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
(1) Principal Executive officer Chairman of the November 30, 1999
and Principal Financial
officer: Board, Treasurer
and Director
/s/ Suresh Bhirud
Suresh Bhirud
(2) Majority of Directors
Timothy Fenton Director
Alexander Norman Crowder, III Director
M. John Sterba, Jr. Director
By: /s/ Suresh Bhirud
November 30, 1999
Suresh Bhirud
Attorney - in - Fact*
----------------------------------------------------------------
* Power of Attorney filed with Pre-Effective Amendment No. 1
to said Registration Statement filed on August 11, 1992, and
incorporated by reference herein.
PEA9.P 46
