As filed with the Securities and Exchange Commission on November 23, 1998
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. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [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 November 30, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (i)
[ ] on (date) pursuant to paragraph (a) (i)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule 485
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, 1998 on September 29, 1998.
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 Prospectus Summary; Table of
Fees and Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objectives,
Policies and Risks; Investment
Restrictions; and General information
5. Management of the Fund Management of the Fund; The
Administrator; Custodian, Transfer
Agent and Dividend Disbursing Agent;
Distribution and Service Plan
5a. Management's Discussion of Fund
Performance Not Applicable
6. Capital Stock and Other Securities Purchase of Shares; Redemption of
Shares; General Information; Dividends,
Distributions and Taxes
7. Purchase of Securities Being
Offered Purchase of Shares; Net Asset Value;
Distribution and Service Plan
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings Not Applicable
- - 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 Advisor; Directors and Officers
13. Investment Objectives and
Policies Investment Objectives,Policies and
Risks
14. Management of the Fund Advisor; Directors and Officers
15. Control Persons and Principal
Holders of Securities Directors and Officers
16. Investment Advisory and Other
Services Advisor; Distribution and Service Plan;
Custodian, Transfer Agent and
Dividend Disbursing Agent
17. Brokerage Allocation Brokerage and Portfolio Turnover
18. Capital Stock and other
Securities Description of Common Stock
19. Purchase, Redemption and Pricing of
Securities Being Offered Purchase and Redemption of Shares;
Net Asset Value
20. Tax Status Tax Status
21. Underwriters Distribution and Service Plan
22. Calculation and Performance Data Performance
23. Financial Statements Independent Auditors' Report;
Financial Statements
- - ii -
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THE APEX MID CAP GROWTH FUND
C/O Bhirud Funds Inc.
1266 EAST MAIN STREET
STAMFORD, CONNECTICUT 06902
TELEPHONE: (800) 446-2987
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PROSPECTUS
NOVEMBER 30, 1998
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Bhirud Funds, Inc. (the "Fund") is a diversified, open-end
management investment company currently consisting of The Apex
Mid Cap Growth Fund portfolio (the "Portfolio"). The Portfolio
is a fund whose investment objective is to seek to achieve
growth of capital by attempting to outperform the Standard &
Poor's MidCap 400 Index ("S&P MidCap Index"). The Portfolio
will seek to achieve this objective by investing primarily in
common stocks of mid-sized companies including common stocks
listed on the S&P MidCap Index. There can be no assurance that
the Portfolio will achieve its objective. See "Investment
Objective, Policies and Risks."
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This Prospectus sets forth concisely the information a
prospective investor should know before investing in the
Portfolio. A Statement of Additional Information, dated
November 30, 1998, containing additional and more complete
information about the Portfolio has been filed with the
Securities and Exchange Commission and is incorporated in its
entirety by reference into this Prospectus. For a free copy,
write or call the Portfolio at the address or at telephone
number 203-977-1521, fax number 203-977-1525.
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Bhirud Associates, Inc. is both the advisor of the Portfolio,
and the distributor of the Portfolio's shares. Bhirud
Associates, Inc. is a registered investment advisor, registered
broker-dealer and member of the National Association of
Securities Dealers, Inc.
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THIS PROSPECTUS SHOULD BE RETAINED
BY INVESTORS FOR FUTURE REFERENCE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing in this Prospectus.
THE FUND: Bhirud Funds, Inc. is an open-end, diversified,
management investment company currently consisting of The Apex
Mid Cap Growth Fund portfolio (the "Portfolio").
INVESTMENT OBJECTIVE: The Portfolio's investment objective is
to seek to achieve growth of capital by attempting to outperform
the S&P MidCap Index. The Portfolio will seek to achieve this
objective by investing primarily in common stocks of mid-sized
companies (those with market capitalization ranging from $150
million to $50 billion) including common stocks listed on the
S&P MidCap Index (collectively, "Common Stocks") which the
Portfolio's investment advisor believes are likely to outperform
the S&P MidCap Index. Although the Portfolio may also invest in
the types of investment grade fixed income instruments described
under "Investment Objective, Policies and Risks" herein, and may
use various special investment techniques, under normal market
conditions the Portfolio will invest at least 80% of its total
assets in Common Stocks. Under normal market conditions, up to
20% of the Portfolio's total assets may be invested in options,
warrants, futures contracts, preferred stocks, investment grade
debt securities and securities convertible into common or
preferred stock. See "Investment Objective, Policies and
Risks". There is no assurance that the Portfolio will achieve
its investment objective. The investment objective of the
Portfolio and its investment restrictions described in the
Statement of Additional Information are fundamental and may not
be changed without shareholder approval.
MANAGEMENT AND FEES: Bhirud Associates, Inc. (the "Advisor")
serves as the Portfolio's investment advisor and is compensated
for its services and its related expenses at an annual rate of
1.00% of the Portfolio's average daily net assets up to $250
million, .75% of the Portfolio's average daily net assets
between $250 and $500 million and .65% of the Portfolio's
average daily net assets over $500 million. The Portfolio's
advisory fee is higher than that paid by most other mutual
funds. Bhirud Associates, Inc. (the "Distributor") will also
act as distributor for the Portfolio's shares. The Portfolio
has a Distribution and Service Plan (the "Plan") which permits
it to pay the Distributor a maximum of .25% per annum of the
Portfolio's average daily net assets for shareholder services
and expenses.
HOW TO PURCHASE SHARES: Shares of the Portfolio may be
purchased at the net asset value per share next determined after
receipt of a purchase order by the Portfolio's Distributor or
transfer agent in proper form with accompanying check or other
bank wire payment arrangements satisfactory to the Portfolio
plus a sales load of 5.75%. The minimum initial investment is
$1,000. The minimum for subsequent investments is $100.
Investments through an Individual Retirement Account or other
retirement plans, however, have different requirements. See
"Purchase of Shares" and "Retirement Plans."
HOW TO SELL SHARES: Shares of the Portfolio may be redeemed
by the shareholder at any time at the net asset value per share
next determined after the redemption request is received by the
Fund in proper order. See "Redemption of Shares."
DIVIDENDS AND REINVESTMENT: Each dividend and capital gains
distribution, if any, declared by the Portfolio on its
outstanding shares will be paid on the payment date in
additional shares of the Portfolio having an aggregate net asset
value as of the ex-dividend date of such dividend or
distribution equal to the cash amount of such dividend or
distribution unless a shareholder otherwise elects to receive
cash. An election may be changed by notifying the Portfolio in
writing at any time prior to the record date for a particular
dividend or distribution. There are no sales or other charges
in connection with the reinvestment of dividends and capital
gains distributions. There is no fixed dividend rate, and there
can be no assurance that the Portfolio will pay any dividends or
realize any capital gains. However, the Portfolio currently
intends to pay dividends and capital gains distributions, if
any, on an annual basis. See "Dividends, Distributions and
Taxes."
RISK FACTORS: Investors should consider the risks associated
with investing in Common Stocks. While investing in mid-cap
growth companies generally entails greater risk and volatility
than investing in large, well-established companies, mid-cap
companies are expected to offer the potential for more rapid
growth and for capital appreciation because of their higher
growth rates. In addition, the stocks of such companies are
less actively followed by securities analysts and may,
therefore, be undervalued by investors. See "Investment
Objective and Policies--Common Stocks." The Portfolio may invest
in options, warrants, futures contracts, investment grade
convertible securities and may engage in short sales. For the
risks associated with these investments see "Investment
Objective, Policies and Risks--Other Investments and Related
Risk Factors."
"Standard & Poor'sR", "S&PR", "S&P MidCap 400 Index" and
"Standard & Poor's MidCap 400 Index" are trademarks of
McGraw-Hill, Inc. and have been licensed for use by Bhirud
Funds, Inc. The Portfolio is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the
advisability of investing in the Portfolio."
TABLE OF FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases 5.75%
(as a percentage of offering price)
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Advisory Fees -- After Fee Waiver 0.00%
12b-1 Fees 0.25%
Other Expenses 5.01%
Administration Fee 0.00%
Total Operating Expenses -- After Fee Waivers 5.26%
======
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the
following expenses
on a $1,000
investment,
assuming a 5%
annual return and
redemption at the
end of each
time period $84 $140 $202 $387
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The foregoing table is to assist you in understanding the
various costs and expenses that an investor in the Portfolio
will bear directly or indirectly. The sales load is a one-time
charge paid at the time of purchase of the shares. An investor
may be entitled to a reduction in such sales loads. For more
information concerning the reduction in sales loads, see
"Purchase of Shares." The Advisory Fee would have been 1.0% of
the Portfolio's average daily net assets absent the fee waiver.
Total Operating Expenses would have been 6.45% (on an annualized
basis) absent any fee waivers. For a further discussion of
these fees see "Management of the Fund" and "Distribution and
Service Plan" herein.
The figures reflected in the above example should not be
considered as a representation of past or future expenses;
actual expenses may be greater or less than those shown above.
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FINANCIAL HIGHLIGHTS
The following table has been audited by Ernst & Young LLP, the
Fund's independent auditors for 1993 and 1994, McCurdy &
Associates CPA's, Inc. for 1995, and by Van Buren & Hauke, LLC,
for 1996, 1997 and 1998 whose unqualified report thereon appears in
the Statement of Additional Information and can be obtained by
shareholders by request:
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31,
1998 1997 1996
Net Asset Value, Beginning of Period $6.93 $7.18 $9.71
Income from Investment Operations:
Net Investment Income (Loss) (0.36) (0.33) (0.35)
Net Gain (Loss) on Securities
(both realized and unrealized) 1.58 0.44 (2.63)
Total from Investment Operations 1.22 0.11 (2.98)
Less Distributions:
Dividends from Net Investment Income (0.62) (0.36) 0.45
Distributions from Capital Gains 0 0 0
Returns of Capital Total Distributions (0.62) (0.36) 0.45
Net Asset Value, End of Period $ 7.53 $ 6.93 $ 7.18
Total Return (not reflecting sales load) 8.66% (3.48)% (26.05)%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $1,703 $1,693 $1,855
Ratio to Average Net Assets:
Expenses 5.26% 5.25% 2.52%
Net Investment Income (Loss) (2.54) (4.73)% (2.11)%
Effect of Reimbursement/Waivers
on Above Ratios 1.19% 1.21% 1.28%
Portfolio Turnover Rate 205.06% 275.55% 320.89%
Average Commission Rate Paid $/Share $0.0617 $0.06 $0.0413
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* Based on weighted average shares outstanding.
** Not annualized.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund is an open-end, diversified, management investment
company organized as a Maryland corporation on May 27, 1992.
The Portfolio's investment objective is to seek to achieve
growth of capital by attempting to outperform the S&P MidCap
Index. The Portfolio will attempt to achieve its objective by
purchasing common stocks of mid-sized companies (companies with
market capitalization ranging from $150 million to $50 billion)
including common stocks listed on the S&P MidCap Index
(collectively, "Common Stocks").1 There is no assurance that
the Portfolio will achieve its investment objective. The
investment objective of the Portfolio and its investment
restrictions (the "Investment Restrictions"), which are
described herein and in the Statement of Additional Information,
are fundamental and may not be changed without shareholder
approval.
INVESTMENT POLICIES
The Portfolio's investment policies described below, and
described more completely under "Common Stocks" and "Other
Investments and Related Risks Factors" herein, may be changed by
the Board of Directors without shareholder approval. Although
under normal market conditions the Portfolio intends to invest
all of its assets in Common Stocks (and in no event less than
80% of the Portfolio's total assets), the Portfolio may invest
up to 20% of its assets in other types of investment grade fixed
income securities of such mid-sized companies (primarily
preferred stocks, debt securities and securities convertible
into common or preferred stock) and in options, warrants and
futures contracts with respect to such companies, as determined
by the Portfolio's advisor, Bhirud Associates, Inc. (the
"Advisor"). When warranted by business or financial conditions,
the Portfolio may invest temporarily for defensive purposes
without limitation in investment grade debt securities,
preferred stocks, obligations of the U.S. government, its
agencies or instrumentalities (including such obligations
subject to repurchase agreements), or in short-term (maturing
less than one year) money market instruments, including
commercial paper rated "A-1" or better by Standard & Poor's
Corporation ("S&P") or "P-1" or better by Moody's Investors
Services, Inc. ("Moody's").
In June 1991, S&P introduced the S&P MidCap Index covering
middle size companies traded in the United States. The S&P
MidCap Index contains 400 domestic stocks with market
capitalization ranging from $200 million to $5.2 billion. The
median market capitalization is about $600 million. This index,
which compliments the widely used S&P's 500 Index, was developed
in response to widespread interest in the U.S. and international
investment communities as a way to track and invest in a broad
base of companies with market capitalizations smaller than those
in the "500" but still large enough to be liquid and easily
traded by large investors.
The Advisor will rely extensively on the experience of its
Chairman, Mr. Suresh L. Bhirud, and from his experience in stock
selection in his previous roles with the research departments of
leading Wall Street firms. The Advisor uses economic and sector
analysis to enhance stock selection. The Advisor will also rely
upon computer models developed by it for stock selection. The
Advisor may also rely upon other factors both fundamental and
non-fundamental in determining the composition of the Portfolio.
Factors considered by the Advisor when selecting the most
attractive stocks include the following:
(1) company profitability;
(2) dividend payout ratio;
(3) earnings volatility;
(4) proprietary valuation model;
(5) proprietary analysis of earnings momentum;
(6) relative valuation and relative earnings momentum; and
(7) composite rank.
1 "Standard & Poor'sR", "S&PR", "S&P MidCap 400 Index" and
"Standard & Poor's MidCap 400 Index" are trademarks of Standard
and Poor's Corporation and have been licensed for use by Bhirud
Funds, Inc. The Portfolio is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the
advisability of investing in the Portfolio."
COMMON STOCKS
Under normal market conditions, the Portfolio will invest at
least 80% of the value of its total assets in Common Stocks.
Common Stocks represent the residual ownership interest in the
issuer and are entitled to the income and increase in the value
of the assets and business of the entity after all of its
obligations, including preferred stock dividends, are satisfied.
Common Stocks generally have voting rights. Common Stocks
fluctuate in price in response to many factors including
historical and prospective earnings of the issuer, the value of
its assets, general economic conditions, interest rates,
investor perceptions and market liquidity.
RISK FACTORS and OTHER INVESTMENTS
Options and Futures Contracts
The Portfolio may invest in options or futures contracts
listed on the S&P MidCap Index as a means of achieving
additional return or of hedging the value of the Portfolio. A
call option is a contract that gives the holder of the option
the right, in return for a premium paid, to buy from the seller
the security underlying the option at a specified exercise price
at any time during the term of the option or, in some cases,
only at the end of the term of the option. The seller of the
call option has the obligation upon exercise of the option to
deliver the underlying security upon payment of the exercise
price. When the Portfolio sells an option on a current
Portfolio security which gives the holder of the option the
right to buy the underlying security from the Portfolio at a
specified time and a specified price, such an option is
considered a "covered" option.
The purchaser of an option risks a total loss of the premium
paid for the option if the price of the underlying security does
not increase or decrease sufficiently to justify the exercise of
the option. The seller of an option, on the other hand, will
recognize the premium as income if the option expires
unexercised but forgoes any capital appreciation in excess of
the exercise price in the case of a call option and may be
required to pay a price in excess of current market value in the
case of a put option. Options that are purchased and sold in
private transactions also create a credit risk on the Portfolio
in that (i) the counterparty could fail to honor its obligations
and (ii) the assets of the Portfolio used to cover its options
positions constitute illiquid securities for purposes of
subsection (i) under "Investment Restrictions" herein. The
Portfolio will not purchase options if, as a result, the
aggregate cost of all outstanding options exceeds 10% of the
Portfolio's total assets. To the extent that puts, calls,
straddles and similar investment strategies involve instruments
regulated by the Commodity Futures Trading Commission, the
Portfolio is limited to an investment not in excess of 5% of its
total assets.
The Portfolio may purchase and sell stock index futures
contracts ("futures contracts") that are listed on the S&P
MidCap Index for the purpose of hedging its portfolio (or
anticipated portfolio) securities against changes in their
prices. As a futures contract purchaser, the Portfolio incurs
an obligation to take delivery of a specified amount of the
obligation underlying the contract at a specified time in the
future for a specified price. As a seller of a futures
contract, the Portfolio incurs an obligation to deliver the
specified amount of the underlying obligation at a specified
time in return for an agreed upon price. The Portfolio will
establish a segregated account in which it will maintain cash
and marketable securities equal in value to the futures
contracts it has purchased. Such segregated securities either
will mature or, if necessary, be sold on or before the
settlement date.
If the Advisor anticipates that the prices of stock held by
the Portfolio may fall, the Portfolio may sell a stock index
futures contract. Conversely, if the Advisor wishes to hedge
against anticipated price rises in those stocks which the
Portfolio intends to purchase, the Portfolio may purchase stock
index futures contracts. In addition, stock index futures
contracts will be bought or sold in order to close out a short
or long position in a corresponding futures contract.
The Portfolio may close out its position as writer of an
option, or as a buyer or seller of a futures contract only if a
liquid secondary market exists for options or futures contracts
of that series. There is no assurance that such a market will
exist.
Exchanges may limit the amount by which the price of many
futures contracts may move on any day. If the price moves equal
the daily limit on successive days, then it may prove impossible
to liquidate a futures position until the daily limit moves have
ceased.
The extent to which the Portfolio may enter into transactions
involving options and futures contracts may be limited by the
Internal Revenue Code's requirements for qualification as a
regulated investment company and the Portfolio's intention to
qualify as such. See "Dividends, Distributions and Taxes."
While the futures contracts and options transactions to be
engaged in by the Portfolio for the purpose of hedging the
Portfolio's securities are not speculative in nature, there are
risks inherent in the use of such instruments. One such risk is
that the Advisor could be incorrect in its expectations as to
the direction or extent of various interest rate or price
movements or the time span within which the movements take
place. For example, if the Portfolio sold futures contracts for
the sale of securities in anticipation of an increase in
interest rates, and then interest rates went down instead,
causing bond prices to rise, the Portfolio would lose money on
the sale.
Another risk which may arise in employing futures contracts to
protect against the price volatility of portfolio securities is
that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may
correlate imperfectly with the behavior of the cash prices of
the Portfolio's securities. Another such risk is that prices of
interest rate futures contracts may not move in tandem with the
changes in prevailing interest rates against which the Portfolio
seeks a hedge. A correlation may also be distorted by the fact
that the futures market is dominated by short-term traders
seeking to profit from the difference between a contract or
security price objective and their cost of borrowing funds.
Such distortions are generally minor and would diminish as the
contract approached maturity.
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 may include corporate notes or
preferred stocks but are ordinarily long-term debt obligations
of the issuer convertible at a stated exchange rate into common
stock of the issuer. As with all debt securities, the market
value of convertible securities tends to decline as interest
rates increase and, conversely, to increase as interest rates
decline. Convertible securities generally offer lower interest
or dividend yields than non-convertible securities of similar
quality. However, when the market price of the common stock
underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value
of the underlying common stock. As the market price of the
underlying common stock declines, the convertible security tends
to trade increasingly on a yield basis, and thus may not
depreciate to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks on an
issuer's capital structure and are consequently of higher
quality and entail less risk than the issuer's common stock,
although the extent to which such risk is reduced depends in
large measure upon the degree to which the convertible security
sells above its value as a fixed income security.
The Portfolio may invest in convertible securities when it
appears to the Advisor that it may not be prudent to be fully
invested in Common Stocks. In evaluating a convertible
security, the Advisor places primary emphasis on the
attractiveness of the underlying common stock and the potential
for capital appreciation through conversion. See "Description
of the Portfolio's Investment Securities" in the Statement of
Additional Information.
The Portfolio will purchase only investment grade convertible
securities having a rating of, or equivalent to, at least an S&P
rating of BBB (which rating may have speculative
characteristics) or, if unrated, judged by the Advisor to be of
comparable quality. Securities in the lowest investment grade
debt category generally have higher yields, may have speculative
characteristics and, as a result, changes in economic conditions
or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the
case with higher investment grade securities. See "Description
of Ratings" in the Statement of Additional Information.
Corporate Reorganizations
Subject to the Portfolio's policy of investing at least 80% 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. For further
information on such investments, see "Description of the
Portfolio's Investment Securities" in the Statement of
Additional Information.
Investments in Small, Unseasoned Companies
The Portfolio may invest up to 5% of its total assets in
small, less well known 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 may enter into forward commitments for the
purchase or sale of securities, including on a "when issued" or
"delayed delivery" basis in excess of customary settlement
periods for the type of security involved. In some cases, a
forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring, i.e., a when,
and if issued security. When such transactions are negotiated,
the price is fixed at the time of the commitment, with payment
and delivery taking place in the future, generally a month or
more after the date of the commitment. While the Portfolio will
only enter into a forward commitment with the intention of
actually acquiring the security, the Portfolio may sell the
security before the settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to
market fluctuation, and no interest (or dividends) accrues to
the Portfolio prior to the settlement date. The Portfolio will
segregate cash or liquid high-grade debt securities with the
Portfolio's custodian in an aggregate amount at least equal to
the amount of its outstanding forward commitments.
Short Sales
The Portfolio may make short sales of securities listed on a
national securities exchange. A short sale is a transaction in
which the Portfolio sells a security it does not own in
anticipation that the market price of that security will
decline. The Portfolio expects to make short sales both to
obtain capital gains from anticipated declines in securities and
as a form of hedging to offset potential declines in long
positions in the same or similar securities. The short sale of
a security is considered a speculative investment technique.
When the Portfolio makes a short sale, it must borrow the
security sold short and deliver it to the broker-dealer through
which it made the short sale in order to satisfy its obligation
to deliver the security upon conclusion of the sale. The
Portfolio may have to pay a fee to borrow particular securities
and is often obligated to pay over any payments received on such
borrowed securities.
The Portfolio's obligation to replace the borrowed security
will be secured by collateral deposited with the broker-dealer,
usually cash, U.S. government securities or other highly liquid
securities. The Portfolio will also be required to deposit
similar collateral with its Custodian to the extent, if any,
necessary so that the value of both collateral deposits in the
aggregate is at all times equal to the greater of the price at
which the security is sold short or 100% of the current market
value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security
regarding payment over of any payments received by the Portfolio
on such security, the Portfolio may not receive any payments
(including interest) on its collateral deposited with such
broker-dealer.
If the price of the security sold short increases between the
time of the short sale and the time the Portfolio replaces the
borrowed security, the Portfolio will incur a loss, and,
conversely, if the price declines, the Portfolio will realize a
capital gain; provided, however, any gain will be decreased, and
any loss increased, by the transaction costs described above.
Although the Portfolio's gain is limited to the price at which
it sold the security short, its potential loss is theoretically
unlimited.
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 invest in repurchase agreements, which are
agreements pursuant to which securities are acquired by the
Portfolio from a third party with the understanding that they
will be repurchased by the seller at a fixed price on an agreed
date. These agreements may be made with respect to any of the
portfolio securities in which the Portfolio is authorized to
invest. Repurchase agreements may be characterized as loans
secured by the underlying securities. The Portfolio may enter
into repurchase agreements with (i) member banks of the Federal
Reserve System having total assets in excess of $500 million and
(ii) securities dealers, provided that such banks or dealers
meet the creditworthiness standards established by the Fund's
Board of Directors ("Qualified Institutions"). The Advisor will
monitor the continued creditworthiness of Qualified
Institutions, subject to the supervision of the Fund's Board of
Directors. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. The
collateral is marked to market daily. Such agreements permit
the Portfolio to keep all its assets earning interest while
retaining "overnight" flexibility in pursuit of investments of a
longer-term nature.
The use of repurchase agreements involves certain risks. For
example, if the seller of securities under a repurchase
agreement defaults on its obligation to repurchase the
underlying securities, as a result of its bankruptcy or
otherwise, the Portfolio will seek to dispose of such
securities, which action could involve costs or delays. If the
seller becomes insolvent and subject to liquidation or
reorganization under applicable bankruptcy or other laws, the
Portfolio's ability to dispose of the underlying securities may
be restricted. Finally, it is possible that the Portfolio may
not be able to substantiate its interest in the underlying
securities. To minimize this risk, the securities underlying
the repurchase agreement will be held by the Portfolio's
custodian at all times in an amount at least equal to the
repurchase price, including accrued interest. If the seller
fails to repurchase the securities, the Portfolio may suffer a
loss to the extent proceeds from the sale of the underlying
securities are less than the repurchase price. The Portfolio
will not enter into repurchase agreements of a duration of more
than seven days if, taken together with all other illiquid
securities in the Portfolio, more than 15% of its net assets
would be so invested.
Loans of Portfolio Securities
To increase income, the Portfolio may lend its securities to
securities broker-dealers or financial institutions if (1) the
loan is collateralized in accordance with applicable regulatory
requirements including collateralization continuously at no less
than 100% by marking to market daily, (2) the loan is subject to
termination by the Portfolio at any time, (3) the Portfolio
receives reasonable interest or fee payments on the loan, (4)
the Portfolio is able to exercise all voting rights with respect
to the loaned securities and (5) the loan will not cause the
value of all loaned securities to exceed one-third of the value
of the Portfolio's total assets.
If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates and the Portfolio
could use the collateral to replace the securities while holding
the borrower liable for any excess of replacement cost over the
value of the collateral. As with any extension of credit, there
are risks of delay in recovery and in some cases even loss of
rights in collateral should the borrower of the securities fail
financially.
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. The Portfolio turnover rate for the fiscal
year ended July 31,1998 was 205%.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the
Portfolio is subject to the following limitations: (a) the
Portfolio may not invest more than 5% of its total assets in the
securities of any one issuer, except obligations of the United
States government and its agencies and instrumentalities, and
(b) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer. The classification of the
Portfolio as a diversified investment company is a fundamental
policy of the Portfolio and may be changed only with the
approval of the holders of a majority of the Portfolio's
outstanding shares. As used in this Prospectus, the term
"majority of the outstanding shares" of the Portfolio means,
respectively, the vote of the lesser of (i) 67% or more of the
shares of the Portfolio present at the meeting, if more than 50%
of the outstanding shares of the Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding
shares of the Portfolio.
The Portfolio also operates under certain investment
restrictions which are deemed fundamental policies of the
Portfolio and also may be changed only with the approval of the
holders of a majority of a Portfolio's outstanding shares. In
addition to other restrictions listed in the Statement of
Additional Information, the Portfolio may not (except where
specified):
(i) invest more than 15% of the market value of the
Portfolio's net assets in illiquid investments including
repurchase agreements maturing in more than seven days;
(ii) purchase securities on margin or borrow money, except
(a) from banks for extraordinary or emergency purposes (not for
leveraging or investment) or (b) by engaging in reverse
repurchase agreements, provided that (a) and (b) in the
aggregate do not exceed an amount equal to one-third of the
value of the total assets of the Portfolio less its liabilities
(not including the amount borrowed) at the time of the
borrowing, and further provided that 300% asset coverage is
maintained at all times;
(iii) purchase securities while borrowings exceed 5% of its
total assets;
(iv) mortgage, pledge or hypothecate any assets except that
the Portfolio may pledge not more than one-third of its total
assets to secure borrowings made in accordance with paragraph
(ii) above. However, although not a fundamental policy of the
Portfolio, as a matter of operating policy in order to comply
with certain state statutes, the Portfolio will not pledge its
assets in excess of an amount equal to 10% of net assets;
(v) lend portfolio securities of value exceeding in the
aggregate one-third of the market value of the Portfolio's total
assets less liabilities other than obligations created by these
transactions; or
(vi) invest in securities of other investment companies,
except (i) the Portfolio may purchase unit investment trust
securities where such unit trusts meet the investment objectives
of the Portfolio and then only up to 5% of the Portfolio's net
assets, except as they may be acquired as part of a merger,
consolidation or acquisition of assets and (ii) as permitted by
Section 12(d) of the Investment Company Act of 1940.
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.
For a more detailed discussion of these investment
restrictions, see "Investment Restrictions" in the Statement of
Additional Information.
MANAGEMENT OF THE FUND
The Fund's Board of Directors, which has overall
responsibility for the management of the Fund, has employed
Bhirud Associates, Inc. to serve as Advisor of the Portfolio.
The Advisor supervises all aspects of the Portfolio's operations
and provides investment advice and portfolio management services
to the Portfolio. Subject to the supervision of the Fund's
Board of Directors, the Advisor makes the Portfolio's day-to-day
investment decisions with respect to all purchases and sales,
arranges for the execution of portfolio transactions and
generally manages the Portfolio's investments.
The individual who is primarily responsible for the day-to-day
management of the Portfolio is Suresh L. Bhirud. 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 in
other various positions involving quantitative market analysis
(1972 to 1981), of 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.
Investors are advised that the Fund was organized in 1992 and
is the first and only mutual fund client 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 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 October 31, 1994, the Advisor served as an
advisor to high net worth individuals with total assets
aggregating approximately $3.0 million under management. 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.
During the year ended July 31st, 1998 the Fund paid brokerage
commissions of $3,268 to Bhirud Associates, Inc.
The Advisor may, from time to time, make recommendations which
result in the purchase or sale of a particular security by its
other clients simultaneously with the Portfolio. If
transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect
on price. It is the policy of the Advisor to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Advisor to the accounts involved,
including the Portfolio. When two or more of the clients of the
Advisor, including the Portfolio, are purchasing the same
security in a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Advisory Contract contains provisions relating to the
selection of securities brokers to effect the portfolio
transactions of the Portfolio. Under those provisions, subject
to applicable law and procedures adopted by the Fund's Board of
Directors, the Advisor may (i) direct Portfolio brokerage to the
Distributor; (ii) pay commissions to brokers other than the
Distributor which are higher than might be charged by another
qualified broker to obtain brokerage and/or research services
considered by the Advisor to be useful or desirable for its
investment management of the Portfolio and/or other advisory
accounts of itself and any investment advisor affiliated with
it; and (iii) consider the sales of shares of the Portfolio by
brokers including the Distributor as a factor in its selection
of brokers of Portfolio transactions.
As compensation for its services and the related expenses
borne by the Advisor, the Portfolio pays the Advisor a fee,
computed daily and payable monthly, in accordance with the
following schedule: 1.0% 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. The Statement of Additional Information
contains further information about the Advisory Contract
including a more complete description of the advisory and
expense arrangements. Pursuant to the Portfolio's Distribution
and Service Plan, the Advisor may use the advisory fee for
distribution purposes including defraying the costs of
performing shareholder servicing functions on behalf of the
Portfolio, compensating others, including banks, broker-dealers
and other organizations whose customers or clients are
shareholders of the Portfolio for providing assistance in
distributing the Portfolio's shares and defraying the cost of
shareholder servicing and other promotional activities. See
"Distribution and Service Plan".
The Portfolio is responsible for payment of its expenses,
including, without limitation, the following types of expenses:
fees payable to the Advisor, Distributor, administrator,
custodian, transfer agent and dividend agent; brokerage and
commission expenses; foreign, Federal, state or local taxes,
including issuance and transfer taxes incurred by or levied on
it; commitment fees, certain insurance premiums and membership
fees and dues in investment company organizations; interest
charges on borrowings; telecommunications expenses; recurring
and nonrecurring legal, accounting, recordkeeping and auditing
expenses; costs of organizing and maintaining the Fund's
existence as a corporation; compensation, including directors'
fees, of any directors, officers or employees who are not the
officers of the Advisor or its affiliates; costs of other
personnel providing administrative and clerical services; costs
of shareholders' services, including charges and expenses of
persons providing confirmations of transactions in the
Portfolio's shares, periodic statements to shareholders and
recordkeeping services and costs of shareholders' reports, proxy
solicitations, and corporate meetings; fees and expenses of
registering their shares under the appropriate federal
securities laws and of qualifying their shares under applicable
state securities laws, including expenses attendant upon the
initial registration and qualification of these shares and
attendant upon renewals of, or amendments to, those
registrations and qualifications; and expenses of preparing,
printing and delivering our initial registration statement and
of preparing, printing and delivering the Prospectus to existing
shareholders and of printing shareholder application forms for
shareholder accounts. The Distributor pays the promotional and
advertising expenses related to the distribution of the
Portfolio's shares and for the printing of all Portfolio
prospectuses used in connection with the distribution and sale
of Portfolio shares. See "Management of Fund" in the Statement
of Additional Information. The Advisor has agreed to a
reduction in the amounts payable to it and to reimburse the
Portfolio, as necessary, if in any fiscal year the sum of the
Portfolio's expenses exceeds the limits set by applicable
regulations of state securities commissions.
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 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.
For the services rendered to the Portfolio by the Advisor under
the Administrative Services Agreement, the Portfolio pays the
Advisor an administration fee, computed daily and payable
monthly, equal, on an annual basis, to .20% of the Portfolio's
aggregate average daily net assets. The Administrative Services
Agreement with the Advisor contains the same terms and
conditions as those which governed the predecessor administrator
under the previous Administrative Services Agreement except (i)
that the accounting related and transfer agent services provided
by the predecessor administrator under the previous
Administrative Services Agreement are now being provided by The
Provident Bank under separate agreements, (ii) the dates of
execution and termination and (iii) the identity of the
administrator.
The Advisor provides persons satisfactory to the Fund's Board
of Directors to serve as officers of the Fund, none of whom
receive compensation from the Portfolio. 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. Due to the services performed by the Advisor in its
capacity as investment manager under the Advisory Contract and
administrator under the Administrative Services Agreement, the
Fund currently has no employees and its officers are not
required to devote their full time to the affairs of the Fund.
The Statement of Additional Information contains general
background information regarding each director and principal
officer of the Fund.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Securities and Exchange Commission has required 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 Fund's Board of Directors has
adopted a Distribution and Service Plan (the "Plan") for the
Portfolio and, pursuant to the Plan, the Portfolio has entered
into a Distribution Agreement and a Shareholder Servicing
Agreement with Bhirud Associates, Inc. (the "Distributor"). 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.
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"). The Shareholder Servicing 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)
shareholder servicing and maintenance of shareholder accounts
and (ii) for payments to Participating Organizations (as defined
below) with eespect to servicing their clients or customers who
are shareholders of the Portfolio.
Under the Distribution Agreement, the Distributor, as agent
for the Portfolio, will solicit orders for the purchase of the
Portfolio's shares, provided that any subscriptions and orders
will not be binding on the Portfolio until accepted by the
Portfolio as principal. The Plan and the Shareholder Servicing
Agreement provide that, in addition to the Shareholder Servicing
Fee, the Portfolio will pay for (i) telecommunications expenses
including the cost of dedicated lines and CRT terminals incurred
by the Distributor in carrying out its obligations under the
Shareholder Servicing Agreement, and (ii) typesetting, printing
and delivering the Portfolio's prospectus to existing
shareholders of the Portfolio and preparing and printing
subscription application forms for shareholder accounts. The
expenses enumerated in this paragraph shall not exceed an amount
equal to .05% per annum of the Portfolio's average daily net
assets.
The Plan and the Advisory Contract provide that the Advisor
and the Distributor may make payments from time to time from
their own resources, which may include the advisory fee and past
profits for the following purposes: to defray the costs of and
to compensate others, including participating organizations with
whom the Distributor has entered into written agreements (each a
"Participating Organization"), for performing shareholder
servicing and related administrative functions on behalf of the
Portfolio; to compensate certain Participating Organizations for
providing assistance in distributing the Portfolio's shares; to
pay the costs of printing and distributing the Portfolio's
prospectus to prospective investors; and to defray the cost of
the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising,
and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the
distribution of 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 made pursuant
to the Plan will not increase the amount which the Portfolio is
required to pay to the Advisor or the Distributor for any fiscal
year under the Advisory Contract or the Shareholder Servicing
Agreement in effect for that year.
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 re-registered 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
interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers
pursuant to state law.
PURCHASE OF SHARES
The minimum initial investment is $1,000. Initial investments
may be made in any amount in excess of the minimum. The minimum
amount for subsequent investments is $100. Orders received as
of the earlier of 4:00 P.M., New York City time, or the close of
business of the New York Stock Exchange ("NYSE") on any Fund
Business Day will be executed at the public offering price
determined on that day. Orders received after the earlier of
4:00 P.M., New York City time, or the close of the NYSE on any
Fund Business Day, will be executed at the public offering price
determined on the next Fund Business Day. Shares will be issued
upon receipt of payment by the Fund. Information on how to
purchase Portfolio shares may be received by calling (800) 446-2987.
The Fund reserves the right to reject any subscription for its shares.
Certificates for Fund shares will not be issued to those who invest
in the Fund.
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.
Subject to compliance with applicable law and regulatory
policies, broker-dealers selling shares of the Portfolio are
eligible to participate in a program in which such firms receive
from the Distributor a non-cash compensation award for each of
their registered representatives who have sold a certain number
of shares of the Portfolio during a specified time period. The
type of non-cash compensation award which the registered
representatives shall be eligible to receive under the program
will vary depending on the cumulative number of shares of the
Portfolio sold during such period, less redemptions, by the
respective registered representative. The types of non-cash
compensation awards available under the program are pens, home
electronic merchandise and sporting goods; all expense paid
cruises for two; and airplane and hotel fares for two to Europe.
Such non-cash compensation awards are made by the Distributor
out of its own assets and not out of the assets of the
Portfolio. These programs will not change the price investors
pay for their shares or the amount that the Portfolio will
receive from the shares sold.
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 above sales load schedule. 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 above sales load
schedule.
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 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:
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.
HOW TO PURCHASE SHARES
All funds received by the Portfolio are invested in full and
fractional shares of the Portfolio. Certificates for shares are
not issued. The Fund maintains records of each shareholder's
holdings of Portfolio shares, and each shareholder receives a
statement of transactions, holdings and dividends. The
Portfolio reserves the right to reject any purchase.
An investment may be made using any of the following methods:
Mail. To purchase shares in the Portfolio, an investor
should deliver a completed new account registration form with a
check payable to "The Apex Mid Cap Growth Fund", c/o Mutual Shareholders
Services Inc., 1301 E. 9th Street, Suite 3600, Cleveland, OH 44114.
If shares are purchased by check and redeemed before the check has cleared,
the transmittal of redemption proceeds will be delayed until
funds are collected, which may take up to 15 days (See "Redemption of Shares").
By Wire. Investments may be made directly through the use
of wire transfers of Federal funds. Contact your bank and
request it to wire Federal funds to the Portfolio. In most
cases, your bank will either be a member of the Federal Reserve
Banking System or have a relationship with a bank that is. Your
bank will normally charge you a fee for handling the
transaction. To purchase shares by a Federal funds wire, please
first contact The Mutual Shareholders Services Inc., Mutual Fund Services
at (800) 446-2987. They will establish a record of information
for the wire to insure the correct processing of funds. Failure
to contact The Mutual Shareholders Services Inc., Mutual Fund Services will
delay the effective date of the purchase order to the next business day.
Investor purchases by wire funds must be directed to:
STAR 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: _____________________
REDEMPTION OF SHARES
Upon receipt by the Fund of a redemption request in proper
form, shares of the Portfolio will be redeemed at their next
determined net asset value. Checks for redemption proceeds will
normally be mailed to the shareholder's address of record within
seven days, but will not be mailed until all checks (including
certified or cashier's checks) in payment for the purchase of
the shares to be redeemed have been honored, which may take up
to 15 days. The proceeds of a redemption may be more or less
than the amount invested and, therefore, a redemption may result
in gain or loss for income tax purposes.
By Mail. Redemption requests may be made by letter to Apex Mid Cap Growth
Fund, c/o Mutual Shareholders Services Inc., 1301 E. 9th Street,
Suite 3600, Cleveland, OH 44114, specifying the name of the
Portfolio, the dollar amount or
number of shares to be redeemed, and the account number. The
request must be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all
must sign). In all cases, all the signatures on a redemption
request must be signature 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. (Guarantees by notaries public are
not acceptable.) Further documentation, such as copies of
corporate resolutions and instruments of authority, may be
requested from corporations, administrators, executors, personal
representatives, trustees or custodians to evidence the
authority of the person or entity making the redemption request.
By Telephone. The Fund may accept telephone redemption
requests ((800) 446-2987) from any person with respect to
accounts of shareholders who have previously elected this
service and thus such shareholders risk possible loss of
principal and interest in the event of a telephone redemption
not authorized by them. Telephone redemption requests may not
exceed the sum of $25,000 per request per day. The proceeds of
a telephone redemption will be sent to the shareholder at his
address or to his bank account as set forth in the subscription
order form or in a subsequent signature guaranteed written
authorization. The Fund will employ reasonable telephone
procedures to confirm that telephone redemption instructions are
genuine. Telephone procedures will include requiring some form
of personal identification prior to acting upon instructions
received by telephone. The failure of the Fund to employ such
procedures may cause the Fund to be liable for the losses
incurred by investors due to telephone redemptions based upon
unauthorized or fraudulent transactions. The telephone
redemption option may be modified or discontinued at any time
upon 60 days notice to shareholders.
Shareholders may also redeem Portfolio shares through
Participating Organizations holding such shares who have made
arrangements with the Portfolio permitting them to redeem such
shares by telephone or facsimile transmission and who may charge
a fee for this service.
The Portfolio may suspend the right of redemption during any
period when (i) trading on the NYSE is restricted or the NYSE is
closed, other than customary weekend and holiday closings; (ii)
the Securities and Exchange Commission has by order permitted
such suspension; or (iii) an emergency, as defined by rules of
the Securities and Exchange Commission, exists making disposal
of portfolio investments or determination of the value of the
net assets of the Portfolio not reasonably practicable. The
Portfolio may postpone for more than seven days the date of
payment for redemptions during any period the right to redeem
has been suspended.
To minimize expenses, the Portfolio reserves the right to
redeem upon not less than 45 days notice all shares of the
Portfolio in an account (other than an Individual Retirement
Account) which has a value below $500 caused by reason of a
redemption by a shareholder of shares of the Portfolio;
provided, however, a shareholder's shares may not be redeemed if
written objection to the redemption is received by the Portfolio
within 30 days after the date on which the notice of the
redemption is received by the shareholder. Shareholders will be
allowed to make additional investments prior to the date fixed
for the redemption to avoid liquidation of the account. In lieu
of the right to redeem shares, the Portfolio may impose a
monthly service charge of $10 on such accounts.
The proceeds of a redemption may be more or less than the
amount invested and, therefore, a redemption may result in a
gain or loss for Federal income purposes.
REINSTATEMENT PRIVILEGE
A shareholder in the Portfolio who has redeemed shares may
reinvest, without a sales charge, up to the full amount of such
redemption at the net asset value determined at the time of the
reinvestment so long as the reinvestment occurs within 30 days
of the original redemption. The shareholder must reinvest in
the same Portfolio and in the same account from which the shares
were redeemed. A redemption is a taxable transaction and gain
or loss may be recognized for Federal income tax purposes even
if the reinstatement privilege is exercised.
EXCHANGE OF SHARES
When and if additional portfolios of the Fund are created, an
investor may, without cost, exchange shares of the Portfolio of
the Fund into any other portfolio of the Fund, subject to the
$1,000 minimum initial investment requirements for the
Portfolio. See "Purchase of Shares." The Fund will provide
shareholders with 60 days written notice prior to any
modifications or discontinuance of the exchange privilege.
Shares are exchanged on the basis of relative net asset value
per share. Exchanges are in effect redemptions from one
portfolio and purchases of another portfolio; and the
Portfolio's purchase and redemption procedures and requirements
are applicable to exchanges. An exchange pursuant to this
exchange privilege is treated for federal income tax purposes as
a sale on which a shareholder may realize a taxable gain or
loss. See "Purchase of Shares" and "Redemption of Shares."
RETIREMENT PLANS
The Portfolio has available a form of Individual Retirement
Account ("IRA") for investment in Portfolio shares which may be
obtained from the Distributor. Self-employed investors may
purchase shares of the Portfolio through tax-deductible
contributions to existing retirement plans for self-employed
persons, known as Keogh or H.R. 10 plans. The Portfolio does
not currently act as sponsor to such plans. Portfolio shares
are also a suitable investment for other types of qualified
pension or profit-sharing plans which are employer sponsored,
including deferred compensation or salary reduction plans known
as "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.
The minimum initial investment for all such retirement plans
is $2,000. The minimum for all subsequent investments is $250.
Under the Internal Revenue Code of 1986, individuals may make
wholly or partly tax deductible IRA contributions of up to
$2,000 annually, depending on whether they are active
participants in an employer-sponsored retirement plan and on
their income level. However, dividends and distributions held
in the account are not taxed until withdrawn in accordance with
the provisions of the Code. An individual with a non-working
spouse may establish a separate IRA for the spouse under the
same conditions and contribute a maximum of $2,000 annually to
either or both IRA's provided that no more than $2,000 may be
contributed to the IRA of either spouse.
Investors should be aware that they may be subject to
penalties or additional tax on contributions or withdrawals from
IRAs or other retirement plans which are not permitted by the
applicable provisions of the Internal Revenue Code, and, prior
to a withdrawal, shareholders may be required to certify their
age and awareness of such restrictions in writing. Persons
desiring information concerning investments through IRAs or
other retirement plans should write or telephone the Distributor.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared
by the Portfolio on its outstanding shares will, at the election
of each shareholder, be paid on the payment date fixed by the
Fund's Board of Directors in additional shares of the Portfolio
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. An 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 Portfolio in
writing at any time prior to the record date for a particular
dividend or distribution. There are no sales or other charges
in connection with the reinvestment of dividends and capital
gains distributions. There is no fixed dividend rate, and there
can be no assurance that the Portfolio will pay any dividends or
realize any capital gains.
The following is a general discussion of certain of the
Federal income tax consequences of the purchase, ownership and
disposition of shares of the Portfolio. The summary is limited
to investors who hold the shares as "capital assets" (generally,
property held for investment), and to whom special categories of
rules do not apply, such as foreign investors and tax-exempt
investors. Shareholders should consult their tax advisers in
determining the Federal, state, local and any other tax
consequences of the purchase, ownership and disposition of
shares.
The Portfolio has elected and intends to qualify each year for
the special tax treatment applicable to "regulated investment
companies." To qualify as a regulated investment company, the
Portfolio must meet certain complex tests concerning its
investments and distributions. It is anticipated that the
Portfolio will not be subject to Federal income or excise tax.
Dividends from net investment income and distributions of
realized short-term capital gains will be taxable to the
recipient shareholders as ordinary income. In the case of
corporate shareholders, all or a portion of such distributions
may be eligible for the dividends-received deduction.
Distributions of long-term capital gains will be taxable to
shareholders as long-term capital gain. Dividends and
distributions declared by the Portfolio may also be subject to
state and local taxes.
A shareholder may recognize a taxable gain or loss if the
shareholder sells or redeems his shares. If the securities held
by the Portfolio appreciate in value, purchasers of shares of
the Portfolio after the occurrence of such appreciation will
acquire such shares subject to the tax obligation that may be
incurred in the future when there is a sale of such shares.
The Federal tax status of each year's distributions will be
reported to shareholders and to the Internal Revenue Service.
Distributions may also be subject to state and local taxation
and shareholders should consult their own tax advisers in this
regard.
CALCULATION OF INVESTMENT PERFORMANCE
The Portfolio may from time to time include its yield, total
return, and average annual total return in advertisements or
information furnished to present or prospective shareholders.
The Portfolio may also from time to time include in
advertisements the ranking of those performance figures relative
to such figures for groups of mutual funds categorized by the
Lipper Analytical Services, Wiesenberger Investment Company
Service, Barron's, Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Personal Investor, Bank Rate
Monitor, and The Wall Street Journal as having the same
investment objectives. The Fund may from time to time compare
its performance to the performance of the S&P MidCap Index, the
S&P 500 Index and other types of investments including, without
limitation, long-term government securities, long-term corporate
bonds, common stocks of small-cap companies and inflation.
Average annual total return is a measure of the average annual
compounded rate of return of $1,000 invested at the maximum
public offering price over a specified period, which assumes
that any dividends or capital gains distributions are
automatically reinvested in the Portfolio rather than paid to
the investor in cash. Total return is calculated with the same
assumptions and shows the aggregate return on an investment over
a specified period.
The formula for total return used by the Portfolio includes
three steps: (1) adding to the total number of shares purchased
by the hypothetical investment in the portfolio of $1,000
(assuming the investment is made at a public offering price that
includes the current maximum sales load of 5.75%) all additional
shares that would have been purchased if all dividends and
distributions paid or distributed during the period had been
automatically reinvested; (2) calculating the value of the
hypothetical initial investment as of the end of the period by
multiplying the total number of shares owned at the end of the
period by the net asset value per share on the last trading day
of the period; and (3) dividing this account value for the
hypothetical investor by the amount of the initial investment
and annualizing the result for periods of less than one year.
Total return may be stated with or without giving effect to any
expense limitations in effect for the Portfolio.
The Portfolio computes yield by annualizing net investment
income per share for a recent 30-day period and dividing that
amount by a Portfolio's share's maximum public offering price
(reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last trading day of that period.
The Portfolio's yield will vary from time to time depending upon
market conditions, the composition of the Portfolio and
operating expenses of the Portfolio.
Total return and yield may be stated with or without giving
effect to any expense limitations in effect for the Portfolio.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of
Maryland on May 27, 1992 and it is registered with the
Securities and Exchange Commission as a diversified, open-end,
management investment company.
The Fund prepares semi-annual unaudited and annual audited
reports which include a list of investment securities held by
the Portfolio and which are sent to shareholders.
As a general matter, the Fund will not hold annual or other
meetings of the Portfolio's shareholders. This is because the
By-laws of the Fund provide for annual meetings only (a) for the
election of directors as required by the Act, (b) for approval
of the Fund's revised Advisory Contract with respect to a
particular class or series of stock, (c) for approval to
revisions of the Fund's distribution plan with respect to a
particular class or series of stock, and (d) upon the written
request of holders of shares entitled to cast not less than ten
percent of all the votes entitled to be cast at such meeting.
The Portfolio's shareholders retain the right to remove
directors. Furthermore, the Fund will assist in shareholder
communications.
The Fund's Board of Directors is authorized to divide the
unissued shares into separate series of stock, each series
representing a separate, additional investment portfolio.
Shares of all series will have identical voting rights, except
where, by law, certain matters must be approved by a majority of
the shares of the affected series. Each share of any series of
shares when issued has equal dividend, distribution, liquidation
and voting rights within the series for which it was issued, and
each fractional share has those rights in proportion to the
percentage that the fractional share represents of a whole
share. Shares will be voted in the aggregate. There are no
conversion or preemptive rights in connection with any shares of
the Fund.
Annual and other meetings may be required with respect to such
additional matters relating to the Fund as may be required by
the Act, any registration of the Fund with the Securities and
Exchange Commission or any state, or as the Directors may
consider necessary or desirable. Each Director serves until the
next meeting of the shareholders 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 shareholders.
For further information with respect to the Fund and the
shares offered hereby, reference is made to the Fund's
registration statement filed with the Securities and Exchange
Commission, including the exhibits thereto. The Registration
Statement and the exhibits thereto may be examined at the
Commission and copies thereof may be obtained upon payment of
certain duplicating fees.
NET ASSET VALUE
The net asset value of the Portfolio's shares is determined as
of the earlier of 4:00 P.M., New York City time, or the close of
the NYSE on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except customary business
holidays and Good Friday. It is computed by dividing the value
of the Portfolio'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. All other investment assets of the Portfolio are
valued in such manner as the Board of Directors in good faith
deems appropriate to reflect their fair value.
CUSTODIAN AND TRANSFER AGENT
The Star 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, and Mutual Shareholders Services
Inc., 1301 E. 9th Street, Suite 3600, Cleveland, OH 44114,is transfer agent
for the Portfolio's shares. The Portfolio's custodian and transfer agent
do not assist in, and are not responsible for, investment
decisions involving Portfolio assets.
STANDARD & POOR'S MIDCAP 400 INDEX
The Fund (the "Licensee") has a licensing agreement with
Standard & Poor's, a division of McGraw-Hill, Inc., for the use
of the S&P MidCap 400 Index in connection with the Portfolio.
The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or
warranty, express or implied, to the owners of the Portfolio or
any member of the public regarding the advisability of investing
in securities generally or in the Portfolio particularly or the
ability of the S&P MidCap 400 Index to track general stock
market performance. S&P's only relationship to the Licensee is
the licensing of certain trademarks and trade names of S&P and
of the S&P MidCap 400 Index which is determined, composed and
calculated by S&P without regard to the Licensee or the
Portfolio. S&P has no obligation to take the needs of the
Licensee or the owners of the Portfolio into consideration in
determining, composing or calculating the S&P MidCap 400 Index.
S&P is not responsible for and has not participated in the
determination of the prices and amount of the Portfolio or the
timing of the issuance or sale of the Portfolio or in the
determination or calculation of the equation by which the
Portfolio is to be converted into cash. S&P has no obligation
or liability in connection with the administration, marketing or
trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P
SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE
PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P
MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P MIDCAP 400 INDEX OR ANY
DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING,
IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
- -----------------------------------------------------------------
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY 5
TABLE OF FEES AND EXPENSES 6
FINANCIAL HIGHLIGHTS 7
INVESTMENT OBJECTIVE, POLICIES AND RISKS 8
INVESTMENT RESTRICTIONS 12
MANAGEMENT OF THE FUND 13
DISTRIBUTION AND SERVICE PLAN 15
PURCHASE OF SHARES 16
REDEMPTION OF SHARES 18
EXCHANGE OF SHARES 19
RETIREMENT PLANS 19
DIVIDENDS, DISTRIBUTIONS AND TAXES 19
CALCULATION OF INVESTMENT PERFORMANCE 20
GENERAL INFORMATION 20
NET ASSET VALUE 21
CUSTODIAN AND TRANSFER AGENT 21
STANDARD & POOR'S MIDCAP 400 INDEX 21
- ------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATION MAY NOT BE RELIED UPON AS
AUTHORIZED BY THE FUND, ITS INVESTMENT ADVISOR, DISTRIBUTOR OR
ANY AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
THE APEX
MID CAP
GROWTH
FUND
- ----------------
PROSPECTUS
- ----------------
BHIRUD ASSOCIATES, INC.
ADVISOR
DISTRIBUTOR
Tel: 203 977 1521
Fax: 203 977 1525
NOVEMBER 30, 1998
- -----------------------------------------------------------------
- -----------------------------------------------------------------------------
THE APEX MID CAP GROWTH FUND
(The Portfolio")
Soundview Plaza
1266 E. Main Street
Stamford, Connecticut 06902
Telephone (800) 446-2987
- -----------------------------------------------------------------
Statement of Additional Information
November 30, 1998
This Statement of Additional Information is not a prospectus and
is only authorized for distribution when preceded or accompanied
by the Portfolio's prospectus dated November 30, 1998 (the
"Prospectus"). This Statement of Additional Information
contains additional and more detailed information than that set
forth in the Prospectus and should be read in conjunction with
the Prospectus, additional copies of which may be obtained
without charge by writing or telephoning the Portfolio at the
address or telephone number set forth above.
TABLE OF CONTENTS
INVESTMENT POLICIES 25 PURCHASE AND REDEMPTION OF SHARES 33
DESCRIPTION OF THE PORTFOLIO'S
INVESTMENT SECURITIES 25 DESCRIPTION OF COMMON STOCK 33
INVESTMENT RESTRICTIONS 27 PERFORMANCE 34
DIRECTORS AND OFFICERS 28 NET ASSET VALUE 34
ADVISOR 28 TAX STATUS 35
CUSTODIAN AND TRANSFER AGENT 31 STANDARD & POOR'S MIDCAP 400 INDEX 37
DISTRIBUTION AND SERVICE PLAN 31 DESCRIPTION OF BOND RATINGS 37
BROKERAGE AND PORTFOLIO
TURNOVER 32 INDEPENDENT AUDITORS REPORT 39
COUNSEL AND INDEPENDENT
AUDITORS 33 FINANCIAL STATEMENTS 40
INVESTMENT POLICIES
Bhirud Funds, Inc., (the "Fund") is an open-end, diversified,
management investment company organized as a Maryland
corporation on May 27, 1992, currently consisting of The Apex
Mid Cap Growth Fund portfolio (the "Portfolio"). The
Portfolio's investment objective is to seek to achieve growth of
capital by attempting to outperform the Standard & Poor's MidCap
400 Index (the "S&P MidCap Index"). To achieve its objective,
the Portfolio expects that, under normal market conditions, at
least 80% of its total assets will be invested in a diversified
portfolio of common stocks of mid-sized companies (companies
with market capitalization ranging from $150 million to $50
billion) including common stocks listed on S&P MidCap Index
judged by Bhirud Associates, Inc. (the "Advisor") to be the most
attractive of such securities. However, under normal market
conditions, up to 20% of the Portfolio's total assets may be
invested in options, warrants and future contracts, preferred
stocks, investment grade debt securities and securities
convertible into common or preferred stocks. The Portfolio may
also invest temporarily without limitation for defensive
purposes in U.S. Government or Government Agency obligations,
investment grade corporate bonds, preferred stocks, convertible
securities, foreign securities, debt securities and/or short
term money market instruments as deemed appropriate by the
Advisor when warranted by business or financial conditions.
The Portfolio has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue
Code. The Fund will be restricted in that, at the close of each
quarter of the taxable year, at least 50% of the value of the
Portfolio's total assets must be represented by cash, Government
securities, investment company securities and other securities
limited in respect of any one issuer to not more than 5% in
value of the total assets of the Portfolio and to not more than
10% of the outstanding voting securities of such issuer. In
addition, at the close of each quarter of its taxable year, not
more than 25% in value of the Portfolio's total assets may be
invested in securities of one issuer other than Government
securities. The limitations described in this paragraph
regarding qualifications as a "regulated investment company" are
not fundamental policies and may be revised to the extent
applicable Federal income tax requirements are revised.
"Standard & Poor'sR", "S&PR", "S&P MidCap 400 Index" and
"Standard & Poor's MidCap 400 Index" are trademarks of
McGraw-Hill Inc. and have been licensed for use by Bhirud Funds,
Inc. The Portfolio is not sponsored, endorsed, sold or promoted
by S&P and S&P makes no representation regarding the
advisability of investing in the Portfolio.
DESCRIPTION OF THE PORTFOLIO'S INVESTMENT SECURITIES
The material relating to the risk factors pertaining to the
securities invested in by the Portfolio set forth in the
Prospectus is herein incorporated by reference. The following
discussion is additional disclosure that supplements the
Prospectus.
Common Stocks
Investing in the common stocks of mid-sized companies
generally entails greater risk and volatility than investing in
large, well-established companies. However, mid-sized companies
seem to offer unique competitive advantages because, unlike
companies listed on the Standard & Poor's Fortune 500 Index,
these companies are still in the developmental stages of their
life cycle and are expected to offer the potential for more
rapid growth and for capital appreciation because of their
higher growth rates. In addition, in comparison with smaller
companies, mid-sized companies tend to have more diversified
products, markets, and better financial resources. Furthermore,
mid-sized companies have a more defined organizational structure
and a plan for management succession. Finally, the common
stocks of such companies are less actively followed by
securities analysts and may, therefore, be undervalued by
investors.
Investments in Warrants and Rights
Warrants basically are options to purchase equity securities
at a specified price valid for a specific period of time. Their
prices do not necessarily move parallel to the prices of the
underlying securities. Rights are similar to warrants, but
normally have a short duration and are distributed directly by
the issuer to its shareholders. Rights and warrants have no
voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
Convertible Securities
The Portfolio may, as an interim alternative to investment in
common stocks, purchase investment grade convertible debt
securities having a rating of, or equivalent to, at least "BBB"
by Standard & Poor's Corporation ("S&P") or, if unrated, judged
by the Advisor to be of comparable quality. Securities rated
less than "A" by S&P may have speculative characteristics.
Although lower rated bonds generally have higher yields, they
are more speculative and subject to a greater risk of default
with respect to the issuer's capacity to pay interest and repay
principal than are higher rated debt securities.
In selecting convertible securities for the Portfolio, the
Advisor relies primarily on its own evaluation of the issuer and
the potential for capital appreciation through conversion. It
does not rely on the rating of the security or sell because of a
change in rating absent a change in its own evaluation of the
underlying common stock and the ability of the issuer to pay
principal and interest or dividends when due without disrupting
its business goals. Interest or dividend yield is a factor only
to the extent it is reasonably consistent with prevailing rates
for securities of similar quality and thereby provides a support
level for the market price of the security. The Portfolio will
purchase the convertible securities of highly leveraged issuers
only when, in the judgment of the Advisor, the risk of default
is outweighed by the potential for capital appreciation.
The issuers of debt obligations having speculative
characteristics may experience difficulty in paying principal
and interest when due in the event of a downturn in the economy
or unanticipated corporate developments. The market prices of
such securities may become increasingly volatile in periods of
economic uncertainty. Moreover, adverse publicity or the
perceptions of investors over which the Advisor has no control,
whether or not based on fundamental analysis, may decrease the
market price and liquidity of such investments. Although the
Advisor will attempt to avoid exposing the Portfolio to such
risks, there is no assurance that it will be successful or that
a liquid secondary market will continue to be available for the
disposition of such securities.
Investments in Small, Unseasoned Companies
The securities of small, unseasoned companies may have a
limited trading market, which may adversely affect their
disposition and can result in their being priced lower than
might otherwise be the case. If other investment companies and
investors who invest in such issuers trade the same securities
when the Portfolio attempts to dispose of its holdings, the
Portfolio may receive lower prices than might otherwise be
obtained.
Corporate Reorganizations
The Portfolio may invest in securities for which a tender or
exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or
reorganization proposal has been announced if, in the judgment
of the Advisor, there is reasonable prospect of capital
appreciation significantly greater than the brokerage and other
transaction expenses involved. The primary risk of such
investments is that if the contemplated transaction is
abandoned, revised, delayed or becomes subject to unanticipated
uncertainties, the market price of the securities may decline
below the purchase price paid by the Portfolio.
In general, securities which are the subject of such an offer
or proposal sell at a premium to their historic market price
immediately prior to the announcement of the offer or proposal.
However, the increased market price of such securities may also
discount what the stated or appraised value of the security
would be if the contemplated transaction were approved or
consummated. Such investments may be advantageous when the
discount significantly overstates the risk of the contingencies
involved; significantly undervalues the securities, assets or
cash to be received by shareholders of the prospective portfolio
company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or
proposal may be replaced or superseded by an offer or proposal
of greater value. The evaluation of such contingencies requires
unusually broad knowledge and experience on the part of the
Advisor which must appraise not only the value of the issuer and
its component businesses as well as the assets or securities to
be received as a result of the contemplated transaction, but
also the financial resources and business motivation of the
offerer as well as the dynamics of the business climate when the
offer or proposal is in process.
In making such investments, the Portfolio will not violate any
of its diversification requirements or investment restrictions
(see below, "Investment Restrictions") including the requirement
that, except for the investment of up to 25% of its total assets
in any one company or industry, not more than 5% of its total
assets may be invested in the securities of any one issuer.
Since such investments are ordinarily short term in nature, they
will tend to increase the turnover ratio of the Portfolio
thereby increasing its brokerage and other transaction expenses
as well as make it more difficult for the Portfolio to meet the
tests for favorable tax treatment as a "Regulated Investment
Company" specified by the Internal Revenue Code (see the
Prospectus, "Dividends, Distributions and Taxes"). The Advisor
intends to select investments of the type described which, in
its view, have a reasonable prospect of capital appreciation
which is significant in relation to both the risk involved and
the potential of available alternate investments as well as
monitor the effect of such investments on the tax qualification
tests of the Internal Revenue Code.
Repurchase Agreements
The Portfolio may engage in repurchase agreements as set forth
in the Prospectus. A repurchase agreement is an instrument
under which the purchaser (i.e., the Portfolio) acquires a debt
security and the seller agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's
holding period. This results in a fixed rate of return
insulated from market fluctuations during such period. The
underlying securities are ordinarily U.S. Treasury or other
government obligations or high quality money market instruments.
The Portfolio will require that the value of such underlying
securities, together with any other collateral held by the
Portfolio, always equals or exceeds the amount of the repurchase
obligations of the vendor. While the maturities of the
underlying securities in repurchase agreement transactions may
be more than one year, the term of such repurchase agreement
will always be less than one year. The Portfolio's risk is
primarily that, if the seller defaults, the proceeds from the
disposition of underlying securities and other collateral for
the seller's obligation are less than the repurchase price. If
the seller becomes bankrupt, the Portfolio might be delayed in
selling the collateral. Under the Investment Company Act of
1940, repurchase agreements are considered loans. Repurchase
agreements usually are for short periods, such as one week or
less, but could be longer. The Portfolio will not enter into
repurchase agreements of a duration of more than seven days if,
taken together with illiquid securities and other securities for
which there are no readily available quotations, more than 15%
of the total net assets would be so invested.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following investment
restrictions which may not be changed without the approval of
the Portfolio's shareholders. Under such restrictions, the
Portfolio may not:
1. Invest more than 15% of the market value of the Portfolio's
total assets in illiquid investments including repurchase
agreements maturing in more than seven days;
2. Invest more than 25% of the value of its total assets in any
particular industry;
3. Purchase securities on margin or borrow money, except (a)
from banks for extraordinary or emergency purposes (not for
leveraging or investment) or (b) by engaging in reverse
repurchase agreements, provided that (a) and (b) in the
aggregate do not exceed an amount equal to one-third of the
value of the total assets of the Portfolio less its liabilities
(not including the amount borrowed) at the time of the
borrowing, and further provided that 300% asset coverage is
maintained at all times;
4. Lend portfolio securities of value exceeding in the
aggregate one-third of the market value of the Portfolio's total
assets less liabilities other than obligations created by these
transactions;
5. Mortgage, pledge or hypothecate any assets except that a
Portfolio may pledge not more than one-third of its total assets
to secure borrowings made in accordance with paragraph 3 above.
However, although not a fundamental policy of the Fund, as a
matter of operating policy in order to comply with certain state
statutes, no Portfolio will pledge its assets in excess of an
amount equal to 10% of total assets;
6. Invest in securities of other investment companies, except
(i) the Portfolio may purchase unit investment trust securities
where such unit trusts meet the investment objectives of the
Portfolio and then only up to 5% of the Portfolio's net assets,
except as they may be acquired as part of a merger,
consolidation or acquisition of assets or (ii) as permitted by
Section 12(d) of the Investment Company Act of 1940;
7. Act as an underwriter of securities of other issuers, except
insofar as the Portfolio may be deemed an underwriter under the
Securities Act of 1933 in disposing of a portfolio security;
8. Purchase or otherwise acquire interests in real estate, real
estate mortgage loans or interests in oil, gas or other mineral
exploration or development programs;
9. Purchase securities while borrowings exceed 5% of its total assets;
10. Purchase or acquire commodities or commodity contracts;
11. Issue senior securities, except insofar as the Portfolio may
be deemed to have issued a senior security in connection with
any permitted borrowing;
12. Participate on a joint, or a joint and several, basis in any
securities trading account; or
13. Invest in companies for the purpose of exercising control.
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.
DIRECTORS AND OFFICERS
The Directors and principal officers of the Fund, and their
principal occupations for the past five years, are listed below.
Directors deemed to be "interested persons" of the Fund for
purposes of the Investment Company Act of 1940 (the "Act") are
indicated by an asterisk.
Name, age, position(s) with Principal
Fund and address occupations during past five years
Suresh L. Bhirud*, (49)
Director, Chairman of the
Board and Treasurer
Soundview Plaza
1266 E. Main Street
Stamford,Connecticut 06902 President of Bhirud Associates, Inc.,
Stamford, CT, 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) of The First Boston Corporation,
New York, NY, from 1972-87.
Harish L. Bhirud*, (44)
Director and Vice-President
1266 E. Main Street
Stamford, CT 06902 Vice-President Bhirud Funds Inc., Stamford,
CT 06902, from 1993 to date; Project Manager
at M/s Mehtalia and Associates, Bombay,
India, from 1990-1993.
Alexander Norman Crowder, III, (62)
159 E. Ave., Old Forge Green
New Canaan, CT 06810 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, (54)
Director
46 Norton Avenue
Darien, CT 06620 Partner of Fenton & Zalenetz, a direct
marketing consulting firm, from 1990 to
date; President of Bozell Direct
Response, a division of Bozell
Worldwide, Inc. from 1987-90.
M. John Sterba, Jr., (55)
Director Investment Management
Advisors, Inc.
156 Fifth Avenue
New York, NY 10010 Chairman ofInvestment Management
Advisors, Inc. from 1991 to date; Of
Counsel to Taub & Fasciana, P.C.; Principal
of Venture Capital Associates from 1988
to date; Vice President of Bank of America
from 1987-88.
For the fiscal year ended July 31, 1998, the Portfolio paid a
total of $12,000 in Directors' fees. Each disinterested
Director is paid $2000 per year as a retainer fee and a $500
allowance for attending each board meeting.
As of October 31, 1998, the Directors and officers of the
Fund, as a group, owned more than 2% of the issued and
outstanding shares of the Portfolio.
ADVISOR
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 October
31, 1998, the Advisor served as an investment advisor to
individual accounts having a total value of approximately $3.0
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.
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 28, 1997.
The Advisory Contract has a term which extends to July 31, 1998,
and may be continued in force thereafter for
successive twelve-month periods beginning each August 1,
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.
The Portfolio has, under the Advisory Contract, confirmed its
obligation for payment of all its other expenses, including
without limitation: fees payable to the Advisor, administrator,
custodian, transfer agent and dividend agent; brokerage and
commission expenses; foreign, federal, state or local taxes,
including issuance and transfer taxes incurred by or levied on
it; commitment fees, certain insurance premiums and membership
fees and dues in investment company organizations; interest
charges on borrowings; telecommunications expenses; recurring
and non-recurring legal, accounting and recordkeeping expenses;
costs of organizing and maintaining the Fund's existence as a
corporation; compensation, including directors' fees, of any
directors, officers or employees who are not also officers of
the Advisor or its affiliates and costs of other personnel
providing administrative and clerical services; costs of
stockholders' services and costs of stockholders' reports, proxy
solicitations, and corporate meetings; fees and expenses of
registering its shares under the appropriate Federal securities
laws and of qualifying its shares under applicable state
securities laws, including expenses attendant upon the initial
registration and qualification of these shares and attendant
upon renewals of, or amendments to, those registrations and
qualifications; and expenses of preparing, printing and
delivering the Prospectus to existing shareholders and of
printing shareholder application forms for shareholder accounts.
The Distributor pays the promotional and advertising expenses
related to the distribution of the Portfolio's shares and for
the printing of all Portfolio prospectuses used in connection
with the distribution and sale of Portfolio shares. The
Portfolio also reimburses the Advisor for all of the Portfolio's
operating costs, including rent, depreciation of equipment and
facilities, interest and amortization of loans financing
equipment used by the Portfolio and all the expenses incurred to
conduct the Portfolio's affairs. The amounts of such
reimbursements must be agreed upon between the Portfolio and the
Advisor. The Advisor at its discretion may voluntarily waive
all or a portion of the advisory fee and the operating expense
reimbursement.
The Fund may from time to time hire its own employees or
contract to have management services performed by third parties,
and the management of the Fund intends to do so whenever it
appears advantageous to the Fund. The Fund's expenses for
employees and for such services are among the expenses subject
to the expense limitation described below under "Distribution
and Service Plan".
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.
Any portion of the total fees received by the Advisor may be
used by the Advisor to provide distribution, shareholder and
administrative services. (See "Distribution and Service Plan"
below.) The Advisor may irrevocably waive its rights to any
portion of the advisory fees and may use any portion of the
advisory fee for distribution purposes including defraying the
costs of performing shareholder servicing functions on behalf of
the Portfolio, compensating others, including banks,
broker-dealers and other organizations whose customers or
clients are shareholders of the Portfolio for providing
assistance in distributing the Portfolio's shares and defraying
the costs of shareholder servicing and other promotional
activities. See "Distribution and Service Plan." For the
period of commencement of operations (November 4, 1992) through
July 31, 1993, the Advisor was entitled to and voluntarily,
permanently and irrevocably waived all advisory fees of $20,366.
For the fiscal year ended July 31, 1994, the Advisor was
entitled to $90,633 in advisory fees, however, the Advisor
voluntarily, permanently and irrevocably waived advisory fees of
$62,620 and, therefore, it received $28,013 in advisory fees for
the year ended July 31, 1994. For the fiscal year ended July 31,
1995, the Advisor was entitled to $76,942 in advisory fees,
however, the Advisor voluntarily, permanently and irrevocably
waived advisory fees of $15,682 and, therefore, it received
$61,260 in advisory fees for the year ended July 31, 1995. For
the fiscal year ended July 31, 1996, the Advisor was entitled to
$39,604 in advisory fees, however, the Advisor voluntarily,
permanently and irrevocably waived all advisory fees of $39,604
and, therefore, it did not receive any advisory fees for the
year ended July 31, 1996. For the fiscal year ended July 31,
1997, the Advisor was entitled to $16,182 in advisory fees,
however, the Advisor voluntarily, permanently and irrevocably
waived all advisory fees of $16,182 and, therefore, it did not
receive any advisory fees for the year ended July 31, 1997.
There can be no assurance that such fees will be waived in the
future. For the fiscal year ended July 31, 1998, the Advisor was
entitled to $17,082 in advisory fees,
however, the Advisor voluntarily, permanently and irrevocably
waived all advisory fees of $17,082 and, therefore, it did not
receive any advisory fees for the year ended July 31, 1998.
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.
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.
The Administrative Services Agreement with the Advisor
contains the same terms and conditions as those which governed
the predecessor administrator under the previous Administrative
Services Agreement except that (i) the accounting related and
transfer agent services provided by the predecessor
administrator under the previous Administrative Services
Agreement are now being provided by The Provident Bank under
separate agreements, (ii) the dates of execution and termination
and (iii) the identity of the administrator.
The Portfolio paid Administration Fees to the predecessor
administrator in the amounts of $4,066, $18,268 and 16,716 for
the fiscal years ended July 31, 1993 (from commencement of
operations on November 4, 1992), July 31, 1994, and July 31,
1995 respectively. For the fiscal year ended July 31, 1996 the
Administrator was entitled to $7,141 in administrative fee,
however, the Administrator voluntarily, permanently and
irrevocably waived all administrative fees of $7,141 and,
therefore, it did not receive any administrative fees for the year
ended July 31, 1996. For the fiscal year ended July 31, 1997 the
Administrator was entitled to $3,236 in administrative fee,
however, the Administrator voluntarily, permanently and
irrevocably waived all administrative fees of $3,236 and,
therefore, it did not receive any administrative fees for the year
ended July 31, 1997. For the fiscal year ended July 31, 1998 the
Administrator was entitled to $3,416 in administrative fee,
however, the Administrator voluntarily, permanently and
irrevocably waived all administrative fees of $3,416 and,
therefore, it did not receive any administrative fees for the year
ended July 31, 1998.
The Administrative Services Agreement is terminable at any
time, without the payment of any penalty, by a vote of the
majority of the Portfolio's shareholders, by the Fund on behalf
of the Portfolio or the Advisor on sixty days' written notice
and automatically in the event of an "assignment" as defined by
the 1940 Act. The Administrative Services Agreement shall
remain in effect for the same periods as the Advisory Contract
subject to annual approval by the Fund's Board of Directors.
The Administrative Services Agreement provides that in the
absence of willful misfeasance, bad faith or gross negligence on
the part of the Advisor, or 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.
CUSTODIAN AND TRANSFER AGENT
The Star 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, and Mutual Shareholders Services
Inc., 1301 E. 9th Street, Suite 3600, Cleveland, OH 44114
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.
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,
in addition to the Shareholder Servicing Fee, the Fund will pay
for (i) telecommunications expenses, including the cost of
dedicated lines and CRT terminals, incurred by the Distributor
in carrying out its obligations under the Shareholder Servicing
Agreement, and (ii) preparing, printing and delivering the
Portfolio's prospectus to existing shareholders of the Portfolio
and preparing and printing subscription application forms for
shareholder accounts. The expenses enumerated in this paragraph
shall not exceed an amount equal to .05% per annum of the
Portfolio's average daily net assets.
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 and $4,256 for the
fiscal years ended July 31, 1993, 1994, 1995, 1996, 1997 and 1998
respectively, pursuant to the Plan.
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.
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, 1999 was approved by a majority of the
directors at a Board of Directors meeting held July 28, 1998.
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 to it 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.
BROKERAGE AND PORTFOLIO TURNOVER
Brokerage
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 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 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 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 $3,268, in brokerage commissions for the
fiscal year ended July 31, 1998 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, 1998 was
27.34%. 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, 1998 was 21.77%.
Portfolio Turnover
The Portfolio's average annual portfolio turnover rate, i.e.,
the ratio of the lesser of sales or purchases to the monthly
average value of the portfolio (excluding from both the
numerator and the denominator all securities with maturities at
the time of acquisition of one year or less) is high. Purchases
and sales are made for the Portfolio whenever necessary in the
Advisor's opinion, to meet the Portfolio's objective. The Portfolio
turnover rate was 164%, 276%, 225%, 321%, 275% and 205% for the
fiscal years ended July 31, 1993, July 31, 1994, July 31, 1995,
July 31, 1996, July 31, 1997 and July 31, 1998 respectively. The variance
in the Portfolio turnover rate is not abnormal for an equity
portfolio; it is normal for an equity portfolio to have a
turnover rate ranging from 100% to 300% depending on market
conditions.
COUNSEL AND INDEPENDENT AUDITORS
Legal matters for the Fund are passed upon by Battle Fowler
LLP, Park Avenue Tower, 75 East 55th Street, New York, New York
10022.
Effective July 24, 1996, Van Buren & Hauke, LLC , 63 Wall
Street, Suite 2501, New York, NY 10005 have been selected as
independent auditors for the Portfolio.
PURCHASE AND REDEMPTION OF SHARES
The material relating to the purchase and redemption of shares
in the Prospectus is herein incorporated by reference.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was
incorporated on May 27, 1992 in Maryland, consists of twenty
billion shares of stock having a par value of one tenth of one
cent ($.001) per share. The Fund's Board of Directors is
authorized to divide the unissued shares into separate series of
stock, each series representing a separate, additional
investment portfolio. Shares of all series will have identical
voting rights, except where, by law, certain matters must be
approved by a majority of the shares of the affected series.
Each share of any series of shares when issued has equal
dividend, distribution, liquidation and voting rights within the
series for which it was issued, and each fractional share has
those rights in proportion to the percentage that the fractional
share represents of a whole share. Shares will be voted in the
aggregate. 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 nonassessable. Shares are redeemable at net asset value, at
the option of the shareholder.
As of October 31, 1998, three shareholders owned 5% or more of
the outstanding shares of the Portfolio.
Under its Articles of Incorporation the Fund has the right to
redeem for cash shares of stock owned by any shareholder to the
extent and at such times as the Fund's Board of Directors
determines to be necessary or appropriate to prevent an undue
concentration of stock ownership which would cause the Fund to
become a "personal holding company" for Federal income tax
purposes. In this regard, the Fund may also exercise its right
to reject purchase orders.
The shares of the Portfolio have non-cumulative voting rights,
which means that the holders of more than 50% of the shares
outstanding voting for the election of directors can elect 100%
of the directors if the holders choose to do so, and, in that
event, the holders of the remaining shares will not be able to
elect any person or persons to the Board of Directors. Unless
specifically requested by an investor, the Fund will not issue
certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other
meetings of the Fund's shareholders. This is because the
By-laws of the Fund provide for annual meetings only (a) for the
election of directors as required by the Act, (b) for approval
of the Fund's revised Advisory Contract with respect to a
particular class or series of stock, (c) for approval of
revisions of the Fund's distribution plan with respect to a
particular class or series of stock, and (d) upon the written
request of holders of shares entitled to cast not less than ten
percent 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 Act, any registration of the Fund with the Securities and
Exchange Commission or any state, or as the Directors may
consider necessary or desirable. Each Director serves until the
next meeting of the shareholders called for the purpose of
considering the election or re-election 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 shareholders.
PERFORMANCE
From time to time the Fund may distribute sales literature or
publish advertisements containing "total return" quotations for
the Portfolio. Such sales literature or advertisements will
disclose the Portfolio's average annual compounded total return
for the Portfolio's last one year and five year period, if
applicable, and the period since the Portfolio's inception, and
may include total return information for other periods. The
Portfolio'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 (less the maximum sales load) 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 Portfolio are assumed to
have been reinvested when received.
The Portfolio's total return for the twelve-month period ended
July 31,1998 was 8.66%. The Portfolio's annualized total
return for the period of November 4,1992 (commencement of
operations) to July 31,1998 was (3.00)%.
The Portfolio'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 Portfolio and the
Portfolio's expenses. The total return information is useful in
reviewing the Portfolio'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 Portfolio is not
fixed and will fluctuate in response to prevailing market
conditions.
NET ASSET VALUE
For purposes of determining the Portfolio'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 at the close of the regular
trading session 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 Advisor 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 Director deems appropriate to reflect
their fair value.
United States Government obligations and other debt
instruments having sixty days or less remaining until maturity
are stated at amortized cost. Debt instruments having a greater
remaining maturity will be valued at the highest bid price
obtained from a dealer maintaining an active market in that
security or on the basis of prices obtained from a pricing
service approved as reliable by the Board of Director. All
other investment assets, including restricted and not readily
marketable securities, are valued under procedures established
by and under the general supervision and responsibility of the
Fund's Board of Directors designed to reflect in good faith the
fair value of such securities.
As indicated in the Prospectus, the net asset value per share
of the Portfolio's shares will be determined as of the close of
the regular trading session of the New York Stock Exchange on
each day that the New York Stock Exchange is open for trading.
That Exchange annually announces the days on which it will not
be open for trading; the most recent announcement indicates that
it will not be open on the following days: New Year's Day,
Washington's Birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. However,
that Exchange may close on days not included in that
announcement.
TAX STATUS
The following is a general discussion of certain of the
Federal income tax consequences of the purchase, ownership and
disposition of shares of the Portfolio (the "Shares") and
holders of the Shares (the "Shareholders"). The summary is
limited to investors who hold the Shares as "capital assets"
(generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). Shareholders should consult their tax advisers in
determining the Federal, state, local and any other tax
consequences of the purchase, ownership and disposition of
Shares.
The Portfolio intends to qualify for and has elected the
special tax treatment applicable to "regulated investment
companies" under Sections 851-855 of the Code. The Portfolio
for the fiscal year ended July 31, 1997 qualified for special
treatment applicable to "regulated investment companies." If
the Portfolio qualifies as a "regulated investment company" and
distributes to Shareholders 90% or more of its investment
company taxable income (without regard to its net capital gain,
i.e., the excess of its net long-term capital gain over its net
short-term capital loss), it will not be subject to Federal
income tax on the portion of its investment company taxable
income (including any net capital gain) it distributes to
Shareholders in a timely manner. In addition, to the extent the
Portfolio distributes to Shareholders in a timely manner at
least 98% of its taxable income (including any net capital gain)
it will not be subject to the 4% excise tax on certain
undistributed income of a regulated investment company.
It is anticipated that the Portfolio will not be
subject to Federal income tax or the excise tax. Distribution
of the Portfolio's investment company taxable income (including
any net capital gain) shall occur in a timely manner. Although
all or a portion of the Portfolio's taxable income (including
any net capital gain) for a calendar year may be distributed
shortly after the end of the calendar year, such a distribution
will be treated for Federal income tax purposes as having been
received by Shareholders during the calendar year.
The Portfolio intends to qualify as a publicly offered
regulated investment company and as such will not be subject to
the 2% limitation on itemized expense deductions. Additionally,
Section 68 of the Code, which limits the amount of allowable
itemized deductions of individuals with an adjusted gross income
in excess of specified amounts, does not appear to apply to
indirect deductions incurred by a pass through entity, such as a
regulated investment company. However, regulations may be
promulgated in the future that could alter this result.
Distributions to Shareholders of the Portfolio's taxable
income (other than its net capital gain) for a year will be
taxable as ordinary income to Shareholders. To the extent that
distributions to a Shareholder in any year are not taxable as
ordinary income, they will be treated as a return of capital and
will reduce the Shareholder's basis in his Shares and, to the
extent that they exceed his basis, will be treated as a gain
from the sale of his Shares as discussed below. It is
anticipated that substantially all of the distributions of the
Portfolio's taxable income (other than net capital gain
distributions) will be taxable as ordinary income to
Shareholders.
Distributions of the Portfolio's net capital gain (designated
as capital gain dividends by the Portfolio) will be taxable to
Shareholders as long-term capital gain, regardless of the length
of time the Shares have been held by a Shareholder. A
Shareholder may recognize a taxable gain or loss if the
Shareholder sells or redeems his Shares. Any gain or loss
arising from (or treated as arising from) the sale or redemption
of Shares will be a capital gain or loss, except in the case of
a dealer in securities. The excess of net long-term capital
gains over net short-term capital losses may be taxed at a lower
rate than ordinary income for certain noncorporate taxpayers. A
capital gain or loss is long-term if the asset is held for more
than one year and short-term if held for one year or less. To
the extent that a capital gain dividend with respect to the
Shares is afforded long-term capital gain treatment, a
Shareholder who realizes a capital loss upon the sale of such
Shares that were owned for six months or less must treat the
loss as long-term. The deduction of capital losses is subject
to limitations. If the securities appreciate in value,
purchasers of Shares after the occurrence of such appreciation
will acquire their Shares subject to the tax obligation that may
be incurred in the future when there is a sale of such Shares.
If a Shareholder incurs a load charge in acquiring a Share and a
reinvestment right and disposes of the Share within 90 days and
subsequently acquires an interest in a regulated investment
company for no load charge, any loss recognized on the first
disposition will be disallowed to the extent of the load charge.
A distribution of cash to a Shareholder upon liquidation will
be a taxable event to such Shareholder, and that Shareholder
will recognize taxable gain or loss (equal to the difference
between such Shareholder's tax basis in his Shares and the cash
received), which will be capital gain or loss except in the case
of a dealer in securities.
Distributions that are taxable as ordinary income to
Shareholders will constitute dividends for Federal income tax
purposes. Corporate Shareholders (other than corporations such
as "S" corporations that are not eligible for such deduction
because of their special characteristics and other than for
purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) will be eligible for the
dividends-received deduction for corporations only to the extent
that such dividends are received from domestic issuers by the
Portfolio with respect to stock held by the Portfolio for more
than 45 days and only if the Shareholder has held his Shares for
more than 45 days. The dividends-received deduction is
currently 70%. However, Congress from time to time considers
proposals to reduce the rate, and enactment of such a proposal
would adversely affect the after-tax return to investors who can
take advantage of the deduction. Shareholders are urged to
consult their own tax advisers. Sections 246 and 246A of the
Code contain limitations on the eligibility of dividends for the
corporate dividends-received deduction (in addition to the
limitations discussed above). Depending upon the corporate
Shareholder's circumstances (including whether it has a more
than 45-day holding period for its Shares and whether its Shares
are debt financed), these limitations may be applicable to
dividends received by a corporate Shareholder from the Portfolio
that would otherwise qualify for the dividends-received
deduction under the principles discussed above. Accordingly,
Shareholders should consult their own tax advisers in this
regard. A corporate Shareholder should be aware that the
receipt of dividend income for which the dividends-received
deduction is available may give rise to an alternative minimum
tax liability (or increase an existing liability) because the
dividend income will be included in the corporation's "adjusted
current earnings" for purposes of the adjustment to alternative
minimum taxable income required by Section 56(g) of the Code.
Dividends received by the Portfolio from foreign issuers will in
most cases be subject to foreign withholding taxes. The
Portfolio expects that it will not qualify to make an election
that will enable Shareholders to credit foreign withholding
taxes against their Federal income tax liability on
distributions by the Portfolio.
The Federal tax status of each year's distributions will be
reported to Shareholders and to the Internal Revenue Service.
The foregoing discussion relates only to the Federal income tax
status of the Portfolio and to the tax treatment of
distributions by the Portfolio to U.S. Shareholders.
Shareholders who are not United States citizens or residents
should be aware that distributions from the Portfolio will
generally be subject to a withholding tax of 30%, or a lower
treaty rate, and should consult their own tax advisers to
determine whether an investment in the Portfolio is appropriate.
Distributions may also be subject to state and local taxation
and Shareholders should consult their own tax advisers in this
regard.
Entities that generally qualify for an exemption from Federal
income tax, such as many pension trusts, are nevertheless taxed
under Section 511 of the Code on "unrelated business taxable
income." Unrelated business taxable income is income from a
trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated
business taxable income generally does not include dividend or
interest income or gain from the sale of investment property,
unless such income is derived from property that is
debt-financed or is dealer property. A tax-exempt entity's
dividend income from the Portfolio and gain from the sale of
Shares in the Portfolio or the Portfolio's sale of securities is
not expected to constitute unrelated business taxable income to
such tax-exempt entity unless the acquisition of the Share
itself is debt-financed or constitutes dealer property in the
hands of the tax-exempt entity.
Before investing in the Portfolio, the trustee or investment
manager of an employee benefit plan (e.g., a pension or profit
sharing retirement plan) should consider among other things (a)
whether the investment is prudent under the Employee Retirement
Income Security Act of 1974 ("ERISA"), taking into account the
needs of the plan and all of the facts and circumstances of the
investment in the Portfolio; (b) whether the investment
satisfies the diversification requirement of Section
404(a)(1)(C) of ERISA; and (c) whether the assets of the
Portfolio are deemed "plan assets" under ERISA and the
Department of Labor regulations regarding the definition of
"plan assets."
Prospective tax-exempt investors are urged to consult their
own tax advisers prior to investing in the Portfolio.
STANDARD & POOR'S MIDCAP 400 INDEX
The Fund (the "Licensee") has a licensing agreement with
Standard & Poor's, a division of McGraw-Hill, Inc., for the use
of the S&P MidCap 400 Index in connection with the Portfolio.
The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or
warranty, express or implied, to the owners of the Portfolio or
any member of the public regarding the advisability of investing
in securities generally or in the Portfolio particularly or the
ability of the S&P MidCap 400 Index to track general stock
market performance. S&P's only relationship to the Licensee is
the licensing of certain trademarks and trade names of S&P and
of the S&P MidCap 400 Index which is determined, composed and
calculated by S&P without regard to the Licensee or the
Portfolio. S&P has no obligation to take the needs of the
Licensee or the owners of the Portfolio into consideration in
determining, composing or calculating the S&P MidCap 400 Index.
S&P is not responsible for and has not participated in the
determination of the prices and amount of the Portfolio or the
timing of the issuance or sale of the Portfolio or in the
determination or calculation of the equation by which the
Portfolio is to be converted into cash. S&P has no obligation
or liability in connection with the administration, marketing or
trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED
THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE,
OWNERS OF THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE
USE OF THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P MIDCAP 400
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
DESCRIPTION OF BOND RATINGS
Moody's Investor Service, Inc. ("Moody's")
Aaa: Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuations of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of
a desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating
has been suspended or withdrawn, it may be for reasons unrelated
to the quality of the issue.
Should no rating be assigned, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue
or issuer.
4. The issue was privately placed, in which case the rating
is not published in Moody's publications.
Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory
analysis; if there is no longer available reasonable up-to-date
data to permit a judgment to be formed; if a bond is called for
redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are
designated by the symbols Aa-1, A-1, Baa-1 and B-1.
Standard & Poor's Corporation ("Standard & Poor's")
AAA: Bonds rated AAA have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated
issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in the highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are
regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance
with the terms of this obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation.
While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of
major risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no
interest is being paid.
D: Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
NR: Indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or that
Standard & Poor's does not rate a particular type of obligation
as a matter of policy.
Report of Independent Certified Public Accountants'
The Shareholders and Board of Directors
Bhirud Funds, Inc.
We have audited the accompanying statement of assets and
liabilities of the Apex Mid Cap Growth Fund (a portfolio of
Bhirud Funds, Inc.), including the portfolio of investments, as
of July 31, 1998, and the related statement of operations, the
statement of changes in net assets, and financial highlights for
the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The
financial statements and financial highlights of the Apex Mid
Cap Growth Fund (formerly known as the Bhirud Mid Cap Growth
Fund) (a portfolio of Bhirud Funds, Inc.) as of July 31, 1995
and 1994, and for the years then ended, were audited by other
auditors whose reports dated August 31, 1995 and September 7,
1994, respectively, expressed unqualified opinions on those
financial highlights.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform our audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of July 31, 1998 by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly in all material
respects, the financial position of the Apex Mid Cap Growth Fund
at July 31, 1998, the results of its operations, changes in its
net assets and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles.
Van Buren & Hauke, LLC
Certified Public Accountants
63 Wall Street, Suite 2501
New York, NY 10005
September 23, 1998
<TABLE>
THE APEX MID CAP GROWTH FUND
SCHEDULE OF INVESTMENTS REPORT DATE 31-Jul-98
<CAPTION>
CO. NAME Shares % MV Market Value
<S> <C> <C> <C>
Agouron Pharmaceuticals * 700 18,113
ICN Pharmaceuticals 750 21,281
Vivus * 1000 6,625
Noven Pharmaceuticals * 2000 12,000
TOTAL DRUG INDUSTRY 3.41 58,019
Smart Modular Technologies * 1000 19,125
Sequent Computer Systems * 1000 11,406
TOTAL COMPUTER & PERIP. 1.79 30,531
VIASOFT * 1000 12,875
TOTAL COMPUTER SOFTW & SVC 0.76 12,875
Zenith Electronics * 2000 1,140
TOTAL ELECTRONICS 0.07 1,140
Integrated Device Techno.* 1000 5,375
TOTAL SEMICONDUCTOR 0.32 5,375
Boeing 1000 38,813
TOTAL AEROSPACE / DEFENSE 2.28 38,813
CAI Wireless Systems * 5000 225
TOTAL TELECOM. EQUIPMENT 0.01 225
Sharper Image * 2000 10,750
CDnow * 1000 16,313
TOTAL RETAIL SPECIALTY 1.59 27,063
Imatron * 2000 4,876
TOTAL MEDICAL SUPPLIES 0.29 4,876
Noise Cancellation Tech * 3000 1,923
TeleVideo * 2500 2,813
Trimedyne * 5000 6,250
Camelton Corp. * 625 88
Vista 2000 Inc. * 4000 320
Applix * 3000 10,689
Sanctuary Woods Multimedia * 400 28
TOTAL MISCELLANEOUS 1.30 22,110
TOTAL COMMON STOCKS 11.80 201,022
Linear Technology -500 -29,907
TOTAL SEMICONDUCTOR -1.76 -29,907
Novellus Systems * -700 -27,475
TOTAL SEMICONDUCTOR CAP EQ -1.61 -27,475
Travelers Group -500 -33,625
TOTAL FINANCIAL SERVICES COMP. -1.97 -33,625
Infoseek * -1000 -24,875
RealNetworks * -1000 -29,688
Lycos * -500 -28,563
TOTAL INTERNET INDUSTRY -4.88 -83,126
TOTAL COMMON STOCKS - SHORT SELLS -10.22 -174,131
STAR BANK REPO'S 1331000 78.16 1,331,000
TOTAL SECURITY INVESTMENTS 79.74 1,357,891
TOTAL INVESTMENTS 79.74 1,357,891
OTHER ASSETS 20.26 345,102
NET ASSETS 100.00 1,702,993
<FN>
* Non - income producing securities
</FN>
</TABLE>
THE APEX MID CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES July 31, 1998 (AUDITED)
ASSETS
Investment Securities at Value $1,357,891
(Identified cost - $1,960,668) (Note 1)
Cash 200
Interest receivable 174
Due from broker - Short sales 378,955
Total Assets $1,737,220
LIABILITIES
Payables:
Accrued expenses $34,227
Total Liabilities ($34,227)
NET ASSETS (Equivalent to $7.53 per share based on 226,196
shares outstanding) $ 1,702,993
COMPOSITION OF NET ASSETS:
Paid in Capital $ 2,648,224
Distribution in excess of accumulated Net Realized gain (342,454)
Accumulated Net Investment Income --
Net Unrealized Depreciation of Investments (602,777)
Total Net Assets $1,702,993
STATEMENT OF OPERATIONS (AUDITED) FOR THE YEAR ENDED JULY 31,1998
INVESTMENT INCOME
Dividends $ 3,024
Interest 23,233
EXPENSES
Audit $ 4,000
Fund Accounting 11,175
Transfer Agent (Note 6) 7,560
Legal 5,000
Miscellaneous 500
Shareholder Report 1,800
Directors 12000
Registration 4,640
Organization (Note 5) 9,889
Insurance 1,458
Fund Administration (Note 4) 3,416
Custodian 7,000
Investment Advisor (Note 4) 17,082
Dividends on Short Sales 633
12b-1 Fees 4,256
Total Expenses ( 90,409)
Expense Reimbursement/ waived by Advisor (Note 4) 20,498
Expense net of Reimbursement/ waiver (69,911)
NET INVESTMENT LOSS $ ( 43,654)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments $ 472,323
Change in Unrealized Appreciation (Depreciation) of
Investments (280,018)
NET REALIZED/UNREALIZED GAIN (LOSS) ON INVESTMENTS $192,305
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $148,651
See accompanying Notes to Financial Statements
<TABLE>
THE APEX MID CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS JULY 31,1998 (AUDITED)
<CAPTION>
For the For the
Year Ended Year Ended
July 31,1998 July 31, 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Net Investment Income/ (loss) $ (43,654) $ (75,923)
Net Realized Gain / (loss) on investment
Securities Sold 472,323 (198,579)
Net unrealized appreciation/(depreciation)
of Investments (280,018) 300,684
Net Increase (Decrease) in Net Assets Resulting from
Operations $ 148,651 $ 26,182
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Dividend distributions paid 75,923 83,993
Capital Gains 0 0
Total Distributions 75,923 83,993
CAPITAL SHARE TRANSACTIONS
Shares Sold 214,637 708,471
Shares issued in lieu of Cash Distributions (75,923) (83,993)
Cost of shares Redeemed (353,118) (896,690)
Increase (Decrease) in Net Assets Due to Capital
Share Transactions (214,404) (272,212)
TOTAL INCREASE (DECREASE) IN NET ASSETS 10,170 (162,037)
NET ASSETS BEGINNING OF PERIOD 1,692,823 1,854,860
NET ASSETS END OF PERIOD $ 1,702,993 $1,692,823
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD (AUDITED)
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
July 31, July 31, July 31,
1998 1997 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $6.93 $7.18 $9.71
Income/(Loss) from Investment Operations:
Net Investment Income/(Loss) (0.36) (0.33) (0.35)
Net Gain/(Loss) on Securities
(Both Realized and Unrealized) 1.58 0.44 (2.63)
Total from Investment Operations 1.22 0.11 (2.98)
Distributions:
Dividend Distributions Paid (0.62) (0.36) 0.45
Distributions from Capital Gains 0 0 0
Total Distributions (0.62) (0.36) 0.45
NET ASSET VALUE, END OF PERIOD $ 7.53 $ 6.93 $ 7.18
Total Return (Not Reflecting Sales Load) 8.66% (3.48)% (26.05)%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $1,703 $1,693 $1,855
Ratios to Average Net Assets:
Expenses 5.26% 5.25% 2.52%
Net Investment Income/(Loss) (2.54)% (4.73)% (2.11)%
Effect of Reimbursements/Waivers
on Above Ratios 1.19% 1.21% 1.28%
Portfolio Turnover Rate 205.06% 275.55% 320.89%
Average Commission Rate Paid $/Share $0.0617 $ 0.06 $ 0.0413
<FN>
* Based on weighted average shares outstanding ** Not annualized
See accompanying Notes to Financial Statements
</FN>
</TABLE>
THE APEX MID CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JULY 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Bhirud Funds, Inc. (the "Fund") is a diversified open-end
management investment company currently consisting of The Apex
Mid Cap Growth Fund portfolio (the "Portfolio"). The Fund was
incorporated in Maryland on May 27, 1992. Prior to November 4,
1992 (commencement of operations), the Fund had no operations
other than the sale of 10,000 shares of stock on August 4, 1992
at a cost of $100,000 to Thomas James MidCap Partners
representing the initial capital. The following is a summary of
significant accounting policies followed by the Fund:
SECURITY VALUATION
Readily marketable portfolio securities listed on the New York
Stock Exchange are valued at the last sale price reflected at
the close of the regular trading session 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 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 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 Advisor 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 deem appropriate to reflect
their fair value.
United States Government obligations and other debt instruments
having sixty days or less remaining until maturity are stated at
amortized cost. Debt instruments having a greater remaining
maturity will be valued at the highest bid price obtained from a
dealer maintaining an active market in that security or on the
basis of prices obtained from a pricing service approved as
reliable by the Board of Directors.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the dates the
securities are purchased or sold (the trade dates), with
realized gain and loss on investments determined by using
specific identification as the cost method. Interest income
(including amortization of premium and discount, when
appropriate) is recorded as earned. Dividend income and
dividends and capital gain distributions to shareholders are
recorded on the ex-dividend date.
FEDERAL INCOME TAXES
The Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code and distribute
all of its taxable income to its shareholders. Therefore, no
federal income tax provision is required.
2. CAPITAL STOCK TRANSACTIONS
The Articles of Incorporation, dated May 27, 1992, permit the
Fund to issue twenty billion shares (par value $0.001).
Transactions in shares of common stock for the year ended July
31, 1998 were as follows:
Shares Amount
Beginning Balance 244,425 $ 2,938,551
Shares Sold 29,035 214,637
Shares Issued in Reinvestment of Dividends 0 (75,923)
Shares Redeemed ( 47,264) ( 353,118)
Net Increase (Decrease) ( 18,229) ( 214,404)
Ending Balance 226,196 $2,724,147
3. INVESTMENTS
Purchases and sales of securities for the year ended July 31st,
1998 other than short-term securities, aggregated $2,311,033 and
$3,967,676, respectively. There were short sale transactions for
the year ended July 31, 1998 which aggregate $748,844 of
purchases and $754,543 of sales. The cost of securities is
substantially the same for Federal income tax purposes.
For Federal income tax purposes:
Aggregate Cost $1,960,668
Gross Unrealized Appreciation 8,218
Gross Unrealized Depreciation (610,995)
Net Unrealized Depreciation ($602,777)
Short-Selling. The Fund is engaged in short selling which
obligates the Fund to replace the security borrowed by
purchasing the security at current market value. The Fund would
incur a loss if the price of the security increases between the
date of the short sale and the date on which the Fund replaces
the borrowed security. The Fund would realize a gain if the
price of the security declines between those dates. Until the
Fund replaces the borrowed security, the Fund will deposit
collateral with the broker-dealer, usually cash, U.S. government
securities, or other highly liquid securities, sufficient to
cover its short position. Securities sold short at July 31st,
1998 and their related market values and proceeds are set forth
in the Schedule of Securities Sold Short.
4. INVESTMENT ADVISORY CONTRACT
The Fund employs Bhirud Associates, Incorporated (the "Advisor")
to provide a continuous investment program for the Fund's
portfolio, provide all facilities and personnel, including
Officers required for its administrative management, and to pay
the compensation of all Officers and Directors of the Fund who
are affiliated with the Advisor. As compensation for the
services rendered and related expenses borne by the Advisor, the
Fund pays the Advisor a fee, computed and accrued daily and
payable monthly, equal to 1.00% of the first $250 million of the
average net assets of the Portfolio; 0.75% of the average net
assets of the Portfolio between $250 and $500 million; and 0.65%
of the average net assets of the Portfolio over $500 million.
The Advisor has voluntarily agreed to reimburse the Fund in the
event the Fund's expenses exceed certain prescribed limits.
During the year ended July 31, 1998 the Advisor elected to defer
the payment of Advisor fees payable in amount of $ 17,082. The
Advisor has voluntarily agreed to waive these fees, considering
the small assets of the Fund. The Advisory and Administrative
Services Contracts provide that if, in any fiscal year, the
aggregate expenses of a Fund, excluding interest, taxes,
brokerage and extraordinary expenses, but including the Advisory
and Administrative Services fees, exceed the expense limitation
of any state in which the Trust is registered for sale, the
Funds may deduct from fees paid to the Advisor and Administrator
their proportionate share of such excess expenses to the extent
of the fees payable. Currently, the most restrictive state
limitation is 2.5% of the first $30 million, 2% of the next $70
million and 1.5% of the excess over $100 million of the average
value of the Fund's net assets.
The Fund retained Bhirud Associates, Inc. ("BAI") to act as
Administrator for the Fund from November 1, 1994. BAI provided
administrative services for the Fund. During the year ended July
31, 1998 the Administrator elected to defer the payment of
Administrative service fees payable in amount of $3,416.
From December 1, 1996, the Star Bank, N.A. has been providing
custodian services and fund accounting, and transfer agency
functions are provided by American Data Services for the Fund
until January 31st, 1998. From February 1st, 1998, the Mutual
Shareholders Services, Inc. has been providing fund accounting,
and transfer agency functions.
5. ORGANIZATION EXPENSES
The organizational expense was amortized over the first five years of the
Fund's operation and is now zero going forward.
6. DISTRIBUTION PLAN
The Fund's Board of Directors has adopted a distribution plan
(the "Plan") under Section 12(b) of the Investment Company Act
of 1940 and Rule 12b-1 thereunder. The Plan provides that the
Portfolio may bear certain expenses and costs which in the
aggregate are subject to a maximum of 0.25% per annum of the
Portfolio's average daily net assets. For the year ended July
31st, 1998, the Fund has incurred distribution costs of $2,675
payable to Bhirud Associates, Inc.
7. TRANSACTIONS WITH AFFILIATES
During the six months ended January 31st, 1998 the Fund paid $3,268
brokerage commissions to Bhirud Associates, Inc.
8. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with generally accepted accounting principals, the
Fund recorded reclassifications in the capital accounts. The
Fund recorded a permanent book/tax difference of $(43654) as of
July 31, 1998, from undistributed net investment income to paid
in capital. These reclassifications have no impact on net asset
value of the Fund and are designed generally to present
undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder.
BHIRUD FUNDS, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(A) Financial Statements.
Included in Prospectus:
1) Financial Highlights for the year ended July 31, 1997 and
July 31, 1998
Included in Statement of Additional Information:
(1) Portfolio of Investments, dated July 31, 1998;
(2) Statement of Assets and Liabilities, dated July 31, 1998;
(3) Statement of Operations, for the year ended July 31, 1998;
(4) Statement of Changes in Net Assets, for the year ended July 31, 1997
and July 31, 1998;
(5) Notes to Financial Statements, for the year ended July 31, 1998;
(6) Financial Highlights, for the year ended July 31, 1996,
July 31, 1997, and July 31, 1998; and
(7) Report of Van Buren & Hauke, LLC, Independent Auditors,
dated September 23, 1998.
(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 Shareholderes 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.
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, 1998
Common Stock (par value $.001) 246
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
$3.0 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 of the
and Director Board, Treasurer
Susan Bhirud Secretary None
Harish Bhirud Assistant Secretary Director and
Vice-president
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 Shareholders Services Inc.,
1301 E 9th Street, Suite 3600, 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies
that it has met all of the requirements for effectiveness of
this Amendment to its 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 18 th day of
November, 1998.
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 18,1998
and Principal Financial officer: Board, Treasurer
and Director
/s/ Suresh Bhirud
Suresh Bhirud
(2) Majority of Directors
Tim Fenton Director
Alexander Norman Crowder, III Director
M. John Sterba, Jr. Director
By: /s/ Suresh Bhirud November 18, 1998
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.
Exhibit Index
Page No.
(8) Form of Custody Agreement between the Registrant and The
Star Bank 49
(9.1) Form of Administrative Services Agreement between the
Registrant and Bhirud Associates, Inc. for the Portfolio of the
Registrant 59
(9.2) Form of Transfer Agent Agreement between the Registrant
and The Mutual Shareholder Services, Inc. (Maxus Infor-
mation Systems). 62
(11) Consent of Van Buren & Hauke, LLC, Independent Auditors 69
(15.1) Form of Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 70
(15.3) Form of Shareholder Servicing Agreement between the
Registrant and Bhirud Associates, Inc. 72
EXHIBIT 8
CUSTODY AGREEMENT
This agreement (the "Agreement") is entered into as of the
_1st__day of _December__, 1996 by and between The Apex Mid Cap
Growth Fund , (the "Fund"), an open-end diversified investment
business trust organized under the laws of _Maryland________ and
having its office at 1266 East Main Street, Stamford, CT 06902_
and Star Bank, National Association, (the "Custodian"), a
national banking association having its principal office at 425
Walnut Street, Cincinnati, Ohio, 45202.
WHEREAS, the Fund and the Custodian desire to enter into this
Agreement to provide for the custody and safekeeping of the
assets of the Fund as required by the Investment Company Act of
1940, as amended (the "Act").
WHEREAS, the Fund hereby appoints the Custodian as custodian of
all the Fund's Securities and moneys at any time owned by the
Fund during the term of this Agreement (the "Fund Assets").
WHEREAS, the Custodian hereby accepts such appointment as
Custodian and agrees to perform the duties thereof as
hereinafter set forth.
THEREFORE, in consideration of the mutual promises hereinafter
set forth, the Fund and the Custodian agree as follows:
ARTICLE I
Definitions
The following words and phrases, when used in this Agreement,
unless the context otherwise requires, shall have the following
meanings:
Authorized Person - the Chairman, President, Secretary,
Treasurer, Controller, or Senior Vice President of the Fund, or
any other person, whether or not any such person is an officer
or employee of the Fund, duly authorized by the Board of
Trustees of the Fund to give Oral Instructions and Written
Instructions on behalf of the Fund, and listed in the
Certificate annexed hereto as Appendix A, or such other
Certificate as may be received by the Custodian from time to
time.
Book-Entry System - the Federal Reserve Bank book-entry system
for United States Treasury securities and federal agency
securities.
Depository - The Depository Trust Company ("DTC"), a limited
purpose trust company its successor(s) and its nominee(s) or
any other person or clearing agent
Dividend and Transfer Agent - the dividend and transfer agent
appointed, from time to time, pursuant to a written agreement
between the dividend and transfer agent and the Fund
Foreign Securities - a) securities issued and sold primarily
outside of the United States by a foreign government, a national
of any foreign country, or a trust or other organization
incorporated or organized under the laws of any foreign country
or; b) securities issued or guaranteed by the government of the
United States, by any state, by any political subdivision or
agency thereof, or by any entity organized under the laws of the
United States or of any state thereof, which have been issued
and sold primarily outside of the United States.
Money Market Security - debt obligations issued or guaranteed
as to principal and/or interest by the government of the United
States or agencies or instrumentalities thereof, commercial
paper, obligations (including certificates of deposit, bankers'
acceptances, repurchase agreements and reverse repurchase
agreements with respect to the same), and time deposits of
domestic banks and thrift institutions whose deposits are
insured by the Federal Deposit Insurance Corporation, and
short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or
their equivalent on the same day as such purchase and sale, all
of which mature in not more than thirteen (13) months.
Officers - the Chairman, President, Secretary, Treasurer,
Controller, and Senior Vice President of the Fund listed in the
Certificate annexed hereto as Appendix A, or such other
Certificate as may be received by the Custodian from time to
time.
Oral Instructions - verbal instructions received by the
Custodian from an Authorized Person (or from a person that the
Custodian reasonably believes in good faith to be an Authorized
Person) and confirmed by Written Instructions in such a manner
that such Written Instructions are received by the Custodian on
the business day immediately following receipt of such Oral
Instructions.
Prospectus - the Fund's then currently effective prospectus and
Statement of Additional Information, as filed with and declared
effective from time to time by the Securities and Exchange
Commission.
Security or Securities - Money Market Securities, common stock,
preferred stock, options, financial futures, bonds, notes,
debentures, corporate debt securities, mortgages, and any
certificates, receipts, warrants, or other instruments
representing rights to receive, purchase, or subscribe for the
same or evidencing or representing any other rights or interest
therein, or any property or assets.
Written Instructions - communication received in writing by the
Custodian from an Authorized Person.
ARTICLE II
Documents and Notices to be Furnished by the Fund
A The following documents, including any amendments thereto,
will be provided contemporaneously with the execution of the
Agreement, to the Custodian by the Fund:
1. A copy of the Articles of Incorporation of the Fund
certified by the Secretary.
2. A copy of the By-Laws of the Fund certified by the Secretary.
3. A copy of the resolution of the Board of Trustees of the
Fund appointing the Custodian, certified by the Secretary.
4. A copy of the then current Prospectus.
5. A Certificate of the President and Secretary of the Fund
setting forth the names and signatures of the Officers of
the Fund.
B. The Fund agrees to notify the Custodian in writing of the
appointment of any Dividend and Transfer Agent.
ARTICLE III
Receipt of Fund Assets
A. During the term of this Agreement, the Fund will deliver or
cause to be delivered to the Custodian all moneys constituting
Fund Assets. The Custodian shall be entitled to reverse any
deposits made on the Fund's behalf where such deposits have been
entered and moneys are not finally collected within 30 days of
the making of such entry.
B. During the term of this Agreement, the Fund will deliver or
cause to be delivered to the Custodian all Securities
constituting Fund Assets. The Custodian will not have any duties
or responsibilities with respect to such Securities until
actually received by the Custodian.
C. As and when received, the Custodian shall deposit to the
account(s) of the Fund any and all payments for shares of the
Fund issued or sold from time to time as they are received from
the Fund's distributor or Dividend and Transfer Agent or from
the Fund itself.
ARTICLE IV
Disbursement of Fund Assets
A. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Trustees of the Fund, certified by
the Fund's Secretary, either (i) setting forth the date of the
declaration of any dividend or distribution in respect of shares
of the Fund, the date of payment thereof, the record date as of
which Fund shareholders entitled to payment shall be determined,
the amount payable per share to Fund shareholders of record as
of that date, and the total amount to be paid by the Dividend
and Transfer Agent on the payment date, or (ii) authorizing the
declaration of dividends and distributions in respect of shares
of the Fund on a daily basis and authorizing the Custodian to
rely on a Certificate setting forth the date of the declaration
of any such dividend or distribution, the date of payment
thereof, the record date as of which Fund shareholders entitled
to payment shall be determined, the amount payable per share to
Fund shareholders of record as of that date, and the total
amount to be paid by the Dividend and Transfer Agent on the
payment date.
On the payment date specified in such resolution or
Certificate described above, the Custodian shall segregate such
amounts from moneys held for the account of the Fund so that
they are available for such payment.
B. Upon receipt of Written Instructions so directing it, the
Custodian shall segregate amounts necessary for the payment of
redemption proceeds to be made by the Dividend and Transfer
Agent from moneys held for the account of the Fund so that they
are available for such payment.
C. Upon receipt of a Certificate directing payment and setting
forth the name and address of the person to whom such payment is
to be made, the amount of such payment, and the purpose for
which payment is to be made, the Custodian shall disburse
amounts as and when directed from the Fund Assets. The
Custodian is authorized to rely on such directions and shall be
under no obligation to inquire as to the propriety of such
directions.
D. Upon receipt of a Certificate directing payment, the
Custodian shall disburse moneys from the Fund Assets in payment
of the Custodian's fees and expenses as provided in Article VIII
hereof.
ARTICLE V
Custody of Fund Assets
A. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the
Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold all cash
received by it from or for the account of the Fund, other than
cash maintained by the Fund in a bank account established and
used by the Fund in accordance with Rule 17f-3 under the Act.
Moneys held by the Custodian on behalf of the Fund may be
deposited by the Custodian to its credit as Custodian in the
banking department of the Custodian. Such moneys shall be
deposited by the Custodian in its capacity as such, and shall be
withdrawable by the Custodian only in such capacity.
B. The Custodian shall hold all Securities delivered to it in
safekeeping in a separate account or accounts maintained at Star
Bank, N.A. for the benefit of the Fund.
C. All Securities held which are issued or issuable only in
bearer form, shall be held by the Custodian in that form; all
other Securities held for the Fund shall be registered in the
name of the Custodian or its nominee. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold, or deliver in proper form for transfer, any
Securities that it may hold for the account of the Fund and
which may, from time to time, be registered in the name of the
Fund.
D. With respect to all Securities held for the Fund , the
Custodian shall on a timely basis (concerning items 1 and 2
below, as defined in the Custodian's Standards of Service Guide,
as amended from time to time, annexed hereto as Appendix C):
1.) Collect all income due and payable with respect to such
Securities;
2.) Present for payment and collect amounts payable upon all
Securities which may mature or be called, redeemed, or retired,
or otherwise become payable;
3.) Surrender Securities in temporary form for definitive
Securities; and
4.) Execute, as agent, any necessary declarations or
certificates of ownership under the Federal income tax laws or
the laws or regulations of any other taxing authority, including
any foreign taxing authority, now or hereafter in effect.
E. Upon receipt of a Certificate and not otherwise, the
Custodian shall:
1.) Execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as
beneficial owner of any Securities may be exercised;
2.) Deliver any Securities in exchange for other Securities or
cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation, or
recapitalization of any trust, or the exercise of any conversion
privilege;
3.) Deliver any Securities to any protective committee,
reorganization committee, or other person in connection with the
reorganization, refinancing, merger, consolidation,
recapitalization, or sale of assets of any trust, and receive
and hold under the terms of this Agreement such certificates of
deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
4.) Make such transfers or exchanges of the assets of the Fund
and take such other steps as shall be stated in said Certificate
to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
5.) Deliver any Securities held for the Fund to the depository
agent for tender or other similar offers.
F. The Custodian shall promptly deliver to the Fund all
notices, proxy material and executed but unvoted proxies
pertaining to shareholder meetings of Securities held by the
Fund. The Custodian shall not vote or authorize the voting of
any Securities or give any consent, waiver or approval with
respect thereto unless so directed by a Certificate or Written
Instruction.
G. The Custodian shall promptly deliver to the Fund all
information received by the Custodian and pertaining to
Securities held by the Fund with respect to tender or exchange
offers, calls for redemption or purchase, or expiration of
rights.
ARTICLE VI
Purchase and Sale of Securities
A. Promptly after each purchase of Securities by the Fund, the
Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities,
Written Instructions, and (ii) with respect to each purchase of
Money Market Securities, Written Instructions or Oral
Instructions, specifying with respect to each such purchase the;
1.) name of the issuer and the title of the Securities,
2.) principal amount purchased and accrued interest, if any,
3.) date of purchase and settlement,
4.) purchase price per unit,
5.) total amount payable, and
6.) name of the person from whom, or the broker through which,
the purchase was made.
The Custodian shall, against receipt of Securities purchased by
or for the Fund, pay out of the Fund Assets, the total amount
payable to the person from whom or the broker through which the
purchase was made, provided that the same conforms to the total
amount payable as set forth in such Written Instructions or Oral
Instructions, as the case may be.
B. Promptly after each sale of Securities by the Fund, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, Written
Instructions, and (ii) with respect to each sale of Money Market
Securities, Written Instructions or Oral Instructions,
specifying with respect to each such sale the;
1.) name of the issuer and the title of the Securities,
2.) principal amount sold and accrued interest, if any,
3.) date of sale and settlement,
4.) sale price per unit,
5.) total amount receivable, and
6.) name of the person to whom, or the broker through which,
the sale was made.
The Custodian shall deliver the Securities against receipt of
the total amount receivable, provided that the same conforms to
the total amount receivable as set forth in such Written
Instructions or Oral Instructions, as the case may be.
C. On contractual settlement date, the account of the Fund will
be charged for all purchased Securities settling on that day,
regardless of whether or not delivery is made. Likewise, on
contractual settlement date, proceeds from the sale of
Securities settling that day will be credited to the account of
the Fund, irrespective of delivery.
D. Purchases and sales of Securities effected by the Custodian
will be made on a delivery versus payment basis. The Custodian
may, in its sole discretion, upon receipt of a Certificate,
elect to settle a purchase or sale transaction in some other
manner, but only upon receipt of acceptable indemnification from
the Fund.
E. The Custodian shall, upon receipt of a Written Instructions
so directing it, establish and maintain a segregated account or
accounts for and on behalf of the Fund. Cash and/or Securities
may be transferred into such account or accounts for specific
purposes, to-wit:
1.) in accordance with the provision of any agreement among
the Fund, the Custodian, and a broker-dealer registered under
the Securities and Exchange Act of 1934, as amended, and also a
member of the National Association of Securities Dealers (NASD)
(or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules
of the Options Clearing Corporation and of any registered
national securities exchange, the Commodity Futures Trading
Commission, any registered contract market, or any similar
organization or organizations requiring escrow or other similar
arrangements in connection with transactions by the Fund;
2.) for purposes of segregating cash or government securities
in connection with options purchased, sold, or written by the
Fund or commodity futures contracts or options thereon
purchased or sold by the Fund;
3.) for the purpose of compliance by the fund with the
procedures required for reverse repurchase agreements, firm
commitment agreements, standby commitment agreements, and short
sales by Act Release No. 10666, or any subsequent release or
releases or rule of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered
investment companies; and
4.) for other corporate purposes, only in the case of this
clause 4 upon receipt of a copy of a resolution of the Board of
Trustees of the Fund, certified by the Secretary of the Fund,
setting forth the purposes of such segregated account.
F. Except as otherwise may be agreed upon by the parties
hereto, the Custodian shall not be required to comply with any
Written Instructions to settle the purchase of any Securities on
behalf of the Fund unless there is sufficient cash in the
account(s) at the time or to settle the sale of any Securities
from an account(s) unless such Securities are in deliverable
form. Notwithstanding the foregoing, if the purchase price of
such Securities exceeds the amount of cash in the account(s) at
the time of such purchase, the Custodian may, in its sole
discretion, advance the amount of the difference in order to
settle the purchase of such Securities. The amount of any such
advance shall be deemed a loan from the Custodian to the Fund
payable on demand and bearing interest accruing from the date
such loan is made up to but not including the date such loan is
repaid at a rate per annum customarily charged by the Custodian
on similar loans.
ARTICLE VII
Fund Indebtedness
In connection with any borrowings by the Fund, the Fund will
cause to be delivered to the Custodian by a bank or broker
requiring Securities as collateral for such borrowings
(including the Custodian if the borrowing is from the
Custodian), a notice or undertaking in the form currently
employed by such bank or broker setting forth the amount of
collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a)
the name of the bank or broker, (b) the amount and terms of the
borrowing, which may be set forth by incorporating by reference
an attached promissory note duly endorsed by the Fund, or a loan
agreement, (c) the date, and time if known, on which the loan is
to be entered into, (d) the date on which the loan becomes due
and payable, (e) the total amount payable to the Fund on the
borrowing date, and (f) the description of the Securities
securing the loan, including the name of the issuer, the title
and the number of shares or the principal amount. The Custodian
shall deliver on the borrowing date specified in the Certificate
the required collateral against the lender's delivery of the
total loan amount then payable, provided that the same conforms
to that which is described in the Certificate. The Custodian
shall deliver, in the manner directed by the Fund, such
Securities as additional collateral, as may be specified in a
Certificate, to secure further any transaction described in
this Article VII. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian
and the Custodian shall receive from time to time such return of
collateral as may be tendered to it.
The Custodian may, at the option of the lender, keep such
collateral in its possession, subject to all rights therein
given to the lender because of the loan. The Custodian may
require such reasonable conditions regarding such collateral and
its dealings with third-party lenders as it may deem appropriate.
ARTICLE VIII
Concerning the Custodian
A. Except as otherwise provided herein, the Custodian shall
not be liable for any loss or damage resulting from its action
or omission to act or otherwise, except for any such loss or
damage arising out of its own gross negligence or willful
misconduct. The Fund shall defend, indemnify and hold harmless
the Custodian and its directors, officers, employees and agents
with respect to any loss, claim, liability or cost (including
reasonable attorneys' fees) arising or alleged to arise from or
relating to the Fund's duties hereunder or any other action or
inaction of the Fund or its Trustees, officers, employees or
agents, except such as may arise from the negligent action,
omission, willful misconduct or breach of this Agreement by the
Custodian. The Custodian may, with respect to questions of law,
apply for and obtain the advice and opinion of counsel, at the
expense of the Fund, and shall be fully protected with respect
to anything done or omitted by it in good faith in conformity
with the advice or opinion of counsel. The provisions under this
paragraph shall survive the termination of this Agreement.
B. Without limiting the generality of the foregoing, the
Custodian, acting in the capacity of Custodian hereunder, shall
be under no obligation to inquire into, and shall not be liable
for:
1.) The validity of the issue of any Securities purchased by
or for the account of the Fund, the legality of the purchase
thereof, or the propriety of the amount paid therefor;
2.) The legality of the sale of any Securities by or for the
account of the Fund, or the propriety of the amount for which
the same are sold;
3.) The legality of the issue or sale of any shares of the
Fund, or the sufficiency of the amount to be received therefor;
4.) The legality of the redemption of any shares of the Fund,
or the propriety of the amount to be paid therefor;
5.) The legality of the declaration or payment of any dividend
by the Fund in respect of shares of the Fund;
6.) The legality of any borrowing by the Fund on behalf of the
Fund, using Securities as collateral;
C. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund
from any Dividend and Transfer Agent of the Fund nor to take any
action to effect payment or distribution by any Dividend and
Transfer Agent of the Fund of any amount paid by the Custodian
to any Dividend and Transfer Agent of the Fund in accordance
with this Agreement.
D. Notwithstanding Section D of Article V, the Custodian shall
not be under any duty or obligation to take action to effect
collection of any amount, if the Securities upon which such
amount is payable are in default, or if payment is refused after
due demand or presentation, unless and until (i) it shall be
directed to take such action by a Certificate and (ii) it shall
be assured to its satisfaction (including prepayment thereof) of
reimbursement of its costs and expenses in connection with any
such action.
E. The Fund acknowledges and hereby authorizes the Custodian to
hold Securities through its various agents described in Appendix
B annexed hereto. The Fund hereby represents that such
authorization has been duly approved by the Board of Trustees of
the Fund as required by the Act. The Custodian acknowledges
that although certain Fund Assets are held by its agents, the
Custodian remains primarily liable for the safekeeping of the
Fund Assets.
In addition, the Fund acknowledges that the Custodian may
appoint one or more financial institutions, as agent or agents
or as sub-custodian or sub-custodians, including, but not
limited to, banking institutions located in foreign countries,
for the purpose of holding Securities and moneys at any time
owned by the Fund. The Custodian shall not be relieved of any
obligation or liability under this Agreement in connection with
the appointment or activities of such agents or sub-custodians.
Any such agent or sub-custodian shall be qualified to serve as
such for assets of investment companies registered under the
Act. Upon request, the Custodian shall promptly forward to the
Fund any documents it receives from any agent or sub-custodian
appointed hereunder which may assist trustees of registered
investment companies fulfill their responsibilities under Rule
17f-5 of the Act.
F. The Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or
held by it for the account of the Fund are such as properly may
be held by the Fund under the provisions of the Articles of
Incorporation and the Fund's By-Laws.
G. The Custodian shall treat all records and other information
relating to the Fund and the Fund Assets as confidential and
shall not disclose any such records or information to any other
person unless (i) the Fund shall have consented thereto in
writing or (ii) such disclosure is required by law.
H. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian such compensation as shall be
determined pursuant to Appendix D attached hereto, or as shall
be determined pursuant to amendments to such Appendix D. The
Custodian shall be entitled to charge against any money held by
it for the account of the Fund, the amount of any of its fees,
any loss, damage, liability or expense, including counsel fees.
The expenses which the Custodian may charge against the account
of the Fund include, but are not limited to, the expenses of
agents or sub-custodians incurred in settling transactions
involving the purchase and sale of Securities of the Fund.
I. The Custodian shall be entitled to rely upon any Oral
Instructions and any Written Instructions. The Fund agrees to
forward to the Custodian Written Instructions confirming Oral
Instructions in such a manner so that such Written Instructions
are received by the Custodian, whether by hand delivery,
facsimile or otherwise, on the same business day on which such
Oral Instructions were given. The Fund agrees that the failure
of the Custodian to receive such confirming instructions shall
in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund for acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions.
J. The Custodian will (i) set up and maintain proper books of
account and complete records of all transactions in the accounts
maintained by the Custodian hereunder in such manner as will
meet the obligations of the Fund under the Act, with particular
attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder and those records are the property of the Fund, and
(ii) preserve for the periods prescribed by applicable Federal
statute or regulation all records required to be so preserved.
All such books and records shall be the property of the Fund,
and shall be open to inspection and audit at reasonable times
and with prior notice by Officers and auditors employed by the
Fund.
K. The Custodian shall send to the Fund any report received on
the systems of internal accounting control of the Custodian, or
its agents or sub-custodians, as the Fund may reasonably request
from time to time.
L. The Custodian performs only the services of a custodian and
shall have no responsibility for the management, investment or
reinvestment of the Securities from time to time owned by the
Fund. The Custodian is not a selling agent for shares of the
Fund and performance of its duties as custodian shall not be
deemed to be a recommendation to the Fund's depositors or others
of shares of the Fund as an investment.
M. The Custodian shall take all reasonable action, that the
Fund may from time to time request, to assist the Fund in
obtaining favorable opinions from the Fund's independent
accountants, with respect to the Custodian's activities
hereunder, in connection with the preparation of the Fund's Form
N-1A, Form N-SAR, or other annual reports to the Securities and
Exchange Commission.
N. The Fund hereby pledges to and grants the Custodian a
security interest in any Fund Assets to secure the payment of
any liabilities of the Fund to the Custodian, whether acting in
its capacity as Custodian or otherwise, or on account of money
borrowed from the Custodian. This pledge is in addition to any
other pledge of collateral by the Fund to the Custodian.
ARTICLE X
Termination
A. Either of the parties hereto may terminate this Agreement
for any reason by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of giving of such notice.
If such notice is given by the Fund, it shall be accompanied by
a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary of the Fund, electing to terminate
this Agreement and designating a successor custodian or
custodians. In the event such notice is given by the Custodian,
the Fund shall, on or before the termination date, deliver to
the Custodian a copy of a resolution of the Board of Trustees of
the Fund, certified by the Secretary, designating a successor
custodian or custodians to act on behalf of the Fund. In the
absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust
company having not less than $100,000,000 aggregate capital,
surplus, and undivided profits. Upon the date set forth in such
notice this Agreement shall terminate, and the Custodian,
provided that it has received a notice of acceptance by the
successor custodian, shall deliver, on that date, directly to
the successor custodian all Securities and moneys then owned by
the Fund and held by it as Custodian. Upon termination of this
Agreement, the Fund shall pay to the Custodian on behalf of the
Fund such compensation as may be due as of the date of such
termination. The Fund agrees on behalf of the Fund that the
Custodian shall be reimbursed for its reasonable costs in
connection with the termination of this Agreement.
B. If a successor custodian is not designated by the Fund, or
by the Custodian in accordance with the preceding paragraph, or
the designated successor cannot or will not serve, the Fund
shall, upon the delivery by the Custodian to the Fund of all
Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and moneys then owned by
the Fund, be deemed to be the custodian for the Fund, and the
Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book-Entry System, which
cannot be delivered to the Fund, which shall be held by the
Custodian in accordance with this Agreement.
ARTICLE XI
MISCELLANEOUS
A. Appendix A sets forth the names and the signatures of all
Authorized Persons, as certified by the Secretary of the Fund.
The Fund agrees to furnish to the Custodian a new Appendix A in
form similar to the attached Appendix A, if any present
Authorized Person ceases to be an Authorized Person or if any
other or additional Authorized Persons are elected or appointed.
Until such new Appendix A shall be received, the Custodian
shall be fully protected in acting under the provisions of this
Agreement upon Oral Instructions or signatures of the then
current Authorized Persons as set forth in the last delivered
Appendix A.
B. No recourse under any obligation of this Agreement or for
any claim based thereon shall be had against any organizer,
shareholder, Officer, Director, past, present or future as such,
of the Fund or of any predecessor or successor, either directly
or through the Fund or any such predecessor or successor,
whether by virtue of any constitution, statute or rule of law or
equity, or be the enforcement of any assessment or penalty or
otherwise; it being expressly agreed and understood that this
Agreement and the obligations thereunder are enforceable solely
against the Fund, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, the organizers,
shareholders, Officers, Trustees of the Fund or of any
predecessor or successor, or any of them as such. To the extent
that any such liability exists, it is hereby expressly waived
and released by the Custodian as a condition of, and as a
consideration for, the execution of this Agreement.
C. The obligations set forth in this Agreement as having been
made by the Fund have been made by the Board of Trustees, acting
as such Trustees for and on behalf of the Fund, pursuant to the
authority vested in them under the laws of the State of
_Maryland__, the Articles of Incorporation and the By-Laws of
the Fund. This Agreement has been executed by Officers of the
Fund as officers, and not individually, and the obligations
contained herein are not binding upon any of the Trustees,
Officers, agents or holders of shares, personally, but bind only
the Fund.
D. Provisions of the Prospectus and any other documents
(including advertising material) specifically mentioning the
Custodian (other than merely by name and address) shall be
reviewed with the Custodian by the Fund prior to publication
and/or dissemination or distribution, and shall be subject to
the consent of the Custodian.
E. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall
be sufficiently given if addressed to the Custodian and mailed
or delivered to it at its offices at Star Bank Center, 425
Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention
Mutual Fund Custody Department, or at such other place as the
Custodian may from time to time designate in writing.
F. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given when delivered to the Fund or on the second
business day following the time such notice is deposited in the
U.S. mail postage prepaid and addressed to the Fund at its
office at _1266 East Main Street, Stamford, CT 06902 or at such
other place as the Fund may from time to time designate in
writing.
G. This Agreement, with the exception of the Appendices, may
not be amended or modified in any manner except by a written
agreement executed by both parties with the same formality as
this Agreement, and authorized and approved by a resolution of
the Board of Trustees of the Fund.
H. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
by the Fund or by the Custodian, and no attempted assignment by
the Fund or the Custodian shall be effective without the written
consent of the other party hereto.
I. This Agreement shall be construed in accordance with the
laws of the State of Ohio.
J. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto
duly authorized as of the day and year first above written.
ATTEST: Apex Mid Cap Growth Fund
/S/ Harish L. Bhirud By: /S/ Suresh L. Bhirud
Title: Chairman
ATTEST: Star Bank, N.A.
/S/ Lynnette C. Gibson By: /S/ Marsha A. Croxton
Title: Vice President
APPENDIX D
Schedule of Compensation
Star Bank, N. A.
Proposed Domestic Custody Fee Schedule
for the Bhirud Mid Cap Growth Fund
Star Bank, N.A., as Custodian, will receive monthly compensation
for services according to the terms of the following Schedule:
I. Market Value Fee
Based upon an annual rate of: Million
0.0006 (6 Basis Points) on First $25
0.0004 (4 Basis Points) on Next $25
0.0003 (3 Basis Points) on Next $25
0.0002 (2 Basis Points) on Next Balance
II. Monthly Minimum Fee-Per Fund $ 550.00
III.
IV. Out-of-Pocket Expenses
The only out-of-pocket expenses charged to your account will be
shipping fees or transfer fees.
V. IRA Documents
Per Shareholder/ year to hold each IRA Document $8.00
VI. Earnings Credits
On a monthly basis any earnings credits generated from
uninvested custody balances will be applied against any cash
management service fees generated. Earnings credits are based on
the average yield on the 91 day U. S. Treasury Bill for the
preceding thirteen weeks less the 10% reserve.
Star Bank will guarantee this custody fee schedule for a period
of 18 months from the date of conversion.
Star Bank, N. A.
Proposed Cash Management Fee Schedule
for The Bhirud Mid Cap Growth Fund
Services Unit Cost ($) Monthly Cost ($)
D.D.A. Account Maintenance 14.00
Deposits 0.399
Deposited Items 0.109
Checks Paid 0.159
Balance Reporting - P. C. Access 50.00
ACH Transaction 0.095
ACH monthly Maintenance 40.00
Controlled Disbursement (1st account) 110.00
Each additional account 25.00
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 110.00
Data Capture* 0.10
Drafts Cleared 0.179
Lockbox Maintenance** 55.00
Lockbox items Processed
With copy of check 0.32
Without copy of check 0.26
Checks Printed 0.20
Positive pay 0.06
Issued Items 0.015
Wires Incoming
Domestic 10.00
International 10.00
Wires Outgoing
Domestic
Repetitive 12.00
Non-repetitive 13.00
International
Repetitive 35.00
Non-Repetitive 40.00
PC - Initiated Wires:
Domestic
Repetitive 9.00
Non-repetitive 9.00
International
Repetitive 25.00
Non-Repetitive 25.00
***Uncollected Charges Star Bank Prime Rate as of first of
month plus 4%
* Price can very depending upon what information needs to be
captured
** With the use of lockbox, the collected balance in the demand
deposit account will be significantly increased
*** Fees for uncollected balances are figured on the monthly
averages of all combined accounts.
**** Other available cash management services are priced
separately.
EXHIBIT 9.1
ADMINISTRATIVE SERVICES AGREEMENT
BHIRUD FUNDS, INC. (the "Fund")
The Apex Mid Cap Growth Fund (the "Portfolio")
1266 E. Main St.
Stamford, CT 06902
July 14, 1998
Bhirud Associates, Inc.
Soundview Plaza
1266 E. Main St.
Stamford, CT 06902
Ladies and Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in
accordance with the limitations, specified in our Amended
Articles of Incorporation, By-Laws and Registration Statement
filed with the Securities and Exchange Commission under the
Investment Company Act of 1940 (the 1940 Act") and the
Securities Act of 1933, including the Prospectus forming a part
thereof (the "Registration Statement"), all as from time to time
in effect, and in such manner and to such extent as may from
time to time be authorized by our Board of Directors. We
enclose copies of the documents listed above and will furnish
you such amendments thereto as may be made from time to time.
2. (a) We hereby employ you as our administrator (the
"Administrator") to provide all management and administrative
services reasonably necessary for our operation, other than
those services which are to be provided by the advisor, Bhirud
Associates, Inc. (the "Advisor"), pursuant to the Advisory
Contract. The services to be provided by you shall include but
not be limited to those enumerated on Exhibit A hereto. The
personnel providing these services may be your employees or
employees of your affiliates or of other organizations. The
Administrator shall make periodic reports to the Portfolio's
Advisor and the Fund's Board of Directors in the performance of
its obligations under this Agreement.
(b) It is understood that you will from time to time employ,
subcontract with or otherwise associate yourself with, entirely
at your expense such persons as you believe to be particularly
fitted to assist you in the execution of your duties hereunder.
3. We agree, subject to the limitations described below, to-be
responsible for, and hereby assume the obligation for payment
of, all our expenses including: (a) brokerage and commission
expenses; (b) foreign, Federal, state or local taxes, including
issue and transfer taxes incurred by or levied on us; (c)
commitment fees, certain insurance premiums and membership fees
and dues in investment company organizations; (d) interest
charges on borrowings; (e) charges and expenses of our
custodian; (f) charges and expenses relating to the issuance,
redemption, transfer and dividend disbursing functions for us;
(g) telecommunications expenses; (h) recurring and non-recurring
legal, accounting and recordkeeping expenses; (i) costs of
organizing and maintaining our existence as a corporation; (j)
compensation, including directors fees, of any of our directors,
officers or employees who are not your officers or officers of
your affiliates, and costs of other personnel providing
administrative and clerical services to us; (k) costs of
providing shareholders services including charges and expenses
of persons providing confirmations of transactions in the
Portfolio's shares, periodic statements to shareholders and
recordkeeping services and costs of shareholders reports, proxy
solicitations, and corporate meetings; (1) fees and expenses of
registering our shares under the appropriate Federal securities
laws and of qualifying our shares under applicable state
securities laws, including expenses attendant upon the initial
registration and qualification of our shares and attendant upon
renewals of, or amendment to, those registrations and
qualifications; (m) expenses of preparing, printing and
delivering our initial registration statement and of preparing,
printing and delivering our Prospectus to our existing
shareholders and of printing shareholder application forms for
shareholder accounts; (n) payment of the fees and expenses
provided for herein and to our Advisor, Distributor, Custodian,
Transfer Agent and Dividend Agent and (o) any other distribution
or promotional expenses contemplated by an effective plan
adopted by us pursuant to Rule 12b-1 under the 1940 Act in the
Advisory and Distribution Agreements.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to
us, and we agree as an inducement to your undertaking these
services that you will not be liable hereunder for any mistake
of judgment or for any other cause, provided that nothing herein
shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
5. In consideration of the foregoing we will pay you a fee in
accordance with the schedule reflected on Exhibit A hereto plus
any out-of-pocket expenses incurred by you in connection with
the performance of your duties hereunder. Your fee will be
accrued by us daily, and will be payable on the last day of each
calendar month for services performed hereunder during that
month or on such other schedule as we may agree in writing. You
may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
6. This Agreement will become effective on the date hereof and
shall continue in effect until July 31, 1999 and thereafter for
successive twelve-month periods (computed from each August 1)
provided that such continuation is specifically approved at
least annually by our Board of Directors and by a majority of
those of our directors who are neither party to this Agreement
nor, other than by their service as directors of the
corporation, interested persons, as defined in the 1940 Act, of
any such person who is party to this Agreement. This Agreement
.may be terminated at any time, without the payment of any
penalty, by vote of a majority of our outstanding voting
securities, as defined in the 1940 Act, or by a vote of a
majority of our entire Board of Directors, on sixty days'
written notice to you, or by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement
shall terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge by you. The terms
"transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange
Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict
your right, or the right of any of your officers, directors or
employees who may also be a director, officer or employee of
ours, or of a person affiliated with us, as defined in the Act,
to engage in any other business or to devote time and attention
to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services
of any kind to any other corporation, firm, individual or
association.
9. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of
the Investment Company Act of 1940, as amended.
If the foregoing is in accordance with your understanding, will
you kindly so indicate by signing and returning to us the
enclosed copy hereof.
Very truly yours,
BHIRUD FUNDS, INC.
The Apex Mid Cap Growth Fund
By: ________________________
Name
Title:
ACCEPTED: July 14, 1998
BHIRUD ASSOCIATES, INC.
By:
Name: Suresh L. Bhirud
Title: President
Exhibit A
Fund Administration Services To Be Performed By Bhirud Associates, Inc.
A. Administration Services
1. In conjunction with counsel for Apex Mid Cap Growth Fund (the
"Portfolio"), prepare and file all PostEffective Amendments to
the Registration Statement, all state and federal Fund tax
returns and all other required regulatory filings.
2. In conjunction with Portfolio counsel, prepare and file all
Blue Sky filings, reports and renewals.
3. Coordinate, but not pay for, required Fidelity Bond and
Directors and Officers Insurance (if any) and monitor their
compliance with Investment Company Act.
4. Coordinate the preparation and distribution of all materials
for Directors, including the agenda for meetings and all
exhibits thereto, and actual and projected quarterly summaries.
5. Coordinate the activities of the Portfolio's Advisor,
Custodian, Legal Counsel and Independent Accountants.
6. Prepare and file all periodic reports to shareholders and
proxies and provide support for shareholder meetings.
7. Monitor daily and periodic compliance with respect to all
requirements and restrictions of the Investment Company Act, the
Internal Revenue Code and the Prospectus.
8. Monitor daily all income and expense accruals, sales and
redemptions of capital shares outstanding.
9. Evaluate expenses, project future expenses, determine
accruals and process payments of expenses.
For all administrative services provided, the Administrator
shall be paid a fee calculated at an annual rate of 0.2 % of the
Portfolio's aggregate average daily net assets.
EXHIBIT 9.2
MUTUAL FUND
ADMINISTRATION AGREEMENT
Recitals
Whereas, the Bhirud Funds, Inc. - Apex Mid Cap Growth Fund (the
"Fund") is a business trust organized and operated under the
laws of the State of Maryland and which is commonly referred to
as a mutual fund; and
Whereas, Maxus Information Systems, Inc, ("MIS") is a
corporation organized and operated under the laws of the State
of Ohio; and
Whereas, MIS provides transfer agent services in the securities
and investment industry to entities providing retail securities
and investment services acting as Transfer Agent, Dividend
and/or Capital Gain Disbursing Agent, Redemption Agent,
Administrator and in other such capacities as are agreed herein;
and
Whereas, MIS pursuant to a separate Agreement between the
parties, provides Accounting Agent Services to the Fund; and
Whereas, the Fund desires the services offered by MIS and MIS
desires to provide such services to the Fund:
Agreement
Now therefore, in consideration of the foregoing, the parties
intend to be legally bound and it is, therefore, agreed as
follows:
Section I. Appointment
The Fund hereby appoints MIS as its Transfer Agent, Dividend
and/or Capital Gain Disbursing Agent, Redemption Agent and
Administrator. MIS agrees to such appointment and agrees to
perform in such a capacity.
Section II. Transfer Agent Services
A. MIS shall transfer the registration of the Fund's Share
Certificates within the Rules and Regulations established by
applicable industry standards.
B. Transfers of the Fund's regular shares shall be made in
compliance with the rules of the Securities and Exchange
Commission (SEC), particularly Rule 17. All other transfers
shall be made in a timely manner and in accord with relevant
industry standards.
C. MIS shall maintain complete and accurate records of all
transactions in accord with SEC requirements and in accord with
relevant industry standards.
D. The Fund shall issue no Share Certificates and MIS shall have
no responsibility in this regard.
E. MIS shall originate the issue of Shares of the Fund. MIS
may, at its sole discretion, also require:
(1) A certified copy of a resolution or resolutions of the
Board of Trustees of the Fund authorizing such issue;
(2) An opinion of counsel as to the validity of such shares;
(3) Funds necessary for the payment of any original issue tax
applicable to the shares;
F. Transfer of Shares shall be issued by MIS:
(1) Upon all necessary signatures guaranteed by a member firm
of a national securities exchange or commercial bank and in
accord with the Fund's prospectus.
(2) Other assurances as MIS shall deem necessary and
appropriate to evidence the genuineness and effectiveness of
each necessary endorsement;
(3) Satisfactory evidence of compliance with all applicable
laws relating to the payment or collection of taxes;
(4) Satisfactory evidence of compliance with all applicable
laws relating to the registration and good standing and lawful
operation of the Fund.
G. MIS may, as Transfer Agent, delay and/or refuse registration
of shares where such registration appears to be subject to an
adverse claim.
H. MIS will maintain stock registry records in the usual form in
which it will note the:
(1) Issuance, transfer and redemption of Shares;
(2) Number and place of unissued Shares in an Unissued Shares
Account;
(3) Shares and fractional Shares issued and outstanding for
which issuance of Share is deferred
I. MIS shall be responsible for providing the Fund reports of
Fund Share purchases, redemption and total Shares outstanding on
the next business day after each net asset valuation.
(1) MIS is authorized to keep records, which will be part of
the stock transfer records as well as its records of the Plans,
in which it will note the names and registered addresses of
Shareholders and Planholders, and the number of Shares and
fractional Shares from time to time owned by them for which no
Shares are outstanding.
(2) Each Shareholder or Planholder will be assigned a single
account number even though Shares held under each Plan and
Shares which have been issued will be accounted for separately.
J. All requests for inspection of the records of the Fund made
directly to MIS will be refused unless such requests are made by
court order or by an appropriate governmental body having
jurisdiction over such records and activities or where counsel
for MIS advises that MIS may suffer injury as a result of such
refusal. All such requests will be directed to contact the Fund
directly; the Fund may subsequently direct MIS to permit the
inspection of such records through written instructions.
K. MIS in its capacity as Transfer Agent will, in addition to
the previously enumerated duties and functions perform the usual
duties and functions of a stock Transfer Agent for a
corporation. It will countersign for issuance or reissuance of
Shares representing original issue or reissued Shares as
directed by the Written Instructions of the Fund, and will
transfer Shares registered in the name of Shareholders from one
Shareholder to another in the usual manner.
Section III. Issuance of Shares
A. Prior to the daily determination of net asset value in
accordance with the Fund's Prospectus, MIS shall process all
purchase orders received since the last determination of the
Fund's net asset value.
(1) MIS shall calculate daily the amount available for
investment in Shares at the net asset value determined by MIS as
of the close of trading on the New York Stock Exchange, the
number of Shares and fractional Shares to be purchased and the
net asset value to be deposited with the Custodian.
(2) MIS, as agent for the Shareholders and Planholders, shall
place a purchased order daily with the Fund for the proper
number of Shares and fractional Shares to be purchased and
confirm such number to the Fund in writing.
B. MIS, having made the calculation provided for in eIII: A,
shall thereupon:
(1) Pay over the net asset value of Shares purchased to the
Custodian for deposit in the account maintained by the Custodian
for the Fund;
(2) The proper number of Shares and fractional Shares shall
then be issued daily and credited by MIS to its separate account.
(3) MIS shall mail to each Shareholder and Planholder a
confirmation of each purchase, with copies to the Fund if
requested. Such confirmation will show the prior Share balance,
the new Share balance, the Shares held under a Plan (if any),
the amount invested and the price paid for the newly purchased
Shares.
Section IV. Redemption
A. MIS shall, prior to the daily determination of net asset
value in accordance with the Fund's Prospectus, process all
requests from Shareholders to redeem Shares and determine the
number of Shares required to be redeemed to make monthly
payments, automatic payments or the like.
(1) MIS shall advise the Fund of the total number of Shares
available for redemption and the number of Shares and fractional
Shares requested to be redeemed. MIS shall then quote the
applicable net asset value, whereupon MIS shall furnish the Fund
with an appropriate confirmation of the redemption and process
the redemption by making the proper distribution and application
of the redemption proceeds in accordance with the Fund's current
Prospectus, as amended from time to time. The stock registry
books recording outstanding Shares and the individual account of
the Shareholder or Planholder shall be properly debited.
(2) In lieu of carrying out the redemption procedures
hereinafter provided for in this Section, MIS may, at the
request of the Fund, sell Shares to the Fund as repurchases from
Shareholder and/or Planholders, provided that in each such case
the sale price shall be not less than the applicable redemption
price. In such case the redemption procedures shall be
appropriately modified.
B. The proceeds of redemption shall be remitted by MIS in
accordance with the Fund's current Prospectus as amended from
time to time.
(1) The signature of the Shareholder on the redemption request
must be guaranteed by a commercial bank or member firm of a
National Securities Exchange. The fund may authorize MIS to
waive the signature guarantee in certain cases by written
instruction. MIS will not honor telephonic redemption requests.
(2) For the purposes of redemption of Shares which have been
purchased within 15 days of a redemption request, the Fund shall
provide MIS, from time to time, with written instruction
concerning the time within which such request may be honored.
Section V. Dividends
A. Upon the declaration of each dividend and each capital gains
distribution by the Board of Trustees of the Fund, the Fund
shall notify MIS of the date of such declaration, the amount
payable per share, the record date for determining the
Shareholders entitled to payment, the payment and the
reinvestment date price.
B. On or before each payment date, the Fund will transfer, or
cause the Custodian to transfer, to MIS in its capacity as
Dividend Disbursing Agent, the total amount of the dividend or
distribution currently payable. MIS will, on the designated
payment date, automatically reinvest all dividends and
distributions in additional shares.
Section VI. General Provisions
A. MIS shall maintain records, which may be part of the stock
transfer records, in connection with the issuance and redemption
of Shares, the disbursement of dividends and the administration
of the Plans and dividend reinvestment, in which will be noted
the transactions effected for each Shareholder and Planholder
and the number of Shares and fractional Shares owned by each for
which no Shares are outstanding. MIS agrees to make available
upon request and to preserve for the period prescribed in Rule
31a-2 under the Investment Company Act of 1940, as amended, any
records relating to services provided under this Agreement which
are required to be maintained pursuant to Rule 31a-1.
B. In addition to the services as Transfer Agent, Dividend
Disbursing Agent and Administrator as set forth above, MIS will
perform other services for the Fund as agreed from time to time,
including but not limited to, mailing annual and semi-annual
reports of the Fund and mailing notices of Shareholders'
meetings, proxies and proxy statements.
C. This Agreement shall not cause MIS to incur obligations to
perform on any legal Holiday, on any day that the New York Stock
Exchange is closed or on any day MIS is closed for a designated
Holiday or other similar reason. Obligations under this
Agreement, which cannot be fulfilled on any particular day(s)
for the reasons in the preceding sentence, shall be performed on
the next business day that MIS is operating.
D. The Fund agrees to compensate MIS for its services and to
reimburse MIS for expenses as set forth in Schedule A attached
hereto, or as shall be set forth in amendments to this Agreement
or to Schedule A as approved by both parties.
Section VII. Indemnification
A. The Fund shall indemnify MIS and save it harmless from and
against any and all actions, suits and claims, whether
groundless or otherwise, arising directly or indirectly out of
or in connection with MIS's performance under this Agreement and
from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities incurred by MIS
in connection with any such action, suit or claim except that
nothing herein shall be understood to provide indemnity for
negligence, negligent performance, gross negligence, willful
misconduct or fraud. MIS shall not be under any obligation to
prosecute or to defend any action, suit or claim arising out of
or in connection with its performance under this Agreement and
subject to the foregoing indemnity, which, in the opinion of
counsel, may involve it in expense or liability, and the Fund
shall, so often as reasonably requested, furnish MIS with
satisfactory indemnity against such expense or liability, and
upon request of MIS the Fund shall assume the entire defense of
any action, suit or claim subject to the foregoing indemnity.
Provided, however, that MIS shall give the Fund notice of, and
reasonable opportunity to defend, any such action, suit or claim
in the name of the Fund or MIS or both; Without limitation of
the foregoing:
(1) MIS may rely upon the advice of the Fund, or of counsel,
and upon statement of accountants, brokers and other persons
believed by it in good faith to be expert in the matters upon
which they are consulted, and, for any actions taken in good
faith upon such statements, MIS shall not be liable to anyone.
(2) MIS shall not be liable for any action taken in good faith
reliance upon any Written Instruction from the Fund or certified
copy of any resolution of the Board of Trustees of the Fund, and
MIS may rely upon the genuineness of any such document or copy
thereof believed in good faith by MIS to have been validly
executed.
(3) MIS may rely and shall be protected in acting upon any
signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report,
notice, consent, order, or other paper or document believed by
it to be genuine and to have been signed or presented by the
purchaser, Fund or other proper party or parties.
(4) MIS will be responsible for errors and omissions resulting
from download, keypunch, calculation and other similar acts to,
and only to, the extent that such errors and omissions are
covered under a policy held by MIS for such purposes. MIS does
not, however, make any guarantee or representation that it does
or will have such a policy in effect or that such a policy is
current. MIS will, however, accept responsibility for actual
losses to clients resulting from its own such errors and
omissions but only upon (a) Written notification of an error
and/or omission that is given and provided that (b) MIS may
first take corrective measures of its own choosing, that (c) MIS
is given sufficient time to take such corrective measures and
that (d) Damages or losses are incurred and are actual damages
or losses.
B. MIS shall indemnify the Fund and save it harmless from and
against any and all actions, suits or claims, whether groundless
or otherwise, and any losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities, which are actual,
incurred by the Fund in connection with any such action, suit or
claim to the extent that any such claim results from MIS's
negligence, negligent performance, gross negligence, willful
misconduct or fraud related to MIS's performance under this
Agreement.
C. MIS is authorized:
(1) Upon receipt of Written Instruction from the Fund, to make
payment upon redemption of Shares without a signature guarantee;
and
(2) If a written election authorizing the same shall be on file
with MIS, to honor a telephonic redemption request.
The Fund hereby agrees to indemnify and hold MIS, its successor
and assign, harmless from and against any and all expenses,
damages, claims, suits, liabilities, action, demands, or losses
whatsoever arising out of or in connection with a payment by MIS
upon redemption of Shares without a signature subject to the
authority granted in this paragraph above and, upon the request
of MIS, the Fund shall assume the entire defend of any action,
suit or claims subject to the foregoing indemnity. MIS shall
notify the Fund of any such action, suit or claim within 30 days
after receipt by MIS of notice thereof.
D. The Fund shall promptly cause to be turned over to MIS:
(1) An accurate list of shareholders of the Fund showing the
proper registered addresses and number of Shares;
(2) All records relating to Plans, including original
application signed by the Planholders and original plan accounts
recording payments, deduction, reinvestments, withdrawals and
liquidations; and
(3) All shareholder records, files and other materials
necessary or appropriate for proper performance of the functions
assumed by MIS under this Agreement and hereby agrees to
indemnify and hold MIS, its successors and assigns, harmless of
and from any and all expenses, damages, claims, suits,
liabilities, actions, demand and losses whatsoever arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such materials, or out of the failure of the
Fund to provide any portion of such or to provide any
information needed by MIS to knowledgeably perform its functions.
E. It is expressly agreed that the obligation of the Fund
hereunder shall not be binding upon nor resort be had to the
private property of any of the trustees, Shareholders, nominees,
officers, agents or employees of the Fund, personally, but bind
only the trust property of the Fund, as provided in the
Declaration of Trust of the Fund. The execution and delivery of
this Agreement have been authorized by the trustees of the Fund
and signed by the officers of the Fund, acting as such, and
neither such authorization by such trustees nor such execution
and delivery by such officers shall be deemed to have been made
by any of them individually, or to impose any liability on any
of them personally, but shall bind only the trust property of
the Fund as provided in the Declaration of Trust.
Section VIII. Taxes and Regulatory Matters
Except as contemplated in this Agreement, all liabilities and
procedures necessary for the maintenance of the Fund in good
standing with:
(1) Both Federal and State agencies, including, but not limited
to taxes, charters, fees, applications, forms, permits, licenses
and documents shall be the responsibility of the Fund.
(2) MIS shall not be liable for any taxes, assessments or
governmental charges which may be levied or assessed on any
basis whatsoever in connection with this Agreement, excepting
only for taxes assessed against its corporate capacity arising
out of its compensation hereunder.
Section IX. Notices
All notices required or permitted to be given hereunder shall be
in writing and may be delivered personally or through the public
or private mails (postage paid). Receipt of notice shall be
deemed to have been given upon receipt if personally delivered
or within ten (10) days after being deposited in the mail.
Notice shall be addressed:
If to the Fund: Bhirud Funds, Inc.
Apex Mid Cap Growth Fund
1266 East Main Street
Stamford, CT 06902
If to MIS: Maxus Information Systems, Inc.
28601 Chagrin Blvd, Suite 500
Cleveland, OH 44122
Section X. Written Instructions and Oral Instructions
The Fund shall file with MIS a certified copy of each resolution
of its Board of Trustees authorizing the execution of Written
Instructions or the transmittal of Oral Instructions. The
following terms, for the purposes of this Agreement or any
amendment or supplement thereto, shall have the meaning herein
specified unless the context otherwise requires:
(1) Plan. The term plan shall include such investment plan,
dividends or capital gains reinvestment plans, systematic
withdrawal plans or other types of plans set forth in the
Prospectus of the Fund, in form acceptable to MIS, which the
Fund may from time to time adopt and make available to its
Shareholders, including plans or accounts by self-employed
individuals or partnerships.
(2) Planholder. The term Planholder shall mean a Shareholder
who, at the time of reference, is participating in a Plan, and
shall include any underwriter, representative or broker/dealer.
(3) Oral Instructions. The term Oral Instructions shall mean an
authorization, instruction, approval, item set of data, or
information of any kind transmitted to MIS in person or by
telephone, telegram, telecopy, or other mechanical or
documentary means lacking original signature, by a person or
persons believed in good faith by the Custodian to be a person
or persons authorized by a resolution of the Board of Trustees
of the Fund to give Oral Instructions on behalf of the Fund.
(4) Written Instructions. The term Written Instructions shall
mean an authorization, instruction, approval, item or set of
data, or information of any kind transmitted to MIS in original
writing containing original signatures or a copy of such
document transferred by telecopy including transmission of such
signature, believed in good faith by MIS to be the signature of
a person(s) authorized by a resolution of the Board of Trustees
of the Fund to give Written Instructions on behalf of the Fund
Section XI. Warranties
A. The Fund represents and warrants MIS that the execution and
delivery of this Agreement by the undersigned officer of the
Fund has been duly and validly authorized by resolution of the
Board of Trustees of the Fund.
B. MIS represents and warrants that the execution and delivery
of this Agreement by the undersigned officer has been duly and
validly authorized.
Section XII. Cancellation, Rescission And Termination
A. Cancellation - Within five (5) business days of the signing
of this Agreement the Fund may, by written notice, cancel this
Agreement for any reason. Written notice, postmarked not later
than the last day of the cancellation period, shall be sent to
MIS by registered or certified mail, return receipt requested.
Cancellation shall terminate this Agreement and neither party
will have any further obligation or liability to the other.
This clause shall have no effect upon other agreements between
the parties which must be separately canceled, rescinded or
terminated.
B. Rescission - This Agreement may be rescinded on the grounds
of mutual mistake, fraud or impossibility by either party;
however, such rescission must be granted in accord with the
provisions for dispute resolution enumerated in this Agreement
or by mutual written agreement.
C. Termination - Either the Fund or MIS may give 60 days written
notice to the other for termination of this Agreement.
(1) Termination to take effect at the time specified in the
notice.
(2) Such notice shall be evidenced by and be delivered via a
secured delivery requiring a signature.
Section XIII. Dispute Resolution
A. Mediation - Any controversies, disputes or claims arising out
of or relating to this Agreement shall be subject to mediation.
The parties stipulate that the procedures for mediation
enumerated by the National Association of Securities Dealers,
Inc. (NASD) shall apply. The NASD shall designate the
mediator(s).
(1) Mediation may take place in any mutually agreed upon
location or within Cuyahoga County, Ohio.
(2) In the event that no resolution is found, the parties shall
be subject to arbitration as prescribed by section (B) of this
clause.
B. Arbitration - Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be
settled by arbitration in accordance with the arbitration rules
of the NASD. In addition, the parties stipulate:
(1) The number of arbitrators shall be three; and
(2) The place of arbitration shall be within Cuyahoga County,
Ohio.
Section XIV. Jurisdiction
This Agreement and any Schedules and/or Amendments hereto, shall
be construed and understood under the laws of the State of Ohio
at Cuyahoga County.
Section XV. Force Majeure
A party shall not be considered to be in default in the
performance of its obligations to the extent that it proves that
such performance has been prevented by force Majeure.
Section XVI. Assignment
Either party shall not assign this Agreement and any rights
granted hereunder hereto to any person, firm or corporation
without the prior written consent of the other.
Section XVII. Counterparts
This Agreement may be executed in two or more counterparts, each
of which when so executed shall be deemed to be an original, but
such counterparts shall together constitute but one and the same
instrument.
Section XVII. Alterations/Entire Agreement
A. It is agreed between the parties hereto that there are no
other agreements or understandings between them relating to the
subject matter of this Agreement. This Agreement supersedes all
prior agreements, oral or written, between the parties and is
intended as a complete and exclusive statement of the Agreement
between the parties. Neither this Agreement, nor its execution,
has been induced by any reliance; representation, stipulation
warranty, agreement or understanding of any kind other than
those herein expressed.
B. No change or modification of this Agreement shall be valid
unless the same be in writing and signed by the parties. Any
and all addenda to this Agreement must and shall be endorsed by
both parties and must make direct and specific mention to their
status as addenda and to their incorporation hereto.
Dated, this __14th_____________ day of _November____ , 1997_____
IN WITNESS WHEREOF, The parties hereto have caused this
Agreement to be signed by their duly authorized officers:
Bhirud Funds, Inc. Maxus Information Systems, Inc.
By: ____________________ By: _________________________
S/d Suresh L. Bhirud S/d Gregory B. Getts
President
Effective date February 1st , 1998
Schedule A
Shareholder Servicing Fees
9.25 annual fee per shareholder with a minimum of $775.00 charge per month.
Discount should be worked out as follows:
Discount Net Assets of Fund
45% 1,000,000 to 2,000,000
40% 2,000,000 to 3,000,000
35% 3,000,000 to 4,000,000
30% 4,000,000 to 5,000,000
25% 5,000,000 to 6,000,000
20% 6,000,000 to 7,000,000
15% 7,000,000 to 8,000,000
10% 8,000,000 to 9,000,000
5% 9,000,000 to 10,000,000
0% 10,000,000 and up
Calculated monthly charges for the Bhirud Funds Inc.
Value Monthly Fee
Approximate Fund Size: 1,600,000 775.00
Less 45% Discount -348.75
Monthly Shareholder Servicing Fee 426.25
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption
"Financial Highlights" and to the use of our report dated September
23, 1998 in this Registration Statement (Form N-1A No. 33-48013)
of Bhirud Funds, Inc.
By: /s/ Van Buren & Hauke, LLC
Van Buren & Hauke, CPA's, LLC
New York, New York
September 24, 1998
EXHIBIT 15.1
DISTRIBUTION AND SERVICE PLAN (Amended Nov. 30, 1993)
BHIRUD FUNDS, INC.
The Apex Mid Cap Growth Fund
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
This Distribution Plan and Service plan (the "Plan") is hereby
amended to reflect that Bhirud Associates, Inc. (the
"Distributor") and Bhirud Funds Inc. (the "Fund") , on behalf of
the Bhirud Mid Cap Growth Fund (the "Portfolio") have agreed
that the Fund will no longer reimburse the Distributor, in any
amount, for distribution, promotional and advertising costs
incurred by the Distributor in connection with the distribution
of the Portfolio's shares. The Board of Directors of the Fund
has approved unanimously this amendment to the Plan and has
authorized the Fund to re-execute the Shareholder Servicing
Agreement with the Distributor to reflect the foregoing. The
Plan is hereby amended in its entirety as set forth herein and
as authorized under Section 8 of the previous Plan.
The Plan is adopted by the Fund on behalf of the Portfolio, in
accordance with the provisions of Rule 12b-1 under the
Investment Company Act of 1940 (the "Act").
The Plan
1. The Portfolio and the Distributor, have entered into a
Distribution Agreement, in a form satisfactory to the Fund's
Board of Directors, under which the Distributor will act as
distributor of Portfolio's shares. Pursuant to the Distribution
Agreement, the Distributor, as agent of the Portfolio, will
solicit orders for the Purchase of the Portfolio's shares,
provided that any subscriptions and orders for the purchase of
the Portfolio's shares will not be binding on the Portfolio
until accepted by the Portfolio as principal.
2. (a) The Portfolio and the Distributor have entered into a
Shareholder Servicing Agreement, in a form satisfactory to the
Portfolio's Board of Directors, which provides that the
Distributor may make payments from time to time from the
shareholder Servicing fee received by the Distributor and past
profits to pay the costs of, and to compensate others, including
organizations whose customers or clients are Portfolio
shareholders ("Participating Organizations"), for performing
shareholder Servicing and related administrative functions on
behalf of the Portfolio.
(b) The Shareholder Servicing Agreement will further provide
that the Distributor will in its sole discretion determine the
amount of such payments made pursuant to the Plan, provided that
such payments will not increase the amount which the Portfolio
is required to pay to (1) the Advisor for any fiscal year under
the Advisory Contract in effect for that year or otherwise or
(2) to the Distributor under the Shareholder Servicing Agreement
in effect for that year or otherwise. The Advisory Contract
will also require the Advisor to reimburse the Fund for any
amounts by which the Fund's annual operating expenses, including
distribution expenses, exceed in the aggregate in any fiscal
year the limits prescribed by any state in which the Fund's
shares are qualified for sale.
(c) Furthermore, the Advisor may make payments from time to
time from the advisory fees received by the Advisor from the
Portfolio and from other companies and past profits for the
following purposes:
(i) to pay the costs of, and to compensate others, including
Participating Organizations, for performing shareholder
servicing and related administrative functions on behalf of the
Portfolio;
(ii) to compensate Participating Organizations for providing
assistance in distributing the Portfolio's shares; and
(iii) to pay the cost of the preparation and printing of
brochures and other promotional materials, mailings to
prospective shareholders, advertising, and other promotional
activities, including salaries and/or commissions of sales
personnel of the Distributor and other persons, and of printing
and distributing the Portfolio's prospectus to prospective
investors in connection with the distribution of the Portfolio's
shares.
3. The Portfolio will pay for (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals,
incurred by the Distributor in carrying out its obligations
under the Shareholder Servicing Agreement and (ii) preparing,
printing and delivering the Portfolio's prospectus to existing
shareholders of the portfolio and preparing and printing
subscription application forms for shareholder accounts.
4. Payments by the Distributor to Participating Organizations
for the purpose of distributing the Portfolio's shares are
subject to compliance by them with the terms of written
agreements in a form satisfactory to the Portfolio's Board of
Directors to he entered into between the Distributor and the
Participating organizations.
5. The Portfolio and the Distributor will prepare and furnish to
the Portfolio's Board of Directors, at least Quarterly, written
reports setting forth all amounts expended for distribution
purposes by the Portfolio, the Distributor and the Advisor,
pursuant to the Plan and identifying the distribution activities
for which such expenditures were made.
6. The Plan became effective upon approval by (i) a majority of
the outstanding voting securities of the Portfolio (as defined
in the Act), and (ii) a majority of the Board of Directors of
the Portfolio, including a majority of the Directors who are not
interested persons (as defined in the Act) of the Portfolio and
who have no direct or indirect financial interest in the
operation of the Plan or in any agreement entered into in
connection with the Plan, pursuant to a vote cast in person at a
meeting called for the purpose of voting on the approval of the
Plan.
7. The plan will remain in effect until July 31, 1999 unless
earlier terminated in accordance with its terms, and thereafter
may continue in effect for successive annual periods if approved
each year in the manner described in clause (ii) of paragraph 6
hereof.
8. The Plan may be amended at any time with the approval of the
Board of Directors of the Portfolio, provided that (i) any
material amendments of the terms of the Plan will be effective
only upon approval as provided in clause (ii) of paragraph 6
hereof, and (ii) any amendment which increases materially the
amount which may be spent by the Portfolio pursuant to the Plan
will be effective only upon the additional approval as provided
in clause (i) of paragraph 6 hereof.
9. The Plan may be terminated without penalty at any time (i) by
a vote of the majority of the entire Board of Directors of the
Portfolio and by a vote of a majority of the Directors of the
Portfolio who are not interested persons (as defined in the Act)
of the Portfolio and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by a vote of a majority of the
outstanding voting securities of the Portfolio (as defined in
the Act).
EXHIBIT 15.3
SHAREHOLDER SERVICING AGREEMENT
BHIRUD FUNDS, INC. (the "Fund")
The Apex Mid Cap Growth Fund (the "Portfolio")
Bhirud Associates, Inc.
Soundview Plaza
1266 East Main Street
Stamford, Connecticut 06902
Ladies and Gentlemen.
This Agreement is being reexecuted to reflect that, effective
November 30, 1993, the Distribution and Service Plan adopted by
the Fund, on behalf of the Portfolio, in accordance with Rule
12b-1 of the Investment Company Act, as amended (the "Act"),
dated August 6, 1992, and continued thereafter in accordance
with Rule 12b-1 of the Act, has been amended to eliminate the
reimbursement of the Distributor, in any amount, by the Fund for
distribution, promotional and advertising costs incurred by the
Distributor in connection with the distribution of the
Portfolio's shares.
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Amended
Distribution and Service Plan dated November 30, 1993, adopted
by us in accordance with Rule 12b-1 (the "Plan") under the
Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below:
(a) You will perform, or arrange for others including
organizations whose customers or clients are shareholders of our
corporation (the "Participating Organizations") to perform, all
shareholder servicing functions not performed by us or by our
Transfer Agent. You may make payments from time to time from
your own resources, which may include any Shareholder Servicing
Fees (as defined below) received under this Agreement and past
profits, to defray the costs of, and to compensate others,
including Participating Organizations with whom you have entered
into written agreements, for performing shareholder servicing
and maintenance of shareholder accounts.
(b) In consideration of the foregoing we will pay you a fee at
the annual rate of one quarter of one percent (0.25%) of the
Portfolio's average daily net assets (the "Shareholder Servicing
Fee"). Your fee will be accrued by us daily, and will be
payable on the last day of each calendar month for services
performed hereunder during that month or an such other schedule
as you shall request us in writing. You may waive your right to
any fee to which you are entitled hereunder, provided such
waiver is delivered to us in writing. You will in your sole
discretion determine the amount of any payments made by you
pursuant to this Agreement, and you may from time to time in
your sole discretion increase or decrease the amount of such
payments; provided, however, that no such payment will increase
the amount which we are required to pay to you under either this
Agreement or any advisory agreement or distribution agreement
between you and us, or otherwise.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that
we will pay (i) telecommunications expenses, including the cost
of dedicated lines and CRT terminals, incurred by you and
Participating Organizations in rendering such services, and (ii)
the cost of typesetting, printing and delivering our prospectus
to existing shareholders of the Portfolio and of preparing and
printing subscription application forms for shareholder
accounts. Our obligation to be responsible for the expenses
enumerated in this paragraph 2 is limited to an amount equal to
.05% per annum of the Portfolio's average daily net assets.
3. Payments to Participating Organizations to compensate them
for distributing our shares and/or providing shareholder
servicing and related administrative functions are subject to
compliance by them with the terms of written agreements
satisfactory to our Board of Directors to be entered into
between you and the Participating Organizations,
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to
us, and we agree as an inducement to your undertaking these
services that you will not be liable hereunder for any mistake
of judgment or for any other cause, provided that nothing herein
shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or
gross negligence in the performance of your duties hereunder, or
by reason of your reckless disregard of your obligations and
duties hereunder.
5. This Agreement will become effective on the date hereof and
will remain in effect until July 31, 1999 and thereafter for
successive twelve-month periods (computed from each August 1),
provided that such continuation is specifically approved at
least annually by vote of our Board of Directors and of a
majority of those of our directors who are not interested
persons (as defined in the Act) and have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to the Plan, cast in person at a meeting
called for the purpose of voting on this Agreement. This
Agreement may be terminated at any time, without the payment of
any penalty, by vote of a majority of our entire Board of
Directors, or by a vote of a majority of our Directors who are
not interested persons (as defined in the Act) and who have no
direct or indirect financial interest in the operation of the
Plan or in any agreement related to the Plan, or by vote of a
majority of our outstanding voting securities, as defined in the
Act, on sixty days' written notice to you, or by you on sixty
days' written notice to us.
6. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you, and this Agreement
shall terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge by you. The terms
"transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the securities and Exchange
Commission thereunder.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict
your right, or the right of any of your officers, directors or
employees who may also be a director, officer or employee of
ours, or of a person affiliated with us, as defined in the Act,
to engage in any other business or to devote time and attention
to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services
of any kind to another corporation, firm, individual or
association.
If the foregoing is in accordance with your understanding, will
you kindly so indicate by signing and returning to us the
enclosed copy hereof.
Very truly yours,
BHIRUD FUNDS, INC.
The Apex Mid Cap Growth Fund
By: ___________________________
Name: Suresh L. Bhirud
Title: President
Accepted: July 14, 1998
Bhirud Associates, Inc.
By: ______________________
Name: Suresh L. Bhirud
Title: President
