As filed with the Securities and Exchange Commission on November
25, 1995
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. 4 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 [X]
Amendment No. 5 [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, 1995 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, 1995 on September 25, 1995.
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 BHIRUD MID CAP GROWTH FUND
SOUNDVIEW PLAZA
1266 EAST MAIN STREET
STAMFORD, CONNECTICUT 06902
TELEPHONE: (800) 424-2295
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PROSPECTUS
NOVEMBER 30, 1995
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Bhirud Funds, Inc. (the "Fund") is a diversified, open-end
management investment company currently consisting of The Bhirud
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, 1995, 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 telephone number
set forth above.
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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.
- ------------------------------------
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 Bhirud
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 $5.5 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 0.92%
12b-1 Fees 0.24%
Other Expenses 1.32%
Administration Fee 0.20%
Total Operating Expenses -- After Fee Waivers 2.68%
======
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10YEARS
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 2.87% (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, and by McCurdy &
Associates CPA's, Inc. for 1995, whose unqualified report
thereon appears in the Statement of Additional Information and
can be obtained by shareholders by request:
<TABLE>
FOR THE FOR THE NOVEMBER 4, YEAR YEAR 1992
ENDED ENDED (COMMENCE-
JULY 31, JULY 31, MENT OF
1995 1994 OPERATIONS)
THROUGH
JULY 31, 1993
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.50 $10.87 $10.00
Income from Investment Operations:
Net Investment Income (Loss) (0.14) (0.04)* 0.28*
Net Gain (Loss) on Securities
(both realized and
unrealized) 0.86 (0.24) 0.59
Total from Investment Operations 0.72 (0.28) 0.87
Less Distributions:
Dividends from Net
Investment Income 0 (0.09) 0
Distributions from
Capital Gains (1.51) 0 0
Returns of Capital Total Distributions (1.51) (0.09) 0
Net Asset Value, End of Period $ 9.71 $10.50 $10.87
Total Return (not reflecting
sales load) 8.97% (2.60)% 8.70%**
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $6,589 $9,719 $6,265
Ratio to Average Net Assets:
Expenses 2.68% 2.71% 0.13%**
Net Investment Income(Loss) (1.02)% (0.36)% 2.74%**
Effect of Reimbursement/Waivers on
Above Ratios 0.19% 0.71% 5.90%**
Portfolio Turnover Rate 224.77% 276.26% 163.72%**
Average Commission Rate Paid $/Share $0.0586
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<FN>
<F1>
* Based on weighted average shares outstanding.
<F2>
** Not annualized.
</FN>
</TABLE>
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 $5.5 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.
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 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 Informatio..
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 o 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 20% of the
value of its assets or the Portfolio's aggregate short sales of
a particular class of securities exceeds 20% 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. In addition, in order to qualify as a
regulated investment company, less than 30% of the Portfolio's
gross income must be derived from the sale or other disposition
of stock, securities or certain other investments held for less
than three months. Although increased portfolio turnover may
increase the likelihood of additional capital gains for the
Portfolio, the Portfolio expects to satisfy the 30% income test.
The Portfolio turnover rate for the fiscal year ended July 31,
1995 was 225%.
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 $3.5 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, 1995 the Fund paid brokerage
commissions of $882 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 respect 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 compensat 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)
424-2295. 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:
<TABLE>
DEALER SALES CHARGE DISCOUNT
AMOUNT OF SALES AS % OF NET AS % OF
PURCHASE LOAD AMOUNT INVESTED OFFERING PRICE
<S> <C> <C> <C>
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%
</TABLE>
The Distributor reserves the right to change the dealer's
concession from time to time. In addition, the Distributor
entered into a Select Dealer Agreement with H. J. Meyers & Co.,
Inc. pursuant to which the entire sales charge is retained by H.
J. Meyers & Co., Inc. (i.e., a dealer discount of 0%).
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. and H. J.
Meyers & Co., 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.
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 Bhirud Mid Cap Growth Fund" to The Bhirud
Mid Cap Growth Fund, c/o The Provident Bank, Mutual Fund
Services, P. O. Box 14967, Cincinnati, Ohio 45250-0967. 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 Provident Bank, Mutual Fund Services at (800)
424-2295. They will establish a record of information for the
wire to insure the correct processing of funds. Failure to
contact The Provident Bank, 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:
THE PROVIDENT BANK
ABA: 042000424
MUTUAL FUND SERVICES
Further Credit To: THE BHIRUD MID CAP GROWTH FUND
Account Number: ___________________
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 the
Fund, 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) 424-2295) 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 ($2,250 for combined spousal IRAs). 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 combined maximum of $2,250
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 Provident Bank, One East Fourth Street, Cincinnati, Ohio
45202, is custodian for the Portfolio's cash and securities, and
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>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
PROSPECTUS SUMMARY 2
TABLE OF FEES AND EXPENSES 4
FINANCIAL HIGHLIGHTS 5
INVESTMENT OBJECTIVE 6
INVESTMENT POLICIES 6
COMMON STOCKS 7
RISK FACTORS 7
INVESTMENT RESTRICTIONS 12
MANAGEMENT OF THE FUND 13
DISTRIBUTION AND SERVICE PLAN 16
PURCHASE OF SHARES 17
REDEMPTION OF SHARES 20
EXCHANGE OF SHARES 21
RETIREMENT PLANS 21
DIVIDENDS, DISTRIBUTIONS AND TAXES 22
CALCULATION OF INVESTMENT PERFORMANCE 23
GENERAL INFORMATION 23
NET ASSET VALUE 24
CUSTODIAN AND TRANSFER AGENT 24
STANDARD & POOR'S MIDCAP 400 INDEX 25
</TABLE>
- ------------------
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 BHIRUD
MID CAP
GROWTH
FUND
- ----------------
PROSPECTUS
- ----------------
BHIRUD ASSOCIATES, INC.
ADVISOR
DISTRIBUTOR
NOVEMBER 30, 1995
- -----------------------------------------------------------------
____________________________________________________________________________
- ---------------------------------------------------------------------
THE BHIRUD MID CAP GROWTH FUND
(the "Portfolio")
Soundview Plaza
1266 E. Main Street
Stamford, Connecticut 06902
Telephone (800) 424-2295
_________________________________________________________________
Statement of Additional Information
November 30, 1995
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, 1995 (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>
TABLE OF CONTENTS
<CAPTION>
<S> <C>
INVESTMENT POLICIES 2
DESCRIPTION OF THE PORTFOLIO'S INVESTMENT SECURITIES 3
INVESTMENT RESTRICTIONS 5
DIRECTORS AND OFFICERS 7
ADVISOR 8
CUSTODIAN AND TRANSFER AGENT 12
DISTRIBUTION AND SERVICE PLAN 12
BROKERAGE AND PORTFOLIO TURNOVER 14
COUNSEL AND INDEPENDENT AUDITORS 16
PURCHASE AND REDEMPTION OF SHARES 16
DESCRIPTION OF COMMON STOCK 16
PERFORMANCE 17
NET ASSET VALUE 17
TAX STATUS 18
STANDARD & POOR'S MIDCAP 400 INDEX 21
DESCRIPTION OF BOND RATINGS 22
INDEPENDENT AUDITORS REPORT 25
FINANCIAL STATEMENTS 26
</TABLE>
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 Bhirud
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 $5.5
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 duranion 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 Fund and address Principal
occupations during past five years
Suresh L. Bhirud*, (47) 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.
Michael Smith*, (41) Managing Director of Corporate Finance 1895
Mt. Hope Avenue Rochester, NY 14620 General Counsel for H. J.
Meyers & Co., Inc., from 1991 to date; Associate with the law
firm of Harter, Secrest & Emery of Rochester, New York, from
1987-91; Senior Trial Counsel with the Securities Exchange
Commission, Office of General Counsel from 1984-87.
Alexander Norman Crowder, III, (60) Director 6 Canoe Trail
Darien, CT 06820 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, (52) 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., (53) Director Investment Management
Advisors, Inc. 156 Fifth Avenue New York, NY 10010 Chairman of
Investment Management Advisors, Inc. from 1991 to date; Of
Counsel to Taub & Fasciana, P.C.; Principal of Venture Capital
Associates from 1988 to date; Vice President of Bank of America
from 1987-88.
For the fiscal year ended July 31,1995, the Portfolio paid a
total of $11,000 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 31,1995, the Directors and officers of the Fund,
as a group, owned less than 1% 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
31,1995, the Advisor served as an investment advisor to
individual accounts having a total value of approximately $3.5
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 18,
1995. The Advisory Contract has a term which extends to July
31, 1996, 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
reimbursemen..
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. 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.
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 Provident Bank, an Ohio banking corporation located at One
East Fourth Street, Cincinnati, Ohio, 45202, is the Portfolio's
custodian and transfer agent ("The Provident"). The Provident
is a subsidiary of Provident Bancorp, Inc. a bank holding
company located in Cincinnati, Ohio with $4.7 billion in
consolidated assets as of December 31, 1993. Pursuant to a
custody agreement with the Portfolio, The Provident 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, Provident also
maintains the Portfolio's accounting and portfolio transaction
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 and $19,773 for the fiscal years ended
July 31, 1993, 1994, and 1995 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, 1996 was approvedbby a majority of the
directors at a Board of Directors meeting held July 18, 1995.
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. and H. J. Meyers & Co., Inc. are each
affiliated persons of the Fund, and were paid by the Portfolio
$882 and $ 0, respectively, in brokerage commissions for the
fiscal year ended July 31, 1995 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. and H. J.
Meyers & Co., Inc. for the fiscal year ended July 31, 1995 was
0.83%. The percentage of the Portfolio's aggregate dollar
amount of transactions involving the payment of commissions
effected through Bhirud Associates, Inc. and H. J. Meyers & Co.,
Inc. for the fiscal year ended July 31, 1995 was 0.85%.
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. In order
to qualify as a regulated investment company, less than 30% of
the Portfolio's gross income (including tax exempt income) must
be derived from the sale or other disposition of stock,
securities or certain investments held for less than three
months. Although increased Portfolio turnover may increase the
likelihood of additional capital gains for the Portfolio, the
Portfolio expects to satisfy the 30% income test. The Portfolio
turnover rate was 164%, 276% and 225% for the fiscal years ended
July 31, 1993, July 31, 1994, and July 31, 1995 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 November 1, 1994, McCurdy & Associates CPA's, Inc.,
27955 Clemens Road, Westlake, Ohio 44145 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, 1995, no persons 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 31,1995 was 8.97%. The Portfolio's annualized total return
for the period of November 4,1992 (commencement of operations)
to July 31,1995 was 3.3%.
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, 1995 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. In
order to maintain its status as a regulated investment company,
the Portfolio must derive less than 30% of its gross income from
the sale or other disposition of securities held less than three
months. 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.
- -----------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Directors Bhirud Funds, Inc.
We have audited the accompanying statement of assets and
liabilities of the Bhirud Mid Cap Growth Fund (a portfolio of
Bhirud Funds Inc.), including the portfolio of investments, as
of July 31, 1995, and the related statement of operations for
the year ended, and the statement of changes in net assets for
each of the two years in the period then ended and financial
highlights for each of the two years in the period then ended
and for the period from November 4, 1992 (commencement of
operations) to July 31, 1993. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our
audits.
We conducted our 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 text
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of July 31, 1995 by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statements 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 Bhirud Mid Cap Growth
Fund at July 31, 1995, the results of its operations for the
year then ended, and the changes in its net assets for each of
the two years in the period then ended and the financial
highlights for each of the two years in the period then ended
and for the period from November 4, 1992 to July 31, 1993, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
August 31, 1995
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<TABLE>
THE BHIRUD MID CAP GROWTH FUND
SCHEDULE OF INVESTMENTS REPORT DATE 07/31/1995 <CAPTION>
- - - - - -
NAME No of % MV Cost Market
Share Value Value
<S> <S> <C> <C> <C> <C>
TOLL BROS INC * 3,000 49,335 49,125
TOTAL OPERATIVE BUILDERS 0.75 49,335 49,125
REPAP ENTERPRISES INC * 5,000 43,944 41,250
TOTAL PAPER MILLS 0.63 43,944 41,250
LONGVIEW FIBRE CO 2,000 41,390 37,500
TOTAL PLASTIC,FOIL,COATD P 0.57 41,390 37,500
PAXAR CORP * 7,000 106,328 136,500
TOTAL COMMERCIAL PRINTING 2.07 106,328 136,500
BORDEN CHEMS & PLASTICS 10,000 178,200 176,250
UNION CARBIDE CORP 2,000 61,390 69,500
TOTAL PLASTICS,RESINS,ELAS 3.73 239,590 245,750
NBTY INC * 2,000 34,750 14,000
MEDEVA PLC 22,000 277,845 349,250
MYLAN LABS INC 3,000 95,085 90,375
TOTAL PHARMACEUTICALS 6.88 407,680 453,625
STERLING CHEMS INC * 5,000 68,475 53,750
TOTAL INDUSTRIAL ORGANIC C 0.82 68,475 53,750
NU-WEST INDS INC * 1,666 21,741 20,409
TOTAL AGRICULTURE CHEMICAL 0.31 21,741 20,409
SEALED AIR CORP * 2,000 84,890 101,500
TOTAL PLASTICS PRODUCTS, N 1.54 84,890 101,500
MAGMA COPPER CO NEW * 10,000 183,200 185,000
TOTAL PRIM SMELT,REFIN NON 2.81 183,200 185,000
BRUSH WELLMAN INC 8,000 136,310 177,000
TOTAL PRIM PRODUCTION OF A 2.69 136,310 177,000
BALL CORP 3,000 110,835 111,000
TOTAL METAL CANS 1.68 110,835 111,000
CINCINNATI MILACRON 7,000 166,740 218,750
TOTAL MACHINE TOOLS, METAL 3.32 166,740 218,750
TANDEM COMPUTERS INC * 5,000 93,475 65,625
TOTAL ELECTRONIC COMPUTERS 1 93,475 65,625
MAXTOR CORP * 9,000 63,000 38,250
CONNER PERIPHERALS * 2,000 24,640 27,000
SANCTUARY WOOD MULTA * 8,000 54,990 54,000
SEAGATE TECHNOLOGY * 2,000 60,640 88,750
TOTAL COMPUTER STORAGE DEV 3.16 203,270 208,000
TELEVIDEO SYS INC * 10,000 12,050 7,187
TOTAL COMPUTER TERMINALS 0.11 12,050 7,187
E M C CORP MASS * 13,000 222,160 297,375
WESTERN DIGITAL CORP * 3,000 56,460 58,125
SYMBOL TECHNOLOGIES * 2,000 71,890 76,250
TOTAL COMPUTER PERIPHERAL 6.55 350,510 431,750
TENCOR INSTRS * 2,000 93,600 88,000
TOTAL AIR COND,HEATING,REF 1.34 93,600 88,000
MAGNETEK INC * 7,000 113,365 90,125
TOTAL MOTORS AND GENERATOR 1.37 113,365 90,125
GO VIDEO INC * 2,000 5,370 3,000
TOTAL HOUSEHOLD AUDIO & VI 0.05 5,370 3,000
NORTHERN TELECOM LTD 5,000 195,350 188,125
DIGITAL SYS INTL INC * 5,000 53,750 54,375
TELEBIT CORP * 4,000 31,136 19,000
TOTAL TELE & TELEGRAPH APP 3.97 280,236 261,500
WAVEPHORE INC * 2,000 28,870 32,750
QUALCOMM INC * 4,000 157,100 171,000
TOTAL RADIO,TV BROADCAST, 3.09 185,970 203,750
ACTEL CORP * 3,000 43,875 48,375
CYPRESS SEMICONDUCTOR* 2,000 86,640 105,500
TOTAL SEMICONDUCTOR,RELATE 2.34 130,515 153,875
APPLIED MAGNETICS * 9,000 64,040 78,750
TOTAL ELECTRONIC COMPONENT 1.2 64,040 78,750
SYQUEST TECHNOLOGYC * 3,000 46,899 49,500
TOTAL MAGNETIC, OPTIC REC. 0.75 46,899 49,500
GALOOB LEWIS TOYS * 10,000 78,100 75,000
TOTAL GAMES,TOYS,CHLD VEH, 1.14 78,100 75,000
CALLAWAY GOLF CO 3,000 45,210 45,000
TOTAL SPORTING & ATHLETIC 0.68 45,210 45,000
KLM ROYAL DUTCH AIRL * 3,000 97,710 111,750
U S AIR GROUP INC * 10,000 79,350 95,000
TOTAL AIR TRANSPORT, SCHED 3.14 177,060 206,750
COMCAST CORP 2,000 37,850 40,500
TOTAL CABLE AND OTHER PAY 0.61 37,850 40,500
HOME SHOPPING NETWORK* 15,000 211,050 133,125
TOTAL CATALOG, MAIL-ORDER 2.02 211,050 133,125
USF&G CORP 6,000 114,255 99,000
TOTAL FIRE, MARINE, CASUAL 1.5 114,255 99,000
TANGER FACTORY OUTLET CTRS 2,000 52,140 54,000
TOTAL REAL ESTATE INVESTME 0.82 52,140 54,000
MARRIOTT INTL INC 3,000 107,835 108,750
CASINO MAGIC CORP * 4,000 31,000 22,250
TOTAL HOTELS,MOTELS,TOURIS 1.99 138,835 131,000
BLOCK H & R INC 1,000 40,945 37,500
TOTAL PERSONAL SERVICES 0.57 40,945 37,500
COMPUTERVISION CORPW * 15,000 89,700 157,500
ACCLAIM ENTMT INC * 6,000 165,125 142,500
ADOBE SYS INC 3,000 142,500 185,250
SYMANTEC CORP * 4,000 61,000 109,000
ELECTRONIC ARTS INC * 5,000 174,750 180,625
QUARTERDECK CORP * 5,000 68,750 73,438
GUPTA CORP * 11,000 145,415 104,500
TOTAL PREPACKAGED SOFTWARE 14.46 847,240 952,813
GRIFFIN GAMING & ENT * 12,000 214,012 195,000
BALLY ENTMT CORP * 14,000 151,085 180,250
DISNEY WALT CO 2,000 114,640 117,250
TOTAL MISC AMUSEMENT & REC 7.47 479,737 492,500
BRILLIANCE CHINA AUTOMOTIVE 5,000 36,600 30,625
RMS TITANIC INC * 25,000 34,375 18,750
FILA HLDGS S P A 9,000 146,130 263,250
TOTAL OTHER 4.74 217,105 312,625
TOTAL COMMON STOCKS 91.84 5,674,692 6,052,033
- - - - - -
TOTAL INVESTMENTS 5,674,692 6,052,033
OTHER ASSETS (LESS LIABILITIES) 537,464 537,464
- - - - - -
NET ASSETS 100 6,589,497
NET ASSETS VALUE PER SHARE 9.71
OFFERING PRICE PER SHARE 10.31
- - - - - -
<FN>
<F1>
* Non - income producing securities
</FN>
</TABLE>
- ----------------------------------------------------------------------
<TABLE>
BHIRUD MID CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1995
<CAPTION>
<S> <C> <C>
ASSETS
Investment Securities at Value $6,052,033
(Identified cost - $5,674,692) (Note 1)
Receivable Investment Securities Sold 523,214
Receivable From Advisor 15,682
Receivable for Fund Shares Sold 30,467
Due from Broker ------
Deferred organization expenses (Note 5) 49,433
Dividends receivable 15,530
Prepaid insurance 1,362
Other receivable 636
Total Assets $6,688,357
LIABILITIES
Payables:
Investment Securities Purchases $ 46,650
Other accrued expenses 39,436
Cash overdraft 12,774
Total Liabilities $ 98,860
NET ASSETS (Equivalent to $9.71 per share based
on 678,934 shares outstanding) $ 6,,589,497
COMPOSITION OF NET ASSETS:
Paid in Capital $ 7,183,407
Distribution in excess of accumulated
Net Realized gain (971,251)
Accumulated Net Investment Income --
Net Unrealized Appreciation of Investments 377,341
Total Net Assets $6,589,497
</TABLE>
- -----------------------------------------------------------------------
<TABLE>
STATEMENT OF OPERATIONS (AUDITED) FOR THE YEAR ENDED JULY 31ST, 1995
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 138,627
EXPENSES
Audit $5,491
Fund Accounting 14,681
Transfer Agent (Note 6) 19,052
Legal 14,387
Miscellaneous 1,143
Shareholder Report 4,305
Directors 11,000
Registration 18,426
Organization (Note 5) 19,051
Insurance 6,647
Fund Administration (Note 4) 16,716
Custodian 11,988
Investment Advisor (Note 4) 76,942
12b-1 Fees 19,773
Total Expenses (239,602)
Expense Reimbursement/ waived by Advisor (Note 4) (15,682)
Expense net of Reimbursement/ waiver 223,920
NET INVESTMENT LOSS $(85,293)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Loss on Investments ($504,234)
Change in Unrealized Appreciation of Investments 1,105,777
NET REALIZED/UNREALIZED (GAIN) ON INVESTMENTS $601,543
NET (INCREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(516,250)
<FN>
<F1>
See accompanying Notes to financial Statements
</FN>
</TABLE>
- ------------------------------------------------------------------------
<TABLE>
THE BHIRUD MID CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS JULY 31,1995
<CAPTION>
For year For the
Ended Year Ended
July 31, 1995 July 31, 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Net Investment Income/ (loss) $(85,293) $(32,783)
Net Realized Gain / (loss) on investment
Securities Sold (504,234) 926,045
Net unrealized appreciation/(depreciation)
of Investments 1,105,777 (1,170,658)
Net Increase (Decrease) in Net
Assets Resulting from Operations $ 516,250 $ (277,396)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income 0 (74,700)
Capital Gains (1,337,998) 0
Total Distributions (1,337,998) (74,700)
CAPITAL SHARE TRANSACTIONS
Shares Sold 1,235,531 6,657,995
Dividends Reinvested 1,330,680 68,650
Cost of shares Redeemed (4,893,843) (2,920,710)
Increase (Decrease) in Net Assets
Due to Capital Share Transactions (2,307,632) 3,805,935
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,129,380) 3,453,839
NET ASSETS BEGINNING OF PERIOD 9,718,877 6,265,038
NET ASSETS END OF PERIOD $6,589,497 $9,718,877
<FN>
<F1>
See accompanying Notes to Financial Statements
</FN)
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (AUDITED)
<CAPTION>
November 4th, 1992
For the For the (Commencement Year Year ofOperations)
Ended Ended through
July 31,July 31,July 31st, 1995 1994 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.50 $10.87 $10.00
Income/(Loss) from Investment Operations:
Net Investment Income/(Loss) (0.14) (0.04)* 0.28*
Net Gain/(Loss) on Securities
(Both Realized and Unrealized) 0.86 (0.24) 0.59
Total from Investment Operations 0.72 (0.28) 0.87
Distributions:
Dividends from Net Investment Income 0.00 (0.09) 0.00
Distributions from Capital Gains (1.51) 0.00 0.00
Total Distributions (1.51) (0.09) 0.00
NET ASSET VALUE, END OF PERIOD $ 9.71 $10.50 $10.87
Total Return (Not Reflecting Sales Load) 9.51% (2.60)% 8.70%**
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $6,589 $9,719 $6,265
Ratios to Average Net Assets:
Expenses 2.68% 2.71% 0.13%**
Net Investment Income/(Loss) (1.02)% (0.36)% 2.74%**
Effect of Reimbursements/Waivers on
Above Ratios 0.19% 0.71% 5.90%**
Portfolio Turnover Rate 224.77% 276.26%163.72%**
<FN>
<F1>
* Based on weighted average shares outstanding
<F2>
** Not annualized
<F3>
See accompanying Notes to Financial Statements
</FN>
</TABLE>
- ------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Bhirud Funds, Inc. (the "Fund") is a diversified open-end
management investment company currently consisting of The Bhirud
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, 1995 were as follows:
<TABLE>
Shares Amount
<S> <C> <C>
Beginning Balance 925,512 $ 9,608,157
Shares Sold 123,732 1,255,531
Shares Issued in Reinvestment of
Dividends 151,765 1,330,680
Shares Redeemed (522,075) (4,893,843)
Net Increase (246,578) (2,307,632)
Ending Balance 678,934 $7,300,525
</TABLE>
3. INVESTMENTS
Purchases and sales of securities for the year ended July 31st,
1995 other than short-term securities, aggregated $17,979,426
and $21,609,365, respectively. The cost of securities is
substantially the same for Federal income tax purposes.
For Federal income tax purposes:
Aggregate Cost $5,674,692
Gross Unrealized Appreciation 753,051
Gross Unrealized Depreciation (375,710)
Net Unrealized Appreciation $377,341
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.
For the year ended July 31st, 1995, the Advisor was entitled to
fees of $76,942. The Advisor has voluntarily agreed to
reimburse the Fund in the event the Fund's expenses exceed
certain prescribed limits. Reimbursements in the amount of
$15,682 were accrued for during the year ended July 31st, 1995.
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.
Pursuant to the provisions in the contract, no such expense
reimbursements were required for the six months ended January
31, 1995.
The Fund retained Furman Selz Incorporated ("Furman Selz") to
act as Administrator for the Fund from August 1, 1994 through
October 31, 1994. Furman Selz provided management and
administrative services for the operation of the Fund and
furnished office space and facilities required for conducting
the business of the Fund and pays the compensation of the
Trust's Officers and Trustees affiliated with Furman Selz. As
compensation for their administrative services Furman Selz was
paid a fee, computed daily and payable monthly, equal on an
annual basis, to .20% of the Fund's aggregate average daily net
assets. For the three months ended October 31, 1994, Furman
Selz earned administrative services fees of $4,944. The
Administrator also provided the Fund with all accounting related
services. For the three months ended October 31, 1994 Furman
Selz earned fees of $7,932 for fund accounting. From November
1, 1994 through July 31, 1995, Bhirud Associates, Inc. provided
the administrative services for the Fund and was paid $11,772.
From November 1, 1994 through July 31, 1995, the Provident Bank
has been providing custodian, fund accounting, dividend and
transfer agency functions for the Fund.
5. ORGANIZATION EXPENSES
The organization and start-up expenses of the Fund are being
amortized on a straight line basis over a period of 60 months.
The initial shareholder has agreed in the event that any of the
initial 10,000 shares it owns are redeemed during the period of
amortization of the Fund's organization and start-up expenses,
the redemption proceeds will be reduced by any such unamortized
organizational expenses in the same proportion as the number of
shares being redeemed bears to the initial shares outstanding at
the time of redemption.
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, 1995, the Fund has incurred distribution costs of $16,023
payable to H. J. Meyers formerly Thomas James Associates, Inc.
and $982 payable to Bhirud Associates, Inc.
7. TRANSACTIONS WITH AFFILIATES
During the year ended July 31st, 1995 the Fund paid brokerage
commissions of $882 to Bhirud Associates, Inc.
8. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with recently approved accounting pronouncements,
the Fund recorded reclassifications in the capital accounts. The
Fund recorded permanent book/tax difference of $ (117,118) as
of July 31, 1995, 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 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 period of November 4, 1992 to
July 31, 1993 and the year ended July 31, 1994 and July 31, 1995
Included in Statement of Additional Information:
(1) Portfolio of Investments, dated July 31, 1995;
(2) Statement of Assets and Liabilities, dated July 31, 1995;
(3) Statement of Operations, for the year ended July 31, 1995;
(4) Statement of Changes in Net Assets, for the year ended July
31, 1994 and July 31, 1995;
(5) Notes to Financial Statements, for the year ended July 31,
1995;
(6) Financial Highlights, for the period of November 4, 1992 to
July 31, 1993 and for the year ended July 31, 1994, and July 31,
1995; and
(7) Report of McCurdy & Associates CPA's, Independent Auditors,
dated August 31, 1995.
(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 Provident Bank.
(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 The Provident Bank.
- -----------------------------------------------------------------
* 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.
- ---------------------------------------------------------------------
**(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 McCurdy & Associates CPA's, Independent
Auditors.
(12) Not applicable.
*(13) Written assurance of H. J. Meyers & Co., 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.
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, 1995
Common Stock (par value $.001) 1,100
The Bhirud 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
$3.5 million. The advisor does not serve as investment advisor
to any other investment companies.
- -----------------------------------------------------------------
* Filed with Pre-Effective Amendment No. 1 to said Registration
Statement on August 11, 1992, and incorporated herein by
reference.
** Filed with Pre-Effective Amendment No. 1 to said Registration
Statement on August 11, 1992, and incorporated herein by
reference.
- ----------------------------------------------------------------------
Item 29. Principal Underwriters.
(a) Bhirud Associates, Inc. is the Registrant's distributor.
(b) The following are the directors and officers of Bhirud
Associates, Inc. The principal business address of each of
these persons is 1266 E. Main Street, Stamford, Connecticut
06902.
Positions & offices Positions & offices
Name with Distributor With Registrant
Suresh Bhirud President, Treasurer Director, Chairman
and Director of the Board, Treasurer
Susan Bhirud Secretary None
Harish Bhirud Assistant Secretary 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 The Provident Bank, One East
Fourth Street, Cincinnati, Ohio 45202, the Registrant's
custodian, 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, 1995.
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
and Principal Financial Board, Treasurer
officer: and Director November 18,1995
/s/ Suresh Bhirud
Suresh Bhirud
(2) Majority of Directors
Michael Smith Director
Alexander Norman Crowder, III Director
M. John Sterba, Jr. Director
By: /s/ Suresh Bhirud November 18, 1995
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
Provident Bank
(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 The Provident Bank
(11) Consent of McCurdy & Associates, CPA's, Independent Auditors
(15.1) Form of Distribution and Service Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940
(15.3) Form of Shareholder Servicing Agreement between the
Registrant and Bhirud Associates, Inc.
- ----------------------------------------------------------------------
EXHIBIT 8
CUSTODIAN AGREEMENT
- ----------------------------------------------------------------------
CUSTODIAN AGREEMENT
AGREEMENT made as of ____________ between BHIRUD ASSOCIATES,
INCORPORATED, business trust- (the, "Trust"), and THE PROVIDENT
BANK, an Ohio banking corporation ("Provident");
WHEREAS, the Trust is engaged in the business of investment in
certain types of securities, as more fully described in its
Registration Statement on Form N-1A under the Securities Act of
1933, as amended, including its then current prospectus and
statement of additional information (the "Registration
Statement");
WHEREAS, the Trustees of the Trust have selected Provident to
act as the custodian of the Securities (as subsequently defined)
and funds of the Trust and to perform certain ministerial duties
as agent, as more fully set forth herein;
WHEREAS, Provident is ready and willing to act as custodian and
agent in accordance with the provisions hereof;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
Article 1. Definitions.
1.1 "Book-Entry" or "Book Entry System" shall mean the
Federal Reserve/Treasury book-entry system for United States and
federal agency securities as provided in Subpart 0 of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and
the book-entry regulations of federal agencies substantially in
the form of Subpart 0, and its successor or successors.
1.2 "Broker Account" shall mean a segregated account, in the
name of a broker, dealer or futures commission merchant or in
the name of-the Trust for the benefit of a broker, dealer or
futures commission merchant, as the case may be, separate and
distinct from the Trust's custody account; in which certain
securities and/or cash of the Trust shall be deposited and held
by Provident for the benefit of a broker, dealer or futures
commission merchant in connection with the purchase or sale of
Financial Futures Contract.
1.3 "Financial Futures Contract" shall mean a contractual
commitment to buy or sell Securities during a specified month at
an agreed-upon price, issued by or pursuant to the regulations
of a commodities exchange regulated under the Commodities
Futures Trading Act.
1.4 "Option" shall mean any exchange traded put or call option
on Securities (as defined below).
1.5 (a) "Proper Instruction" shall mean a writing signed or
initialled by one or more persons as the Trustees shall have
from time to time authorized, and, to the extent and for the
purposes authorized by the Trustees of the Trust. Each such
writing shall set forth the specific transaction or type of
transaction involved in a manner customarily used in the
industry. Oral instructions confirmed in writing within
twenty-four (24) hours by persons authorized to do so will be
considered Proper Instructions if Provident reasonably believes
them to have been given by persons authorized to give such
instructions with respect to the transaction involved. Upon
receipt of a certificate of the Secretary of the Trust as to the
authorization by the Trustees of the Trust accompanied by a
detailed description of procedures approved by the Trustees,
Proper Instructions may include communications effected directly
between electromechanical or electronic devices provided that
such procedures afford adequate safeguards for the Trust's
assets. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange
of securities made by or for the Trust, Provident may take
cognizance of the provisions of the Trust's Declaration of
Trust, By-Laws and Registration Statement; however, except as
otherwise expressly provided herein, it may assume unless and
until notified in writing to the contrary that instructions
purporting to be proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the
Trust's Declaration of Trust, By-Laws, or Registration
Statements.
1.6 "Securities" shall mean stocks, bonds, debentures, notes,
evidence of indebtedness, evidences of interest; warrants,
Options and Financial Futures Contracts and other securities,
irrespective of their form, the name by which they may be
described, or the character or form of the entities by which
they are issued or created.
1.7 "Securities Depository" shall mean a clearing agency that is
registered under Section 17A of the Securities Exchange Act of
1934 and that acts as a securities depository as that tern is
defined by Rule 17f-4(a) under the Investment Company Act of
1940.
1.8 "Shares" shall mean the shares of beneficial interests of
the Trust issued by the Trust.
Article 2. Appointment and Property to be Held in Custody
2.1 The Trust hereby appoints Provident as its custodian and
agent subject to the provisions of this Agreement. The Trust
agrees to deliver to Provident all Securities and cash owned by
it, and all payments of income, payments of principal and
capital distributions received by it with respect to all
Securities owned by the Trust from time to time, and the cash
consideration received by it for such Shares of the Trust as nay
be issued or sold from time to time.
2.2 The Trust will deposit with Provident properly certified or
authenticated copies of its Declaration of Trust and By-Laws,
and all amendments thereto, its current prospectus and statement
of additional information, as from time to time amended, and
such resolutions, votes, or other proceedings of the Trust as
may be necessary for or convenient to Provident in the
performance of its duties.
Article 3. Duties of Provident with Respect to Property of
Trust Held in Custody.
3.1 Safekeeping. Provident shall hold and physically segregate
for the account of the Trust all non-cash property and
Securities other than Securities that are maintained pursuant to
Section 3.13, and shall maintain records of all receipts,
deliveries and locations of such Securities, together with a
current inventory thereof, and shall conduct periodic physical
inspections (including sampling counts and four quarterly
complete physical accounts per year to be conducted and
certified to the Trust by a Bank officer of Provident) of
certificates representing bonds and other Securities held by it
under this Agreement in such manner as Provident shall determine
from time to time to be advisable in order to verify the
accuracy of such inventory. With respect to Securities held by
any agent appointed pursuant to Section 3.11, and with respect
to Securities or cash held by any Sub-Custodian employed
pursuant to Section 3.12, Provident may rely upon certificates
from such agent as to the holdings of such Sub-Custodian, it
being understood that Provident must perform account
reconciliations with such agents and Sub-Custodians no less
frequently than quarterly, and that reliance upon such
certificates in no way relieves Provident of its
responsibilities under this Agreement.
Provident will promptly report to the Trust the results of such
inspections and certifications, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy such shortages or discrepancies.
3.2 Delivery of Securities. Provident shall release and deliver
Securities owned by the Trust that are either held by Provident
or are in a Securities System account (as defined in Section
3.13) of Provident, and only upon receipt of Proper Instructions
(which may be continuing instruction when deemed appropriate by
the parties) and only in the following cases:
(a) upon sale of such Securities for the account of the Trust
and receipt of payment thereof;
(b) upon the receipt of payment in connection with any
repurchase agreement related to such Securities entered into by
'the Trust, and prior to any receipt of confirmation of the
repurchase agreement if Provident in its sole discretion deems
it appropriate;
(c) in the case of a sale effected through a Securities System,
in accordance with the provisions of Section 3.13 hereof;
(d) to the depository agent in connection with tender or other
similar offers for portfolio Securities of the Trust;
(e) to the issuer thereof or its agent when such Securities
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other consideration
is to be delivered to Provident;
(f) to the issuer thereof, or its agent, for transfer into
the name of the Trust or into the name of any nominee or
nominees of Provident or into the name or nominee name of any
agent appointed pursuant to Section 3.11 or into the name or
nominee name of any sub-custodian appointed pursuant to Section
3.12; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such case,
the new Securities are to be delivered to Provident;
(g) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the Securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to Provident;
(h) in the case of warrants, rights or similar Securities, the
surrender thereof in the exercise of such warrants, rights, or
similar Securities or the surrender of interim receipts or
temporary Securities for definitive Securities; provided that,
in any such case, the new Securities and cash, if any, are to be
delivered to Provident;
(i) for delivery in connection with any loans of Securities made
by the Trust, but only against receipt of adequate collateral as
determined by the Trust, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities;
(j) for delivery as security in connection with any borrowings
by the Trust requiring a pledge of assets by the Trust, but only
against receipt of amounts borrowed;
(k) upon receipt of instructions from the Transfer Agent, for
delivery to such Transfer Agent or to the holders of Shares in
connection with distributions in kind, as may be described from
time to time in the Trust's currently effective prospectus, in
satisfaction of requests by holders of Shares for repurchase or
redemption;
(1) in the case of Options for the purchase or sale of
Securities, upon the exercise of any put Option by the Trust or
sale of an Option by the Trust and receipt of payment thereof;
(m) for any other proper purpose, upon receipt of Proper
Instructions specifying the Securities to be delivered and
naming the person or persons to whom delivery of such Securities
shall be made. Provident shall have no responsibility to
determine whether said activities are a proper purpose of the
Trust.
3.3 Liability for Delivery of Securities in Violation of Section
3.2. Notwithstanding anything to the contrary in this Agreement,
in any and every case where Securities owned by the Trust are
released and delivered by Provident in violation of Section 3.2,
Provident shall be liable to the Trust in the event any loss
results to the Trust from the failure of Provident to comply
with the provisions of Section 3.2.
3.4 Registration of Securities. Securities held by Provident
pursuant to this Agreement (other than bearer Securities) shall
be registered (a) in the name of the Trust, (b) in the name of
any nominee of the Trust or of any nominee of Provident (which
nominee shall be assigned exclusively to the Trust), (c) in the
name or nominee name of any agent appointed pursuant to Section
3.11, or (d) in the name or nominee name of any sub-custodian
appointed pursuant to Section 3.12. All Securities accepted by
Provident on behalf of the Trust under the terms of this
Agreement shall be in "street name" or other good delivery form.
3.5 Bank Accounts. Provident shall retain all cash of the
Trust, other than cash maintained by the Trust in a checking
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, in the banking department of
Provident in a separate account or accounts in the name of the
Trust, subject only to draft or order by Provident acting
pursuant to the terms of this Agreement. If and when authorized
by Proper Instructions in accordance with a vote of the majority
of the Board of Trustees of the Trust, Provident may open and
maintain an additional account or accounts in such other bank or
trust companies (which are qualified to act as a custodian under
the Investment Company Act of 1940) as may be designated by such
instructions, such account or accounts, however, to be in the
name of Provident in its capacity as Custodian and subject only
to its draft or order in accordance with the terms of this
Agreement. If requested by the Trust, Provident shall furnish
the Trust with monthly statements of the Trust's accounts.
3.6 Payments for Shares. Provident shall receive as
transfer agent for the Trust, and it shall receive from the
distributor for the Trust shares, or from the Trust, and deposit
into the Trust's accounts such payments as are received for
shares of the Trust issued or sold from time to time by the
Trust.
3.7 Collections. Unless otherwise instructed by receipt of
Proper Instructions, and to the extent that Provident should
reasonably be cognizant of same in the exercise of due care,
Provident shall collect, receive and deposit in a bank account
or accounts maintained pursuant to Section 3.5 all income and
other payments with respect to the Securities held hereunder,
and to execute ownership and other certificates and affidavits
for all Federal and State tax purposes in connection with the
collection of bond and note coupons, and to do all other things
necessary or proper in connection with the collection of such
income, and without waiving the generality of the foregoing, to:
(1) present for payment on the date of payment all coupons and
other income items requiring presentation;
(2) present for payment all Securities which may mature or be
called, redeemed, retired or otherwise become payable on the
date such Securities become payable;
(3) endorse and deposit for collection, in the name of the
Trust, checks, drafts or other negotiable instruments on the
same day as received.
In any case in which Provident does not receive any such due and
unpaid income within a reasonable time after it has made demands
for the same as is customary in the industry (which demands
shall commence within a reasonable period of time) , it shall
notify the Trust in writing, including copies of all demand
letters, if any, any written responses thereto and memoranda of
all oral responses thereto and to telephonic demands, and await
Proper Instructions. Provident shall not be obliged to take
legal action for collection unless and until reasonably
indemnified to its satisfaction. All income and other payments
with respect to the Securities held hereunder shall be credited
to the Trust's appropriate investment account no later than one
day after such income or other payment is due from the obligor
of such Security, whether or not such payments have been
collected by Provident, except where Provident promptly notifies
the Trust at the time when Provident obtains knowledge or
reasonably should have known prior to such time of the
occurrence, of a failure or default on the payment of the
obligor. Provident shall notify the Trust as soon as reasonably
practicable whenever income due on Securities is not received by
Provident in due course.
3.8 Payment of Trust Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, Provident shall pay out moneys of
the Trust in the following cases only:
(a) upon the purchase of Securities for the account of the Trust
but only: ~(i) against the' delivery of such Securities to
Provident (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under
the Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by Provident as its agent for
this purpose) registered in the name of the Trust or in the name
of a nominee of Provident referred to in Section 3.4 hereof or
in proper form for transfer; (ii) in the case of a purchase
effected through a Securities System, in accordance with the
conditions set forth in Section 3.13 hereof; or (iii) in the
case of repurchase agreements entered into between the Trust and
either Provident or another party, (1) against delivery of the
Securities either in certificate form or through an entry
crediting Provident's custodial account at the Federal Reserve
Bank with such Securities; (2) against delivery of a safekeeping
receipt from a Securities depository evidencing purchase by the
Trust of securities owned by Provident or another party, and
prior to any receipt of confirmation of the repurchase agreement
if Provident in its sole discretion deems it appropriate or (3)
pursuant to such other procedures enumerated in written
repurchase agreements entered into by the Trust.
(b) in connection with conversion, exchange or surrender of
Securities owned by the fund as set forth in Section 3.2 hereof;
(c) for the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments for
the account of the Trust: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Trust whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
(d) for the payment of any dividends declared pursuant to the
Trust's Declaration of Trust, By-Laws and Registration Statement.
(e) in the case of Options, (1) the premium for the purchase of
an Option shall be payable upon receipt of Proper Instructions
and the oral affirmation of the purchase of such Options, given
by the clearing member (in the case of Options Clearing
Corporation traded options) or by the broker and may be made in
advance of receipt of a clearing member's confirmation or
broker's confirmation confirming purchase of an Option by the
Trust, and (2) the payment to a clearing member or broker upon
the exercise of a call option by the Trust shall be made upon
receipt of the Securities underlying the call Option exercised
by the Trust;
(f) in the case of Financial Futures Contracts, (1) payments for
Financial Futures Contracts, including payments of initial
margin, shall be payable into a Broker Account upon receipt of
Proper Instructions and the oral affirmation of the purchase or
sale of the Financial Futures Contract given by the broker and
may be made in advance of any receipt of a broker's confirmation
confirming the purchase or sale of the Financial Futures
contract, (2) payment of variation margin shall be payable upon
receipt of proper instructions, and (3) payments in settlement
of Financial Futures Contracts shall be payable into a Broker
Account upon receipt of Proper Instructions and the oral
affirmation of the settlement of the Financial Futures Contract
and may be made in advance of receipt of a broker's confirmation
confirming settlement of the Financial Futures Contract.
(g) upon receipt of Proper Instructions, for any other purpose
which the Trust declares is a proper Trust purpose. Provident
shall have no responsibility to determine whether said
activities are a proper purpose of the Trust.
3.9 Liability for Payment in Advance of Receipt of Securities
Purchased. Notwithstanding anything to the contrary in this
agreement, in any and every case where payment for purchase of
Securities for the account of the Trust is made by Provident in
violation of Section 3.8 and in the absence of specific written
instructions from the Trust, Provident shall be liable to the
Trust in the event any loss results to the Trust from the
failure of Provident to comply with the provisions of Section
3.7. In every and any case of a purchase of Securities for the
account of the Trust where payment is made by Provident in
advance of receipt of the Securities purchased, Provident shall
be absolutely liable to the Trust for such Securities to the
same extent as if the Securities had been received by Provident.
3.10 Failed Transactions. If, on the day a purchase transaction
is to be effected, Provident is unable to obtain custody and
control of any security intended to be purchased by the Trust,
Provident shall advise the Trust of such failure and shall
assist the Trust in obtaining credits in favor of the Trust
based upon any Trust credit balances resulting from such
incompleted transactions. Provident shall also assist the Trust
in collecting any payments of interest, dividends or penalties
arising from the failed transaction.
3.11 Appointment of Agents. Provident, may at any time or times
appoint (and may at any time remove) any other bank, trust
company or reasonable commercial agent, qualified to act as
Custodian under the Investment Company Act of 1940, as its agent
to carry out such of the provisions of this Agreement as
Provident may from time to time direct, provided, however, that
the appointment of such Agent shall have been approved by the
Trustees of the Trust, and that such appointment shall not
relieve Provident of any of its responsibilities under this
Agreement. Each agency relationship shall be established by a
written instrument, copies of which are to be provided promptly
to the Trust, which shall contain, inter alia, the obligation of
the agent to segregate and hold assets of the Trust only in the
name of and for the benefit of the Trust.
3.12 Appointment of Sub-Custodians. Provident may from time to
time employ one or more banks and/or trust companies qualified
under the Investment Company Act of 1940 to act as custodian, as
Sub-Custodians, provided, however, that the appointment of such
Agent shall have been approved by the Trustees of the Trust, and
that such appointment shall not relieve Provident of any of its
responsibilities under this Agreement. Each Sub-Custodian
relationship shall be established by written instrument, copies
of which are to be provided promptly to the Trust, which shall
contain, inter alia, the obligation of the Sub-Custodian to
segregate and hold assets of the Trust only in the name of and
for the benefit of the Trust.
3.13 Deposit of Trust Assets in Securities System. Provident
may deposit and/or maintain Securities owned by the Trust in (a)
a Securities Depository, and (b) the Book-Entry System
authorized by the U.S. Department of Treasury and certain
federal agencies (collectively referred to in this Agreement as
"Securities System") , all in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
(a) Provident may keep Securities of the Trust in a Securities
system provided that such Securities are represented in an
account (for purposes of this paragraph "Account") of Provident
in the Securities System that shall not include any assets of
Provident other than assets held as a fiduciary or custodian.
(b) The records of Provident with respect to Securities of
the Trust that are maintained in a Securities System shall
identify those Securities belonging to the Trust.
(c) Provident shall pay for Securities purchased for the
account of the Trust upon (i) receipt of advice from the
Securities System that such Securities have been transferred to
the Account, and (ii) the making of an entry on the records of
Provident to reflect such payment and transfer for the account
of the Trust. Provident shall transfer Securities sold for the
account of the Trust upon (1) receipt of advice from the
Securities System that payment for such Securities has been
transferred to the Account, and (2) the making of an entry on
the records of Provident to reflect such transfer and payment
for the account of the Trust. Copies of all advices from the
Securities System of transfers of Securities for the account of
the Trust shall identify the Trust, be maintained for the Trust
by Provident, and be provided to the Trust at its request.
Provident shall furnish to the Trust copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of the Trust on the next business day.
(d) Provident, shall provide the Trust with any report
obtained by Provident on the Securities System's accounting
system, internal accounting control and procedures for
safeguarding Securities deposited in the Securities System.
(e) Provident shall not act under this paragraph 3.13 in the
absence of receipt of an initial certificate of the Secretary
that the Trustees of the Trust have approved the initial use of
a particular Securities System and the receipt of an annual
certificate of the Secretary that the Trustees of the Trust have
reviewed the use by the Trust of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company
Act of 1940, as amended.
(f) Anything to the contrary in this Agreement
notwithstanding, Provident shall be liable to the Trust for any
loss or damage to the Trust resulting from (i) any negligence,
misfeasance or misconduct of Provident or any of its agents or
of any of its employees in using the Securities System or from
(ii) failure of Provident or any of its agents or employees to
enforce effectively such rights as it may have against the
Securities System. At the election of the Trust, it shall be
entitled to be subrogated to the rights of Provident with
respect to any claim against the Securities System or any other
person that Provident may have a claim against as a consequence
of any such loss or damage if and to the extent that the Trust
has not been made whole for any such loss or damage.
3.14 Ownership certificates for Tax Purposes. Provident shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to Securities of the Trust
held by it and in connection with transfers of Securities.
3.15 Proxies. Provident shall, with respect to the Securities
held hereunder, cause to be promptly executed by the registered
holder of such Securities, if the Securities are registered
otherwise than in the name of the Trust or a nominee of the
fund, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to the
Trust such proxies, all proxy soliciting materials and all
notices relating to such Securities.
3.16 Communication Relating to Trust Portfolio Securities.
Provident shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of Securities and expirations of rights in
connection therewith) received by Provident from issuers of the
Securities being held for the Trust. With respect to tender or
exchange offers, Provident shall transmit promptly to the Trust
all written information received by Provident from issuers of
the Securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer. If
the Trust desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the
Trust shall provide Provident with Proper Instructions on the
action the Trust desires Provident to take provided, however,
Provident shall not be liable to the Trust for the failure to
take any such action unless such Proper Instructions are
received by Provident at least one (1) business day prior to the
date on which Provident is to take such action.
3.17 Actions Permitted Without Express Authority. Provident may
in its reasonable discretion, without express authority from the
Trust:
(a) surrender Securities in temporary form for Securities in
definitive form;
(b) endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the Securities and property of
the Trust except as otherwise directed by the officers of the
Trust.
3.18 Evidence of Authority. Provident shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed by
it to be genuine and to have been properly executed by or on
behalf of the Trust. Provident may receive and accept a
certified copy of a vote of the Trustees of the Trust as
conclusive evidence of (a) the authority of any person to act in
accordance with such vote, or (b) any determination or action by
the Trustees pursuant to the Declaration of Trust and By-Laws as
the case may be, as described in such vote, and such vote may be
considered as in full force and effect until receipt by
Provident of notice to the contrary.
Article 4. Duties of Provident with Respect to the Books of
account and Calculation of Net Asset Value and Net Income.
4.1 Provident shall cooperate with and supply necessary
information to the entity or entities appointed by the Trustees
of the Trust to keep the books of account of the Trust and/or
compute the net asset value per share of the outstanding shares
of each series of the Trust. If directed in writing to do so by
the Trust, Provident shall itself keep such books of account
and/or compute such net asset value per share. If so directed,
Provident shall also compute such net asset value per share. If
so directed, Provident shall also calculate daily the net income
of each series of the Trust as described in the currently
effective prospectus of such series and shall advise the Trust
and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Trust
to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily
income of each series of the Trust shall be made at the time or
times described from time to time in the currently effective
prospectus of such series.
Article 5. Custodian Records.
5.1 Provident shall create, maintain and retain all records
relating to its activities and obligations under this Agreement
in such manner as will meet with obligations of the Trust under
the Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to
the Trust. All records maintained by Provident in connection
with the performance of its duties under this Agreement shall be
the property of the Trust, shall at all times during the regular
business hours of Provident be open for inspection by duly
authorized officers, employees, attorneys for, auditors employed
by, and other agents of the Trust and, in the event of
termination of this Agreement, will be delivered by Provident to
the Trust or to the successor Custodian designated by the Trust.
Provident shall, on a monthly basis, and otherwise when
requested by the Trust, at Provident's cost, supply the Trust
with a tabulation of securities owned by the Trust and held by
Provident.
Article 6. Opinion of Trust's Independent Accountant.
6.1 Provident shall take all reasonable action, as the Trust may
from time to time request, so that the Trust may obtain from
year to year favorable opinions from the Trust's independent
accountants with respect to its activities hereunder in
connection with the preparation of reports to the Securities and
Exchange commission and with respect to any other requirements
of such Commission.
Article 7. Reports to Trust by Independent Public Accountants.
7.1 Provident shall provide the Trust, at such times as the
Trust may reasonably require, with reports of independent public
accountants on the accounting system, internal accounting
control and procedures for safeguarding Securities, including
Securities deposited and/or maintained in a Securities System,
relating to the services provided by Provident under this
Agreement; such reports, shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Trust,
to provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and, if there are no
such inadequacies, shall so state.
Article 8. Compensation of Provident.
8.1 Provident shall be entitled to such reasonable compensation
for its services and expenses as custodian, as agreed upon in
writing from time to time between the Trust and Provident and
set forth in Schedule A Addendum attached to this Agreement. In
the event Provident shall be instructed to keep the books of
account of the Trust and/or compute the net asset value per
share of the outstanding shares of the Trust pursuant to Article
4 herein, at the time of such instruction Provident and the
Trust shall agree in writing upon reasonable compensation for
those additional services.
Article 9. Liability and Indemnification of Provident.
9.1 Provident shall be entitled to receive and act upon advice
of counsel (who may be counsel for the Trust) and shall be
without liability for any action reasonably taken pursuant to
such advice, provided that such action is not in violation of
applicable Federal or state laws or regulations. Provident
shall be kept indemnified by the Trust and be without liability
for any action taken or thing done by it or its employees,
Sub-Custodians and agents, in carrying out the terms and
provisions of this Agreement in good faith and without
negligence, provided that it shall be liable to the Trust for
any error, omission or other act by it or any of its employees,
Sub-Custodian and agents, including acts of negligence, clerical
errors and mechanical failures. Provident assumes no
responsibility or liability for any acts, errors or omissions
that may have occurred prior to Provident's acceptance of the
duties and responsibilities set forth in this Agreement and the
Trust agrees to indemnify and hold Provident harmless from all
claims, lawsuits, damages and the like which are attributable to
or caused by any service provider previously engaged by the
Trust to perform similar duties for the Trust as are described
herein. In order that the indemnification provision contained
in this Section 9.1 shall apply, however, it is understood that
if in any case the Trust may be asked to indemnify or save
Provident harmless, the Trust shall be fully and promptly
advised of all pertinent facts concerning the situation in
question, and it is further understood that Provident will use
all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification
against the Trust. The Trust shall have the option to defend
Provident against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it
will so notify Provident, and thereupon the Trust shall take
over complete defense of the claim, and Provident shall in such
situation initiate no further legal or other expenses for which
it shall seek indemnification under this Section 9.1 Provident
shall in no case confess any claim or make any compromise in any
case in which the Trust will be asked to indemnify Provident
except with the Trust's written consent.
Article 10. Effective Period; Termination.
10.1 This Agreement shall become effective as of its execution,
shall continue in full force and effect until termination by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than sixty (60) days after the date of such
delivery or mailing; provided, that the Trustees may immediately
terminate this Agreement in the event of the appointment of a
conservator or receiver for Provident by the Ohio Superintendent
of Banks or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent
jurisdiction.
10.2 Upon termination of this Agreement, the Trust shall pay to
Provident such compensation as may be due as of the date of such
termination and shall likewise reimburse Provident for its
reasonable costs, expenses and disbursements in connection with
the termination of this Agreement.
Article 11. Successor Custodian.
11.1 If a successor custodian shall be appointed by the
Trustees of the Trust, Provident shall, upon termination of this
Agreement, deliver to such successor custodian at the office of
Provident, duly endorsed and in the form for transfer, all
Securities then held by it hereunder, shall transfer to an
account of the successor custodian all the Trust's Securities
held in a Securities System and shall deliver to such successor
custodian all funds and other property held by it, including all
books, records, entries, accounts and statements held by
Provident or its agents, and generally shall fully cooperate
with the successor custodian in the transition.
11.2 In the event that no written order designating a successor
custodian shall have been delivered to Provident on or before
the date when such termination shall become effective, then
Provident shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published
report, of not less than $5,000,000, all Securities, funds and
other properties held by Provident and all instruments held by
Provident relative thereto and all other property held by it
under this Agreement and to transfer to an account of such
successor custodian all of the Trust's Securities held in any
Securities System. Thereafter, such bank or trust company shall
be the successor of Provident under this Agreement.
11.3 In the event that Securities, funds and other properties
remain in the possession of Provident after the date of
termination hereof due to the failure of the Trust to appoint a
successor custodian, and Provident retains possession of such
Securities, funds and other properties of the Trust, the
provisions of this Agreement shall remain in full force and
effect.
Article 12. Interpretive and Additional Provisions.
12.1 In connectionwwith the opeaation of this Agreement,
Provident and the Trust may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Agreement as may in their joint opinion be consistent with
the general tenor of this Agreement. Any such interpretive or
additional provision shalr be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust and By-Laws of the Trust. No interpretive
or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
Article 13. Ohio Law to Apply.
13.1 This Agreement shall be construed in accordance with the
laws of Ohio.
Article 14. Limitation of Liability of the Trustees and
Shareholders.
14.1 It is expressly agreed to that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the
Trust, personally, but bind only the trust property of the
Trust, as provided in the Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an
authorized officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and
delivery by such officer 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
Trust as provided in its Declaration of Trust.
Article 15. Entire Agreement and Amendments.
15.1 This Agreement supersedes and terminates, as of the date
hereof, all prior contracts between the Trust and Provident
relating to the custody of the Trust's assets. Provident and
the Trust acknowledge that this Agreement and the Compensation
Addendum attached constitute the entire agreement between them
with respect to the subject matter hereof, and that any and all
prior discussions, negotiations, commitments, or understanding
relating to the subject matter of this Agreement or the
Compensation Addendum are hereby superseded and merged herein.
The terms and provisions of this Agreement shall not be changed,
modified, amended, waived, or terminated in any respect
whatsoever except by a written instrument executed by Provident
and the Trusts.
Article 16. Severability.
16.1 If any of the provisions of this Agreement is held to be
illegal, invalid or unenforceable in any respect, Provident and
the Trust agree that such term or provision shall be deemed to
be modified to the extent necessary to permit its enforcement to
the maximum extent permitted by applicable law. If any of the
provisions of this Agreement is held to be illegal, invalid or
unenforceable in any respect, the remainder of this Agreement
and all other provisions hereof shall not be affected thereby,
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative as of the __________ day of, _________
1993.
BHIRUD ASSOCIATES, INCORPORATED
By: _________________________________
Its: _________________________________
THE PROVIDENT BANK
By: ________________________________
Its: ________________________________
SHAREHOLDER COMMUNICATION ACT
SEC RULE 14(b)-2
CONSENT FORM
In order to permit companies that issue securities to
communicate directly with the shareholders who vote those
securities, the Securities and Exchange Commission has adopted a
rule, known as Rule 14b-2. This rule requires us to ask you
whether you authorize us to provide your name, address, and
share position to companies whose stock you own, if they should
request such information. If you tell us "no", we will not
provide this information to requesting companies. If you tell
us "yes", we will provide the information to requesting
companies. Your "yes" or "no" response will apply to all
securities we hold for you.
For your protection, the rule prohibits the requesting company
from using your name and address for any purpose other than
corporate communications.
Would you please check one of the alternatives below, sign and
date this letter, and return it to us.
Thank you very much for helping us to comply with this
Securities and Exchange Commission rule.
Sincerely,
The Provident Bank
____x_______ YES. You are authorized to release my name,
address, and share positions.
___________ NO. You are not authorized to release my name,
address, and share positions.
_________________ __________________
Signature: Date
Account Name: Bhirud Mid Cap Growth Fund Account #:
SCHEDULE A
TO THE CUSTODIAN AGREEMENT
BETWEEN
BHIRUD ASSOCIATES, INCORPORATED
AND
THE PROVIDENT BANK
Name of Funds
Bhirud Mid Cap Growth Fund
BHIRUD ASSOCIATES, INCORPORATED
By: ____________________________
Date: __________________________
THE PROVIDENT BANK
By: ___________________________
Date: __________________________
SCHEDULE B
TO THE CUSTODIAN AGREEMENT
BETWEEN
BHIRUD ASSOCIATES, INCORPORATED
AND
THE PROVIDENT BANK
MUTUAL FUND DOMESTIC CUSTODIAL FEES
Basis Point Fee
The Provident Bank shall be entitled to receive a fee for each
fund per the fee schedule listed below. The fee is based upon
each months daily net assets, and will be charged monthly in
arrears.
First $15 Million 6.0 basis points
Next $60 Million 5.0 basis points
Next $125 Million 4.0 basis points
Next $200 Million 3.0 basis points
Next $100 Million 2.5 basis points
Excess 2.0 basis points
Annual Minimums
Minimum annual fee - payable monthly $7,800.00
Foreign Custodial Fees
Foreign custody fees will be quoted upon request, and are
subject to change. Fees for foreign securities will be reviewed
every thirty days and any significant increase in the Bank's fee
will be passed along to the client.
Additional Services
Programming cost or data base management fees for special
reports or customized processing will be quoted upon request.
Additional services are subject to additional fees which will be
quoted upon request.
Out of Pocket Expenses
The Provident Bank shall be entitled to be reimbursed for all
reasonable out-of-pocket expenses including, but not limited to,
the expenses set forth on the attached reimbursable expense
sheet.
BHIRUD ASSOCIATES, INCORPORATED
By: __________________________
Date: __________________________
THE PROVIDENT BANK
By: __________________________
Date: __________________________
BHIRUD ASSOCIATES, INCORPORATED
AND
THE PROVIDENT BANK
MUTUAL FUND
REIMBURSABLE EXPENSE
The Provident Bank shall be entitled to be reimbursed for all
reasonable out-of-pocket expenses including, but not limited to
the following:
Postage and Insurance
Overnight Delivery Service
Freight and other delivery charges, plus bonding charges, in
delivering materials to and from the Trust and in delivering all
materials to shareholders.
Special 800 number
Non-standard statements, confirmations, checks or any
customized forms
Hardware, Software, line charges if inquiry access is requested
Certificate Printing
Check or share drafts if a fund has check writing privileges
Out of country or excess telephone calls
Supplies related to fund records
Any expense The Provident Bank shall incur at the written
direction of an officer of the Trust
EXHIBIT 9.1
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT
BHIRUD FUNDS, INC. (the "Fund")
The Bhirud Mid Cap Growth Fund (the "Portfolio")
1266 E. Main St.
Stamford, CT 06902
November 1st, 1994
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, 1995 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.
B. 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 Bhirud Mid Cap Growth Fund
By:
Title:
ACCEPTED: November 1st, 1994
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 Bhirud 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
TRANSFER AGENT AGREEMENT
TRANSFER AGENCY AGREEMENT
AGREEMENT made this _____ day of ______________ between BHIRUD
ASSOCIATES, INCORPORATED (the "Trust"), and THE PROVIDENT BANK,
a Banking Association with its principal place of business at
Cincinnati, Ohio (hereinafter referred to as the "Bank").
WHEREAS, the Trust desires that the Bank perform certain
services for the Trust, and for each of its series (see Schedule
A, as such Schedule may be amended from time to time)
denominated as funds and whose shares of beneficial interest
comprise from time to time the shares of the Trust (individually
referred to herein as a "Fund" and collectively as the "Funds")
and
WHEREAS, the Bank is willing to perform such services on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein set forth, the parties agree as follows:
1. SERVICES. The Bank shall perform for the Trust the
transfer agent services set forth in Schedule B hereto.
The Bank also agrees to perform for the Trust such special
services incidental to the performance of the services
enumerated herein as agreed to by the parties from time to time.
The Bank shall perform such additional services as are provided
on an amendment to Schedule B hereof, in consideration of such
fees as the parties hereto may agree.
2. FEES. The Trust shall pay the Bank for the services to be
provided by the Bank under this Agreement in accordance with,
and in the manner set forth in, Schedule C hereto. The Bank may
increase the fees it charges pursuant to the fee schedule;
provided, however, that the bank may not increase such fees
until the expiration of the Initial Term of this Agreement (as
defined below), unless the Trust otherwise agrees to such change
in writing. Fees for any additional services to be provided by
the Bank pursuant to an amendment to Schedule B hereto shall be
subject to mutual agreement at the time such amendment to
Schedule B is proposed.
3. REIMBURSEMENT OF EXPENSES. In addition to paying the Bank
the fees described in Section 2 hereof, the Trust agrees to
reimburse the Bank for the Bank's out-of-pocket expenses in
providing services hereunder, including without limitation, the
following:
(a) All freight and other delivery and bonding charges incurred
by the Bank in delivering materials to and from the Trust and in
delivering all materials to shareholders;
(b) Costs of postage, couriers, customized statements, labels,
envelopes, checks, reports, letters, tax forms, proxies, notices
or other forms of printer material which shall be required by
the Bank for the performance of the services to be provided
hereunder;
(c) Any expenses the Bank shall incur at written direction of an
officer of the Trust thereunto duly authorized.
4. EFFECTIVE DATE. This Agreement shall become effective as
of the date first written above (the "Effective Date").
5. TERM. This Agreement shall continue in effect, unless
earlier terminated by either party hereto as provided hereunder,
until _____________ (the "Initial Term"). Thereafter, this
Agreement shall continue in effect unless either party hereto
terminates this Agreement by giving 90 days' written notice to
the other party, whereupon this Agreement shall terminate
automatically upon the expiration of said 90 days; provided,
however, that after such termination, for so long as the Bank,
with the written consent of the Trust, in fact continues to
perform any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the provisions of
this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and
effect. Fees and out-of-pocket expenses incurred by the Bank
but unpaid by the Trust upon such termination shall be
immediately due and payable upon and notwithstanding such
termination. The Bank shall be entitled to collect from the
Trust, in addition to the fees and disbursements provided by
Sections 2 and 3 hereof, the amount of all of the Bank's cash
disbursements and a reasonable fee (which fee shall be not less
than one hundred and two percent (102%) for the sum of the
actual costs incurred by the Bank in performing such service)
for services in connection with the Bank's activities in
effecting such termination, including without limitation, the
deliver to the Trust and/or its distributor or investment
advisor and/or other parties, of the trust's property, records,
instruments and documents, or any copies thereof. Subsequent to
such termination, the Bank, for a reasonable fee, will provide
the Trust with reasonable access to any Trust documents or
records remaining in its possession.
6. UNCONTROLLABLE EVENTS. The Bank assumes no responsibility
hereunder, and shall not be liable for any damage, loss of data,
delay or any other loss whatsoever caused by events beyond its
reasonable control.
7. LEGAL ADVICE. The Bank shall notify the Trust at any time
the Bank believes that it is in need of the advice of counsel
(other than counsel in the regular employ of the Bank or any
affiliated companies) with regard to the Bank's responsibilities
and duties pursuant to this Agreement; and after notifying the
Trust, the Bank, at is discretion, shall be entitled to seek,
receive and act upon advice of legal counsel of its choosing,
such advice to be at the expense of the Trust or Funds unless
relating to a matter involving the Bank's willful misfeasance,
bad faith, gross negligence or reckless disregard with respect
to the Bank's responsibilities and duties hereunder, and the
Bank shall in no event be liable to the Trust or any Fund' or
any shareholder or beneficial owner of the Trust for any action
reasonable taken pursuant to such advice.
8. INSTRUCTIONS. Whenever the Bank is requested or authorized
to take/action hereunder pursuant to instructions from a
shareholder, or /a properly authorized agent of a shareholder
("shareholder's agent") , concerning an account in a Fund, the
Bank shall be entitled to rely upon any certificate, letter or
other instrument or communication, believed by the Bank to be
genuine and to have been properly made, signed or authorized by
an officer or other authorized agent of the Trust or by the
shareholder or shareholder's agent, as the case may be, and
shall be entitled to receive as conclusive proof of any fact or
matter required to be ascertained by it hereunder a certificate
signed by an officer of the Trust or any other person authorized
by the Trust's Board of Trustees or by the shareholder or
shareholder's agent, as the case may be.
As to the services to be provided hereunder, the Bank may rely
conclusively upon the terms of the Prospectuses and Statement of
Additional Information of the Trust relating to the Funds to the
extent that such services are described therein unless the Bank
receives written instructions to the contrary in a timely manner
from the Trust.
9. STANDARD OF CARE: RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION. The Bank shall use its best efforts to ensure
the accuracy of all services performed under this Agreement, but
shall not be liable to the Trust for any action taken or omitted
by the Bank in the absence of bad faith, willful misfeasance,
gross negligence or from reckless disregard by it of its
obligations and duties. The Trust agrees to indemnify and hold
harmless the Bank, its employees, agents, directors, officers
and nominees from and against any and all claims, demands,
actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages,
costs, charges, counsel fees and other expenses of every nature
and character arising out of or in any way relating to the
Bank's actions taken or nonactions with respect to the
performance of services under this Agreement or based, if
applicable, upon reasonable reliance on information, records,
instructions or requests given or made to the Bank by the Trust,
the investment adviser and on any records provided by any fund
accountant or custodian thereof. Provident assumes no
responsibility or liability for any acts, errors or omissions
that may have occurred prior to Provident's acceptance of the
duties and responsibilities set forth in this Agreement and the
Trust agrees to indemnify and hold Provident harmless from all
claims, lawsuits, damages, assessments and the like which are
attributable to or caused by any service provider previously
engaged by the Trust to perform similar duties for the Trust as
are described herein. This indemnification shall not however,
apply to actions or omissions of the Bank in cases of its own
bad faith, willful misfeasance, gross negligence or from
reckless disregard by it of its obligations and duties; and
further provided that prior to confessing any claim against it
which may be the subject of this indemnification, the Bank shall
give the Trust written notice of and reasonable opportunity to
defend against said claim in its own name or in the name of the
Bank.
10. RECORD RETENTION AND CONFIDENTIALITY. The Bank shall
keep and maintain on behalf of the Trust all books and records
which the Trust or the Bank is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and
regulations, including without limitation Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended (the "1940
Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. The Bank
further agrees that all such books and records shall be the
property of the Trust and to make such books and records
available for inspection by the Trust or by the Securities and
Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other
information relative to the Trust and its shareholders, except
when requested to divulge such information by duly-constituted
authorities or court process, or requested by a shareholder or
shareholder's agent with respect to information concerning an
account as to which such shareholder has either a legal or
beneficial interest or when requested by the Trust, the
shareholder, or shareholder's agent, or the dealer of record as
to such account.
11. REPORTS. The Bank will furnish to the Trust and to its
properly authorized auditors, investment advisers, examiners,
distributors, dealers, underwriters, salesmen, insurance
companies and others designated by the Trust in writing, such
reports at such times as are prescribed in Schedule D attached
hereto, or as subsequently agreed upon by the parties pursuant
to an amendment to Schedule D. The Trust agrees to examine each
such report or copy promptly and will report or cause to be
reported any errors or discrepancies therein not later than
three business days from the receipt thereof. In the event that
errors or discrepancies, except such errors and discrepancies as
may not reasonably be expected to be discovered by the recipient
within three days after conducting a diligent examination, are
not so reported within the aforesaid period of time, a report
will for all purposes be accepted by and be binding upon the
Trust and any other recipient, and the Bank shall have no
liability for errors or discrepancies therein and shall have no
further responsibility with respect to such report except to
perform reasonable corrections of such errors and discrepancies
within a reasonable time after requested to do so by the Trust.
12. RIGHTS OF OWNERSHIP. All computer programs and
procedures developed to perform services required to be provided
by the Bank under this Agreement are the property of the Bank.
All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in
appropriate form as soon as practical after termination of this
Agreement for any reason.
13. RETURN OF RECORDS. The Bank may at its option at any
time, and shall promptly upon the Trust's demand, turn over to
the Trust and cease to retain the Bank's files, records and
documents created and maintained by the Bank pursuant to this
Agreement which are no longer needed by the Bank in the
performance of its services or for its legal protection. If not
so turned over to the Trust, such documents and records will be
retained by the Bank for six years from the year of creation. At
the end of such six-year period, such records and documents will
be turned over to the Trust unless the Trust authorized in
writing the destruction of such records and documents.
14. BANK ACCOUNTS. The Bank shall establish and maintain
such bank accounts as are necessary in order that the Bank may
perform the services required to be performed hereunder. To the
extent that the performance of such services shall require the
Bank directly to disburse amounts for payment of dividends,
redemption proceeds or other purposes, the Trust and Funds shall
provide the Bank with all instructions and authorizations
necessary for the Bank to effect such disbursements.
15. REPRESENTATIONS OF THE TRUST. The Trust certifies to the
Bank that: (a) as of the close of business on the Effective
Date, each Fund which is in existence as of the Effective Date
has authorized unlimited shares, and (b) by virtue of its
Declaration of Trust, shares of each Fund which are redeemed by
the Trust may be sold by the Trust from its treasury, and. (c)
this agreement has been duly authorized by the Trust and, when
executed and delivered by the Trust, will constitute a legal,
valid and binding obligation of the Trust, enforceable against
the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and
secured parties.
16. REPRESENTATIONS OF THE BANK. The Bank represents and
warrants that (a) the Bank has been in, and shall continue to be
in, substantial compliance with all provision of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), required in connection with the
performance of its duties under this Agreement; and (b) the
various procedures and systems which the Bank has implemented
with regard to safeguarding from loss or damage attributable to
fire, theft, or any other cause of the blank checks, records,
and other data of the Trust and the Bank's records, data,
equipment, facilities and other property used in the performance
of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the
secure performance of its obligations hereunder.
17. INSURANCE. The Bank shall notify the Trust should its
insurance coverage with respect to professional liability or
errors and omissions coverage be cancelled or reduced. Such
notification shall include the date of change and the reasons
therefor. The Bank shall notify the Trust of any material
claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and
shall notify the Trust from time to time as may be appropriate
of the total outstanding claims made by the Bank under its
insurance coverage.
18. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS.
The Trust has furnished to the Bank the following:
(a) Copies of the Declaration of Trust of the Trust and any
amendments thereto, certified by the proper official of the
state in which such Declaration has been filed
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto:
2. Certified copies of resolutions of the Board of Trustees
covering the following matters:
A. Approval of this Agreement and authorization of a specified
officer of the Trust to execute and deliver this Agreement and
authorization for specified officers of the Trust to instruct
the Bank hereunder; and,
B. Authorization of the Bank to act as Transfer Agent for the
Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with specimen
signatures of those officers, who are authorized to instruct the
Bank in all matters.
(d) Two copies of the following (if such documents are employed
by the Trust):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and,
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and transactions
with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the Effective
Date of the Bank's appointment as Transfer Agent (or as of the
date on which the Bank's services are commenced, whichever is
the later date) and as to receipt of full consideration by the
Trust for all shares outstanding, such statement to be certified
by the Treasurer of the Trust.
19. INFORMATION FURNISHED BY THE BANK. The Bank has
furnished to the Trust the following:
(a) The Bank's Articles of Incorporation.
(b) The Bank's Code of Regulations and any amendments thereto.
(c) Certified copies of actions by the Bank covering the
following matters:
1. Approval of this Agreement, and authorization of a specified
officer of the Bank to execute and deliver this Agreement:
2. Authorization of the Bank to act as Transfer Agent for the
Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the commission pursuant to Rule 17Ad-13 under the Exchange Act.
20. AMENDMENTS TO DOCUMENTS. The Trust shall furnish the
Bank written copies of any amendments to, or changes in, any of
the items referred to in Section 18 hereof forthwith upon such
amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses
or Statement of Additional Information of the Trust which might
have the effect of changing the procedures employed by the Bank
in providing the services agreed to hereunder or which amendment
might affect the duties of the Bank hereunder unless the Trust
first obtains the Bank's approval of such amendments or changes.
21. RELIANCE ON AMENDMENTS. The Bank may rely on amendments to
or changes in any of the documents and other items to be
provided by the Trust pursuant to Sections 18 and 20 of this
Agreement and the Trust hereby indemnifies and holds harmless
the Bank from and against any and all claims, demands, actions,
suits, judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character
which may result from actions or omissions on the part of the
Bank in reasonable reliance upon such amendments and/or changes.
Although the Bank is authorized to rely on the above-mentioned
amendments to and changes in the documents and other items to be
provided pursuant to Sections 18 and 20 hereof, the Bank shall
be under no duty to comply with or take any action as a result
of any such amendments or changes unless the Trust first obtains
the Bank's written consent to and approval of such amendments or
changes.
22. COMPLIANCE WITH LAW. Except for the obligations of the
Bank set forth in Section 10 hereof, the Trust assumes full
responsibility for the preparation, contents and distribution of
each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as
amended (the "1933 Act") , the 1940 Act, and any other laws,
rules and regulation of governmental authorities having
jurisdiction. The Bank shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's
shares. The Trust represents and warrants that no shares of the
Trust will be offered to the public until the Trust's
registration statement under the 1933 Act and the 1940 Act has
been declared or becomes effective.
23. NOTICES. Any notice provided hereunder shall be
sufficiently given when sent by registered or certified mail to
the party required to be served with such notice at the
following address: The Provident Bank Trust Dept. , One East
Fourth Street, Cincinnati, Ohio 45202, or at such other address
as such party may from time to time specify in writing to the
other party pursuant to this Section.
24. HEADINGS. Paragraph headings in this Agreement are
included for convenience only and are not to be used to construe
or interpret this Agreement.
25. ASSIGNMENT. This Agreement and the rights and duties
hereunder shall not be assignable by either of the parties
hereto except by the specific written consent of the other party.
26. GOVERNING LAW. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the
State of Ohio.
27. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
The Names "Bhirud Associates, Incorporated" and "Trustees of
Bhirud Associates, Incorporated" refer respectively to the Trust
created and the trustees, as trustees but not individually or
personally, acting from time to time under a Declaration of
Trust dates as of, ___________, to which reference is hereby
made and a copy of which is on file at the office of the
Secretary of the Bhirud Associates, Incorporated and elsewhere
as required by law, and to any and all amendments thereto so
filed and hereafter filed. The obligations of "Bhirud
Associates, Incorporated" entered into in the name or on behalf
thereof by any of the trustees, representatives or agents are
made not individually, but in such capacities, and are not
binding upon any of the trustees, shareholders or
representatives of the Trust personally, but bind only the
assets of the Trust, and all persons dealing with any series of
shares of the Trust must look solely to the assets of the Trust
belonging to such series for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed all as of the day and year first
above written.
BHIRUD ASSOCIATES, INCORPORATED
By: __________________________
THE PROVIDENT BANK
By: __________________________
Dated:
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
BHIRUD ASSOCIATES, INCORPORATED
AND
THE PROVIDENT BANK
NAME OF FUND
Bhirud Mid Cap Growth Fund
BHIRUD ASSOCIATES, INCORPORATED
By: __________________________
THE PROVIDENT BANK
By: __________________________
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
BHIRUD ASSOCIATES, INCORPORATED
AND
THE PROVIDENT BANK
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend
option, taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders
e. Process transfers and exchanges.
f. Process dividend payments, including the purchasing of new
shares through dividend reinvestment.
2. Shareholder information services
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements, or marketing material to current
shareholders.
3. Compliance Reporting
a. Provide reports to the Securities and Exchange commission,
the National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchases of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide
for payment of commissions on direct shareholder purchase in a
load Fund
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the
Trust.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
Dated:
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
BHIRUD ASSOCIATES, INCORPORATED
AND
THE PROVIDENT BANK
Annual Fee
$6,300.00 per fund includes the first 250 accounts.
Next 2,500 Accounts $12.00 per year per account
Next 2,000 Accounts $10.80 per year per account
Excess $9.00 per year per account
Fees are charged on a monthly basis at the rate of 1/12 of the
annual fee. A charge is made for an account in the month that
an account opens.
Multiple Classes of Shares
Classes of shares which have different net asset value or pay
different daily dividends will be treated as separate classes,
and the fee schedule above, including the appropriate minimums,
will be charged for each separate class.
IRA Accounts
The following fee will be charged directly to each IRA Account.
Setup Fee $5.00
Annual Fee $10.00
Termination Fee $5.00
Fund Serv/NSCC Processing
Participating Fee - total monthly charge (maximum) $200.00
Participating Fee - mutual fund networking $250.00
Mutual Fund Transaction $.50/item
Networking Account Base Fee $.03/account
CPU Access --Service Bureau $40.00/month
BHIRUD ASSOCIATES, INCORPORATED
By: __________________________
THE PROVIDENT BANK
By: __________________________
Additional Services
Programming cost or data base management fees for special
reports or customized processing will be quoted upon request.
Additional services are subject to additional fees which will be
quoted upon request.
Out of Pocket Expenses:
The Bank shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to, the
expenses set forth in Section 3 of the Transfer Agency Agreement
to which this Schedule C is attached.
SCHEDULE D
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
BHIRUD ASSOCIATES, INCORPORATED
AND
THE PROVIDENT BANK
REPORTS
I. Daily Shareholder Activity Journal
II. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
III. Daily Wire and Check Registers
IV. Monthly Dealer Processing Reports
V. Monthly Dividend Reports
VI. Sales Data Reports for Blue Sky Registration
VII. Annual report by independent public accountants concerning
the Bank's shareholder system and internal accounting control
systems to be filed with the Securities and Exchange Commission
pursuant to Rule 17Ad-13 of the Securities Exchange Act of 1934,
as amended.
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, Ohio 44145
- -----------------------------------------------------------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Financial Highlights" and to the use of our report dated August
31, 1995 in this Registration Statement (Form N-1A No. 33-48013)
of Bhirud Funds, Inc.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
September 26, 1995
EXHIBIT 15.1
DISTRIBUTION AND SERVICE PLAN
AMENDED NOV. 30, 1993
BHIRUD FUNDS, INC.
The Bhirud 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, 1995 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
SHAREHOLDER SERVICING AGREEMENT
BHIRUD FUNDS, INC. (the "Fund")
The Bhirud 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, 1995 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 Bhirud Mid Cap Growth Fund
By: ___________________________
Name: Suresh L. Bhirud
Title: President
Accepted: July 12, 1995
Bhirud Associates, Inc.
By: ______________________
Name: Suresh L. Bhirud
Title: President
